EXHIBIT 4.e
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N586FE)
Dated as of September 1, 1996
Amended and Restated as of October 15, 1996
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee,
Lessor
and
FEDERAL EXPRESS CORPORATION,
Lessee
COVERING ONE ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MD-11F AIRCRAFT
SERIAL NO. 48487, REGISTRATION NO. N586FE
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE
AGREEMENT OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS
BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF
STATE STREET BANK AND TRUST COMPANY, AS INDENTURE TRUSTEE UNDER THE TRUST
INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO.
N586FE) DATED AS OF SEPTEMBER 1, 1996, AS AMENDED AND RESTATED AS OF OCTOBER
15, 1996 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN
SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN
EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL"
COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY STATE STREET BANK AND
TRUST COMPANY, AS INDENTURE TRUSTEE ON THE SIGNATURE PAGES THEREOF.
TABLE OF CONTENTS
Page
Initial Recitals.............................................................1
ARTICLE 1
DEFINITIONS
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Affirmation of Acceptance under the Lease................ 2
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. Intentionally Left Blank................................. 2
Section 3.02. Basic Rent............................................... 2
Section 3.03. Supplemental Rent........................................ 2
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value,
Termination Value and EBO Price After the Delivery
Date................................................... 3
Section 3.05. Minimum Basic Rent....................................... 4
Section 3.06. Payment to Indenture Trustee............................. 5
Section 3.07. Costs and Expenses....................................... 5
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01. Renewal Options.......................................... 5
Section 4.02. Purchase Options......................................... 6
Section 4.03. Appraisal Procedures..................................... 8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Disclaimer of Representations and Warranties............. 10
Section 5.02. No Modification of Other Warranties...................... 11
Section 5.03. Certain Agreements of the Lessee......................... 11
ARTICLE 6
LIENS
Section 6.01. Liens.................................................... 11
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01. Registration, Maintenance and Operation.................. 13
Section 7.02. Possession and Permitted Transfer and Sublease........... 15
Section 7.03. Insignia................................................. 19
Section 7.04. Change of U.S. Registration Number....................... 20
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01. Replacement of Parts..................................... 20
Section 8.02. Pooling of Parts......................................... 21
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01. Required Alterations and Modifications................... 22
Section 9.02. Other Alterations and Modifications...................... 22
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 24
Section 10.02. Retention of Aircraft by the Lessor..................... 26
Section 10.03. Voluntary Termination as to Engines..................... 28
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01. Lessee's Election Rights................................ 28
Section 11.02. Payment of Stipulated Loss Value........................ 28
Section 11.03. Replacement of Airframe and Engines..................... 29
Section 11.04. Event of Loss with Respect to an Engine................. 33
Section 11.05. Application of Payments from the Government or Others... 35
Section 11.06. Requisition of an Airframe and the Installed Engines for
Use by Government..................................... 36
Section 11.07. Requisition for Use by Government of an Engine Not
Installed on the Airframe............................. 36
Section 11.08. Application of Payments During Existence of Certain
Defaults.............................................. 37
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01. Return of Aircraft...................................... 37
Section 12.02. Return of Engines....................................... 38
Section 12.03. Return of Manuals....................................... 39
Section 12.04. Condition of Aircraft................................... 39
Section 12.05. Delayed Return of Aircraft.............................. 40
Section 12.06. Storage................................................. 41
Section 12.07. Special Markings........................................ 42
Section 12.08. Lessor's Option to Purchase Parts....................... 42
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance..................................... 42
Section 13.02. Insurance Against Loss or Damage to Aircraft
and Engines........................................... 44
Section 13.03. Application of Insurance Proceeds....................... 47
Section 13.04. Reports................................................. 48
Section 13.05. Lessor's Insurance...................................... 48
Section 13.06. Self-Insurance.......................................... 49
ARTICLE 14
INSPECTION
Section 14.01. Right of Inspection..................................... 49
Section 14.02. No Obligation to Inspect................................ 50
ARTICLE 15
ASSIGNMENT
Section 15.01. Lessee's Right to Assign................................ 50
Section 15.02. Citizenship............................................. 50
ARTICLE 16
EVENTS OF DEFAULT
Section 16.01. Events of Default....................................... 50
ARTICLE 17
REMEDIES
Section 17.01. Remedies Upon Lessee's Default.......................... 53
Section 17.02. Cumulative Remedies..................................... 55
Section 17.03. Waiver.................................................. 56
Section 17.04. Lessor's Right to Perform for Lessee.................... 56
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01. Quiet Enjoyment......................................... 56
ARTICLE 19
FURTHER ASSURANCES
Section 19.01. Further Assurances...................................... 57
ARTICLE 20
NET LEASE
Section 20.01. Nature of Lease......................................... 57
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01. Successor Lessor........................................ 59
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section 22.01. Security for Lessor's Obligations to Holders............ 59
Section 22.02. Intentionally Left Blank................................ 59
Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 59
ARTICLE 23
SECURITY FUNDS
Section 23.01. Investment of Security Funds............................ 60
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01. Lessor's Entry Into Lease............................... 61
ARTICLE 25
NOTICES
Section 25.01. Notices................................................. 62
ARTICLE 26
MISCELLANEOUS
Section 26.01. Section Heading and Captions............................ 62
Section 26.02. References.............................................. 62
Section 26.03. APPLICABLE LAW.......................................... 62
Section 26.04. Severability............................................ 62
Section 26.05. No Oral Modification.................................... 63
Section 26.06. Agreement as Chattel Paper.............................. 63
Section 26.07. Counterparts............................................ 63
ARTICLE 27
TRUE LEASE
Section 27.01. Intent of the Parties................................... 63
Section 27.02. Section 1110 Compliance................................. 63
Section 27.03. Finance Lease........................................... 64
Schedule I Definitions
Schedule II Basic Rent
Schedule III Stipulated Loss Values
Schedule IV Termination Values
Schedule V Additional Purchase Option Provisions
Schedule VI Description of Original Lease
Exhibit A Form of Lease Supplement
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N586FE)
LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N586FE) dated
as of September 1, 1996, as amended and restated as of October 15, 1996 (this
"Lease") between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity but solely as Owner Trustee
under the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and
FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have heretofore entered into the
Original Lease dated as of September 1, 1996 as supplemented by the Lease
Supplement;
WHEREAS, the Original Lease was recorded by the FAA and assigned a
Conveyance Number as more particularly described on Schedule VI attached
hereto;
WHEREAS, pursuant to Article 15 of the Original Participation
Agreement, the Lessee, the Original Loan Participants, the Owner Participant,
the Indenture Trustee and the Lessor desire to refinance, in full, the
Original Loan Certificates on the Refunding Date; and
WHEREAS, in connection with such refinancing, the Lessee, the Owner
Participant, the Lessor and the Indenture Trustee desire that the Original
Lease be amended and restated in its entirety as provided herein;
NOW, THEREFORE, in consideration of the mutual promises herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged by the parties, the Lessor and the Lessee agree that the
Original Lease be and the same is hereby amended and restated in its entirety
as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the capitalized terms herein
shall have the meanings given in Schedule I hereto, for all purposes of this
Lease and shall be equally applicable to both the singular and the plural
forms of the terms defined.
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Affirmation of Acceptance under the Lease. The Lessor,
having accepted delivery of the Aircraft from the Lessee on the Delivery Date
and having simultaneously leased the Aircraft to the Lessee, and the Lessee,
having leased the Aircraft from the Lessor on the Delivery Date, as evidenced
by the execution by the Lessor and the Lessee of the initial Lease Supplement
(which is incorporated by reference herein), hereby affirm the terms and
conditions of the Original Lease as herein amended and restated. This Lease
shall last for the Term, at all times during which full legal title to the
Aircraft shall remain vested in the Lessor to the exclusion of the Lessee,
notwithstanding the possession and use thereof by the Lessee or any other
Person.
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. Intentionally Left Blank.
Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in
immediately available funds, on each Rent Payment Date, Basic Rent for the
Aircraft for the Interim Term and the Basic Term, each payment being set forth
on Schedule II hereto opposite the applicable Rent Payment Date, subject to
increase or decrease as provided in Section 3.04 of this Lease. Each payment
of Basic Rent shall be made in arrears or in advance, all as stated in
Schedule II hereto. Each payment of Basic Rent designated as advance rent
shall be allocated over the six-month period beginning on the Rent Payment
Date on which such advance rent payment is scheduled to be made, and each
installment of Basic Rent that is designated as payable in arrears shall be
accrued over the six-month period ending on and including the day immediately
preceding the Rent Payment Date on which such arrears payment is scheduled to
be made.
Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause
to be paid to the Lessor, or to whomever shall be entitled to it, any and all
Supplemental Rent promptly as the same shall become due. If the Lessee fails
to pay any Supplemental Rent when due, the Lessor shall have all rights,
powers and remedies provided for in this Lease or in any other Operative
Agreement, or by law or equity or otherwise in the case of nonpayment of Basic
Rent. The Lessee will also pay to the Person entitled thereto, on demand, as
Supplemental Rent, to the extent permitted by applicable law, an amount equal
to interest at the Past Due Rate on any part of any installment of Basic Rent
not paid when due, for any period until the same shall be paid and on any
payment of Supplemental Rent not paid when due, for the period until the same
shall be paid. In addition, the Lessee will pay to the Lessor, as Supplemental
Rent, in the case of any prepayment of the Certificates pursuant to Section
6.02 of the Indenture (other than in connection with any prepayment or
purchase of the Certificates pursuant to clause (ii) of the first sentence of
Section 8.02(a) of the Indenture), an amount equal to the aggregate amount of
any Make-Whole Premium payable on such prepayment or purchase. The expiration
or other termination of the Lessee's obligation to pay Basic Rent shall not
limit or otherwise modify the obligations of the Lessee with respect to the
payment of Supplemental Rent.
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value,
Termination Value and EBO Price After the Delivery Date. The percentages for
Basic Rent referred to in Schedule II hereto and the percentages for
Stipulated Loss Value and Termination Value in Schedule III and Schedule IV
hereto, respectively, and the EBO Price shall be adjusted (upward or downward)
subject to the minimum value established by Section 3.05 hereof and the
definitions of Stipulated Loss Value, Termination Value and EBO Price, to
reflect (i) any costs and expenses paid by the Lessor or the Owner Participant
pursuant to Section 10.01 of the Participation Agreement being greater or less
than the Estimated Expense Amount, (ii) any Refinancing pursuant to Section
15.01 of the Participation Agreement, (iii) any reoptimization pursuant to
Section 15.02 of the Participation Agreement or (iv) payments pursuant to
Section 5 of the Tax Indemnity Agreement by an adjustment of Basic Rent. Each
such adjustment pursuant to clause (i), (ii) or (iv) of the first sentence of
this Section 3.04 shall maintain the Owner's Economic Return (and, while
maintaining such Return, minimize the aggregate Net Present Value of Rents to
the Lessee); provided, that in no event may the EBO Price be an amount less
than the estimate set forth in the Appraisal of the Fair Market Value of the
Aircraft at the time of exercise of the purchase option under Section
4.02(a)(F) hereof. In the event of an adjustment pursuant to clause (iii) of
the first sentence of this Section 3.04, the Owner Participant may recalculate
Basic Rent as set forth in Schedule II hereto in order to maintain the Owner's
Economic Return and, subject to the provisions of Section 15.02 of the
Participation Agreement, recalculate the schedule of principal repayments, the
Stipulated Loss Value percentages set forth in Schedule III hereto and the
Termination Value percentages set forth in Schedule IV hereto in a manner
consistent with such recalculation of Basic Rent and EBO Price; provided that
any such recalculations may not (A) increase the Net Present Value of Rents to
the Lessee, (B) increase as of any date the sum of (1) the Net Present Value
of Rents to the Lessee payable through such date plus (2) the present value of
the Stipulated Loss Value or the Termination Value or the EBO Price as of such
date, in each case discounted at the Debt Rate, beyond such net present values
prior to such adjustment, or (C) otherwise result in any adverse impact
(including tax consequences) to the Lessee for which the Owner Participant has
not agreed to indemnify the Lessee in a manner satisfactory to the Lessee.
The Owner Participant shall promptly notify the Lessee and the Lessor and the
Lessee shall promptly notify the Owner Participant and the Lessor of the need
for any such adjustment. As promptly as feasible after any such notification,
the Lessor shall furnish the Lessee with a notice setting forth the amount of
any such adjustments together with the calculations upon which the adjustments
are based; provided, however, that the Lessor and the Owner Participant shall
not be required to disclose to the Lessee in such notice any confidential or
proprietary information (including methodology or assumptions) relating to
such calculations. At the request and, subject to the next succeeding
sentence, expense of the Lessee, the accuracy of the calculation of such
adjustments and the consistency of the calculation with the calculation used
to determine Basic Rent, Stipulated Loss Values, Termination Values and EBO
Price shall be verified first, by First Chicago Leasing Corporation or such
other financial advisor chosen by the Lessee (it being agreed that the Owner
Participant shall not be obligated to provide to First Chicago Leasing
Corporation or such other financial advisor any information reasonably deemed
confidential by the Owner Participant) and second, if such adjustments are
still believed to be in error and are not reconciled with the Owner
Participant within fifteen (15) Business Days, by a firm of nationally
recognized independent public accountants selected by the Lessee and reasonably
acceptable to the Owner Participant and, in order to enable them to verify such
adjustments, the Owner Participant shall make available to such accountants
(for their own confidential use and not to be disclosed to the Lessee or any
other Person and subject to the execution of a confidentiality agreement
reasonably satisfactory to the Owner Participant) all information reasonably
necessary for such verification, including the name of the lease analysis
program used by the Owner Participant to calculate such adjustments. The
Lessee will pay the reasonable costs and expenses of the verification process
by the independent public accountants under this Section 3.04 unless as a
result of such verification process by the independent public accountants
Basic Rent is adjusted and such adjustment causes the Net Present Value of
Rents to decline by 10 or more basis points (in which event the Owner
Participant shall pay the reasonable costs and expenses of such verification
process by the independent public accountants). The Lessor and the Lessee
shall execute and deliver an amendment to this Lease to reflect each
adjustment under this Section 3.04.
All adjustments under this Section 3.04 shall be in compliance with
the requirements of Revenue Procedure 75-21, 1975-1 C.B. 715 and Sections
4.02(5), 4.07(1), 4.07(2) and 4.08(1) of Revenue Procedure 75-28, 1975-1 C.B.
752 and shall be structured so as to not cause the Lease to be a "disqualified
leaseback or long-term agreement" within the meaning of Section 467 of the
Code and the Treasury Regulations promulgated thereunder.
Section 3.05. Minimum Basic Rent. Notwithstanding any other
provisions of the Operative Agreements to the contrary, each installment of
Basic Rent due on each Rent Payment Date and not constituting an Excepted
Payment shall be, under any and all circumstances, an amount at least
sufficient to pay in full any installment of principal of and interest on the
Certificates required to be paid pursuant to the Certificates (other than
amounts becoming due on account of the exercise of remedies pursuant to
Article 17 hereof) on such Rent Payment Date.
Section 3.06. Payment to Indenture Trustee. All Rent payable by the
Lessee to the Lessor shall be paid to the Lessor at its principal office at ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department, or as the Lessor may otherwise direct, by wire transfer of
immediately available funds in U.S. Dollars with sufficient information to
identify sources and applications of such funds no later than 10:30 a.m., New
York time on the due date of such payment; provided, however, that so long as
the Lien of the Indenture shall not have been discharged the Lessor hereby
directs, and the Lessee agrees, that all Rent (other than Excepted Payments,
which shall be paid by the Lessee directly to the Person entitled thereto)
shall be paid directly (all without set-off or counterclaim as and to the
extent provided in Article 20 hereof) to the Indenture Trustee at its
principal office at Two International Place, 4th Floor, Boston, Massachusetts,
Attention: Corporate Trust Department, or as the Indenture Trustee may
otherwise direct by wire transfer of immediately available funds in U.S.
Dollars no later than 10:30 a.m., New York time, on the due date of such
payment. In any case where a scheduled Rent Payment Date shall not be a
Business Day such Rent Payment Date shall be adjourned to the next succeeding
Business Day without interest thereon for the period of such extension
(provided that payment is made on such next succeeding Business Day).
Section 3.07. Costs and Expenses. As between the Lessor and the
Lessee, all obligations under this Lease shall be done, performed and complied
with at the Lessee's cost and expense, whether or not so expressed, unless
otherwise expressly stated to the contrary.
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01. Renewal Options. (a) Election to Renew. The Lessee
shall provide the Lessor with irrevocable written notice (each a "Preliminary
Notice") not more than 360 and not less than 180 days prior to the end of the
Basic Term or any Renewal Term, whether it will exercise its options either to
renew this Lease pursuant to this Section 4.01 or to purchase the Aircraft
pursuant to Section 4.02(a)(B) or (C) hereof, as applicable. Provided that
(i) no Payment Default, Bankruptcy Default or Event of Default shall have
occurred and be continuing at the time of renewal, (ii) this Lease has not
otherwise expired or terminated, and (iii) the Lessee shall have timely
delivered the respective Preliminary Notice, the Lessee may, by irrevocable
written notice delivered to the Lessor not less than 60 days prior to the end
of the Basic Term, extend the Term for a Fixed Renewal Term of one (1) or two
(2) years commencing on the expiration of the Basic Term. If the Lessee
elects to extend the Term for a Fixed Renewal Term of one (1) year as
described in the preceding sentence and so elects upon 60 days' written notice
to the Lessor prior to the end of such one-year Fixed Renewal Term, the Lessee
may elect to extend the Term for a further Fixed Renewal Term of one year,
provided that the conditions of clauses (i), (ii) and (iii) of the preceding
sentence are met. The Lessee shall pay the Fixed Renewal Rent during any
Fixed Renewal Term.
In addition, provided that (i) no Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing at the time of
renewal, (ii) this Lease has not otherwise expired or terminated, and (iii)
the Lessee shall have timely delivered the respective Preliminary Notice, the
Lessee may by irrevocable written notice delivered to the Lessor not less than
60 days prior to the end of the Basic Term or any Fixed Renewal Term, elect to
extend the Term for a Fair Market Renewal Term of one (1) or two (2) years.
If the Lessee elects to extend the Term for a Fair Market Renewal Term of one
(1) year as described in the preceding sentence, the Lessee may by irrevocable
written notice delivered to the Lessor not less than 60 days prior to the end
of such one-year Fair Market Renewal Term, elect to extend the Term for a
further Fair Market Renewal Term of one (1) year, provided that the conditions
of clauses (i), (ii) and (iii) of the preceding sentence are met. The Lessee
shall pay the Fair Market Rental during any Fair Market Renewal Term.
(b) Terms and Conditions. Any such renewal shall be on the same
terms and conditions as provided herein, except that (i) rent for the Aircraft
due during any Renewal Term shall be payable semi-annually in arrears on the
dates corresponding to the Rent Payment Dates during such Renewal Term, and
(ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall
as of any Stipulated Loss Value Determination Date during the Renewal Term be
equal to the greater of the Stipulated Loss Value on the last day of the Basic
Term and the Fair Market Value of the Aircraft as of the commencement of such
Renewal Term.
Section 4.02. Purchase Options. (a) Election to Purchase.
Provided that (i) this Lease has not otherwise expired or terminated, (ii) the
Lessee shall have previously given the Preliminary Notice under Section
4.01(a) hereof in the case of paragraph (B) below or the applicable notice for
each other paragraph below, as the case may be, and (iii) if the Lessee shall
have elected to assume the Certificates in accordance with Section 7.11 of the
Participation Agreement, no Payment Default, Bankruptcy Default or Event of
Default shall have occurred and be continuing on the applicable Termination
Date, the Lessee may:
(A) by written notice delivered to the Lessor and the Owner
Participant, not more than 360 days and not less than 60 days prior to the
applicable Termination Date, elect to terminate the Lease and purchase the
Aircraft on the Rent Payment Date falling on July 30, 2013, for, at the
Lessee's option, either (1) an amount in immediately available funds equal
to the greater of the Fair Market Value and the Termination Value on the
applicable Termination Date or (2)(i) the assumption by the Lessee,
pursuant to Section 7.11 of the Participation Agreement, of all of the
obligations of the Lessor under the Indenture, the Certificates and Section
7.04 of the Participation Agreement and under the other Operative
Agreements and (ii) the payment to the Lessor of an amount in immediately
available funds equal to the excess of (A) the greater of (I) the
Termination Value for the Aircraft, computed as of the applicable
Termination Date and (II) the Fair Market Value of the Aircraft on the
Termination Date, over (B) the unpaid principal of the Certificates plus
accrued interest as of such Termination Date. Such notice (which shall be
revocable by the Lessee upon written notice no later than the Business Day
prior to the date 15 days prior to the applicable Rent Payment Date) shall
either direct the Lessor to prepay the Certificates in full on such
Termination Date pursuant to Section 6.02 of the Indenture or state that
the Lessee shall exercise its option to assume the Certificates pursuant to
Section 7.11 of the Participation Agreement and Section 2.12 of the
Indenture; or
(B) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of the Basic Term,
elect to purchase the Aircraft on the last day of the Basic Term for an
amount equal to the Fair Market Value thereof on such day; or
(C) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of any Renewal
Term, elect to purchase the Aircraft on the first day following such
Renewal Term at a price equal to the Fair Market Value of the Aircraft on
such day; provided, however, that the Lessee shall have paid all Rent due
and payable under this Lease on or prior to the expiration of any such
Renewal Term; or
(D) exercise the purchase option in this Section 4.02(a)(D) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(D) and which shall be an option to purchase for an amount
not less than the greater of the amount specified in Schedule V hereto and
the Fair Market Value of the Aircraft; or
(E) exercise the purchase option in this Section 4.02(a)(E) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(E) and which shall be an option to purchase for an amount
not less than the greater of the amount specified in Schedule V hereto and
the Fair Market Value of the Aircraft; or
(F) elect to purchase the Aircraft on July 30, 2011 (the "EBO Date")
for an amount specified therefor in the Ancillary Agreement II (the "EBO
Price") and which is not less than the estimate set forth in the Appraisal
of the Fair Market Value of the Aircraft at the time of exercise of the
purchase option under this Section 4.02(a)(F).
The Lessee shall give the Lessor, the Owner Participant and the
Indenture Trustee not more than 120 days and not less than 60 days' prior
written notice of its election to purchase pursuant to Section 4.02(a)(D),
4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall be revocable by the Lessee
upon written notice no later than the Business Day prior to the date 15 days
prior to the applicable Rent Payment Date and such notice shall either direct
the Lessor to prepay the Certificates in full on such Termination Date
pursuant to Section 6.02 of the Indenture or state that the Lessee shall
exercise its option to assume the Certificates pursuant to Section 7.11 of the
Participation Agreement and Section 2.12 of the Indenture. In the event that
the Lessee shall have given notice to purchase the Aircraft under Section
4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make
payment (and, if applicable, assume the Certificates) on the applicable
Termination Date, the Lease shall continue and the Lessee shall pay to the
Owner Trustee any losses, costs and expenses of the Owner Participant incurred
in connection with such failure.
(b) Terms and Conditions. If the Lessee elects to purchase the
Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the
Lessor on the applicable Termination Date by wire transfer of immediately
available funds any Basic Rent payable on such Termination Date (if payable in
arrears but not if in advance), the applicable purchase price together with
any amounts past due hereunder and all other Supplemental Rent then due under
this Lease including, without limitation, the aggregate amount of any
Make-Whole Premium applicable to any Certificate (if such purchase occurs
prior to the Premium Termination Date for such Certificate) and amounts due
under the Participation Agreement and the Tax Indemnity Agreement, whereupon
(and upon discharge of the Lien of the Indenture in accordance with Section
14.01 thereof), the Lessor will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens (it being understood
that, in connection with such transfer, the Owner Participant shall be
responsible for removal of Lessor's Liens attributable to it, FSB shall be
responsible for removal of Lessor's Liens attributable to it and the Owner
Trustee shall be responsible for removal of Lessor's Liens attributable to the
Owner Trustee, all in accordance with Section 7.03(b) or 7.04(b) as the case
may be, of the Participation Agreement)), all of the Lessor's right, title and
interest in and to the Aircraft on an "as-is, where is" basis. In connection
with such transfer, the Lessee shall prepare and the Lessor shall execute or
arrange for the execution of a ▇▇▇▇ of sale evidencing such transfer and such
other documents as the Lessee may reasonably require. In connection with any
termination or proposed termination of this Lease, the Lessee shall pay at the
time of the applicable Termination Date, all related reasonable costs and
expenses of the Owner Participant, the Lessor and the Indenture Trustee.
Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair
Market Rental or Fair Market Value is required to be determined under this
Lease (unless otherwise provided herein), it shall be determined by the mutual
agreement of the Lessor and the Lessee in accordance with the definitions of
such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree
within twenty (20) days after the Lessee's notice of election to purchase the
Aircraft or notice to extend the Term, as the case may be, such amount shall
be determined by independent appraisal conducted by appraisers selected
pursuant to Section 4.03(b) hereof. At any time prior to final determination
of such amount pursuant to Section 4.03(b) hereof, the Lessee and the Lessor
shall be entitled to submit to the appraisers (and shall submit to each other
any bids submitted to the appraisers) any bids from unrelated third parties,
and such bids shall be accorded the weight such appraisers deem appropriate.
The Lessor and the Lessee shall each have an opportunity to comment on any
such bids after receiving a copy thereof.
(b) Selection. If an independent appraisal is required pursuant to
this Lease, the Lessor and the Lessee shall consult for the purpose of
appointing a mutually acceptable, qualified aircraft appraiser. If they are
unable to agree on a single appraiser within ten (10) Business Days, then the
independent appraisal shall be arrived at by mutual agreement of two
nationally recognized, independent aircraft appraisers, one chosen by the
Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on
the amount of such appraisal, their appraisals shall be treated in the manner
described in Section 4.03(c) hereof with an appraisal arrived at by a third
nationally recognized, independent aircraft appraiser chosen by the mutual
consent of such two appraisers; provided, however, that if either party shall
fail to appoint an appraiser within fifteen (15) Business Days after a written
request to do so by the other party, or if such two appraisers cannot agree on
the amount of such appraisal and fail to appoint a third appraiser within
twenty (20) Business Days after the date of the appointment of the second of
such appraisers, then either party may initiate an arbitration proceeding with
the American Arbitration Association for purposes of appointing a nationally
recognized, independent aircraft appraiser.
(c) Valuation. If one appraiser is chosen, the value determined by
such appraiser shall be final and binding upon the Lessor and the Lessee. If
two appraisers are chosen, one appraiser by the Lessor and one by the Lessee,
and such appraisers agree on the value, such value shall be final and binding
upon the Lessor and the Lessee. If three appraisers shall be appointed and
the difference between the determination which is farther from the middle
determination is more than 125% of the difference between the middle
determination and the third determination, then such further determination
shall be excluded, the remaining two determinations shall be averaged, and
such average shall be final and binding upon the Lessor and the Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon the Lessor and the Lessee.
(d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03
shall be conducted in accordance with the commercial rules of the American
Arbitration Association as then in effect, as modified by this Section 4.03
and the definitions of Fair Market Value and Fair Market Rental. All expenses
of any independent appraisal shall be borne by the Lessee, except that, so
long as no Event of Default shall have occurred and be continuing, each of the
Lessee and the Owner Participant (in the case of the Lessor) shall bear any
fees, costs and expenses of its respective attorneys in connection with such
appraisal, except in the case of a revocation by the Lessee of its election to
terminate the Lease pursuant to Section 4.02 or Article 10 hereof, in which
case the Lessee shall pay all such fees, costs and expenses.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Disclaimer of Representations and Warranties. THE
LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A
SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE
LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS
SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR
IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME
AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR, THE INDENTURE TRUSTEE,
THE OWNER PARTICIPANT OR ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH
ENGINE, AS-IS, WHERE-IS, AND, EXCEPT AS PROVIDED IN THE LAST SENTENCE OF THIS
SECTION 5.01, NEITHER THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT
NOR ANY HOLDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HAS
AND WILL HAVE BEEN DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY WARRANTY OR
REPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS,
WORKMANSHIP, CONDITION, VALUE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE,
DESIGN, OPERATION OR MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART
THEREOF, (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, (D) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
(E) THE LESSOR'S TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO
THE QUIET ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G)
ANY OTHER MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE
MATTERS DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE
INDENTURE TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY
THE LESSEE. The provisions of this Section 5.01 have been negotiated by the
Lessor and the Lessee and, except as provided in Article 7 of the
Participation Agreement, are intended to be a complete exclusion and negation
of any representations or warranties of the Lessor, the Indenture Trustee and
the Owner Participant, express or implied, with respect to the Airframe and
each Engine that may arise pursuant to any law now or hereafter in effect, or
otherwise.
Section 5.02. No Modification of Other Warranties. None of the
provisions of this Article 5 or any other provision of this Lease shall be
deemed to amend, modify or otherwise affect the representations, warranties or
other obligations (express or implied) of the Lessee, the Manufacturer or the
Engine Manufacturer or any of their respective subcontractors or suppliers,
with respect to the Airframe, the Engines or any Parts incorporated or
installed in or attached to the Airframe or Engines, which, in the case of the
Manufacturer or the Engine Manufacturer, have been assigned to the Lessor by
the Lessee, or to release the Lessee, the Manufacturer or the Engine
Manufacturer or any of their respective subcontractors or suppliers from any
such representation, warranty or obligation. So long as an Event of Default
shall not have occurred and be continuing under this Lease and to the extent
permitted under the applicable warranty, patent indemnity, or service-life
policy, (i) the Lessor shall assign or otherwise make available to the Lessee
such rights as the Lessor may have under any warranty, patent indemnity, or
service-life policy made or given by the Manufacturer or the Engine
Manufacturer or any of their respective subcontractors or suppliers, and any
other claims against the Manufacturer and the Engine Manufacturer or any such
subcontractor or supplier with respect to the Aircraft, including all rights to
demand, accept and retain all rights in and to property (other than the
Aircraft), data and services of any kind which the Manufacturer and the Engine
Manufacturer are obligated to provide and do provide pursuant to the
Modification Agreement or the GTA with respect to the Aircraft; and (ii) all
payments pursuant to any manufacturer's or subcontractor's warranty, patent
indemnity, or service-life policy obligation shall be paid to the Lessee and
the Lessee shall apply such payments to the cost of repair or correction of
any condition of the Aircraft which gave rise to such payments.
Section 5.03. Certain Agreements of the Lessee. The Lessee agrees
with the Lessor for the benefit of the Owner Participant that the Lessee shall
perform the agreements, covenants and indemnities of the Lessee set forth in
the Participation Agreement to the extent the same are applicable to the Owner
Participant, as fully and to the same extent and with the same force and
effect as if set forth in full in this Article 5.
ARTICLE 6
LIENS
Section 6.01. Liens. The Lessee will not directly or indirectly
create, incur, assume or suffer to exist, and will promptly, at its own cost
and expense, take such action as may be necessary to discharge, any Lien on or
with respect to the Lessor's Estate or this Lease or the Aircraft, the
Airframe or any Engine or any Part or title thereto or any interest therein
except:
(a) the respective rights of the Lessor and the Lessee as provided in
this Lease, the security interest and Lien of the Indenture and the rights
of the Owner Participant, the Lessor and the Indenture Trustee under the
Trust Agreement, the Indenture and the Participation Agreement;
(b) the rights of any sublessee or transferee under a sublease or a
transfer expressly permitted by the terms of this Lease;
(c) Lessor's Liens and Indenture Trustee's Liens to the extent
required to be discharged by the Owner Participant, the Lessor or the
Indenture Trustee, as the case may be, in accordance with Section 7.03(b),
7.04(b) or 7.05(b) of the Participation Agreement;
(d) Liens for Taxes imposed against the Lessee either not yet due or
being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve (i) any material risk of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein, (ii) any material risk of civil
liabilities or (iii) any risk of the assertion of criminal charges against
the Lessor, the Owner Participant, the Indenture Trustee or any Holder;
(e) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising against the Lessee in the ordinary course of the
Lessee's business for amounts the payment of which is either not yet due or
is being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve any material risk of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein; and
(f) Liens arising from judgments or awards against the Lessee with
respect to which (i) at the time an appeal or proceeding for review is
being prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for
review and then only for the period of such stay and (ii) there is not, and
such proceedings do not involve, any material risk of the sale, forfeiture
or loss of the Lessor's Estate, the Aircraft, Airframe or any Engine or any
interest therein.
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01. Registration, Maintenance and Operation. The Lessee,
at its own cost and expense, shall:
(a) cause the Aircraft to remain at all times duly registered in the
name of the Lessor as owner, pursuant to the Transportation Code and,
subject to the proviso to Section 6.03(b) of the Participation Agreement,
to remain at all times duly registered pursuant to the Transportation Code
and at all times act in accordance with the rules and regulations of the
Aeronautics Authority or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered in
accordance with Section 6.03(b) of the Participation Agreement;
(b) maintain, inspect, service, repair, test and overhaul the
Aircraft (or cause the same to be done) so as to keep the Aircraft (and any
engine which is not an Engine but is installed on the Aircraft) in as good
operating condition as when delivered to the Lessor on the Delivery Date,
ordinary wear and tear excepted, and in any event (i) in accordance with
all applicable laws and regulations and all requirements of the Aeronautics
Authority or of the regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered and the Lessee's maintenance
program approved by the Aeronautics Authority or such agency or body, (ii)
in the same manner and with the same care used by the Lessee with respect
to other ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MD-11F series aircraft and CF6-80C2-D1F series
engines (or other engines permitted by the terms of this Lease to be used on
the Aircraft) owned, operated or leased by the Lessee, to the extent that
the same regulations, and the Lessee's FAA-approved maintenance program
shall apply to any such aircraft and related engines, owned or leased by
the Lessee, and utilized in similar circumstances, and without
discriminating against the Aircraft, with respect to its use, operation or
maintenance in contemplation of the expiration or termination of this Lease
other than withdrawal of the Aircraft from use and operation as is
necessary to prepare the Aircraft for return to the Lessor upon such
expiration or termination and (iii) so as to keep the Aircraft in such
condition as may be necessary to enable its airworthiness certification to
be maintained in good standing at all times under the Transportation Code
or any applicable law, rule or regulation of the applicable regulatory
agency or body of any other jurisdiction in which the Aircraft may then be
registered;
(c) maintain, or cause to be maintained, all records, logs and other
materials in respect of the Aircraft required by the Aeronautics Authority,
or the applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered, all such records and logs to be
maintained in the English language, to the extent required by the
Transportation Code (which records, logs and other materials shall, as
between the Lessor and the Lessee and all parties claiming through the
Lessee, be the property of the Lessor but shall become the property of the
Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of
this Lease or upon the occurrence of an Event of Loss and the Lessee's
compliance with Section 11.03 hereof);
(d) promptly furnish to the Lessor and the Owner Participant such
information within the Lessee's possession as may be required to enable the
Lessor and the Owner Participant to file any reports to be filed by the
Lessor and the Owner Participant with any governmental authority because of
the Lessor's ownership of or the Owner Participant's interest in the
Aircraft;
(e) not maintain, service, repair, overhaul, use or operate the
Aircraft or any Engine in violation of any airworthiness certificate or
registration relating thereto, or in violation of any law or any license,
treaty, rule, regulation or order of or by any government or governmental
authority having jurisdiction over the Lessee or the Aircraft or any Engine
or for any purpose for which the Aircraft or any Engine is not designed;
provided, however, that the Lessee (or if a sublease shall then be in
effect, the sublessee thereunder) may in good faith contest the validity or
application of any such law, license, treaty, rule, regulation or order in
any manner that does not adversely affect the Lessor, its right, title or
interest in the Aircraft or any Engine or the interests of the Indenture
Trustee or the Owner Participant therein, or in any Operative Agreement
(excluding any interests indemnified for under the Tax Indemnity Agreement)
and such contest or non-compliance will not result in any material risk of
loss, forfeiture or damage to the Aircraft or in any risk of criminal
liability to the Lessor, the Indenture Trustee or the Owner Participant;
and if any such law, license, rule, regulation or order requires alteration
of the Aircraft or any Engine, the Lessee will conform the same therewith
at its own cost and expense and will maintain the Aircraft or any Engine in
compliance with such law, license, rule, regulation or order;
(f) not operate or locate the Airframe or any Engine, or suffer the
Airframe or any Engine to be operated or located in any area excluded from
coverage by any insurance policy required by the terms of Article 13
hereof, unless such operation or location is pursuant to the Civil Reserve
Air Fleet Program administrated pursuant to Executive Order No. 12056, as
amended (the "CRAF Program") or other use of the Aircraft by the Government
and (unless in the case of insurance, the Lessee certifies that such
insurance is unobtainable after diligent effort or is obtainable only on
unduly financially burdensome terms and conditions, which may include
unreasonably high rates), the Lessee has obtained, prior to the operation
or location of the Airframe or any Engine in such area, indemnification
from the Government, or other insurance, against the risks and in the
amounts required by, and in compliance with, Article 13 hereof covering
such area (and naming the Lessor, or so long as this Lease is assigned to
the Indenture Trustee, the Indenture Trustee, as sole loss payee in respect
of indemnification or insurance payable in respect of casualties to the
Aircraft) or unless the Aircraft is only temporarily located in such area
as a result of an isolated occurrence attributable to a hijacking, medical
emergency, equipment malfunction, weather conditions, navigational error or
other similar unforeseen circumstances and the Lessee is using its good
faith efforts to remove the Aircraft from such area; and
(g) not install or exchange replacement components with excessive wear
or exchange components on or of the Aircraft about to be returned to the
Lessor for other aircraft or engine components in the Lessee's possession
for use on aircraft and engines that will remain in the Lessee's possession
after such return in order to discriminate against the Aircraft, with
respect to its use, operation or maintenance in contemplation of the
expiration or termination of this Lease other than withdrawal of the
Aircraft from use and operation as is necessary to prepare the Aircraft for
return to the Lessor upon such expiration or termination.
The Lessee may, at any time during the Term, install an engine or
engines on the Airframe and operate the Aircraft with such engine or engines
installed thereon and the Lessor shall have no right, title or interest in and
to any such engine until such time, if any, that such engine is returned to
the Lessor under Section 12.02 hereof.
Section 7.02. Possession and Permitted Transfer and Sublease. (a)
Conditions. The Lessee will not, without the prior written consent of the
Lessor, sublease or otherwise in any manner deliver, transfer or relinquish
possession of the Aircraft, the Airframe or any Engine or install any Engine,
or permit any Engine to be installed, on any airframe other than the Airframe;
provided, that, so long as (i)(A) in respect of subparagraph (i) of this
Section 7.02(a), no Event of Default shall have occurred and be continuing on
the date the sublease is entered into, (B) in respect of subparagraphs (ii),
(iii) and (iv) of this Section 7.02(a), no Event of Default shall have
occurred and be continuing, and (C) in respect of subparagraphs (v), (vi),
(vii) and (viii) of this Section 7.02(a), no Payment Default, Bankruptcy
Default or Event of Default shall have occurred and be continuing, (ii) the
Lessee shall comply with the provisions of Article 13 hereof, (iii) the Lien
of the Indenture is not impaired thereby, and (iv) all applicable governmental
approvals in connection therewith have been obtained, the Lessee may without
the prior written consent of the Lessor:
(i) after the seventh anniversary of the Commencement Date and so long
as the sublessee described in clause (A) or (B) below is generally meeting
its obligations as they come due and is not subject to a proceeding or
final order under applicable bankruptcy, insolvency or reorganization laws
on the date the sublease is entered into, (A) sublease the Aircraft or any
Engine to a U.S. Air Carrier, (B) sublease the Aircraft to an Air Carrier
which is principally based in and domiciled in one of the countries listed
on Schedule III of the Participation Agreement, or (C) sublease the
Aircraft to any other Air Carrier not described in this Section which shall
be reasonably acceptable to the Lessor as evidenced by its prior written
consent; provided, that, with respect to clause (B) above, at the time of
any such sublease the United States of America maintains normal diplomatic
relations with the country in which such Air Carrier is principally based
and domiciled. In the case of any sublease (w) if the sublessee is a
government or governmental body, such sublessee shall have effectively
waived its rights to sovereign immunity, (x) such sublease shall include
the provisions required by Section 7.02(b) hereof and expressly require the
sublessee to operate and maintain the Aircraft in compliance with the
applicable provisions of this Lease, (y) such sublease shall provide that
such sublessee will not further sublease or transfer possession of, or any
other rights to, the subleased Airframe or any Engine to any other Person
without the prior written consent of the Lessor (except as permitted by
subparagraphs (ii) through (viii) below) and (z) such sublease shall expire
not later than 180 days prior to the expiration of the Basic Term or any
applicable Renewal Term with respect to which the Lessee has given
irrevocable written notice and the Renewal Rent has been determined
pursuant to Section 4.01(a) hereof, unless the Lessee shall have given
irrevocable written notice of its election to purchase the Aircraft
pursuant to Section 4.02 hereof. Prior to any sublease to an Air Carrier
permitted under clause (C) of this Section 7.02(a)(i): (I) the Lessee will
provide opinions of counsel (such counsel and the form and substance of
such opinions to be reasonably satisfactory to the Lessor) with respect to
(A) the legality, validity and enforceability of the Operative Agreements
and the sublease in such country, (B) that the laws of such country require
fair compensation by the government of such country payable in a currency
freely convertible into U.S. dollars for the loss of the use of or title to
the Aircraft in the event of a requisition of use or title by such
government, (C) the Lessor's title to the subleased equipment will be
recognized, (D) the required agreement of such foreign air carrier that its
rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such foreign air carrier under applicable
law (subject only to customary exceptions to enforceability), (E) that it
is not necessary for the Owner Participant, the Lessor or the Indenture
Trustee to register or qualify to do business in such country as a result
of the proposed sublease or in order for the Owner Participant, the Lessor
or the Indenture Trustee to enforce the terms and conditions of the
Operative Agreements, and (F) there is no tort liability of the owner of an
aircraft not in possession thereof or of Persons lending money to such an
owner for the purchase of an aircraft, under the laws of such jurisdiction
other than tort liability which might have been imposed on such owner or
Persons under the laws of the United States or any state thereof (it being
understood that, in the event that such latter opinion cannot be given in a
form satisfactory to the Lessor, such opinion shall be waived if insurance
reasonably satisfactory to the Lessor is available to cover such risk to
the Owner Participant and is provided at or before the execution of such a
sublease, at the Lessee's cost and expense); (II) all necessary governmental
approvals required for the subleased equipment, the Airframe or any Engine,
as the case may be, to be imported and, to the extent reasonably
obtainable, exported from the applicable country of domicile upon
repossession of such subleased equipment by the Lessor (and the Lessee as
sublessor), shall have been procured at the Lessee's own cost and expense
by the Lessee prior to commencement of any such sublease; (III) duties and
tariffs, if applicable, shall be paid for by the Lessee; and (IV) the
Lessee shall effect or cause to be effected at the Lessee's own cost and
expense all recordings and filings that are required to continue the
Lessor's right, title and interest to the Aircraft and rights under the
Lease (and sublease) and to perfect and maintain the priority of the Lien
of the Indenture;
(ii)subject the Airframe or permit the Airframe to be subjected to
normal interchange agreements or subject the Engines or permit any Engine
to be subjected to normal interchange or pooling agreements or
arrangements, in each case customary in the airline industry, entered into
by the Lessee in the ordinary course of its business with a vendor
domiciled in the United States or in a country with which the United States
maintains normal diplomatic relations or (x) any U.S. Air Carrier or (y)
any foreign Air Carrier which is (I) organized in a country listed on
Schedule III to the Participation Agreement, (II) organized in a country
with which the United States then maintains normal diplomatic relations,
(III) is a party to the Convention on the International Recognition of
Rights in Aircraft or (IV) otherwise provides equivalent protection to
owners, lessors and mortgagees of aircraft; provided that no transfer of
the registration of the Airframe or any Engine shall be effected and that
throughout the period that the Airframe or any Engine is subjected to such
interchange or pooling agreement or arrangement the terms of this Lease
shall be observed; and provided, further, that no such agreement or
arrangement contemplates or requires the transfer of title to or
registration of the Airframe or any Engine, and if the Lessor's title to
any Engine (but in no case the Airframe) shall nonetheless 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 the Lessee shall
comply with Section 11.04 of this Lease in respect of such Engine;
(iii)deliver or permit the delivery of possession of the Airframe or
any Engine to their respective manufacturers or certified maintenance
providers for testing, service, repair, maintenance or overhaul work or for
alterations or modifications in or additions to the Airframe or any Engine
to the extent required or permitted by the terms of Article 9 hereof;
(iv)transfer or permit the transfer of possession of the Airframe or
any Engine pursuant to a contract or agreement with the Government or
pursuant to the CRAF Program or any similar or substitute programs of the
Government, so long as the Lessee (or any permitted sublessee or transferee
pursuant to this Section) shall promptly notify the Lessor upon such
transfer of possession and provide the Indenture Trustee with the name and
address of the Contracting Officer or representative of the Military
Aircraft Command of the United States Air Force to whom notices must be
given in respect of the Aircraft;
(v) install or permit the installation of an Engine on an airframe
which is owned by the Lessee or any permitted sublessee free and clear of
all Liens, except (A) Liens of the type permitted under Section 6.01
hereof, (B) Liens which apply only to the engines (other than an Engine),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe and which do
not apply to substantially all of such airframe and (C) the rights of an
Air Carrier under normal interchange or pooling agreements which are
customary in the airline industry and do not contemplate or require the
transfer of title to such airframe or the engines installed on it;
(vi)install or permit the installation of an Engine on an airframe
leased to the Lessee or any permitted sublessee or transferee or purchased
by the Lessee subject to a conditional sale or other security agreement,
provided that (A) such lease, conditional sale or other security agreement
does not cover the Engine so installed and the Lessor and the Indenture
Trustee shall have received from the lessor, conditional vendor or secured
party of such airframe an agreement (which may be the lease or conditional
sale or other security agreement covering such airframe), whereby such
lessor, conditional vendor or secured party expressly agrees that neither
it nor its successors or assigns will acquire or claim any right, title or
interest in any Engine by reason of such Engine being installed on such
airframe at any time, and (B) such airframe is and remains free and clear
of all Liens except the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe and Liens of the
type permitted by subparagraph (v) of this Section 7.02(a);
(vii)install or permit the installation of an Engine on an airframe
owned by the Lessee, leased to the Lessee or purchased by the Lessee
subject to a conditional sale or other security agreement under
circumstances where neither subparagraph (v) nor subparagraph (vi) of this
Section 7.02(a) is applicable, provided that such installation shall be
deemed an Event of Loss with respect to such Engine and the Lessee shall
comply with Section 11.04 hereof in respect of such Engine, the Lessor not
intending to waive any right, title or interest it may have to or in such
Engine under applicable law until compliance by the Lessee with such
Section 11.04; and
(viii)enter into a wet lease under which the Lessee has effective
control of the Aircraft in the ordinary course of the Lessee's business
which shall not be considered a transfer of possession hereunder, provided
that the Lessee's obligations under this Lease shall continue in full force
and effect notwithstanding any such wet lease.
(b) Rights of Transferee. Notwithstanding the provisions of Section
7.02(a) hereof, the rights of any transferee who takes possession of the
Aircraft, the Airframe or any Engine by reason of a transfer permitted by
Section 7.02(a) hereof shall be subject and subordinate to, and any sublease
or wet lease permitted by Section 7.02(a) hereof shall be made expressly
subject and subordinate to, all the terms of this Lease, including, without
limitation, the Lessor's right to repossession pursuant to Article 17 hereof
and to avoid such sublease upon such repossession, and the Lessee shall remain
primarily liable for the performance of all the terms of this Lease to the
same extent as if such sublease or transfer had not occurred and all the other
Operative Agreements shall remain in effect. Any such sublease shall include
appropriate provisions for the maintenance, inspection (as required by Section
14.01 hereof), operation, use and insurance of the Aircraft, the Airframe and
each Engine in accordance with the provisions of this Lease and shall provide
assurances reasonably satisfactory to the Lessor that the sublessee shall not
further sublease any of such equipment. The Lessee shall give the Lessor, the
Owner Participant and the Indenture Trustee at least 15 days' prior written
notice of any sublease of the Airframe before the execution and delivery
thereof. The Lessee shall promptly provide the Lessor, the Owner Participant
and the Indenture Trustee a copy of any sublease having a term of six months
or more, and, in the case of any other sublease, promptly after a request
therefor from any such Person.
(c) No Release of Lessee/Costs of Subleasing. No sublease,
interchange or pooling agreement or other relinquishment of possession
permitted under this Article 7 of any of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of the Lessee's obligations
to the Lessor, the Indenture Trustee or the Owner Participant under this
Lease, the Participation Agreement or the Tax Indemnity Agreement or
constitute a waiver of any of the Lessor's rights and remedies hereunder or
thereunder or extend beyond the end of the Term. Subject to the terms and
conditions of this Lease, the Lessee will retain the right to cure any default
by any sublessee permitted pursuant to this Section 7.02 and to terminate such
sublease upon such default. The Lessee shall pay all costs of the Owner
Participant, the Indenture Trustee and the Lessor incurred in connection with
any subleasing or proposed subleasing.
Section 7.03. Insignia. (a) Nameplate. On or prior to the
Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to
and maintain in the cockpit of the Airframe, in a clearly visible location,
and on each Engine, a clearly visible metal nameplate bearing the inscription
"FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR," and, so long as such Airframe or Engines shall be subject to the Lien
of the Indenture, the additional inscription "STATE STREET BANK AND TRUST
COMPANY, AS INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if
necessary, from time to time, with a nameplate reflecting the name of any
successor Lessor or successor Indenture Trustee, in each case as permitted by
the Operative Agreements).
(b) Lessee's Marks. Except as provided in clause (a) above, the
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 during the Term, the Lessee may cause the Aircraft
to be lettered "Federal Express Corporation" or may letter, paint or ▇▇▇▇ it
in some other appropriate manner for convenience of identification of the
Lessee's interest or the interest of any permitted sublessee (including but
not limited to the Lessee's or any permitted sublessee's customary colors and
insignia) and to bear insignia plates or other markings identifying the
supplier or manufacturer of the Airframe or the Engines or any Parts of either.
Section 7.04. Change of U.S. Registration Number. The Lessee shall,
at its own cost and expense, coordinate with the necessary parties and file
instruments with the Aeronautics Authority for the sole purpose of changing
the U.S. registration number of the Aircraft to a registration number reserved
by the Lessee.
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at
its own cost and expense, will replace or cause to be replaced as promptly as
practicable all Parts which may from time to time be incorporated or installed
in or attached to the Airframe or any Engine and which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason, except as
otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee
may, at its own cost and expense, remove or cause to be removed 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 the
Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at
its own cost and expense, replace such Parts as promptly as practicable. All
replacement parts shall be free and clear of Liens (except for pooling
arrangements to the extent permitted by Section 8.02 hereof and Liens
permitted under Section 6.01 hereof, other than clauses (d) and (f) thereof)
and shall be in at least as good operating condition as, and shall have a
value and utility at least equal to, the Parts replaced, and in any event not
less than the condition and repair required to be maintained by the provisions
of this Lease.
(b) Title. All Parts at any time removed from the Airframe or any
Engine shall remain the property of the Lessor until 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 in Section 8.01(a) hereof. Immediately upon any replacement
part (other than, to the extent permitted by Section 8.02 hereof, a
replacement part subject to a pooling arrangement) becoming incorporated or
installed in or attached to the Airframe or any Engine, and without further
act:
(i) title to the replaced Part shall vest in the Lessee, free and
clear of all rights of the Lessor, and such replaced Part shall no longer
be deemed a Part under this Lease;
(ii)title to such replacement part shall vest in the Lessor free and
clear of all Liens except for Liens permitted by Section 6.01 hereof (other
than clauses (d) and (f) thereof) and shall thereupon be and become a Part;
and
(iii)such replacement part shall become subject to this Lease and to
the Lien of the Indenture, and shall be deemed part of the Airframe or such
Engine for all purposes to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine.
Section 8.02. Pooling of Parts. Any Part removed from the Airframe
or any Engine as permitted in Section 8.01(a) hereof may be subjected by the
Lessee to any normal pooling arrangement customary in the U.S. airline
industry and entered into with vendors and other Air Carriers in the ordinary
course of the Lessee's business, provided that the part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 8 hereof, 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 Section 8.01(a) hereof may be owned by another Air Carrier
subject to such normal pooling arrangement, provided that the Lessee, at its
own cost and expense and as promptly as possible, either:
(a) causes title to such replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof by the Lessee acquiring title to such
replacement part for the benefit of, and transferring such title to, the
Lessor free and clear of all Liens (other than Liens permitted under
Section 6.01 hereof (other than clauses (d) and (f) thereof)); or
(b) replaces such replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement part
owned by the Lessee free and clear of all Liens (other than Liens permitted
under Section 6.01 hereof (other than clauses (d) and (f) thereof)) and by
causing title to such further replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof.
All such replacement parts and further replacement parts shall meet
the standards set forth in the last sentence of Section 8.01(a) hereof.
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01. Required Alterations and Modifications. The Lessee,
at its own cost and expense, shall make or cause to be made such alterations
and modifications in and additions to the Airframe and each Engine as may be
required from time to time to comply with all applicable laws and to meet the
applicable requirements of the Aeronautics Authority or any other governmental
authority with jurisdiction over the Lessee's operations and aircraft;
provided, however, that the Lessee may in good faith contest the validity or
application of any such requirements in any reasonable manner that does not
involve any risk of liabilities or civil or criminal penalties being imposed
on or against the Indenture Trustee, the Owner Participant or the Lessor, that
does not involve any material risk of loss, forfeiture or sale of the Aircraft
or any Engine and that does not adversely affect the Lessor, its title or
interest in the Aircraft or any Engine, the first and prior perfected Lien and
security interest of the Indenture, or the interests of the Indenture Trustee
or the Owner Participant in the Airframe or any Engine, or in any Operative
Agreement (excluding any interests indemnified for under the Tax Indemnity
Agreement). All such alterations, modifications or additions shall be made on
or before the date mandated therefor, taking into account authorized
postponements resulting from a contest or otherwise and shall be made at such
time and in such a manner so as not to discriminate against the Aircraft
whether by reason of its leased status or otherwise. Title to all alterations,
modifications and additions made pursuant to this Section 9.01 shall without
further act vest in the Lessor and become subject to this Lease.
Section 9.02. Other Alterations and Modifications. (a) Generally.
The Lessee, at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine
as the Lessee may deem desirable in the proper conduct of its business,
including, without limitation, removal (without replacement) of Obsolete
Parts, provided that the aggregate original cost of all Obsolete Parts so
removed and not replaced shall not exceed $500,000, provided further that no
such alteration, modification, addition or removal, individually or in the
aggregate, shall create any adverse tax consequences for the Owner Participant
not otherwise indemnified for, diminish the value, remaining useful life, or
utility of the Airframe or the value and utility of any Engine or impair its
condition or airworthiness below its value, remaining useful life, utility,
condition and airworthiness immediately prior to such alteration,
modification, addition or removal, assuming that the Airframe or such Engine
was then in the condition and state of airworthiness required to be maintained
by the terms of this Lease, or cause the Airframe or any Engine to become
"limited use property" within the meaning of Revenue Procedure 76-30, 1976-2
C.B. 647, except that the value (but not the remaining useful life, utility,
condition or airworthiness) of the Aircraft may be reduced by the value, if
any, of any such Obsolete Parts which shall have been removed and not
replaced, to the extent permitted above, and provided further that the
Aircraft may not be converted to a passenger configuration.
(b) Title to Installed Parts. Title to each part incorporated or
installed in or attached or added to the Airframe or any Engine as the result
of any alteration, modification, removal or addition made pursuant to Section
9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become
subject to this Lease; provided, however, that the Lessee may remove any such
Part (without replacing such Part) at any time during the Term if:
(i) such Part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or
attached or added to the Airframe or such Engine on the Delivery Date or
any Part in replacement of, or substitution for, any such Part;
(ii)such Part is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms of
Article 7 hereof or the first sentence of Section 9.01 hereof;
(iii)such Part can be removed from the Airframe or such Engine without
(A) causing material damage to the Airframe or such Engine (it being
understood that the Lessee shall repair any damage caused by a permitted
removal) or diminishing or impairing the value, utility, remaining useful
life, condition or airworthiness required to be maintained by the terms of
this Lease or (B) diminishing the value, utility or remaining useful life
which the Airframe or such Engine would have had at such time had such
alteration, modification, removal or addition not occurred, assuming the
Airframe or such Engine was then in the condition required to be maintained
by the terms of this Lease; and
(iv)the cost of such Part was not paid by the Lessor.
(c) Title to Removed Parts. Upon the removal by the Lessee of any
such Part as provided in subsection (b) above, title thereto shall, without
further act, vest in the Lessee and such Part shall no longer be deemed a
Part. Any Part not removed by the Lessee as above provided prior to the
return of the Aircraft to the Lessor hereunder shall remain the property of
the Lessor and subject to this Lease.
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus.
(a) Option to Terminate. So long as no Event of Default shall have occurred
and be continuing, the Lessee shall have the right, at its option, on any
Termination Date, on at least 90 days' prior written notice (which notice
shall state the proposed Termination Date (the "Proposed Termination Date"))
to the Lessor and the Owner Participant, to terminate this Lease as of a
Termination Date if the Aircraft shall have become obsolete or surplus to the
operations of the Lessee; provided that the Lessee shall have furnished to the
Lessor, the Indenture Trustee and the Owner Participant a certificate of the
Lessee's Assistant Treasurer or more senior financial officer stating the
determination of the Lessee that the Aircraft is obsolete or surplus to its
needs. Unless the Lessor has elected to retain the Aircraft as herein
provided, the Lessee shall have the right to revoke its notice of termination
no later than the Business Day prior to the date 15 days prior to the Proposed
Termination Date whereupon this Lease shall continue in full force and effect
provided however, the Lessee may not give more than three (3) additional
termination notices pursuant to this Section 10.01.
(b) Sale Procedure. During the period from the giving of notice
pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the
Lessee, as non-exclusive agent for the Lessor, at the Lessee's expense, shall
use its reasonable efforts to obtain bids for the cash purchase on the
Proposed Termination Date (or such earlier date of sale as shall be consented
to in writing by the Lessor) of the Aircraft. On the Proposed Termination
Date (or such earlier date of sale), the Engines shall be installed on the
Airframe (provided that the Airframe may be sold with engines meeting the
requirements set forth herein for Replacement Engines in lieu of the Engines
so long as the aggregate number of Engines and Replacement Engines being sold
with the Airframe equals three). The Lessor may, if it desires to do so, seek
to obtain such bids. The Owner Participant may inspect any bids received by
the Lessee with respect to the Aircraft and may submit a bid for the Aircraft.
The Lessee will provide the Lessor with copies of bids received by the Lessee
promptly upon the Lessee's receipt thereof. No bid may be submitted by the
Lessee or any Person affiliated with the Lessee (or with whom or which there
is any arrangement or understanding as to the subsequent use of the Aircraft
by the Lessee or any of its Affiliates) or any agent or Person acting on
behalf of the Lessee. The Lessee may reject any bid which is less than the
applicable Termination Value, the aggregate amount of any Make-Whole Premium
and all other expenses incurred by the Lessor, the Owner Participant and the
Indenture Trustee in connection with the sale. Subject to the provisions of
Section 10.02 hereof, on the Proposed Termination Date or such earlier date of
sale as shall be consented to in writing by the Lessor, the Lessee shall
deliver the Airframe which shall have the Engines installed on it (provided
that the Airframe may be delivered with installed engines meeting the
requirements set forth herein for Replacement Engines in lieu of the Engines
so long as the aggregate number of Engines and Replacement Engines being
delivered with the Airframe equals three and the Lessee shall comply with the
provisions of Section 11.04 hereof as if an Event of Loss occurred with regard
to the Engines) to the bidder which shall have submitted the highest (evaluated
on an After-Tax Basis, taking into account FSC Benefits (as defined in the Tax
Indemnity Agreement) actually available, if any) cash bid (whether certified
to the Lessor by the Lessee or directly received by the Lessor and certified
to the Lessee) in the same manner and condition as if delivery were made to
the Lessor pursuant to Article 12 hereof at a location specified by such
bidder, and shall duly transfer to the Lessor title to any such engines not
owned by the Lessor, and the Lessor shall, upon payment to the Lessor in full
of the bid price and all amounts due and owing pursuant to Section 10.01(c)
hereof by wire transfer of immediately available funds and upon discharge of
the Lien of the Indenture in accordance with Article 7 thereof, sell the
Airframe and Engines or engines to such bidder without recourse or warranty
(except as to the absence of Lessor's Liens (it being understood that, in
connection with such transfer, the Owner Participant shall be responsible for
removal of Lessor's Liens attributable to it, FSB shall be responsible for
removal of Lessor's Liens attributable to it and the Owner Trustee shall be
responsible for removal of Lessor's Liens attributable to the Owner Trustee,
all in accordance with Section 7.03(b) or 7.04(b) as the case may be, of the
Participation Agreement)).
(c) Payments to the Lessor. The total selling price realized at a
sale pursuant to Section 10.01(b) hereof net of all expenses of the sale
(including commissions and any sales or transfer taxes) (the "Net Sales
Price") shall be retained by the Lessor (or the Indenture Trustee as long as
the Indenture is in force) and, in addition, on or before the Proposed
Termination Date (or any earlier date of sale), the Lessee shall pay to the
Lessor (or the Indenture Trustee as long as the Indenture is in force), by
wire transfer of immediately available funds, the sum of:
(1) the excess, if any, of the Termination Value for the Aircraft
computed as of the Proposed Termination Date (whether or not the date of
sale is on or prior to such Termination Date) over the Net Sales Price; plus
(2) the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date if payable in arrears but not if payable in
advance (whether or not the date of sale is on or prior to such Proposed
Termination Date); plus
(3) all other amounts then due and payable by the Lessee (including,
without limitation, the aggregate amount of any Make-Whole Premium, if the
Proposed Termination Date occurs prior to the applicable Premium Termination
Date) under this Lease and any other Operative Agreement.
(d) Transfer of Uninstalled Engines. Upon payment of the amounts
described in Section 10.01(c) hereof and upon transfer to the Lessor of title
to engines which have been returned in lieu of Engines as provided in Section
10.01(b) hereof, the Lessor will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens (it being understood
that, in connection with such transfer, the Owner Participant shall be
responsible for removal of Lessor's Liens attributable to it, FSB shall be
responsible for removal of Lessor's Liens attributable to it and the Owner
Trustee shall be responsible for removal of Lessor's Liens attributable to the
Owner Trustee, all in accordance with Section 7.03(b) or 7.04(b) as the case
may be, of the Participation Agreement)), all of the Lessor's right, title and
interest in and to any Engines which were replaced with engines pursuant to
Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as
the Lessor shall have received from the Indenture Trustee releasing such
Engines from the Lien of the Indenture.
(e) Limitation on the Lessor's Duties. The Lessor shall be under no
duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids
or otherwise to take any action in connection with any such sale other than to
transfer to the purchaser named in the highest cash bid as referred to above
(or to such purchaser and to the Lessee, as the case may be), without recourse
or warranty (except as to the absence of Lessor's Liens (it being understood
that, in connection with such transfer, the Owner Participant shall be
responsible for removal of Lessor's Liens attributable to it, FSB shall be
responsible for removal of Lessor's Liens attributable to it and the Owner
Trustee shall be responsible for removal of Lessor's Liens attributable to the
Owner Trustee, all in accordance with Section 7.03(b) or 7.04(b) as the case
may be, of the Participation Agreement)), all of the Lessor's right, title and
interest in and to the Aircraft, against receipt by the Lessor of the payments
provided for.
(f) Termination of the Lessee's Obligations. Upon the sale of the
Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with
the further provisions of this Article 10, the obligation of the Lessee to pay
Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date
occurring after the Proposed Termination Date or, in the case of a sale
pursuant to Section 7.01(b) hereof, after the date of sale of the Aircraft and
the Term shall end effective as of the Proposed Termination Date or the date
of sale in the case of a sale pursuant to Section 7.01(b) hereof. If no sale
shall have occurred on or before the Proposed Termination Date specified in
the notice delivered by the Lessee pursuant to Section 10.01(a) hereof, this
Lease shall continue in full force and effect and, for purposes of Section
10.01(a) hereof, it shall be deemed that the Lessee has revoked its notice of
termination, and the Lessee shall pay the expenses incurred by the Lessor, the
Indenture Trustee and the Owner Participant in connection with the proposed
sale.
Section 10.02. Retention of Aircraft by the Lessor. (a) Generally.
Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section
10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's
notice of termination given in accordance with Section 10.01(a) hereof, by
giving the Lessee and the Indenture Trustee written irrevocable notice of such
election not less than thirty (30) days prior to the Proposed Termination
Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the
Proposed Termination Date, by wire transfer of immediately available funds the
sum of:
(1) the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date if payable in arrears but not if payable in
advance; plus
(2) all other amounts then due and payable by the Lessee under this
Lease and any other Operative Agreement including, the aggregate amount of
any Make- Whole Premium (if the Proposed Termination Date occurs prior to
the applicable Premium Termination Date), on or prior to the Proposed
Termination Date.
(b) Payment of the Certificates. It shall be an absolute condition
precedent to the Lessor's right to retain the Aircraft and to the termination
of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to
the extent set forth in Section 10.02(a) hereof) shall have paid to the
Holders and such Holders shall have received the entire outstanding principal
amount of, the aggregate amount of any Make-Whole Premium and accrued interest
on the Certificates on the Proposed Termination Date and all other sums due
and owing to the Indenture Trustee and the Holders on or prior to the Proposed
Termination Date under this Lease, the Indenture or any other Operative
Agreement.
(c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor
elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall
deliver the Airframe and the Engines (provided that the Airframe may be
delivered with engines meeting the requirements set forth herein for
Replacement Engines in lieu of the Engines so long as the aggregate number of
Engines and engines being delivered with the Airframe equals three and
provided that the other requirements of Section 11.04 hereof are met as if an
Event of Loss has occurred with regard to the Engines) to the Lessor in the
same manner as if delivery were made to the Lessor pursuant to Article 12
hereof, and shall duly transfer to the Lessor right, title and interest to any
such engines not owned by the Lessor, all in accordance with Article 12
hereof. Upon such delivery of the Airframe and Engines or engines to the
Lessor and payment by the Lessee of any amounts required to be paid by the
Lessee pursuant to Section 10.02(a) hereof, the Lessor will transfer to the
Lessee, without recourse or warranty (except as to the absence of Lessor's
Liens (it being understood that, in connection with such transfer, the Owner
Participant shall be responsible for removal of Lessor's Liens attributable to
it, FSB shall be responsible for removal of Lessor's Liens attributable to it
and the Owner Trustee shall be responsible for removal of Lessor's Liens
attributable to the Owner Trustee, all in accordance with Section 7.03(b) or
7.04(b) as the case may be, of the Participation Agreement)), all of the
Lessor's right, title and interest in and to any Engines which were replaced
by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee
such instrument as the Lessor shall have received from the Indenture Trustee
releasing such Engines from the Lien of the Indenture.
(d) Termination of the Lessee's Obligations. Upon compliance by the
Lessor and the Lessee with the provisions of this Section 10.02 and upon
compliance by the Lessee with the further provisions of this Article 10, the
obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall
cease for any Rent Payment Date occurring after the Proposed Termination Date
and the Term shall end effective as of the Termination Date.
Section 10.03. Voluntary Termination as to Engines. So long as no
Event of Default shall have occurred and be continuing, the Lessee shall have
the right at its option and at any time, on at least thirty (30) days' prior
written notice to the Lessor, to terminate this Lease with respect to any
Engine not then installed or held for use on the Airframe, provided that prior
to the date of such termination, the Lessee shall comply with the terms of
Section 11.04 hereof to the same extent as if an Event of Loss had occurred
with respect to such Engine.
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01. Lessee's Election Rights. The Lessee shall notify
the Lessor, the Indenture Trustee and the Owner Participant as soon as
practicable but in no event more than 10 Business Days following the
occurrence of an event which constitutes or might constitute an Event of Loss
with respect to the Airframe or with respect to the Airframe and the Engines
or engines then installed on the Airframe. By written notice to the Lessor,
the Indenture Trustee and the Owner Participant given within 60 days of the
occurrence of any Event of Loss, the Lessee shall elect the alternative set
forth in Section 11.02 hereof or the alternative set forth in Section 11.03
hereof. The Lessee's failure to make such election within said 60-day period
shall be deemed to be an election of the alternative set forth in Section
11.02 hereof.
Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee
shall, if it has so elected or is deemed to have so elected under Section
11.01 hereof, pay to the Lessor, by wire transfer of immediately available
funds on the earlier of (i) the fifteenth day following receipt in full of
insurance proceeds or requisition proceeds, described in Section 11.05 hereof,
in connection with such Event of Loss and (ii) the 120th day after the
occurrence of such Event of Loss (the earlier of such dates being referred to
herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value
for the Aircraft, determined as of the Stipulated Loss Value Determination
Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs
on a Stipulated Loss Value Determination Date, determined as of such
Stipulated Loss Value Determination Date) together with interest on such
amount at the Debt Rate from such Stipulated Loss Value Determination Date to
the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or
prior to the relevant Stipulated Loss Value Determination Date and unpaid,
plus (C) any and all Supplemental Rent due and payable on or prior to such
Loss Payment Date and all Supplemental Rent accrued through such date, plus
(D) all other amounts owing by the Lessee or the Owner Trustee to the Indenture
Trustee or the Holders under the Indenture and the other Operative Agreements,
plus (E) any reasonable out-of-pocket expenses incurred in connection with
such Event of Loss and the related prepayment of the Certificates by the
Lessor, the Owner Participant and the Indenture Trustee, minus (F) if the
relevant Stipulated Loss Value Determination Date is a Rent Payment Date, the
portion, if any, of the Basic Rent installment due and paid by the Lessee on
such Stipulated Loss Value Determination Date pursuant to Section 3.02 hereof
to the extent such Basic Rent installment (or portion thereof) is designated
on Schedule II hereto as being payable in advance, together with an imputed
interest amount in respect of such advance payment of Basic Rent (or portion
thereof) at the Debt Rate from the date of payment of such Basic Rent
installment (or portion thereof) by the Lessee to the Loss Payment Date;
provided that in no event shall there be subtracted pursuant to clause (F) an
amount such that the Holders shall not be paid in full.
(b) Termination of Lease; Title Transfer. The obligation of the
Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the
Loss Payment Date shall, upon payment of the amounts specified in Section
11.02(a) hereof, terminate and the Term shall end on such Loss Payment Date.
Further, upon such payment, the Lessor will transfer to the Lessee, without
recourse or warranty (except as to the absence of Lessor's Liens (it being
understood that, in connection with such transfer, the Owner Participant shall
be responsible for removal of Lessor's Liens attributable to it, FSB shall be
responsible for removal of Lessor's Liens attributable to it and the Owner
Trustee shall be responsible for removal of Lessor's Liens attributable to the
Owner Trustee, all in accordance with Section 7.03(b) or 7.04(b) as the case
may be, of the Participation Agreement)), all of the Lessor's right, title and
interest in and to the Airframe and Engines with respect to which such Event
of Loss occurred, as well as all of the Lessor's right, title and interest in
and to any Engines constituting part of the Aircraft but not installed on the
Airframe when such Event of Loss occurred, and will deliver to the Lessee such
instrument as the Lessor shall have received from the Indenture Trustee,
releasing the Aircraft from the Lien of the Indenture.
Section 11.03. Replacement of Airframe and Engines. (a) Generally.
So long as no Default or Event of Default shall have occurred and be
continuing, and subject to Section 11.01 hereof, if the Lessee has elected to
replace the Airframe and Engines suffering an Event of Loss pursuant to this
Section 11.03, the Lessee shall cause to be duly conveyed to the Lessor within
one hundred twenty (120) days after the occurrence of such Event of Loss, as
replacement for the Airframe and Engines with respect to which such Event of
Loss has occurred, good and marketable title to a ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MD-11F
airframe (the "Replacement Airframe") and good and marketable title to a
number of Replacement Engines equal to the number of Engines with respect to
which an Event of Loss has occurred, provided that following compliance with
all other terms of this Section 11.03 all three Engines shall be of identical
make and model and, in the case of such Replacement Airframe and each such
Replacement Engine, owned by the Lessee free and clear of all Liens not
excepted in Section 6.01 hereof, other than Sections 6.01(b),(d) and (f)
hereof, duly certified as an airworthy aircraft by the Aeronautics Authority,
and having a value, remaining useful life and utility, at least equal to, and
being in as good operating condition as, the Airframe and Engines with respect
to which such Event of Loss occurred, assuming that the Airframe and Engines
were then in the condition and state of airworthiness required to be
maintained by the terms of this Lease immediately prior to the occurrence of
such Event of Loss. In such case and as a condition to such substitution the
Lessee, at its own cost and expense, will also promptly:
(i) furnish the Indenture Trustee with originals of, and the Lessor
with copies of, full warranty bills of sale, in form and substance
satisfactory to the Lessor and the Indenture Trustee, with respect to such
Replacement Airframe and Replacement Engines together with an assignment in
form and substance satisfactory to the Lessor and the Indenture Trustee of
any and all manufacturer's warranties applicable thereto and a consent
reasonably satisfactory to the Lessor and the Indenture Trustee from such
manufacturer or manufacturers to such assignment;
(ii)cause such Replacement Airframe and Replacement Engines to be duly
registered in the name of the Lessor pursuant to the Transportation Code or
the applicable laws of any other jurisdiction in which the Aircraft may
then be registered in accordance with Section 6.03(b) of the Participation
Agreement;
(iii)cause a Lease Supplement with respect to such Replacement
Airframe and Replacement Engines to be duly executed by the Lessee and
recorded pursuant to the Transportation Code, or the applicable laws, rules
and regulations of any other jurisdiction in which the Aircraft may then be
registered as permitted by Section 6.03(b) of the Participation Agreement;
(iv)furnish the Lessor, the Indenture Trustee and the Owner
Participant with an appraisal or other report of a nationally recognized
aircraft appraiser based on an inspection of such Replacement Airframe and
Replacement Engines reasonably satisfactory to the Indenture Trustee and
the Owner Participant certifying that such Replacement Airframe and such
Replacement Engine have a value, remaining useful life and utility, at
least equal to, and are in as good operating condition as, the Airframe and
Engines replaced, assuming such Airframe and Engines were at least in the
condition and repair required by the terms of this Lease immediately prior
to the occurrence of such Event of Loss;
(v) furnish the Lessor, the Indenture Trustee and the Owner
Participant with such evidence as the Lessor or the Indenture Trustee may
reasonably request of compliance with the insurance provisions of Article
13 hereof with respect to such Replacement Airframe and Replacement Engines;
(vi)provide the Owner Participant and the Lessor with (A) an opinion
of counsel selected by the Owner Participant and reasonably acceptable to
the Lessee (which opinion shall be reasonably satisfactory in form and
substance to the Owner Participant and the Lessor) that the Owner
Participant and the Lessor will suffer no adverse tax consequence not
otherwise indemnified for as a result of such substitution or (B) an
indemnity reasonably acceptable to the Owner Participant and the Lessor
against such consequences;
(vii)comply with the provisions of Section 9.08 of the Indenture;
(viii)cause an Indenture and Security Agreement Supplement with
respect to such Replacement Airframe and Replacement Engines to be duly
executed by the Lessor and the Indenture Trustee and recorded pursuant to
the Transportation Code, or the applicable laws, rules and regulations of
any other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement in order that
the Lien of the Indenture shall constitute a first priority, duly perfected
Lien and security interest on and in respect of such Replacement Airframe
and Replacement Engines;
(ix)take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as a secured party with the
Secretary of State of Utah and the filing of a notice with the Secretary of
State of Tennessee, as the Lessor or the Indenture Trustee may reasonably
request in order that such Replacement Airframe and Replacement Engines
shall be duly and properly titled in the Lessor, leased under this Lease
and subjected to the Lien of the Indenture to the same extent as the
replaced Airframe and Engines;
(x) furnish the Indenture Trustee with an opinion (reasonably
satisfactory in form and substance to the Lessor, the Owner Participant and
the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's
General Counsel) addressed to the Indenture Trustee and the Owner
Participant to the effect that (A) the Lessor has good title to such
Replacement Airframe and Replacement Engines free and clear of all Liens
(except for Liens permitted under Section 6.01 hereof, other than Sections
6.01(b),(d) and (f) thereof) and (B) such Replacement Airframe and
Replacement Engines have been validly subjected to the Lien of the Indenture
(with the effect and result that the Indenture constitutes a first priority
duly perfected security interest and Lien on such Replacement Airframe and
Replacement Engines); and
(xi)cause to be delivered to the Lessor, the Owner Participant and the
Indenture Trustee an opinion of counsel to the Lessee addressed to the
Lessor, the Owner Participant and the Indenture Trustee as to the due
registration of the Aircraft and the due recordation of the requisite
documents or instruments and the validity and perfection of the Lien in
such Replacement Airframe and Replacement Engines.
(b) Title to Replaced Equipment. Upon compliance by the Lessee with
the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens (it being understood that, in
connection with such transfer, the Owner Participant shall be responsible for
removal of Lessor's Liens attributable to it, FSB shall be responsible for
removal of Lessor's Liens attributable to it and the Owner Trustee shall be
responsible for removal of Lessor's Liens attributable to the Owner Trustee,
all in accordance with Section 7.03(b) or 7.04(b) as the case may be, of the
Participation Agreement)), all of the Lessor's right, title and interest, if
any, in and to the Airframe and Engines with respect to which such Event of
Loss occurred. In connection with such transfer, the Lessee will prepare, and
the Lessor will execute or forward to the Indenture Trustee for execution, as
the case may be, a ▇▇▇▇ of sale evidencing such transfer and will deliver to
the Lessee such instrument as the Lessor shall have received from the
Indenture Trustee releasing the Aircraft from the Lien of the Indenture. Any
Engine constituting part of the Aircraft, but not installed on the Airframe
when such Event of Loss occurred, shall continue to be property of the Lessor
and leased under this Lease as part of the same equipment as the Replacement
Airframe and Replacement Engines.
(c) Definitions. Each Replacement Airframe and Replacement Engine
shall be deemed part of the property leased under this Lease, each such
Replacement Airframe shall be deemed an "Airframe," each such Replacement
Engine shall be deemed an "Engine" and each such Replacement Airframe and
Replacement Engine shall be deemed part of the same Aircraft as was the
Airframe or Engine replaced.
(d) Rent Adjustments. An Event of Loss covered by this Section
11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or
Termination Values but may result in payments pursuant to the Tax Indemnity
Agreement and the Participation Agreement.
(e) Time Limitations. If the Lessee has elected to proceed under
this Section 11.03 but has not fully performed its obligations under this
Section 11.03 within 120 days of the occurrence of the applicable Event of
Loss, in the event that any amounts held by the Lessor (or, so long as the
Indenture shall be in effect, the Indenture Trustee) in respect of such Event
of Loss are less than the Stipulated Loss Value otherwise payable in respect
thereof, the Lessee will deposit with the Lessor or the Indenture Trustee, as
the case may be, the amount of any deficiency as security on such 120th day.
If the Lessee has elected to proceed under this Section 11.03 but has not
fully performed its obligations under this Section 11.03 within 180 days of the
occurrence of such Event of Loss, the Lessee shall be deemed to have elected to
proceed under Section 11.02 hereof and shall immediately perform its
obligations thereunder, and the Lessor (or the Indenture Trustee, as the case
may be), shall apply the amounts held by it pursuant to the preceding sentence
as a credit against such obligations.
Section 11.04. Event of Loss with Respect to an Engine. (a)
Generally. 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, the Lessee shall give the Lessor and the Indenture
Trustee prompt written notice thereof and shall, as soon as practicable but in
any event within sixty (60) days after the occurrence of such Event of Loss,
duly convey or cause to be conveyed to the Lessor, a Replacement Engine for
the Engine with respect to which such Event of Loss occurred, good and
marketable title to a Replacement Engine, free and clear of all Liens not
excepted in Section 6.01 hereof, other than Sections 6.01(b),(d) and (f)
hereof, and having a value, remaining useful life and utility at least equal
to, and being in as good operating condition as, the Engine with respect to
which such Event of Loss occurred, assuming such Engine was of the value,
remaining useful life and utility and in the condition and repair required by
the terms of this Lease immediately prior to the occurrence of such Event of
Loss, provided that after any replacement, all three Engines shall be of
identical make and model and any Replacement Engines of a different
manufacturer than the original Engines shall be then commonly in use in the
commercial aviation industry on ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MD-11 airframes. The
standards set forth in this Section with respect to Replacement Engines shall
apply upon any replacement or substitution of an Engine with a Replacement
Engine pursuant to any other provision of this Lease.
(b) Conditions Precedent. Prior to or at the time of any conveyance
of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost
and expense will:
(i) furnish the Indenture Trustee with an original of, and the Lessor
with a copy of, a full warranty ▇▇▇▇ of sale, in form and substance
satisfactory to the Lessor, with respect to such Replacement Engine
together with an assignment in form and substance satisfactory to the
Lessor of any and all manufacturer's warranties applicable thereto and a
consent reasonably satisfactory to the Lessor and the Indenture Trustee
from such manufacturer to such assignment;
(ii)cause a Lease Supplement covering such Replacement Engine to be
duly executed by the Lessee and filed for recordation pursuant to the
Transportation Code, or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement and, if the
Engine being replaced was registered under the applicable laws of the
jurisdiction in which the Aircraft is then registered, the Replacement
Engine shall be registered in the same fashion;
(iii)furnish the Lessor and the Indenture Trustee with a certificate
of a nationally recognized aircraft appraiser reasonably satisfactory to
the Lessor certifying that such Replacement Engine has a value and utility
at least equal to, and is in as good operating condition as, the Engine
replaced, assuming such Engine was in at least the condition and repair
required by the terms of this Lease immediately prior to the occurrence of
such Event of Loss;
(iv)furnish the Lessor with such evidence of compliance with the
insurance provisions of Article 13 hereof with respect to such Replacement
Engine as the Lessor or the Indenture Trustee may reasonably request;
(v) comply with the provisions of Section 9.08 of the Indenture;
(vi)cause an Indenture Supplement with respect to such Replacement
Engine to be duly executed by the Lessor and the Indenture Trustee and
recorded pursuant to the Transportation Code, or the applicable laws, rules
and regulations of any other jurisdiction in which the Aircraft may be
registered as permitted by Section 6.03(b) of the Participation Agreement
in order that the Indenture shall constitute a first priority duly
perfected Lien and security interest on and in respect of such Replacement
Engine;
(vii)take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as Secured Party with the Secretary
of State of Utah and a notice filing with the Secretary of State of
Tennessee, as the Lessor or the Indenture Trustee may reasonably request in
order that such Replacement Engine be duly and properly titled in the
Lessor, leased under this Lease and subjected to the Lien of the Indenture
to the same extent as the replaced Engine;
(viii)furnish the Lessor, the Owner Participant and the Indenture
Trustee with an opinion (reasonably satisfactory in form and substance to
the Lessor, the Owner Participant and the Indenture Trustee) of counsel to
the Lessee (which may be the Lessee's General Counsel) addressed to the
Indenture Trustee and the Owner Participant to the effect that (A) the
Lessor has good title to such Replacement Engine, and (B) such Replacement
Engine has been validly subjected to the Lien of the Indenture (with the
effect and result that the Indenture constitutes a first priority duly
perfected security interest and Lien on such Replacement Engine); and
(ix)take such other action as the Indenture Trustee may reasonably
request in order that such Replacement Engine be duly and properly
subjected to the Lien of the Indenture to the same extent as the replaced
Engine.
(c) Title Transfer. Upon compliance by the Lessee with the terms of
Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens (it being understood that, in
connection with such transfer, the Owner Participant shall be responsible for
removal of Lessor's Liens attributable to it, FSB shall be responsible for
removal of Lessor's Liens attributable to it and the Owner Trustee shall be
responsible for removal of Lessor's Liens attributable to the Owner Trustee,
all in accordance with Section 7.03(b) or 7.04(b) as the case may be, of the
Participation Agreement)), all of the Lessor's right, title and interest, if
any, in and to the Engine with respect to which such Event of Loss occurred.
In connection with such transfer, the Lessee will prepare, and the Lessor will
execute or forward to the Indenture Trustee for execution, as the case may be,
a ▇▇▇▇ of sale evidencing such transfer and will deliver to the Lessee such
instrument as the Lessor shall have received from the Indenture Trustee,
releasing the Aircraft from the Lien of the Indenture. Each Replacement
Engine shall, after such conveyance, be deemed part of the property leased
under this Lease. An Event of Loss covered by this Section 11.04 shall not
result in any change in Basic Rent, Stipulated Loss Values or Termination
Values, but may result in payments to be made pursuant to the Tax Indemnity
Agreement and the Participation Agreement.
Section 11.05. Application of Payments from the Government or
Others. (a) Generally. Any payments (other than insurance proceeds the
application of which is provided for in Section 13.03 hereof) received at any
time by the Lessor or by the Lessee from any governmental authority or any
other Person, foreign or domestic, with respect to an Event of Loss resulting
from the condemnation, confiscation, theft or seizure of, or requisition of
title to or use of, the Airframe or any Engine will be applied, as
appropriate, in accordance with Section 11.05(b) or Section 11.05(c) hereof.
(b) Payments of Stipulated Loss Value. If the payments described in
Section 11.05(a) hereof are received with respect to the Airframe or with
respect to the Airframe and Engines or engines then installed on the Airframe
and the Lessee has elected the alternative set forth in Section 11.02 hereof,
so much of such payments as shall not exceed the amount required to be paid by
the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or,
if the Lien of the Indenture has not been discharged, the Indenture Trustee)
in reduction of the Lessee's obligations under Section 11.02 hereof if not
already paid by the Lessee, or, if such obligations have already been
discharged in full by the Lessee, subject to Section 11.08 hereof, such
payments shall be applied to reimburse the Lessee for its payment of such
Stipulated Loss Value and, if and to the extent specifically included in such
payment, to pay to the Lessee interest on such amount of Stipulated Loss Value
at the rate included in such payment if any. The excess, if any, remaining
after such application shall be divided between the Lessor and the Lessee as
their respective interests may appear.
(c) Payment if the Lessee Elects Replacement. If the payments
described in Section 11.05(a) hereof are received with respect to the Airframe
or with respect to the Airframe and the Engines or engines then installed on
the Airframe and the Lessee has elected the alternative set forth in Section
11.03 hereof, or if such payments are received with respect to an Engine not
then installed on the Airframe under the circumstances contemplated by Section
11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be
paid over to or retained by the Lessee, provided that the Lessee shall have
fully performed its obligations pursuant to Section 11.03 or Section 11.04
hereof, as the case may be, with respect to the Event of Loss for which such
payments are made.
Section 11.06. Requisition of an Airframe and the Installed Engines
for Use by Government. In the event of the requisition for use by the
Government or any other government of registry of the Aircraft, or any agency
or instrumentality of either (a "Requisitioning Government") of the Airframe
and the Engines or engines then installed on the Airframe during the Term,
which requisition does not constitute an Event of Loss, the Lessee shall
promptly notify the Lessor, the Indenture Trustee and the Owner Participant of
such requisition and all of the Lessee's obligations under this Lease with
respect to such Airframe and Engines or engines shall continue to the same
extent as if such requisition had not occurred except to the extent that any
failure or delay in the performance or observance of such obligations (other
than obligations for the payment of Rent and, subject to Section 7.01(f)
hereof, the maintenance of required insurance) by the Lessee shall have been
caused by such requisition. All payments received by the Lessor, the Lessee
or any permitted sublessee or transferee from the Requisitioning Government
for such use of the Airframe and Engines or engines during the Term (other
than any such requisition which constitutes an Event of Loss, as to which the
provisions of Section 11.05 hereof shall govern) shall, subject to Section
11.08 hereof, be paid over to, or retained by the Lessee or such permitted
sublessee or transferee. All payments received by the Lessor, the Lessee or
any such permitted sublessee or transferee from the Requisitioning Government
for the use of the Airframe and Engines or engines after the Term shall be
paid over to, or retained by, the Lessor (or the Lessee if it shall have
purchased the Lessor's interest therein in accordance with the provisions
hereof).
Section 11.07. Requisition for Use by Government of an Engine Not
Installed on the Airframe. In the event of the requisition for use by a
Requisitioning Government of registry of the Aircraft or any agency or
instrumentality thereof of any Engine not then installed on the Airframe, the
Lessee shall replace such Engine by complying with the terms of Section 11.04
hereof to the same extent as if an Event of Loss had occurred with respect to
such Engine as of the date of such requisition, and any payments received by
the Lessor or the Lessee from the Requisitioning Government with respect to
such requisition shall, subject to Section 11.08 hereof, be paid over to or
retained by the Lessee, provided that the Lessee shall have fully performed
its obligations under Section 11.04 hereof.
Section 11.08. Application of Payments During Existence of Certain
Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof
which is payable to or retainable by the Lessee shall not be paid to the
Lessee, or, if it has been previously paid directly to the Lessee, shall not
be retained by the Lessee, if at the time of such payment a Payment Default, a
Bankruptcy Default or an Event of Default shall have occurred and be
continuing, but shall be paid to and held by the Lessor (or the Indenture
Trustee so long as the Lien of the Indenture is in effect) as provided in
Article 23 hereof as security for the obligations of the Lessee under this
Agreement, and at such time as there shall not be continuing any such Payment
Default, Bankruptcy Default or Event of Default, such amount to the extent not
theretofore applied as provided herein, shall be paid to the Lessee.
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01. Return of Aircraft. Unless the Aircraft is purchased
by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or
upon the termination of this Lease pursuant to Article 10 or Article 17 hereof
or otherwise (including termination as a result of a rejection hereof pursuant
to any provision of the Bankruptcy Code applicable to the Lessee), the Lessee,
at its own cost and expense, will return the Aircraft by delivering it to the
Lessor on the last day of the Term or upon such earlier termination of the
Term, as the case may be, at a location on the Lessee's route system, as in
effect on the date of return, in the forty-eight (48) contiguous states of the
United States, as designated by the Lessor and reasonably acceptable to the
Lessee or, if such location designated by the Lessor is not reasonably
acceptable to the Lessee, at Memphis, Tennessee, and the Airframe shall be
fully equipped with three Engines of the same or an improved make and model as
were delivered on the Delivery Date (or Replacement Engines), free and clear
of all Liens (other than Lessor's Liens (it being understood that, in
connection with such transfer, the Owner Participant shall be responsible for
removal of Lessor's Liens attributable to it, FSB shall be responsible for
removal of Lessor's Liens attributable to it and the Owner Trustee shall be
responsible for removal of Lessor's Liens attributable to the Owner Trustee,
all in accordance with Section 7.03(b) or 7.04(b) as the case may be, of the
Participation Agreement)), including any rights of third parties under
pooling, interchange, overhaul, repair or similar agreements or arrangements,
it being understood that all such Engines and Replacement Engines so returned
shall be of identical make and model and that any Replacement Engine shall be
in at least as good operating condition and have at least the same value,
remaining useful life and utility as the Engines being replaced, assuming such
Engines were in the condition required hereunder. The Lessor will give the
Lessee at least thirty (30) days' (or five (5) Business Days' in the case of a
return pursuant to Article 17 hereof) prior written notice of the place of
such return; provided, however, that if the Lessor shall have made the request
for storage pursuant to Section 12.06 hereof, the Lessee shall return the
Aircraft to the Lessor at the site of the storage. If the Lessor furnishes to
the Lessee a written request regarding the return of the Aircraft so as to
enable the Lessor or the Owner Participant to realize "foreign trade income"
as defined in Section 923(b) of the Code or other favorable tax treatment for
Illinois state income tax purposes from the sale or release of the Aircraft,
the Lessee will comply with such proposal to the extent the Lessee can do so
without incurring any cost or expense not indemnified against by the Lessor in
a manner reasonably acceptable to the Lessee and to the extent such compliance
would not otherwise interfere with the Lessee's conduct of its business.
Section 12.02. Return of Engines. If any engine not owned by the
Lessor shall be delivered with the Airframe as set forth in Section 12.01
hereof, the Lessee, concurrently with such delivery, will, at its own cost and
expense furnish the Lessor with (i) a full warranty ▇▇▇▇ of sale, in form and
substance reasonably satisfactory to the Lessor, with respect to such engine,
(ii) an opinion of the Lessee's counsel to the effect that, upon such return,
the Lessor will acquire full right, title and interest to such engine free and
clear of all Liens (other than Lessor's Liens (it being understood that, in
connection with such transfer, the Owner Participant shall be responsible for
removal of Lessor's Liens attributable to it, FSB shall be responsible for
removal of Lessor's Liens attributable to it and the Owner Trustee shall be
responsible for removal of Lessor's Liens attributable to the Owner Trustee,
all in accordance with Section 7.03(b) or 7.04(b) as the case may be, of the
Participation Agreement)) and (iii) a certificate as described in Section
11.04(b)(iii) hereof. The Lessee shall take such other action as the Lessor
may reasonably request in order that such Replacement Engine shall be duly and
properly titled in the Lessor free and clear of all Liens (other than Lessor's
Liens (it being understood that, in connection with such transfer, the Owner
Participant shall be responsible for removal of Lessor's Liens attributable to
it, FSB shall be responsible for removal of Lessor's Liens attributable to it
and the Owner Trustee shall be responsible for removal of Lessor's Liens
attributable to the Owner Trustee, all in accordance with Section 7.03(b) or
7.04(b) as the case may be, of the Participation Agreement)), and the Lessor
will then (i) transfer to the Lessee, without recourse or warranty (except as
to the absence of Lessor's Liens (other than Lessor's Liens (it being
understood that, in connection with such transfer, the Owner Participant shall
be responsible for removal of Lessor's Liens attributable to it and FSB shall
be responsible for removal of Lessor's Liens attributable to it and the Owner
Trustee shall be responsible for removal of Lessor's Liens attributable to the
Owner Trustee, all in accordance with Section 7.03(b) or 7.04(b) as the case
may be, of the Participation Agreement)), all the Lessor's right, title and
interest in and to any Engine in lieu of which a Replacement Engine has been
delivered pursuant to Section 12.01 hereof, "as is, where is" and (ii) deliver
to the Lessee such instrument as the Lessor shall have received from the
Indenture Trustee, releasing such Engine from the Lien of the Indenture.
Section 12.03. Return of Manuals. Upon the return of the Aircraft,
the Lessee shall deliver to the Lessor all original (or photocopied or
microfilmed copies thereof) logs, manuals, certificates and technical data,
and inspection, modification, maintenance and overhaul records pertaining to
the Airframe, Engines or engines, which are required to be maintained or are
actually maintained with respect thereto under applicable rules and
regulations of the Aeronautics Authority or pursuant to the Lessee's or any
permitted sublessee's Aeronautics Authority-approved maintenance program and
all original (or photocopied or microfilmed copies thereof) records maintained
with respect to the Aircraft under the maintenance program approved by the
aeronautical authority of any other country of registry of the Aircraft. All
records shall be returned in the format necessary to allow the Lessee or any
sublessee to comply with Section 12.04(a)(i) hereof.
Section 12.04. Condition of Aircraft. (a) Required Condition. The
Aircraft when returned to the Lessor shall, at the Lessee's own cost and
expense, meet the following requirements:
(i) it shall be duly registered in the name of the Lessor or its
designee pursuant to the Transportation Code, unless the Lessor shall have
given the Lessee at least 60 days' prior written notice that the
then-existing registration shall be retained;
(ii)it shall be clean by airline and cargo handling operating
standards;
(iii)the Airframe shall be returned with the Engines, or any
replacements thereto as herein authorized, provided that the Airframe shall
have an aggregate of three Engines or engines (as authorized under Section
12.02 hereof), all of the same make and model, installed thereon, together
with the equipment, accessories or parts installed thereon on the Delivery
Date or replacements therefor (as herein authorized) and alterations,
modifications and additions thereto made in accordance with the provisions
of this Lease;
(iv)it shall be in the condition required by Section 7.01(b) hereof,
and otherwise be in as good operating condition and in as good physical
condition as when delivered, ordinary wear and tear excepted;
(v) it shall have a currently effective airworthiness certificate
issued by the Aeronautics Authority;
(vi)it shall comply with any then applicable rules and regulations
imposed by the Aeronautics Authority and, without limitation of the
foregoing, terminate all airworthiness directives of the Aeronautics
Authority applicable to the Aircraft and required to be terminated within 6
months after the end of the Term of the Lease and each Engine (including
any Replacement Engine) shall be serviceable in accordance with the
Lessee's FAA-approved maintenance program;
(vii)it shall be free and clear of all Liens and rights of others
(other than Lessor's Liens (it being understood that, in connection with
such transfer, the Owner Participant shall be responsible for removal of
Lessor's Liens attributable to it, FSB shall be responsible for removal of
Lessor's Liens attributable to it and the Owner Trustee shall be
responsible for removal of Lessor's Liens attributable to the Owner
Trustee, all in accordance with Section 7.03(b) or 7.04(b) as the case may
be, of the Participation Agreement)) including, without limitation, rights
of third parties under pooling, interchange, overhaul, repair and other
similar agreements or arrangements referred to in Section 7.02(a) hereof;
(viii)it shall be in a standard cargo configuration; and
(ix)it shall not be subject to a use prohibition of the character
described in clause (iv) of the definition of "Event of Loss".
(b) Remaining Time. If, at the time of return of the Aircraft, the
Airframe is not being maintained under a continuous maintenance program, then
the Airframe shall have remaining until the next scheduled "C" check at least
25% of the allowable hours between "C" checks permitted under the Lessee's
FAA-approved maintenance program. If, at the time of return of the Aircraft,
the Airframe is subject to a continuous maintenance program, there will be no
time-before-overhaul requirement. If, at the time of return of the Aircraft,
the Engines are not being maintained under an on-condition maintenance
program, then the average number of hours on such Engines remaining until the
next scheduled engine heavy maintenance visit shall be at least 25% of the
allowable hours between engine heavy maintenance visits permitted under the
Lessee's FAA-approved maintenance program. If, at the time of return of the
Aircraft, the Engines are subject to an on-condition maintenance program,
there will be no time-before-overhaul requirement. The Lessee shall have
maintained the Aircraft in a non-discriminatory manner with other ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ MD-11F series aircraft in the Lessee's fleet (whether owned, operated
or leased), and the Aircraft shall be in compliance in every material respect
with the Lessee's maintenance program as if the Term were not ending.
Section 12.05. Delayed Return of Aircraft. (a) If the return of the
Aircraft to the Lessor in compliance with the terms of this Lease shall be
delayed beyond the scheduled end of the Term because of the occurrence of an
event described in clause (iii)(2)(C) of the definition of Event of Loss, this
Lease shall not terminate but shall continue in full force and effect until
the earlier to occur of the return of the Aircraft hereunder or the expiration
of the six-month period (or such shorter period referred to in said clause
(iii)(2)(C)) after the scheduled end of the Term, provided that (i) Stipulated
Loss Value and Termination Value during such extension shall be an amount
determined in accordance with Section 4.01(b) hereof, (ii) the Lessee shall
pay on demand, as Basic Rent for each day of such delay and for each day this
Lease shall continue, an amount equal to the daily equivalent of the average
Basic Rent paid during the Basic Term and any Renewal Term, in each case with
such Basic Rent to include for this purpose such higher compensation being
paid by the Government pursuant to the CRAF Program and (iii) neither the
Lessee nor any other Person shall use or operate the Aircraft in any manner,
except pursuant to the activation of such CRAF Program.
(b) If, in the case of a delay in return pursuant to paragraph (a)
above, at the expiration of the six-month period following the scheduled end
of the Term the Aircraft has not been returned to the Lessor, an Event of Loss
shall be deemed to have occurred on the date of expiration of such six-month
period (or such shorter period referred to in paragraph (a) above) and on such
date (or at such earlier date as an Event of Loss pursuant to clause (iv) of
the definition of Event of Loss shall have occurred) the Lessee shall pay to
the Lessor all amounts then due hereunder together with the Stipulated Loss
Value for the Aircraft determined as of such date; provided, however, that the
Lessor shall have the right to waive payment of such Stipulated Loss Value and
accept the Aircraft on such date, "as is, where is" (including the Aircraft's
being subject to any use prohibition of the character described in clause (iv)
of the definition of Event of Loss).
(c) In any other situation in which the Aircraft is not returned to
the Lessor upon the expiration of the Term (other than due to a purchase of
the Aircraft by the Lessee pursuant to this Lease or by a purchaser under
Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day
of such delay and this Lease shall continue, an amount equal to the Rent per
diem at a rate equal to the greater of average Basic Rent or the Fair Market
Rental; provided, however, that nothing in this paragraph shall be deemed (i)
to relieve the Lessee in any respect from any Default or Event of Default
arising from the failure to return the Aircraft at the time or in the
condition required by the Operative Agreements or (ii) to permit the Lessee or
any sublessee to operate or use the Aircraft otherwise than in connection with
effecting such return.
Section 12.06. Storage. Upon any expiration or termination of this
Lease, at the written request of the Lessor given at least fifteen (15) days
prior to such expiration or termination, the Lessee will arrange, or will
cause to be arranged, at no charge to the Lessor, storage at a ramp storage
facility for the Aircraft located in the forty-eight (48) contiguous states of
the United States and selected by the Lessee and reasonably acceptable to the
Lessor if not at one of the Lessee's principal maintenance bases for a period
of up to thirty (30) days commencing on the date the Aircraft is returned
substantially in the condition required under this Section 12 and if the Lessor
so requests the Lessee in writing ten (10) days before expiration of such
thirty (30) day period, the Lessee shall continue to provide or cause to be
provided storage at the Lessor's cost for a further period of sixty (60) days.
The maintenance and risk of loss of, and responsibility for obtaining
insurance on, the Aircraft shall be the responsibility of the Lessor during
any period of storage; provided, however, the Lessee will, upon written
request of the Lessor and at the Lessor's expense, not to exceed the Lessee's
incremental cost of such service, obtain insurance for such property
(including, if possible, coverage through its fleet policy).
Section 12.07. Special Markings. Upon any expiration or termination
of the Term, the Lessee shall, at the Lessee's cost, completely strip from the
interior and the exterior of the Aircraft all insignias and other distinctive
markings of the Lessee or any sublessee and repaint the stripped down areas in
matching exterior colors in accordance with industry standards.
Section 12.08. Lessor's Option to Purchase Parts. At any time after
the Lessee has advised the Lessor that it has determined not to renew this
Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to
the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee
intends, and is permitted, to remove as provided in Section 9.02(b) above, and
the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase
any or all of such Parts from the Lessee upon the expiration of the Term at
their then Fair Market Value determined in accordance with the provisions of
Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article
12, if the Lessor does not elect to exercise its option under this Section
12.08, the Lessee will, at its own cost and expense, remove such Parts
described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the
Lessor may request.
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance. (a) Comprehensive Airline Liability and Property Damage
Liability Insurance. The Lessee, at its own cost and expense, will maintain
or cause to be maintained with respect to the Aircraft, (i) comprehensive
airline liability insurance including, without limitation, passenger legal
liability and property damage liability insurance and cargo legal liability in
such amounts, against such risks (including, without limitation, contractual
liability and allied perils liability but excluding war risk insurance (except
as required under the second sentence of this Section 13.01(a)), with such
retentions (subject to the limitations set forth in Section 13.06 hereof) and
on such terms and conditions (including coverage for cost of claims) as the
Lessee customarily maintains with respect to similar aircraft and engines
which comprise the fleet of the Lessee, and (ii) such insurance against such
other risks as is usually carried by similar corporations engaged in the same
or similar business and similarly situated as the Lessee and owning or
operating aircraft and engines similar to the Aircraft and Engines; provided
that in no event shall the limits of liability for all such insurance be less
than the amount, per occurrence, as set forth on the insurance certificate
delivered on the Delivery Date unless and only so long as the Aircraft is not
operated and all risk-ground insurance for the Aircraft on the ground is
maintained in the same manner and covering the same risks as is from time to
time applicable to other aircraft owned or operated by the Lessee on the
ground and not in operation. The Lessee will be required to maintain war risk
insurance if the Aircraft is operated in a war zone and if it is the custom
for major international Air Carriers flying comparable routes to carry such
insurance, but only to the extent that such insurance is available on
commercially reasonable terms. All insurance required by this Section
13.01(a) shall be maintained with insurers of recognized responsibility.
(b) Government Indemnification. Notwithstanding Section 13.01(a)
hereof, in the event of the requisition for use by the Government of the
Airframe or the Airframe and the Engines or engines then installed on the
Airframe, the Lessee shall maintain throughout the period of such requisition
such insurance as would otherwise be required under this Section 13.01;
provided that the Lessor shall accept, in lieu of such insurance coverage,
written indemnification or insurance from the Government which is
substantially the same as otherwise required under this Article 13.
(c) Policy Terms. Any policy of insurance carried and maintained in
accordance with this Section 13.01, and any policy taken out in substitution or
replacement for any such policy subject to the terms, conditions and
limitations thereof, shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft, the Indenture Trustee in its individual
capacity and as trustee/mortgagee of the Aircraft and the Owner Participant
and each of their respective officers and directors in their respective
capacities as such as additional insureds (hereinafter in this paragraph
(c) sometimes referred to as "Additional Insured");
(ii)provide that, in respect of the interest of any Additional
Insured in such policies, the insurance shall not be invalidated by any
action or inaction of the Lessee or any Additional Insured as defined under
the policy of insurance required under this Section 13.01 (other than any
action or inaction of such Additional Insured) and shall insure each
Additional Insured regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Lessee or any
other Additional Insured (other than any breach or violation of any
warranty, declaration or condition by such Additional Insured) as defined
under the policy of insurance required under this Section 13.01;
(iii)provide that if such insurance is cancelled for any reason, or
any substantial change is made in the policies which adversely affect the
scope of the coverage required herein, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to any Additional Insured for thirty (30) days (except
in the case of war risk coverage in which event the applicable period shall
be seven (7) days or such other period as may be customary) after receipt
by each such Additional Insured of written notice from such insurers or
such insurers' broker of such cancellation, change or lapse;
(iv)provide that the insurers shall waive any rights of subrogation
against each Additional Insured, to the extent that the Lessee has waived
its rights under this Lease and the Participation Agreement; provided that
the exercise by insurers of rights of subrogation derived from rights
retained by the Lessee shall not, in any way, delay payment of any claim
that would otherwise be payable by such insurers but for the existence of
rights of subrogation derived from rights retained by the Lessee;
(v) provide that all of the provisions of such policy shall operate
in the same manner as if there were a separate policy covering each
Additional Insured; provided, that such policies shall not operate to
increase any insurer's limit of liability;
(vi)be primary, without right of contribution from any other insurance
which is carried by any Additional Insured with respect to its interest in
the Aircraft;
(vii)provide that no Additional Insured shall have any obligation or
liability for premiums or other payments, if any, in connection with such
insurance; and
(viii) provide that such insurer shall waive the right of such
insurer to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional
Insured.
Section 13.02. Insurance Against Loss or Damage to Aircraft and
Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall
maintain or cause to be maintained in effect, with insurers of recognized
responsibility, all-risk ground and flight aircraft hull insurance covering
the Aircraft and all-risk coverage with respect to any Engines and Parts while
removed from the Aircraft and not replaced by similar Engines or Parts,
including in each case war-risk and allied perils, hijacking (air piracy) and
governmental confiscation and expropriation insurance (except with respect to
the country of registry) with such retentions (subject to the limitations set
forth in Section 13.06 hereof) and in such form, and upon such terms and
conditions (including coverage for cost of claims), and in amounts as the
Lessee customarily maintains with respect to the aircraft in the Lessee's
fleet of the same type and model and operated on the same routes as the
Aircraft (except that the Lessee shall be required to maintain (i) allied
perils, hijacking (air piracy) and governmental confiscation and expropriation
insurance (except with respect to the country of registry) if the Aircraft is
operated on routes where the custom is for major international Air Carriers
flying comparable routes to carry such insurance and (ii) war risk insurance
only if the Aircraft is operated in a war zone or if it is the custom for
major international Air Carriers flying comparable routes to carry such
insurance), provided that such insurance shall at all times while the Aircraft
is subject to this Lease and the Lien of the Indenture be on an agreed-value
basis for an amount not less than an amount equal to the Stipulated Loss Value
for the Aircraft from time to time.
(b) Policy Terms. Any policies carried and maintained in accordance
with this Section 13.02 and any policies taken out in substitution or
replacement for any such policies subject to the terms, conditions and
limitations thereof shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft (or, so long as the Indenture shall not have
been discharged, the Indenture Trustee) as sole loss payee (hereinafter in
this paragraph (b) sometimes referred to as "Loss Payee");
(ii)provide with respect to coverage provided under this Section
13.02, that (i) in the event of a loss involving proceeds in the aggregate
in excess of $6,000,000, the proceeds in respect of such loss up to an
amount equal to the Stipulated Loss Value for the Aircraft shall be payable
to the Lessor (or, so long as the Indenture shall not have been discharged,
the Indenture Trustee), it being understood and agreed that in the case of
any payment to the Lessor (or the Indenture Trustee) otherwise than in
respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall in
the aggregate upon receipt of evidence satisfactory to it that the damage
giving rise to such payment shall have been repaired or that such payment
shall then be required to pay for repairs then being made, pay the amount
of such payment to the Lessee or its order, and (ii) the entire amount of
any loss involving proceeds in the aggregate of $6,000,000 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 the Lessee or its order;
(iii)provide that if such insurance is cancelled for any reason or any
substantial change is made in the policies which adversely affects the
scope of the coverage required herein, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to the Loss Payee for thirty days (except in the case
of war-risk coverage in which event the applicable period shall be seven
(7) days or such other period as may be customary) after receipt by the
Loss Payee of written notice from such insurer of such cancellation, change
or lapse;
(iv)provide that, in respect of the interest of the Lessor (in its
individual capacity and as the Owner Trustee), the Owner Participant or the
Indenture Trustee (in their respective capacities as such) in such
policies, the insurance shall not be invalidated by any action or inaction
of the Lessee or the Loss Payee (other than any action or inaction of such
Loss Payee) and shall insure the Lessor (in its individual capacity and as
Owner Trustee), the Owner Participant and the Indenture Trustee regardless
of any breach or violation of any warranty, declaration or condition
contained in such policies by the Lessee or the Loss Payee (other than any
breach or violation of any warranty, declaration or condition by the Loss
Payee) as defined under the policy of insurance required under this Section
13.02;
(v) provide that the insurers shall waive any rights of subrogation
against the Lessor (in its individual capacity and as Owner Trustee), the
Owner Participant and the Indenture Trustee to the extent that the Lessee
has waived its rights under this Lease or the Participation Agreement;
provided that the exercise by insurers of rights of subrogation derived
from rights retained by the Lessee shall not, in any way, delay payment of
any claim that would otherwise be payable by such insurers but for the
existence of rights of subrogation derived from rights retained by the
Lessee;
(vi)be primary and without rights of contribution from any other
insurance which is carried by the Loss Payee with respect to its interest
in the Aircraft;
(vii)provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines, or spare parts, as the case may be)
such insurer shall waive any right of such insurer to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Loss Payee;
(viii) provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines or spare parts, as the case may be)
no Loss Payee shall have any obligation or liability for premiums or other
payments, if any, in connection with such insurance; and
(ix)in the event that separate policies are maintained to cover
all-risk ground and flight aircraft, hull and war risks and allied perils
insurance, include a 50/50 provisional claims settlement clause as
contained in the policies of insurance maintained by the Lessee with
respect to all other aircraft in the Lessee's fleet, and a copy of the
50/50 provisional claims settlement clause in effect on the Delivery Date
shall be attached to the insurance certificate issued on the Delivery Date.
Section 13.03. Application of Insurance Proceeds. (a) Generally.
All insurance proceeds (other than proceeds from policies carried by the
Lessor, the Indenture Trustee or the Owner Participant) received under
policies described in Section 13.02 hereof as the result of the occurrence of
an Event of Loss with respect to the Airframe or an Engine will be applied as
follows:
(i) if such proceeds are received with respect to the Airframe or with
respect to the Airframe and the Engines or engines then installed on the
Airframe and the Lessee has elected or is deemed to have elected the
alternative set forth in Section 11.02 hereof, so much of such proceeds as
shall not exceed the amounts required to be paid by the Lessee pursuant to
said Section 11.02 hereof shall be applied in reduction of the Lessee's
obligation to pay such amounts if not already paid by the Lessee, or if
already paid by the Lessee, shall be applied to reimburse the Lessee for
its payment of such amounts; or
(ii)if such proceeds are received with respect to the Airframe or the
Airframe and the Engines or engines then installed on the Airframe and the
Lessee has elected the alternative set forth in Section 11.03 hereof, or if
such proceeds are received with respect to an Engine not then installed on
the Airframe and not replaced by an Engine or engine under the
circumstances contemplated by Section 11.04 hereof, all such proceeds shall
be paid to the Indenture Trustee (unless the Indenture has been discharged
in which case paid to the Lessor) for disbursement to the order of the
Lessee, after the Lessee shall have fully performed the terms of Section
11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for
which such proceeds are paid.
(b) Payment if no Event of Loss. The insurance proceeds of any
property damage loss not constituting an Event of Loss with respect to the
Airframe or an Engine will be applied in payment (or to reimburse the Lessee)
for repairs or for replacement property in accordance with Articles 7 and 8
hereof, if not already paid for by the Lessee, and any balance remaining after
compliance with said Articles 7 and 8 hereof with respect to such loss shall
be paid to the order of the Lessee.
(c) Application of Payments During Existence of an Event of Default.
Any amount referred to in this Article 13 which is payable to or retainable by
the Lessee shall not be paid to or retained by the Lessee if at the time of
such payment or retention a Payment Default or Bankruptcy Default or an Event
of Default shall have occurred and be continuing, but shall be held by or paid
over to the Indenture Trustee (unless the Indenture has been discharged in
which case such amount shall be paid to the Lessor) to be held in accordance
with Article 23 hereof, as security for the obligations of the Lessee under
this Lease and, if an Event of Default shall have occurred and be continuing,
applied against the Lessee's obligations hereunder as and when due. At such
time as there shall not be continuing any such Payment Default or Bankruptcy
Default or Event of Default, such amount shall be paid to the Lessee to the
extent not previously applied in accordance with the preceding sentence.
(d) Information. If any Additional Insured becomes subject to any
claim covered by any insurance policy maintained pursuant to this Article 13,
the Lessee shall make available any information required by such Additional
Insured in connection with such claim.
Section 13.04. Reports. On or before the Delivery Date and
thereafter annually on or before the scheduled expiration date for such policy
during the Term, the Lessee will cause its aviation insurance broker to
furnish to the Lessor and the Indenture Trustee a signed report, stating the
types of coverage and limits carried and maintained on the Aircraft and
certifying that such insurance complies with the terms and conditions of this
Lease. The Lessee will cause such aviation insurance broker to advise the
Lessor, the Owner Participant and the Indenture Trustee in writing promptly
of any default in the payment of any premium and of any other act or omission
on the part of the Lessee of which it has knowledge and which might
invalidate, cause cancellation of or render unenforceable all or any part of
any insurance carried by the Lessee with respect to the Aircraft. The Lessee
will cause such insurance broker to agree to advise the Lessor, the Indenture
Trustee and the Owner Participant in writing if and when it becomes evident to
such broker that any insurance policy carried and maintained on the Aircraft
pursuant to this Article 13 will not be renewed at the scheduled expiration
date for such policy. If the Lessee shall fail to maintain insurance as
required, the Lessor may, at its option, provide such insurance, and in such
event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental
Rent, for the cost of such insurance; provided, however, that no exercise of
said option shall affect the provisions of this Lease, including the
provisions that failure by the Lessee to maintain the prescribed insurance
shall constitute an Event of Default or otherwise constitute a waiver of any
other rights the Lessor may have against the Lessee.
Section 13.05. Lessor's Insurance. The Lessor, the Indenture
Trustee or the Owner Participant may insure the Airframe or any Engine at its
own cost and expense, including insuring the Aircraft for amounts in excess of
the Stipulated Loss Value of the Aircraft, provided that any insurance so
maintained by the Lessor, the Indenture Trustee or the Owner Participant shall
not result in a reduction of coverage or amounts payable under insurance
required or permitted to be maintained by the Lessee under this Article 13 or
increase the cost to the Lessee of maintaining such insurance; provided
further, that any insurance policies of the Lessor, the Indenture Trustee or
the Owner Participant insuring the Airframe or any Engine shall provide for a
release to the Lessee of any and all salvage rights in and to the Airframe or
any Engine.
Section 13.06. Self-Insurance. The Lessee may self-insure the risks
required to be insured against by Sections 13.01 and 13.02 hereof in such
manner and in such reasonable amounts as are then applicable to other aircraft
or engines of the Lessee of value comparable to the Aircraft, but in no case
shall such self-insurance with respect to all aircraft in the Lessee's fleet
in aggregate exceed for any 12-month policy year an amount equal to the lesser
of (i) 50% of the highest insured value of any single aircraft in the Lessee's
fleet and (ii) 1.5% of the average aggregate insured value from time to time
of the Lessee's entire aircraft fleet provided that a standard deductible per
occurrence per aircraft (and/or retentions) not in excess of the amount
customarily allowed as a deductible in the industry shall be permitted in
addition to the above-mentioned self-insurance. The foregoing shall not
permit the Lessee to discriminate as between insurance coverage on the
Aircraft and insurance which the Lessee maintains with respect to similar
aircraft owned or operated by the Lessee operating on similar routes in
similar locations.
ARTICLE 14
INSPECTION
Section 14.01. Right of Inspection. At reasonable times, and upon
at least ten (10) Business Days' prior written notice to the Lessee, the
Lessor, the Indenture Trustee or the Owner Participant, or their respective
authorized representatives, may inspect the Aircraft and upon at least ten
(10) Business Days' prior written notice all Aeronautics Authority required
books and records of the Lessee and any sublessee relating to the maintenance
of the Aircraft and such Persons shall keep any information obtained thereby
confidential and shall not disclose the same to any Person except to a Person
described in Section 18.01 of the Participation Agreement. Any such
inspection of the Aircraft may be undertaken during any letter check or heavy
maintenance visit with respect to the Aircraft and shall be a visual,
walk-around inspection of the interior and exterior of the Aircraft and shall
not include opening any panel, bays or the like without the express consent of
the Lessee (except to the extent any such inspection takes place when any such
panel, bays or the like are open). Notwithstanding the previous sentence, the
Lessor, the Indenture Trustee, the Owner Participant or their respective
authorized representatives shall, so long as no Payment Default, Bankruptcy
Default or Event of Default shall have occurred and be continuing, each be
entitled to inspect the Aircraft only one time during any consecutive twelve
month period (except in the last year of the Term when such inspection may be
made twice by such Person). The Lessee shall make any permitted sublease or
transfer permitted under Section 7.02 hereof expressly subject to inspection
rights consistent with this Article 14. The Lessee agrees to respond in a
timely fashion to any of the Owner Trustee's, the Indenture Trustee's or the
Owner Participant's inquiries regarding (x) the location of the Aircraft or
any Engine or (y) the scheduling of any letter check or heavy maintenance
visit with respect to the Aircraft.
Section 14.02. No Obligation to Inspect. None of the Lessor, the
Indenture Trustee or the Owner Participant shall have any duty to make any
inspection pursuant to Section 14.01 hereof and no such party shall incur any
liability or obligation by reason of making or not making any such inspection.
ARTICLE 15
ASSIGNMENT
Section 15.01. Lessee's Right to Assign. The Lessee shall not, and
shall have no authority or power to assign, convey or sublease any of its
rights under this Lease without the prior written consent of the Lessor except
(i) as expressly provided in Section 7.02 hereof, or (ii) to a wholly-owned
subsidiary of the Lessee which shall be a certificated U.S. Air Carrier. Any
such assignment, conveyance or sublease shall in no way relieve the Lessee
from any obligation under any Operative Agreement, which shall be and remain
primary obligations of the Lessee. The Lessor agrees that it will not assign
or convey its right, title and interest in and to this Lease or the Aircraft
except as contemplated by or provided in this Lease, the Trust Agreement, the
Indenture or the Participation Agreement. The terms and provisions of this
Lease shall be binding upon and inure to the benefit of the Lessor and the
Lessee and their respective successors and permitted assigns, and shall inure,
to the extent expressly provided herein and therein, to the direct benefit of,
and in accordance with the provisions of the Indenture and the Participation
Agreement shall be enforceable by, the Indenture Trustee, the Lessor and their
respective successors and permitted assigns.
Section 15.02. Citizenship. The Lessee will at all times be a duly
certificated U.S. Air Carrier under the Transportation Code.
ARTICLE 16
EVENTS OF DEFAULT
Section 16.01. 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:
(a) the Lessee shall fail to make any payment of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value, as the case may be,
within five (5) Business Days after the date when due; or
(b) the Lessee shall fail to make any payment of Supplemental Rent
(other than amounts described in clause (a) above) within thirty (30) days
after the Lessee has received written notice from the Person entitled to
receive such payment stating that such payment is due; or
(c) the Lessee shall fail to procure, carry and maintain insurance on
or in respect of the Aircraft at any time in accordance with the provisions
of Article 13 or such insurance lapses or is cancelled, provided that if
the Aircraft is grounded, as long as the Aircraft is insured as required
while on the ground and not operated, no such lapse or cancellation shall
constitute an Event of Default until the earlier of thirty (30) days (or
seven (7) days or such shorter time as may be standard in the industry with
respect to war risk coverage) after receipt by any Additional Insured of
written notice of such lapse or cancellation or the date that such lapse or
cancellation is effective as to any Additional Insured; or
(d) the Lessee shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it under any Operative
Agreement (excluding the Tax Indemnity Agreement) or any other written
agreement of the Lessee entered into in connection with the transactions
contemplated by the Operative Agreements and such failure shall continue
unremedied for a period of thirty (30) days from the date on which the
Lessee shall have actual knowledge thereof (whether by reason of notice
from the Lessor or the Owner Participant of such failure or otherwise),
provided, that in the event such failure is curable and so long as (but for
no longer than 90 days after such 30-day period) the Lessee shall be
diligently attempting to cure such failure, such failure shall not
constitute an Event of Default; provided, further, that failure of the
Lessee to maintain the registration of the Aircraft under the
Transportation Code pursuant to the Lessee's covenants and agreement in
Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of
this Lease, when the lapse of such registration is solely because the Owner
Participant or the Lessor has ceased to be a Citizen of the United States,
shall not constitute a Default or an Event of Default; or
(e) an order for relief shall be entered in respect of the Lessee by
a court having jurisdiction in the premises in an involuntary case under
the federal bankruptcy laws as now or hereafter in effect; or the Lessee
shall consent to the appointment of a custodian, receiver, trustee or
liquidator of itself or of a substantial part of its property; or the
Lessee is not paying, or shall admit in writing its inability to pay, its
debts generally as they come due or shall make a general assignment for the
benefit of creditors; or the Lessee shall file, or the Board of Directors
of the Lessee shall authorize the filing of, or grant one or more persons
authority (at their discretion) to make a filing for, a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking reorganization
in a proceeding under any bankruptcy laws (as now or hereafter in effect)
or an answer admitting the material allegations of a petition filed against
the Lessee in any such proceeding; or the Lessee shall file, or the Board
of Directors of the Lessee shall authorize the Lessee to, or grant one or
more persons authority (at their discretion) to, seek relief by voluntary
petition, answer or consent, under the provisions of any other or future
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(f) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Lessee, a
custodian, receiver, trustee, or liquidator of the Lessee or of any
substantial part of its property, or sequestering any substantial part of
the property of the Lessee, or granting any other relief in respect of the
Lessee under the federal bankruptcy laws or other insolvency laws, and any
such order, judgment or decree of appointment or sequestration shall remain
in force undismissed or unvacated for a period of sixty (60) days after the
date of its entry; or
(g) a petition against the Lessee in a proceeding under the federal
bankruptcy law or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within sixty (60)
days, or under the provisions of any law providing for reorganization or
winding-up of corporations which may apply to the Lessee, any court of
competent jurisdiction shall assume jurisdiction, custody or control of the
Lessee or of any substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished or unterminated for
a period of sixty (60) days; or
(h) any representation or warranty made by the Lessee in this Lease
or in the Participation Agreement or in any document or certificate
furnished by the Lessee in connection with or pursuant to this Lease or the
Participation Agreement (except for the Tax Indemnity Agreement) shall at
any time prove to have been incorrect at the time made in any respect
material to the transactions contemplated by this Lease and the other
Operative Agreements and shall remain material and unremedied for a period
of thirty (30) days after the Lessee shall have actual knowledge thereof
(whether by reason of receipt of written notice thereof or otherwise).
ARTICLE 17
REMEDIES
Section 17.01. Remedies Upon Lessee's Default. (a) Remedies
Generally. Upon the occurrence of any Event of Default and at any time after
such occurrence so long as the same shall be continuing, the Lessor may, at
its option, declare this Lease to be in default (except that no such
declaration shall be required in the case of an Event of Default pursuant to
paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be
deemed declared in default without any further act or notice), and at any time
thereafter the Lessor may do, and the Lessee shall comply with, one or more
of the following with respect to all or any part of the Airframe and the
Engines, as the 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:
(i) Demand in writing that the Lessee shall, and upon such written
demand the Lessee shall, at the Lessee's own cost and expense, return
promptly to the Lessor all or such part of the Airframe and the Engines as
the Lessor may demand in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Article 12 hereof,
or the Lessor, at its option, may enter upon the premises where such
Airframe or Engines are located or believed to be located and take
immediate possession of and remove such Airframe and Engines (together with
any engine which is not an Engine but is installed on the Airframe, subject
to all of the rights of the owner, lessor, Lien holder or secured party of
such engine) without the necessity for first instituting proceedings, or by
summary proceedings or otherwise, all without liability of the Lessor to
the Lessee for or by reason of such entry or taking of possession, whether
for the restoration of damage to property caused by such action or
otherwise;
(ii)With or without taking possession thereof, sell or otherwise
dispose of the Airframe or any Engine, at public or private sale and with
or without advertisement or notice to the Lessee, as the Lessor may
determine, and the Lessor may hold the Lessee liable for any installment of
Basic Rent and Renewal Rent due on or before the date of such sale (and, if
Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of
the installment of Basic Rent or Renewal Rent due on the next succeeding
Rent Payment Date in respect of any period commencing on the immediately
preceding Rent Payment Date to the date of such sale), or hold, use,
operate, lease to others or keep idle all or any part of the Airframe or any
Engine as the Lessor, in its sole discretion, may determine, in any such
case free and clear of any rights of the Lessee except as otherwise set
forth in this Article 17, and without any duty to account to the Lessee
with respect to such action or inaction or for any proceeds except to the
extent required by Section 17.01(a)(iv) hereof; in the event the Lessor
elects to exercise its rights under said Section, and in connection with
any sale of the Aircraft or any part thereof pursuant to this Article 17,
the Lessor, the Indenture Trustee, the Owner Participant or any Holder may
bid for and purchase such property;
(iii)Whether or not the Lessor shall have exercised or shall later at
any time exercise any of its rights under Section 17.01(a)(i) or
17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying
a payment date not earlier than 5 days from the date of such notice, may
demand that the Lessee pay to the Lessor, and the Lessee shall pay to the
Lessor on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent or
Renewal Rent due on Rent Payment Dates occurring after the payment date
specified in such notice), any installment of Basic Rent, Renewal Rent and
any Supplemental Rent due on or before such payment date, and any other
Supplemental Rent accrued through such date (and, if Basic Rent or Renewal
Rent is payable in arrears, the pro rata portion of the installment of
Basic Rent or Renewal Rent due on the next succeeding Rent Payment Date in
respect of the period commencing on the Stipulated Loss Value Determination
Date referred to below and ending on the date of such payment), plus an
amount equal to the excess, if any, of the Stipulated Loss Value for the
Aircraft, computed as of the Stipulated Loss Value Determination Date on or
next preceding the payment date specified in such notice over, at the
Lessor's option, the Fair Market Value or the Fair Market Rental (in each
case, on an "as-is, where-is" basis) of the Aircraft for the remainder of
the Term applicable thereto, after discounting such Fair Market Rental
semi-annually to the present value as of such Rent Payment Date at the Past
Due Rate computed as of the Stipulated Loss Value Determination Date on or
next preceding the payment date specified in such notice, together in each
case, with interest, to the extent permitted by applicable law, at the Past
Due Rate on the amount of such Stipulated Loss Value, from the date as of
which such Stipulated Loss Value is computed to the date of actual payment
of such amount, and after payment in full by the Lessee of the amount
specified above and all other amounts due from the Lessee under this Lease
and the other Operative Agreements, the Lessor shall promptly transfer
(without recourse or warranty other than as to the absence of the Lessor's
Liens (it being understood that, in connection with such transfer, the
Owner Participant shall be responsible for removal of Lessor's Liens
attributable to it, FSB shall be responsible for removal of Lessor's Liens
attributable to it and the Owner Trustee shall be responsible for removal
of Lessor's Liens attributable to the Owner Trustee, all in accordance with
Section 7.03(b) or 7.04(b) as the case may be, of the Participation
Agreement)) all of its right, title and interest in the Aircraft or such
portion, to the Lessee;
(iv)In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof,
shall have sold the Airframe and/or any Engine, the Lessor, in lieu of
exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall
so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay
to the Lessor, on the date of such sale, as liquidated damages for loss of
a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent
due after the date on which such sale occurs) any unpaid Basic Rent or
Renewal Rent due on or before the date on which such sale occurs (and, if
Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of
the installment of Basic Rent or Renewal Rent due on the next succeeding
Rent Payment Date in respect of any period commencing on the Stipulated
Loss Value Determination Date referred to below and ending on the date of
such sale), and any Supplemental Rent due on or before the date (and any
other Supplemental Rent accrued through such date) on which such sale
occurs, plus an amount equal to the excess, if any, of (A) the Stipulated
Loss Value for the Aircraft, computed as of the Stipulated Loss Value
Determination Date next preceding the sale date, over (B) the net proceeds
of such sale (after deduction of all of the Lessor's costs and expenses of
such sale, including, without limitation, sales or transfer taxes, costs of
storage, overhaul, maintenance, preparation and transportation of the
Aircraft and brokers' and attorneys' fees), together with interest, to the
extent permitted by applicable law, at the Past Due Rate, on the amount of
such excess from the date of such sale to the date of actual payment by the
Lessee;
(v) Proceed by appropriate court action to enforce the terms of this
Lease or to recover damages for its breach;
(vi)Terminate or rescind this Lease as to the Airframe or any or all
of the Engines; or
(vii)Exercise any other right or remedy which may be available to the
Lessor under applicable law.
(b) Cost of Exercise of Remedies. In addition, the Lessee shall be
liable, except as otherwise provided above, for any and all unpaid Rent due
before, after or during the exercise of any of the Lessor's remedies, for all
amounts payable by the Lessee under the Participation Agreement before or
after any termination hereof, and for all reasonable legal fees and other
costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner
Participant by reason of the occurrence of any Event of Default or the
exercise of the Lessor's remedies, including, without limitation, all costs
and expenses incurred in connection with the return of the Airframe or any
Engine in accordance with the terms of Article 12 hereof or in placing the
Airframe or Engines in the condition and state of airworthiness required by
such Article or in connection with any inspection, use, operation,
maintenance, insurance, storage, or leasing carried out as part of such
exercise.
Section 17.02. Cumulative Remedies. Except as otherwise provided, no
remedy referred to in this Article 17 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies.
Section 17.03. Waiver. No express or implied waiver by the 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. To the extent permitted by
applicable law, the Lessee waives any rights now or in the future conferred by
statute or otherwise which may require the Lessor to sell, lease or otherwise
use the Airframe or any Engine in mitigation of the Lessor's damages or which
may otherwise limit or modify any of the Lessor's rights or remedies under
this Article 17. The Lessor's access to the Aircraft is of the essence and
shall not be impaired.
Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee
fails to make any required payment of Supplemental Rent or fails to perform or
comply with any of its agreements contained in this Lease whether or not such
failure shall constitute an Event of Default hereunder, the Lessor may (but
shall not be obligated to) make such payments or perform or comply with such
agreement, and the amount of such payment and the amount of the reasonable
costs and expenses of the Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, together with interest
(to the extent permitted by applicable law) at the Past Due Rate from the date
of the making of such payment or the incurring of such costs and expenses by
the Lessor to the date of payment of such Supplemental Rent or other amount by
the Lessee, shall be deemed Supplemental Rent payable by the Lessee upon
demand. No such payment or performance by the Lessor shall be deemed to waive
any Default or Event of Default or relieve the Lessee of its obligations
hereunder.
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01. Quiet Enjoyment. So long as no Event of Default
shall have occurred and be continuing, the Lessor covenants that neither it
nor any other Person lawfully claiming through it (other than the holder of a
Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof)
shall interfere with the Lessee's right to quietly enjoy the Aircraft without
hindrance or disturbance by it or any such other Person; provided, however,
the Lessor shall not be liable for any act or omission of the Indenture
Trustee or any other Person claiming through the Indenture Trustee.
ARTICLE 19
FURTHER ASSURANCES
Section 19.01. Further Assurances. Promptly upon the execution and
delivery of this Lease, the Trust Agreement and the Indenture, the Lessee will
cause each of them to be duly filed for recordation in accordance with the
Transportation Code and will maintain the recordation of the Indenture until
the Lien of the Indenture shall have been discharged pursuant to the terms of
the Indenture. In addition, the Lessee will, at the Lessee's own cost and
expense, at the request of the Lessor, the Owner Participant or the Indenture
Trustee, as the case may be, promptly and duly execute and deliver to the
Lessor, the Owner Participant and the Indenture Trustee such further documents
and assurances to carry out the intent and purpose of this Lease and the
Indenture and to establish and protect the rights and remedies created or
intended to be created in favor of the Lessor under this Lease, and of the
Owner Participant under the Trust Agreement, and of the Indenture Trustee
under the Indenture, including, without limitation, the execution and filing
of Uniform Commercial Code financing and continuation statements, the
execution and delivery of supplements and amendments to this Lease and the
Indenture, in recordable form, subjecting to this Lease and the Indenture any
Replacement Airframe and/or Replacement Engines delivered by the Lessee
pursuant to Section 11.03 hereof and any Replacement Engine delivered by the
Lessee pursuant to Section 11.04 hereof and the recording and filing of
counterparts of this Lease and the Indenture in accordance with the laws of
such jurisdictions as the Lessor or the Indenture Trustee may from time to
time deem advisable. The foregoing does not, except as expressly provided
therein, impose upon the Lessor any additional liabilities not otherwise
contemplated by this Lease.
ARTICLE 20
NET LEASE
Section 20.01. Nature of Lease. (a) This Lease is a net lease, it
being the intention of the parties hereto that the obligations of the Lessee
to pay all costs and expenses of every character in connection with the use,
operation, maintenance and repair of the Airframe and each Engine by the
Lessee, including, without limitation, the costs and expenses particularly set
forth in this Lease, shall be absolute and unconditional, shall be separate
and independent covenants and agreements, and shall continue unaffected unless
and until the covenants have been terminated pursuant to an express provision
of this Lease. The Lessee's obligation to pay Rent and all amounts payable by
the Lessee under this Lease or the Participation Agreement shall be absolute
and unconditional and (except as otherwise expressly provided with respect to
notice of Supplemental Rent) shall be paid without notice or demand, and such
obligation shall not be affected by any circumstance whatsoever, including,
without limitation:
(i) any set-off, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Owner Participant, any
Holder, the Indenture Trustee or anyone else for any reason (including,
without limitation, any breach by the Lessor or the Owner Participant or
the Indenture Trustee or any Holder of their respective representations,
warranties, agreements or covenants contained in any of the Operative
Agreements);
(ii)any defect in the title, airworthiness, registration, eligibility
for registration under the Transportation Code (and the regulations
thereunder) or under any of the laws or regulations of any other country of
registry of the Aircraft, condition, design, operation, merchantability or
fitness for use of, suitability for a particular purpose of, or any damage
to or loss or destruction of, the Aircraft or any portion thereof, or any
interruption or cessation in the use or possession of the Aircraft by the
Lessee or any sublessee for any reason including, without limitation, by
reason of governmental action or any doctrine of force majeure or
impossibility of performance;
(iii)any insolvency, bankruptcy, reorganization or similar case or
proceedings by or against the Lessor, the Lessee, the Indenture Trustee or
the Owner Participant or any other Person;
(iv)any Liens, encumbrances or rights of any other Person with
respect to the Aircraft, the invalidity or unenforceability or lack of due
authorization or other infirmity of this Lease or any other Operative
Agreement or document or instrument executed pursuant hereto or thereto, or
any lack of right, power or authority of the Lessor or the Lessee or any
sublessee or any other party to any other Operative Agreement to enter into
this Lease or any other Operative Agreement or any such document or
instrument; or
(v) any other circumstance, happening or event whatsoever, whether or
not unforeseen, or similar to any of the foregoing.
(b) To the extent permitted by applicable law, the Lessee waives any
and all rights which it may now have or which at any time it may have
conferred upon it, by statute or otherwise, to terminate, cancel, quit,
rescind or surrender this Lease, the Airframe, or any Engine or part thereof,
other than in accordance with the terms hereof.
(c) Except as expressly provided herein, each payment of Rent made
by the Lessee shall be final as to the Lessee, and the Lessee will not seek to
return nor to recover, ▇▇▇▇▇, suspend, defer or reduce all or any part of any
such payment of Rent for any reason.
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01. Successor Lessor. The Lessee agrees that in the case
of the appointment of any successor trustee for the Lessor pursuant to the
terms of the Participation Agreement, such successor trustee shall, upon
written notice by such successor to the Lessee, succeed to all the rights,
powers and title of the Lessor under this Lease and shall be deemed to be the
Lessor and the owner of the Aircraft for all purposes of this Lease without
the necessity of any consent or approval by the Lessee and without in any way
altering the terms of this Lease or the Lessee's obligations. One such
appointment and designation of a successor trustee shall not exhaust the right
to appoint and designate a further successor trustee pursuant to the
Participation Agreement, but such right may be exercised repeatedly so long as
this Lease shall be in effect.
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section 22.01. Security for Lessor's Obligations to Holders. In
order to secure the indebtedness evidenced by the Certificates, the Indenture
provides among other things, for the assignment by the Lessor to the Indenture
Trustee of this Lease and the Lease Supplement and for the creation of a first
mortgage and security interest in favor of the Indenture Trustee on the
Aircraft. The Lessee consents to and acknowledges such assignment (subject to
the reservations and conditions therein set forth) and the receipt of a copy
of the Indenture.
Section 22.02. Intentionally Left Blank.
Section 22.03. Consent of Lessee to Assignment of Lease as Security.
The Lessee hereby accepts and consents to pursuant to the terms of the
Indenture, the Indenture Trustee's rights to receive payments (other than
Excepted Payments not constituting Basic Rent) due under this Lease, the right
to transfer or assign title to the Aircraft subject to this Lease, to make all
waivers and agreements except as otherwise provided in the Indenture, to give
all notices, consents and releases and to take all action upon the happening
of a Default or Event of Default under this Lease (except as otherwise
specifically provided in the Indenture), or to do any and all other things
whatsoever which the Lessor is or may become entitled to do under this Lease
(except as otherwise provided in the Indenture); all or any of which rights,
obligations, benefits and interests may, pursuant to the terms of the
Indenture, be reassigned or retransferred by the Indenture Trustee at any time
and from time to time (except as otherwise provided in the Indenture);
provided, however, that the Lessor, except to the extent, and for such time
as, it is unable to do so by virtue of the Indenture, shall remain liable for
the performance of all the terms, conditions, covenants and provisions for
which it is obligated under this Lease notwithstanding such assignment.
ARTICLE 23
SECURITY FUNDS
Section 23.01. Investment of Security Funds. (a) Any amounts
otherwise payable to the Lessee shall, to the extent so required under the
terms of this Lease or any other Operative Agreement, be held by the Lessor as
security for, and may be applied by the Lessor against, the obligations of the
Lessee under this Lease and the Participation Agreement during such time as
there shall have occurred and be continuing a Payment Default, Bankruptcy
Default or Event of Default, and, at such times as there shall not be
continuing a Payment Default, Bankruptcy Default or Event of Default, such
amounts, net of any amounts which have been applied by the Lessor against the
Lessee's obligations hereunder and thereunder, shall be paid to the Lessee.
Any amounts which are held by the Lessor pending payment to the Lessee shall,
until paid to the Lessee or applied against the Lessee's obligations hereunder
and thereunder, be invested by the Lessor, as directed from time to time, in
writing (and in the absence of a written direction by the Lessee, the Lessor
shall invest such monies in direct obligations of the United States of
America), by the Lessee and at the expense and risk of the Lessee, in the
following securities (which in the case of securities referred to in
subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall mature
within ninety (90) days of the date of purchase):
(i) direct obligations of the United States of America; or
(ii) obligations fully guaranteed by the United States of America;
or
(iii) certificates of deposit issued by, or bankers' acceptances
of, or time deposits or a deposit account with, any bank,
trust company or national banking association incorporated
or doing business under the laws of the United States of
America or one of its States, having a combined capital and
surplus of at least $500,000,000 and having a rating of "A"
or better from Moody's or S&P; or
(iv) commercial paper rated A-1/P-1 by S&P or Moody's,
respectively (or if neither such organization shall rate
such commercial paper at any time, a rating by any
nationally recognized statistical rating organization in
the United States of America equal to the highest rating
assigned by such rating organization).
(b) At any time any invested funds are distributed to the Lessee,
there shall be promptly remitted to the Lessee any gain (including interest
received) realized as the result of any investment pursuant to Section
23.01(a) hereof (net of any expenses, fees or commissions incurred by the
Lessor in connection with such investment), unless a Payment Default,
Bankruptcy Default or Event of Default shall have occurred and be continuing
in which case such funds shall be applied in the same manner as the principal
so invested. The Lessee shall be responsible for and will promptly pay to the
Indenture Trustee or the Lessor, as the case may be, on demand, the amount of
any loss realized as the result of any such investment (together with any
expenses, fees or commissions incurred by the Indenture Trustee or the Lessor
in connection with such investment), such amount to be disposed of in
accordance with the terms of the Indenture or the Lease, as the case may be.
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01. Lessor's Entry Into Lease. Except as expressly
provided herein, the Lessor and the Lessee agree that this Lease is executed
by FSB not individually but solely as Owner Trustee under the Trust Agreement
in the exercise of the power and authority conferred and vested in it as such
Owner Trustee, that each and all of the representations, undertakings and
agreements by the Lessor herein are for the purpose and with the intention of
binding only the Lessor's Estate, and that in no case whatsoever shall FSB be
personally liable for any loss in respect of such representations,
undertakings and agreements, that actions to be taken by the Lessor pursuant
to its obligations hereunder may, in certain instances, be taken by the Lessor
only upon specific authority of the Owner Participant, that nothing herein
contained shall be construed as creating any liability on FSB, individually or
personally, to perform any covenant, either express or implied, herein, all
such liability, if any, being expressly waived by the Lessee and by each and
every Person now or hereafter claiming by, through or under the Lessee except
with respect to the gross negligence or willful misconduct of FSB, and that so
far as FSB, individually or personally is concerned, the Lessee and any Person
claiming by, through or under the Lessee shall look solely to the Lessor's
Estate for the performance by the Lessor of any of its obligations under this
Lease; provided, that nothing in this Section 24.01 shall be construed to
limit in scope or substance those representations and warranties of FSB in its
individual capacity set forth in the Participation Agreement and the Trust
Agreement. The term "Lessor" as used in this Lease shall include any trustee
succeeding FSB as Owner Trustee under the Trust Agreement. Any obligation of
the Lessor hereunder may be performed by the Owner Participant, and any such
performance shall not be construed as revocation of the trust created by the
Trust Agreement. Nothing contained in this Lease shall restrict the operation
of the provisions of the Trust Agreement with respect to its revocation of the
resignation or removal of the Owner Trustee hereunder.
ARTICLE 25
NOTICES
Section 25.01. Notices. All notices, demands, declarations and other
communications required by this Lease shall be in writing and shall be deemed
received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, (b) if given by certified mail, return receipt
requested, postage prepaid, five Business Days after being deposited in the
United States mail, and (c) if given by FedEx service or other delivery
service of established reputation or other means, when received or personally
delivered, addressed in accordance with the terms of Article 14 of the
Participation Agreement.
ARTICLE 26
MISCELLANEOUS
Section 26.01. Section Heading and Captions. All article and section
headings and captions used in this Lease are purely for convenience and shall
not affect the interpretation of this Lease.
Section 26.02. References. Any reference to a specific article or
section number shall be interpreted as a reference to that article or section
of this Lease unless otherwise expressly provided.
Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING
DELIVERED IN NEW YORK.
Section 26.04. Severability. 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.
Section 26.05. No Oral Modification. The terms and provisions of
this Lease may not be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against which enforcement
of the change, waiver, discharge or termination is sought. Any such change,
waiver, discharge or termination is also subject to the provisions of Section
8.01 and Article XIII of the Indenture.
Section 26.06. Agreement as Chattel Paper. To the extent 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 chattel-paper counterpart, which shall
be the counterpart containing the receipt executed by the Indenture Trustee on
its signature page.
Section 26.07. Counterparts. This Lease may be executed in any
number of counterparts, each of which shall be an original (except that only
the counterpart bearing the receipt executed by the Indenture Trustee shall be
the original for purposes of perfecting a security interest therein as chattel
paper under the Uniform Commercial Code), but all of which taken together
shall constitute one and the same instrument and any of the parties hereto may
execute this Lease by signing any such counterpart.
ARTICLE 27
TRUE LEASE
Section 27.01. Intent of the Parties. It is the intent of the
parties to this Lease that for all purposes (including without limitation U.S.
federal income tax purposes) this Lease will be a true lease, and that this
Lease conveys to the Lessee no right, title or interest in the Aircraft except
as a lessee.
Section 27.02. Section 1110 Compliance. Notwithstanding any
provision herein or elsewhere contained to the contrary, it is understood and
agreed among the parties hereto that the transactions contemplated by this
Lease and the other Operative Agreements are expressly intended to be, shall
be and should be construed so as to be, entitled to the full benefits of
Section 1110 of the Bankruptcy Code from time to time with respect to the
right to repossess the Airframe, the Engines and any Parts as provided herein,
and in any circumstances where more than one construction of the terms and
conditions of the Lease is possible, a construction which would preserve such
benefits shall control over any construction which would not preserve such
benefits or would render them doubtful.
Section 27.03. Finance Lease. This Lease is a "finance lease"
within the meaning of Section 2-A-103(g) of the Uniform Commercial Code.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease to be duly executed as of the date first above written.
LESSOR: FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By: _______________________________________________
Name:
Title:
LESSEE: FEDERAL EXPRESS CORPORATION
By: _______________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer and
Managing Director -
Structured Finance
Receipt of this original counterpart of the Lease is hereby
acknowledged on this __ day of October 1996.
Indenture Trustee: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Indenture Trustee
By: _____________________________________________
Name:
Title:
SCHEDULE I
DEFINITIONS
GENERAL PROVISIONS
The following terms shall have the following meanings for all
purposes of the Operative Agreements (other than the Pass Through Agreement
and the Series Supplements) referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require. In the
case of any conflict between the provisions of this Schedule and the
provisions of any Operative Agreement, the provisions of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean and include such agreements as amended and
supplemented from time to time, and (ii) references to parties to agreements
shall be deemed to include the successors and permitted assigns of such
parties.
DEFINED TERMS:
Additional Insured. As defined in Article 13 of the Lease.
Additional Leverage Amount. An amount equal to 5.506252521% of the
outstanding principal amount of the Original Loan Certificates to be
refinanced on the Refunding Date.
Aeronautics Authority. As appropriate, the Federal Aviation
Administration and/or the Administrator of the Federal Aviation
Administration, any successor to the former United States Civil Aeronautics
Board, or any Person, governmental department, bureau, commission or agency
located in the United States succeeding to the functions of any of the
foregoing.
Affiliate. 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. In no event shall the Owner Trustee or the Lessor be deemed an
Affiliate of the Owner Participant.
After-Tax Basis. A basis such that any payment received or deemed to
have been received by a Person shall be supplemented by a further payment to
such Person so that the sum of the two payments, after deduction of all Taxes
resulting from the receipt or accrual of such payments, shall be equal to the
payment received or deemed to have been received. In the case of amounts
payable to the Lessor, the Owner Participant, or any corporate Affiliate of
the Owner Participant, it shall be presumed that such Person is at all times
subject to Federal income tax at the maximum marginal rate generally
applicable to corporations from time to time and actual state, local and
foreign income taxes.
Agent. ▇▇▇▇▇▇ Guaranty Trust Company of New York and its successors
and permitted assigns as Agent for the Original Loan Participants pursuant to
Article 16 of the Original Participation Agreement.
Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as
defined in the Transportation Code) as to which there is in force a permit
granted under Section 41302 of the Transportation Code.
Aircraft. The Airframe (or any permitted substitute airframe)
together with three Engines (whether any of which is an initial Engine or a
Replacement Engine) whether or not any of such initial or Replacement Engines
may from time to time be installed on such Airframe or may be installed on any
other airframe or on any other aircraft, including any aircraft substituted
pursuant to Section 11.03 of the Lease.
Airframe. The ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MD-11F aircraft (excluding the
Engines or engines from time to time installed thereon) leased by the Lessor
to the Lessee pursuant to the Lease and the initial Lease Supplement and
having the United States FAA Registration Number initially and manufacturer's
serial number specified in the initial Lease Supplement, including (i) all
Parts in respect thereof and (ii) any replacement airframe which may be
substituted pursuant to Section 11.03 of the Lease.
Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment
No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation
Trust No. N586FE), dated as of October 15, 1996.
Ancillary Agreement. Any written agreement of the Lessee to which the
Lessor is a party or to which the Lessor has consented in writing entered into
on the Delivery Date or the Refunding Date or any date thereafter in
connection with the transactions contemplated by the Operative Agreements, as
such agreement may be amended and supplemented from time to time with the
consent of the Lessor and delivered to the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Owner Participant.
Ancillary Agreement I. The Ancillary Agreement I (Federal Express
Corporation Trust No. N586FE), dated the Delivery Date, as amended and
restated as of the Refunding Date, among the Lessee, the Owner Trustee, not in
its individual capacity, but solely as Owner Trustee, the Owner Participant
and the Indenture Trustee not in its individual capacity, but solely as
Indenture Trustee, as originally executed or as amended, modified or
supplemented with the consent of all the parties thereto.
Ancillary Agreement II. The Ancillary Agreement II (Federal Express
Corporation Trust No. N586FE), dated the Refunding Date, among the Lessee, the
Owner Trustee, not in its individual capacity, but solely as Owner Trustee,
the Owner Participant and the Indenture Trustee not in its individual
capacity, but solely as Indenture Trustee, as originally executed or as
amended, modified or supplemented with the consent of all the parties thereto.
Appraisal. The report prepared by BK Associates, Inc. and delivered
to the Owner Participant on the Delivery Date pursuant to Section 4.01(n) of
the Original Participation Agreement.
Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and
any successor thereto.
Bankruptcy Default. An event specified in Section 16.01(e), (f) or
(g) of the Lease which either does or, with the giving of notice or lapse of
time or both, would constitute an Event of Default.
Basic Rent. The aggregate periodic rent for the Interim Term and the
Basic Term payable for the Aircraft throughout the Basic Term pursuant to
Section 3.02 of the Lease, adjusted pursuant to Article 3 of the Lease.
Basic Term. The period commencing at the beginning of the day on the
Commencement Date and ending at the end of the day on March 22, 2017, or such
earlier date on which the Lease shall be terminated as provided therein.
Beneficial Interest. The interest of the Owner Participant under the
Trust Agreement.
Bills of Sale. Collectively, the FAA ▇▇▇▇ of Sale and the Warranty
▇▇▇▇ of Sale.
Breakage Costs. Has the meaning specified in Schedule II to the
Original Participation Agreement.
Business Day. Any day on which commercial banks are not authorized or
required to close in New York, New York, Memphis, Tennessee and the city in
which the office or agency in the United States is maintained by the Pass
Through Trustee for the payment of the Pass Through Certificates, and after
the Lien of the Indenture is discharged, Salt Lake City, Utah.
Certificates. The Equipment Trust Certificates (Federal Express
Corporation Trust No. N586FE), issued by the Owner Trustee pursuant to the
Indenture and any certificate issued in exchange therefor or replacement
thereof pursuant to the Indenture.
Change in Tax Rate. Any amendment, modification, deletion, addition,
or change to the Code which is enacted into law after the Delivery Date which
changes the highest marginal statutory rate of Federal income tax applicable
to the Owner Participant (other than a change which is in the nature of a
minimum tax).
Citizen of the United States. A citizen of the United States as
defined in Section 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.
Closings. The closing with respect to the acquisition of the Pass
Through Certificates by the Underwriters and the closing with respect to the
refunding of the Original Loan Certificates.
Code. Except as otherwise provided, the Internal Revenue Code of
1986, as amended from time to time.
Commencement Date. January 30, 1997.
Corporate Trust Administration. The principal office of the
Indenture Trustee located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department, or such other
office at which the Indenture Trustee's corporate trust business shall be
administered which the Indenture Trustee shall have specified by notice in
writing to the Lessee, the Owner Participant and the Owner Trustee.
Corporate Trust Department. The principal office of the Owner Trustee
located at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Trust Department, or such other office at which the Owner Trustee's
corporate trust business shall be administered which the Owner Trustee shall
have specified by notice in writing to the Lessee, the Owner Participant and
the Indenture Trustee.
CRAF Program. Has the meaning specified in Section 7.01(f) of the
Lease.
Debt Rate. The weighted average (based on Outstanding principal
amount) rate of interest on the Certificates issued pursuant to the Indenture.
Default. Any event or condition which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
Delivery Date. September 23, 1996.
EBO Date. As defined in Section 4.02(a)(F) of the Lease.
EBO Price. Has the meaning specified in Section 4.02(a)(F) of the
Lease.
Engine. Each of the three General Electric CF6-80C2-D1F engines
listed by its manufacturer's serial number in the initial Lease Supplement and
leased pursuant to the Lease, whether or not from time to time installed on
the Airframe or installed on any other airframe or on any other aircraft, and
any Replacement Engine which may from time to time be substituted for an
Engine pursuant to Section 7.02(a)(vii), 10.03, 11.03, 11.04 or 12.02 of the
Lease, together with all Parts related thereto. Except as otherwise provided,
at such time as a Replacement Engine shall be so substituted and the Engine
for which the substitution is made shall be released from the Lien of the
Indenture, such replaced Engine shall cease to be an "Engine" under the Lease.
The term "Engines" means, as of any date of determination, all Engines then
leased to the Lessee pursuant to the Lease.
Engine Consent. The Engine Consent dated as of September 1, 1996,
executed by the Engine Manufacturer, as the same may be amended, modified or
supplemented from time to time.
Engine Manufacturer. General Electric Company, a New York
corporation.
Engine Warranty Assignment. The Engine Warranty Assignment (Federal
Express Corporation Trust No. N586FE), dated as of September 1, 1996 between
the Lessor and the Lessee, as the same may be amended, modified or
supplemented from time to time.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plan. An employee benefit plan subject to Title I of ERISA, or
an individual retirement account or plan subject to Section 4975 of the Code.
Estimated Expense Amount. Has the meaning specified in Section
10.01(a) of the Participation Agreement.
Event of Default. Each of the events specified in Article 16 of the
Lease.
Event of Loss. Any of the following events with respect to the
Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A)
due to theft or disappearance for a period in excess of 30 days (or such
longer period not to exceed 60 days from the end of such 30 day period if and
so long as the location of such property is known and the Lessee is pursuing
the recovery thereof) or to the end of the Term, if less, unless such event
constitutes an Event of Loss under clause (i)(B) or clause (ii) below, or (B)
due to the destruction, damage beyond economic repair or rendition of such
property permanently unfit for normal use by Lessee 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 constructive or
compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or
requisition of title to such property by the Government, any foreign
government or purported government or any agency or instrumentality thereof,
or (2) condemnation, confiscation, or seizure of, or requisition or taking of,
use of such property (A) by the government of Canada, France, Germany, Japan,
the Netherlands, Sweden, Switzerland or the United Kingdom, or instrumentality
or agency of any such foreign government, for a period in excess of 180 days,
(B) by a foreign government (other than any such government referred to in the
immediately preceding clause (A)), or instrumentality or agency of any such
foreign government, or any purported government or instrumentality or agency
thereof, or (C) by the Government for a period extending beyond the Term
provided that no Event of Loss shall be deemed to have occurred, and the Term
shall be extended automatically for a period of up to six months beyond the
end of the Term in the event that the Aircraft or the Airframe or any Engine
is requisitioned by the Government pursuant to an activation as part of the
CRAF Program described in Section 7.02(a)(iv) of the Lease; or (iv) as a
result of any law, rule, regulation, order or other action by the Aeronautics
Authority or other governmental body having jurisdiction, the use of the
Aircraft or Airframe in the normal course of air transportation of cargo shall
have been prohibited for a period of six (6) consecutive months, unless the
Lessee, prior to the expiration of such six (6) month period, shall be
diligently carrying forward all steps which are necessary and desirable to
permit the normal use of the Aircraft or Airframe provided, however, that an
Event of Loss shall be deemed to have occurred if (x) the Lessee fails to
continue diligently carrying forward all such steps or (y) the use of the
Aircraft or the Airframe in the normal course of air transportation of cargo
shall have been prohibited for a period of an additional 12 months following
such 6 month period or (z) unless waived by the Lessor, the Term shall have
expired. The date of such Event of Loss shall be (t) the 30th day or the 90th
day, as the case may be, following loss of such property or its use due to
theft or disappearance; (u) the date of any destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal
use; (v) the date of any insurance settlement on the basis of a total loss or
constructive or compromised total loss; (w) the date of any condemnation,
confiscation, seizure or requisition of title of such property; (x) the 181st
day following condemnation, confiscation, seizure or requisition for use of
such property by a foreign government referred to in clause (iii)(2)(A) above
and the date of such condemnation, confiscation, seizure or requisition in the
case of any other foreign government or instrumentality or agency thereof; (y)
the last day of the Term in the case of requisition for use of such property
by the Government or (z) the last day of the 6 month or additional 12 month
period, referred to in clause (iv) above. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if any Event of Loss occurs with
respect to the Airframe.
Excepted Payments. Collectively, (i) indemnity or other payments of
expenses paid or payable by the Lessee in respect of the Owner Participant,
the Owner Trustee in its individual capacity or any of their respective
successors, permitted assigns, directors, officers, employees, servants and
agents or Affiliates, pursuant to Article 8, 9, or 10 and Section 15.01 of the
Participation Agreement or any indemnity hereafter granted to the Owner
Participant or the Owner Trustee in its individual capacity pursuant to
Section 7.01(e), Article 9 or Section 11.03(a) of the Lease or Section 15.01
of the Participation Agreement, (ii) proceeds of public liability insurance
(or government indemnities in lieu thereof) in respect of the Aircraft payable
as a result of insurance claims paid for the benefit of, or losses suffered
by, the Owner Trustee or the Indenture Trustee in their respective individual
capacities or by the Owner Participant, or their respective successors,
permitted assigns or Affiliates, (iii) proceeds of insurance maintained with
respect to the Aircraft by the Owner Participant (whether directly or through
the Owner Trustee) maintained in accordance with the provisions of but not
required under Article 13 of the Lease, (iv) all right, title and interest of
the Owner Participant in, to and under the Tax Indemnity Agreement and
payments of Supplemental Rent by the Lessee in respect of any amounts payable
under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to
the Owner Participant or the Owner Trustee in its individual capacity, after
the release thereof from the Lien of the Indenture, (vi) subject to Section
3.05 of the Lease, payments constituting increases in Basic Rent attributable
to payments arising pursuant to Section 5 of the Tax Indemnity Agreement,
(vii) any right to demand, collect or otherwise receive and enforce the
payment of any amount described in clauses (i) through (vi) above and (viii)
any payments in respect of interest to the extent attributable to the payments
referred to in clauses (i) through (vi) above.
Exempt Recipient. A person described in Section 6049(b)(4) of the
Code.
Expense; Expenses. Have the meaning specified in Section 9.01(a) of
the Participation Agreement.
FAA ▇▇▇▇ of Sale. The ▇▇▇▇ of sale for the Airframe on AC Form
8050-2, or such other form as may be approved by the Aeronautics Authority,
executed by the Lessee in favor of the Owner Trustee and dated the Delivery
Date.
FSB. First Security Bank, National Association, a national banking
association.
FSC. ▇▇▇▇▇▇ International Sales Corporation, a United States Virgin
Islands corporation.
Fair Market Renewal Term. A term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the second paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
Fair Market Rental. An amount determined on the basis of, and equal
in amount to, the rental which would be obtained in an arm's-length
transaction between an informed and willing lessee and an informed and willing
lessor unaffiliated with such lessee, neither being under any compulsion to
lease. In such determination, except for purposes of Section 17.01 of the
Lease, it shall be assumed that the Aircraft is in at least the condition
required under the Lease in the case of return of the Aircraft pursuant to
Article 12 of the Lease and Fair Market Rental shall be determined in
accordance with the provisions of Section 4.03 of the Lease. For purposes of
Section 17.01 of the Lease, such determination shall be made on an "as is,
where is" basis by a qualified independent appraiser selected by the Lessor
and the costs and expenses of the appraisal shall be borne by the Lessee,
unless the Lessor has not obtained possession of the Aircraft pursuant to such
Section 17.01, in which case an appraiser shall not be appointed and such Fair
Market Rental shall be deemed to be zero.
Fair Market Value. An amount determined on the basis of, and equal in
amount to, the value which would be obtained in an arm's-length transaction
between an informed and willing purchaser under no compulsion to buy and an
informed and willing seller unaffiliated with such purchaser and under no
compulsion to sell, assuming the Aircraft (or other property) is unencumbered
by the Lease. In such determination, except for purposes of Section 17.01 of
the Lease, it shall be assumed that the Aircraft is in at least the condition
required under the Lease in the case of return of the Aircraft pursuant to
Article 12 of the Lease and Fair Market Value shall be determined in
accordance with the provisions of Section 4.03 of the Lease. For purposes of
Section 17.01 of the Lease, such determination shall be made on an "as is,
where is" basis by a qualified independent appraiser selected by the Lessor
and the costs and expenses of the appraisal shall be borne by the Lessee,
unless the Lessor has not obtained possession of the Aircraft free and clear
of all Liens and unencumbered by the Lease pursuant to such Section 17.01, in
which case an appraiser shall not be appointed and such Fair Market Value
shall be deemed to be zero.
Federal Aviation Administration; FAA. The United States Federal
Aviation Administration and any successor agency or agencies thereto.
Fixed Renewal Rent. Semi-annual payments of rent during the Fixed
Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of
the commencement of such Fixed Renewal Term and (ii) 50% of the average actual
semi-annual Basic Rent payable during the Basic Term.
Fixed Renewal Term. The term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the first paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
Government. The United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and
credit of the United States of America.
GTA. The General Terms Agreement dated as of July 3, 1991 between the
Engine Manufacturer and the Lessee related to the purchase by the Lessee of the
Engines as originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the General Terms
Agreement relates to the Engines, to the extent assigned to the Owner Trustee
pursuant to the Engine Warranty Assignment.
Holder of a Certificate; Certificate Holder; Holder. As of any
particular time, the Person in whose name a Certificate shall be registered
(but not including the holder of any Pass Through Certificate).
Indemnitee. Each of FSB, in its individual capacity and as Owner
Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of
the Original Participation Agreement), the Owner Participant, the Original
Loan Participants (to the extent set forth in Articles 8 and 9 of the Original
Participation Agreement), the Indenture Trustee, in its individual capacity
and as trustee, and any successor (including any trustee which may succeed to
the Lessor's interest under the Lease), Affiliate, assign, officer, director,
employee, agent and servant of any of the foregoing, the Lessor's Estate and
the Trust Indenture Estate.
Indenture. The Trust Indenture and Security Agreement (Federal
Express Corporation Trust No. N586FE), dated as of September 1, 1996, as
amended and restated as of October 15, 1996, between the Lessor and the
Indenture Trustee, as supplemented by the Indenture and Security Agreement
Supplement, and as said Indenture may from time to time be further
supplemented or amended, including any amendment or supplement thereto entered
into from time to time pursuant to the applicable provisions of the Indenture.
Indenture and Security Agreement Supplement. The Indenture and
Security Agreement Supplement No. 1 (Federal Express Corporation Trust No.
N586FE), dated September 23, 1996, as such Indenture and Security Agreement
Supplement shall be amended or supplemented from time to time and any other
supplement to the Indenture, substantially in the form of Exhibit A to the
Indenture.
Indenture Default. Any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute an Indenture Event of
Default.
Indenture Documents. Has the meaning specified in the Granting
Clause of the Indenture.
Indenture Event of Default. Each of the events specified in Section
7.01 of the Indenture.
Indenture Trustee. State Street Bank and Trust Company, a
Massachusetts trust company, not in its individual capacity but solely as
Indenture Trustee under the Indenture and each other Person which may from
time to time be acting as successor trustee under the Indenture.
Indenture Trustee's Liens. Any Lien on the Trust Indenture Estate
resulting from (i) claims against the Indenture Trustee not related to the
administration of the Trust Indenture Estate or any transactions pursuant to
the Indenture or any document included in the Trust Indenture Estate, (ii) any
act or omission of the Indenture Trustee which is not related to the
transactions contemplated by the Operative Agreements or is in violation of
any of the terms of the Operative Agreements or (iii) Taxes imposed against
the Indenture Trustee in its individual capacity against which the Lessee has
not indemnified (and is not obligated to indemnify) the Indenture Trustee in
such capacity.
Independent Appraisal. An appraisal conducted pursuant to Section
4.03 of the Lease.
Independent Investment Banker. An independent investment banking
institution of national standing appointed by the Lessee that is independent
in fact, does not have any direct financial interests, or any material
indirect financial interest, in the Lessee or any Affiliate of the Lessee, and
is not connected with the Lessee or any Affiliate of the Lessee, as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions; provided, that if the Indenture Trustee shall
not have received written notice of such an appointment at least 10 days prior
to the Prepayment Date, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
Interim Term. The period commencing on the Delivery Date and ending
at the end of the day immediately preceding the Commencement Date.
Invoice. The invoice for the Aircraft given by the Lessee to the
Lessor.
Lease. The Lease Agreement (Federal Express Corporation Trust No.
N586FE), dated as of September 1, 1996, as amended and restated as of October
15, 1996, entered into by the Lessor and the Lessee concurrently with the
execution and delivery of the Indenture, as said Lease may from time to time
be supplemented or amended, or its terms waived or modified, to the extent
permitted by, and in accordance with, the terms of the Indenture, including,
without limitation, supplementation by one or more Lease Supplements entered
into pursuant to the applicable provisions of the Lease.
Lease Supplement. The Lease Supplement No. 1 (Federal Express
Corporation Trust No. N586FE), dated September 23, 1996, as such Lease
Supplement shall be amended or supplemented from time to time and any other
supplement to the Lease, substantially in the form of Exhibit A to the Lease.
Lease Term. The period commencing on the Delivery Date and ending at
the end of the Basic Term.
Lessee. Federal Express Corporation, a Delaware corporation, and its
successors and permitted assigns.
Lessee Documents. Has the meaning set forth in Section 6.01(b) of the
Participation Agreement.
Lessor. First Security Bank, National Association, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, and its successors and permitted assigns.
Lessor's Estate. All estate, right, title and interest of the Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement, the
Participation Agreement, the Bills of Sale, the Modification Agreement, the
GTA, the Engine Warranty Assignment, the Engine Consent, any Ancillary
Agreement, any warranty with respect to the Airframe and the Engines, all
amounts of Basic Rent, Renewal Rent and Supplemental Rent, including without
limitation, insurance proceeds (other than insurance proceeds payable to or
for the benefit of either the Owner Trustee in its individual capacity or the
Owner Participant) and requisition, indemnity or other payments of any kind
for or with respect to the Aircraft (except amounts owing to the Owner
Participant or to the Owner Trustee in its individual capacity, or to any of
their respective directors, officers, employees and agents pursuant to
Articles 8 and 9 of the Participation Agreement). Notwithstanding the
foregoing, "Lessor's Estate" shall (i) not include any Excepted Payment and
(ii) "Lessor's Estate" shall include all property intended to be subjected to
the Indenture by the Granting Clause thereof.
Lessor's Liens. Liens on the Lessor's Estate or the Trust Indenture
Estate arising as a result of (i) claims against the Lessor, in its individual
capacity or as Owner Trustee, the Owner Participant or any Affiliate of the
Owner Participant, in each case not related to the transactions contemplated
by the Operative Agreements, (ii) acts or omissions of the Lessor in its
individual capacity or as Owner Trustee, and, in the case of the Lessor in its
individual capacity, arising from its gross negligence or willful misconduct
either not related to the transactions contemplated by or expressly prohibited
under the Operative Agreements and any act or omission of the Owner
Participant or any Affiliate of the Owner Participant which is not related to
the transactions contemplated by the Operative Agreements or is in violation
of any of the terms of the Operative Agreements, (iii) Taxes or Expenses
imposed against the Lessor, in its individual capacity or as Owner Trustee, or
the Owner Participant or any Affiliate of the Owner Participant, the Lessor's
Estate or the trust created by the Trust Agreement which are not required to
be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement
or by reason of Section 8.01(b) or 9.01(b) of the Participation Agreement, or
(iv) claims against the Lessor or the Owner Participant arising from the
voluntary transfer by the Lessor or the Owner Participant of its interests in
the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a)
or Article 10 or 11 of the Lease and other than a transfer pursuant to the
exercise of the remedies set forth in Article 17 of the Lease.
Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or
security interest or other similar interest.
Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the
Lease.
Majority in Interest of Certificate Holders. As of a particular date
of determination, the Holders of more than 50% of the aggregate unpaid
principal amount of all Certificates outstanding as of such date excluding for
purposes of this definition any Certificates held by (i) the Owner Trustee or
the Owner Participant or any interests of the Owner Participant unless all
Certificates then outstanding shall be held by the Owner Participant, (ii) the
Lessee or (iii) any Affiliate of any thereof.
Make-Whole Premium. An amount determined as of the day before the
applicable Prepayment Date (or date of purchase, as the case may be) which an
Independent Investment Banker determines to be equal to the excess, if any, of
(i) the present values of all remaining scheduled payments of such principal
amount or portion thereof and interest thereon (excluding interest accrued
from the immediately preceding Payment Date to such Prepayment Date or date of
purchase, as the case may be) to the Maturity of such Certificate in
accordance with generally accepted financial practices assuming a 360-day year
consisting of twelve 30-day months at a discount rate equal to the Treasury
Yield, all as determined by the Independent Investment Banker over (ii) the
unpaid principal amount of such Certificate.
Manufacturer. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corporation, a Maryland corporation,
and its successors and assigns.
Maturity. With respect to any Certificate, the date on which the
final principal amount of such Certificate is scheduled to be due and payable.
Modification Agreement. The Aircraft Modification Agreement dated as
of December 1, 1995 between the Lessee and the Manufacturer providing for the
refurbishing and reconfiguration of the Aircraft including any warranties
relating thereto, as originally executed or as modified, supplemented, amended
or supplemented in accordance with the terms thereof, but only to the extent
that the foregoing relates to the Aircraft, to the extent assigned to the
Owner Trustee pursuant to the Warranty ▇▇▇▇ of Sale.
Moody's. ▇▇▇▇▇'▇ Investors Service, Inc.
Net Present Value of Rents. The net present value, as of the
Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted
at a rate per semi-annual period equal to the Debt Rate.
Non-U.S. Person. Any Person other than (i) a citizen or resident of
the United States, as defined in Section 7701(a)(30) of the Code, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof or therein, or
(iii) any estate or trust that is subject to United States federal income
taxation regardless of the source of its income.
Obsolete Parts. Parts which the Lessee in good faith determines to be
obsolete or no longer suitable or appropriate for use on the Airframe or any
Engine.
Officer's Certificate. When delivered pursuant to the Indenture, a
certificate signed by a Responsible Officer of the Lessee or the Owner
Trustee, as the case may be, and delivered to the Indenture Trustee. Each
such certificate shall include the statements provided for in Section 15.07 of
the Indenture.
Operative Agreements. The Participation Agreement, the Trust
Agreement, the Bills of Sale, the Modification Agreement, the GTA, the Engine
Warranty Assignment, the Lease, the Lease Supplement, the Owner Participant
Guaranty, if any, the Owner Trustee Guaranty, if any, any Ancillary Agreement
entered into by or with the written consent of the Indenture Trustee, which by
its terms is an Operative Agreement, the Certificates outstanding at the time
of reference, the Indenture, the Indenture and Security Agreement Supplement,
the Engine Consent and the Tax Indemnity Agreement, each as amended from time
to time.
Opinion of Counsel. When delivered pursuant to the Indenture, a
written opinion of legal counsel, who in the case of counsel (a) for the
Lessee may be (i) an attorney employed by the Lessee who is generally
empowered to deliver such written opinions, (ii) ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or a
successor firm or (iii) other counsel designated by the Lessee and reasonably
satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the
Indenture Trustee, an attorney selected by such Person and, in the case of the
Owner Trustee, reasonably satisfactory to the Indenture Trustee.
Original Agreements. The documents and instruments delivered on the
Delivery Date in connection with the transactions contemplated by the Original
Participation Agreement.
Original Ancillary Agreement I. The Ancillary Agreement I (Federal
Express Corporation Trust No. N586FE), among the Lessee, the Owner
Participant, the Indenture Trustee and the Owner Trustee as it was originally
executed on the Delivery Date.
Original Indenture. The Trust Indenture, Mortgage and Security
Agreement (Federal Express Corporation Trust No. N586FE), dated as of
September 1, 1996, between the Owner Trustee and the Indenture Trustee, which
together with the Indenture and Security Agreement Supplement No. 1 (Federal
Express Corporation Trust No. N586FE), dated September 23, 1996 attached
thereto was recorded as one instrument by the FAA on September 24, 1996 and
assigned Conveyance Number HH012951.
Original Lease. The Lease Agreement (Federal Express Corporation
Trust No. N586FE), dated as of September 1, 1996, between the Owner Trustee as
lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal
Express Corporation Trust No. N586FE), dated September 23, 1996 attached
thereto was recorded as one instrument by the FAA on September 24, 1996 and
assigned Conveyance Number HH012952.
Original Loan Certificates. The loan certificates issued on the
Delivery Date to the Original Loan Participants.
Original Loan Participants. The entities listed on Schedule I to the
Original Participation Agreement and their successors and assigns (other than
any assignees in connection with the Refunding Date).
Original Participation Agreement. The Participation Agreement
(Federal Express Corporation Trust No. N586FE), dated as of April 1, 1996, as
amended and restated as of September 1, 1996, among the Lessee, the Owner
Participant, the Indenture Trustee, the Owner Trustee and the Original Loan
Participants as it was originally executed on April 19, 1996 and amended and
restated as of September 1, 1996.
Original Tax Indemnity Agreement. The Tax Indemnity Agreement
(Federal Express Corporation Trust No. N586FE), between the Lessee and the
Owner Participant as it was originally executed as of September 1, 1996.
Original Trust Agreement. The Trust Agreement (Federal Express
Corporation Trust No. N586FE), dated as of April 1, 1996, as amended and
restated as of September 1, 1996, between the Owner Participant and the Owner
Trustee as it was originally executed on April 19, 1996 and amended and
restated as of September 1, 1996, and filed with the FAA on September 23, 1996.
Outstanding. When used with respect to Certificates, as of the date
of determination and subject to the provisions of Section 10.04 of the
Indenture, all Certificates theretofore executed and delivered under the
Indenture, with the exception of the following:
(i) Certificates theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation pursuant to
Section 2.08 of the Indenture or otherwise;
(ii) Certificates for which prepayment money in the necessary amount
has been theretofore deposited with the Indenture Trustee in trust
for the Holders of such Certificates pursuant to Section 14.01 of the
Indenture; provided, that if such Certificates are to be prepaid,
notice of such prepayment has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Indenture Trustee
has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to Article II
of the Indenture.
Owner Participant. The trustor originally named in the Trust
Agreement and any successor thereto, and any Person to which Owner Participant
transfers, in accordance with the Trust Agreement, its right, title and
interest in and to the Operative Agreements and the Lessor's Estate.
Owner Participant Guarantor. The provider, if any, of an Owner
Participant Guaranty.
Owner Participant Guaranty. Any guaranty delivered in compliance with
Section 7.03(d) of the Participation Agreement.
Owner Trustee. FSB, not in its individual capacity except as
otherwise expressly stated, but solely as Owner Trustee under the Trust
Agreement, and its successors and permitted assigns.
Owner Trustee Guarantor. The provider of an Owner Trustee Guaranty.
Owner Trustee Guaranty. Any guaranty delivered in compliance with
Section 11.01(b)(ii) of the Participation Agreement.
Owner's Economic Return. The Owner Participant's anticipated net
after-tax yield and aggregate after-tax cash flow during the Interim Term and
the Basic Term, 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, Stipulated
Loss Value and Termination Value percentages and EBO Price, as such
assumptions may be adjusted for events which have been the basis of
adjustments to Rent pursuant to Section 3.04 of the Lease.
Participation Agreement. The Participation Agreement (Federal Express
Corporation Trust No. N586FE), dated as of April 1, 1996, as amended and
restated as of September 1, 1996 and as further amended and restated as of
October 15, 1996, among the Lessee, the Original Loan Participants, the Owner
Trustee not in its individual capacity except as otherwise expressly provided
therein, but solely as owner trustee, the Owner Participant, the Indenture
Trustee not in its individual capacity except as otherwise expressly provided
therein, but solely as indenture trustee and the Pass Through Trustee not in
its individual capacity except as otherwise expressly provided therein, but
solely as pass through trustee, as amended, modified or supplemented, or the
terms thereof waived.
Parts. All appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever
nature (other than complete Engines or engines) which may from time to time
be incorporated or installed in or attached to the Airframe or any Engine
or, prior to replacement thereof in accordance with the Lease, which may be
removed therefrom.
Pass Through Agreement. The Pass Through Trust Agreement dated as
of June 1, 1996 between the Lessee and the Pass Through Trustee, as such
Pass Through Agreement may be modified, supplemented or amended from time
to time in accordance with the provisions thereof.
Pass Through Certificates. Any of the 1996 Pass Through
Certificates, Series B1 or 1996 Pass Through Certificates, Series B2, in
each case as issued by the related Pass Through Trust; and "Pass Through
Certificates" means both of the Pass Through Certificates issued by each of
the Pass Through Trusts.
Pass Through Closing Date. The Business Day on which the sale of
the Pass Through Certificates to the Underwriters pursuant to the
Underwriting Agreement takes place.
Pass Through Trust. The Federal Express Pass Through Trust, 1996-B1
or Federal Express Pass Through Trust, 1996-B2, in each case formed pursuant
to the related Series Supplement in accordance with the Pass Through
Agreement; and "Pass Through Trusts" means both of such Pass Through Trusts.
Pass Through Trustee. State Street Bank and Trust Company, a
Massachusetts trust company, in its capacity as Pass Through Trustee under the
Pass Through Agreement and each Pass Through Trust, and its successors and
permitted assigns as Pass Through Trustee thereunder.
Past Due Rate. In respect of (A) any amount payable to the Owner
Participant or the Owner Trustee a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 2% plus the Debt Rate and (B) any principal of or interest on
any Certificate or any other amount payable under the Indenture, any
Certificate or any other Operative Agreement that is not paid when due
(whether at Maturity, by acceleration, by optional or mandatory prepayment or
otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to (i) in the
case of any such amount payable to the Holder of any Certificate, 2% plus the
interest rate applicable to such Certificate and (ii) in the case of any other
such amount, 2% plus the Debt Rate.
Payment Date. Each January 30 and July 30 commencing on January 30,
1997.
Payment Default. Any event specified in Section 16.01(a) or 16.01(b)
of the Lease which with the giving of notice or lapse of time or both would
constitute an Event of Default.
Permitted Investments. Those investments enumerated in Section
23.01(a) (i), (ii), (iii) and (iv) of the Lease.
Person. Any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization,
association, corporation, institution, entity or government (federal,
state, local, foreign or any agency, instrumentality, division or body
thereof).
Preliminary Notice. Has the meaning specified in Section 4.01(a) of
the Lease.
Premium Termination Date. With respect to the Certificates having a
Maturity in 2013, October 23, 2006 and with respect to the Certificates having
a Maturity in 2015, June 23, 2016.
Prepayment Date. Has the meaning specified in Section 6.02(b) of the
Indenture.
Prepayment Price. Has the meaning specified in Section 6.02(b) of
the Indenture.
Property. Any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible.
Proposed Termination Date. Has the meaning specified in Section
10.01(a) of the Lease.
Purchase Price. The amount specified as such in Ancillary Agreement
II.
Record Date. With respect to Payment Dates under the Indenture
(except a date for payment of defaulted interest), January 15 for January 30
Payment Dates and July 15 for July 30 Payment Dates, whether or not such date
is a Business Day.
Recourse Amount. Has the meaning specified in Section 17.10 of the
Participation Agreement.
Refinancing. A non-recourse loan to the Lessor arranged pursuant to
Section 15.01 of the Participation Agreement.
Refunding Date. A Business Day on which the refunding of the
Original Loan Certificates occurs, the expected date thereof having been
specified by the Lessee in a written notice given to the parties to the
Participation Agreement and the Underwriters at least three (3) Business Days
prior to such expected Refunding Date.
Register. Has the meaning set forth in Section 3.02 of the
Indenture.
Registrar. Has the meaning set forth in Section 3.02 of the
Indenture.
Remaining Weighted Average Life. For any Certificate, as of any
determination date, the number of years obtained by dividing (a) the sum of
the products obtained by multiplying (i) the amount of each then remaining
mandatory sinking fund redemption payment of principal, including the
payment due on the Maturity of such Certificate, by (ii) the number of
years (calculated to the nearest one-twelfth) which will elapse between
such determination date, and the date on which such payment is scheduled to
be made, by (b) the then outstanding principal amount of such Certificate.
Renewal Rent. The amount payable by the Lessee as rent in accordance
with Section 4.01 of the Lease during any Renewal Term.
Renewal Term. Any Fixed Renewal Term or Fair Market Renewal Term
with respect to which the Lessee has exercised its option to renew the
Lease pursuant to Section 4.01(a) thereof.
Rent. All payments due from the Lessee under the Lease as Basic
Rent, Renewal Rent and Supplemental Rent, collectively.
Rent Payment Date. Each January 30 and July 30 commencing on
January 30, 1997, and continuing thereafter during the Term.
Reoptimization Date. Has the meaning specified in Section 15.02(a)
of the Participation Agreement.
Replacement Aircraft. Any aircraft substituted for the Aircraft
pursuant to Section 11.03(a) of the Lease.
Replacement Airframe. Has the meaning set forth in Section 11.03
of the Lease.
Replacement Engine. A General Electric CF6-80C2-D1F engine (or an
engine of the same or another manufacturer) of equal or greater value,
remaining useful life and utility as the Engine being replaced, together with
all Parts relating to such engine; provided, however, that if such replacement
engine is not a General Electric CF6-80C2-D1F engine, such replacement engine
must then be commonly used in the commercial aviation industry on ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ MD-11 airframes.
Responsible Officer. With respect to the Owner Trustee (except
for purposes of the Trust Agreement in which case the definition of
Responsible Officer set forth in Section 3.10 of the Trust Agreement is
applicable) or the Indenture Trustee, any officer in its Corporate Trust
Administration, as the case may be, designated by such Person to perform
obligations under the Operative Agreements, and with respect to any other
party, any corporate officer or (except in the case of the Owner
Participant) other employee of a party who, in the normal performance of
his or her operational responsibilities, with respect to the subject matter
of any covenant, agreement or obligation of such party pursuant to any
Operative Agreement, would have responsibility for and knowledge of such
matter and the requirements of any Operative Agreement with respect
thereto.
S&P. Standard & Poor's Ratings Group.
SEC. The Securities and Exchange Commission of the United States
and any successor agencies or authorities.
SSB. State Street Bank and Trust Company, a Massachusetts trust
company.
Securities Act. The Securities Act of 1933, as amended.
Series Supplement. The Series Supplement 1996-B1 to be executed and
delivered by the Lessee and the Pass Through Trustee or the Series Supplement
1996-B2 to be executed and delivered by the Lessee and the Pass Through
Trustee, in each case as such Series Supplement may be modified, supplemented
or amended from time to time in accordance with the provisions thereof and
"Series Supplements" means both such Series Supplements.
Sinking Fund Redemption Date. Has the meaning specified in Section
6.06 of the Indenture.
Sinking Fund Redemption Price. Has the meaning specified in Section
6.06 of the Indenture.
Special Aviation Counsel. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇.
Stipulated Loss Value. As of any Stipulated Loss Value Determination
Date during the Basic Term, the amount determined by multiplying the Purchase
Price by the percentage set forth in Schedule III of the Lease under the
heading "Stipulated Loss Value Factor" opposite such date (as such Schedule
III may be adjusted from time to time as provided in Section 3.04 of the
Lease), and during any Renewal Term, the amount determined pursuant to Section
4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or
the Participation Agreement or the Indenture, each Stipulated Loss Value for
the Aircraft shall be, under any circumstances and in any event, an amount,
together with so much of the arrears portion of Basic Rent due and owing
through the date of payment of Stipulated Loss Value as does not constitute an
Excepted Payment, at least sufficient to pay in full as of such date of
payment the aggregate unpaid principal amount of and accrued interest on the
Certificates outstanding on such date of payment. Subject to the immediately
preceding sentence, it is understood and agreed that the amounts set forth on
Schedule III of the Lease, for dates other than Rent Payment Dates on which
arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and
credits of unearned Basic Rent and, accordingly, no further accrual or credit
shall be required whenever Stipulated Loss Value is to be calculated with
reference to any such date.
Stipulated Loss Value Determination Date. Each date set forth on
Schedule III of the Lease under the heading "Stipulated Loss Value Factors."
Supplemental Rent. All amounts, liabilities and obligations which
the Lessee assumes or agrees to perform or pay under the Lease or under the
Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement
or any other Operative Agreement to FSB, the Lessor, the Owner Participant,
the Indenture Trustee or others, including, without limitation, payments of
Stipulated Loss Value, EBO Price and amounts calculated by reference to
Termination Value, and all amounts required to be paid by Lessee under the
agreements, covenants and indemnities contained in the Lease or in the
Participation Agreement or the Tax Indemnity Agreement or any other Operative
Agreement, but excluding Basic Rent.
Tax. Has the meaning set forth in Section 8.01(a) of the
Participation Agreement.
Tax Indemnity Agreement. The Original Tax Indemnity Agreement as
amended by Amendment No. 1 to the Original Tax Indemnity Agreement, as from
time to time modified, amended or supplemented pursuant to its applicable
provisions.
Term. The Interim Term, the Basic Term and any Renewal Term unless
the Lease is terminated earlier pursuant to its terms.
Termination Date. A Rent Payment Date during the Basic Term that is
on or after the seventh anniversary of the Commencement Date in the case of
Article 10 of the Lease, and in the case of (i) Section 4.02(a)(A) of the
Lease, July 30, 2013, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent
Payment Date that is on or after the seventh anniversary of the Commencement
Date and (iii) Section 4.02(a)(F) of the Lease, July 30, 2011.
Termination Value. As of any Termination Date, the amount
determined by multiplying the Purchase Price by the percentage set forth in
Schedule IV of the Lease under the heading "Termination Value Factor"
opposite such Termination Date (as such Schedule IV may be adjusted from
time to time as provided in Section 3.04 of the Lease). Notwithstanding
any other provisions of the Lease, the Participation Agreement or the
Indenture, each Termination Value shall be, under any circumstances and in
any event, an amount, together with so much of the arrears portion of Basic
Rent due and owing through the date of payment of any amount calculated by
reference to Termination Value as does not constitute an Excepted Payment,
at least sufficient to pay in full as of such date of payment the aggregate
unpaid principal amount of and accrued interest on the Certificates
outstanding on such date of payment. Subject to the immediately preceding
sentence, it is understood and agreed that the amounts set forth on
Schedule IV of the Lease, for dates other than Rent Payment Dates on which
arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals
and credits of unearned Basic Rent and, accordingly, no further accrual or
credit shall be required whenever Termination Value is to be calculated
with reference to any such date.
Transaction Costs. Those costs and expenses set forth in Section
10.01(a) of the Participation Agreement.
Transportation Code. Title 49 of the United States Code, as amended
and in effect on the date of the Lease or as subsequently amended, or any
successor or substituted legislation at the time in effect and applicable, and
the regulations promulgated pursuant thereto.
Treasury Yield. (i) In the case of a Certificate having a Maturity
within one year after the Prepayment Date the average yield to maturity on a
government bond equivalent basis of the applicable United States Treasury ▇▇▇▇
due the week of Maturity of such Certificate and (ii) in the case of a
Certificate having a Maturity one year or more after the Prepayment Date, the
average yield of the most actively traded United States Treasury Note (as
reported by Cantor ▇▇▇▇▇▇▇▇▇▇ Securities Corp. on page 5 of Telerate Systems,
Inc., a financial news service, or if such report is not available, a source
deemed comparable by the Independent Investment Banker selected to determine
the Make-Whole Premium and reasonably acceptable to the Lessee) corresponding
in maturity to the Remaining Weighted Average Life of such Certificate (or, if
there is no corresponding maturity, an interpolation of maturities by the
Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Make-Whole Premium based on the
average of the yields to stated maturity determined from the bid prices as of
10:00 a.m. and 2:00 p.m. New York time, on the second Business Day preceding
the Prepayment Date.
Trust Agreement. The Trust Agreement (Federal Express Corporation
Trust No. N586FE), dated as of April 1, 1996, as amended and restated as of
September 1, 1996 and as further amended and restated as of October 15, 1996,
between the Owner Participant and the Owner Trustee in its individual
capacity, as from time to time modified, amended or supplemented pursuant to
its applicable provisions and in accordance with the Operative Agreements.
Trust Estate. The Lessor's Estate.
Trust Indenture Act. The Trust Indenture Act of 1939, as amended.
Trust Indenture Estate. All estate, right, title and interest of the
Indenture Trustee in and to any of the property, rights, interests and
privileges granted to the Indenture Trustee pursuant to the Granting Clause of
the Indenture, other than Excepted Payments and any and all other rights of
the Owner Trustee or the Owner Participant expressly reserved to the Owner
Trustee or the Owner Participant pursuant to the Indenture.
Underwriters. ▇▇▇▇▇▇▇, Sachs & Co., ▇.▇. ▇▇▇▇▇▇ Securities Inc.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, BA Securities, Inc. and First Chicago
Capital Markets, Inc.
Underwriting Agreement. The Underwriting Agreement dated October 17,
1996 among the Lessee and the Underwriters.
United States, U.S. or US. The United States of America.
U.S. Air Carrier. Any United States air carrier as to which there is
in force a certificate issued pursuant to Section 41102(a) or Section 41103 of
the Transportation Code, and as to which there is in force an air carrier
operating certificate issued pursuant to Chapter 447 of the Transportation
Code and Part 121 of the regulations under such Transportation Code, for
aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or
more of cargo, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provision thereof or in absence
thereof.
U.S. Person. A Person described in Section 7701(a)(30) of the Code.
Warranty ▇▇▇▇ of Sale. The full warranty ▇▇▇▇ of sale covering the
Aircraft (and specifically referring to each Engine) executed by the Lessee,
as seller in favor of the Owner Trustee, as buyer, and dated the Delivery Date.
SCHEDULE II
BASIC RENT
(As a Percentage of Purchase Price)
Rent
Payment
Date Advance Arrears
[On each Payment Date, Lessee will pay as Basic Rent an amount
that will be at least sufficient to pay in full, as of such
Payment Date, the aggregate unpaid principal amount of due and
unpaid installments on the Certificates outstanding on such
Payment Date, together with the accrued and unpaid interest
thereon.]
SCHEDULE III
STIPULATED LOSS VALUES
Stipulated Loss
Date Value Factor
[Stipulated Loss Value will be an amount at least sufficient to
pay in full, as of the date of payment thereof, the aggregate
unpaid principal amount of the Certificates outstanding on such
date of payment, together with the accrued and unpaid interest
thereon.]
SCHEDULE IV
TERMINATION VALUES
Termination Termination
Date Value Factor
[Termination Value will be an amount at least sufficient to pay
in full, as of the date of payment thereof, the aggregate
unpaid principal amount of the Certificates outstanding on such
date of payment, together with the accrued and unpaid interest
thereon.]
SCHEDULE V
ADDITIONAL PURCHASE OPTION PROVISIONS
(D) The Purchase Option Referred to in Section 4.02(a)(D) of the
Lease. If any Significant Expenditure (as defined below) with respect to
the Aircraft is in the Lessee's judgment, as certified by the Lessee's
Assistant Treasurer or any more senior financial officer to the Lessor, the
Owner Participant and the Indenture Trustee, necessary, desirable or
required at any time on or after the seventh anniversary of the
Commencement Date, the Lessee may elect to terminate the Lease and purchase
the Aircraft on any Rent Payment Date occurring after such seventh
anniversary for, at the Lessee's option, either (1) the payment to the
Lessor in immediately available funds of an amount equal to the greater of
(x) the Fair Market Value of the Aircraft or (y) 102.5% of the Termination
Value for the Aircraft, determined in each case as of such Rent Payment
Date or (2) the assumption by the Lessee pursuant to Section 7.11 of the
Participation Agreement and Section 2.12 of the Indenture of all of the
obligations of the Lessor under the Indenture and the Certificates and
Section 7.04 of the Participation Agreement and the other Operative
Agreements and the payment to the Lessor in immediately available funds of
an amount equal to the excess of (A) the greater of (I) 102.5% of the
Termination Value for the Aircraft, or (II) the Fair Market Value of the
Aircraft, both computed as of such Rent Payment Date, over (B) the unpaid
principal amount of the Certificates outstanding plus accrued interest as
of such Rent Payment Date; it being understood that the Fair Market Value
for this purpose shall be determined without regard to the improvements
giving rise to such Significant Expenditures, or the value thereof. For
purposes of this paragraph (D) the term "Significant Expenditure" means
expenditures in respect of non-severable improvements which in the Lessee's
reasonable judgment would exceed $8,250,000, which the Owner Participant
will not permit to be financed on similar terms and conditions then
available for similar transactions through the issuance of additional
non-recourse notes of the Lessor or through additional equity investments
of the Owner Participant or both (it being understood that Section
4.02(a)(D) of the Lease shall not impose any obligation on the Owner
Participant to provide or permit such financing); or
(E) The Purchase Option Referred to in Section 4.02(a)(E) of the
Lease. In the event that a Burdensome Indemnity Payment (as defined below)
that is not deliberately caused by the Lessee shall occur at any time on or
after the seventh anniversary of the Commencement Date, the Lessee may
elect to terminate the Lease and purchase the Aircraft on the first Rent
Payment Date (the "Burdensome Indemnity Payment Date") following the date
that the Owner Participant provides the Lessee with a written notice of
any Loss (as defined in Section 5 of the Tax Indemnity Agreement) that is a
Burdensome Indemnity Payment for, at the Lessee's option, either (1) the
payment to the Lessor in immediately available funds of an amount equal to
the greater of (x) the Fair Market Value of the Aircraft, or (y) 102.5% of
the Termination Value for the Aircraft, determined in each case as of such
Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee,
pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of
the Indenture, of all of the obligations of the Lessor under the Indenture
and the Certificates and Section 7.04 of the Participation Agreement and
the other Operative Agreements and the payment to the Lessor in immediately
available funds of an amount equal to the excess of (A) the greater of (I)
102.5% of the Termination Value for the Aircraft, or (II) the Fair Market
Value of the Aircraft, both computed as of the Burdensome Indemnity Payment
Date, over (B) the unpaid principal amount of the Certificates outstanding
plus accrued interest as of such date. For purposes of this paragraph (E),
the term "Burdensome Indemnity Payment" means a Loss as defined in the Tax
Indemnity Agreement, which causes the aggregate net present value as of the
determination date, discounted semi-annually at the Debt Rate, of all such
Losses (but excluding any Losses for which the Owner Participant shall have
waived its right to payment under the Tax Indemnity Agreement) paid or
payable by the Lessee which can be avoided through a purchase by the Lessee
of the Aircraft, to exceed 2.5% of the Purchase Price.
SCHEDULE VI
DESCRIPTION OF ORIGINAL LEASE
Lease Agreement (Federal Express Corporation Trust No. N586FE) dated
as of September 1, 1996 between Federal Express Corporation, as lessee and
First Security Bank, National Association, as owner trustee under Trust
Agreement (Federal Express Corporation Trust No. N586FE) dated as of April 1,
1996, as amended and restated as of September 1, 1996 between Ameritech Credit
Corporation, as owner participant and First Security Bank, National
Association, recorded by the Federal Aviation Administration on September 24,
1996 and assigned Conveyance No. HH012952, as supplemented by the following
described instrument:
FAA FAA
Date of Recording Conveyance
Instrument Instrument Date Number
Lease Supplement No. 1
(Federal Express Corporation
Trust No. N586FE) 09/23/96 09/24/96 HH012952
Exhibit A
to
Lease Agreement
THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT
NO. __ IS SUBJECT TO A SECURITY INTEREST
LEASE SUPPLEMENT NO. __
(Federal Express Corporation Trust No. N586FE)
LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No.
N586FE), dated _________, ____, between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
but solely as Owner Trustee under the Trust Agreement (Federal Express
Corporation Trust No. N586FE) dated as of April 1, 1996, as amended and
restated as of September 1, 1996 and as further amended and restated as of
October 15, 1996 (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware
corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have entered into that certain
Lease Agreement (Federal Express Corporation Trust No. N586FE) dated as of
September 1, 1996, as amended and restated as of October 15, 1996 (the
"Lease", the defined terms in the Lease being used in this Lease Supplement
with the same meaning as in the Lease), which provides for the execution and
delivery of a Lease Supplement, substantially in the form of this Lease
Supplement No. __, for the purpose of leasing under the Lease the aircraft and
engines described below ("Aircraft") as and when delivered by the Lessor to
the Lessee in accordance with the terms of the Lease;
WHEREAS, the Lease relates to the Aircraft;
WHEREAS, a counterpart of the Lease is attached to and made a part of
this Lease Supplement, and this Lease Supplement, together with such
attachment, is being filed for recordation on this date with the FAA as one
document.
NOW, THEREFORE, for and in consideration of the premises and other
good and sufficient consideration, the Lessor and the Lessee agree as follows:
Section 1. Delivered Aircraft. The Lessor hereby delivers and
leases to the Lessee under the Lease, and the Lessee hereby accepts and leases
from the Lessor under the Lease, the following described ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MD-11F Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the
date of this Lease Supplement consists of the following:
(a) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MD-11F Airframe; U.S. Registration Number
______; Manufacturer's Serial No. _____; and
(b) Three (3) General Electric CF6-80C2-D1F 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).
Section 2. Delivery Date. The Delivery Date of the Delivered
Aircraft is the date of this Lease Supplement.
Section 3. Purchase Price. The Purchase Price of the Delivered
Aircraft shall be the amount set forth in Schedule II to the Participation
Agreement.
Section 4. Term. The Term for the Delivered Aircraft shall commence
on the Delivery Date, and shall terminate on __________________, unless
earlier terminated or extended pursuant to the terms of the Lease.
Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent
for the Delivered Aircraft throughout the Term thereof in accordance with the
terms and provisions of the Lease.
Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee
hereby confirms to the Lessor that the Delivered Aircraft has been duly marked
in accordance with Section 7.03 of the Lease and that the Lessee has accepted
the Delivered Aircraft for all purposes hereof and of the Lease, and as being
free and clear of all Liens except Lessor's Liens. Such acceptance by the
Lessee shall be without prejudice to any rights of the Lessor or the Lessee
against the Manufacturer, the Engine Manufacturer or any vendor of equipment
included in the Aircraft.
Section 7. Incorporation of Lease By Reference. All the provisions
of the Lease are hereby incorporated by reference in this Lease Supplement to
the same extent as if fully set forth in this Lease Supplement.
Section 8. Governing Law. THIS LEASE SUPPLEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND
IS BEING DELIVERED IN THE STATE OF NEW YORK.
Section 9. Agreement as Chattel Paper. To the extent that this
Lease Supplement constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Lease Supplement may be created through the
transfer or possession of any counterpart other than the original chattel-
paper counterpart, which shall be the counterpart containing the receipt
executed by the Indenture Trustee on its signature page.
Section 10. Counterparts. This Lease Supplement may be executed in
any number of counterparts, each of which shall be an original (except that
only the counterpart bearing the receipt executed by Indenture Trustee shall
be the original for purposes of perfecting a security interest therein as
chattel paper under the Uniform Commercial Code), but all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Lease Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease Supplement to be duly executed as of the date first above written.
LESSOR: FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By: _______________________________________________
Name:
Title:
LESSEE: FEDERAL EXPRESS CORPORATION
By: _______________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer and
Managing Director - Structured Finance
Receipt of this original counterpart of the Lease Supplement is hereby
acknowledged on this __ day of _________ 1996.
Indenture Trustee: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Indenture Trustee
By: _____________________________________________
Name:
Title:
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N662FE)
Dated as of September 1, 1996
Amended and Restated as of October 15, 1996
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee,
Lessor
and
FEDERAL EXPRESS CORPORATION,
Lessee
COVERING ONE AIRBUS A300F4-605R AIRCRAFT
SERIAL NO. 761, REGISTRATION NO. N662FE
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE
AGREEMENT OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS
BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF
STATE STREET BANK AND TRUST COMPANY, AS INDENTURE TRUSTEE UNDER THE TRUST
INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO.
N662FE) DATED AS OF SEPTEMBER 1, 1996, AS AMENDED AND RESTATED AS OF OCTOBER
15, 1996 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN
SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN
EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL"
COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY STATE STREET BANK AND
TRUST COMPANY, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF.
TABLE OF CONTENTS
Page
Initial Recitals.............................................................1
ARTICLE 1
DEFINITIONS
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Affirmation of Acceptance under the Lease................ 2
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. Intentionally Left Blank................................. 2
Section 3.02. Basic Rent............................................... 2
Section 3.03. Supplemental Rent........................................ 3
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value and
Termination Value After the Delivery
Date................................................... 3
Section 3.05. Minimum Basic Rent....................................... 5
Section 3.06. Payment to Indenture Trustee............................. 5
Section 3.07. Costs and Expenses....................................... 5
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01. Renewal Options.......................................... 5
Section 4.02. Purchase Options......................................... 6
Section 4.03. Appraisal Procedures..................................... 8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Disclaimer of Representations and Warranties............. 10
Section 5.02. No Modification of Other Warranties...................... 11
Section 5.03. Certain Agreements of the Lessee......................... 11
ARTICLE 6
LIENS
Section 6.01. Liens.................................................... 11
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01. Registration, Maintenance and Operation.................. 12
Section 7.02. Possession and Permitted Transfer and Sublease........... 15
Section 7.03. Insignia................................................. 19
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01. Replacement of Parts..................................... 19
Section 8.02. Pooling of Parts......................................... 20
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01. Required Alterations and Modifications................... 21
Section 9.02. Other Alterations and Modifications...................... 22
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 23
Section 10.02. Retention of Aircraft by the Lessor..................... 25
Section 10.03. Voluntary Termination as to Engines..................... 27
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01. Lessee's Election Rights................................ 27
Section 11.02. Payment of Stipulated Loss Value........................ 27
Section 11.03. Replacement of Airframe and Engines..................... 28
Section 11.04. Event of Loss with Respect to an Engine................. 31
Section 11.05. Application of Payments from the Government or Others... 33
Section 11.06. Requisition of an Airframe and the Installed Engines for
Use by Government..................................... 34
Section 11.07. Requisition for Use by Government of an Engine Not
Installed on the Airframe............................. 35
Section 11.08. Application of Payments During Existence of Certain
Defaults.............................................. 35
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01. Return of Aircraft...................................... 35
Section 12.02. Return of Engines....................................... 36
Section 12.03. Return of Manuals....................................... 36
Section 12.04. Condition of Aircraft................................... 37
Section 12.05. Intentionally Left Blank................................ 38
Section 12.06. Storage................................................. 38
Section 12.07. Special Markings........................................ 38
Section 12.08. Lessor's Option to Purchase Parts....................... 39
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance................................... 39
Section 13.02. Insurance Against Loss or Damage to Aircraft and Engines 41
Section 13.03. Application of Insurance Proceeds....................... 43
Section 13.04. Reports................................................. 44
Section 13.05. Lessor's Insurance...................................... 45
Section 13.06. Self-Insurance.......................................... 45
ARTICLE 14
INSPECTION
Section 14.01. Right of Inspection..................................... 46
Section 14.02. No Obligation to Inspect................................ 46
ARTICLE 15
ASSIGNMENT
Section 15.01. Lessee's Right to Assign................................ 46
Section 15.02. Citizenship............................................. 47
ARTICLE 16
EVENTS OF DEFAULT
Section 16.01. Events of Default....................................... 47
ARTICLE 17
REMEDIES
Section 17.01. Remedies Upon Lessee's Default.......................... 49
Section 17.02. Cumulative Remedies..................................... 52
Section 17.03. Waiver.................................................. 52
Section 17.04. Lessor's Right to Perform for Lessee.................... 53
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01. Quiet Enjoyment......................................... 53
ARTICLE 19
FURTHER ASSURANCES
Section 19.01. Further Assurances...................................... 53
ARTICLE 20
NET LEASE
Section 20.01. Nature of Lease......................................... 54
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01. Successor Lessor........................................ 55
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section 22.01. Security for Lessor's Obligations to Holders............ 56
Section 22.02. Intentionally Left Blank................................ 56
Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 56
ARTICLE 23
SECURITY FUNDS
Section 23.01. Investment of Security Funds............................ 57
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01. Lessor's Entry Into Lease............................... 58
ARTICLE 25
NOTICES
Section 25.01. Notices................................................. 59
ARTICLE 26
MISCELLANEOUS
Section 26.01. Section Heading and Captions............................ 60
Section 26.02. References.............................................. 60
Section 26.03. APPLICABLE LAW.......................................... 60
Section 26.04. Severability............................................ 60
Section 26.05. No Oral Modification.................................... 60
Section 26.06. Agreement as Chattel Paper.............................. 60
Section 26.07. Counterparts............................................ 60
Section 26.08. Public Release of Information........................... 61
ARTICLE 27
TRUE LEASE
Section 27.01. Intent of the Parties................................... 61
Section 27.02. Section 1110 Compliance................................. 61
Section 27.03. Finance Lease........................................... 61
Schedule I Definitions
Schedule II Basic Rent
Schedule III Stipulated Loss Values
Schedule IV Termination Values
Schedule V Purchase Option Schedule
Schedule VI Description of Original Lease
Exhibit A Form of Lease Supplement
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N662FE)
LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N662FE) dated
as of September 1, 1996, as amended and restated as of October 15, 1996 (this
"Lease") between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and
FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, all capitalized terms used herein shall have the meanings
assigned thereto as provided in Article 1 below;
WHEREAS, the Lessor and the Lessee have heretofore entered into the
Original Lease dated as of September 1, 1996 as supplemented by the Lease
Supplement;
WHEREAS, the Original Lease was recorded by the FAA and assigned a
Conveyance Number as more particularly described on Schedule VI attached
hereto;
WHEREAS, pursuant to Article 15 of the Original Participation
Agreement, the Lessee, the Original Loan Participants, the Owner Participant,
the Indenture Trustee and the Lessor desire to refinance, in full, the
Original Loan Certificates on the Refunding Date; and
WHEREAS, in connection with such refinancing, the Lessee, the Owner
Participant, the Lessor and the Indenture Trustee desire that the Original
Lease be amended and restated in its entirety as provided herein;
NOW, THEREFORE, in consideration of the mutual promises herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged by the parties, the Lessor and the Lessee agree that the
Original Lease be and the same is hereby amended and restated in its entirety
as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the capitalized terms herein
shall have the meanings given in Schedule I hereto, for all purposes of this
Lease and shall be equally applicable to both the singular and the plural
forms of the terms defined.
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Affirmation of Acceptance under the Lease. The Lessor,
having accepted delivery of the Aircraft from AVSA on the Delivery Date and
having simultaneously leased the Aircraft to the Lessee, and the Lessee,
having leased the Aircraft from the Lessor on the Delivery Date, as evidenced
by the execution by the Lessor and the Lessee of the initial Lease Supplement
(which is incorporated by reference herein), hereby affirm the terms and
conditions of the Original Lease as herein amended and restated. This Lease
shall last for the Term, at all times during which full legal title to the
Aircraft shall remain vested in the Lessor to the exclusion of the Lessee,
notwithstanding the possession and use thereof by the Lessee or any other
Person.
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. Intentionally Left Blank.
Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in
immediately available funds, on each Rent Payment Date, Basic Rent for the
Aircraft during the Basic Term, each payment being set forth on Schedule II
hereto opposite the applicable Rent Payment Date, subject to increase or
decrease as provided in Section 3.04 of this Lease. Each payment of Basic
Rent shall be made in arrears or in advance, all as stated in Schedule II
hereto. Each payment of Basic Rent designated as advance rent shall be
allocated over the six-month period beginning on the Rent Payment Date on
which such advance rent payment is scheduled to be made, and each installment
of Basic Rent that is designated as payable in arrears shall be accrued over
the six-month period ending on and including the day immediately preceding the
Rent Payment Date on which such arrears payment is scheduled to be made.
Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause
to be paid to the Lessor, or to whomever shall be entitled to it, any and all
Supplemental Rent promptly as the same shall become due. If the Lessee fails
to pay any Supplemental Rent when due, the Lessor shall have all rights,
powers and remedies provided for in this Lease, or by law or equity or
otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay
to the Person entitled thereto, on demand, as Supplemental Rent, to the extent
permitted by applicable law, an amount equal to interest at the Past Due Rate
on any part of any installment of Basic Rent not paid when due, for any period
until the same shall be paid and on any payment of Supplemental Rent not paid
when due, for the period until the same shall be paid. In addition, the
Lessee will pay to the Lessor, as Supplemental Rent, (i) an amount equal to
the aggregate amount of any Make-Whole Premium payable under the Indenture
(other than any Make-Whole Premium payable in connection with an Indenture
Event of Default that is not and does not arise out of a Lease Event of
Default) and (ii) an amount equal to the excess of interest at the Past Due
Rate on the principal of the Certificates in connection with an acceleration
of the Certificates pursuant to Section 7.02 of the Indenture following an
Indenture Event of Default attributable to an Event of Default over interest
payable by the Lessee at the Past Due Rate on Basic Rent. The expiration or
other termination of the Lessee's obligation to pay Basic Rent shall not limit
or otherwise modify the obligations of the Lessee with respect to the payment
of Supplemental Rent.
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value and
Termination Value After the Delivery Date. The percentages for Basic Rent
referred to in Schedule II hereto and the percentages for Stipulated Loss
Value and Termination Value referred to in Schedule III and Schedule IV
hereto, respectively, shall be adjusted (upward or downward) subject to the
minimum value established by Section 3.05 hereof and the definitions of
Stipulated Loss Value and Termination Value to reflect (i) any costs and
expenses paid by the Lessor or the Owner Participant pursuant to Section 10.01
of the Participation Agreement being greater or less than the Estimated
Expense Amount, (ii) any Refinancing pursuant to Section 15.01 of the
Participation Agreement, (iii) any reoptimization pursuant to Section 15.02(a)
of the Participation Agreement, (iv) payments pursuant to Section 5 of the Tax
Indemnity Agreement by an adjustment of Basic Rent or (v) the Commencement
Date being other than January 30, 1997. Each such adjustment pursuant to
clause (i), (ii), (iv) or (v) of the first sentence of this Section 3.04 shall
maintain the Owner's Economic Return (and, while maintaining such Return,
minimize the aggregate Net Present Value of Rents to the Lessee). In the
event of an adjustment pursuant to clause (iii) of the first sentence of this
Section 3.04, the Owner Participant may recalculate Basic Rent as set forth in
Schedule II hereto in order to maintain to the extent feasible the Owner's
Economic Return and, subject to the provisions of Section 15.02 of the
Participation Agreement, recalculate the schedule of principal repayments, the
Stipulated Loss Value percentages set forth in Schedule III hereto and the
Termination Value percentages set forth in Schedule IV hereto in a manner
consistent with such recalculation of Basic Rent; provided that any such
recalculations as a result of an adjustment pursuant to such clause (iii) of
the first sentence of this Section 3.04 may not (A) increase the Net Present
Value of Rents to the Lessee, (B) increase as of any date the sum of (1) the
Net Present Value of Rents to the Lessee payable through such date plus (2) the
present value of the Stipulated Loss Value or the Termination Value as of such
date, in each case discounted at the Debt Rate, beyond such net present values
prior to such adjustment, or (C) otherwise result in any adverse impact
(including tax consequences) to the Lessee for which the Owner Participant has
not agreed to indemnify the Lessee on terms reasonably acceptable to the
Lessee.
The Owner Participant shall promptly notify the Lessee and the Lessor
and the Lessee shall promptly notify the Owner Participant and the Lessor of
the need for any such adjustment pursuant to this Section 3.04. As promptly
as feasible after any such notification, the Lessor shall furnish the Lessee
with a notice setting forth the amount of any such adjustments together with
the calculations upon which the adjustments are based; provided, however, that
the Lessor and the Owner Participant shall not be required to disclose to the
Lessee in such notice any confidential or proprietary information (including
methodology or assumptions) relating to such calculations. At the request
and, subject to the next succeeding sentence, expense of the Lessee, the
accuracy of the calculation of such adjustments and the consistency of the
calculation with the calculation used to determine Basic Rent, Stipulated Loss
Values and Termination Values shall be verified first, by First Chicago Leasing
Corporation or such other financial advisor chosen by the Lessee and second,
if such adjustments are still believed to be in error and are not reconciled
with the Owner Participant within fifteen (15) Business Days, by a firm of
nationally recognized independent public accountants selected by the Lessee
and reasonably acceptable to the Owner Participant and, in order to enable
them to verify such adjustments, the Owner Participant shall make available to
such accountants (for their own confidential use and not to be disclosed to
the Lessee or any other Person and subject to the execution of a
confidentiality agreement reasonably satisfactory to the Owner Participant)
all information reasonably necessary for such verification, including the name
of the lease analysis program used by the Owner Participant to calculate such
adjustments. The Lessee will pay the reasonable costs and expenses of the
verification process under this Section 3.04 unless as a result of such
verification process by the independent public accountants Basic Rent is
adjusted and such adjustment causes the Net Present Value of Rents, to decline
by 10 or more basis points (in which event the Owner Participant shall pay the
reasonable costs and expenses of such verification process). The Lessor and
the Lessee shall execute and deliver an amendment to this Lease to reflect
each adjustment under this Section 3.04.
All adjustments under this Section 3.04 shall be in compliance with
the requirements of Revenue Procedure 75-21, 1975-1 C.B. 715 and Sections
4.02(5), 4.07(1), 4.07(2) and 4.08(1) of Revenue Procedure 75-28, 1975-1 C.B.
752 and shall be structured so as to not cause the Lease to be a "disqualified
leaseback or long-term agreement" within the meaning of Section 467 of the
Code.
Section 3.05. Minimum Basic Rent. Notwithstanding any other
provisions of the Operative Agreements to the contrary, each installment of
Basic Rent due on each Rent Payment Date and not constituting an Excepted
Payment shall be, under any and all circumstances, an amount at least
sufficient to pay in full any installment of principal of and interest on the
Certificates required to be paid pursuant to the Certificates (other than
amounts becoming due on account of the exercise of remedies pursuant to
Article 17 hereof) on such Rent Payment Date.
Section 3.06. Payment to Indenture Trustee. All Rent payable by the
Lessee to the Lessor shall be paid to the Lessor at its principal office at ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department, or as the Lessor may otherwise direct, by wire transfer of
immediately available funds in U.S. Dollars with sufficient information to
identify sources and applications of such funds no later than 10:30 a.m., New
York time on the due date of such payment; provided, however, that so long as
the Lien of the Indenture shall not have been discharged the Lessor hereby
directs, and the Lessee agrees, that all Rent (other than Excepted Payments,
which shall be paid by the Lessee directly to the Person entitled thereto) (all
without set-off or counterclaim as and to the extent provided in Article 20
hereof) shall be paid directly to the Indenture Trustee at its principal
office at Two International Place, 4th Floor, Boston, Massachusetts,
Attention: Corporate Trust Department, or as the Indenture Trustee may
otherwise direct within the United States by wire transfer of immediately
available funds in U.S. Dollars no later than 10:30 a.m., New York time, on
the due date of such payment. In any case where a scheduled Rent Payment Date
shall not be a Business Day such Rent Payment Date shall be adjourned to the
next succeeding Business Day without interest thereon for the period of such
extension (provided that payment is made on such next succeeding Business Day).
Section 3.07.Costs and Expenses. As between the Lessor and the
Lessee, all obligations under this Lease shall be done, performed and complied
with at the Lessee's cost and expense, whether or not so expressed, unless
otherwise expressly stated to the contrary.
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01.Renewal Options. (a) Election to Renew. The Lessee
shall provide the Lessor with irrevocable written notice (the "Preliminary
Notice") not more than 360 days nor less than 180 days prior to the end of the
Basic Term or any Renewal Term, as the case may be, whether it will exercise
its options either to renew this Lease pursuant to this Section 4.01 or to
purchase the Aircraft pursuant to Section 4.02(a)(B), (C) or (F) hereof, as
applicable. Provided that (i) no Event of Default shall have occurred and be
continuing at the time of renewal, (ii) this Lease has not otherwise expired
or terminated, and (iii) the Lessee shall have timely delivered the respective
Preliminary Notice, the Lessee may, by irrevocable written notice delivered
to the Lessor not less than 90 days prior to the end of the Basic Term, extend
the Term for one Fixed Renewal Term of three years commencing on the
expiration of the Basic Term. The Lessee shall pay the Fixed Renewal Rent
during the Fixed Renewal Term.
In addition, provided that (i) no Event of Default shall have
occurred and be continuing at the time of renewal, (ii) this Lease has not
otherwise expired or terminated, and (iii) the Lessee shall have timely
delivered the respective Preliminary Notice, the Lessee may, on no more than
two occasions, by irrevocable written notice delivered to the Lessor not less
than 90 days prior to the end of the Basic Term or the preceding Renewal Term,
as the case may be, elect to extend the Term for a Renewal Term or further
Renewal Term commencing on the expiration of the Basic Term or the preceding
Renewal Term and ending two years thereafter for a rent equal to the
then-current Fair Market Rental of the Aircraft. The Term may be extended
pursuant to this paragraph for an aggregate of no more than four years
following the Basic Term or the Fixed Renewal Term. The Lessee shall pay the
Fair Market Rental during any Fair Market Renewal Term.
(b) Terms and Conditions. Any such renewal shall be on the same
terms and conditions as provided herein, except that (i) rent for the Aircraft
due during any Renewal Term shall be payable semi-annually in arrears on the
dates corresponding to the Rent Payment Dates during such Renewal Term, and
(ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall
as of any Stipulated Loss Value Determination Date during the Renewal Term be
equal to the greater of the Stipulated Loss Value on the last day of the Basic
Term and the Fair Market Value of the Aircraft as of the commencement of such
Renewal Term.
Section 4.02.Purchase Options. (a) Election to Purchase. Provided
that (i) this Lease has not otherwise expired or terminated, (ii) the Lessee
shall have previously given the Preliminary Notice under Section 4.01(a)
hereof (in the case of paragraph (B) or (F) below or, if a Renewal Term is
available, paragraph (C) below) or the applicable notice for each other
paragraph below, as the case may be, and (iii) no Event of Default shall have
occurred and be continuing on the applicable Termination Date, the Lessee may:
(A) by written notice delivered to the Lessor and the Owner
Participant, not more than 180 nor less than 90 days prior to the
applicable Rent Payment Date, elect to terminate the Lease and purchase the
Aircraft on (and only on) January 30, 2017, for, at the Lessee's option,
either (1) an amount in immediately available funds equal to the greater of
the Fair Market Value or the Termination Value on such date or (2)(i) the
assumption by the Lessee, pursuant to Section 7.11 of the Participation
Agreement, of all of the obligations of the Lessor under the Indenture, the
Certificates and Section 7.04 of the Participation Agreement and (ii) the
payment to the Lessor of an amount in immediately available funds equal to
the excess of (A) the greater of the Fair Market Value or the Termination
Value on such date over (B) the unpaid principal of the Certificates plus
accrued interest as of such date. Such notice (which shall be revocable by
the Lessee upon at least 15 days' written notice prior to the applicable
Rent Payment Date) shall either direct the Lessor to prepay the
Certificates in full on such Termination Date pursuant to Section 6.02 of
the Indenture or state that the Lessee shall exercise its option to assume
the Certificates pursuant to Section 7.11 of the Participation Agreement
and Section 2.12 of the Indenture; or
(B) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of the Basic Term,
elect to purchase the Aircraft on the last day of the Basic Term for an
amount in immediately available funds equal to the Fair Market Value
thereof on such date; provided, however, that the Lessee shall have paid
all Rent due and payable under this Lease on or prior to the last day of
the Basic Term; or
(C) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of any Renewal
Term, elect to terminate the Lease and purchase the Aircraft on the last
day of such Renewal Term at a price in immediately available funds equal to
the Fair Market Value of the Aircraft on such day; provided, however, that
the Lessee shall have paid all Rent due and payable under this Lease on or
prior to the expiration of any such Renewal Term; or
(D) exercise the purchase option in this Section 4.02(a)(D) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(D) and which shall be in an amount in immediately available
funds not less than the greater of the amount specified in Schedule V
hereto and the Fair Market Value of the Aircraft; or
(E) exercise the purchase option in this Section 4.02(a)(E) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(E) and which shall be in an amount in immediately available
funds not less than the greater of the amount specified in Schedule V
hereto and the Fair Market Value of the Aircraft; or
(F) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of the Basic Term,
elect to purchase the Aircraft on the last day of the Basic Term for the
amount in immediately available funds specified in the Ancillary Agreement
II (the "FPO Price") which is not less than the estimate set forth in the
Appraisal of the Fair Market Value of the Aircraft at the time of exercise
of the purchase option under this Section 4.02(a)(F).
The Lessee shall give the Lessor, the Owner Participant and the
Indenture Trustee not more than 180 and not less than 90 days' prior written
notice of its election to purchase pursuant to Section 4.02(a)(D) or
4.02(a)(E) hereof. Such notice shall either direct the Lessor to prepay the
Certificates in full on such Termination Date pursuant to Section 6.02 of the
Indenture or state that the Lessee shall exercise its option to assume the
Certificates pursuant to Section 7.11 of the Participation Agreement and
Section 2.12 of the Indenture. In the event that the Lessee shall have given
notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D) or
4.02(a)(E) hereof and shall fail to make payment (and, if applicable, assume
the Certificates) on the applicable Termination Date, the Lease shall continue
and the Lessee shall pay to the Owner Trustee any losses, costs and expenses
of the Owner Participant incurred in connection with such failure.
(b) Terms and Conditions. If the Lessee elects to purchase the
Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the
Lessor on the applicable Termination Date by wire transfer of immediately
available funds any Basic Rent payable on such Termination Date (to the extent
payable in arrears but not to the extent payable in advance), the applicable
purchase price together with any other amounts past due hereunder or due on
the applicable Termination Date and all other Supplemental Rent then due under
this Lease including, without limitation, the aggregate amount of any
Make-Whole Premium applicable to any Certificate and amounts due under the
Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon
discharge of the Lien of the Indenture in accordance with Section 14.01
thereof) the Lessor will transfer to the Lessee, without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to the Aircraft on an "as-is, where is" basis. In
connection with such transfer, the Lessee shall prepare and the Lessor shall
execute or arrange for the execution of a ▇▇▇▇ of sale evidencing such
transfer and such other documents as the Lessee may reasonably require. In
connection with any termination or proposed termination of this Lease, the
Lessee shall pay, at the time of the applicable Termination Date, all related
reasonable costs and expenses of the Owner Participant, the Lessor and the
Indenture Trustee.
Section 4.03.Appraisal Procedures. (a) Generally. Whenever Fair
Market Rental or Fair Market Value is required to be determined under this
Lease (unless otherwise provided herein), it shall be determined by the mutual
agreement of the Lessor and the Lessee in accordance with the definitions of
such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by
the date 60 days prior to the date for exercise of the applicable option, such
amount shall be determined by independent appraisal conducted by appraisers
selected pursuant to Section 4.03(b) hereof. At any time prior to final
determination of such amount pursuant to Section 4.03(b) hereof, the Lessee
and the Lessor shall be entitled to submit to the appraisers (and shall submit
to each other any bids submitted to the appraisers) any bids from unrelated
third parties, and such bids shall be accorded the weight such appraisers deem
appropriate. The Lessor and the Lessee shall each have an opportunity to
comment on any such bids after receiving a copy thereof.
(b) Selection. If an independent appraisal is required pursuant to
this Lease, the Lessor and the Lessee shall consult for the purpose of
appointing a mutually acceptable, qualified aircraft appraiser. If they are
unable to agree on a single appraiser within ten (10) Business Days, then the
independent appraisal shall be arrived at by mutual agreement of two
nationally recognized, independent aircraft appraisers, one chosen by the
Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on
the amount of such appraisal, their appraisals shall be treated in the manner
described in Section 4.03(c) hereof with an appraisal arrived at by a third
nationally recognized, independent aircraft appraiser chosen by the mutual
consent of such two appraisers; provided, however, that if either party shall
fail to appoint an appraiser within fifteen (15) Business Days after a written
request to do so by the other party, or if such two appraisers cannot agree on
the amount of such appraisal and fail to appoint a third appraiser within
twenty (20) Business Days after the date of the appointment of the second of
such appraisers, then either party may initiate an arbitration proceeding with
the American Arbitration Association for purposes of appointing a nationally
recognized, independent aircraft appraiser.
(c) Valuation. If one appraiser is chosen, the value determined by
such appraiser shall be final and binding upon the Lessor and the Lessee. If
two appraisers are chosen, one appraiser by the Lessor and one by the Lessee,
and such appraisers agree on the value, such value shall be final and binding
upon the Lessor and the Lessee. If three appraisers shall be appointed and
the difference between the determination which is farther from the middle
determination is more than 125% of the difference between the middle
determination and the third determination, then such further determination
shall be excluded, the remaining two determinations shall be averaged, and
such average shall be final and binding upon the Lessor and the Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon the Lessor and the Lessee.
(d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03
shall be conducted in accordance with the commercial rules of the American
Arbitration Association as then in effect, as modified by this Section 4.03
and the definitions of Fair Market Value and Fair Market Rental. All expenses
of any independent appraisal shall be borne by the Lessee, except that each of
the Lessee and the Owner Participant (in the case of the Lessor) shall bear
any fees, costs and expenses of its respective attorneys in connection with
such appraisal except in the case of an Event of Default or in the case of a
revocation by the Lessee of its election to terminate the Lease under Section
4.02 hereof, in which case such expenses shall be borne by the Lessee.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01.Disclaimer of Representations and Warranties. THE LESSEE
ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE,
DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE,
(ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR
ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND
EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL
CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR
ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS,
AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE
INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE
EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR
IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE,
FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR
MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S
TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET
ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER
MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS
DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE
TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE.
The provisions of this Section 5.01 have been negotiated by the Lessor and the
Lessee and, except as provided in Article 7 of the Participation Agreement,
are intended to be a complete exclusion and negation of any representations or
warranties of the Lessor, the Indenture Trustee and the Owner Participant,
express or implied, with respect to the Airframe and each Engine that may
arise pursuant to any law now or hereafter in effect, or otherwise.
Section ▇.▇▇.▇▇ Modification of Other Warranties. None of the
provisions of this Article 5 or any other provision of this Lease shall be
deemed to amend, modify or otherwise affect the representations, warranties or
other obligations (express or implied) of the Lessee, AVSA, the Manufacturer
or the Engine Manufacturer or any of their respective subcontractors or
suppliers, with respect to the Airframe, the Engines or any Parts incorporated
or installed in or attached to the Airframe or Engines, or to release the
Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their
respective subcontractors or suppliers from any such representation, warranty
or obligation. So long as an Event of Default shall not have occurred and be
continuing under this Lease and to the extent permitted under the applicable
warranty, patent indemnity, or service-life policy, (i) the Lessor shall
assign or otherwise make available to the Lessee such rights as the Lessor may
have under any warranty, patent indemnity, or service-life policy made or
given by the Manufacturer, AVSA or the Engine Manufacturer or any of their
respective subcontractors or suppliers, and any other claims against the
Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or
supplier with respect to the Aircraft, including all rights to demand, accept
and retain all rights in and to property (other than the Aircraft), data and
services of any kind which the Manufacturer, AVSA and the Engine Manufacturer
are obligated to provide and do provide pursuant to the Purchase Agreement or
the GTA with respect to the Aircraft; and (ii) all payments pursuant to any
manufacturer's or subcontractor's warranty, patent indemnity, or service-life
policy obligation shall be paid to the Lessee; provided that the Lessee shall
apply such payments to the cost of repair or correction of any condition of
the Aircraft which gave rise to such payments.
Section 5.03.Certain Agreements of the Lessee. The Lessee agrees with
the Lessor for the benefit of the Owner Participant that the Lessee shall
perform the agreements, covenants and indemnities of the Lessee set forth in
the Participation Agreement to the extent the same are applicable to the Owner
Participant, as fully and to the same extent and with the same force and
effect as if set forth in full in this Article 5.
ARTICLE 6
LIENS
Section 6.01.Liens. The Lessee will not directly or indirectly
create, incur, assume or suffer to exist, and will promptly, at its own cost
and expense, take such action as may be necessary to discharge, any Lien on or
with respect to the Lessor's Estate or this Lease or the Aircraft, the
Airframe or any Engine or any Part or title thereto or any interest therein
except:
(a) the respective rights of the Lessor and the Lessee as provided
in this Lease, the security interest and Lien of the Indenture and the
rights of the Owner Participant, the Lessor and the Indenture Trustee under
the Trust Agreement, the Indenture and the Participation Agreement;
(b) the rights of any sublessee or transferee or other Person under a
sublease, transfer, assignment or other such arrangement expressly
permitted by the terms of this Lease;
(c) Lessor's Liens and Indenture Trustee's Liens to the extent
required to be discharged by the Owner Participant, the Lessor or the
Indenture Trustee, as the case may be, in accordance with Section 7.03(b),
7.04(b) or 7.05(b) of the Participation Agreement;
(d) Liens for Taxes imposed against the Lessee either not yet due or
being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve (i) any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein, (ii) any material risk of civil
liabilities or (iii) any risk of the assertion of criminal charges against
the Lessor, the Owner Participant, the Indenture Trustee or any Holder;
(e) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising against the Lessee in the ordinary course of the
Lessee's business for amounts the payment of which is either not yet due or
is being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein; and
(f) Liens arising from judgments or awards against the Lessee with
respect to which (i) at the time an appeal or proceeding for review is
being prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for
review and then only for the period of such stay and (ii) there is not, and
such proceedings do not involve, any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any
Engine or any interest therein.
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01.Registration, Maintenance and Operation. The Lessee, at
its own cost and expense, shall:
(a) cause the Aircraft to remain at all times duly registered in
the name of the Lessor as owner, pursuant to the Transportation Code and,
subject to the proviso to Section 6.03(b) of the Participation Agreement,
to remain at all times duly registered pursuant to the Transportation Code
and at all times act in accordance with the rules and regulations of the
Aeronautics Authority or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered in
accordance with Section 6.03(b) of the Participation Agreement;
(b) maintain, inspect, service, repair, test and overhaul the
Aircraft (or cause the same to be done) so as to keep the Aircraft (and any
engine which is not an Engine but is installed on the Aircraft) in as good
operating condition as when delivered to the Lessor on the Delivery Date,
ordinary wear and tear excepted, and in any event (i) in accordance with
the applicable regulations of the Aeronautics Authority or of the
regulatory agency or body of any other jurisdiction in which the Aircraft
may then be registered pursuant to Section 6.03(b) of the Participation
Agreement and the Lessee's maintenance program approved by the Aeronautics
Authority or such agency or body, (ii) in the same manner and with the same
care used by the Lessee with respect to other A300-600 series aircraft and
CF6-80C2-A5F series engines (or other engines permitted by the terms of
this Lease to be used on the Aircraft) owned, operated or leased by the
Lessee, to the extent that the same regulations, and the Lessee's
FAA-approved maintenance program shall apply to any such aircraft and
related engines, owned or leased by the Lessee, and utilized in similar
circumstances, and without discriminating against the Aircraft, with
respect to its use, operation or maintenance in contemplation of the
expiration or termination of this Lease other than withdrawal of the
Aircraft from use and operation as is necessary to prepare the Aircraft for
return to the Lessor upon such expiration or termination, and (iii) so as
to keep the Aircraft in such condition as may be necessary to enable its
airworthiness certification to be maintained in good standing at all times
under the Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered;
(c) maintain, or cause to be maintained, all records, logs and other
materials in respect of the Aircraft required by the Aeronautics Authority,
or the applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered, all such records and logs to be
maintained in the English language (which records, logs and other materials
shall, as between the Lessor and the Lessee and all parties claiming
through the Lessee, be the property of the Lessor but shall become the
property of the Lessee upon purchase by the Lessee of the Aircraft pursuant
to the terms of this Lease or upon the occurrence of an Event of Loss and
the Lessee's compliance with Section 11.03 hereof);
(d) promptly furnish to the Lessor such information within the
Lessee's possession as may be required to enable the Lessor to file any
reports to be filed by the Lessor with any governmental authority because
of the Lessor's ownership of or the Owner Participant's interest in the
Aircraft;
(e) not maintain, service, repair, overhaul, use or operate the
Aircraft or any Engine in violation of any airworthiness certificate or
registration relating thereto, or in violation of any law or any license,
rule, regulation or order of or by any government or governmental authority
having jurisdiction over the Lessee or the Aircraft or any Engine or for
any purpose for which the Aircraft or any Engine is not designed; provided,
however, that the Lessee (or if a sublease shall then be in effect, the
sublessee thereunder) may in good faith contest the validity or application
of any such law, license, rule, regulation or order in any manner that does
not adversely affect the Lessor, its right, title or interest in the
Aircraft or any Engine or the interests of the Indenture Trustee or the
Owner Participant therein, or in any Operative Agreement (excluding any
interests the Lessee agrees are indemnified for under the Tax Indemnity
Agreement) and such contest or non-compliance will not result in any
material risk of loss, forfeiture or damage to the Aircraft or in any risk
of criminal liability to the Lessor, the Indenture Trustee or the Owner
Participant; and if any such law, license, rule, regulation or order
requires alteration of the Aircraft or any Engine, the Lessee will conform
the same therewith at its own cost and expense and will maintain the
Aircraft or any Engine in compliance with such law, license, rule,
regulation or order; and
(f) not operate or locate the Airframe or any Engine, or suffer the
Airframe or any Engine to be operated or located in any area excluded from
coverage by any insurance policy required by the terms of Article 13
hereof, unless the Lessee has obtained, prior to the operation or location
of the Airframe or any Engine in such area, indemnification from the
Government, or other insurance, against the risks and in the amounts
required by, and in compliance with, Article 13 hereof covering such area
(and naming the Lessor, or so long as this Lease is assigned to the
Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of
indemnification or insurance payable in respect of casualties to the
Aircraft) or unless the Aircraft is only temporarily located in such area
as a result of an isolated occurrence attributable to a hijacking, medical
emergency, equipment malfunction, weather conditions, navigational error or
other similar unforeseen circumstances and the Lessee is using its good
faith efforts to remove the Aircraft from such area.
The Lessee may, at any time during the Term, install an engine or
engines on the Airframe and operate the Aircraft with such engine or engines
installed thereon and the Lessor shall have no right, title or interest in and
to any such engine until such time, if any, that such engine is returned to
the Lessor under Section 12.02 hereof.
Section 7.02.Possession and Permitted Transfer and Sublease. (a)
Conditions. The Lessee will not, without the prior written consent of the
Lessor, sublease or otherwise in any manner deliver, transfer or relinquish
possession of the Aircraft, the Airframe or any Engine or install any Engine,
or permit any Engine to be installed, on any airframe other than the Airframe;
provided, that, so long as (i) in the case of clause (i) below, no Payment
Default, Bankruptcy Default or Event of Default shall have occurred and be
continuing at the commencement of such sublease, (ii) the Lien of the
Indenture is not impaired thereby, (iii) all applicable governmental approvals
in connection therewith have been obtained and (iv) the Lessee shall comply
with the provisions of Article 13 hereof, the Lessee may without the prior
written consent of the Lessor:
(i) so long as the sublessee is generally meeting its material
obligations as they come due and is not subject to a proceeding or final
order under applicable bankruptcy, insolvency or reorganization laws on the
date the sublease is entered into and with 30 days' prior written notice to
the Lessor and the Owner Participant, (A) sublease the Aircraft or any
Engine to a U.S. Air Carrier, (B) after December 31, 2003 sublease the
Aircraft or any Engine to an Air Carrier which is principally based in and
domiciled in one of the countries listed on Schedule III of the
Participation Agreement, or (C) after December 31, 2003 sublease the
Aircraft or any Engine to any other Air Carrier not described in this
Section which shall be reasonably acceptable to the Lessor as evidenced by
its prior written consent; provided, that, with respect to clauses (B) and
(C) above, at the time of any such sublease the United States of America
maintains normal diplomatic relations with the country in which such Air
Carrier is principally based and domiciled and provided further that such
country shall not then be experiencing war. In the case of any sublease (x)
such sublease shall include the provisions required by Section 7.02(b)
hereof and expressly require the sublessee to operate and maintain the
Aircraft in compliance with the applicable provisions of this Lease, (y)
such sublease shall provide that such sublessee will not transfer
possession of, or any other rights to, the subleased Airframe or any Engine
to any other Person without the prior written consent of the Lessor (except
as permitted by subparagraphs (ii) through (viii) below and except that, in
the case of subparagraph (iv), possession of the Aircraft may only be
transferred at the direction of the Lessee) and (z) such sublease shall
expire not later than the expiration of the Basic Term or any Renewal Term
then in effect hereunder. Prior to any sublease to an Air Carrier
permitted under Section 7.02(a)(i)(C) above: (I) the maintenance standards
of the aeronautical authority of the country of domicile or principal
operation of the sublessee taken as a whole shall not be materially less
stringent than those of the FAA or at least comparable to those, taken as a
whole, required by the central civil aviation authority of any of the
United Kingdom, France, Canada, Japan or Germany; (II) the Lessee will
provide opinions of counsel (such counsel and the form and substance of
such opinions to be reasonably satisfactory to the Lessor) with respect to
(A) the legality, validity and enforceability of the Operative Agreements
and the sublease in such country, (B) that the laws of such country require
fair compensation by the government of such country payable in a currency
freely convertible into U.S. dollars for the loss of the use of or title to
the Aircraft in the event of a requisition of use or title by such
government, (C) the Lessor's title to the subleased equipment will be
recognized, (D) the required agreement of such foreign air carrier that its
rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such foreign air carrier under applicable
law (subject only to customary exceptions to enforceability), (E) that it
is not necessary for the Owner Participant, the Lessor or the Indenture
Trustee to register or qualify to do business in such country as a result
of the proposed sublease or in order for the Owner Participant, the Lessor
or the Indenture Trustee to enforce the terms and conditions of the
Operative Agreements, (F) there is no tort liability of the owner of an
aircraft not in possession thereof or of Persons lending money to such an
owner for the purchase of an aircraft, under the laws of such jurisdiction
other than tort liability which might reasonably have been imposed on such
owner or Persons under the laws of the United States or any state thereof
(it being understood that, in the event that such latter opinion cannot be
given in a form satisfactory to the Lessor, such opinion shall be waived if
insurance reasonably satisfactory to the Lessor is available to cover such
risk to the Owner Participant and is provided at or before the execution of
such a sublease, at the Lessee's cost and expense), (G) that there exist no
possessory rights in favor of such sublessee under the laws of such country
which would, upon bankruptcy or insolvency of the Lessee (and assuming that
at such time such sublessee is not bankrupt or insolvent) or of the
sublessee, prevent the return of the Aircraft in accordance with the terms
of this Lease and (H) all necessary governmental approvals required for the
subleased equipment, the Airframe or any Engine, as the case may be, to be
imported and, to the extent reasonably obtainable, exported from the
applicable country of domicile upon repossession of such subleased
equipment by the Lessor (and the Lessee as sublessor), shall have been
procured at the Lessee's own cost and expense by the Lessee prior to
commencement of any such sublease; (III) duties and tariffs, if applicable,
shall be paid for by the Lessee; and (IV) the Lessee shall effect or cause
to be effected at the Lessee's own cost and expense all recordings and
filings that are required, or reasonably requested by the Lessor, to
continue the Lessor's right, title and interest to the Aircraft and rights
under the Lease (and sublease) and to perfect and maintain the priority of
the Lien of the Indenture;
(ii) subject the Engines or permit any Engine to be subjected to
normal interchange or pooling agreements or arrangements, in each case
customary in the airline industry, entered into by the Lessee in the
ordinary course of its business with a vendor domiciled in the United
States or in a country with which the United States maintains normal
diplomatic relations (and which is not experiencing war) or (x) any U.S.
Air Carrier or (y) any foreign Air Carrier which is (I) organized in a
country listed on Schedule III to the Participation Agreement, (II)
organized in a country with which the United States then maintains normal
diplomatic relations, (III) is a party to the Convention on the
International Recognition of Rights in Aircraft or (IV) otherwise provides
equivalent protection to owners, lessors and mortgagees of aircraft;
provided that no transfer of the registration of or any Engine shall be
effected and that throughout the period that any Engine is subjected to
such interchange or pooling agreement or arrangement the terms of this
Lease shall be observed; and provided, further, that no such agreement or
arrangement contemplates or requires the transfer of title to or
registration of any Engine, and if the Lessor's title to any Engine shall
nonetheless 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 the Lessee shall comply with Section 11.04 of this Lease in
respect of such Engine;
(iii) deliver or permit the delivery of possession of the Airframe or
any Engine to their respective manufacturers or certified maintenance
providers for testing, service, repair, maintenance or overhaul work or for
alterations or modifications in or additions to the Airframe or any Engine
to the extent required or permitted by the terms of Article 9 hereof;
(iv) transfer or permit the transfer of possession of the Airframe
or any Engine pursuant to a contract or agreement with the Government or
pursuant to the Civil Reserve Air Fleet Program administrated pursuant to
Executive Order No. 12056, as amended (the "CRAF Program"), or any similar
or substitute programs of the Government, so long as the Lessee (or any
permitted sublessee or transferee pursuant to this Section) shall promptly
notify the Lessor upon such transfer of possession and provide the Lessor
and the Indenture Trustee with the name and address of the Contracting
Officer or representative of the Military Aircraft Command of the United
States Air Force to whom notices must be given in respect of the Aircraft;
(v) install or permit the installation of an Engine on an airframe
which is owned by the Lessee or any permitted sublessee free and clear of
all Liens, except (A) Liens of the type permitted under Section 6.01
hereof, (B) Liens which apply only to the engines (other than an Engine),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe and which do
not apply to substantially all of such airframe and (C) the rights of an
Air Carrier under normal interchange or pooling agreements which are
customary in the airline industry and do not contemplate or require the
transfer of title to such airframe or the engines installed on it;
(vi) install or permit the installation of an Engine on an airframe
leased to the Lessee or any permitted sublessee or transferee or purchased
by the Lessee subject to a conditional sale or other security agreement,
provided that (A) such lease, conditional sale or other security agreement
does not cover the Engine so installed and the Lessor shall have received
from the lessor, conditional vendor or secured party of such airframe an
agreement (which may be the lease or conditional sale or other security
agreement covering such airframe), whereby such lessor, conditional vendor
or secured party expressly agrees that neither it nor its successors or
assigns will acquire or claim any right, title or interest in any Engine
by reason of such Engine being installed on such airframe at any time, and
(B) such airframe is and remains free and clear of all Liens except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and Liens of the type permitted by
subparagraph (v) of this Section 7.02(a);
(vii) install or permit the installation of an Engine on an airframe
owned by the Lessee, leased to the Lessee or purchased by the Lessee
subject to a conditional sale or other security agreement under
circumstances where neither subparagraph (v) nor subparagraph (vi) of this
Section 7.02(a) is applicable, provided that such installation shall be
deemed an Event of Loss with respect to such Engine and the Lessee shall
comply with Section 11.04 hereof in respect of such Engine, the Lessor not
intending to waive any right, title or interest it may have to or in such
Engine under applicable law until compliance by the Lessee with such
Section 11.04; and
(viii) enter into a wet lease under which the Lessee has effective
control of the Aircraft in the ordinary course of the Lessee's business
which shall not be considered a transfer of possession hereunder, provided
that the Lessee's obligations under this Lease shall continue in full force
and effect notwithstanding any such wet lease.
(b) Rights of Transferee. Notwithstanding the provisions of Section
7.02(a) hereof, the rights of any transferee who takes possession of the
Aircraft, the Airframe or any Engine by reason of a transfer permitted by
Section 7.02(a) hereof shall be subject and subordinate to, and any sublease
or wet lease permitted by Section 7.02(a) hereof shall be made expressly
subject and subordinate to, all the terms of this Lease, including, without
limitation, the Lessor's right to repossession pursuant to Article 17 hereof
and to avoid such sublease upon such repossession, and the Lessee shall remain
primarily liable for the performance of all the terms of this Lease and the
other Operative Agreements to the same extent as if such sublease or transfer
had not occurred. Any such sublease shall include appropriate provisions for
the maintenance, inspection (as required by Section 14.01 hereof), operation,
use and insurance of the Aircraft, the Airframe and each Engine in accordance
with the provisions of this Lease and shall provide assurances reasonably
satisfactory to the Lessor that the sublessee may not further sublease any of
such equipment. The Lessee shall promptly provide the Lessor, the Owner
Participant and the Indenture Trustee a copy of any sublease and, prior to
execution and delivery of any sublease deliver to the Lessor all other
documents (including all insurance certificates evidencing compliance with
this Lease) required hereunder relating to such sublease or transfer of
possession.
(c) No Release of Lessee/Costs of Subleasing. No sublease,
interchange or pooling agreement or other relinquishment of possession
permitted under this Article 7 of any of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of the Lessee's obligations
to the Lessor, the Indenture Trustee or the Owner Participant under this
Lease, the Participation Agreement or the Tax Indemnity Agreement or
constitute a waiver of any of the Lessor's rights and remedies hereunder or
thereunder or extend beyond the end of the Term. Subject to the terms and
conditions of this Lease, the Lessee will retain the right to cure any default
by any sublessee permitted pursuant to this Section 7.02 and to terminate such
sublease upon such default. The Lessee shall pay all costs of the Owner
Participant, the Indenture Trustee and the Lessor incurred in connection with
any subleasing or proposed subleasing.
Section 7.03.Insignia. (a) Nameplate. On or prior to the Delivery
Date or as soon thereafter as possible, the Lessee agrees to affix to and
maintain in the cockpit of the Airframe, in a clearly visible location, and on
each Engine, a clearly visible metal nameplate bearing the inscription "FIRST
SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and,
so long as such Airframe or Engines shall be subject to the Lien of the
Indenture, the additional inscription "STATE STREET BANK AND TRUST COMPANY, AS
INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary,
from time to time, with a nameplate reflecting the name of any successor
Lessor or successor Indenture Trustee, in each case as permitted by the
Operative Agreements).
(b) Lessee's Marks. Except as provided in Section 7.03(a) hereof,
the 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 during the Term, the Lessee may cause the Aircraft
to be lettered "Federal Express Corporation" or may letter, paint or ▇▇▇▇ it
in some other appropriate manner for convenience of identification of the
Lessee's interest or the interest of any permitted sublessee (including but
not limited to the Lessee's or any permitted sublessee's customary colors and
insignia) and to bear insignia plates or other markings identifying the
supplier or manufacturer of the Airframe or the Engines or any Parts of either.
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01.Replacement of Parts. (a) Generally. The Lessee, at
its own cost and expense, will replace or cause to be replaced as promptly as
practicable all Parts which may from time to time be incorporated or installed
in or attached to the Airframe or any Engine and which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason, except as
otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee
may, at its own cost and expense, remove or cause to be removed 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 the
Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at
its own cost and expense, replace such Parts as promptly as practicable. All
replacement parts shall be free and clear of Liens (except for pooling
arrangements to the extent permitted by Section 8.02 hereof and Liens
permitted under Section 6.01 hereof, other than clauses (d) and (f) thereof)
and shall be in at least as good operating condition as, and shall have a
value and utility at least equal to, the Parts replaced, and in any event not
less than the condition and repair required to be maintained by the provisions
of this Lease.
(b) Title. All Parts at any time removed from the Airframe or any
Engine shall remain the property of the Lessor until 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 in Section 8.01(a) hereof. Immediately upon any replacement
part (other than, to the extent permitted by Section 8.02 hereof, a
replacement part subject to a pooling arrangement) becoming incorporated or
installed in or attached to the Airframe or any Engine, and without further
act:
(i) title to the replaced Part shall vest in the Lessee, free and
clear of all rights of the Lessor, and such replaced Part shall no longer
be deemed a Part under this Lease;
(ii) title to such replacement part shall vest in the Lessor free
and clear of all Liens except for Liens permitted by Section 6.01 hereof
(other than clauses (d) and (f) thereof) and shall thereupon be and become
a Part; and
(iii) such replacement part shall become subject to this Lease and to
the Lien of the Indenture, and shall be deemed part of the Airframe or such
Engine for all purposes to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine.
Section 8.02.Pooling of Parts. Any Part removed from the Airframe or
any Engine as permitted in Section 8.01(a) hereof may be subjected by the
Lessee to any normal pooling arrangement customary in the U.S. airline
industry and entered into with vendors and other Air Carriers in the ordinary
course of the Lessee's business, provided that the part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 8 hereof, 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 Section 8.01(a) hereof may be owned by another Air Carrier
subject to such normal pooling arrangement, provided that the Lessee, at its
own cost and expense and as promptly as possible, either:
(a) causes title to such replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof by the Lessee acquiring title to
such replacement part for the benefit of, and transferring such title to,
the Lessor free and clear of all Liens (other than Liens permitted under
Section 6.01 hereof (other than clauses (d) and (f) thereof)); or
(b) replaces such replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement part
owned by the Lessee free and clear of all Liens (other than Liens permitted
under Section 6.01 hereof (other than clauses (d) and (f) thereof)) and by
causing title to such further replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof.
All such replacement parts and further replacement parts shall meet
the standards set forth in the last sentence of Section 8.01(a) hereof.
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01.Required Alterations and Modifications. The Lessee, at
its own cost and expense, shall make or cause to be made such alterations and
modifications in and additions to the Airframe and each Engine as may be
required from time to time to meet the applicable requirements of the
Aeronautics Authority or any other governmental authority with jurisdiction
over the Lessee's operations and aircraft; provided, however, that the Lessee
or sublessee, as the case may be, may in good faith contest the validity or
application of any such requirements in any reasonable manner that does not
involve any material risk of civil liabilities (unless indemnified by the
Lessee) or any risk of criminal penalties being imposed on or against the
Indenture Trustee, the Owner Participant or the Lessor, that does not involve
any material risk or danger of loss, forfeiture or sale of the Aircraft or any
Engine and that does not adversely affect the Lessor, its title or interest in
the Aircraft or any Engine, the first and prior perfected Lien and security
interest of the Indenture, or the interests of the Indenture Trustee or the
Owner Participant in the Airframe or any Engine, or in any Operative Agreement
(excluding any interests the Lessee agrees are indemnified for under the Tax
Indemnity Agreement). All such alterations, modifications or additions shall
be made on or before the date mandated therefor, taking into account
authorized postponements resulting from a contest or otherwise and shall be
made at such time and in such a manner so as not to discriminate against the
Aircraft whether by reason of its leased status or otherwise.
Section 9.02.Other Alterations and Modifications. (a) Generally.
The Lessee, at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine
as the Lessee may deem desirable in the proper conduct of its business,
including, without limitation, removal of Obsolete Parts in its usual course
of maintenance, provided that no such alteration, modification, addition or
removal, individually or in the aggregate, shall create any adverse tax
consequences for the Owner Participant not otherwise indemnified for, diminish
the value, remaining useful life, or utility of the Airframe or the value or
utility of any Engine or impair its condition or airworthiness below its
value, remaining useful life (in the case of the Airframe only), utility,
condition and state of airworthiness immediately prior to such alteration,
modification, addition or removal, assuming that the Airframe or such Engine
was then in the condition and state of airworthiness required to be maintained
by the terms of this Lease, or cause the Airframe or any Engine to become
"limited use property" within the meaning of Revenue Procedure 76-30, 1976-2
C.B. 647, except that the value (but not the remaining useful life, utility,
condition or airworthiness) of the Aircraft may be reduced by the value, if
any, of any such Obsolete Parts which shall have been removed; provided that
in no event shall the aggregate value of all such Obsolete Parts which shall
have been so removed and not replaced exceed $500,000.
(b) Title to Installed Parts. Title to each part incorporated or
installed in or attached or added to the Airframe or any Engine as the result
of any alteration, modification, removal or addition made pursuant to Section
9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become
subject to this Lease; provided, however, that the Lessee may remove any such
Part at any time during the Term if:
(i) such Part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or
attached or added to the Airframe or such Engine on the Delivery Date or
any Part in replacement of, or substitution for, any such Part;
(ii) such Part is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms of
Article 7 hereof or the first sentence of Section 9.01 hereof; and
(iii) such Part can be removed from the Airframe or such Engine
without (A) causing material damage to the Airframe or such Engine (it
being understood that the Lessee shall repair any damage caused by a
permitted removal) or diminishing or impairing the value, utility,
condition or airworthiness or remaining useful life of the Airframe
required to be maintained by the terms of this Lease or (B) diminishing the
value, utility or remaining useful life (in the case of the Airframe) or
the value and utility (in the case of such Engine) which the Airframe or
such Engine would have had at such time had such alteration, modification,
removal or addition not occurred, assuming the Airframe or such Engine was
then in the condition required to be maintained by the terms of this Lease.
(c) Title to Removed Parts. Upon the removal by the Lessee of any
such Part as provided in subsection (b) above, title thereto shall, without
further act, vest in the Lessee and such Part shall no longer be deemed a
Part. Any Part not removed by the Lessee as above provided prior to the
return of the Aircraft to the Lessor hereunder shall remain the property of
the Lessor and subject to this Lease.
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus.
(a) Option to Terminate. So long as no Event of Default shall have occurred
and be continuing, the Lessee shall have the right, at its option, on any
Termination Date, on no more than 180 days' and at least 90 days' irrevocable
(except as provided herein) prior written notice (which notice shall state the
Proposed Termination Date) to the Lessor and the Owner Participant to
terminate this Lease as of a Termination Date if the Aircraft shall have
become obsolete or surplus to the operations of the Lessee; provided that the
Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner
Participant a certificate of the Lessee's President, Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant
Treasurer stating the determination of the Lessee that the Aircraft is
obsolete or surplus to its needs. Unless the Lessor has elected to retain the
Aircraft as herein provided, the Lessee shall have the right on one occasion
to revoke its notice of termination no later than the Business Day prior to
the date 15 days prior to the Proposed Termination Date whereupon this Lease
shall continue in full force and effect.
(b) Sale Procedure. During the period from the giving of notice
pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the
Lessee, as non-exclusive agent for the Lessor, shall use its reasonable
efforts to obtain bids for the cash purchase on the Proposed Termination Date
(or such earlier date as shall be consented to in writing by the Lessor) of
the Aircraft. On the Proposed Termination Date, the Engines shall be
installed on the Airframe (provided that the Airframe may be sold with engines
meeting the requirements set forth herein for Replacement Engines in lieu of
the Engines so long as the aggregate number of Engines and Replacement Engines
being sold with the Airframe equals two). The Lessor may, if it desires to do
so, seek to obtain such bids. The Owner Participant shall not inspect any bids
received by the Lessee with respect to the Aircraft, unless the Owner
Participant has given to the Lessee binding and irrevocable notice that
neither the Owner Participant nor any of its Affiliates nor any Person acting
for the Owner Participant or such Affiliate will submit a bid for the purchase
of the Aircraft and if such notice has been given, the Lessee will provide the
Lessor with copies of bids received by the Lessee. No bid may be submitted by
the Lessee or any Person affiliated with the Lessee (or with whom or which
there is any arrangement or understanding as to the subsequent use of the
Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting
on behalf of the Lessee. The Lessee may reject any bid which is less than the
sum of the applicable Termination Value, the aggregate amount of any
Make-Whole Premium and all other expenses incurred by the Lessor, the Owner
Participant and the Indenture Trustee in connection with the sale. Subject to
the provisions of Section 10.02 hereof, on the Proposed Termination Date or
such earlier date of sale as shall be consented to in writing by the Lessor,
the Lessee shall deliver the Airframe which shall have the Engines installed
on it (provided that the Airframe may be delivered with installed engines
meeting the requirements set forth herein for Replacement Engines in lieu of
the Engines so long as the aggregate number of Engines and Replacement Engines
being delivered with the Airframe equals two and the Lessee shall comply with
the provisions of Section 11.04 hereof as if an Event of Loss occurred with
regard to the Engines) to the bidder which shall have submitted the highest
cash bid (whether certified to the Lessor by the Lessee or directly received
by the Lessor and certified to the Lessee) in the same manner as if delivery
were made to the Lessor pursuant to Article 12 hereof, at a location specified
by such bidder, and shall duly transfer to the Lessor title to any such
engines not owned by the Lessor, and the Lessor shall, upon payment in full to
the Lessor of the bid price and all amounts due and owing pursuant to Section
10.01(c) hereof by wire transfer of immediately available funds and upon
discharge of the Lien of the Indenture in accordance with Article 7 thereof,
sell the Airframe and Engines or engines to such bidder without recourse or
warranty (except as to the absence of Lessor's Liens).
(c) Payments to the Lessor. The total selling price realized at a
sale pursuant to Section 10.01(b) hereof net of all expenses of the sale
(including commissions and any sales or transfer taxes) (the "Net Sales
Price") shall be retained by the Lessor (or the Indenture Trustee as long as
the Indenture is in force) and, in addition, on or before the Proposed
Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee
as long as the Indenture is in force), by wire transfer of immediately
available funds, the sum of:
(i) the excess, if any, of the Termination Value for the Aircraft
computed as of the Proposed Termination Date over the Net Sales Price; plus
(ii)the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date to the extent payable in arrears but not to
the extent payable in advance; plus
(iii)all other amounts then due and payable by the Lessee (including,
without limitation, the aggregate amount of any Make-Whole Premium) under
this Lease and any other Operative Agreement.
(d) Transfer of Uninstalled Engines. Upon payment of the amounts
described in Section 10.01(c) hereof and upon transfer to the Lessor of title
to engines which have been returned in lieu of Engines as provided in Section
10.01(b) hereof, and upon payment of all other amounts then due under this
Lease, the Lessor will transfer to the Lessee, without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to any Engines which were replaced with engines pursuant
to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as
the Lessor shall have received from the Indenture Trustee releasing such
Engines from the Lien of the Indenture.
(e) Limitation on the Lessor's Duties. The Lessor shall be under no
duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids
or otherwise to take any action in connection with any such sale other than to
transfer to the purchaser named in the highest cash bid (determined as
described in Section 10.01(b) above) as referred to above (or to such
purchaser and to the Lessee, as the case may be), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to the Aircraft, against receipt by the Lessor of the
payments provided for in Section 10.01(c) hereof.
(f) Termination of the Lessee's Obligations. Upon the sale of the
Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with
the further provisions of this Article 10, the obligation of the Lessee to pay
Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date
occurring after the Proposed Termination Date and the Term shall end effective
as of the Proposed Termination Date. If no sale shall have occurred on or
before the Proposed Termination Date, this Lease shall continue in full force
and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed
that the Lessee has rescinded its notice of termination, and the Lessee shall
pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner
Participant in connection with the proposed sale.
Section 10.02.Retention of Aircraft by the Lessor. (a) Generally.
Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section
10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's
notice of termination given in accordance with Section 10.01(a) hereof, by
giving the Lessee and the Indenture Trustee written irrevocable notice of such
election not less than sixty (60) days prior to the Proposed Termination Date.
If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed
Termination Date, by wire transfer of immediately available funds the sum of:
(i) the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date to the extent payable in arrears but not to
the extent payable in advance; plus
(ii)all other amounts then due and payable by the Lessee under this
Lease and any other Operative Agreement, including the aggregate amount of
any Make- Whole Premium, on or prior to the Proposed Termination Date.
(b) Payment of the Certificates. It shall be an absolute condition
precedent to the Lessor's right to retain the Aircraft and to the termination
of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to
the extent set forth in Section 10.02(a) hereof) shall have paid to the
Holders and such Holders shall have received the entire outstanding principal
amount of, the aggregate amount of any Make-Whole Premium and accrued interest
on the Certificates on the Proposed Termination Date and all other sums due
and owing to the Indenture Trustee and the Holders on or prior to the Proposed
Termination Date under this Lease, the Indenture or any other Operative
Agreement.
(c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor
elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall
deliver the Airframe and the Engines (provided that the Airframe may be
delivered with engines meeting the requirements set forth herein for
Replacement Engines in lieu of the Engines so long as the aggregate number of
Engines and engines being delivered with the Airframe equals two and provided
that the other requirements of Section 11.04 hereof are met as if an Event of
Loss has occurred with regard to the Engines) to the Lessor in the same manner
as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall
duly transfer to the Lessor right, title and interest to any such engines not
owned by the Lessor, all in accordance with Article 12 hereof. Upon such
delivery of the Airframe and Engines or engines to the Lessor and payment by
the Lessee of any amounts required to be paid by the Lessee pursuant to
Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without
recourse or warranty (except as to the absence of Lessor's Liens), all of the
Lessor's right, title and interest in and to any Engines which were replaced
by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee
such instrument as the Lessor shall have received from the Indenture Trustee
releasing such Engines from the Lien of the Indenture.
(d) Termination of the Lessee's Obligations. Upon compliance by the
Lessor and the Lessee with the provisions of this Section 10.02 and upon
compliance by the Lessee with the further provisions of this Article 10, the
obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall
cease for any Rent Payment Date occurring after the Proposed Termination Date
and the Term shall end effective as of the Termination Date.
Section 10.03.Voluntary Termination as to Engines. The Lessee shall
have the right at its option and at any time, on at least thirty (30) days'
prior written notice to the Lessor, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe, provided that
prior to the date of such termination, the Lessee shall comply with the terms
of Section 11.04 hereof to the same extent as if an Event of Loss had occurred
with respect to such Engine.
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01.Lessee's Election Rights. The Lessee shall notify the
Lessor, the Indenture Trustee and the Owner Participant as soon as practicable
but in no event more than 10 Business Days following the occurrence of an
event which constitutes, or would with the passage of time constitute, an
Event of Loss with respect to the Airframe or with respect to the Airframe and
the Engines or engines then installed on the Airframe. By written notice to
the Lessor, the Indenture Trustee and the Owner Participant delivered within
60 days of the occurrence of any Event of Loss, the Lessee shall have the
right to elect the alternative set forth in Section 11.02 hereof or the
alternative set forth in Section 11.03 hereof. The Lessee's failure to make
such election within said 60-day period shall be deemed to be an election of
the alternative set forth in Section 11.02 hereof.
Section 11.02.Payment of Stipulated Loss Value. (a) The Lessee
shall, if it has so elected or is deemed to have so elected under Section
11.01 hereof, pay to the Lessor, by wire transfer of immediately available
funds on the earlier of (i) the fifteenth day following receipt in full of
insurance proceeds or requisition proceeds, described in Section 11.05 hereof,
in connection with such Event of Loss and (ii) the 120th day after the
occurrence of such Event of Loss (the earlier of such dates being referred to
herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value
for the Aircraft, determined as of the Stipulated Loss Value Determination
Date next succeeding the Loss Payment Date (or, if the Loss Payment Date
occurs on a Stipulated Loss Value Determination Date, determined as of such
Stipulated Loss Value Determination Date), plus (B) any and all Basic Rent due
and payable on the relevant Stipulated Loss Value Determination Date to the
extent payable in arrears but not to the extent payable in advance, plus (C)
any and all Supplemental Rent due and payable on or prior to such Loss Payment
Date, plus (D) all other amounts (including Basic Rent due and payable with
respect to Rent Payment Dates occurring prior to such Stipulated Loss Value
Determination Date and unpaid) due and payable by the Lessee hereunder or
owing by the Lessee or the Owner Trustee to the Indenture Trustee or the
Holders under the Indenture and the other Operative Agreements, plus (E) any
reasonable out-of-pocket expenses incurred in connection with such Event of
Loss and the related prepayment of the Certificates by the Lessor, the Owner
Participant and the Indenture Trustee; provided that in no event shall the
Holders not be paid in full.
(b) Termination of Lease; Title Transfer. Upon payment in full of
the amounts due pursuant to Section 11.02(a) hereof, the obligation of the
Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the
payment of such amounts shall terminate and the Term shall end. Further, upon
such payment, the Lessor will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens), all of the Lessor's
right, title and interest, if any, in and to the Airframe, Engines and engines
with respect to which such Event of Loss occurred, as well as all of the
Lessor's right, title and interest in and to any Engines constituting part of
the Aircraft but not installed on the Airframe when such Event of Loss
occurred, and will deliver to the Lessee such instrument as the Lessor shall
have received from the Indenture Trustee, releasing the Aircraft from the Lien
of the Indenture.
Section 11.03.Replacement of Airframe and Engines. (a) Generally.
So long as no Payment Default, Bankruptcy Default or Event of Default shall
have occurred and be continuing, and subject to Section 11.01 hereof and
provided that the Lessee shall have reimbursed the reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable counsel fees and
disbursements) of the Lessor, the Owner Participant, the Indenture Trustee and
the Holders (to the extent of the reasonable fees and expenses of one legal
counsel in each relevant jurisdiction representing all of the Holders) in
connection with the matters contemplated by this Section 11.03, if the Lessee
has elected to replace the Airframe and Engines suffering
an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be
duly conveyed to the Lessor within one hundred twenty (120) days after the
occurrence of such Event of Loss, as replacement for the Airframe and Engines
with respect to which such Event of Loss has occurred, good and marketable
title to an Airbus A300-600 series airframe manufactured no earlier than
January 1, 1996 (the "Replacement Airframe") and good and marketable title to
a number of Replacement Engines equal to the number of Engines with respect to
which an Event of Loss has occurred, provided that following compliance with
all other terms of this Section 11.03 each Engine shall be of identical make
and model and, in the case of such Replacement Airframe and each such
Replacement Engine, owned by the Lessee free and clear of all Liens not
excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an
airworthy aircraft by the Aeronautics Authority, and having in the case of the
Replacement Airframe a value, remaining useful life and utility, and in the
case of the Replacement Engines a value and utility, at least equal to, and
being in as good operating condition as, the Airframe and Engines with respect
to which such Event of Loss occurred, assuming that the Airframe and Engines
were then in the condition and state of airworthiness required to be
maintained by the terms of this Lease immediately prior to the occurrence of
such Event of Loss. In such case and as a condition to such substitution the
Lessee, at its own cost and expense, will also promptly:
(i) furnish the Indenture Trustee with originals of, and the Lessor
with copies of, full warranty bills of sale, in form and substance
satisfactory to the Lessor and the Indenture Trustee, with respect to such
Replacement Airframe and Replacement Engines together with an assignment in
form and substance satisfactory to the Lessor and the Indenture Trustee of
any and all manufacturer's warranties applicable thereto and a consent
reasonably satisfactory to the Lessor and the Indenture Trustee from such
manufacturer or manufacturers to such assignment;
(ii)cause such Replacement Airframe and Replacement Engines to be duly
registered in the name of the Lessor pursuant to the Transportation Code or
the applicable laws of any other jurisdiction in which the Aircraft may
then be registered in accordance with Section 6.03(b) of the Participation
Agreement;
(iii)cause a Lease Supplement with respect to such Replacement
Airframe and Replacement Engines to be duly executed by the Lessee and
recorded pursuant to the Transportation Code, or the applicable laws, rules
and regulations of any other jurisdiction in which the Aircraft may then be
registered as permitted by Section 6.03(b) of the Participation Agreement;
(iv)furnish the Lessor, the Indenture Trustee and the Owner
Participant with an appraisal or other report of a nationally recognized
aircraft appraiser based on an inspection of such Replacement Airframe and
Replacement Engines reasonably satisfactory to the Indenture Trustee and
the Owner Participant certifying that such Replacement Airframe has a
value, remaining useful life and utility, and such Replacement Engines have
a utility and value, at least equal to, and are in as good operating
condition as, the Airframe and Engines replaced, assuming such Airframe and
Engines were in the condition and repair required by the terms of this Lease
immediately prior to the occurrence of such Event of Loss;
(v) furnish the Lessor, the Indenture Trustee and the Owner
Participant with such evidence as the Lessor or the Indenture Trustee may
reasonably request of compliance with the insurance provisions of Article
13 hereof with respect to such Replacement Airframe and Replacement Engines;
(vi)provide the Owner Participant and the Lessor with (A) an opinion
of counsel selected by the Owner Participant and reasonably acceptable to
the Lessee (which opinion shall be reasonably satisfactory in form and
substance to the Owner Participant and the Lessor) that it will suffer no
adverse tax consequence not otherwise indemnified for to its reasonable
satisfaction as of the Delivery Date as a result of such substitution or
(B) an indemnity reasonably acceptable to the Lessor and the Owner
Participant against such consequences;
(vii)comply with the provisions of Section 9.08 of the Indenture;
(viii) cause an Indenture and Security Agreement Supplement with
respect to such Replacement Airframe and Replacement Engines to be duly
executed by the Lessor and the Indenture Trustee and recorded pursuant to
the Transportation Code, or the applicable laws, rules and regulations of
any other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement in order that
the Lien of the Indenture shall constitute a first priority, duly perfected
Lien and security interest on and in respect of such Replacement Airframe
and Replacement Engines;
(ix)take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as a secured party with the
Secretary of State of Utah and the filing of a notice with the Secretary of
State of Tennessee, as the Lessor or the Indenture Trustee may reasonably
request in order that such Replacement Airframe and Replacement Engines
shall be duly and properly titled in the Lessor, leased under this Lease
and subjected to the Lien of the Indenture to the same extent as the
replaced Airframe and Engines;
(x) furnish the Indenture Trustee with an opinion (reasonably
satisfactory in form and substance to the Lessor, the Owner Participant and
the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's
General Counsel) addressed to the Indenture Trustee and the Owner
Participant to the effect that (A) the Lessor has good title to such
Replacement Airframe and Replacement Engines, and (B) such Replacement
Airframe and Replacement Engines have been validly subjected to the Lien of
the Indenture (with the effect and result that the Indenture constitutes a
first priority duly perfected security interest and Lien on such
Replacement Airframe and Replacement Engines); and
(xi)cause to be delivered to the Lessor, the Owner Participant and the
Indenture Trustee an opinion of counsel to the Lessee addressed to the
Lessor, the Owner Participant and the Indenture Trustee as to the due
registration of the Aircraft and the due recordation of the requisite
documents or instruments and the validity and perfection of the Lien in
such Replacement Airframe and Replacement Engines.
(b) Title to Replaced Equipment. Upon compliance by the Lessee with
the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest, if any, in and to the Airframe and Engines with respect to which
such Event of Loss occurred. In connection with such transfer, the Lessee
shall prepare and the Lessor shall execute or forward to the Indenture Trustee
for execution, as the case may be, all in recordable form, a ▇▇▇▇ of sale
evidencing such transfer, a release of the Airframe and Engines with respect to
which such Event of Loss occurred from the Indenture and such other documents
as the Lessee reasonably requests, all at the Lessee's sole cost and expense.
Any Engine constituting part of the Aircraft, but not installed on the
Airframe when such Event of Loss occurred, shall continue to be property of
the Lessor and leased under this Lease as part of the same equipment as the
Replacement Airframe and Replacement Engines.
(c) Definitions. Each Replacement Airframe and Replacement Engine
shall be deemed part of the property leased under this Lease, each such
Replacement Airframe shall be deemed an "Airframe," each such Replacement
Engine shall be deemed an "Engine" and each such Replacement Airframe and
Replacement Engine shall be deemed part of the same Aircraft as was the
Airframe or Engine replaced.
(d) Rent Adjustments. An Event of Loss covered by this Section
11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or
Termination Values except as may be provided pursuant to the Tax Indemnity
Agreement and the Participation Agreement.
(e) Time Limitations. If the Lessee has elected to proceed under
this Section 11.03 but has not fully performed its obligations under this
Section 11.03 within 120 days of the occurrence of the applicable Event of
Loss, in the event that any amounts held by the Lessor (or, so long as the
Indenture shall be in effect, the Indenture Trustee) in respect of such Event
of Loss are less than the Stipulated Loss Value thereof, the Lessee will
deposit with the Lessor or the Indenture Trustee, as the case may be, the
amount of any deficiency as security on such 120th day. If the Lessee has
elected to proceed under this Section 11.03 but has not fully performed its
obligations under this Section 11.03 within 180 days of the occurrence of such
Event of Loss, the Lessee shall be deemed to have elected to proceed under
Section 11.02 hereof and shall immediately perform its obligations thereunder,
and the Indenture Trustee, or the Lessor if the Indenture shall have been
discharged, shall apply the amounts held by it pursuant to the preceding
sentence as a credit against such obligations.
Section 11.04.Event of Loss with Respect to an Engine. (a)
Generally. 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, the Lessee shall give the Lessor and the Indenture
Trustee prompt written notice thereof and shall, as soon as practicable but in
any event within sixty (60) days after the occurrence of such Event of Loss,
duly convey or cause to be conveyed to the Lessor, a Replacement Engine for
the Engine with respect to which such Event of Loss occurred, good and
marketable title to a Replacement Engine, free and clear of all Liens not
excepted in Sections 6.01(a), (b) (provided that if there are any Liens of the
type described in Section 6.01(b) hereof, such Liens are subordinate to the
Lien of the Indenture), (c) and (e) hereof and having a value and utility at
least equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was of the
value and utility and in the condition and repair required by the terms of
this Lease immediately prior to the occurrence of such Event of Loss, provided
that after any replacement, each Engine shall be of identical make and model.
The standards set forth in this Section with respect to Replacement Engines
shall apply upon any replacement or substitution of an Engine with a
Replacement Engine pursuant to any other provision of this Lease.
(b) Conditions Precedent. Prior to or at the time of any conveyance
of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost
and expense will:
(i) furnish the Indenture Trustee with an original of, and the Lessor
with a copy of, a full warranty ▇▇▇▇ of sale, in form and substance
satisfactory to the Lessor, with respect to such Replacement Engine
together with an assignment in form and substance satisfactory to the
Lessor of any and all manufacturer's warranties applicable thereto and a
consent reasonably satisfactory to the Lessor and the Indenture Trustee
from such manufacturer to such assignment;
(ii)cause a Lease Supplement covering such Replacement Engine to be
duly executed by the Lessee and filed for recordation pursuant to the
Transportation Code, or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement and, if the
Engine being replaced was registered under the applicable laws of the
jurisdiction in which the Aircraft is then registered, the Replacement
Engine shall be registered in the same fashion;
(iii)furnish the Lessor and the Indenture Trustee with a certificate
of a nationally recognized aircraft appraiser reasonably satisfactory to
the Lessor certifying that such Replacement Engine has a value and utility
at least equal to, and is in as good operating condition as, the Engine
replaced, assuming such Engine was in at least the condition and repair
required by the terms of this Lease immediately prior to the occurrence of
such Event of Loss;
(iv)furnish the Lessor with such evidence of compliance with the
insurance provisions of Article 13 hereof with respect to such Replacement
Engine as the Lessor or the Indenture Trustee may reasonably request;
(v) comply with the provisions of Section 9.08 of the Indenture;
(vi)cause an Indenture and Security Agreement Supplement with respect
to such Replacement Engine to be duly executed by the Lessor and the
Indenture Trustee and recorded pursuant to the Transportation Code, or the
applicable laws, rules and regulations of any other jurisdiction in which
the Aircraft may be registered as permitted by Section 6.03(b) of the
Participation Agreement in order that the Indenture shall constitute a
first priority duly perfected Lien and security interest on and in respect
of such Replacement Engine;
(vii)take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as Secured Party with the Secretary
of State of Utah and a notice filing with the Secretary of State of
Tennessee, as the Lessor or the Indenture Trustee may reasonably request in
order that such Replacement Engine be duly and properly titled in the
Lessor, leased under this Lease and subjected to the Lien of the Indenture
to the same extent as the replaced Engine;
(viii) furnish the Lessor, the Owner Participant and the Indenture
Trustee with an opinion (reasonably satisfactory in form and substance to
the Lessor, the Owner Participant and the Indenture Trustee) of counsel to
the Lessee (which may be the Lessee's General Counsel) addressed to the
Indenture Trustee and the Owner Participant to the effect that (A) the
Lessor has good title to such Replacement Engine, and (B) such Replacement
Engine has been validly subjected to the Lien of the Indenture (with the
effect and result that the Indenture constitutes a first priority duly
perfected security interest and Lien on such Replacement Engine); and
(ix)take such other action as the Indenture Trustee may reasonably
request in order that such Replacement Engine be duly and properly
subjected to the Lien of the Indenture to the same extent as the replaced
Engine.
(c) Title Transfer. Upon compliance by the Lessee with the terms of
Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest, if any, in and to the Engine with respect to which such Event of
Loss occurred. In connection with such transfer, the Lessee shall prepare and
the Lessor shall execute or forward to the Indenture Trustee for execution, as
the case may be, all in recordable form, a ▇▇▇▇ of sale evidencing such
transfer, a release of the Engine with respect to which such Event of Loss
occurred from the Indenture and such other documents as the Lessee reasonably
requests, all at the Lessee's sole cost and expense. Each Replacement Engine
shall, after such conveyance, be deemed part of the property leased under this
Lease. An Event of Loss covered by this Section 11.04 shall not result in any
change in Basic Rent, Stipulated Loss Values or Termination Values, but may
result in payments to be made pursuant to the Tax Indemnity Agreement and the
Participation Agreement.
Section 11.05.Application of Payments from the Government or Others.
(a) Generally. Any payments (other than insurance proceeds the application
of which is provided for in Section 13.03 hereof) received at any time by the
Lessor or by the Lessee from any governmental authority or any other party,
foreign or domestic, with respect to an Event of Loss resulting from the
condemnation, confiscation, theft or seizure of, or requisition of title to or
use of, the Airframe or any Engine will be applied, as appropriate, in
accordance with Section 11.05(b) or Section 11.05(c) hereof.
(b) Payments of Stipulated Loss Value. If the payments described in
Section 11.05(a) hereof are received with respect to the Airframe or with
respect to the Airframe and Engines or engines then installed on the Airframe
and the Lessee has elected the alternative set forth in Section 11.02 hereof,
so much of such payments as shall not exceed the amount required to be paid by
the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or,
if the Lien of the Indenture has not been discharged, the Indenture Trustee)
in reduction of the Lessee's obligations under Section 11.02 hereof if not
already paid by the Lessee, or, if such obligations have already been
discharged in full by the Lessee, such payments shall be applied to reimburse
the Lessee for its payment of such Stipulated Loss Value and, if and to the
extent specifically included in such payment, to pay to the Lessee interest on
such amount of Stipulated Loss Value at the rate included in such payment if
any, or otherwise at the applicable Debt Rate, for the period from the date of
payment by the Lessee of the Stipulated Loss Value to the date of
reimbursement of the Lessee under this Section 11.05(b). The excess, if any,
remaining after such application shall be divided between the Lessor and the
Lessee as their respective interests may appear.
(c) Payment if the Lessee Elects Replacement. If the payments
described in Section 11.05(a) hereof are received with respect to the Airframe
or with respect to the Airframe and the Engines or engines then installed on
the Airframe and the Lessee has elected the alternative set forth in Section
11.03 hereof, or if such payments are received with respect to an Engine not
then installed on the Airframe under the circumstances contemplated by Section
11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be
paid over to or retained by the Lessee, provided that the Lessee shall have
fully performed its obligations pursuant to Section 11.03 or Section 11.04
hereof, as the case may be, with respect to the Event of Loss for which such
payments are made.
Section 11.06.Requisition of an Airframe and the Installed Engines
for Use by Government. In the event of the requisition for use by the
Government or any other government of registry of the Aircraft, or any agency
or instrumentality of either (a "Requisitioning Government") of the Airframe
and the Engines or engines then installed on the Airframe during the Term,
which requisition does not constitute an Event of Loss, the Lessee shall
promptly notify the Lessor, the Indenture Trustee and the Owner Participant of
such requisition and all of the Lessee's obligations under this Lease with
respect to such Airframe and Engines or engines shall continue to the same
extent as if such requisition had not occurred except to the extent that any
failure or delay in repairing or maintaining the Aircraft by the Lessee shall
have been caused by such requisition. All payments received by the Lessor,
the Lessee or any permitted sublessee or transferee from the Requisitioning
Government for such use of the Airframe and Engines or engines during the Term
(other than any such requisition which constitutes an Event of Loss, as to
which the provisions of Section 11.05 hereof shall govern) shall, subject to
Section 11.08 hereof, be paid over to, or retained by the Lessee or such
permitted sublessee or transferee. All payments received by the Lessor, the
Lessee or any such permitted sublessee or transferee from the Requisitioning
Government for the use of the Airframe and Engines or engines after the Term
shall be paid over to, or retained by, the Lessor (or the Lessee if it shall
have purchased the Lessor's interest therein in accordance with the provisions
hereof).
Section 11.07.Requisition for Use by Government of an Engine Not
Installed on the Airframe. In the event of the requisition for use by a
Requisitioning Government of registry of the Aircraft or any agency or
instrumentality thereof of any Engine not then installed on the Airframe, the
Lessee shall replace such Engine by complying with the terms of Section 11.04
hereof to the same extent as if an Event of Loss had occurred with respect to
such Engine as of the date of such requisition, and any payments received by
the Lessor or the Lessee from the Requisitioning Government with respect to
such requisition shall, subject to Section 11.08 hereof, be paid over to or
retained by the Lessee, provided that the Lessee shall have fully performed
its obligations under Section 11.04 hereof.
Section 11.08.Application of Payments During Existence of Certain
Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof
which is payable to the Lessee shall not be paid to the Lessee, or, if it has
been previously paid directly to the Lessee, shall not be retained by the
Lessee, if at the time of such payment a Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing, but shall be paid
to and held by the Lessor (or the Indenture Trustee so long as the Lien of the
Indenture is in effect) as provided in Article 23 hereof as security for the
obligations of the Lessee under this Agreement, and at such time as there
shall not be continuing any such Payment Default, Bankruptcy Default or Event
of Default, such amount to the extent not theretofore applied as provided
herein, shall be paid to the Lessee.
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01.Return of Aircraft. Unless the Aircraft is purchased
by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or
upon the termination of this Lease pursuant to Article 10 or Article 17 hereof
or otherwise, the Lessee, at its own cost and expense, will return the
Aircraft by delivering it to the Lessor on the last day of the Term or on the
Termination Date, as the case may be, at the Lessee's principal maintenance
facility in Memphis, Tennessee or such other location specified by the Lessee
(and reasonably acceptable to the Owner Participant), or if such termination
is pursuant to Article 17 hereof, selected by the Lessor in its reasonable
discretion, within or, if the Aircraft is then registered outside the United
States, outside of the continental United States (on the Lessee's route
structure as in effect on the return date and provided that the Lessee shall
pay any incremental expenses incurred in connection with a redelivery outside
the United States) and the Airframe shall be fully equipped with two Engines
of the same or an improved make and model as were delivered on the Delivery
Date (or Replacement Engines), free and clear of all Liens (other than
Lessor's Liens), including any rights of third parties under pooling,
interchange, overhaul, repair or similar agreements or arrangements, it being
understood that all such Engines and Replacement Engines so returned shall be
of identical make and model and that any Replacement Engine shall be in at
least as good operating condition and have at least the same value and utility
as the Engines being replaced, assuming such Engines were in the condition
required hereunder. The Lessee will give the Lessor at least 30 days' prior
written notice of the place of such return; provided, however, that if the
Lessor shall have made the request for storage pursuant to Section 12.06
hereof, the Lessee shall return the Aircraft to the Lessor at the site of the
storage.
Section 12.02.Return of Engines. If any engine not owned by the
Lessor shall be delivered with the Airframe as set forth in Section 12.01
hereof, the Lessee, concurrently with such delivery, will, at its own cost and
expense furnish the Lessor with (i) a full warranty ▇▇▇▇ of sale, in form and
substance reasonably satisfactory to the Lessor, with respect to such engine,
(ii) an opinion of the Lessee's counsel to the effect that, upon such return,
the Lessor will acquire full right, title and interest to such engine free and
clear of all Liens (other than Lessor's Liens) and (iii) a certificate as
described in Section 11.04(b)(iii) hereof. The Lessee shall take such other
action as the Lessor may reasonably request in order that such Replacement
Engine shall be duly and properly titled in the Lessor free and clear of all
Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to
the Lessee, without recourse or warranty (except as to the absence of Lessor's
Liens), and subject to the disclaimers provided in Section 5.01 hereof, all
the Lessor's right, title and interest in and to any Engine in lieu of which a
Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as
is, where is" and (ii) deliver to the Lessee such instrument as the Lessor
shall have received from the Indenture Trustee, releasing such Engine from the
Lien of the Indenture.
Section 12.03.Return of Manuals. Upon the return of the Aircraft, the
Lessee shall deliver to the Lessor all original (or photocopied or microfilmed
copies thereof, if then permitted to be maintained in such form under
applicable law) logs, manuals, certificates and technical data, and
inspection, modification and overhaul records pertaining to the Airframe,
Engines or engines, which are required to be maintained under applicable rules
and regulations of the Aeronautics Authority or pursuant to the Lessee's or
any permitted sublessee's Aeronautics Authority-approved maintenance program
and all original (or photocopied or microfilmed copies thereof, if then
permitted to be maintained in such form under applicable law) records required
to be maintained with respect to the Aircraft under the maintenance program
approved by the aeronautical authority of any other country of registry of the
Aircraft. All records shall be returned in the format necessary to allow the
Lessee or any sublessee to comply with Section 12.04(a)(i) hereof.
Section 12.04.Condition of Aircraft. (a) Required Condition. The
Aircraft when returned to the Lessor shall, at the Lessee's own cost and
expense, meet the following requirements:
(i) it shall, unless otherwise requested by the Lessor not less than
90 days prior to the end of the Term to retain the then-existing
registration of the Aircraft, be duly registered in the name of the Lessor
or its designee pursuant to the Transportation Code;
(ii)it shall be clean by airline and cargo handling operating
standards;
(iii)the Airframe shall be returned with the Engines, or any
replacements thereto as herein authorized, provided that the Airframe shall
have an aggregate of two Engines or engines (as herein authorized under
Section 12.02 hereof), both of the same make and model, installed thereon,
together with the equipment, accessories or parts installed thereon on the
Delivery Date or replacements therefor (as herein authorized) and
alterations, modifications and additions thereto made in accordance with
the provisions of this Lease;
(iv)it shall be in the condition required by Section 12.04(b) hereof
and in as good operating condition as when delivered to the Lessor on the
Delivery Date, ordinary wear and tear excepted;
(v) it shall have a currently effective airworthiness certificate
issued by the Aeronautics Authority;
(vi)it shall comply with any then applicable rules and regulations
imposed by the Aeronautics Authority and, without limitation of the
foregoing, terminate all airworthiness directives of, and mandatory
modifications required by, the Aeronautics Authority (or any government or
governmental authority, domestic or foreign, having jurisdiction over the
Aircraft) to be terminated during the Term of the Lease and the Airframe
and each Engine (including any Replacement Engine) shall be serviceable in
accordance with the Lessee's FAA-approved maintenance program;
(vii)it shall be free and clear of all Liens and rights of others
(other than Lessor's Liens) including, without limitation, rights of third
parties under pooling, interchange, overhaul, repair and other similar
agreements or arrangements referred to in Section 7.02(a) hereof; and
(viii) it shall be in a standard cargo configuration.
(b) Remaining Time. If, at the time of return of the Aircraft, the
Airframe is not being maintained under a continuous maintenance program, then
the Airframe shall have remaining until the next scheduled "C" check at least
25% of the allowable hours between "C" checks permitted under the Lessee's
FAA-approved maintenance program (or other permitted maintenance program).
If, at the time of return of the Aircraft, the Engines or engines are not
being maintained under an on-condition maintenance program, then the average
number of hours of operation on such Engines or engines remaining until the
next scheduled engine heavy maintenance visit under the Lessee's FAA-approved
maintenance program (or other permitted maintenance program) shall be at least
25% of the allowable hours between engine heavy maintenance visits. With
respect to maintenance under the Lessee's FAA-approved maintenance program,
the Lessee shall have treated the Aircraft in a nondiscriminatory manner with
other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft
shall be free and clear of all Liens and rights of others other than Lessor's
Liens and shall be in compliance in every material respect with the Lessee's
FAA-approved maintenance program as if the Term were not ending.
Section 12.05.Intentionally Left Blank.
Section ▇▇.▇▇.▇▇▇▇▇▇▇. Upon any expiration or termination of this
Lease, at the written request of the Lessor given at least 45 days prior to
such expiration or termination, the Lessee will arrange, or will cause to be
arranged, at no charge to the Lessor (subject, however, to the last sentence
of this Section 12.06), storage at a ramp storage facility for the Aircraft at
the Lessee's principal maintenance facilities in Memphis, Tennessee or one of
the Lessee's other maintenance facilities or at a location selected by the
Lessee used as a location for the parking or storage of aircraft for a period
of up to 30 days; provided that if storage is available at no additional cost
or expense to the Lessee at the location at which the Lessor has specified
pursuant to Section 12.01 hereof that return of the Aircraft shall take place,
the Lessee shall provide storage at such location. At the end of such 30 day
period, if the Lessor so requests within 10 days of before the end of such
period, the Lessee will continue to provide such ramp storage facility at such
facility or location for an additional 30 days at the Lessor's expense. If
the Lessee is required to move the Aircraft from one storage facility to
another, such move shall be at the risk and expense of the Lessor. The
maintenance and risk of loss of, and responsibility for obtaining insurance
on, the Aircraft shall be the responsibility of the Lessor during any period
of storage; provided, however, the Lessee will, upon written request of the
Lessor and at the Lessor's expense, not to exceed the Lessee's incremental
cost of such service, obtain insurance for such property (including, if
possible, coverage through its fleet policy).
Section 12.07.Special Markings. If requested by the Lessor, the
Lessee shall, at the Lessee's cost, remove or paint over all insignias and
other distinctive markings of the Lessee or any sublessee on the Aircraft and
repaint the stripped down areas in a workmanlike manner to match exterior
colors.
Section 12.08.Lessor's Option to Purchase Parts. At any time after
the Lessee has advised the Lessor that it has determined not to renew this
Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to
the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee
intends, and is permitted, to remove as provided in Section 9.02(b) above, and
the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase
any or all of such Parts from the Lessee upon the expiration of the Term at
their then Fair Market Value (taking into account the provisions of this
Lease) determined in accordance with the provisions of Section 4.03 hereof.
Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does
not elect to exercise its option under this Section 12.08, the Lessee will, at
its own cost and expense, remove such Parts described in subparagraph (i),
(ii) or (iii) of Section 9.02(b) hereof as the Lessor may request.
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance. (a) Comprehensive Airline Liability and Property Damage
Liability Insurance. The Lessee, at its own cost and expense, will maintain
or cause to be maintained with respect to the Aircraft, (i) comprehensive
airline liability insurance including, without limitation, passenger legal and
bodily injury liability and property damage liability insurance and cargo
legal liability in such amounts, against such risks (including, without
limitation, contractual liability and allied perils liability but excluding
war risk insurance (except as required under the second sentence of this
Section 13.01(a)), with such retentions (subject to the limitations set forth
in Section 13.06 hereof) and on such terms and conditions (including coverage
for cost of claims) as the Lessee customarily maintains with respect to
aircraft and engines of the same type and model which comprise the fleet of
the Lessee, and (ii) such insurance against such other risks as is usually
carried by similar corporations engaged in the same or similar business and
similarly situated as the Lessee and owning or operating aircraft and engines
similar to the Aircraft and Engines; provided that in no event shall the
limits of liability for all such insurance be less than the amount, per
occurrence, as set forth on the insurance certificate delivered on the
Delivery Date unless and only so long as the Aircraft is not operated and all
risk-ground insurance for the Aircraft on the ground is maintained in the same
manner and covering the same risks as is from time to time applicable to other
aircraft owned or operated by the Lessee of the same type and model on the
ground and not in operation. The Lessee will be required to maintain war risk
insurance only if the Aircraft is operated in a war zone or a recognized area
of armed hostilities. All insurance required by this Section 13.01(a) shall
be maintained with insurers of recognized reputation and responsibility.
(b) Government Indemnification. Notwithstanding Section 13.01(a)
hereof, in the event of the requisition for use by the Government of the
Airframe or the Airframe and the Engines or engines then installed on the
Airframe, the Lessee shall maintain throughout the period of such requisition
such insurance as would otherwise be required under this Section 13.01;
provided that the Lessor shall accept, in lieu of such insurance coverage,
written indemnification or insurance from the Government which is
substantially the same as otherwise required under this Article 13.
(c) Policy Terms. Any policy of insurance carried and maintained in
accordance with this Section 13.01, and any policy taken out in substitution or
replacement for any such policy subject to the terms, conditions and
limitations thereof, shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft, the Indenture Trustee in its individual
capacity and as trustee/mortgagee of the Aircraft and the Owner Participant
and each of their respective officers and directors in their respective
capacities as such as additional insureds (hereinafter in this paragraph
(c) sometimes referred to as "Additional Insured");
(ii)provide that, in respect of the interest of any Additional
Insured in such policies, the insurance shall not be invalidated by any
action or inaction of the Lessee or any Additional Insured as defined under
the policy of insurance required under this Section 13.01 (other than any
action or inaction of such Additional Insured) and shall insure each
Additional Insured regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Lessee or any
other Additional Insured (other than any breach or violation of any
warranty, declaration or condition by such Additional Insured) as defined
under the policy of insurance required under this Section 13.01;
(iii)provide that if such insurance is cancelled for any reason, or
any substantial change is made in the policies which adversely affect the
scope of the coverage required herein, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to any Additional Insured for thirty (30) days (except
in the case of war risk coverage in which event the applicable period shall
be seven (7) days or such other period as may be customary) after receipt
by each such Additional Insured of written notice from such insurers or
such insurers' broker of such cancellation, change or lapse;
(iv)provide that the insurers shall waive any rights of subrogation
against each Additional Insured, to the extent that the Lessee has waived
its rights under this Lease and the Participation Agreement; provided that
the exercise by insurers of rights of subrogation derived from rights
retained by the Lessee shall not, in any way, delay payment of any claim
that would otherwise be payable by such insurers but for the existence of
rights of subrogation derived from rights retained by the Lessee;
(v) provide that all of the provisions of such policy shall operate
in the same manner as if there were a separate policy covering each
Additional Insured; provided, that such policies shall not operate to
increase any insurer's limit of liability;
(vi)be primary, without right of contribution from any other
insurance which is carried by the Lessee or any sublessee or any Additional
Insured with respect to its interest in the Aircraft;
(vii)provide that no Additional Insured shall have any obligation or
liability for premiums or other payments, if any, in connection with such
insurance; and
(viii) provide that such insurer shall waive the right of such
insurer to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional
Insured.
Section 13.02. Insurance Against Loss or Damage to Aircraft and
Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall
maintain or cause to be maintained in effect, with insurers of recognized
reputation and responsibility, all-risk ground and flight aircraft hull
insurance covering the Aircraft and all-risk coverage with respect to any
Engines and Parts while removed from the Aircraft and not replaced by similar
Engines or Parts, including in each case war-risk and allied perils, hijacking
(air piracy) and governmental confiscation and expropriation insurance (except
with respect to the country of registry) with such retentions (subject to the
limitations set forth in Section 13.06 hereof) and in such form, and upon such
terms and conditions (including coverage for cost of claims), and in amounts
as the Lessee customarily maintains with respect to the aircraft in the
Lessee's fleet of the same type and model and operated on the same routes as
the Aircraft (except that the Lessee shall be required to maintain (i) allied
perils, hijacking (air piracy) and governmental confiscation and expropriation
insurance (except with respect to the country of registry) if the Aircraft is
operated on routes where the custom is for major international Air Carriers
flying comparable routes to carry such insurance and (ii) war risk insurance
only if the Aircraft is operated in a war zone or a recognized area of armed
hostilities), provided that such insurance shall at all times while the
Aircraft is subject to this Lease and the Lien of the Indenture be on an
agreed-value basis for an amount not less than an amount equal to the
Stipulated Loss Value for the Aircraft from time to time.
(b) Policy Terms. Any policies carried and maintained in accordance
with this Section 13.02 and any policies taken out in substitution or
replacement for any such policies subject to the terms, conditions and
limitations thereof shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft (or, so long as the Indenture shall not have
been discharged, the Indenture Trustee) as an additional insured and as the
sole loss payee (hereinafter in this paragraph (b) sometimes referred to as
"Loss Payee");
(ii)provide with respect to coverage provided under this Section
13.02, (except as otherwise provided under Section 13.03 hereof when an
Event of Loss or a Payment Default, Bankruptcy Default or Event of Default
has occurred and is continuing), that (i) in the event of a loss involving
proceeds in the aggregate in excess of $6,000,000, the proceeds in respect
of such loss up to an amount equal to the Stipulated Loss Value for the
Aircraft shall be payable to the Lessor (or, so long as the Indenture shall
not have been discharged, the Indenture Trustee), it being understood and
agreed that in the case of any payment to the Lessor (or the Indenture
Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the
Indenture Trustee) shall in the aggregate upon receipt of evidence
satisfactory to it that the damage giving rise to such payment shall have
been repaired or that such payment shall then be required to pay for
repairs then being made, pay the amount of such payment to the Lessee or
its order, and (ii) the entire amount of any loss involving proceeds in the
aggregate of $6,000,000 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
the Lessee or its order to pay for repairs or replacement property;
(iii)provide that if such insurance is cancelled for any reason or any
substantial change is made in the policies which adversely affect the scope
of the coverage required herein, or if such insurance is allowed to lapse
for nonpayment of premium, such cancellation, change or lapse shall not be
effective as to the Loss Payee for thirty days (except in the case of
war-risk coverage in which event the applicable period shall be seven (7)
days or such other period as may be customary) after receipt by the Loss
Payee of written notice from such insurer of such cancellation, change or
lapse;
(iv)provide that, in respect of the interest of the Lessor (in its
individual capacity and as the Owner Trustee), the Owner Participant or the
Indenture Trustee (in their respective capacities as such) in such
policies, the insurance shall not be invalidated by any action or inaction
of the Lessee or the Loss Payee (other than any action or inaction of such
Loss Payee) and shall insure the Lessor (in its individual capacity and as
Owner Trustee), the Owner Participant and the Indenture Trustee regardless
of any breach or violation of any warranty, declaration or condition
contained in such policies by the Lessee or the Loss Payee (other than any
breach or violation of any warranty, declaration or condition by the Loss
Payee) as defined under the policy of insurance required under this Section
13.02;
(v) provide that the insurers shall waive any rights of subrogation
against the Lessor (in its individual capacity and as Owner Trustee), the
Owner Participant and the Indenture Trustee to the extent that the Lessee
has waived its rights under this Lease or the Participation Agreement;
provided that the exercise by insurers of rights of subrogation derived
from rights retained by the Lessee shall not, in any way, delay payment of
any claim that would otherwise be payable by such insurers but for the
existence of rights of subrogation derived from rights retained by the
Lessee;
(vi)be primary and without rights of contribution from any other
insurance which is carried by the Loss Payee with respect to its interest
in the Aircraft;
(vii)provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines, or spare parts, as the case may be)
such insurer shall waive any right of such insurer to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Loss Payee;
(viii) provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines or spare parts, as the case may be)
no Loss Payee shall have any obligation or liability for premiums or other
payments, if any, in connection with such insurance; and
(ix)in the event that separate policies are maintained to cover
all-risk ground and flight aircraft, hull and war risks and allied perils
insurance, include a 50/50 provisional claims settlement clause as
contained in the policies of insurance maintained by the Lessee with
respect to all other aircraft in the Lessee's fleet, and a copy of the
50/50 provisional claims settlement clause in effect on the Delivery Date
shall be attached to the insurance certificate issued on the Delivery Date.
Section 13.03. Application of Insurance Proceeds. (a) Generally.
All insurance proceeds (other than proceeds from policies carried by the
Lessor, the Indenture Trustee or the Owner Participant) received under
policies described in Section 13.02 hereof as the result of the occurrence of
an Event of Loss with respect to the Airframe or an Engine will be applied as
follows:
(i) if such proceeds are received with respect to the Airframe or with
respect to the Airframe and the Engines or engines then installed on the
Airframe and the Lessee has elected or is deemed to have elected the
alternative set forth in Section 11.02 hereof, so much of such proceeds as
shall not exceed the amounts required to be paid by the Lessee pursuant to
said Section 11.02 hereof shall be applied in reduction of the Lessee's
obligation to pay such amounts if not already paid by the Lessee, or if
already paid by the Lessee, shall be applied to reimburse the Lessee for
its payment of such amounts; or
(ii)if such proceeds are received with respect to the Airframe or the
Airframe and the Engines or engines then installed on the Airframe and the
Lessee has elected the alternative set forth in Section 11.03 hereof, or if
such proceeds are received with respect to an Engine not then installed on
the Airframe and not replaced by an Engine or engine under the
circumstances contemplated by Section 11.04 hereof, all such proceeds shall
be paid to the Indenture Trustee (unless the Indenture has been discharged
in which case paid to the Lessor) for disbursement to the order of the
Lessee, after the Lessee shall have fully performed the terms of Section
11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for
which such proceeds are paid.
(b) Payment if no Event of Loss. The insurance proceeds of any
property damage loss not constituting an Event of Loss with respect to the
Airframe or an Engine will be applied in payment (or to reimburse the Lessee)
for repairs or for replacement property in accordance with Articles 7 and 8
hereof, if not already paid for by the Lessee, and any balance remaining after
compliance with said Articles 7 and 8 hereof with respect to such loss shall
be paid to the order of the Lessee.
(c) Application of Payments During Existence of Certain Defaults. Any
amount referred to in this Article 13 which is payable to or retainable by the
Lessee shall not be paid to or retained by the Lessee if at the time of such
payment or retention a Payment Default, Bankruptcy Default or Event of Default
shall have occurred and be continuing, but shall be held by or paid over to
the Indenture Trustee (unless the Indenture has been discharged in which case
such amount shall be paid to the Lessor) to be held in accordance with Article
23 hereof, as security for the obligations of the Lessee under this Lease and,
if an Event of Default shall have occurred and be continuing, applied against
the Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such Payment Default, Bankruptcy Default or Event
of Default, such amount shall be paid to the Lessee to the extent not
previously applied in accordance with the preceding sentence.
(d) Information. If any Additional Insured becomes subject to any
claim covered by any insurance policy maintained pursuant to this Article 13,
the Lessee shall make available any information required by such Additional
Insured in connection with such claim.
Section 13.04. Reports. On or before the Delivery Date and
thereafter annually on or before the scheduled expiration date for such policy
during the Term, the Lessee will cause its aviation insurance broker to
furnish to the Lessor and the Indenture Trustee a signed report, stating the
types of coverage and limits carried and maintained on the Aircraft and
certifying that such insurance complies with the terms and conditions of this
Lease. The Lessee will cause such aviation insurance broker to advise the
Lessor, the Owner Participant and the Indenture Trustee in writing promptly
of any default in the payment of any premium and of any other act or omission
on the part of the Lessee of which it has knowledge and which might
invalidate, cause cancellation of or render unenforceable all or any part of
any insurance carried by the Lessee with respect to the Aircraft. The Lessee
will cause such insurance broker to agree to advise the Lessor, the Indenture
Trustee and the Owner Participant in writing if and when it becomes evident to
such broker that any insurance policy carried and maintained on the Aircraft
pursuant to this Article 13 will not be renewed at the scheduled expiration
date for such policy. If the Lessee shall fail to maintain insurance as
required, the Lessor may, at its option, provide such insurance, and in such
event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental
Rent, for the cost of such insurance; provided, however, that no exercise of
said option shall affect the provisions of this Lease, including the
provisions that failure by the Lessee to maintain the prescribed insurance
shall constitute an Event of Default or otherwise constitute a waiver of any
other rights the Lessor may have against the Lessee.
Section 13.05. Lessor's Insurance. The Lessor, the Indenture
Trustee or the Owner Participant may insure the Airframe or any Engine at its
own cost and expense, including insuring the Aircraft for amounts in excess of
the Stipulated Loss Value of the Aircraft, provided that any insurance so
maintained by the Lessor, the Indenture Trustee or the Owner Participant shall
not result in a reduction of coverage or amounts payable under insurance
required or permitted to be maintained by the Lessee under this Article 13 or
increase the cost to the Lessee of maintaining such insurance; provided
further, that any insurance policies of the Lessor, the Indenture Trustee or
the Owner Participant insuring the Airframe or any Engine shall provide for a
release to the Lessee of any and all salvage rights in and to the Airframe or
any Engine.
Section 13.06. Self-Insurance. The Lessee may self-insure the risks
required to be insured against by Sections 13.01 and 13.02 hereof in such
manner and in such reasonable amounts as are then generally applicable to
other aircraft or engines of the Lessee of the same type and model as the
Aircraft, but in no case shall such self-insurance with respect to all
aircraft (whether owned or leased) in the Lessee's fleet in aggregate exceed
for any 12-month policy year an amount equal to the lesser of (i) 50% of the
highest insured value of any single aircraft in the Lessee's fleet and (ii)
1.5% of the average aggregate insured value from time to time of the Lessee's
entire aircraft fleet provided that a standard deductible per occurrence per
aircraft (and/or retentions) not in excess of the amount imposed by the
aircraft hull or liability insurer shall be permitted in addition to the
above-mentioned self-insurance. The foregoing shall not permit the Lessee to
discriminate as between insurance coverage on the Aircraft and insurance which
the Lessee maintains with respect to similar aircraft owned or operated by the
Lessee operating on similar routes in similar locations.
ARTICLE 14
INSPECTION
Section 14.01.Right of Inspection. At reasonable times, and upon at
least ten (10) Business Days' prior written notice to the Lessee, the Lessor,
the Indenture Trustee or the Owner Participant, or their respective authorized
representatives, may inspect the Aircraft and upon at least ten (10) Business
Days' prior written notice, all Aeronautics Authority required books and
records of the Lessee or any sublessee relating to the maintenance of the
Aircraft and such Persons shall keep any information obtained thereby
confidential and shall not disclose the same to any Person, except to a Person
described in Section 18.01 of the Participation Agreement. Any such
inspection of the Aircraft shall be a visual, walk-around inspection of the
interior and exterior of the Aircraft and shall not include opening any panel,
bays or the like without the express consent of the Lessee (except to the
extent any such inspection takes place when any such panel, bays or the like
are open). Notwithstanding the first sentence of this Section 14.01, unless a
material Default relating to maintenance or an Event of Default shall have
occurred and be continuing, the Lessor, the Indenture Trustee, the Owner
Participant or their respective authorized representatives shall each be
entitled to inspect the Aircraft only one time during any consecutive
twelve-month period. The Lessee shall make any permitted sublease or transfer
permitted under Section 7.02 hereof expressly subject to inspection rights
consistent with this Article 14.
Section ▇▇.▇▇.▇▇ Obligation to Inspect. None of the Lessor, the
Indenture Trustee or the Owner Participant shall have any duty to make any
inspection pursuant to Section 14.01 hereof and no such party shall incur any
liability or obligation by reason of making or not making any such inspection.
ARTICLE 15
ASSIGNMENT
Section 15.01.Lessee's Right to Assign. The Lessee shall not, and
shall have no authority or power to assign, convey or sublease any of its
rights under this Lease without the prior written consent of the Lessor except
(i) as expressly provided in Section 7.02 hereof, or (ii) to a wholly-owned
domestic subsidiary of the Lessee which shall be a certificated U.S. Air
Carrier. Any such assignment, conveyance or sublease shall in no way relieve
the Lessee from any obligation hereunder or under any other Operative
Agreement or any written agreement of the Lessee entered into in connection
with the transactions contemplated by the Operative Agreements, which shall be
and remain primary obligations of the Lessee. The Lessor agrees that it will
not assign or convey its right, title and interest in and to this Lease or the
Aircraft except as contemplated by or provided in this Lease, the Trust
Agreement, the Indenture or the Participation Agreement. The terms and
provisions of this Lease shall be binding upon and inure to the benefit of the
Lessor and the Lessee and their respective successors and permitted assigns,
and shall inure, to the extent expressly provided herein and therein, to the
direct benefit of, and in accordance with the provisions of the Indenture and
the Participation Agreement shall be enforceable by, the Indenture Trustee,
the Lessor and their respective successors and permitted assigns.
Section 15.02.Citizenship. The Lessee will at all times be a duly
certificated U.S. Air Carrier under the Transportation Code.
ARTICLE 16
EVENTS OF DEFAULT
Section ▇▇.▇▇.▇▇▇▇▇▇ of Default. Each of the following events shall
constitute an Event of Default, whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body:
(a) the Lessee shall fail to make any payment of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value, as the case may be,
within ten Business Days after the date when due (except that with respect
to any failure to pay Excepted Payments, such failure shall constitute an
Event of Default at the discretion of the Owner Participant); or
(b) the Lessee shall fail to make any payment of Supplemental Rent
(other than amounts described in clause (a) above) within 30 days after the
Lessee has received written notice from the Person entitled to receive such
payment stating that such payment is due (except that with respect to any
failure to pay Excepted Payments for such period, such failure shall
constitute an Event of Default at the discretion of the Owner Participant);
or
(c) (i) the Lessee shall fail to procure, carry and maintain
insurance on or in respect of the Aircraft at any time in accordance with
the provisions of Article 13 or such insurance lapses or is cancelled,
provided that, in the case of insurance with respect to which cancellation
or lapse for nonpayment is not effective as to the Lessor, the Indenture
Trustee, the Holders or the Owner Participant for 30 days (seven days, in
the case of any aircraft war risk coverage) no such lapse or cancellation
shall constitute an Event of Default until the earlier of (A) 30 days (or
seven days or such shorter time as may be standard in the industry with
respect to war risk coverage) after receipt by any Additional Insured of
written notice of such lapse or cancellation and (B) the date that such
lapse or cancellation is effective as to any Additional Insured and
provided further that such failure shall not constitute an Event of Default
as long as the Aircraft is insured as required while on the ground and not
operated, or (ii) the Aircraft shall be operated at any time when
comprehensive airline liability insurance required under Section 13.01
hereof shall not be in effect (it being understood that the Lessee is not
required to maintain such insurance under Section 13.01 hereof while the
indemnification or insurance referred to in the proviso to Section 13.01(b)
hereof is in effect); or
(d) the Lessee shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it under any
Operative Agreement (excluding the Tax Indemnity Agreement) or any other
written agreement of the Lessee entered into in connection with the
transactions contemplated by the Operative Agreements and such failure
shall continue unremedied for a period of thirty (30) days after the Lessee
shall have received written notice from the Lessor or the Owner Participant
of such failure, provided, that in the event such failure is curable and so
long as (but for no longer than 150 days after such 30-day period) the
Lessee shall have promptly undertaken such cure after the Lessee receives
notice thereof which undertaking shall be diligently and continuously
pursued using the Lessee's reasonable best efforts, such failure shall not
constitute an Event of Default; provided, further, that failure of the
Lessee to maintain the registration of the Aircraft under the
Transportation Code pursuant to the Lessee's covenants and agreement in
Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of
this Lease, when the lapse of such registration is solely because the Owner
Participant or the Lessor has ceased to be a Citizen of the United States,
shall not constitute a Default or an Event of Default; or
(e) an order for relief shall be entered in respect of the Lessee by
a court having jurisdiction in the premises in an involuntary case under
the federal bankruptcy laws as now or hereafter in effect; or the Lessee
shall consent to the appointment of a custodian, receiver, trustee or
liquidator of itself or of a substantial part of its property; or the
Lessee is not paying, or shall admit in writing its inability to pay, its
debts generally as they come due or shall make a general assignment for the
benefit of creditors; or the Lessee shall file, or the Board of Directors
of the Lessee shall authorize the filing of, or grant one or more persons
authority (at their discretion) to make a filing for, a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking reorganization
in a proceeding under any bankruptcy laws (as now or hereafter in effect)
or an answer admitting the material allegations of a petition filed against
the Lessee in any such proceeding; or the Lessee shall file, or the Board
of Directors of the Lessee shall authorize the Lessee to, or grant one or
more persons authority (at their discretion) to, seek relief by voluntary
petition, answer or consent, under the provisions of any other or future
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(f) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Lessee, a
custodian, receiver, trustee, or liquidator of the Lessee or of any
substantial part of its property, or sequestering any substantial part of
the property of the Lessee, or granting any other relief in respect of the
Lessee under the federal bankruptcy laws or other insolvency laws, and any
such order, judgment or decree of appointment or sequestration shall remain
in force undismissed or unvacated for a period of 60 days after the date of
its entry; or
(g) a petition against the Lessee in a proceeding under the federal
bankruptcy law or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within 60 days, or
under the provisions of any law providing for reorganization or winding-up
of corporations which may apply to the Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Lessee or
of any substantial part of its property and such jurisdiction, custody or
control shall remain in force unrelinquished or unterminated for 60 days; or
(h) any representation or warranty made by the Lessee in this Lease
or in the Participation Agreement or in any document or certificate
furnished by the Lessee in connection with or pursuant to this Lease or the
Participation Agreement (except for the Tax Indemnity Agreement) shall at
any time prove to have been incorrect at the time made in any respect
material to the transactions contemplated by this Lease and, if originally
made by the Lessee in good faith, shall remain material and unremedied for
a period of 120 days after the Lessee shall have received written notice of
such misstatement.
ARTICLE 17
REMEDIES
Section 17.01.Remedies Upon Lessee's Default. (a) Remedies
Generally. Upon the occurrence of any Event of Default and at any time after
such occurrence so long as the same shall be continuing, the Lessor may, at
its option, declare this Lease to be in default (except that no such
declaration shall be required in the case of an Event of Default pursuant to
paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be
deemed declared in default without any further act or notice), and at any time
thereafter the Lessor may do, and the Lessee shall comply with, one or more
of the following with respect to all or any part of the Airframe and the
Engines, as the 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:
(i) Demand in writing that the Lessee shall, and upon such written
demand the Lessee shall, at the Lessee's own cost and expense, return
promptly to the Lessor all or such part of the Airframe and the Engines as
the Lessor may demand in the manner and condition required by, and
otherwise in accordance with all of the provisions of this Lease (provided
that, unless the Lessor shall require otherwise, the Aircraft shall be
returned within the continental United States), or the Lessor, at its
option, may enter upon the premises where such Airframe or Engines are
located or believed to be located and take immediate possession of and
remove such Airframe and Engines (together with any engine which is not an
Engine but is installed on the Airframe, subject to all of the rights of
the owner, lessor, Lien holder or secured party of such engine) without the
necessity for first instituting proceedings, or by summary proceedings or
otherwise, all without liability of the Lessor to the Lessee for or by
reason of such entry or taking of possession, whether for the restoration
of damage to property caused by such action or otherwise;
(ii)With or without taking possession thereof, sell or otherwise
dispose of the Airframe or any Engine, at public or private sale and with
or without advertisement or notice to the Lessee, as the Lessor may
determine, and the Lessor may hold the Lessee liable for any installment of
Basic Rent and Renewal Rent due on or before the date of such sale (and, if
Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of
the installment of Basic Rent or Renewal Rent due on the next succeeding
Rent Payment Date in respect of any period commencing on the immediately
preceding Rent Payment Date to the date of such sale), or hold, use,
operate, lease to others or keep idle all or any part of the Airframe or any
Engine as the Lessor, in its sole discretion, may determine, in any such
case free and clear of any rights of the Lessee except as otherwise set
forth in this Article 17, and without any duty to account to the Lessee
with respect to such action or inaction or for any proceeds except to the
extent required by Section 17.01(a)(iv) hereof; in the event the Lessor
elects to exercise its rights under said Section, and in connection with
any sale of the Aircraft or any part thereof pursuant to this Article 17,
the Lessor, the Indenture Trustee, the Owner Participant or any Holder may
bid for and purchase such property;
(iii)Whether or not the Lessor shall have exercised or shall later at
any time exercise any of its rights under Section 17.01(a)(i) or
17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying
a payment date not earlier than 10 days from the date of such notice, may
demand that the Lessee pay to the Lessor, and the Lessee shall pay to the
Lessor on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent or
Renewal Rent due on Rent Payment Dates occurring after the payment date
specified in such notice), any installment of Basic Rent, Renewal Rent and
any Supplemental Rent due on or before such payment date (and, to the
extent Basic Rent or Renewal Rent is payable in arrears, the pro rata
portion of the installment of Basic Rent or Renewal Rent due on the next
succeeding Rent Payment Date in respect of the period commencing on the
Stipulated Loss Value Determination Date referred to below and ending on
the date of such payment), plus an amount equal to the excess, if any, of
the Stipulated Loss Value for the Aircraft, computed as of the Stipulated
Loss Value Determination Date on or next preceding the payment date
specified in such notice over the Fair Market Value of the Aircraft,
computed as of such Stipulated Loss Value Determination Date, together with
(A), if Basic Rent is payable in advance, interest, to the extent permitted
by applicable law, at the Debt Rate on the amount of such Stipulated Loss
Value from such Stipulated Loss Value Determination Date to the date for
payment set forth in such notice from the Lessor and (B) in all cases,
interest, to the extent permitted by applicable law at the Past Due Rate on
the excess of such Stipulated Loss Value over such Fair Market Value, from
the date as of which such Stipulated Loss Value is payable to the date of
actual payment of such amount; provided, however, that if (and in any event
prior to the time for payment hereunder) the Lessor is unable within a
reasonable period of time to recover possession of the Aircraft, or any
portion thereof, pursuant to clause (i) above unencumbered by this Lease
and free and clear of all Liens (other than Lessor's Liens), the Fair
Market Value of the Aircraft or such portion shall, at the option of the
Lessor to the extent legally enforceable, be zero and, if the Fair Market
Value of the Aircraft is deemed to be zero, after payment in full by the
Lessee of the amount specified above and all other amounts due from the
Lessee under this Lease and the other Operative Agreements, the Lessor
shall promptly transfer (without recourse or warranty other than as to the
absence of the Lessor's Liens) all of its right, title and interest in the
Aircraft or such portion, to the Lessee;
(iv)In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof,
shall have sold the Airframe and/or any Engine, the Lessor, in lieu of
exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall
so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay
to the Lessor, on the date of such sale, as liquidated damages for loss of
a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent
due after the date on which such sale occurs) any unpaid Basic Rent or
Renewal Rent due on or before the date on which such sale occurs (and, to
the extent Basic Rent or Renewal Rent is payable in arrears, the pro rata
portion of the installment of Basic Rent or Renewal Rent due on the next
succeeding Rent Payment Date in respect of any period commencing on the
Stipulated Loss Value Determination Date referred to below and ending on
the date of such sale), and any Supplemental Rent due on or before the date
on which such sale occurs, plus an amount equal to the excess, if any, of
(A) the Stipulated Loss Value for the Aircraft, computed as of the
Stipulated Loss Value Determination Date next preceding the sale date, over
(B) the net proceeds of such sale (after deduction of all of the Lessor's
costs and expenses of such sale, including, without limitation, sales or
transfer taxes, costs of storage, overhaul, maintenance, preparation and
transportation of the Aircraft and brokers' and attorneys' fees) together
with (x), if Basic Rent is payable in advance, interest, to the extent
permitted by applicable law, at the Debt Rate on such Stipulated Loss Value
from such Stipulated Loss Value Determination Date to the date of such sale
and (y) in all cases, interest to the extent permitted by applicable law at
the Past Due Rate, on the amount of such excess from the date of such sale
to the date of actual payment by the Lessee;
(v) Proceed by appropriate court action to enforce the terms of this
Lease or to recover damages for its breach;
(vi)Terminate or rescind this Lease as to the Airframe or any or all
of the Engines; or
(vii)Exercise any other right or remedy which may be available to the
Lessor under applicable law.
(b) Cost of Exercise of Remedies. In addition, the Lessee shall be
liable, except as otherwise provided above, for any and all unpaid Rent due
before, after or during the exercise of any of the Lessor's remedies, for all
amounts payable by the Lessee under the Participation Agreement before or
after any termination hereof, and for all reasonable legal fees and other
costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner
Participant by reason of the occurrence of any Event of Default or the
exercise of the Lessor's remedies, including, without limitation, all costs
and expenses incurred in connection with the return of the Airframe or any
Engine in accordance with the terms of Article 12 hereof or in placing the
Airframe or Engines in the condition and state of airworthiness required by
such Article or in connection with any inspection, use, operation,
maintenance, insurance, storage, or leasing carried out as part of such
exercise.
Section 17.02.Cumulative Remedies. Except as otherwise provided, no
remedy referred to in this Article 17 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies.
Section 17.03.Waiver. No express or implied waiver by the 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. To the extent permitted by
applicable law, the Lessee waives any rights now or in the future conferred by
statute or otherwise which may require the Lessor to sell, lease or otherwise
use the Airframe or any Engine in mitigation of the Lessor's damages or which
may otherwise limit or modify any of the Lessor's rights or remedies under
this Article 17. The Lessor's access to the Aircraft is of the essence and
shall not be impaired.
Section 17.04.Lessor's Right to Perform for Lessee. If the Lessee
fails to make any required payment of Rent or fails to perform or comply with
any of its agreements contained in this Lease, whether or not such failure
shall constitute an Event of Default hereunder, the Lessor may (but shall not
be obligated to) make such payments or perform or comply with such agreement,
and the amount of such payment and the amount of the reasonable costs and
expenses of the Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, together with interest (to
the extent permitted by applicable law) at the Past Due Rate from the date of
the making of such payment or the incurring of such costs and expenses by the
Lessor to the date of payment of such Rent or other amount by the Lessee,
shall be deemed Supplemental Rent payable by the Lessee upon demand. No such
payment or performance by the Lessor shall be deemed to waive any Default or
Event of Default or relieve the Lessee of its obligations hereunder.
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01.Quiet Enjoyment. So long as no Event of Default shall
have occurred and be continuing, the Lessor covenants that neither it nor any
other Person lawfully claiming through it (other than the holder of a Lien
which the Lessee is obligated to discharge pursuant to Article 6 hereof, and
it being understood that the Lessor shall not be liable for any act or
omission of the Indenture Trustee or any other Person claiming through the
Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy
the Aircraft without hindrance or disturbance by it or any such other Person.
ARTICLE 19
FURTHER ASSURANCES
Section 19.01.Further Assurances. Promptly upon the execution and
delivery of this Lease, the Trust Agreement and the Indenture, the Lessee will
cause each of them to be duly filed for recordation in accordance with the
Transportation Code and will maintain the recordation of the Indenture until
the Lien of the Indenture shall have been discharged pursuant to the terms of
the Indenture. In addition, the Lessee will, at the Lessee's own cost and
expense, promptly and duly execute and deliver to the Lessor, the Owner
Participant and the Indenture Trustee such further documents and assurances to
carry out the intent and purpose of this Lease and the Indenture and to
establish and protect the rights and remedies created or intended to be
created in favor of the Lessor under this Lease, and of the Owner Participant
under the Trust Agreement, and of the Indenture Trustee under the Indenture,
including, without limitation, the execution and filing of Uniform Commercial
Code financing and continuation statements, the execution and delivery of
supplements and amendments to this Lease and the Indenture, in recordable
form, subjecting to this Lease and the Indenture any Replacement Airframe
and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03
hereof and any Replacement Engine delivered by the Lessee pursuant to Section
11.04 hereof and the recording and filing of counterparts of this Lease and
the Indenture in accordance with the laws of such jurisdictions as the Lessor
or the Indenture Trustee may from time to time deem advisable. The foregoing
does not impose upon the Lessor any additional liabilities not otherwise
contemplated by this Lease.
ARTICLE 20
NET LEASE
Section 20.01.Nature of Lease. (a) This Lease is a net lease, it
being the intention of the parties hereto that the obligations of the Lessee
to pay all costs and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary, or structural or nonstructural, in connection with
the use, operation, maintenance, repair and reconstruction of the Airframe and
each Engine by the Lessee, including, without limitation, the costs and
expenses particularly set forth in this Lease (unless expressly excluded from
the terms hereof, the costs and expenses of the Lessor and the Owner
Participant shall include the reasonable fees and expenses of their respective
outside counsel), shall be absolute and unconditional, shall be separate and
independent covenants and agreements, and shall continue unaffected unless and
until the covenants have been terminated pursuant to an express provision of
this Lease. The obligation to pay Rent and all amounts payable by the Lessee
under this Lease or the Participation Agreement shall be absolute and
unconditional and (except as otherwise expressly provided with respect to
Supplemental Rent) shall be paid without notice or demand and such obligation
shall not be affected by any circumstance, including, without limitation:
(i) any set-off, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Owner Participant, any
Holder, the Indenture Trustee or anyone else for any reason (including,
without limitation, any breach by the Lessor or the Owner Participant or
the Indenture Trustee or any Holder of their respective representations,
warranties, agreements or covenants contained in any of the Operative
Agreements);
(ii)any defect in the title, airworthiness, registration, eligibility
for registration under the Transportation Code (and the regulations
thereunder) or under any of the laws or regulations of any other country of
registry of the Aircraft, condition, design, operation, merchantability or
fitness for use of, suitability for a particular purpose of, or any damage
to or loss or destruction of, the Aircraft or any portion thereof, or any
interruption or cessation in the use or possession of the Aircraft by the
Lessee or any sublessee for any reason including, without limitation, by
reason of governmental action or any doctrine of force majeure or
impossibility of performance;
(iii)any insolvency, bankruptcy, reorganization or similar case or
proceedings by or against the Lessor, the Lessee, the Indenture Trustee or
the Owner Participant or any other Person;
(iv)any Liens, encumbrances or rights of any other Person with
respect to the Aircraft, the invalidity or unenforceability or lack of due
authorization or other infirmity of this Lease or any other Operative
Agreement or document or instrument executed pursuant hereto or thereto, or
any lack of right, power or authority of the Lessor or the Lessee or any
sublessee or any other party to any other Operative Agreement to enter into
this Lease or any other Operative Agreement or any such document or
instrument; or
(v) any other circumstance, happening or event whatsoever, whether or
not unforeseen, or similar to any of the foregoing.
(b) To the extent permitted by applicable law, the Lessee waives any
and all rights which it may now have or which at any time it may have
conferred upon it, by statute or otherwise, to suspend performance under,
terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any
Engine or part thereof, other than in accordance with the terms hereof.
(c) Each payment of Rent made by the Lessee shall be final as to the
Lessor and the Lessee, and the Lessee will not seek to return nor to recover,
▇▇▇▇▇, suspend, defer or reduce all or any part of any such payment of Rent
from the Lessor or from the Indenture Trustee for any reason.
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01.Successor Lessor. The Lessee agrees that in the case
of the appointment of any successor trustee for the Lessor pursuant to the
terms of the Participation Agreement, such successor trustee shall, upon
written notice by such successor to the Lessee, succeed to all the rights,
powers and title of the Lessor under this Lease and shall be deemed to be the
Lessor and the owner of the Aircraft for all purposes of this Lease without
the necessity of any consent or approval by the Lessee and without in any way
altering the terms of this Lease or the Lessee's obligations. One such
appointment and designation of a successor trustee shall not exhaust the right
to appoint and designate a further successor trustee pursuant to the
Participation Agreement, but such right may be exercised repeatedly so long as
this Lease shall be in effect.
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section ▇▇.▇▇.▇▇▇▇▇▇▇▇ for Lessor's Obligations to Holders. In order
to secure the indebtedness evidenced by the Certificates, the Indenture
provides among other things, for the assignment by the Lessor to the Indenture
Trustee of this Lease and the Lease Supplement and for the creation of a first
mortgage and security interest in favor of the Indenture Trustee on the
Aircraft. The Lessee consents to and acknowledges such assignment (subject to
the reservations and conditions therein set forth) and the receipt of a copy
of the Indenture.
Section 22.02.Intentionally Left Blank.
Section 22.03.Consent of Lessee to Assignment of Lease as Security.
The Lessee hereby acknowledges and consents to the Indenture Trustee's rights
pursuant to the terms of the Indenture to receive payments (other than
Excepted Payments not constituting Basic Rent) due under this Lease, to
transfer or assign title to the Aircraft subject to this Lease, to make
(jointly with the Lessor where provided in the Indenture) all waivers and
agreements except as otherwise provided in the Indenture (including Section
8.01 thereof), to give all notices, consents and releases and to take all
action upon the happening of a Default or Event of Default under this Lease
(except as otherwise specifically provided in the Indenture, including Section
8.01 thereof), or to do any and all other things whatsoever which the Lessor
is or may become entitled to do under this Lease (except as otherwise provided
in the Indenture, including Section 8.01 thereof); all or any of which rights,
obligations, benefits and interests may, pursuant to the terms of the
Indenture, be reassigned or retransferred by the Indenture Trustee at any time
and from time to time (except as otherwise provided in the Indenture);
provided, however, that the Lessor, except to the extent, and for such time
as, it is unable to do so by virtue of the Indenture, shall remain liable for
the performance of all the terms, conditions, covenants and provisions for
which it is obligated under this Lease notwithstanding such assignment.
ARTICLE 23
SECURITY FUNDS
Section 23.01.Investment of Security Funds. (a) Any amounts otherwise
payable to the Lessee in accordance with the terms hereof shall instead be
held by the Lessor as security for, and may be applied by the Lessor against,
the obligations of the Lessee under this Lease during such time as there shall
have occurred and be continuing a Payment Default, Bankruptcy Default or Event
of Default, and, at such times as there shall not be continuing a Payment
Default, Bankruptcy Default or Event of Default, such amounts, net of any
amounts which have been applied by the Lessor against the Lessee's obligations
hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts
which are held by the Lessor pending payment to the Lessee shall, until paid
to the Lessee or applied against the Lessee's obligations hereunder, be
invested by the Lessor, as directed from time to time, in writing (and in the
absence of a written direction by the Lessee, the Lessor shall invest such
monies in direct obligations of the United States of America), by the Lessee
and at the expense and risk of the Lessee, in the following securities (which
in the case of securities referred to in subparagraphs (i) through (iv) of
this Section 23.01(a) hereof shall mature within ninety (90) days of the date
of purchase):
(i) direct obligations of the United States of America; or
(ii)obligations fully guaranteed by the United States of America; or
(iii)certificates of deposit issued by, or bankers' acceptances of,
or time deposits or a deposit account with, any bank, trust company or
national banking association incorporated or doing business under the laws
of the United States of America or one of its States (which may include the
Owner Trustee or the Indenture Trustee in their respective individual
capacities or any Affiliate thereof), having a combined capital and surplus
of at least $500,000,000 and having a rating of "A" or better from ▇▇▇▇▇'▇
or S&P; or
(iv)commercial paper rated A-1/P-1 by S&P or ▇▇▇▇▇'▇, respectively
(or if neither such organization shall rate such commercial paper at any
time, a rating by any nationally recognized statistical rating organization
in the United States of America equal to the highest rating assigned by
such rating organization) (which may include commercial paper issued by the
Owner Trustee or the Indenture Trustee in their respective individual
capacities or any Affiliate thereof).
(b) At any time any invested funds are distributed to the Lessee,
there shall be promptly remitted to the Lessee any gain (including interest
received) realized as the result of any investment pursuant to Section
23.01(a) hereof (net of any fees, commissions and other costs, Taxes and
expenses, if any, incurred by the Lessor or the Owner Participant in
connection with such investment), unless a Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing in which case such
funds shall be applied in the same manner as the principal so invested. The
Lessee shall be responsible for and will promptly pay to the Indenture Trustee
or the Lessor, as the case may be, on demand, the amount of any loss realized
as the result of any such investment (together with any fees, commissions and
other costs, Taxes and expenses, if any, incurred by the Indenture Trustee or
the Lessor or the Owner Participant in connection with such investment), such
amount to be disposed of in accordance with the terms of the Indenture or the
Lease, as the case may be.
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01.Lessor's Entry Into Lease. Except as expressly provided
herein, the Lessor and the Lessee agree that this Lease is executed by FSB not
individually but solely as Owner Trustee under the Trust Agreement in the
exercise of the power and authority conferred and vested in it as such Owner
Trustee, that each and all of the representations, undertakings and agreements
by the Lessor herein are for the purpose and with the intention of binding
only the Lessor's Estate, and that in no case whatsoever shall FSB be
personally liable for any loss in respect of such representations,
undertakings and agreements, that actions to be taken by the Lessor pursuant
to its obligations hereunder may, in certain instances, be taken by the Lessor
only upon specific authority of the Owner Participant and the Indenture
Trustee, that nothing herein contained shall be construed as creating any
liability on FSB, individually or personally, to perform any covenant, either
express or implied, herein, all such liability, if any, being expressly waived
by the Lessee and by each and every Person now or hereafter claiming by,
through or under the Lessee except with respect to the gross negligence or
willful misconduct of FSB, and that so far as FSB, individually or personally
is concerned, the Lessee and any Person claiming by, through or under the
Lessee shall look solely to the Lessor's Estate for the performance by the
Lessor of any of its obligations under this Lease; provided, that nothing in
this Section 24.01 shall be construed to limit in scope or substance those
representations and warranties of FSB in its individual capacity set forth in
the Participation Agreement and the Trust Agreement. The term "Lessor" as
used in this Lease shall include any trustee succeeding FSB as Owner Trustee
under the Trust Agreement. Any obligation of the Lessor hereunder may be
performed by the Owner Participant, and any such performance shall not be
construed as revocation of the trust created by the Trust Agreement. Nothing
contained in this Lease shall restrict the operation of the provisions of the
Trust Agreement with respect to its revocation of the resignation or removal
of the Owner Trustee hereunder.
ARTICLE 25
NOTICES
Section 25.01.Notices. All notices, demands, declarations and other
communications required by this Lease shall be in writing and shall be deemed
received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, (b) if given by certified mail, return receipt
requested, postage prepaid, five Business Days after being deposited in the
United States mail and (c) if given by FedEx service (or, if a Default or
Event of Default shall have occurred and be continuing, by other comparable
courier service), when received or personally delivered, addressed:
(a) If to the Lessee, to its office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Senior Vice President and Chief
Financial Officer with a copy to Senior Vice President and General Counsel;
telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or at such other
address as the Lessee shall from time to time designate in writing to the
Lessor, the Agent, Indenture Trustee and the Owner Participant;
(b) If to the Lessor or Owner Trustee, to its office at ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department; telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such
other address as the Lessor shall from time to time designate in writing to
the Lessee and the Indenture Trustee, with a copy to Owner Participant at
the Owner Participant's address as provided in subsection (c) below;
(c) If to the Owner Participant, in accordance with the Participation
Agreement; and
(d) If to the Indenture Trustee, to its office at Two ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department, telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such
other address as the Indenture Trustee shall from time to time designate in
writing to the Lessor, the Lessee, the Agent and the Owner Participant.
ARTICLE 26
MISCELLANEOUS
Section 26.01.Section Heading and Captions. All article and section
headings and captions used in this Lease are purely for convenience and shall
not affect the interpretation of this Lease.
Section 26.02.References. Any reference to a specific article or
section number shall be interpreted as a reference to that article or section
of this Lease unless otherwise expressly provided.
Section 26.03.APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING
DELIVERED IN NEW YORK.
Section 26.04.Severability. 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.
Section ▇▇.▇▇.▇▇ Oral Modification. The terms and provisions of this
Lease may not be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any such change, waiver,
discharge or termination is also subject to the provisions of Section 8.01 and
Article XIII of the Indenture.
Section 26.06.Agreement as Chattel Paper. To the extent 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 chattel-paper counterpart, which shall
be the counterpart containing the receipt executed by the Indenture Trustee on
its signature page.
Section 26.07.Counterparts. This Lease may be executed in any number
of counterparts, each of which shall be an original (except that only the
counterpart bearing the receipt executed by the Indenture Trustee shall be the
original for purposes of perfecting a security interest therein as chattel
paper under the Uniform Commercial Code), but all of which taken together
shall constitute one and the same instrument and any of the parties hereto may
execute this Lease by signing any such counterpart.
Section 26.08.Public Release of Information. Provided no Event of
Default shall have occurred and be continuing, each party shall in each
instance obtain the prior written approval of each party concerning the exact
text and timing of news releases, articles and other informational releases to
the public media concerning this Lease.
ARTICLE 27
TRUE LEASE
Section 27.01.Intent of the Parties. It is the intent of the parties
to this Lease that for all purposes (including, without limitation, U.S.
Federal income tax purposes) this Lease will be a true lease, and that this
Lease conveys to the Lessee no right, title or interest in the Aircraft except
as a lessee.
Section 27.02.Section 1110 Compliance. Notwithstanding any provision
herein or elsewhere contained to the contrary, it is understood and agreed
among the parties hereto that the transactions contemplated by this Lease and
the other Operative Agreements are expressly intended to be, shall be and
should be construed so as to be, entitled to the full benefits of Section 1110
of the Bankruptcy Code and any successor provision thereof.
Section ▇▇.▇▇.▇▇▇▇▇▇▇ Lease. This Lease is a "finance lease" within
the meaning of Section 2-A--103(g) of the Uniform Commercial Code.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease to be duly executed as of the date first above written.
LESSOR: FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By: ______________________________________________
Name:
Title:
LESSEE: FEDERAL EXPRESS CORPORATION
By: _______________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer and
Managing Director - Structured Finance
Receipt of this original counterpart of the Lease is hereby
acknowledged on this __ day of October 1996.
Indenture Trustee: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Indenture Trustee
By: _____________________________________________
Name:
Title:
SCHEDULE I
DEFINITIONS
GENERAL PROVISIONS
The following terms shall have the following meanings for all
purposes of the Operative Agreements (other than the Pass Through Agreement
and the Series Supplements) referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require. In the
case of any conflict between the provisions of this Schedule and the
provisions of any Operative Agreement, the provisions of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires and except in the case of the
Original Agreements, (i) references to agreements shall be deemed to mean and
include such agreements as amended and supplemented from time to time, and
(ii) references to parties to agreements shall be deemed to include the
successors and permitted assigns of such parties.
DEFINED TERMS:
Additional Insured. As defined in Article 13 of the Lease.
Aeronautics Authority. As appropriate, the Federal Aviation
Administration and/or the Administrator of the Federal Aviation
Administration, any successor to the former United States Civil Aeronautics
Board, or any Person, governmental department, bureau, commission or agency
located in the United States succeeding to the functions of any of the
foregoing.
Affiliate. 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. In no event shall the Owner Trustee or the Lessor be deemed an
Affiliate of the Owner Participant.
After-Tax Basis. A basis such that any payment to be received by a
Person shall be supplemented by a further payment to such Person so that the
sum of the two payments, after deduction of all Taxes resulting from the
receipt or accrual of such payments, shall be equal to the payment to be
received. In the case of amounts payable to the Lessor, the Owner Participant,
or any corporate Affiliate of the Owner Participant, it shall be presumed that
such Person is at all times subject to Federal income tax at the maximum
marginal rate generally applicable to corporations from time to time and
actual state, local and foreign income taxes.
Agent. ▇▇▇▇▇▇ Guaranty Trust Company of New York and its successors
and permitted assigns as Agent for the Original Loan Participants pursuant to
Article 16 of the Original Participation Agreement.
Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as
defined in the Transportation Code) as to which there is in force a permit
granted under Section 41302 of the Transportation Code.
Airbus Guaranty. The Guaranty dated the Delivery Date executed by the
Manufacturer and guaranteeing AVSA's Warranty ▇▇▇▇ of Sale.
Aircraft. The Airframe (or any permitted substitute airframe
thereunder) together with two Engines (whether either is an initial Engine or
a Replacement Engine) whether or not any of such initial or Replacement
Engines may from time to time be installed on such Airframe or may be
installed on any other airframe or on any other aircraft, including any
aircraft substituted pursuant to Section 11.03 of the Lease.
Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or
engines from time to time installed thereon) leased by the Lessor to the Lessee
pursuant to the Lease and the initial Lease Supplement and having the United
States FAA Registration Number initially and manufacturer's serial number
specified in the initial Lease Supplement, including (i) all Parts in respect
thereof and (ii) any replacement airframe which may be substituted pursuant to
Section 11.03 of the Lease.
Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment
No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation
Trust No. N662FE), dated as of October 15, 1996.
Ancillary Agreement. Any written agreement of the Lessee to which the
Lessor is a party or to which the Lessor has consented in writing entered into
on the Delivery Date or the Refunding Date or any date thereafter in
connection with the transactions contemplated by the Operative Agreements, as
such agreement may be amended and supplemented from time to time with the
consent of the Lessor and delivered to the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Owner Participant.
Ancillary Agreement I. The Ancillary Agreement I (Federal Express
Corporation Trust No. N662FE), dated the Delivery Date, as amended and
restated as of the Refunding Date, among the Lessee, the Owner Trustee, not in
its individual capacity, but solely as Owner Trustee, the Owner Participant
and the Indenture Trustee not in its individual capacity, but solely as
Indenture Trustee, as originally executed or as amended, modified or
supplemented with the consent of all the parties thereto.
Ancillary Agreement II. The Ancillary Agreement II (Federal Express
Corporation Trust No. N662FE), dated the Refunding Date, among the Lessee, the
Owner Trustee, not in its individual capacity, but solely as Owner Trustee,
the Owner Participant and the Indenture Trustee not in its individual
capacity, but solely as Indenture Trustee, as originally executed or as
amended, modified or supplemented with the consent of all the parties thereto.
Appraisal. The report prepared by BK Associates, Inc. and delivered
to the Owner Participant (with an abbreviated report to the Lessee) on the
Delivery Date pursuant to Section 4.01(n) of the Original Participation
Agreement.
Assignment and Assumption Agreement. Any agreement delivered in
compliance with Section 7.03(d) of the Participation Agreement.
AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized
and existing under the laws of France, and its successors and assigns.
AVSA Consent and Agreement. The Consent and Agreement dated as of
September 1, 1996, executed by AVSA, as the same may be amended, modified or
supplemented from time to time.
AVSA's FAA ▇▇▇▇ of Sale. The ▇▇▇▇ of sale for the Airframe on AC
Form 8050-2, or such other form as may be approved by the Aeronautics
Authority, executed by AVSA in favor of the Owner Trustee and dated the
Delivery Date.
AVSA's Warranty ▇▇▇▇ of Sale. The full warranty ▇▇▇▇ of sale
covering the Aircraft (and specifically referring to each Engine) executed by
AVSA as owner of the Aircraft in favor of the Owner Trustee and dated the
Delivery Date.
Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and
any successor thereto.
Bankruptcy Default. An event specified in Section 16.01(e), (f) or
(g) of the Lease which either does or, with the giving of notice or lapse of
time or both, would constitute an Event of Default.
Basic Rent. The aggregate periodic rent payable for the Aircraft
throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted
pursuant to Article 3 of the Lease.
Basic Term. The period commencing at the beginning of the day on the
Commencement Date and ending at the end of the day on December 23, 2019, or
such earlier date on which the Lease shall be terminated as provided therein.
Beneficial Interest. The interest of the Owner Participant under the
Trust Agreement.
Breakage Costs. Has the meaning specified in Schedule II to the
Original Participation Agreement.
Business Day. Any day on which commercial banks are not authorized or
required to close in New York, New York, Memphis, Tennessee and the city in
which the office or agency in the United States is maintained by the Pass
Through Trustee for the payment of the Pass Through Certificates, and after
the Lien of the Indenture is discharged, Salt Lake City, Utah.
Certificates. The Equipment Trust Certificates (Federal Express
Corporation Trust No. N662FE), issued by the Owner Trustee pursuant to the
Indenture and any certificate issued in exchange therefor or replacement
thereof pursuant to the Indenture.
Change in Tax Rate. Any amendment, modification, deletion, addition,
or change to the Code which is enacted into law after the Delivery Date which
changes the highest marginal statutory rate of Federal income tax applicable
to the Owner Participant (other than a change which is in the nature of a
minimum tax).
Citizen of the United States. A citizen of the United States as
defined in Section 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.
Closings. The closing with respect to the acquisition of the Pass
Through Certificates by the Underwriters and the closing with respect to the
refunding of the Original Loan Certificates.
Code. Except as otherwise provided, the Internal Revenue Code of
1986, as amended from time to time.
Commencement Date. January 30, 1997.
Consent and Agreement. The Consent and Agreement dated as of
September 1, 1996 executed by the Manufacturer, as the same may be amended,
modified or supplemented from time to time.
Consent and Guaranty. The Consent and Guaranty of the Manufacturer
attached to the Purchase Agreement.
Corporate Trust Administration. The principal office of the
Indenture Trustee located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department, or such other
office at which the Indenture Trustee's corporate trust business shall be
administered which the Indenture Trustee shall have specified by notice in
writing to the Lessee, the Owner Participant and the Owner Trustee.
Corporate Trust Department. The principal office of the Owner Trustee
located at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Trust Department, or such other office at which the Owner Trustee's
corporate trust business shall be administered which the Owner Trustee shall
have specified by notice in writing to the Lessee, the Owner Participant and
the Indenture Trustee.
CRAF Program. Has the meaning specified in Section 7.01(a)(iv) of the
Lease.
Debt Rate. The weighted average (based on Outstanding principal
amount) rate of interest on the Certificates issued pursuant to the Indenture.
Default. Any event or condition which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
Delivery Date. September 23, 1996.
Engine. Each of the two General Electric CF6-80C2-A5F engines listed
by manufacturer's serial numbers in the initial Lease Supplement and leased
pursuant to the Lease, whether or not from time to time installed on the
Airframe or installed on any other airframe or on any other aircraft, and any
Replacement Engine which may from time to time be substituted for an Engine
pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of
the Lease, together with all Parts related thereto. Except as otherwise
provided, at such time as a Replacement Engine shall be so substituted and the
Engine for which the substitution is made shall be released from the Lien of
the Indenture, such replaced Engine shall cease to be an "Engine" under the
Lease. The term "Engines" means, as of any date of determination, both Engines
then leased to the Lessee pursuant to the Lease.
Engine Consent. The Engine Consent dated as of September 1, 1996,
executed by the Engine Manufacturer, as the same may be amended, modified or
supplemented from time to time.
Engine Manufacturer. General Electric Company, a New York
corporation.
Engine Warranty Assignment. The Engine Warranty Assignment (Federal
Express Corporation Trust No. N662FE), dated as of September 1, 1996 between
the Lessor and the Lessee, as the same may be amended, modified or
supplemented from time to time.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plan. An employee benefit plan subject to Title I of ERISA, or
an individual retirement account or plan subject to Section 4975 of the Code.
Estimated Expense Amount. Has the meaning specified in Section
10.01(a) of the Participation Agreement.
Event of Default. Each of the events specified in Article 16 of the
Lease.
Event of Loss. Any of the following events with respect to the
Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A)
for a period in excess of 60 days due to theft or disappearance or such longer
period, not to exceed 180 days from the end of such initial 60-day period, if
and so long as the location of such property is known to the Lessee and the
Lessee is diligently pursuing recovery of such property, or to the end of the
Term, if less (unless such theft or disappearance constitutes an Event of Loss
pursuant to (i)(B) or (ii) hereof) or (B) for a period in excess of 60 days
due to the destruction, damage beyond economic repair or rendition of such
property permanently unfit for normal use by Lessee 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 constructive or
compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or
requisition of title to such property by the Government, any foreign
government or purported government or any agency or instrumentality thereof,
or (2) condemnation, confiscation, or seizure of, or requisition or taking of,
use of such property (A) by a foreign government or instrumentality or agency
of any such foreign government, for a period in excess of 180 days (or such
shorter period ending on the earlier of the expiration of the Term or on the
date on which an insurance settlement with respect to such property on the
basis of a total loss or constructive or compromised total loss shall occur)
or (B) by the Government for a period extending beyond the Term; and (iv) as a
result of any law, rule, regulation, order or other action by the Aeronautics
Authority or other governmental body having jurisdiction, the use of the
Aircraft or Airframe in the normal course of air transportation of cargo shall
have been prohibited by virtue of a condition affecting all Airbus A300-600
series aircraft equipped with engines of the same make and model as the
Engines for a period of twelve (12) consecutive months, unless the Lessee,
prior to the expiration of such twelve (12) month period, shall be diligently
carrying forward all steps which are necessary or desirable to permit the
normal use of the Aircraft or Airframe or, in any event, if such use of the
Aircraft or the Airframe shall have been prohibited for a period of
twenty-four (24) consecutive months or until the end of the Term, if earlier.
The date of such Event of Loss shall be (s) the 61st day or the 241st day, as
the case may be, following loss of such property or its use due to theft or
disappearance (or the end of the Term or the Lessee's abandonment of diligent
efforts to recover such property, if earlier); (t) the 61st day following the
date of any destruction, damage beyond economic repair or rendition of such
property permanently unfit for normal use; (u) the date of any insurance
settlement on the basis of a total loss or constructive or compromised total
loss; (v) the date of any condemnation, confiscation, seizure or requisition
of title of such property; (w) the 181st day following condemnation,
confiscation, seizure or requisition for use of such property by a foreign
government referred to in clause (iii)(2)(A) above (or the end of the Term or
the date of any insurance settlement described therein, if earlier than such
181st day); (x) the last day of the Term in the case of requisition for use of
such property by the Government; (y) the last day of the 12 month or 24 month
period, referred to in clause (iv) above (or if earlier, the end of the Term
or abandonment of the Lessee's efforts to restore the normal use of the
Aircraft). An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if any Event of Loss occurs with respect to the Airframe. If an
Event of Loss described in any of clauses (i) (A), (iii) or (iv) above shall
occur, Lessor may elect, within 30 days following the date upon which such
Event of Loss is deemed to have occurred, to waive such Event of Loss and the
consequences thereof.
Excepted Payments. Collectively, (i) indemnity, expense,
reimbursement or other payments paid or payable by the Lessee in respect of
the Owner Participant, the Owner Trustee in its individual capacity or any of
their respective successors, permitted assigns, directors, officers,
employees, servants and agents or Affiliates, pursuant to the Participation
Agreement or any other Operative Agreement or any indemnity hereafter granted
to the Owner Participant or the Owner Trustee in its individual capacity
pursuant to the Lease or the Participation Agreement, (ii) proceeds of public
liability insurance (or government indemnities in lieu thereof) in respect of
the Aircraft payable as a result of insurance claims paid for the benefit of,
or losses suffered by, the Owner Trustee or the Indenture Trustee in their
respective individual capacities or by the Owner Participant, or their
respective successors, permitted assigns or Affiliates, (iii) proceeds of
insurance maintained with respect to the Aircraft by the Owner Participant
(whether directly or through the Owner Trustee) maintained in accordance with
Section 13.05 of the Lease but not required under Article 13 of the Lease,
(iv) payments of Supplemental Rent by the Lessee in respect of any amounts
payable under the Tax Indemnity Agreement, (v) any purchase price paid to the
Owner Participant for its interest in the Trust Estate pursuant to Section
7.03(d) of the Participation Agreement, (vi) subject to Section 3.05 of the
Lease, payments constituting increases in Basic Rent attributable to payments
arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) any
payments in respect of interest to the extent attributable to payments
referred to in clauses (i) through (vi) above and (viii) any right to demand,
collect or otherwise receive and enforce the payment of any amount described
in clauses (i) through (v) and (vii) above (except with respect to interest
attributable to payments referred to in clause (vi) above).
Expense; Expenses. Have the meaning specified in Section 9.01(a) of
the Participation Agreement.
FPO Price. Has the meaning set forth in Section 4.02(a)(F) of the
Lease.
FSB. First Security Bank, National Association, a national banking
association.
Fair Market Renewal Term. A term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the second paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
Fair Market Rental. An amount determined on the basis of, and equal
in amount to, the rental which would be obtained in an arm's-length
transaction between an informed and willing lessee and an informed and willing
lessor unaffiliated with such lessee, neither being under any compulsion to
lease. In such determination, it shall be assumed that the Aircraft is in the
condition required under the Lease in the case of return of the Aircraft
pursuant to Article 12 of the Lease and Fair Market Rental shall be determined
in accordance with the provisions of Section 4.03 of the Lease.
Fair Market Value. An amount determined on the basis of, and equal in
amount to, the value which would be obtained in an arm's-length transaction
between an informed and willing purchaser under no compulsion to buy and an
informed and willing seller unaffiliated with such purchaser and under no
compulsion to sell, assuming the Aircraft (or other property) is unencumbered
by the Lease. In such determination, except for purposes of Section 17.01 of
the Lease (when it shall be determined based upon the actual condition and
location of the Aircraft), it shall be assumed that the Aircraft is in the
condition required under the Lease in the case of return of the Aircraft
pursuant to Article 12 of the Lease and Fair Market Value shall be determined
in accordance with the provisions of Section 4.03 of the Lease.
Federal Aviation Administration; FAA. The United States Federal
Aviation Administration and any successor agency or agencies thereto.
Fixed Renewal Rent. Semi-annual payments of rent during the Fixed
Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of
the commencement of such Fixed Renewal Term and (ii) 50% of the average actual
semi-annual Basic Rent payable during the Basic Term.
Fixed Renewal Term. The term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the first paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
French Pledge Agreement. The French Pledge Agreement dated as of
September 1, 1996 between the Owner Trustee and the Indenture Trustee.
Government. The United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and
credit of the United States of America.
GTA. The General Terms Agreement dated as of July 3, 1991 between the
Engine Manufacturer and the Lessee related to the purchase by the Lessee of the
Engines as originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the General Terms
Agreement relates to the Engines, to the extent assigned to the Owner Trustee
pursuant to the Engine Warranty Assignment.
Holder of a Certificate; Certificate Holder; Holder. As of any
particular time, the Person in whose name a Certificate shall be registered
(but not including the holder of any Pass Through Certificate).
Indemnitee. Each of FSB, in its individual capacity and as Owner
Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of
the Original Participation Agreement), the Owner Participant, the Original
Loan Participants (to the extent set forth in Articles 8 and 9 of the Original
Participation Agreement), the Indenture Trustee, in its individual capacity
and as trustee, any Owner Participant Guarantor, and any successor (including
any trustee which may succeed to the Lessor's interest under the Lease),
Affiliate, assign, officer, director, employee, agent and servant of any of
the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither
the Certificate Holder nor any holder of a Pass Through Certificate shall be
deemed to be an Indemnitee.
Indenture. The Trust Indenture and Security Agreement (Federal
Express Corporation Trust No. N662FE), dated as of September 1, 1996, as
amended and restated as of October 15, 1996, between the Lessor and the
Indenture Trustee, as supplemented by the Indenture and Security Agreement
Supplement, and as said Indenture may from time to time be further
supplemented or amended, including any amendment or supplement thereto entered
into from time to time pursuant to the applicable provisions of the Indenture.
Indenture and Security Agreement Supplement. The Indenture and
Security Agreement Supplement No. 1 (Federal Express Corporation Trust No.
N662FE) dated September 23, 1996, as such Indenture and Security Agreement
Supplement shall be amended or supplemented from time to time and any other
supplement to the Indenture, substantially in the form of Exhibit A to the
Indenture.
Indenture Default. Any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute an Indenture Event of
Default.
Indenture Documents. Has the meaning specified in the Granting
Clause of the Indenture.
Indenture Event of Default. Each of the events specified in Section
7.01 of the Indenture.
Indenture Trustee. State Street Bank and Trust Company, a
Massachusetts trust company, not in its individual capacity but solely as
Indenture Trustee under the Indenture and each other Person which may from
time to time be acting as successor trustee under the Indenture.
Indenture Trustee's Liens. Any Lien on the Trust Indenture Estate
resulting from (i) claims against the Indenture Trustee not related to the
administration of the Trust Indenture Estate or any transactions pursuant
to the Indenture or any document included in the Trust Indenture Estate,
(ii) any act or omission of the Indenture Trustee which is not related to
the transactions contemplated by the Operative Agreements or is in
violation of any of the terms of the Operative Agreements or (iii) Taxes
imposed against the Indenture Trustee in its individual capacity in respect
of which the Lessee has not indemnified (and is not obligated to indemnify)
the Indenture Trustee in such capacity.
Independent Appraisal. An appraisal conducted pursuant to Section
4.03 of the Lease.
Independent Investment Banker. An independent investment banking
institution of national standing appointed by the Lessee that is independent
in fact, does not have any direct financial interests, or any material
indirect financial interest, in the Lessee or any Affiliate of the Lessee, and
is not connected with the Lessee or any Affiliate of the Lessee, as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions; provided, that if the Indenture Trustee shall
not have received written notice of such an appointment at least 10 days prior
to the Prepayment Date, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
Interim Term. The period commencing on the Delivery Date and ending
at the end of the day immediately preceding the Commencement Date.
Invoice. The invoice for the Aircraft given by AVSA to the Lessor.
Lease. The Lease Agreement (Federal Express Corporation Trust No.
N662FE) dated as of September 1, 1996, as amended and restated as of October
15, 1996, entered into by the Lessor and the Lessee concurrently with the
execution and delivery of the Indenture, as said Lease may from time to time
be supplemented or amended, or its terms waived or modified, to the extent
permitted by, and in accordance with, the terms of the Indenture, including,
without limitation, supplementation by one or more Lease Supplements entered
into pursuant to the applicable provisions of the Lease.
Lease Supplement. The Lease Supplement No. 1 (Federal Express
Corporation Trust No. N662FE) dated September 23, 1996, as such Lease
Supplement shall be amended or supplemented from time to time and any other
supplement to the Lease, substantially in the form of Exhibit A to the Lease.
Lease Term. The period commencing on the Delivery Date and ending at
the end of the Basic Term.
Lessee. Federal Express Corporation, a Delaware corporation, and its
successors and permitted assigns.
Lessee Documents. Has the meaning set forth in Section 6.01(b) of the
Participation Agreement.
Lessor. First Security Bank, National Association, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, and its successors and permitted assigns.
Lessor's Estate. All estate, right, title and interest of the Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement, the
Participation Agreement, AVSA's FAA ▇▇▇▇ of Sale, AVSA's Warranty ▇▇▇▇ of
Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement
Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the
Consent and Guaranty (to the extent assigned by the Purchase Agreement
Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment,
the Engine Consent, any warranty with respect to the Airframe and the Engines,
all amounts of Basic Rent and Supplemental Rent, including without limitation,
insurance proceeds (other than insurance proceeds payable to or for the
benefit of the Owner Trustee in its individual capacity or the Owner
Participant) and requisition, indemnity or other payments of any kind for or
with respect to the Aircraft (except amounts owing to the Owner Participant,
to the Indenture Trustee, to the Owner Trustee in its individual capacity, or
to any of their respective directors, officers, employees and agents pursuant
to Articles 8 and 9 of the Participation Agreement), and all other property of
the Owner Trustee purportedly subjected to the Lien of the Indenture by the
Granting Clause thereof; provided that in no event shall "Lessor's Estate"
include any Excepted Payment.
Lessor's Liens. Liens on the Lessor's Estate or the Trust Indenture
Estate arising as a result of (i) claims against the Lessor, in its individual
capacity or as Owner Trustee, or the Owner Participant, in each case not
related to the transactions contemplated by the Operative Agreements, (ii)
acts or omissions of the Lessor in its individual capacity or as Owner
Trustee, and, in the case of the Lessor in its individual capacity, arising
from its gross negligence or willful misconduct or expressly prohibited under
the Operative Agreements and any act or omission of the Owner Participant
which is in violation of any of the terms of the Operative Agreements, (iii)
Taxes or Expenses imposed against the Lessor, in its individual capacity or as
Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the
Trust Agreement which are not required to be indemnified against by the Lessee
pursuant to the Participation Agreement by reason of Section 8.01(b) or
9.01(b) thereof and which are not required to be indemnified against by the
Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the
Lessor or the Owner Participant arising from the voluntary transfer by the
Lessor or the Owner Participant of its interests in the Aircraft other than a
transfer of the Aircraft pursuant to Section 4.02(a) or Article 10 or 11 of the
Lease and other than a transfer pursuant to the exercise of the remedies set
forth in Article 17 of the Lease.
Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or
security interest or other similar interest.
Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the
Lease.
Majority in Interest of Certificate Holders. As of a particular date
of determination, the Holders of more than 50% of the aggregate unpaid
principal amount of all Certificates outstanding as of such date excluding for
purposes of this definition any Certificates held by (i) the Owner Trustee or
the Owner Participant or any interests of the Owner Participant unless all
Certificates then outstanding shall be held by the Owner Participant, (ii) the
Lessee or (iii) any Affiliate of any thereof.
Make-Whole Premium. An amount determined as of the day before the
applicable Prepayment Date (or date of purchase, as the case may be) which an
Independent Investment Banker determines to be equal to the excess, if any, of
(i) the present values of all remaining scheduled payments of such principal
amount or portion thereof and interest thereon (excluding interest accrued
from the immediately preceding Payment Date to such Prepayment Date or date of
purchase, as the case may be) to the Maturity of such Certificate in
accordance with generally accepted financial practices assuming a 360-day year
consisting of twelve 30-day months at a discount rate equal to the Treasury
Yield, all as determined by the Independent Investment Banker over (ii) the
unpaid principal amount of such Certificate.
Manufacturer. Airbus Industrie G.I.E., a groupement d'interet
economique formed under the laws of France, and its successors and assigns.
Maturity. With respect to any Certificate, the date on which the
final principal amount of such Certificate is scheduled to be due and payable.
Moody's. ▇▇▇▇▇'▇ Investors Service, Inc.
Net Present Value of Rents. The net present value, as of the
Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted
at a rate equal to the Debt Rate per annum compounded semi-annually.
Non-U.S. Person. Any Person other than a U.S. Person.
Obsolete Parts. Parts which are severable from the Aircraft in
accordance with clauses (ii) and (iii) of the proviso to Section 9.02(b) of
the Lease and the Lessee in good faith determines to be obsolete or no longer
suitable or appropriate for use on the Airframe or any Engine.
Officer's Certificate. When delivered pursuant to the Indenture, a
certificate signed by a Responsible Officer of the Lessee or the Owner
Trustee, as the case may be, and delivered to the Indenture Trustee. Each
such certificate shall include the statements provided for in Section 15.07 of
the Indenture.
Operative Agreements. The Participation Agreement, the Trust
Agreement, AVSA's FAA ▇▇▇▇ of Sale, AVSA's Warranty ▇▇▇▇ of Sale, the Airbus
Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA,
the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the
Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee
Guaranty, if any, any Ancillary Agreement entered into by or with the written
consent of the Indenture Trustee, which by its terms is an Operative
Agreement, the Certificates outstanding at the time of reference, the
Indenture, the Indenture and Security Agreement Supplement, the Consent and
Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the
extent assigned by the Purchase Agreement Assignment), the Engine Consent, the
Tax Indemnity Agreement and any Assignment and Assumption Agreement, each as
amended from time to time.
Opinion of Counsel. When delivered pursuant to the Indenture, a
written opinion of legal counsel, who in the case of counsel (a) for the
Lessee may be (i) an attorney employed by the Lessee who is generally
empowered to deliver such written opinions, (ii) ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or a
successor firm or (iii) other counsel designated by the Lessee and reasonably
satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the
Indenture Trustee, an attorney selected by such Person and, in the case of the
Owner Trustee, reasonably satisfactory to the Indenture Trustee.
Original Agreements. The documents and instruments delivered on the
Delivery Date in connection with the transactions contemplated by the Original
Participation Agreement.
Original Ancillary Agreement I. The Ancillary Agreement I (Federal
Express Corporation Trust No. N662FE), among the Lessee, the Owner
Participant, the Indenture Trustee and the Owner Trustee as it was originally
executed on the Delivery Date.
Original Indenture. The Trust Indenture, Mortgage and Security
Agreement (Federal Express Corporation Trust No. N662FE), dated as of
September 1, 1996, between the Owner Trustee and the Indenture Trustee, which
together with the Indenture and Security Agreement Supplement No. 1 (Federal
Express Corporation Trust No. N662FE), dated September 23, 1996 attached
thereto was recorded as one instrument by the FAA on September 25, 1996, and
assigned Conveyance Number 2A270116.
Original Lease. The Lease Agreement (Federal Express Corporation
Trust No. N662FE), dated as of September 1, 1996, between the Owner Trustee as
lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal
Express Corporation Trust No. N662FE), dated September 23, 1996 attached
thereto was recorded as one instrument by the FAA on September 25, 1996, and
assigned Conveyance Number 2A270117.
Original Loan Certificates. The loan certificates issued on the
Delivery Date to the Original Loan Participants.
Original Loan Participants. The entities listed on Schedule I to the
Original Participation Agreement and their successors and assigns (other than
any assignees in connection with the Refunding Date).
Original Participation Agreement. The Participation Agreement
(Federal Express Corporation Trust No. N662FE), among the Lessee, the Owner
Participant, the Indenture Trustee, the Owner Trustee and the Original Loan
Participants as it was originally executed as of September 1, 1996.
Original Tax Indemnity Agreement. The Tax Indemnity Agreement
(Federal Express Corporation Trust No. N662FE) between the Lessee and the
Owner Participant as it was originally executed as of September 1, 1996.
Original Trust Agreement. The Trust Agreement (Federal Express
Corporation Trust No. N662FE) between the Owner Participant and the Owner
Trustee as it was originally executed as of September 1, 1996 and filed with
the FAA on September 23, 1996.
Outstanding. When used with respect to Certificates, as of the date
of determination and subject to the provisions of Section 10.04 of the
Indenture, all Certificates theretofore executed and delivered under the
Indenture, with the exception of the following:
(i) Certificates theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation pursuant to
Section 2.08 of the Indenture or otherwise;
(ii) Certificates for which prepayment money in the necessary amount
has been theretofore deposited with the Indenture Trustee in trust
for the Holders of such Certificates pursuant to Section 14.01 of the
Indenture; provided, that if such Certificates are to be prepaid,
notice of such prepayment has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Indenture Trustee
has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to Article II
of the Indenture.
Owner Participant. The trustor originally named in the Trust
Agreement and any successor thereto, and any Person to which Owner Participant
transfers, in accordance with the Trust Agreement, its right, title and
interest in and to the Operative Agreements and the Lessor's Estate.
Owner Participant Guarantor. The provider of an Owner Participant
Guaranty.
Owner Participant Guaranty. Any guaranty delivered in compliance with
Section 7.03(d) of the Participation Agreement.
Owner Trustee. FSB, not in its individual capacity except as
otherwise expressly stated, but solely as Owner Trustee under the Trust
Agreement, and its successors and permitted assigns.
Owner Trustee Guarantor. The provider of an Owner Trustee Guaranty.
Owner Trustee Guaranty. Any guaranty delivered in compliance with
Section 11.01(b)(ii) of the Participation Agreement.
Owner's Economic Return. The Owner Participant's anticipated net
after-tax book yield and aggregate after-tax cash during the Interim Term and
the Basic Term 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, Stipulated
Loss Value and Termination Value percentages, as the case may be, as such
assumptions may be adjusted for events which have been the basis of
adjustments to Rent pursuant to Section 3.04 of the Lease.
Participation Agreement. The Participation Agreement (Federal Express
Corporation Trust No. N662FE), dated as of September 1, 1996, as amended and
restated as of October 15, 1996, among the Lessee, the Original Loan
Participants, the Owner Trustee not in its individual capacity except as
otherwise expressly provided therein, but solely as owner trustee, the Owner
Participant, the Indenture Trustee not in its individual capacity except as
otherwise expressly provided therein, but solely as indenture trustee and the
Pass Through Trustee not in its individual capacity except as otherwise
expressly provided therein, but solely as pass through trustee, as amended,
modified or supplemented, or the terms thereof waived.
Parts. All appliances, parts, components, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines) which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine or title to which
remains vested in the Lessor pursuant to Article 8 of the Lease.
Pass Through Agreement. The Pass Through Trust Agreement dated as of
June 1, 1996 between the Lessee and the Pass Through Trustee, as such Pass
Through Agreement may be modified, supplemented or amended from time to time in
accordance with the provisions thereof.
Pass Through Certificates. Any of the 1996 Pass Through Certificates,
Series B1 or 1996 Pass Through Certificates, Series B2, in each case as issued
by the related Pass Through Trust; and "Pass Through Certificates" means both
of the Pass Through Certificates issued by each of the Pass Through Trusts.
Pass Through Closing Date. The Business Day on which the sale of the
Pass Through Certificates to the Underwriters pursuant to the Underwriting
Agreement takes place.
Pass Through Trust. The Federal Express Pass Through Trust, 1996-B1
or Federal Express Pass Through Trust, 1996-B2, in each case formed pursuant
to the related Series Supplement in accordance with the Pass Through
Agreement; and "Pass Through Trusts" means both of such Pass Through Trusts.
Pass Through Trustee. State Street Bank and Trust Company, a
Massachusetts trust company, in its capacity as Pass Through Trustee under the
Pass Through Agreement and each Pass Through Trust, and its successors and
permitted assigns as Pass Through Trustee thereunder.
Past Due Rate. In respect of (A) any amount payable to the Owner
Participant or the Owner Trustee a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 2% plus the Debt Rate and (B) any principal of or interest on
any Certificate or any other amount payable under the Indenture, any
Certificate or any other Operative Agreement that is not paid when due
(whether at Maturity, by acceleration, by optional or mandatory prepayment or
otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to (i) in the
case of any such amount payable to the Holder of any Certificate, 2% plus the
interest rate applicable to such Certificate and (ii) in the case of any other
such amount, 2% plus the Debt Rate.
Payment Date. December 23, 2019 and each January 30 and July 30
commencing on January 30, 1997.
Payment Default. Any event specified in Section 16.01(a) or 16.01(b)
of the Lease which with the giving of notice or lapse of time or both would
constitute an Event of Default.
Permitted Investments. Those investments enumerated in Section
23.01(a) (i), (ii), (iii) and (iv) of the Lease.
Person. Any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, entity or government (federal, state, local, foreign
or any agency, instrumentality, division or body thereof).
Preliminary Notice. Has the meaning specified in Section 4.01(a) of
the Lease.
Premium Termination Date. With respect to the Certificates having a
Maturity in 2012, October 23, 2006 and with respect to the Certificates having
a Maturity in 2018, June 23, 2016.
Prepayment Date. Has the meaning specified in Section 6.02(b) of the
Indenture.
Prepayment Price. Has the meaning specified in Section 6.02(b) of the
Indenture.
Property. Any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
Proposed Termination Date. The proposed date of termination of the
Lease as specified by the Lessee in its notice given pursuant to Section 10.01
thereof.
Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement,
dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits,
appendices and letter agreements attached thereto as originally executed or as
modified, amended or supplemented in accordance with the terms thereof, but
only to the extent that the foregoing relates to the Aircraft and to the
extent assigned pursuant to the Purchase Agreement Assignment.
Purchase Agreement Assignment. The Purchase Agreement Assignment
(Federal Express Corporation Trust No. N662FE), dated as of September 1, 1996
between the Lessor and the Lessee, as the same may be amended, modified or
supplemented from time to time.
Purchase Price. The amount specified as such in Ancillary Agreement
II.
Record Date. With respect to Payment Dates under the Indenture
(except a date for payment of defaulted interest), January 15 for January 30
Payment Dates and July 15 for July 30 Payment Dates, whether or not such date
is a Business Day.
Recourse Amount. Has the meaning specified in Section 17.10 of the
Participation Agreement.
Refinancing. A non-recourse loan to the Lessor arranged pursuant to
Section 15.01 of the Participation Agreement.
Refunding Date. A Business Day on which the refunding of the
Original Loan Certificates occurs, the expected date thereof having been
specified by the Lessee in a written notice given to the parties to the
Participation Agreement and the Underwriters at least three (3) Business Days
prior to such expected Refunding Date.
Register. Has the meaning set forth in Section 3.02 of the Indenture.
Registrar. Has the meaning set forth in Section 3.02 of the
Indenture.
Regulation D. Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
Remaining Weighted Average Life. For any Certificate, as of any
determination date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
mandatory sinking fund redemption payment of principal, including the payment
due on the Maturity of such Certificate, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse between such
determination date, and the date on which such payment is scheduled to be
made, by (b) the then outstanding principal amount of such Certificate.
Renewal Rent. The amount payable by the Lessee as rent in accordance
with Section 4.01 of the Lease during any Renewal Term.
Renewal Term. One or more terms with respect to which the Lessee has
exercised its option to renew the Lease pursuant to Section 4.01(a) thereof.
Rent. All payments due from the Lessee under the Lease as Basic Rent,
Renewal Rent and Supplemental Rent, collectively.
Rent Payment Date. December 23, 2019 and each January 30 and July 30
commencing on January 30, 1997.
Reoptimization Date. Has the meaning specified in Section 15.02(a)
of the Participation Agreement.
Replacement Aircraft. Any aircraft substituted for the Aircraft
pursuant to Section 11.03(a) of the Lease.
Replacement Airframe. Has the meaning set forth in Section 11.03 of
the Lease.
Replacement Engine. A General Electric CF6-80C2-A5F engine (or an
engine of the same or another manufacturer) of equal or greater value,
airworthiness, remaining useful life and utility as the Engine being replaced,
together with all Parts relating to such engine; provided, however, that if
such replacement engine is not a General Electric CF6-80C2-A5F engine, such
replacement engine must then be commonly used in the commercial aviation
industry on Airbus A300-600 airframes.
Responsible Officer. With respect to the Owner Trustee (except for
purposes of the Trust Agreement in which case the definition of Responsible
Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the
Indenture Trustee, any officer in its Corporate Trust Administration, as the
case may be, designated by such Person to perform obligations under the
Operative Agreements, and with respect to any other party, any corporate
officer or (except in the case of the Owner Participant) other employee of a
party who, in the normal performance of his or her operational
responsibilities, with respect to the subject matter of any covenant,
agreement or obligation of such party pursuant to any Operative Agreement,
would have responsibility for and knowledge of such matter and the
requirements of any Operative Agreement with respect thereto.
S&P. Standard & Poor's Ratings Group.
SEC. The Securities and Exchange Commission of the United States and
any successor agencies or authorities.
SSB. State Street Bank and Trust Company, a Massachusetts trust
company.
Securities Act. The Securities Act of 1933, as amended.
Series Supplement. The Series Supplement 1996-B1 to be executed and
delivered by the Lessee and the Pass Through Trustee or the Series Supplement
1996-B2 to be executed and delivered by the Lessee and the Pass Through
Trustee, in each case as such Series Supplement may be modified, supplemented
or amended from time to time in accordance with the provisions thereof and
"Series Supplements" means both such Series Supplements.
Sinking Fund Redemption Date. Has the meaning specified in Section
6.06 of the Indenture.
Sinking Fund Redemption Price. Has the meaning specified in Section
6.06 of the Indenture.
Special Aviation Counsel. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇.
Stipulated Loss Value. As of any Stipulated Loss Value Determination
Date during the Basic Term, the amount determined by multiplying the Purchase
Price by the percentage set forth in Schedule III of the Lease under the
heading "Stipulated Loss Value Factor" opposite such date (as such Schedule
III may be adjusted from time to time as provided in Section 3.04 of the
Lease), and during any Renewal Term, the amount determined pursuant to Section
4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or
the Participation Agreement or the Indenture, each Stipulated Loss Value for
the Aircraft shall be, under any circumstances and in any event, an amount,
together with so much of the arrears portion of Basic Rent due and owing
through the date of payment of Stipulated Loss Value as does not constitute an
Excepted Payment, at least sufficient to pay in full as of such date of
payment the aggregate unpaid principal amount of and accrued interest on the
Certificates outstanding on such date of payment. Subject to the immediately
preceding sentence, it is understood and agreed that the amounts set forth on
Schedule III of the Lease, for dates other than Rent Payment Dates on which
arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and
credits of unearned Basic Rent through such date and, accordingly, no further
accrual or credit shall be required through such date whenever Stipulated Loss
Value is to be calculated with reference to any such date; provided that if
amounts in respect of Stipulated Loss Value are payable under the Operative
Agreements after the Stipulated Loss Determination Date in respect of which
such Stipulated Loss Value was determined, the Lessor shall be compensated
during the period from the Stipulated Loss Determination Date to such payment
date in accordance with the provisions of the Operative Agreements.
Stipulated Loss Value Determination Date. Each date set forth on
Schedule III of the Lease under the heading "Stipulated Loss Value Date."
Supplemental Rent. All amounts, liabilities and obligations which
the Lessee assumes or agrees to perform or pay under the Lease or under the
Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement
or any other Operative Agreement to the Lessor, the Owner Participant, the
Indenture Trustee or others, including, without limitation, payments of
Stipulated Loss Value, FPO Price and amounts calculated by reference to
Termination Value, any amounts of Make-Whole Premium payable under the
Indenture to the extent provided in Section 3.03 of the Lease, and all amounts
required to be paid by Lessee under the agreements, covenants and indemnities
contained in the Lease or in the Participation Agreement or the Tax Indemnity
Agreement or any other Operative Agreement, but excluding Basic Rent.
Tax. Has the meaning set forth in Section 8.01(a) of the
Participation Agreement.
Tax Indemnity Agreement. The Original Tax Indemnity Agreement as
amended by Amendment No. 1 to the Original Tax Indemnity Agreement, as from
time to time modified, amended or supplemented pursuant to its applicable
provisions.
Term. The Interim Term and the Basic Term of the lease for the
Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the
Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or
such earlier date on which the Lease is terminated pursuant to its terms.
Termination Date. A Rent Payment Date during the Basic Term that is
on or after December 31, 2003 in the case of Article 10 of the Lease, and in
the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling
on January 30, 2017, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent
Payment Date that is on or after the seventh anniversary of the Commencement
Date and (iii) Section 4.02(a)(F) of the Lease, the last day of the Basic Term.
Termination Value. As of any Termination Date, the amount determined
by multiplying the Purchase Price by the percentage set forth in Schedule IV
of the Lease under the heading "Termination Value Factor" opposite such
Termination Date (as such Schedule IV may be adjusted from time to time as
provided in Section 3.04 of the Lease). Notwithstanding any other provisions
of the Lease, the Participation Agreement or the Indenture, each Termination
Value shall be, under any circumstances and in any event, an amount, together
with so much of the arrears portion of Basic Rent due and owing through the
date of payment of any amount calculated by reference to Termination Value as
does not constitute an Excepted Payment, at least sufficient to pay in full as
of such date of payment the aggregate unpaid principal amount of and accrued
interest on the Certificates outstanding on such date of payment. Subject to
the immediately preceding sentence, it is understood and agreed that the
amounts set forth on Schedule IV of the Lease, for dates other than Rent
Payment Dates on which arrears Basic Rent is due, fully reflect appropriate
Basic Rent accruals and credits of unearned Basic Rent through such date and,
accordingly, no further accrual or credit shall be required through such date
whenever Termination Value is to be calculated with reference to any such
date; provided that if amounts in respect of Termination Value are payable
under the Operative Agreements after the Termination Date in respect of which
such Termination Value was determined, the Lessor shall be compensated during
the period from the Termination Date to such payment date in accordance with
the provisions of the Operative Agreements.
Transaction Costs. Those costs and expenses set forth in Section
10.01(a) of the Participation Agreement.
Transportation Code. Title 49 of the United States Code, as amended
and in effect on the date of the Lease or as subsequently amended, or any
successor or substituted legislation at the time in effect and applicable, and
the regulations promulgated pursuant thereto.
Treasury Yield. (i) In the case of a Certificate having a Maturity
within one year after the Prepayment Date the average yield to maturity on a
government bond equivalent basis of the applicable United States Treasury ▇▇▇▇
due the week of Maturity of such Certificate and (ii) in the case of a
Certificate having a Maturity one year or more after the Prepayment Date, the
average yield of the most actively traded United States Treasury Note (as
reported by Cantor ▇▇▇▇▇▇▇▇▇▇ Securities Corp. on page 5 of Telerate Systems,
Inc., a financial news service, or if such report is not available, a source
deemed comparable by the Independent Investment Banker selected to determine
the Make-Whole Premium and reasonably acceptable to the Lessee) corresponding
in maturity to the Remaining Weighted Average Life of such Certificate (or, if
there is no corresponding maturity, an interpolation of maturities by the
Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Make-Whole Premium based on the
average of the yields to stated maturity determined from the bid prices as of
10:00 a.m. and 2:00 p.m. New York time, on the second Business Day preceding
the Prepayment Date.
Trust Agreement. The Trust Agreement (Federal Express Corporation
Trust No. N662FE), dated as of September 1, 1996, as amended and restated as
of October 15, 1996, between the Owner Participant and the Owner Trustee in
its individual capacity, as from time to time modified, amended or
supplemented pursuant to its applicable provisions and in accordance with the
Operative Agreements.
Trust Estate. The Lessor's Estate.
Trust Indenture Act. The Trust Indenture Act of 1939, as amended.
Trust Indenture Estate. All estate, right, title and interest of the
Indenture Trustee in and to any of the property, rights, interests and
privileges granted to the Indenture Trustee pursuant to the Granting Clause of
the Indenture, other than Excepted Payments and any and all other rights of
the Owner Trustee or the Owner Participant expressly reserved to the Owner
Trustee or the Owner Participant pursuant to the Indenture.
Underwriters. ▇▇▇▇▇▇▇, Sachs & Co., ▇.▇. ▇▇▇▇▇▇ Securities Inc.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, BA Securities, Inc. and First Chicago
Capital Markets, Inc.
Underwriting Agreement. The Underwriting Agreement dated October 17,
1996 among the Lessee and the Underwriters.
United States, U.S. or US. The United States of America.
U.S. Air Carrier. Any United States air carrier as to which there is
in force a certificate issued pursuant to Section 41102(a) or Section 41103 of
the Transportation Code, and as to which there is in force an air carrier
operating certificate issued pursuant to Chapter 447 of the Transportation
Code and Part 121 of the regulations under such Transportation Code, for
aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or
more of cargo, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provision thereof or in absence
thereof.
U.S. Person. A Person described in Section 7701(a)(30) of the Code.
SCHEDULE II
BASIC RENT
(As a Percentage of Purchase Price)
Rent
Payment
Date Advance Arrears
[On each Payment Date, Lessee will pay as Basic Rent an amount
that will be at least sufficient to pay in full, as of such
Payment Date, the aggregate unpaid principal amount of due and
unpaid installments on the Certificates outstanding on such
Payment Date, together with the accrued and unpaid interest
thereon.]
SCHEDULE III
STIPULATED LOSS VALUES
Stipulated Loss
Date Value Factor
[Stipulated Loss Value will be an amount at least sufficient to
pay in full, as of the date of payment thereof, the aggregate
unpaid principal amount of the Certificates outstanding on such
date of payment, together with the accrued and unpaid interest
thereon.]
SCHEDULE IV
TERMINATION VALUES
Termination Termination
Date Value Factor
[Termination Value will be an amount at least sufficient to pay
in full, as of the date of payment thereof, the aggregate
unpaid principal amount of the Certificates outstanding on such
date of payment, together with the accrued and unpaid interest
thereon.]
SCHEDULE V
PURCHASE OPTION SCHEDULE
(D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease.
In the event of any Significant Expenditure (as defined below) with respect
to the Aircraft, which the Lessee has certified in a certificate of the
Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Treasurer or Assistant Treasurer furnished to the
Lessor, the Indenture Trustee and the Owner Participant, is (as determined
in the Lessee's sole discretion) necessary, desirable or required to be
made at any time on or after the seventh anniversary of the Commencement
Date, the Lessee may elect to terminate the Lease and purchase the Aircraft
on (and only on) the first Rent Payment Date occurring at least six months
after the Owner Participant have notified the Lessee that they will not
permit such Significant Expenditure to be financed as contemplated in
clause (ii) of the definition of "Significant Expenditure" below, for, at
the Lessee's option, either (1) the payment to the Lessor in immediately
available funds of an amount equal to the greater of the Fair Market Value
of the Aircraft and the Termination Value for the Aircraft, determined in
each case as of such Rent Payment Date, or (2) the assumption by the
Lessee, pursuant to Section 7.11 of the Participation Agreement and Section
2.12 of the Indenture, of all of the Lessor's obligations under the
Indenture, the Certificates and Section 7.04 of the Participation
Agreement, and the payment to the Lessor in immediately available funds of
an amount equal to the excess of (A) the greater of (I) the Termination
Value for the Aircraft, and (II) the Fair Market Value of the Aircraft,
both computed as of such Rent Payment Date, over (B) the unpaid principal
amount of the Certificates outstanding plus accrued interest as of such
date; it being understood that the Fair Market Value for this purpose shall
be determined without regard to any Significant Expenditure not yet made.
For purposes of this paragraph (D) the term "Significant Expenditure"
means a single expenditure or a series of related expenditures in respect
of non-severable improvements (i.e. improvements which cannot by the terms
of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in
the Lessee's reasonable judgment (or, in the event the Owner Participant
disagrees with such judgment, in accordance with the appraisal procedures
set forth in Section 4.03 of the Lease) would exceed $10,000,000 and (ii)
the Owner Participant will not permit to be financed on similar terms and
conditions then available for similar transactions for like-situated
lessees through the issuance of additional non-recourse notes of the Lessor
or through additional equity investments of the Owner Participant or both
(it being understood that Section 4.02(a)(D) of the Lease shall not impose
any obligation on the Owner Participant to provide such financing). The
Lessee, prior to notifying the Owner Participant and the Indenture Trustee
in accordance with Paragraph (F) of this Schedule V of its election to
purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall
notify the Owner Participant of the non-severable improvements which would
satisfy the conditions described in clauses (i) and (iii) of the preceding
sentence, and provide the Owner Participant with a reasonable opportunity
to permit the financing thereof as contemplated in clause (ii) of such
sentence. The Owner Participant shall notify the Lessee of their decision
with respect to such financing within 60 days after the Lessee has given
the notice described in the preceding sentence.
(E) Purchase Option Referred to in Section 4.02(a)(E) of the Lease.
In the event that a Burdensome Indemnity Payment shall occur at any time on
or after the seventh anniversary of the Commencement Date, the Lessee may
elect to terminate the Lease and purchase the Aircraft on (and only on) the
first Rent Payment Date (the "Burdensome Indemnity Payment Date") following
the date that the Owner Participant provides the Lessee with a written
notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement)
that is a Burdensome Indemnity Payment for, at the Lessee's option, either
(1) the payment to the Lessor in immediately available funds of an amount
equal to the greater of the Fair Market Value of the Aircraft and the
Termination Value for the Aircraft, determined in each case as of such
Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee,
pursuant to Section 7.11 of the Participation Agreement and Section 2.12
of the Indenture, of all of the obligations of the Lessor under the
Indenture, the Certificates and Section 7.04 of the Participation Agreement
and the payment to the Lessor in immediately available funds of an amount
equal to the excess of (A) the greater of (I) the Termination Value for the
Aircraft and (II) the Fair Market Value of the Aircraft, both computed as
of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of
the Certificates outstanding plus accrued interest as of such date.
For purposes of this paragraph (E), the term "Burdensome Indemnity
Payment" means a Loss as defined in the Tax Indemnity Agreement which under
the circumstances cannot be commercially reasonably avoided by the Lessee
which causes the aggregate net present value as of the determination date,
discounted semi-annually at the Debt Rate, of all such Losses (but
excluding any Losses for which the Owner Participant shall have waived its
right to payment under the Tax Indemnity Agreement) paid or payable by the
Lessee which, in the opinion of independent tax counsel, can be avoided
through a purchase by the Lessee of the Aircraft, to exceed 3% of the
Purchase Price.
(F) Notice from the Lessee. The Lessee shall give the Lessor, the
Owner Participant and the Indenture Trustee not more than 180 days nor less
than 90 days prior written notice of its election to purchase pursuant to
Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either
direct the Lessor to prepay the Certificates in full on such Termination
Date pursuant to Section 6.02 of the Indenture or state that the Lessee
shall exercise its option to assume the Certificates pursuant to Section
7.11 of the Participation Agreement and Section 2.12 of the Indenture. The
Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) hereof shall
become irrevocable on the Business Day preceding the 15th day prior to the
applicable purchase date designated in such notice but if any such notice
is revoked, the Lessee shall no longer be entitled to purchase the Aircraft
as a result of the facts and circumstances originally giving rise to such
right and will pay all reasonable expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection therewith.
SCHEDULE VI
DESCRIPTION OF ORIGINAL LEASE
Lease Agreement (Federal Express Corporation Trust No. N662FE) dated
as of September 1, 1996 between Federal Express Corporation, as lessee and
First Security Bank, National Association, as owner trustee under Trust
Agreement (Federal Express Corporation Trust No. N662FE) dated as of September
1, 1996 between PMCC Leasing Corporation, as owner participant and First
Security Bank, National Association, recorded by the Federal Aviation
Administration on September 25, 1996, 1996 and assigned Conveyance No.
2A270117, as supplemented by the following described instrument:
FAA FAA
Date of Recording Conveyance
Instrument Instrument Date Number
Lease Supplement No. 1
(Federal Express Corporation
Trust No. N662FE) 09/23/96 09/25/96 2A270117
Exhibit A
to
Lease Agreement
THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT
NO. __ IS SUBJECT TO A SECURITY INTEREST
LEASE SUPPLEMENT NO. __
(Federal Express Corporation Trust No. N662FE)
LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No.
N662FE), dated ________ __, ____, between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
but solely as Owner Trustee under the Trust Agreement (Federal Express
Corporation Trust No. N662FE) dated as of September 1, 1996, as amended and
restated as of October 15, 1996 (the "Lessor"), and FEDERAL EXPRESS
CORPORATION, a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have entered into that certain
Lease Agreement (Federal Express Corporation Trust No. N662FE) dated as of
September 1, 1996, as amended and restated as of October 15, 1996 (the
"Lease", the defined terms in the Lease being used in this Lease Supplement
with the same meaning as in the Lease), which provides for the execution and
delivery of a Lease Supplement, substantially in the form of this Lease
Supplement No. __, for the purpose of leasing under the Lease the aircraft and
engines described below ("Aircraft") as and when delivered by the Lessor to
the Lessee in accordance with the terms of the Lease;
WHEREAS, the Lease relates to the Aircraft;
WHEREAS, a counterpart of the Lease is attached to and made a part of
this Lease Supplement, and this Lease Supplement, together with such
attachment, is being filed for recordation on this date with the FAA as one
document.
NOW, THEREFORE, for and in consideration of the premises and other
good and sufficient consideration, the Lessor and the Lessee agree as follows:
Section 1. Delivered Aircraft. The Lessor hereby delivers and
leases to the Lessee under the Lease, and the Lessee hereby accepts and leases
from the Lessor under the Lease, the following described Airbus A300F4-605R
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
of this Lease Supplement consists of the following:
(a) Airbus ▇▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇; U.S. Registration Number ______;
Manufacturer's Serial No. ___; and
(b) Two (2) General Electric CF6-80C2-A5F 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).
Section 2. Delivery Date. The Delivery Date of the Delivered
Aircraft is the date of this Lease Supplement.
Section 3. Purchase Price. The Purchase Price of the Delivered
Aircraft shall be the amount set forth in Ancillary Agreement II.
Section 4. Term. The Term for the Delivered Aircraft shall commence
on the Delivery Date, and shall terminate on ______, ____, unless earlier
terminated or extended pursuant to the terms of the Lease.
Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent
for the Delivered Aircraft throughout the Term thereof in accordance with the
terms and provisions of the Lease.
Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee
hereby confirms to the Lessor that the Delivered Aircraft has been duly marked
in accordance with Section 7.03 of the Lease and that the Lessee has accepted
the Delivered Aircraft for all purposes hereof and of the Lease, and as being
free and clear of all Liens except Lessor's Liens. Such acceptance by the
Lessee shall be without prejudice to any rights of the Lessor or the Lessee
against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of
equipment included in the Aircraft.
Section 7. Incorporation of Lease By Reference. All the provisions
of the Lease are hereby incorporated by reference in this Lease Supplement to
the same extent as if fully set forth in this Lease Supplement.
Section 8. Governing Law. THIS LEASE SUPPLEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND
IS BEING DELIVERED IN THE STATE OF NEW YORK.
Section 9. Agreement as Chattel Paper. To the extent that this Lease
Supplement constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Lease Supplement may be created through the transfer or
possession of any counterpart other than the original chattel-paper
counterpart, which shall be the counterpart containing the receipt executed by
the Indenture Trustee on its signature page.
Section 10. Counterparts. This Lease Supplement may be executed in
any number of counterparts, each of which shall be an original (except that
only the counterpart bearing the receipt executed by Indenture Trustee shall
be the original for purposes of perfecting a security interest therein as
chattel paper under the Uniform Commercial Code), but all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Lease Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written.
LESSOR: FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By: __________________________________________
Name:
Title:
LESSEE: FEDERAL EXPRESS CORPORATION
By: ___________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer and
Managing Director -
Structured Finance
Receipt of this original counterpart of the Lease Supplement is hereby
acknowledged on this __ day of _________.
Indenture Trustee: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Indenture Trustee
By: _____________________________________________
Name:
Title:
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N667FE)
Dated as of August 1, 1996
Amended and Restated as of October 15, 1996
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee,
Lessor
and
FEDERAL EXPRESS CORPORATION,
Lessee
COVERING ONE AIRBUS A300F4-605R AIRCRAFT
SERIAL NO. 771, REGISTRATION NO. N667FE
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE
AGREEMENT OF FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, HAS
BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF
STATE STREET BANK AND TRUST COMPANY, AS INDENTURE TRUSTEE UNDER THE TRUST
INDENTURE AND SECURITY AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO.
N667FE) DATED AS OF AUGUST 1, 1996, AS AMENDED AND RESTATED AS OF OCTOBER 15,
1996 FOR THE BENEFIT OF THE HOLDERS OF THE CERTIFICATES REFERRED TO IN SUCH
TRUST INDENTURE AND SECURITY AGREEMENT. THIS LEASE AGREEMENT HAS BEEN EXECUTED
IN SEVERAL COUNTERPARTS. ONLY THE CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS
THE RECEIPT THEREFOR EXECUTED BY STATE STREET BANK AND TRUST COMPANY, AS
INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF.
TABLE OF CONTENTS
Page
Initial Recitals.............................................................1
ARTICLE 1
DEFINITIONS
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Affirmation of Acceptance under the Lease................ 2
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. Intentionally Left Blank................................. 2
Section 3.02. Basic Rent............................................... 2
Section 3.03. Supplemental Rent........................................ 3
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value and
Termination Value After the Delivery Date.............. 3
Section 3.05. Minimum Basic Rent....................................... 5
Section 3.06. Payment to Indenture Trustee............................. 5
Section 3.07. Costs and Expenses....................................... 5
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01. Renewal Options.......................................... 5
Section 4.02. Purchase Options......................................... 6
Section 4.03. Appraisal Procedures..................................... 8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Disclaimer of Representations and Warranties............. 10
Section 5.02. No Modification of Other Warranties...................... 11
Section 5.03. Certain Agreements of the Lessee......................... 11
ARTICLE 6
LIENS
Section 6.01. Liens.................................................... 11
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01. Registration, Maintenance and Operation.................. 12
Section 7.02. Possession and Permitted Transfer and Sublease........... 15
Section 7.03. Insignia................................................. 19
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01. Replacement of Parts..................................... 19
Section 8.02. Pooling of Parts......................................... 20
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01. Required Alterations and Modifications................... 21
Section 9.02. Other Alterations and Modifications...................... 22
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 23
Section 10.02. Retention of Aircraft by the Lessor..................... 25
Section 10.03. Voluntary Termination as to Engines..................... 27
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01. Lessee's Election Rights................................ 27
Section 11.02. Payment of Stipulated Loss Value........................ 27
Section 11.03. Replacement of Airframe and Engines..................... 28
Section 11.04. Event of Loss with Respect to an Engine................. 31
Section 11.05. Application of Payments from the Government or Others... 33
Section 11.06. Requisition of an Airframe and the Installed Engines for
Use by Government..................................... 34
Section 11.07. Requisition for Use by Government of an Engine Not
Installed on the Airframe............................. 35
Section 11.08. Application of Payments During Existence of Certain
Defaults.............................................. 35
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01. Return of Aircraft...................................... 35
Section 12.02. Return of Engines....................................... 36
Section 12.03. Return of Manuals....................................... 36
Section 12.04. Condition of Aircraft................................... 37
Section 12.05. Intentionally Left Blank................................ 38
Section 12.06. Storage................................................. 38
Section 12.07. Special Markings........................................ 38
Section 12.08. Lessor's Option to Purchase Parts....................... 39
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance................................... 39
Section 13.02. Insurance Against Loss or Damage to Aircraft
and Engines........................................... 41
Section 13.03. Application of Insurance Proceeds....................... 43
Section 13.04. Reports................................................. 44
Section 13.05. Lessor's Insurance...................................... 45
Section 13.06. Self-Insurance.......................................... 45
ARTICLE 14
INSPECTION
Section 14.01. Right of Inspection..................................... 46
Section 14.02. No Obligation to Inspect................................ 46
ARTICLE 15
ASSIGNMENT
Section 15.01. Lessee's Right to Assign................................ 46
Section 15.02. Citizenship............................................. 47
ARTICLE 16
EVENTS OF DEFAULT
Section 16.01. Events of Default....................................... 47
ARTICLE 17
REMEDIES
Section 17.01. Remedies Upon Lessee's Default.......................... 49
Section 17.02. Cumulative Remedies..................................... 52
Section 17.03. Waiver.................................................. 52
Section 17.04. Lessor's Right to Perform for Lessee.................... 53
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01. Quiet Enjoyment......................................... 53
ARTICLE 19
FURTHER ASSURANCES
Section 19.01. Further Assurances...................................... 53
ARTICLE 20
NET LEASE
Section 20.01. Nature of Lease......................................... 54
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01. Successor Lessor........................................ 55
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section 22.01. Security for Lessor's Obligations to Holders............ 56
Section 22.02. Intentionally Left Blank................................ 56
Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 56
ARTICLE 23
SECURITY FUNDS
Section 23.01. Investment of Security Funds............................ 57
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01. Lessor's Entry Into Lease............................... 58
ARTICLE 25
NOTICES
Section 25.01. Notices................................................. 59
ARTICLE 26
MISCELLANEOUS
Section 26.01. Section Heading and Captions............................ 60
Section 26.02. References.............................................. 60
Section 26.03. APPLICABLE LAW.......................................... 60
Section 26.04. Severability............................................ 60
Section 26.05. No Oral Modification.................................... 60
Section 26.06. Agreement as Chattel Paper.............................. 60
Section 26.07. Counterparts............................................ 60
Section 26.08. Public Release of Information........................... 61
ARTICLE 27
TRUE LEASE
Section 27.01. Intent of the Parties................................... 61
Section 27.02. Section 1110 Compliance................................. 61
Section 27.03. Finance Lease........................................... 61
Schedule I Definitions
Schedule II Basic Rent
Schedule III Stipulated Loss Values
Schedule IV Termination Values
Schedule V Purchase Option Schedule
Schedule VI Description of Original Lease
Exhibit A Form of Lease Supplement
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N667FE)
LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N667FE) dated
as of August 1, 1996, as amended and restated as of October 15, 1996 (this
"Lease") between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement (as defined in Article 1 below) (the "Lessor"), and
FEDERAL EXPRESS CORPORATION, a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, all capitalized terms used herein shall have the meanings
assigned thereto as provided in Article 1 below;
WHEREAS, the Lessor and the Lessee have heretofore entered into the
Original Lease dated as of August 1, 1996 as supplemented by the Lease
Supplement;
WHEREAS, the Original Lease was recorded by the FAA and assigned a
Conveyance Number as more particularly described on Schedule VI attached
hereto;
WHEREAS, pursuant to Article 15 of the Original Participation
Agreement, the Lessee, the Original Loan Participants, the Owner Participant,
the Indenture Trustee and the Lessor desire to refinance, in full, the
Original Loan Certificates on the Refunding Date; and
WHEREAS, in connection with such refinancing, the Lessee, the Owner
Participant, the Lessor and the Indenture Trustee desire that the Original
Lease be amended and restated in its entirety as provided herein;
NOW, THEREFORE, in consideration of the mutual promises herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged by the parties, the Lessor and the Lessee agree that the
Original Lease be and the same is hereby amended and restated in its entirety
as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the capitalized terms herein
shall have the meanings given in Schedule I hereto, for all purposes of this
Lease and shall be equally applicable to both the singular and the plural
forms of the terms defined.
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Affirmation of Acceptance under the Lease. The Lessor,
having accepted delivery of the Aircraft from AVSA on the Delivery Date and
having simultaneously leased the Aircraft to the Lessee, and the Lessee,
having leased the Aircraft from the Lessor on the Delivery Date, as evidenced
by the execution by the Lessor and the Lessee of the initial Lease Supplement
(which is incorporated by reference herein), hereby affirm the terms and
conditions of the Original Lease as herein amended and restated. This Lease
shall last for the Term, at all times during which full legal title to the
Aircraft shall remain vested in the Lessor to the exclusion of the Lessee,
notwithstanding the possession and use thereof by the Lessee or any other
Person.
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. Intentionally Left Blank.
Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in
immediately available funds, on each Rent Payment Date, Basic Rent for the
Aircraft during the Basic Term, each payment being set forth on Schedule II
hereto opposite the applicable Rent Payment Date, subject to increase or
decrease as provided in Section 3.04 of this Lease. Each payment of Basic
Rent shall be made in arrears or in advance, all as stated in Schedule II
hereto. Each payment of Basic Rent designated as advance rent shall be
allocated over the six-month period beginning on the Rent Payment Date on
which such advance rent payment is scheduled to be made, and each installment
of Basic Rent that is designated as payable in arrears shall be accrued over
the six-month period ending on and including the day immediately preceding the
Rent Payment Date on which such arrears payment is scheduled to be made.
Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause
to be paid to the Lessor, or to whomever shall be entitled to it, any and all
Supplemental Rent promptly as the same shall become due. If the Lessee fails
to pay any Supplemental Rent when due, the Lessor shall have all rights,
powers and remedies provided for in this Lease, or by law or equity or
otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay
to the Person entitled thereto, on demand, as Supplemental Rent, to the extent
permitted by applicable law, an amount equal to interest at the Past Due Rate
on any part of any installment of Basic Rent not paid when due, for any period
until the same shall be paid and on any payment of Supplemental Rent not paid
when due, for the period until the same shall be paid. In addition, the
Lessee will pay to the Lessor, as Supplemental Rent, (i) an amount equal to
the aggregate amount of any Make-Whole Premium payable under the Indenture
(other than any Make-Whole Premium payable in connection with an Indenture
Event of Default that is not and does not arise out of a Lease Event of
Default) and (ii) an amount equal to the excess of interest at the Past Due
Rate on the principal of the Certificates in connection with an acceleration
of the Certificates pursuant to Section 7.02 of the Indenture following an
Indenture Event of Default attributable to an Event of Default over interest
payable by the Lessee at the Past Due Rate on Basic Rent. The expiration or
other termination of the Lessee's obligation to pay Basic Rent shall not limit
or otherwise modify the obligations of the Lessee with respect to the payment
of Supplemental Rent.
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value and
Termination Value After the Delivery Date. The percentages for Basic Rent
referred to in Schedule II hereto and the percentages for Stipulated Loss
Value and Termination Value referred to in Schedule III and Schedule IV
hereto, respectively, shall be adjusted (upward or downward) subject to the
minimum value established by Section 3.05 hereof and the definitions of
Stipulated Loss Value and Termination Value to reflect (i) any costs and
expenses paid by the Lessor or the Owner Participant pursuant to Section 10.01
of the Participation Agreement being greater or less than the Estimated
Expense Amount, (ii) any Refinancing pursuant to Section 15.01 of the
Participation Agreement, (iii) any reoptimization pursuant to Section 15.02(a)
of the Participation Agreement, (iv) payments pursuant to Section 5 of the Tax
Indemnity Agreement by an adjustment of Basic Rent or (v) the Commencement
Date being other than January 30, 1997. Each such adjustment pursuant to
clause (i), (ii), (iv) or (v) of the first sentence of this Section 3.04 shall
maintain the Owner's Economic Return (and, while maintaining such Return,
minimize the aggregate Net Present Value of Rents to the Lessee). In the
event of an adjustment pursuant to clause (iii) of the first sentence of this
Section 3.04, the Owner Participant may recalculate Basic Rent as set forth in
Schedule II hereto in order to maintain to the extent feasible the Owner's
Economic Return and, subject to the provisions of Section 15.02 of the
Participation Agreement, recalculate the schedule of principal repayments, the
Stipulated Loss Value percentages set forth in Schedule III hereto and the
Termination Value percentages set forth in Schedule IV hereto in a manner
consistent with such recalculation of Basic Rent; provided that any such
recalculations as a result of an adjustment pursuant to such clause (iii) of
the first sentence of this Section 3.04 may not (A) increase the Net Present
Value of Rents to the Lessee, (B) increase as of any date the sum of (1) the
Net Present Value of Rents to the Lessee payable through such date plus (2) the
present value of the Stipulated Loss Value or the Termination Value as of such
date, in each case discounted at the Debt Rate, beyond such net present values
prior to such adjustment, or (C) otherwise result in any adverse impact
(including tax consequences) to the Lessee for which the Owner Participant has
not agreed to indemnify the Lessee on terms reasonably acceptable to the
Lessee.
The Owner Participant shall promptly notify the Lessee and the Lessor
and the Lessee shall promptly notify the Owner Participant and the Lessor of
the need for any such adjustment pursuant to this Section 3.04. As promptly
as feasible after any such notification, the Lessor shall furnish the Lessee
with a notice setting forth the amount of any such adjustments together with
the calculations upon which the adjustments are based; provided, however, that
the Lessor and the Owner Participant shall not be required to disclose to the
Lessee in such notice any confidential or proprietary information (including
methodology or assumptions) relating to such calculations. At the request
and, subject to the next succeeding sentence, expense of the Lessee, the
accuracy of the calculation of such adjustments and the consistency of the
calculation with the calculation used to determine Basic Rent, Stipulated Loss
Values and Termination Values shall be verified first, by First Chicago Leasing
Corporation or such other financial advisor chosen by the Lessee and second,
if such adjustments are still believed to be in error and are not reconciled
with the Owner Participant within fifteen (15) Business Days, by a firm of
nationally recognized independent public accountants selected by the Lessee
and reasonably acceptable to the Owner Participant and, in order to enable
them to verify such adjustments, the Owner Participant shall make available to
such accountants (for their own confidential use and not to be disclosed to
the Lessee or any other Person and subject to the execution of a
confidentiality agreement reasonably satisfactory to the Owner Participant)
all information reasonably necessary for such verification, including the name
of the lease analysis program used by the Owner Participant to calculate such
adjustments. The Lessee will pay the reasonable costs and expenses of the
verification process under this Section 3.04 unless as a result of such
verification process by the independent public accountants Basic Rent is
adjusted and such adjustment causes the Net Present Value of Rents, to decline
by 10 or more basis points (in which event the Owner Participant shall pay the
reasonable costs and expenses of such verification process). The Lessor and
the Lessee shall execute and deliver an amendment to this Lease to reflect
each adjustment under this Section 3.04.
All adjustments under this Section 3.04 shall be in compliance with
the requirements of Revenue Procedure 75-21, 1975-1 C.B. 715 and Sections
4.02(5), 4.07(1), 4.07(2) and 4.08(1) of Revenue Procedure 75-28, 1975-1 C.B.
752 and shall be structured so as to not cause the Lease to be a "disqualified
leaseback or long-term agreement" within the meaning of Section 467 of the
Code.
Section 3.05. Minimum Basic Rent. Notwithstanding any other
provisions of the Operative Agreements to the contrary, each installment of
Basic Rent due on each Rent Payment Date and not constituting an Excepted
Payment shall be, under any and all circumstances, an amount at least
sufficient to pay in full any installment of principal of and interest on the
Certificates required to be paid pursuant to the Certificates (other than
amounts becoming due on account of the exercise of remedies pursuant to
Article 17 hereof) on such Rent Payment Date.
Section 3.06. Payment to Indenture Trustee. All Rent payable by the
Lessee to the Lessor shall be paid to the Lessor at its principal office at ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department, or as the Lessor may otherwise direct, by wire transfer of
immediately available funds in U.S. Dollars with sufficient information to
identify sources and applications of such funds no later than 10:30 a.m., New
York time on the due date of such payment; provided, however, that so long as
the Lien of the Indenture shall not have been discharged the Lessor hereby
directs, and the Lessee agrees, that all Rent (other than Excepted Payments,
which shall be paid by the Lessee directly to the Person entitled thereto) (all
without set-off or counterclaim as and to the extent provided in Article 20
hereof) shall be paid directly to the Indenture Trustee at its principal
office at Two International Place, 4th Floor, Boston, Massachusetts,
Attention: Corporate Trust Department, or as the Indenture Trustee may
otherwise direct within the United States by wire transfer of immediately
available funds in U.S. Dollars no later than 10:30 a.m., New York time, on
the due date of such payment. In any case where a scheduled Rent Payment Date
shall not be a Business Day such Rent Payment Date shall be adjourned to the
next succeeding Business Day without interest thereon for the period of such
extension (provided that payment is made on such next succeeding Business Day).
Section 3.07.Costs and Expenses. As between the Lessor and the
Lessee, all obligations under this Lease shall be done, performed and complied
with at the Lessee's cost and expense, whether or not so expressed, unless
otherwise expressly stated to the contrary.
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01.Renewal Options. (a) Election to Renew. The Lessee
shall provide the Lessor with irrevocable written notice (the "Preliminary
Notice") not more than 360 days nor less than 180 days prior to the end of the
Basic Term or any Renewal Term, as the case may be, whether it will exercise
its options either to renew this Lease pursuant to this Section 4.01 or to
purchase the Aircraft pursuant to Section 4.02(a)(B), (C) or (F) hereof, as
applicable. Provided that (i) no Event of Default shall have occurred and be
continuing at the time of renewal, (ii) this Lease has not otherwise expired
or terminated, and (iii) the Lessee shall have timely delivered the respective
Preliminary Notice, the Lessee may, by irrevocable written notice delivered
to the Lessor not less than 90 days prior to the end of the Basic Term, extend
the Term for one Fixed Renewal Term of three years commencing on the
expiration of the Basic Term. The Lessee shall pay the Fixed Renewal Rent
during the Fixed Renewal Term.
In addition, provided that (i) no Event of Default shall have
occurred and be continuing at the time of renewal, (ii) this Lease has not
otherwise expired or terminated, and (iii) the Lessee shall have timely
delivered the respective Preliminary Notice, the Lessee may, on no more than
two occasions, by irrevocable written notice delivered to the Lessor not less
than 90 days prior to the end of the Basic Term or the preceding Renewal Term,
as the case may be, elect to extend the Term for a Renewal Term or further
Renewal Term commencing on the expiration of the Basic Term or the preceding
Renewal Term and ending two years thereafter for a rent equal to the
then-current Fair Market Rental of the Aircraft. The Term may be extended
pursuant to this paragraph for an aggregate of no more than four years
following the Basic Term or the Fixed Renewal Term. The Lessee shall pay the
Fair Market Rental during any Fair Market Renewal Term.
(b) Terms and Conditions. Any such renewal shall be on the same
terms and conditions as provided herein, except that (i) rent for the Aircraft
due during any Renewal Term shall be payable semi-annually in arrears on the
dates corresponding to the Rent Payment Dates during such Renewal Term, and
(ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall
as of any Stipulated Loss Value Determination Date during the Renewal Term be
equal to the greater of the Stipulated Loss Value on the last day of the Basic
Term and the Fair Market Value of the Aircraft as of the commencement of such
Renewal Term.
Section 4.02.Purchase Options. (a) Election to Purchase. Provided
that (i) this Lease has not otherwise expired or terminated, (ii) the Lessee
shall have previously given the Preliminary Notice under Section 4.01(a)
hereof (in the case of paragraph (B) or (F) below or, if a Renewal Term is
available, paragraph (C) below) or the applicable notice for each other
paragraph below, as the case may be, and (iii) no Event of Default shall have
occurred and be continuing on the applicable Termination Date, the Lessee may:
(A) by written notice delivered to the Lessor and the Owner
Participant, not more than 180 nor less than 90 days prior to the
applicable Rent Payment Date, elect to terminate the Lease and purchase the
Aircraft on (and only on) January 30, 2015, for, at the Lessee's option,
either (1) an amount in immediately available funds equal to the greater of
the Fair Market Value or the Termination Value on such date or (2)(i) the
assumption by the Lessee, pursuant to Section 7.11 of the Participation
Agreement, of all of the obligations of the Lessor under the Indenture, the
Certificates and Section 7.04 of the Participation Agreement and (ii) the
payment to the Lessor of an amount in immediately available funds equal to
the excess of (A) the greater of the Fair Market Value or the Termination
Value on such date over (B) the unpaid principal of the Certificates plus
accrued interest as of such date. Such notice (which shall be revocable by
the Lessee upon at least 15 days' written notice prior to the applicable
Rent Payment Date) shall either direct the Lessor to prepay the
Certificates in full on such Termination Date pursuant to Section 6.02 of
the Indenture or state that the Lessee shall exercise its option to assume
the Certificates pursuant to Section 7.11 of the Participation Agreement
and Section 2.12 of the Indenture; or
(B) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of the Basic Term,
elect to purchase the Aircraft on the last day of the Basic Term for an
amount in immediately available funds equal to the Fair Market Value
thereof on such date; provided, however, that the Lessee shall have paid
all Rent due and payable under this Lease on or prior to the last day of
the Basic Term; or
(C) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of any Renewal
Term, elect to terminate the Lease and purchase the Aircraft on the last
day of such Renewal Term at a price in immediately available funds equal to
the Fair Market Value of the Aircraft on such day; provided, however, that
the Lessee shall have paid all Rent due and payable under this Lease on or
prior to the expiration of any such Renewal Term; or
(D) exercise the purchase option in this Section 4.02(a)(D) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(D) and which shall be in an amount in immediately available
funds not less than the greater of the amount specified in Schedule V
hereto and the Fair Market Value of the Aircraft; or
(E) exercise the purchase option in this Section 4.02(a)(E) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(E) and which shall be in an amount in immediately available
funds not less than the greater of the amount specified in Schedule V
hereto and the Fair Market Value of the Aircraft; or
(F) by irrevocable written notice delivered to the Lessor and the
Owner Participant not less than 90 days prior to the end of the Basic Term,
elect to purchase the Aircraft on the last day of the Basic Term for the
amount in immediately available funds specified in the Ancillary Agreement
II (the "FPO Price") which is not less than the estimate set forth in the
Appraisal of the Fair Market Value of the Aircraft at the time of exercise
of the purchase option under this Section 4.02(a)(F).
The Lessee shall give the Lessor, the Owner Participant and the
Indenture Trustee not more than 180 and not less than 90 days' prior written
notice of its election to purchase pursuant to Section 4.02(a)(D) or
4.02(a)(E) hereof. Such notice shall either direct the Lessor to prepay the
Certificates in full on such Termination Date pursuant to Section 6.02 of the
Indenture or state that the Lessee shall exercise its option to assume the
Certificates pursuant to Section 7.11 of the Participation Agreement and
Section 2.12 of the Indenture. In the event that the Lessee shall have given
notice to purchase the Aircraft under Section 4.02(a)(A), 4.02(a)(D) or
4.02(a)(E) hereof and shall fail to make payment (and, if applicable, assume
the Certificates) on the applicable Termination Date, the Lease shall continue
and the Lessee shall pay to the Owner Trustee any losses, costs and expenses
of the Owner Participant incurred in connection with such failure.
(b) Terms and Conditions. If the Lessee elects to purchase the
Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the
Lessor on the applicable Termination Date by wire transfer of immediately
available funds any Basic Rent payable on such Termination Date (to the extent
payable in arrears but not to the extent payable in advance), the applicable
purchase price together with any other amounts past due hereunder or due on
the applicable Termination Date and all other Supplemental Rent then due under
this Lease including, without limitation, the aggregate amount of any
Make-Whole Premium applicable to any Certificate and amounts due under the
Participation Agreement and the Tax Indemnity Agreement, whereupon (and upon
discharge of the Lien of the Indenture in accordance with Section 14.01
thereof) the Lessor will transfer to the Lessee, without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to the Aircraft on an "as-is, where is" basis. In
connection with such transfer, the Lessee shall prepare and the Lessor shall
execute or arrange for the execution of a ▇▇▇▇ of sale evidencing such
transfer and such other documents as the Lessee may reasonably require. In
connection with any termination or proposed termination of this Lease, the
Lessee shall pay, at the time of the applicable Termination Date, all related
reasonable costs and expenses of the Owner Participant, the Lessor and the
Indenture Trustee.
Section 4.03.Appraisal Procedures. (a) Generally. Whenever Fair
Market Rental or Fair Market Value is required to be determined under this
Lease (unless otherwise provided herein), it shall be determined by the mutual
agreement of the Lessor and the Lessee in accordance with the definitions of
such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by
the date 60 days prior to the date for exercise of the applicable option, such
amount shall be determined by independent appraisal conducted by appraisers
selected pursuant to Section 4.03(b) hereof. At any time prior to final
determination of such amount pursuant to Section 4.03(b) hereof, the Lessee
and the Lessor shall be entitled to submit to the appraisers (and shall submit
to each other any bids submitted to the appraisers) any bids from unrelated
third parties, and such bids shall be accorded the weight such appraisers deem
appropriate. The Lessor and the Lessee shall each have an opportunity to
comment on any such bids after receiving a copy thereof.
(b) Selection. If an independent appraisal is required pursuant to
this Lease, the Lessor and the Lessee shall consult for the purpose of
appointing a mutually acceptable, qualified aircraft appraiser. If they are
unable to agree on a single appraiser within ten (10) Business Days, then the
independent appraisal shall be arrived at by mutual agreement of two
nationally recognized, independent aircraft appraisers, one chosen by the
Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on
the amount of such appraisal, their appraisals shall be treated in the manner
described in Section 4.03(c) hereof with an appraisal arrived at by a third
nationally recognized, independent aircraft appraiser chosen by the mutual
consent of such two appraisers; provided, however, that if either party shall
fail to appoint an appraiser within fifteen (15) Business Days after a written
request to do so by the other party, or if such two appraisers cannot agree on
the amount of such appraisal and fail to appoint a third appraiser within
twenty (20) Business Days after the date of the appointment of the second of
such appraisers, then either party may initiate an arbitration proceeding with
the American Arbitration Association for purposes of appointing a nationally
recognized, independent aircraft appraiser.
(c) Valuation. If one appraiser is chosen, the value determined by
such appraiser shall be final and binding upon the Lessor and the Lessee. If
two appraisers are chosen, one appraiser by the Lessor and one by the Lessee,
and such appraisers agree on the value, such value shall be final and binding
upon the Lessor and the Lessee. If three appraisers shall be appointed and
the difference between the determination which is farther from the middle
determination is more than 125% of the difference between the middle
determination and the third determination, then such further determination
shall be excluded, the remaining two determinations shall be averaged, and
such average shall be final and binding upon the Lessor and the Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon the Lessor and the Lessee.
(d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03
shall be conducted in accordance with the commercial rules of the American
Arbitration Association as then in effect, as modified by this Section 4.03
and the definitions of Fair Market Value and Fair Market Rental. All expenses
of any independent appraisal shall be borne by the Lessee, except that each of
the Lessee and the Owner Participant (in the case of the Lessor) shall bear
any fees, costs and expenses of its respective attorneys in connection with
such appraisal except in the case of an Event of Default or in the case of a
revocation by the Lessee of its election to terminate the Lease under Section
4.02 hereof, in which case such expenses shall be borne by the Lessee.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01.Disclaimer of Representations and Warranties. THE LESSEE
ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A SIZE,
DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE,
(ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR
ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME AND
EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL
CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR
ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS,
AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE
INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE
EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR
IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE,
FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR
MERCHANTABILITY OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S
TITLE THERETO, (F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET
ENJOYMENT THEREOF (EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER
MATTER WHATSOEVER. IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS
DISCUSSED IN THE PRECEDING SENTENCE, AS AMONG THE LESSOR, THE INDENTURE
TRUSTEE, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE.
The provisions of this Section 5.01 have been negotiated by the Lessor and the
Lessee and, except as provided in Article 7 of the Participation Agreement,
are intended to be a complete exclusion and negation of any representations or
warranties of the Lessor, the Indenture Trustee and the Owner Participant,
express or implied, with respect to the Airframe and each Engine that may
arise pursuant to any law now or hereafter in effect, or otherwise.
Section ▇.▇▇.▇▇ Modification of Other Warranties. None of the
provisions of this Article 5 or any other provision of this Lease shall be
deemed to amend, modify or otherwise affect the representations, warranties or
other obligations (express or implied) of the Lessee, AVSA, the Manufacturer
or the Engine Manufacturer or any of their respective subcontractors or
suppliers, with respect to the Airframe, the Engines or any Parts incorporated
or installed in or attached to the Airframe or Engines, or to release the
Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their
respective subcontractors or suppliers from any such representation, warranty
or obligation. So long as an Event of Default shall not have occurred and be
continuing under this Lease and to the extent permitted under the applicable
warranty, patent indemnity, or service-life policy, (i) the Lessor shall
assign or otherwise make available to the Lessee such rights as the Lessor may
have under any warranty, patent indemnity, or service-life policy made or
given by the Manufacturer, AVSA or the Engine Manufacturer or any of their
respective subcontractors or suppliers, and any other claims against the
Manufacturer, AVSA and the Engine Manufacturer or any such subcontractor or
supplier with respect to the Aircraft, including all rights to demand, accept
and retain all rights in and to property (other than the Aircraft), data and
services of any kind which the Manufacturer, AVSA and the Engine Manufacturer
are obligated to provide and do provide pursuant to the Purchase Agreement or
the GTA with respect to the Aircraft; and (ii) all payments pursuant to any
manufacturer's or subcontractor's warranty, patent indemnity, or service-life
policy obligation shall be paid to the Lessee; provided that the Lessee shall
apply such payments to the cost of repair or correction of any condition of
the Aircraft which gave rise to such payments.
Section 5.03.Certain Agreements of the Lessee. The Lessee agrees with
the Lessor for the benefit of the Owner Participant that the Lessee shall
perform the agreements, covenants and indemnities of the Lessee set forth in
the Participation Agreement to the extent the same are applicable to the Owner
Participant, as fully and to the same extent and with the same force and
effect as if set forth in full in this Article 5.
ARTICLE 6
LIENS
Section 6.01.Liens. The Lessee will not directly or indirectly
create, incur, assume or suffer to exist, and will promptly, at its own cost
and expense, take such action as may be necessary to discharge, any Lien on or
with respect to the Lessor's Estate or this Lease or the Aircraft, the
Airframe or any Engine or any Part or title thereto or any interest therein
except:
(a) the respective rights of the Lessor and the Lessee as provided
in this Lease, the security interest and Lien of the Indenture and the
rights of the Owner Participant, the Lessor and the Indenture Trustee under
the Trust Agreement, the Indenture and the Participation Agreement;
(b) the rights of any sublessee or transferee or other Person under a
sublease, transfer, assignment or other such arrangement expressly
permitted by the terms of this Lease;
(c) Lessor's Liens and Indenture Trustee's Liens to the extent
required to be discharged by the Owner Participant, the Lessor or the
Indenture Trustee, as the case may be, in accordance with Section 7.03(b),
7.04(b) or 7.05(b) of the Participation Agreement;
(d) Liens for Taxes imposed against the Lessee either not yet due or
being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve (i) any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein, (ii) any material risk of civil
liabilities or (iii) any risk of the assertion of criminal charges against
the Lessor, the Owner Participant, the Indenture Trustee or any Holder;
(e) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising against the Lessee in the ordinary course of the
Lessee's business for amounts the payment of which is either not yet due or
is being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein; and
(f) Liens arising from judgments or awards against the Lessee with
respect to which (i) at the time an appeal or proceeding for review is
being prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for
review and then only for the period of such stay and (ii) there is not, and
such proceedings do not involve, any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any
Engine or any interest therein.
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01.Registration, Maintenance and Operation. The Lessee, at
its own cost and expense, shall:
(a) cause the Aircraft to remain at all times duly registered in
the name of the Lessor as owner, pursuant to the Transportation Code and,
subject to the proviso to Section 6.03(b) of the Participation Agreement,
to remain at all times duly registered pursuant to the Transportation Code
and at all times act in accordance with the rules and regulations of the
Aeronautics Authority or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered in
accordance with Section 6.03(b) of the Participation Agreement;
(b) maintain, inspect, service, repair, test and overhaul the
Aircraft (or cause the same to be done) so as to keep the Aircraft (and any
engine which is not an Engine but is installed on the Aircraft) in as good
operating condition as when delivered to the Lessor on the Delivery Date,
ordinary wear and tear excepted, and in any event (i) in accordance with
the applicable regulations of the Aeronautics Authority or of the
regulatory agency or body of any other jurisdiction in which the Aircraft
may then be registered pursuant to Section 6.03(b) of the Participation
Agreement and the Lessee's maintenance program approved by the Aeronautics
Authority or such agency or body, (ii) in the same manner and with the same
care used by the Lessee with respect to other A300-600 series aircraft and
CF6-80C2-A5F series engines (or other engines permitted by the terms of
this Lease to be used on the Aircraft) owned, operated or leased by the
Lessee, to the extent that the same regulations, and the Lessee's
FAA-approved maintenance program shall apply to any such aircraft and
related engines, owned or leased by the Lessee, and utilized in similar
circumstances, and without discriminating against the Aircraft, with
respect to its use, operation or maintenance in contemplation of the
expiration or termination of this Lease other than withdrawal of the
Aircraft from use and operation as is necessary to prepare the Aircraft for
return to the Lessor upon such expiration or termination, and (iii) so as
to keep the Aircraft in such condition as may be necessary to enable its
airworthiness certification to be maintained in good standing at all times
under the Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered;
(c) maintain, or cause to be maintained, all records, logs and other
materials in respect of the Aircraft required by the Aeronautics Authority,
or the applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered, all such records and logs to be
maintained in the English language (which records, logs and other materials
shall, as between the Lessor and the Lessee and all parties claiming
through the Lessee, be the property of the Lessor but shall become the
property of the Lessee upon purchase by the Lessee of the Aircraft pursuant
to the terms of this Lease or upon the occurrence of an Event of Loss and
the Lessee's compliance with Section 11.03 hereof);
(d) promptly furnish to the Lessor such information within the
Lessee's possession as may be required to enable the Lessor to file any
reports to be filed by the Lessor with any governmental authority because
of the Lessor's ownership of or the Owner Participant's interest in the
Aircraft;
(e) not maintain, service, repair, overhaul, use or operate the
Aircraft or any Engine in violation of any airworthiness certificate or
registration relating thereto, or in violation of any law or any license,
rule, regulation or order of or by any government or governmental authority
having jurisdiction over the Lessee or the Aircraft or any Engine or for
any purpose for which the Aircraft or any Engine is not designed; provided,
however, that the Lessee (or if a sublease shall then be in effect, the
sublessee thereunder) may in good faith contest the validity or application
of any such law, license, rule, regulation or order in any manner that does
not adversely affect the Lessor, its right, title or interest in the
Aircraft or any Engine or the interests of the Indenture Trustee or the
Owner Participant therein, or in any Operative Agreement (excluding any
interests the Lessee agrees are indemnified for under the Tax Indemnity
Agreement) and such contest or non-compliance will not result in any
material risk of loss, forfeiture or damage to the Aircraft or in any risk
of criminal liability to the Lessor, the Indenture Trustee or the Owner
Participant; and if any such law, license, rule, regulation or order
requires alteration of the Aircraft or any Engine, the Lessee will conform
the same therewith at its own cost and expense and will maintain the
Aircraft or any Engine in compliance with such law, license, rule,
regulation or order; and
(f) not operate or locate the Airframe or any Engine, or suffer the
Airframe or any Engine to be operated or located in any area excluded from
coverage by any insurance policy required by the terms of Article 13
hereof, unless the Lessee has obtained, prior to the operation or location
of the Airframe or any Engine in such area, indemnification from the
Government, or other insurance, against the risks and in the amounts
required by, and in compliance with, Article 13 hereof covering such area
(and naming the Lessor, or so long as this Lease is assigned to the
Indenture Trustee, the Indenture Trustee, as sole loss payee in respect of
indemnification or insurance payable in respect of casualties to the
Aircraft) or unless the Aircraft is only temporarily located in such area
as a result of an isolated occurrence attributable to a hijacking, medical
emergency, equipment malfunction, weather conditions, navigational error or
other similar unforeseen circumstances and the Lessee is using its good
faith efforts to remove the Aircraft from such area.
The Lessee may, at any time during the Term, install an engine or
engines on the Airframe and operate the Aircraft with such engine or engines
installed thereon and the Lessor shall have no right, title or interest in and
to any such engine until such time, if any, that such engine is returned to
the Lessor under Section 12.02 hereof.
Section 7.02.Possession and Permitted Transfer and Sublease. (a)
Conditions. The Lessee will not, without the prior written consent of the
Lessor, sublease or otherwise in any manner deliver, transfer or relinquish
possession of the Aircraft, the Airframe or any Engine or install any Engine,
or permit any Engine to be installed, on any airframe other than the Airframe;
provided, that, so long as (i) in the case of clause (i) below, no Payment
Default, Bankruptcy Default or Event of Default shall have occurred and be
continuing at the commencement of such sublease, (ii) the Lien of the
Indenture is not impaired thereby, (iii) all applicable governmental approvals
in connection therewith have been obtained and (iv) the Lessee shall comply
with the provisions of Article 13 hereof, the Lessee may without the prior
written consent of the Lessor:
(i) so long as the sublessee is generally meeting its material
obligations as they come due and is not subject to a proceeding or final
order under applicable bankruptcy, insolvency or reorganization laws on the
date the sublease is entered into and with 30 days' prior written notice to
the Lessor and the Owner Participant, (A) sublease the Aircraft or any
Engine to a U.S. Air Carrier, (B) after December 31, 2003 sublease the
Aircraft or any Engine to an Air Carrier which is principally based in and
domiciled in one of the countries listed on Schedule III of the
Participation Agreement, or (C) after December 31, 2003 sublease the
Aircraft or any Engine to any other Air Carrier not described in this
Section which shall be reasonably acceptable to the Lessor as evidenced by
its prior written consent; provided, that, with respect to clauses (B) and
(C) above, at the time of any such sublease the United States of America
maintains normal diplomatic relations with the country in which such Air
Carrier is principally based and domiciled and provided further that such
country shall not then be experiencing war. In the case of any sublease (x)
such sublease shall include the provisions required by Section 7.02(b)
hereof and expressly require the sublessee to operate and maintain the
Aircraft in compliance with the applicable provisions of this Lease, (y)
such sublease shall provide that such sublessee will not transfer
possession of, or any other rights to, the subleased Airframe or any Engine
to any other Person without the prior written consent of the Lessor (except
as permitted by subparagraphs (ii) through (viii) below and except that, in
the case of subparagraph (iv), possession of the Aircraft may only be
transferred at the direction of the Lessee) and (z) such sublease shall
expire not later than the expiration of the Basic Term or any Renewal Term
then in effect hereunder. Prior to any sublease to an Air Carrier
permitted under Section 7.02(a)(i)(C) above: (I) the maintenance standards
of the aeronautical authority of the country of domicile or principal
operation of the sublessee taken as a whole shall not be materially less
stringent than those of the FAA or at least comparable to those, taken as a
whole, required by the central civil aviation authority of any of the
United Kingdom, France, Canada, Japan or Germany; (II) the Lessee will
provide opinions of counsel (such counsel and the form and substance of
such opinions to be reasonably satisfactory to the Lessor) with respect to
(A) the legality, validity and enforceability of the Operative Agreements
and the sublease in such country, (B) that the laws of such country require
fair compensation by the government of such country payable in a currency
freely convertible into U.S. dollars for the loss of the use of or title to
the Aircraft in the event of a requisition of use or title by such
government, (C) the Lessor's title to the subleased equipment will be
recognized, (D) the required agreement of such foreign air carrier that its
rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such foreign air carrier under applicable
law (subject only to customary exceptions to enforceability), (E) that it
is not necessary for the Owner Participant, the Lessor or the Indenture
Trustee to register or qualify to do business in such country as a result
of the proposed sublease or in order for the Owner Participant, the Lessor
or the Indenture Trustee to enforce the terms and conditions of the
Operative Agreements, (F) there is no tort liability of the owner of an
aircraft not in possession thereof or of Persons lending money to such an
owner for the purchase of an aircraft, under the laws of such jurisdiction
other than tort liability which might reasonably have been imposed on such
owner or Persons under the laws of the United States or any state thereof
(it being understood that, in the event that such latter opinion cannot be
given in a form satisfactory to the Lessor, such opinion shall be waived if
insurance reasonably satisfactory to the Lessor is available to cover such
risk to the Owner Participant and is provided at or before the execution of
such a sublease, at the Lessee's cost and expense), (G) that there exist no
possessory rights in favor of such sublessee under the laws of such country
which would, upon bankruptcy or insolvency of the Lessee (and assuming that
at such time such sublessee is not bankrupt or insolvent) or of the
sublessee, prevent the return of the Aircraft in accordance with the terms
of this Lease and (H) all necessary governmental approvals required for the
subleased equipment, the Airframe or any Engine, as the case may be, to be
imported and, to the extent reasonably obtainable, exported from the
applicable country of domicile upon repossession of such subleased
equipment by the Lessor (and the Lessee as sublessor), shall have been
procured at the Lessee's own cost and expense by the Lessee prior to
commencement of any such sublease; (III) duties and tariffs, if applicable,
shall be paid for by the Lessee; and (IV) the Lessee shall effect or cause
to be effected at the Lessee's own cost and expense all recordings and
filings that are required, or reasonably requested by the Lessor, to
continue the Lessor's right, title and interest to the Aircraft and rights
under the Lease (and sublease) and to perfect and maintain the priority of
the Lien of the Indenture;
(ii) subject the Engines or permit any Engine to be subjected to
normal interchange or pooling agreements or arrangements, in each case
customary in the airline industry, entered into by the Lessee in the
ordinary course of its business with a vendor domiciled in the United
States or in a country with which the United States maintains normal
diplomatic relations (and which is not experiencing war) or (x) any U.S.
Air Carrier or (y) any foreign Air Carrier which is (I) organized in a
country listed on Schedule III to the Participation Agreement, (II)
organized in a country with which the United States then maintains normal
diplomatic relations, (III) is a party to the Convention on the
International Recognition of Rights in Aircraft or (IV) otherwise provides
equivalent protection to owners, lessors and mortgagees of aircraft;
provided that no transfer of the registration of or any Engine shall be
effected and that throughout the period that any Engine is subjected to
such interchange or pooling agreement or arrangement the terms of this
Lease shall be observed; and provided, further, that no such agreement or
arrangement contemplates or requires the transfer of title to or
registration of any Engine, and if the Lessor's title to any Engine shall
nonetheless 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 the Lessee shall comply with Section 11.04 of this Lease in
respect of such Engine;
(iii) deliver or permit the delivery of possession of the Airframe or
any Engine to their respective manufacturers or certified maintenance
providers for testing, service, repair, maintenance or overhaul work or for
alterations or modifications in or additions to the Airframe or any Engine
to the extent required or permitted by the terms of Article 9 hereof;
(iv) transfer or permit the transfer of possession of the Airframe
or any Engine pursuant to a contract or agreement with the Government or
pursuant to the Civil Reserve Air Fleet Program administrated pursuant to
Executive Order No. 12056, as amended (the "CRAF Program"), or any similar
or substitute programs of the Government, so long as the Lessee (or any
permitted sublessee or transferee pursuant to this Section) shall promptly
notify the Lessor upon such transfer of possession and provide the Lessor
and the Indenture Trustee with the name and address of the Contracting
Officer or representative of the Military Aircraft Command of the United
States Air Force to whom notices must be given in respect of the Aircraft;
(v) install or permit the installation of an Engine on an airframe
which is owned by the Lessee or any permitted sublessee free and clear of
all Liens, except (A) Liens of the type permitted under Section 6.01
hereof, (B) Liens which apply only to the engines (other than an Engine),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe and which do
not apply to substantially all of such airframe and (C) the rights of an
Air Carrier under normal interchange or pooling agreements which are
customary in the airline industry and do not contemplate or require the
transfer of title to such airframe or the engines installed on it;
(vi) install or permit the installation of an Engine on an airframe
leased to the Lessee or any permitted sublessee or transferee or purchased
by the Lessee subject to a conditional sale or other security agreement,
provided that (A) such lease, conditional sale or other security agreement
does not cover the Engine so installed and the Lessor shall have received
from the lessor, conditional vendor or secured party of such airframe an
agreement (which may be the lease or conditional sale or other security
agreement covering such airframe), whereby such lessor, conditional vendor
or secured party expressly agrees that neither it nor its successors or
assigns will acquire or claim any right, title or interest in any Engine
by reason of such Engine being installed on such airframe at any time, and
(B) such airframe is and remains free and clear of all Liens except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and Liens of the type permitted by
subparagraph (v) of this Section 7.02(a);
(vii) install or permit the installation of an Engine on an airframe
owned by the Lessee, leased to the Lessee or purchased by the Lessee
subject to a conditional sale or other security agreement under
circumstances where neither subparagraph (v) nor subparagraph (vi) of this
Section 7.02(a) is applicable, provided that such installation shall be
deemed an Event of Loss with respect to such Engine and the Lessee shall
comply with Section 11.04 hereof in respect of such Engine, the Lessor not
intending to waive any right, title or interest it may have to or in such
Engine under applicable law until compliance by the Lessee with such
Section 11.04; and
(viii) enter into a wet lease under which the Lessee has effective
control of the Aircraft in the ordinary course of the Lessee's business
which shall not be considered a transfer of possession hereunder, provided
that the Lessee's obligations under this Lease shall continue in full force
and effect notwithstanding any such wet lease.
(b) Rights of Transferee. Notwithstanding the provisions of Section
7.02(a) hereof, the rights of any transferee who takes possession of the
Aircraft, the Airframe or any Engine by reason of a transfer permitted by
Section 7.02(a) hereof shall be subject and subordinate to, and any sublease
or wet lease permitted by Section 7.02(a) hereof shall be made expressly
subject and subordinate to, all the terms of this Lease, including, without
limitation, the Lessor's right to repossession pursuant to Article 17 hereof
and to avoid such sublease upon such repossession, and the Lessee shall remain
primarily liable for the performance of all the terms of this Lease and the
other Operative Agreements to the same extent as if such sublease or transfer
had not occurred. Any such sublease shall include appropriate provisions for
the maintenance, inspection (as required by Section 14.01 hereof), operation,
use and insurance of the Aircraft, the Airframe and each Engine in accordance
with the provisions of this Lease and shall provide assurances reasonably
satisfactory to the Lessor that the sublessee may not further sublease any of
such equipment. The Lessee shall promptly provide the Lessor, the Owner
Participant and the Indenture Trustee a copy of any sublease and, prior to
execution and delivery of any sublease deliver to the Lessor all other
documents (including all insurance certificates evidencing compliance with
this Lease) required hereunder relating to such sublease or transfer of
possession.
(c) No Release of Lessee/Costs of Subleasing. No sublease,
interchange or pooling agreement or other relinquishment of possession
permitted under this Article 7 of any of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of the Lessee's obligations
to the Lessor, the Indenture Trustee or the Owner Participant under this
Lease, the Participation Agreement or the Tax Indemnity Agreement or
constitute a waiver of any of the Lessor's rights and remedies hereunder or
thereunder or extend beyond the end of the Term. Subject to the terms and
conditions of this Lease, the Lessee will retain the right to cure any default
by any sublessee permitted pursuant to this Section 7.02 and to terminate such
sublease upon such default. The Lessee shall pay all costs of the Owner
Participant, the Indenture Trustee and the Lessor incurred in connection with
any subleasing or proposed subleasing.
Section 7.03.Insignia. (a) Nameplate. On or prior to the Delivery
Date or as soon thereafter as possible, the Lessee agrees to affix to and
maintain in the cockpit of the Airframe, in a clearly visible location, and on
each Engine, a clearly visible metal nameplate bearing the inscription "FIRST
SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND LESSOR," and,
so long as such Airframe or Engines shall be subject to the Lien of the
Indenture, the additional inscription "STATE STREET BANK AND TRUST COMPANY, AS
INDENTURE TRUSTEE, MORTGAGEE" (such nameplate to be replaced, if necessary,
from time to time, with a nameplate reflecting the name of any successor
Lessor or successor Indenture Trustee, in each case as permitted by the
Operative Agreements).
(b) Lessee's Marks. Except as provided in Section 7.03(a) hereof,
the 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 during the Term, the Lessee may cause the Aircraft
to be lettered "Federal Express Corporation" or may letter, paint or ▇▇▇▇ it
in some other appropriate manner for convenience of identification of the
Lessee's interest or the interest of any permitted sublessee (including but
not limited to the Lessee's or any permitted sublessee's customary colors and
insignia) and to bear insignia plates or other markings identifying the
supplier or manufacturer of the Airframe or the Engines or any Parts of either.
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01.Replacement of Parts. (a) Generally. The Lessee, at
its own cost and expense, will replace or cause to be replaced as promptly as
practicable all Parts which may from time to time be incorporated or installed
in or attached to the Airframe or any Engine and which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason, except as
otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee
may, at its own cost and expense, remove or cause to be removed 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 the
Lessee, except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at
its own cost and expense, replace such Parts as promptly as practicable. All
replacement parts shall be free and clear of Liens (except for pooling
arrangements to the extent permitted by Section 8.02 hereof and Liens
permitted under Section 6.01 hereof, other than clauses (d) and (f) thereof)
and shall be in at least as good operating condition as, and shall have a
value and utility at least equal to, the Parts replaced, and in any event not
less than the condition and repair required to be maintained by the provisions
of this Lease.
(b) Title. All Parts at any time removed from the Airframe or any
Engine shall remain the property of the Lessor until 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 in Section 8.01(a) hereof. Immediately upon any replacement
part (other than, to the extent permitted by Section 8.02 hereof, a
replacement part subject to a pooling arrangement) becoming incorporated or
installed in or attached to the Airframe or any Engine, and without further
act:
(i) title to the replaced Part shall vest in the Lessee, free and
clear of all rights of the Lessor, and such replaced Part shall no longer
be deemed a Part under this Lease;
(ii) title to such replacement part shall vest in the Lessor free
and clear of all Liens except for Liens permitted by Section 6.01 hereof
(other than clauses (d) and (f) thereof) and shall thereupon be and become
a Part; and
(iii) such replacement part shall become subject to this Lease and to
the Lien of the Indenture, and shall be deemed part of the Airframe or such
Engine for all purposes to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine.
Section 8.02.Pooling of Parts. Any Part removed from the Airframe or
any Engine as permitted in Section 8.01(a) hereof may be subjected by the
Lessee to any normal pooling arrangement customary in the U.S. airline
industry and entered into with vendors and other Air Carriers in the ordinary
course of the Lessee's business, provided that the part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 8 hereof, 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 Section 8.01(a) hereof may be owned by another Air Carrier
subject to such normal pooling arrangement, provided that the Lessee, at its
own cost and expense and as promptly as possible, either:
(a) causes title to such replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof by the Lessee acquiring title to
such replacement part for the benefit of, and transferring such title to,
the Lessor free and clear of all Liens (other than Liens permitted under
Section 6.01 hereof (other than clauses (d) and (f) thereof)); or
(b) replaces such replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement part
owned by the Lessee free and clear of all Liens (other than Liens permitted
under Section 6.01 hereof (other than clauses (d) and (f) thereof)) and by
causing title to such further replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof.
All such replacement parts and further replacement parts shall meet
the standards set forth in the last sentence of Section 8.01(a) hereof.
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01.Required Alterations and Modifications. The Lessee, at
its own cost and expense, shall make or cause to be made such alterations and
modifications in and additions to the Airframe and each Engine as may be
required from time to time to meet the applicable requirements of the
Aeronautics Authority or any other governmental authority with jurisdiction
over the Lessee's operations and aircraft; provided, however, that the Lessee
or sublessee, as the case may be, may in good faith contest the validity or
application of any such requirements in any reasonable manner that does not
involve any material risk of civil liabilities (unless indemnified by the
Lessee) or any risk of criminal penalties being imposed on or against the
Indenture Trustee, the Owner Participant or the Lessor, that does not involve
any material risk or danger of loss, forfeiture or sale of the Aircraft or any
Engine and that does not adversely affect the Lessor, its title or interest in
the Aircraft or any Engine, the first and prior perfected Lien and security
interest of the Indenture, or the interests of the Indenture Trustee or the
Owner Participant in the Airframe or any Engine, or in any Operative Agreement
(excluding any interests the Lessee agrees are indemnified for under the Tax
Indemnity Agreement). All such alterations, modifications or additions shall
be made on or before the date mandated therefor, taking into account
authorized postponements resulting from a contest or otherwise and shall be
made at such time and in such a manner so as not to discriminate against the
Aircraft whether by reason of its leased status or otherwise.
Section 9.02.Other Alterations and Modifications. (a) Generally.
The Lessee, at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine
as the Lessee may deem desirable in the proper conduct of its business,
including, without limitation, removal of Obsolete Parts in its usual course
of maintenance, provided that no such alteration, modification, addition or
removal, individually or in the aggregate, shall create any adverse tax
consequences for the Owner Participant not otherwise indemnified for, diminish
the value, remaining useful life, or utility of the Airframe or the value or
utility of any Engine or impair its condition or airworthiness below its
value, remaining useful life (in the case of the Airframe only), utility,
condition and state of airworthiness immediately prior to such alteration,
modification, addition or removal, assuming that the Airframe or such Engine
was then in the condition and state of airworthiness required to be maintained
by the terms of this Lease, or cause the Airframe or any Engine to become
"limited use property" within the meaning of Revenue Procedure 76-30, 1976-2
C.B. 647, except that the value (but not the remaining useful life, utility,
condition or airworthiness) of the Aircraft may be reduced by the value, if
any, of any such Obsolete Parts which shall have been removed; provided that
in no event shall the aggregate value of all such Obsolete Parts which shall
have been so removed and not replaced exceed $500,000.
(b) Title to Installed Parts. Title to each part incorporated or
installed in or attached or added to the Airframe or any Engine as the result
of any alteration, modification, removal or addition made pursuant to Section
9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become
subject to this Lease; provided, however, that the Lessee may remove any such
Part at any time during the Term if:
(i) such Part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or
attached or added to the Airframe or such Engine on the Delivery Date or
any Part in replacement of, or substitution for, any such Part;
(ii) such Part is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms of
Article 7 hereof or the first sentence of Section 9.01 hereof; and
(iii) such Part can be removed from the Airframe or such Engine
without (A) causing material damage to the Airframe or such Engine (it
being understood that the Lessee shall repair any damage caused by a
permitted removal) or diminishing or impairing the value, utility,
condition or airworthiness or remaining useful life of the Airframe
required to be maintained by the terms of this Lease or (B) diminishing the
value, utility or remaining useful life (in the case of the Airframe) or
the value and utility (in the case of such Engine) which the Airframe or
such Engine would have had at such time had such alteration, modification,
removal or addition not occurred, assuming the Airframe or such Engine was
then in the condition required to be maintained by the terms of this Lease.
(c) Title to Removed Parts. Upon the removal by the Lessee of any
such Part as provided in subsection (b) above, title thereto shall, without
further act, vest in the Lessee and such Part shall no longer be deemed a
Part. Any Part not removed by the Lessee as above provided prior to the
return of the Aircraft to the Lessor hereunder shall remain the property of
the Lessor and subject to this Lease.
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus.
(a) Option to Terminate. So long as no Event of Default shall have occurred
and be continuing, the Lessee shall have the right, at its option, on any
Termination Date, on no more than 180 days' and at least 90 days' irrevocable
(except as provided herein) prior written notice (which notice shall state the
Proposed Termination Date) to the Lessor and the Owner Participant to
terminate this Lease as of a Termination Date if the Aircraft shall have
become obsolete or surplus to the operations of the Lessee; provided that the
Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner
Participant a certificate of the Lessee's President, Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant
Treasurer stating the determination of the Lessee that the Aircraft is
obsolete or surplus to its needs. Unless the Lessor has elected to retain the
Aircraft as herein provided, the Lessee shall have the right on one occasion
to revoke its notice of termination no later than the Business Day prior to
the date 15 days prior to the Proposed Termination Date whereupon this Lease
shall continue in full force and effect.
(b) Sale Procedure. During the period from the giving of notice
pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the
Lessee, as non-exclusive agent for the Lessor, shall use its reasonable
efforts to obtain bids for the cash purchase on the Proposed Termination Date
(or such earlier date as shall be consented to in writing by the Lessor) of
the Aircraft. On the Proposed Termination Date, the Engines shall be
installed on the Airframe (provided that the Airframe may be sold with engines
meeting the requirements set forth herein for Replacement Engines in lieu of
the Engines so long as the aggregate number of Engines and Replacement Engines
being sold with the Airframe equals two). The Lessor may, if it desires to do
so, seek to obtain such bids. The Owner Participant shall not inspect any bids
received by the Lessee with respect to the Aircraft, unless the Owner
Participant has given to the Lessee binding and irrevocable notice that
neither the Owner Participant nor any of its Affiliates nor any Person acting
for the Owner Participant or such Affiliate will submit a bid for the purchase
of the Aircraft and if such notice has been given, the Lessee will provide the
Lessor with copies of bids received by the Lessee. No bid may be submitted by
the Lessee or any Person affiliated with the Lessee (or with whom or which
there is any arrangement or understanding as to the subsequent use of the
Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting
on behalf of the Lessee. The Lessee may reject any bid which is less than the
sum of the applicable Termination Value, the aggregate amount of any
Make-Whole Premium and all other expenses incurred by the Lessor, the Owner
Participant and the Indenture Trustee in connection with the sale. Subject to
the provisions of Section 10.02 hereof, on the Proposed Termination Date or
such earlier date of sale as shall be consented to in writing by the Lessor,
the Lessee shall deliver the Airframe which shall have the Engines installed
on it (provided that the Airframe may be delivered with installed engines
meeting the requirements set forth herein for Replacement Engines in lieu of
the Engines so long as the aggregate number of Engines and Replacement Engines
being delivered with the Airframe equals two and the Lessee shall comply with
the provisions of Section 11.04 hereof as if an Event of Loss occurred with
regard to the Engines) to the bidder which shall have submitted the highest
cash bid (whether certified to the Lessor by the Lessee or directly received
by the Lessor and certified to the Lessee) in the same manner as if delivery
were made to the Lessor pursuant to Article 12 hereof, at a location specified
by such bidder, and shall duly transfer to the Lessor title to any such
engines not owned by the Lessor, and the Lessor shall, upon payment in full to
the Lessor of the bid price and all amounts due and owing pursuant to Section
10.01(c) hereof by wire transfer of immediately available funds and upon
discharge of the Lien of the Indenture in accordance with Article 7 thereof,
sell the Airframe and Engines or engines to such bidder without recourse or
warranty (except as to the absence of Lessor's Liens).
(c) Payments to the Lessor. The total selling price realized at a
sale pursuant to Section 10.01(b) hereof net of all expenses of the sale
(including commissions and any sales or transfer taxes) (the "Net Sales
Price") shall be retained by the Lessor (or the Indenture Trustee as long as
the Indenture is in force) and, in addition, on or before the Proposed
Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee
as long as the Indenture is in force), by wire transfer of immediately
available funds, the sum of:
(i) the excess, if any, of the Termination Value for the Aircraft
computed as of the Proposed Termination Date over the Net Sales Price; plus
(ii)the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date to the extent payable in arrears but not to
the extent payable in advance; plus
(iii)all other amounts then due and payable by the Lessee (including,
without limitation, the aggregate amount of any Make-Whole Premium) under
this Lease and any other Operative Agreement.
(d) Transfer of Uninstalled Engines. Upon payment of the amounts
described in Section 10.01(c) hereof and upon transfer to the Lessor of title
to engines which have been returned in lieu of Engines as provided in Section
10.01(b) hereof, and upon payment of all other amounts then due under this
Lease, the Lessor will transfer to the Lessee, without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to any Engines which were replaced with engines pursuant
to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as
the Lessor shall have received from the Indenture Trustee releasing such
Engines from the Lien of the Indenture.
(e) Limitation on the Lessor's Duties. The Lessor shall be under no
duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids
or otherwise to take any action in connection with any such sale other than to
transfer to the purchaser named in the highest cash bid (determined as
described in Section 10.01(b) above) as referred to above (or to such
purchaser and to the Lessee, as the case may be), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to the Aircraft, against receipt by the Lessor of the
payments provided for in Section 10.01(c) hereof.
(f) Termination of the Lessee's Obligations. Upon the sale of the
Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with
the further provisions of this Article 10, the obligation of the Lessee to pay
Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date
occurring after the Proposed Termination Date and the Term shall end effective
as of the Proposed Termination Date. If no sale shall have occurred on or
before the Proposed Termination Date, this Lease shall continue in full force
and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed
that the Lessee has rescinded its notice of termination, and the Lessee shall
pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner
Participant in connection with the proposed sale.
Section 10.02.Retention of Aircraft by the Lessor. (a) Generally.
Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section
10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's
notice of termination given in accordance with Section 10.01(a) hereof, by
giving the Lessee and the Indenture Trustee written irrevocable notice of such
election not less than sixty (60) days prior to the Proposed Termination Date.
If the Lessor so elects, the Lessee shall pay to the Lessor on the Proposed
Termination Date, by wire transfer of immediately available funds the sum of:
(i) the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date to the extent payable in arrears but not to
the extent payable in advance; plus
(ii)all other amounts then due and payable by the Lessee under this
Lease and any other Operative Agreement, including the aggregate amount of
any Make- Whole Premium, on or prior to the Proposed Termination Date.
(b) Payment of the Certificates. It shall be an absolute condition
precedent to the Lessor's right to retain the Aircraft and to the termination
of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to
the extent set forth in Section 10.02(a) hereof) shall have paid to the
Holders and such Holders shall have received the entire outstanding principal
amount of, the aggregate amount of any Make-Whole Premium and accrued interest
on the Certificates on the Proposed Termination Date and all other sums due
and owing to the Indenture Trustee and the Holders on or prior to the Proposed
Termination Date under this Lease, the Indenture or any other Operative
Agreement.
(c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor
elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall
deliver the Airframe and the Engines (provided that the Airframe may be
delivered with engines meeting the requirements set forth herein for
Replacement Engines in lieu of the Engines so long as the aggregate number of
Engines and engines being delivered with the Airframe equals two and provided
that the other requirements of Section 11.04 hereof are met as if an Event of
Loss has occurred with regard to the Engines) to the Lessor in the same manner
as if delivery were made to the Lessor pursuant to Article 12 hereof, and shall
duly transfer to the Lessor right, title and interest to any such engines not
owned by the Lessor, all in accordance with Article 12 hereof. Upon such
delivery of the Airframe and Engines or engines to the Lessor and payment by
the Lessee of any amounts required to be paid by the Lessee pursuant to
Section 10.02(a) hereof, the Lessor will transfer to the Lessee, without
recourse or warranty (except as to the absence of Lessor's Liens), all of the
Lessor's right, title and interest in and to any Engines which were replaced
by engines pursuant to this Section 10.02(c), and shall deliver to the Lessee
such instrument as the Lessor shall have received from the Indenture Trustee
releasing such Engines from the Lien of the Indenture.
(d) Termination of the Lessee's Obligations. Upon compliance by the
Lessor and the Lessee with the provisions of this Section 10.02 and upon
compliance by the Lessee with the further provisions of this Article 10, the
obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall
cease for any Rent Payment Date occurring after the Proposed Termination Date
and the Term shall end effective as of the Termination Date.
Section 10.03.Voluntary Termination as to Engines. The Lessee shall
have the right at its option and at any time, on at least thirty (30) days'
prior written notice to the Lessor, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe, provided that
prior to the date of such termination, the Lessee shall comply with the terms
of Section 11.04 hereof to the same extent as if an Event of Loss had occurred
with respect to such Engine.
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01.Lessee's Election Rights. The Lessee shall notify the
Lessor, the Indenture Trustee and the Owner Participant as soon as practicable
but in no event more than 10 Business Days following the occurrence of an
event which constitutes, or would with the passage of time constitute, an
Event of Loss with respect to the Airframe or with respect to the Airframe and
the Engines or engines then installed on the Airframe. By written notice to
the Lessor, the Indenture Trustee and the Owner Participant delivered within
60 days of the occurrence of any Event of Loss, the Lessee shall have the
right to elect the alternative set forth in Section 11.02 hereof or the
alternative set forth in Section 11.03 hereof. The Lessee's failure to make
such election within said 60-day period shall be deemed to be an election of
the alternative set forth in Section 11.02 hereof.
Section 11.02.Payment of Stipulated Loss Value. (a) The Lessee
shall, if it has so elected or is deemed to have so elected under Section
11.01 hereof, pay to the Lessor, by wire transfer of immediately available
funds on the earlier of (i) the fifteenth day following receipt in full of
insurance proceeds or requisition proceeds, described in Section 11.05 hereof,
in connection with such Event of Loss and (ii) the 120th day after the
occurrence of such Event of Loss (the earlier of such dates being referred to
herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value
for the Aircraft, determined as of the Stipulated Loss Value Determination
Date next succeeding the Loss Payment Date (or, if the Loss Payment Date
occurs on a Stipulated Loss Value Determination Date, determined as of such
Stipulated Loss Value Determination Date), plus (B) any and all Basic Rent due
and payable on the relevant Stipulated Loss Value Determination Date to the
extent payable in arrears but not to the extent payable in advance, plus (C)
any and all Supplemental Rent due and payable on or prior to such Loss Payment
Date, plus (D) all other amounts (including Basic Rent due and payable with
respect to Rent Payment Dates occurring prior to such Stipulated Loss Value
Determination Date and unpaid) due and payable by the Lessee hereunder or
owing by the Lessee or the Owner Trustee to the Indenture Trustee or the
Holders under the Indenture and the other Operative Agreements, plus (E) any
reasonable out-of-pocket expenses incurred in connection with such Event of
Loss and the related prepayment of the Certificates by the Lessor, the Owner
Participant and the Indenture Trustee; provided that in no event shall the
Holders not be paid in full.
(b) Termination of Lease; Title Transfer. Upon payment in full of
the amounts due pursuant to Section 11.02(a) hereof, the obligation of the
Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the
payment of such amounts shall terminate and the Term shall end. Further, upon
such payment, the Lessor will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens), all of the Lessor's
right, title and interest, if any, in and to the Airframe, Engines and engines
with respect to which such Event of Loss occurred, as well as all of the
Lessor's right, title and interest in and to any Engines constituting part of
the Aircraft but not installed on the Airframe when such Event of Loss
occurred, and will deliver to the Lessee such instrument as the Lessor shall
have received from the Indenture Trustee, releasing the Aircraft from the Lien
of the Indenture.
Section 11.03.Replacement of Airframe and Engines. (a) Generally.
So long as no Payment Default, Bankruptcy Default or Event of Default shall
have occurred and be continuing, and subject to Section 11.01 hereof and
provided that the Lessee shall have reimbursed the reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable counsel fees and
disbursements) of the Lessor, the Owner Participant, the Indenture Trustee and
the Holders (to the extent of the reasonable fees and expenses of one legal
counsel in each relevant jurisdiction representing all of the Holders) in
connection with the matters contemplated by this Section 11.03, if the Lessee
has elected to replace the Airframe and Engines suffering
an Event of Loss pursuant to this Section 11.03, the Lessee shall cause to be
duly conveyed to the Lessor within one hundred twenty (120) days after the
occurrence of such Event of Loss, as replacement for the Airframe and Engines
with respect to which such Event of Loss has occurred, good and marketable
title to an Airbus A300-600 series airframe manufactured no earlier than
January 1, 1996 (the "Replacement Airframe") and good and marketable title to
a number of Replacement Engines equal to the number of Engines with respect to
which an Event of Loss has occurred, provided that following compliance with
all other terms of this Section 11.03 each Engine shall be of identical make
and model and, in the case of such Replacement Airframe and each such
Replacement Engine, owned by the Lessee free and clear of all Liens not
excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an
airworthy aircraft by the Aeronautics Authority, and having in the case of the
Replacement Airframe a value, remaining useful life and utility, and in the
case of the Replacement Engines a value and utility, at least equal to, and
being in as good operating condition as, the Airframe and Engines with respect
to which such Event of Loss occurred, assuming that the Airframe and Engines
were then in the condition and state of airworthiness required to be
maintained by the terms of this Lease immediately prior to the occurrence of
such Event of Loss. In such case and as a condition to such substitution the
Lessee, at its own cost and expense, will also promptly:
(i) furnish the Indenture Trustee with originals of, and the Lessor
with copies of, full warranty bills of sale, in form and substance
satisfactory to the Lessor and the Indenture Trustee, with respect to such
Replacement Airframe and Replacement Engines together with an assignment in
form and substance satisfactory to the Lessor and the Indenture Trustee of
any and all manufacturer's warranties applicable thereto and a consent
reasonably satisfactory to the Lessor and the Indenture Trustee from such
manufacturer or manufacturers to such assignment;
(ii)cause such Replacement Airframe and Replacement Engines to be duly
registered in the name of the Lessor pursuant to the Transportation Code or
the applicable laws of any other jurisdiction in which the Aircraft may
then be registered in accordance with Section 6.03(b) of the Participation
Agreement;
(iii)cause a Lease Supplement with respect to such Replacement
Airframe and Replacement Engines to be duly executed by the Lessee and
recorded pursuant to the Transportation Code, or the applicable laws, rules
and regulations of any other jurisdiction in which the Aircraft may then be
registered as permitted by Section 6.03(b) of the Participation Agreement;
(iv)furnish the Lessor, the Indenture Trustee and the Owner
Participant with an appraisal or other report of a nationally recognized
aircraft appraiser based on an inspection of such Replacement Airframe and
Replacement Engines reasonably satisfactory to the Indenture Trustee and
the Owner Participant certifying that such Replacement Airframe has a
value, remaining useful life and utility, and such Replacement Engines have
a utility and value, at least equal to, and are in as good operating
condition as, the Airframe and Engines replaced, assuming such Airframe and
Engines were in the condition and repair required by the terms of this Lease
immediately prior to the occurrence of such Event of Loss;
(v) furnish the Lessor, the Indenture Trustee and the Owner
Participant with such evidence as the Lessor or the Indenture Trustee may
reasonably request of compliance with the insurance provisions of Article
13 hereof with respect to such Replacement Airframe and Replacement Engines;
(vi)provide the Owner Participant and the Lessor with (A) an opinion
of counsel selected by the Owner Participant and reasonably acceptable to
the Lessee (which opinion shall be reasonably satisfactory in form and
substance to the Owner Participant and the Lessor) that it will suffer no
adverse tax consequence not otherwise indemnified for to its reasonable
satisfaction as of the Delivery Date as a result of such substitution or
(B) an indemnity reasonably acceptable to the Lessor and the Owner
Participant against such consequences;
(vii)comply with the provisions of Section 9.08 of the Indenture;
(viii) cause an Indenture and Security Agreement Supplement with
respect to such Replacement Airframe and Replacement Engines to be duly
executed by the Lessor and the Indenture Trustee and recorded pursuant to
the Transportation Code, or the applicable laws, rules and regulations of
any other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement in order that
the Lien of the Indenture shall constitute a first priority, duly perfected
Lien and security interest on and in respect of such Replacement Airframe
and Replacement Engines;
(ix)take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as a secured party with the
Secretary of State of Utah and the filing of a notice with the Secretary of
State of Tennessee, as the Lessor or the Indenture Trustee may reasonably
request in order that such Replacement Airframe and Replacement Engines
shall be duly and properly titled in the Lessor, leased under this Lease
and subjected to the Lien of the Indenture to the same extent as the
replaced Airframe and Engines;
(x) furnish the Indenture Trustee with an opinion (reasonably
satisfactory in form and substance to the Lessor, the Owner Participant and
the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's
General Counsel) addressed to the Indenture Trustee and the Owner
Participant to the effect that (A) the Lessor has good title to such
Replacement Airframe and Replacement Engines, and (B) such Replacement
Airframe and Replacement Engines have been validly subjected to the Lien of
the Indenture (with the effect and result that the Indenture constitutes a
first priority duly perfected security interest and Lien on such
Replacement Airframe and Replacement Engines); and
(xi)cause to be delivered to the Lessor, the Owner Participant and the
Indenture Trustee an opinion of counsel to the Lessee addressed to the
Lessor, the Owner Participant and the Indenture Trustee as to the due
registration of the Aircraft and the due recordation of the requisite
documents or instruments and the validity and perfection of the Lien in
such Replacement Airframe and Replacement Engines.
(b) Title to Replaced Equipment. Upon compliance by the Lessee with
the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest, if any, in and to the Airframe and Engines with respect to which
such Event of Loss occurred. In connection with such transfer, the Lessee
shall prepare and the Lessor shall execute or forward to the Indenture Trustee
for execution, as the case may be, all in recordable form, a ▇▇▇▇ of sale
evidencing such transfer, a release of the Airframe and Engines with respect to
which such Event of Loss occurred from the Indenture and such other documents
as the Lessee reasonably requests, all at the Lessee's sole cost and expense.
Any Engine constituting part of the Aircraft, but not installed on the
Airframe when such Event of Loss occurred, shall continue to be property of
the Lessor and leased under this Lease as part of the same equipment as the
Replacement Airframe and Replacement Engines.
(c) Definitions. Each Replacement Airframe and Replacement Engine
shall be deemed part of the property leased under this Lease, each such
Replacement Airframe shall be deemed an "Airframe," each such Replacement
Engine shall be deemed an "Engine" and each such Replacement Airframe and
Replacement Engine shall be deemed part of the same Aircraft as was the
Airframe or Engine replaced.
(d) Rent Adjustments. An Event of Loss covered by this Section
11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or
Termination Values except as may be provided pursuant to the Tax Indemnity
Agreement and the Participation Agreement.
(e) Time Limitations. If the Lessee has elected to proceed under
this Section 11.03 but has not fully performed its obligations under this
Section 11.03 within 120 days of the occurrence of the applicable Event of
Loss, in the event that any amounts held by the Lessor (or, so long as the
Indenture shall be in effect, the Indenture Trustee) in respect of such Event
of Loss are less than the Stipulated Loss Value thereof, the Lessee will
deposit with the Lessor or the Indenture Trustee, as the case may be, the
amount of any deficiency as security on such 120th day. If the Lessee has
elected to proceed under this Section 11.03 but has not fully performed its
obligations under this Section 11.03 within 180 days of the occurrence of such
Event of Loss, the Lessee shall be deemed to have elected to proceed under
Section 11.02 hereof and shall immediately perform its obligations thereunder,
and the Indenture Trustee, or the Lessor if the Indenture shall have been
discharged, shall apply the amounts held by it pursuant to the preceding
sentence as a credit against such obligations.
Section 11.04.Event of Loss with Respect to an Engine. (a)
Generally. 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, the Lessee shall give the Lessor and the Indenture
Trustee prompt written notice thereof and shall, as soon as practicable but in
any event within sixty (60) days after the occurrence of such Event of Loss,
duly convey or cause to be conveyed to the Lessor, a Replacement Engine for
the Engine with respect to which such Event of Loss occurred, good and
marketable title to a Replacement Engine, free and clear of all Liens not
excepted in Sections 6.01(a), (b) (provided that if there are any Liens of the
type described in Section 6.01(b) hereof, such Liens are subordinate to the
Lien of the Indenture), (c) and (e) hereof and having a value and utility at
least equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was of the
value and utility and in the condition and repair required by the terms of
this Lease immediately prior to the occurrence of such Event of Loss, provided
that after any replacement, each Engine shall be of identical make and model.
The standards set forth in this Section with respect to Replacement Engines
shall apply upon any replacement or substitution of an Engine with a
Replacement Engine pursuant to any other provision of this Lease.
(b) Conditions Precedent. Prior to or at the time of any conveyance
of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost
and expense will:
(i) furnish the Indenture Trustee with an original of, and the Lessor
with a copy of, a full warranty ▇▇▇▇ of sale, in form and substance
satisfactory to the Lessor, with respect to such Replacement Engine
together with an assignment in form and substance satisfactory to the
Lessor of any and all manufacturer's warranties applicable thereto and a
consent reasonably satisfactory to the Lessor and the Indenture Trustee
from such manufacturer to such assignment;
(ii)cause a Lease Supplement covering such Replacement Engine to be
duly executed by the Lessee and filed for recordation pursuant to the
Transportation Code, or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement and, if the
Engine being replaced was registered under the applicable laws of the
jurisdiction in which the Aircraft is then registered, the Replacement
Engine shall be registered in the same fashion;
(iii)furnish the Lessor and the Indenture Trustee with a certificate
of a nationally recognized aircraft appraiser reasonably satisfactory to
the Lessor certifying that such Replacement Engine has a value and utility
at least equal to, and is in as good operating condition as, the Engine
replaced, assuming such Engine was in at least the condition and repair
required by the terms of this Lease immediately prior to the occurrence of
such Event of Loss;
(iv)furnish the Lessor with such evidence of compliance with the
insurance provisions of Article 13 hereof with respect to such Replacement
Engine as the Lessor or the Indenture Trustee may reasonably request;
(v) comply with the provisions of Section 9.08 of the Indenture;
(vi)cause an Indenture and Security Agreement Supplement with respect
to such Replacement Engine to be duly executed by the Lessor and the
Indenture Trustee and recorded pursuant to the Transportation Code, or the
applicable laws, rules and regulations of any other jurisdiction in which
the Aircraft may be registered as permitted by Section 6.03(b) of the
Participation Agreement in order that the Indenture shall constitute a
first priority duly perfected Lien and security interest on and in respect
of such Replacement Engine;
(vii)take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as Secured Party with the Secretary
of State of Utah and a notice filing with the Secretary of State of
Tennessee, as the Lessor or the Indenture Trustee may reasonably request in
order that such Replacement Engine be duly and properly titled in the
Lessor, leased under this Lease and subjected to the Lien of the Indenture
to the same extent as the replaced Engine;
(viii) furnish the Lessor, the Owner Participant and the Indenture
Trustee with an opinion (reasonably satisfactory in form and substance to
the Lessor, the Owner Participant and the Indenture Trustee) of counsel to
the Lessee (which may be the Lessee's General Counsel) addressed to the
Indenture Trustee and the Owner Participant to the effect that (A) the
Lessor has good title to such Replacement Engine, and (B) such Replacement
Engine has been validly subjected to the Lien of the Indenture (with the
effect and result that the Indenture constitutes a first priority duly
perfected security interest and Lien on such Replacement Engine); and
(ix)take such other action as the Indenture Trustee may reasonably
request in order that such Replacement Engine be duly and properly
subjected to the Lien of the Indenture to the same extent as the replaced
Engine.
(c) Title Transfer. Upon compliance by the Lessee with the terms of
Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest, if any, in and to the Engine with respect to which such Event of
Loss occurred. In connection with such transfer, the Lessee shall prepare and
the Lessor shall execute or forward to the Indenture Trustee for execution, as
the case may be, all in recordable form, a ▇▇▇▇ of sale evidencing such
transfer, a release of the Engine with respect to which such Event of Loss
occurred from the Indenture and such other documents as the Lessee reasonably
requests, all at the Lessee's sole cost and expense. Each Replacement Engine
shall, after such conveyance, be deemed part of the property leased under this
Lease. An Event of Loss covered by this Section 11.04 shall not result in any
change in Basic Rent, Stipulated Loss Values or Termination Values, but may
result in payments to be made pursuant to the Tax Indemnity Agreement and the
Participation Agreement.
Section 11.05.Application of Payments from the Government or Others.
(a) Generally. Any payments (other than insurance proceeds the application
of which is provided for in Section 13.03 hereof) received at any time by the
Lessor or by the Lessee from any governmental authority or any other party,
foreign or domestic, with respect to an Event of Loss resulting from the
condemnation, confiscation, theft or seizure of, or requisition of title to or
use of, the Airframe or any Engine will be applied, as appropriate, in
accordance with Section 11.05(b) or Section 11.05(c) hereof.
(b) Payments of Stipulated Loss Value. If the payments described in
Section 11.05(a) hereof are received with respect to the Airframe or with
respect to the Airframe and Engines or engines then installed on the Airframe
and the Lessee has elected the alternative set forth in Section 11.02 hereof,
so much of such payments as shall not exceed the amount required to be paid by
the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or,
if the Lien of the Indenture has not been discharged, the Indenture Trustee)
in reduction of the Lessee's obligations under Section 11.02 hereof if not
already paid by the Lessee, or, if such obligations have already been
discharged in full by the Lessee, such payments shall be applied to reimburse
the Lessee for its payment of such Stipulated Loss Value and, if and to the
extent specifically included in such payment, to pay to the Lessee interest on
such amount of Stipulated Loss Value at the rate included in such payment if
any, or otherwise at the applicable Debt Rate, for the period from the date of
payment by the Lessee of the Stipulated Loss Value to the date of
reimbursement of the Lessee under this Section 11.05(b). The excess, if any,
remaining after such application shall be divided between the Lessor and the
Lessee as their respective interests may appear.
(c) Payment if the Lessee Elects Replacement. If the payments
described in Section 11.05(a) hereof are received with respect to the Airframe
or with respect to the Airframe and the Engines or engines then installed on
the Airframe and the Lessee has elected the alternative set forth in Section
11.03 hereof, or if such payments are received with respect to an Engine not
then installed on the Airframe under the circumstances contemplated by Section
11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be
paid over to or retained by the Lessee, provided that the Lessee shall have
fully performed its obligations pursuant to Section 11.03 or Section 11.04
hereof, as the case may be, with respect to the Event of Loss for which such
payments are made.
Section 11.06.Requisition of an Airframe and the Installed Engines
for Use by Government. In the event of the requisition for use by the
Government or any other government of registry of the Aircraft, or any agency
or instrumentality of either (a "Requisitioning Government") of the Airframe
and the Engines or engines then installed on the Airframe during the Term,
which requisition does not constitute an Event of Loss, the Lessee shall
promptly notify the Lessor, the Indenture Trustee and the Owner Participant of
such requisition and all of the Lessee's obligations under this Lease with
respect to such Airframe and Engines or engines shall continue to the same
extent as if such requisition had not occurred except to the extent that any
failure or delay in repairing or maintaining the Aircraft by the Lessee shall
have been caused by such requisition. All payments received by the Lessor,
the Lessee or any permitted sublessee or transferee from the Requisitioning
Government for such use of the Airframe and Engines or engines during the Term
(other than any such requisition which constitutes an Event of Loss, as to
which the provisions of Section 11.05 hereof shall govern) shall, subject to
Section 11.08 hereof, be paid over to, or retained by the Lessee or such
permitted sublessee or transferee. All payments received by the Lessor, the
Lessee or any such permitted sublessee or transferee from the Requisitioning
Government for the use of the Airframe and Engines or engines after the Term
shall be paid over to, or retained by, the Lessor (or the Lessee if it shall
have purchased the Lessor's interest therein in accordance with the provisions
hereof).
Section 11.07.Requisition for Use by Government of an Engine Not
Installed on the Airframe. In the event of the requisition for use by a
Requisitioning Government of registry of the Aircraft or any agency or
instrumentality thereof of any Engine not then installed on the Airframe, the
Lessee shall replace such Engine by complying with the terms of Section 11.04
hereof to the same extent as if an Event of Loss had occurred with respect to
such Engine as of the date of such requisition, and any payments received by
the Lessor or the Lessee from the Requisitioning Government with respect to
such requisition shall, subject to Section 11.08 hereof, be paid over to or
retained by the Lessee, provided that the Lessee shall have fully performed
its obligations under Section 11.04 hereof.
Section 11.08.Application of Payments During Existence of Certain
Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof
which is payable to the Lessee shall not be paid to the Lessee, or, if it has
been previously paid directly to the Lessee, shall not be retained by the
Lessee, if at the time of such payment a Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing, but shall be paid
to and held by the Lessor (or the Indenture Trustee so long as the Lien of the
Indenture is in effect) as provided in Article 23 hereof as security for the
obligations of the Lessee under this Agreement, and at such time as there
shall not be continuing any such Payment Default, Bankruptcy Default or Event
of Default, such amount to the extent not theretofore applied as provided
herein, shall be paid to the Lessee.
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01.Return of Aircraft. Unless the Aircraft is purchased
by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or
upon the termination of this Lease pursuant to Article 10 or Article 17 hereof
or otherwise, the Lessee, at its own cost and expense, will return the
Aircraft by delivering it to the Lessor on the last day of the Term or on the
Termination Date, as the case may be, at the Lessee's principal maintenance
facility in Memphis, Tennessee or such other location specified by the Lessee
(and reasonably acceptable to the Owner Participant), or if such termination
is pursuant to Article 17 hereof, selected by the Lessor in its reasonable
discretion, within or, if the Aircraft is then registered outside the United
States, outside of the continental United States (on the Lessee's route
structure as in effect on the return date and provided that the Lessee shall
pay any incremental expenses incurred in connection with a redelivery outside
the United States) and the Airframe shall be fully equipped with two Engines
of the same or an improved make and model as were delivered on the Delivery
Date (or Replacement Engines), free and clear of all Liens (other than
Lessor's Liens), including any rights of third parties under pooling,
interchange, overhaul, repair or similar agreements or arrangements, it being
understood that all such Engines and Replacement Engines so returned shall be
of identical make and model and that any Replacement Engine shall be in at
least as good operating condition and have at least the same value and utility
as the Engines being replaced, assuming such Engines were in the condition
required hereunder. The Lessee will give the Lessor at least 30 days' prior
written notice of the place of such return; provided, however, that if the
Lessor shall have made the request for storage pursuant to Section 12.06
hereof, the Lessee shall return the Aircraft to the Lessor at the site of the
storage.
Section 12.02.Return of Engines. If any engine not owned by the
Lessor shall be delivered with the Airframe as set forth in Section 12.01
hereof, the Lessee, concurrently with such delivery, will, at its own cost and
expense furnish the Lessor with (i) a full warranty ▇▇▇▇ of sale, in form and
substance reasonably satisfactory to the Lessor, with respect to such engine,
(ii) an opinion of the Lessee's counsel to the effect that, upon such return,
the Lessor will acquire full right, title and interest to such engine free and
clear of all Liens (other than Lessor's Liens) and (iii) a certificate as
described in Section 11.04(b)(iii) hereof. The Lessee shall take such other
action as the Lessor may reasonably request in order that such Replacement
Engine shall be duly and properly titled in the Lessor free and clear of all
Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to
the Lessee, without recourse or warranty (except as to the absence of Lessor's
Liens), and subject to the disclaimers provided in Section 5.01 hereof, all
the Lessor's right, title and interest in and to any Engine in lieu of which a
Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as
is, where is" and (ii) deliver to the Lessee such instrument as the Lessor
shall have received from the Indenture Trustee, releasing such Engine from the
Lien of the Indenture.
Section 12.03.Return of Manuals. Upon the return of the Aircraft, the
Lessee shall deliver to the Lessor all original (or photocopied or microfilmed
copies thereof, if then permitted to be maintained in such form under
applicable law) logs, manuals, certificates and technical data, and
inspection, modification and overhaul records pertaining to the Airframe,
Engines or engines, which are required to be maintained under applicable rules
and regulations of the Aeronautics Authority or pursuant to the Lessee's or
any permitted sublessee's Aeronautics Authority-approved maintenance program
and all original (or photocopied or microfilmed copies thereof, if then
permitted to be maintained in such form under applicable law) records required
to be maintained with respect to the Aircraft under the maintenance program
approved by the aeronautical authority of any other country of registry of the
Aircraft. All records shall be returned in the format necessary to allow the
Lessee or any sublessee to comply with Section 12.04(a)(i) hereof.
Section 12.04.Condition of Aircraft. (a) Required Condition. The
Aircraft when returned to the Lessor shall, at the Lessee's own cost and
expense, meet the following requirements:
(i) it shall, unless otherwise requested by the Lessor not less than
90 days prior to the end of the Term to retain the then-existing
registration of the Aircraft, be duly registered in the name of the Lessor
or its designee pursuant to the Transportation Code;
(ii)it shall be clean by airline and cargo handling operating
standards;
(iii)the Airframe shall be returned with the Engines, or any
replacements thereto as herein authorized, provided that the Airframe shall
have an aggregate of two Engines or engines (as herein authorized under
Section 12.02 hereof), both of the same make and model, installed thereon,
together with the equipment, accessories or parts installed thereon on the
Delivery Date or replacements therefor (as herein authorized) and
alterations, modifications and additions thereto made in accordance with
the provisions of this Lease;
(iv)it shall be in the condition required by Section 12.04(b) hereof
and in as good operating condition as when delivered to the Lessor on the
Delivery Date, ordinary wear and tear excepted;
(v) it shall have a currently effective airworthiness certificate
issued by the Aeronautics Authority;
(vi)it shall comply with any then applicable rules and regulations
imposed by the Aeronautics Authority and, without limitation of the
foregoing, terminate all airworthiness directives of, and mandatory
modifications required by, the Aeronautics Authority (or any government or
governmental authority, domestic or foreign, having jurisdiction over the
Aircraft) to be terminated during the Term of the Lease and the Airframe
and each Engine (including any Replacement Engine) shall be serviceable in
accordance with the Lessee's FAA-approved maintenance program;
(vii)it shall be free and clear of all Liens and rights of others
(other than Lessor's Liens) including, without limitation, rights of third
parties under pooling, interchange, overhaul, repair and other similar
agreements or arrangements referred to in Section 7.02(a) hereof; and
(viii) it shall be in a standard cargo configuration.
(b) Remaining Time. If, at the time of return of the Aircraft, the
Airframe is not being maintained under a continuous maintenance program, then
the Airframe shall have remaining until the next scheduled "C" check at least
25% of the allowable hours between "C" checks permitted under the Lessee's
FAA-approved maintenance program (or other permitted maintenance program).
If, at the time of return of the Aircraft, the Engines or engines are not
being maintained under an on-condition maintenance program, then the average
number of hours of operation on such Engines or engines remaining until the
next scheduled engine heavy maintenance visit under the Lessee's FAA-approved
maintenance program (or other permitted maintenance program) shall be at least
25% of the allowable hours between engine heavy maintenance visits. With
respect to maintenance under the Lessee's FAA-approved maintenance program,
the Lessee shall have treated the Aircraft in a nondiscriminatory manner with
other Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft
shall be free and clear of all Liens and rights of others other than Lessor's
Liens and shall be in compliance in every material respect with the Lessee's
FAA-approved maintenance program as if the Term were not ending.
Section 12.05.Intentionally Left Blank.
Section ▇▇.▇▇.▇▇▇▇▇▇▇. Upon any expiration or termination of this
Lease, at the written request of the Lessor given at least 45 days prior to
such expiration or termination, the Lessee will arrange, or will cause to be
arranged, at no charge to the Lessor (subject, however, to the last sentence
of this Section 12.06), storage at a ramp storage facility for the Aircraft at
the Lessee's principal maintenance facilities in Memphis, Tennessee or one of
the Lessee's other maintenance facilities or at a location selected by the
Lessee used as a location for the parking or storage of aircraft for a period
of up to 30 days; provided that if storage is available at no additional cost
or expense to the Lessee at the location at which the Lessor has specified
pursuant to Section 12.01 hereof that return of the Aircraft shall take place,
the Lessee shall provide storage at such location. At the end of such 30 day
period, if the Lessor so requests within 10 days of before the end of such
period, the Lessee will continue to provide such ramp storage facility at such
facility or location for an additional 30 days at the Lessor's expense. If
the Lessee is required to move the Aircraft from one storage facility to
another, such move shall be at the risk and expense of the Lessor. The
maintenance and risk of loss of, and responsibility for obtaining insurance
on, the Aircraft shall be the responsibility of the Lessor during any period
of storage; provided, however, the Lessee will, upon written request of the
Lessor and at the Lessor's expense, not to exceed the Lessee's incremental
cost of such service, obtain insurance for such property (including, if
possible, coverage through its fleet policy).
Section 12.07.Special Markings. If requested by the Lessor, the
Lessee shall, at the Lessee's cost, remove or paint over all insignias and
other distinctive markings of the Lessee or any sublessee on the Aircraft and
repaint the stripped down areas in a workmanlike manner to match exterior
colors.
Section 12.08.Lessor's Option to Purchase Parts. At any time after
the Lessee has advised the Lessor that it has determined not to renew this
Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to
the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee
intends, and is permitted, to remove as provided in Section 9.02(b) above, and
the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase
any or all of such Parts from the Lessee upon the expiration of the Term at
their then Fair Market Value (taking into account the provisions of this
Lease) determined in accordance with the provisions of Section 4.03 hereof.
Upon any return of the Aircraft pursuant to this Article 12, if the Lessor does
not elect to exercise its option under this Section 12.08, the Lessee will, at
its own cost and expense, remove such Parts described in subparagraph (i),
(ii) or (iii) of Section 9.02(b) hereof as the Lessor may request.
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance. (a) Comprehensive Airline Liability and Property Damage
Liability Insurance. The Lessee, at its own cost and expense, will maintain
or cause to be maintained with respect to the Aircraft, (i) comprehensive
airline liability insurance including, without limitation, passenger legal and
bodily injury liability and property damage liability insurance and cargo
legal liability in such amounts, against such risks (including, without
limitation, contractual liability and allied perils liability but excluding
war risk insurance (except as required under the second sentence of this
Section 13.01(a)), with such retentions (subject to the limitations set forth
in Section 13.06 hereof) and on such terms and conditions (including coverage
for cost of claims) as the Lessee customarily maintains with respect to
aircraft and engines of the same type and model which comprise the fleet of
the Lessee, and (ii) such insurance against such other risks as is usually
carried by similar corporations engaged in the same or similar business and
similarly situated as the Lessee and owning or operating aircraft and engines
similar to the Aircraft and Engines; provided that in no event shall the
limits of liability for all such insurance be less than the amount, per
occurrence, as set forth on the insurance certificate delivered on the
Delivery Date unless and only so long as the Aircraft is not operated and all
risk-ground insurance for the Aircraft on the ground is maintained in the same
manner and covering the same risks as is from time to time applicable to other
aircraft owned or operated by the Lessee of the same type and model on the
ground and not in operation. The Lessee will be required to maintain war risk
insurance only if the Aircraft is operated in a war zone or a recognized area
of armed hostilities. All insurance required by this Section 13.01(a) shall
be maintained with insurers of recognized reputation and responsibility.
(b) Government Indemnification. Notwithstanding Section 13.01(a)
hereof, in the event of the requisition for use by the Government of the
Airframe or the Airframe and the Engines or engines then installed on the
Airframe, the Lessee shall maintain throughout the period of such requisition
such insurance as would otherwise be required under this Section 13.01;
provided that the Lessor shall accept, in lieu of such insurance coverage,
written indemnification or insurance from the Government which is
substantially the same as otherwise required under this Article 13.
(c) Policy Terms. Any policy of insurance carried and maintained in
accordance with this Section 13.01, and any policy taken out in substitution or
replacement for any such policy subject to the terms, conditions and
limitations thereof, shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft, the Indenture Trustee in its individual
capacity and as trustee/mortgagee of the Aircraft and the Owner Participant
and each of their respective officers and directors in their respective
capacities as such as additional insureds (hereinafter in this paragraph
(c) sometimes referred to as "Additional Insured");
(ii)provide that, in respect of the interest of any Additional
Insured in such policies, the insurance shall not be invalidated by any
action or inaction of the Lessee or any Additional Insured as defined under
the policy of insurance required under this Section 13.01 (other than any
action or inaction of such Additional Insured) and shall insure each
Additional Insured regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Lessee or any
other Additional Insured (other than any breach or violation of any
warranty, declaration or condition by such Additional Insured) as defined
under the policy of insurance required under this Section 13.01;
(iii)provide that if such insurance is cancelled for any reason, or
any substantial change is made in the policies which adversely affect the
scope of the coverage required herein, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to any Additional Insured for thirty (30) days (except
in the case of war risk coverage in which event the applicable period shall
be seven (7) days or such other period as may be customary) after receipt
by each such Additional Insured of written notice from such insurers or
such insurers' broker of such cancellation, change or lapse;
(iv)provide that the insurers shall waive any rights of subrogation
against each Additional Insured, to the extent that the Lessee has waived
its rights under this Lease and the Participation Agreement; provided that
the exercise by insurers of rights of subrogation derived from rights
retained by the Lessee shall not, in any way, delay payment of any claim
that would otherwise be payable by such insurers but for the existence of
rights of subrogation derived from rights retained by the Lessee;
(v) provide that all of the provisions of such policy shall operate
in the same manner as if there were a separate policy covering each
Additional Insured; provided, that such policies shall not operate to
increase any insurer's limit of liability;
(vi)be primary, without right of contribution from any other
insurance which is carried by the Lessee or any sublessee or any Additional
Insured with respect to its interest in the Aircraft;
(vii)provide that no Additional Insured shall have any obligation or
liability for premiums or other payments, if any, in connection with such
insurance; and
(viii) provide that such insurer shall waive the right of such
insurer to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional
Insured.
Section 13.02. Insurance Against Loss or Damage to Aircraft and
Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall
maintain or cause to be maintained in effect, with insurers of recognized
reputation and responsibility, all-risk ground and flight aircraft hull
insurance covering the Aircraft and all-risk coverage with respect to any
Engines and Parts while removed from the Aircraft and not replaced by similar
Engines or Parts, including in each case war-risk and allied perils, hijacking
(air piracy) and governmental confiscation and expropriation insurance (except
with respect to the country of registry) with such retentions (subject to the
limitations set forth in Section 13.06 hereof) and in such form, and upon such
terms and conditions (including coverage for cost of claims), and in amounts
as the Lessee customarily maintains with respect to the aircraft in the
Lessee's fleet of the same type and model and operated on the same routes as
the Aircraft (except that the Lessee shall be required to maintain (i) allied
perils, hijacking (air piracy) and governmental confiscation and expropriation
insurance (except with respect to the country of registry) if the Aircraft is
operated on routes where the custom is for major international Air Carriers
flying comparable routes to carry such insurance and (ii) war risk insurance
only if the Aircraft is operated in a war zone or a recognized area of armed
hostilities), provided that such insurance shall at all times while the
Aircraft is subject to this Lease and the Lien of the Indenture be on an
agreed-value basis for an amount not less than an amount equal to the
Stipulated Loss Value for the Aircraft from time to time.
(b) Policy Terms. Any policies carried and maintained in accordance
with this Section 13.02 and any policies taken out in substitution or
replacement for any such policies subject to the terms, conditions and
limitations thereof shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft (or, so long as the Indenture shall not have
been discharged, the Indenture Trustee) as an additional insured and as the
sole loss payee (hereinafter in this paragraph (b) sometimes referred to as
"Loss Payee");
(ii)provide with respect to coverage provided under this Section
13.02, (except as otherwise provided under Section 13.03 hereof when an
Event of Loss or a Payment Default, Bankruptcy Default or Event of Default
has occurred and is continuing), that (i) in the event of a loss involving
proceeds in the aggregate in excess of $6,000,000, the proceeds in respect
of such loss up to an amount equal to the Stipulated Loss Value for the
Aircraft shall be payable to the Lessor (or, so long as the Indenture shall
not have been discharged, the Indenture Trustee), it being understood and
agreed that in the case of any payment to the Lessor (or the Indenture
Trustee) otherwise than in respect of an Event of Loss, the Lessor (or the
Indenture Trustee) shall in the aggregate upon receipt of evidence
satisfactory to it that the damage giving rise to such payment shall have
been repaired or that such payment shall then be required to pay for
repairs then being made, pay the amount of such payment to the Lessee or
its order, and (ii) the entire amount of any loss involving proceeds in the
aggregate of $6,000,000 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
the Lessee or its order to pay for repairs or replacement property;
(iii)provide that if such insurance is cancelled for any reason or any
substantial change is made in the policies which adversely affect the scope
of the coverage required herein, or if such insurance is allowed to lapse
for nonpayment of premium, such cancellation, change or lapse shall not be
effective as to the Loss Payee for thirty days (except in the case of
war-risk coverage in which event the applicable period shall be seven (7)
days or such other period as may be customary) after receipt by the Loss
Payee of written notice from such insurer of such cancellation, change or
lapse;
(iv)provide that, in respect of the interest of the Lessor (in its
individual capacity and as the Owner Trustee), the Owner Participant or the
Indenture Trustee (in their respective capacities as such) in such
policies, the insurance shall not be invalidated by any action or inaction
of the Lessee or the Loss Payee (other than any action or inaction of such
Loss Payee) and shall insure the Lessor (in its individual capacity and as
Owner Trustee), the Owner Participant and the Indenture Trustee regardless
of any breach or violation of any warranty, declaration or condition
contained in such policies by the Lessee or the Loss Payee (other than any
breach or violation of any warranty, declaration or condition by the Loss
Payee) as defined under the policy of insurance required under this Section
13.02;
(v) provide that the insurers shall waive any rights of subrogation
against the Lessor (in its individual capacity and as Owner Trustee), the
Owner Participant and the Indenture Trustee to the extent that the Lessee
has waived its rights under this Lease or the Participation Agreement;
provided that the exercise by insurers of rights of subrogation derived
from rights retained by the Lessee shall not, in any way, delay payment of
any claim that would otherwise be payable by such insurers but for the
existence of rights of subrogation derived from rights retained by the
Lessee;
(vi)be primary and without rights of contribution from any other
insurance which is carried by the Loss Payee with respect to its interest
in the Aircraft;
(vii)provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines, or spare parts, as the case may be)
such insurer shall waive any right of such insurer to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Loss Payee;
(viii) provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines or spare parts, as the case may be)
no Loss Payee shall have any obligation or liability for premiums or other
payments, if any, in connection with such insurance; and
(ix)in the event that separate policies are maintained to cover
all-risk ground and flight aircraft, hull and war risks and allied perils
insurance, include a 50/50 provisional claims settlement clause as
contained in the policies of insurance maintained by the Lessee with
respect to all other aircraft in the Lessee's fleet, and a copy of the
50/50 provisional claims settlement clause in effect on the Delivery Date
shall be attached to the insurance certificate issued on the Delivery Date.
Section 13.03. Application of Insurance Proceeds. (a) Generally.
All insurance proceeds (other than proceeds from policies carried by the
Lessor, the Indenture Trustee or the Owner Participant) received under
policies described in Section 13.02 hereof as the result of the occurrence of
an Event of Loss with respect to the Airframe or an Engine will be applied as
follows:
(i) if such proceeds are received with respect to the Airframe or with
respect to the Airframe and the Engines or engines then installed on the
Airframe and the Lessee has elected or is deemed to have elected the
alternative set forth in Section 11.02 hereof, so much of such proceeds as
shall not exceed the amounts required to be paid by the Lessee pursuant to
said Section 11.02 hereof shall be applied in reduction of the Lessee's
obligation to pay such amounts if not already paid by the Lessee, or if
already paid by the Lessee, shall be applied to reimburse the Lessee for
its payment of such amounts; or
(ii)if such proceeds are received with respect to the Airframe or the
Airframe and the Engines or engines then installed on the Airframe and the
Lessee has elected the alternative set forth in Section 11.03 hereof, or if
such proceeds are received with respect to an Engine not then installed on
the Airframe and not replaced by an Engine or engine under the
circumstances contemplated by Section 11.04 hereof, all such proceeds shall
be paid to the Indenture Trustee (unless the Indenture has been discharged
in which case paid to the Lessor) for disbursement to the order of the
Lessee, after the Lessee shall have fully performed the terms of Section
11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for
which such proceeds are paid.
(b) Payment if no Event of Loss. The insurance proceeds of any
property damage loss not constituting an Event of Loss with respect to the
Airframe or an Engine will be applied in payment (or to reimburse the Lessee)
for repairs or for replacement property in accordance with Articles 7 and 8
hereof, if not already paid for by the Lessee, and any balance remaining after
compliance with said Articles 7 and 8 hereof with respect to such loss shall
be paid to the order of the Lessee.
(c) Application of Payments During Existence of Certain Defaults. Any
amount referred to in this Article 13 which is payable to or retainable by the
Lessee shall not be paid to or retained by the Lessee if at the time of such
payment or retention a Payment Default, Bankruptcy Default or Event of Default
shall have occurred and be continuing, but shall be held by or paid over to
the Indenture Trustee (unless the Indenture has been discharged in which case
such amount shall be paid to the Lessor) to be held in accordance with Article
23 hereof, as security for the obligations of the Lessee under this Lease and,
if an Event of Default shall have occurred and be continuing, applied against
the Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such Payment Default, Bankruptcy Default or Event
of Default, such amount shall be paid to the Lessee to the extent not
previously applied in accordance with the preceding sentence.
(d) Information. If any Additional Insured becomes subject to any
claim covered by any insurance policy maintained pursuant to this Article 13,
the Lessee shall make available any information required by such Additional
Insured in connection with such claim.
Section 13.04. Reports. On or before the Delivery Date and
thereafter annually on or before the scheduled expiration date for such policy
during the Term, the Lessee will cause its aviation insurance broker to
furnish to the Lessor and the Indenture Trustee a signed report, stating the
types of coverage and limits carried and maintained on the Aircraft and
certifying that such insurance complies with the terms and conditions of this
Lease. The Lessee will cause such aviation insurance broker to advise the
Lessor, the Owner Participant and the Indenture Trustee in writing promptly
of any default in the payment of any premium and of any other act or omission
on the part of the Lessee of which it has knowledge and which might
invalidate, cause cancellation of or render unenforceable all or any part of
any insurance carried by the Lessee with respect to the Aircraft. The Lessee
will cause such insurance broker to agree to advise the Lessor, the Indenture
Trustee and the Owner Participant in writing if and when it becomes evident to
such broker that any insurance policy carried and maintained on the Aircraft
pursuant to this Article 13 will not be renewed at the scheduled expiration
date for such policy. If the Lessee shall fail to maintain insurance as
required, the Lessor may, at its option, provide such insurance, and in such
event, the Lessee shall, upon demand, reimburse the Lessor, as Supplemental
Rent, for the cost of such insurance; provided, however, that no exercise of
said option shall affect the provisions of this Lease, including the
provisions that failure by the Lessee to maintain the prescribed insurance
shall constitute an Event of Default or otherwise constitute a waiver of any
other rights the Lessor may have against the Lessee.
Section 13.05. Lessor's Insurance. The Lessor, the Indenture
Trustee or the Owner Participant may insure the Airframe or any Engine at its
own cost and expense, including insuring the Aircraft for amounts in excess of
the Stipulated Loss Value of the Aircraft, provided that any insurance so
maintained by the Lessor, the Indenture Trustee or the Owner Participant shall
not result in a reduction of coverage or amounts payable under insurance
required or permitted to be maintained by the Lessee under this Article 13 or
increase the cost to the Lessee of maintaining such insurance; provided
further, that any insurance policies of the Lessor, the Indenture Trustee or
the Owner Participant insuring the Airframe or any Engine shall provide for a
release to the Lessee of any and all salvage rights in and to the Airframe or
any Engine.
Section 13.06. Self-Insurance. The Lessee may self-insure the risks
required to be insured against by Sections 13.01 and 13.02 hereof in such
manner and in such reasonable amounts as are then generally applicable to
other aircraft or engines of the Lessee of the same type and model as the
Aircraft, but in no case shall such self-insurance with respect to all
aircraft (whether owned or leased) in the Lessee's fleet in aggregate exceed
for any 12-month policy year an amount equal to the lesser of (i) 50% of the
highest insured value of any single aircraft in the Lessee's fleet and (ii)
1.5% of the average aggregate insured value from time to time of the Lessee's
entire aircraft fleet provided that a standard deductible per occurrence per
aircraft (and/or retentions) not in excess of the amount imposed by the
aircraft hull or liability insurer shall be permitted in addition to the
above-mentioned self-insurance. The foregoing shall not permit the Lessee to
discriminate as between insurance coverage on the Aircraft and insurance which
the Lessee maintains with respect to similar aircraft owned or operated by the
Lessee operating on similar routes in similar locations.
ARTICLE 14
INSPECTION
Section 14.01.Right of Inspection. At reasonable times, and upon at
least ten (10) Business Days' prior written notice to the Lessee, the Lessor,
the Indenture Trustee or the Owner Participant, or their respective authorized
representatives, may inspect the Aircraft and upon at least ten (10) Business
Days' prior written notice, all Aeronautics Authority required books and
records of the Lessee or any sublessee relating to the maintenance of the
Aircraft and such Persons shall keep any information obtained thereby
confidential and shall not disclose the same to any Person, except to a Person
described in Section 18.01 of the Participation Agreement. Any such
inspection of the Aircraft shall be a visual, walk-around inspection of the
interior and exterior of the Aircraft and shall not include opening any panel,
bays or the like without the express consent of the Lessee (except to the
extent any such inspection takes place when any such panel, bays or the like
are open). Notwithstanding the first sentence of this Section 14.01, unless a
material Default relating to maintenance or an Event of Default shall have
occurred and be continuing, the Lessor, the Indenture Trustee, the Owner
Participant or their respective authorized representatives shall each be
entitled to inspect the Aircraft only one time during any consecutive
twelve-month period. The Lessee shall make any permitted sublease or transfer
permitted under Section 7.02 hereof expressly subject to inspection rights
consistent with this Article 14.
Section ▇▇.▇▇.▇▇ Obligation to Inspect. None of the Lessor, the
Indenture Trustee or the Owner Participant shall have any duty to make any
inspection pursuant to Section 14.01 hereof and no such party shall incur any
liability or obligation by reason of making or not making any such inspection.
ARTICLE 15
ASSIGNMENT
Section 15.01.Lessee's Right to Assign. The Lessee shall not, and
shall have no authority or power to assign, convey or sublease any of its
rights under this Lease without the prior written consent of the Lessor except
(i) as expressly provided in Section 7.02 hereof, or (ii) to a wholly-owned
domestic subsidiary of the Lessee which shall be a certificated U.S. Air
Carrier. Any such assignment, conveyance or sublease shall in no way relieve
the Lessee from any obligation hereunder or under any other Operative
Agreement or any written agreement of the Lessee entered into in connection
with the transactions contemplated by the Operative Agreements, which shall be
and remain primary obligations of the Lessee. The Lessor agrees that it will
not assign or convey its right, title and interest in and to this Lease or the
Aircraft except as contemplated by or provided in this Lease, the Trust
Agreement, the Indenture or the Participation Agreement. The terms and
provisions of this Lease shall be binding upon and inure to the benefit of the
Lessor and the Lessee and their respective successors and permitted assigns,
and shall inure, to the extent expressly provided herein and therein, to the
direct benefit of, and in accordance with the provisions of the Indenture and
the Participation Agreement shall be enforceable by, the Indenture Trustee,
the Lessor and their respective successors and permitted assigns.
Section 15.02.Citizenship. The Lessee will at all times be a duly
certificated U.S. Air Carrier under the Transportation Code.
ARTICLE 16
EVENTS OF DEFAULT
Section ▇▇.▇▇.▇▇▇▇▇▇ of Default. Each of the following events shall
constitute an Event of Default, whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body:
(a) the Lessee shall fail to make any payment of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value, as the case may be,
within ten Business Days after the date when due (except that with respect
to any failure to pay Excepted Payments, such failure shall constitute an
Event of Default at the discretion of the Owner Participant); or
(b) the Lessee shall fail to make any payment of Supplemental Rent
(other than amounts described in clause (a) above) within 30 days after the
Lessee has received written notice from the Person entitled to receive such
payment stating that such payment is due (except that with respect to any
failure to pay Excepted Payments for such period, such failure shall
constitute an Event of Default at the discretion of the Owner Participant);
or
(c) (i) the Lessee shall fail to procure, carry and maintain
insurance on or in respect of the Aircraft at any time in accordance with
the provisions of Article 13 or such insurance lapses or is cancelled,
provided that, in the case of insurance with respect to which cancellation
or lapse for nonpayment is not effective as to the Lessor, the Indenture
Trustee, the Holders or the Owner Participant for 30 days (seven days, in
the case of any aircraft war risk coverage) no such lapse or cancellation
shall constitute an Event of Default until the earlier of (A) 30 days (or
seven days or such shorter time as may be standard in the industry with
respect to war risk coverage) after receipt by any Additional Insured of
written notice of such lapse or cancellation and (B) the date that such
lapse or cancellation is effective as to any Additional Insured and
provided further that such failure shall not constitute an Event of Default
as long as the Aircraft is insured as required while on the ground and not
operated, or (ii) the Aircraft shall be operated at any time when
comprehensive airline liability insurance required under Section 13.01
hereof shall not be in effect (it being understood that the Lessee is not
required to maintain such insurance under Section 13.01 hereof while the
indemnification or insurance referred to in the proviso to Section 13.01(b)
hereof is in effect); or
(d) the Lessee shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it under any
Operative Agreement (excluding the Tax Indemnity Agreement) or any other
written agreement of the Lessee entered into in connection with the
transactions contemplated by the Operative Agreements and such failure
shall continue unremedied for a period of thirty (30) days after the Lessee
shall have received written notice from the Lessor or the Owner Participant
of such failure, provided, that in the event such failure is curable and so
long as (but for no longer than 150 days after such 30-day period) the
Lessee shall have promptly undertaken such cure after the Lessee receives
notice thereof which undertaking shall be diligently and continuously
pursued using the Lessee's reasonable best efforts, such failure shall not
constitute an Event of Default; provided, further, that failure of the
Lessee to maintain the registration of the Aircraft under the
Transportation Code pursuant to the Lessee's covenants and agreement in
Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of
this Lease, when the lapse of such registration is solely because the Owner
Participant or the Lessor has ceased to be a Citizen of the United States,
shall not constitute a Default or an Event of Default; or
(e) an order for relief shall be entered in respect of the Lessee by
a court having jurisdiction in the premises in an involuntary case under
the federal bankruptcy laws as now or hereafter in effect; or the Lessee
shall consent to the appointment of a custodian, receiver, trustee or
liquidator of itself or of a substantial part of its property; or the
Lessee is not paying, or shall admit in writing its inability to pay, its
debts generally as they come due or shall make a general assignment for the
benefit of creditors; or the Lessee shall file, or the Board of Directors
of the Lessee shall authorize the filing of, or grant one or more persons
authority (at their discretion) to make a filing for, a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking reorganization
in a proceeding under any bankruptcy laws (as now or hereafter in effect)
or an answer admitting the material allegations of a petition filed against
the Lessee in any such proceeding; or the Lessee shall file, or the Board
of Directors of the Lessee shall authorize the Lessee to, or grant one or
more persons authority (at their discretion) to, seek relief by voluntary
petition, answer or consent, under the provisions of any other or future
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(f) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Lessee, a
custodian, receiver, trustee, or liquidator of the Lessee or of any
substantial part of its property, or sequestering any substantial part of
the property of the Lessee, or granting any other relief in respect of the
Lessee under the federal bankruptcy laws or other insolvency laws, and any
such order, judgment or decree of appointment or sequestration shall remain
in force undismissed or unvacated for a period of 60 days after the date of
its entry; or
(g) a petition against the Lessee in a proceeding under the federal
bankruptcy law or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within 60 days, or
under the provisions of any law providing for reorganization or winding-up
of corporations which may apply to the Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Lessee or
of any substantial part of its property and such jurisdiction, custody or
control shall remain in force unrelinquished or unterminated for 60 days; or
(h) any representation or warranty made by the Lessee in this Lease
or in the Participation Agreement or in any document or certificate
furnished by the Lessee in connection with or pursuant to this Lease or the
Participation Agreement (except for the Tax Indemnity Agreement) shall at
any time prove to have been incorrect at the time made in any respect
material to the transactions contemplated by this Lease and, if originally
made by the Lessee in good faith, shall remain material and unremedied for
a period of 120 days after the Lessee shall have received written notice of
such misstatement.
ARTICLE 17
REMEDIES
Section 17.01.Remedies Upon Lessee's Default. (a) Remedies
Generally. Upon the occurrence of any Event of Default and at any time after
such occurrence so long as the same shall be continuing, the Lessor may, at
its option, declare this Lease to be in default (except that no such
declaration shall be required in the case of an Event of Default pursuant to
paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be
deemed declared in default without any further act or notice), and at any time
thereafter the Lessor may do, and the Lessee shall comply with, one or more
of the following with respect to all or any part of the Airframe and the
Engines, as the 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:
(i) Demand in writing that the Lessee shall, and upon such written
demand the Lessee shall, at the Lessee's own cost and expense, return
promptly to the Lessor all or such part of the Airframe and the Engines as
the Lessor may demand in the manner and condition required by, and
otherwise in accordance with all of the provisions of this Lease (provided
that, unless the Lessor shall require otherwise, the Aircraft shall be
returned within the continental United States), or the Lessor, at its
option, may enter upon the premises where such Airframe or Engines are
located or believed to be located and take immediate possession of and
remove such Airframe and Engines (together with any engine which is not an
Engine but is installed on the Airframe, subject to all of the rights of
the owner, lessor, Lien holder or secured party of such engine) without the
necessity for first instituting proceedings, or by summary proceedings or
otherwise, all without liability of the Lessor to the Lessee for or by
reason of such entry or taking of possession, whether for the restoration
of damage to property caused by such action or otherwise;
(ii)With or without taking possession thereof, sell or otherwise
dispose of the Airframe or any Engine, at public or private sale and with
or without advertisement or notice to the Lessee, as the Lessor may
determine, and the Lessor may hold the Lessee liable for any installment of
Basic Rent and Renewal Rent due on or before the date of such sale (and, if
Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of
the installment of Basic Rent or Renewal Rent due on the next succeeding
Rent Payment Date in respect of any period commencing on the immediately
preceding Rent Payment Date to the date of such sale), or hold, use,
operate, lease to others or keep idle all or any part of the Airframe or any
Engine as the Lessor, in its sole discretion, may determine, in any such
case free and clear of any rights of the Lessee except as otherwise set
forth in this Article 17, and without any duty to account to the Lessee
with respect to such action or inaction or for any proceeds except to the
extent required by Section 17.01(a)(iv) hereof; in the event the Lessor
elects to exercise its rights under said Section, and in connection with
any sale of the Aircraft or any part thereof pursuant to this Article 17,
the Lessor, the Indenture Trustee, the Owner Participant or any Holder may
bid for and purchase such property;
(iii)Whether or not the Lessor shall have exercised or shall later at
any time exercise any of its rights under Section 17.01(a)(i) or
17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying
a payment date not earlier than 10 days from the date of such notice, may
demand that the Lessee pay to the Lessor, and the Lessee shall pay to the
Lessor on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent or
Renewal Rent due on Rent Payment Dates occurring after the payment date
specified in such notice), any installment of Basic Rent, Renewal Rent and
any Supplemental Rent due on or before such payment date (and, to the
extent Basic Rent or Renewal Rent is payable in arrears, the pro rata
portion of the installment of Basic Rent or Renewal Rent due on the next
succeeding Rent Payment Date in respect of the period commencing on the
Stipulated Loss Value Determination Date referred to below and ending on
the date of such payment), plus an amount equal to the excess, if any, of
the Stipulated Loss Value for the Aircraft, computed as of the Stipulated
Loss Value Determination Date on or next preceding the payment date
specified in such notice over the Fair Market Value of the Aircraft,
computed as of such Stipulated Loss Value Determination Date, together with
(A), if Basic Rent is payable in advance, interest, to the extent permitted
by applicable law, at the Debt Rate on the amount of such Stipulated Loss
Value from such Stipulated Loss Value Determination Date to the date for
payment set forth in such notice from the Lessor and (B) in all cases,
interest, to the extent permitted by applicable law at the Past Due Rate on
the excess of such Stipulated Loss Value over such Fair Market Value, from
the date as of which such Stipulated Loss Value is payable to the date of
actual payment of such amount; provided, however, that if (and in any event
prior to the time for payment hereunder) the Lessor is unable within a
reasonable period of time to recover possession of the Aircraft, or any
portion thereof, pursuant to clause (i) above unencumbered by this Lease
and free and clear of all Liens (other than Lessor's Liens), the Fair
Market Value of the Aircraft or such portion shall, at the option of the
Lessor to the extent legally enforceable, be zero and, if the Fair Market
Value of the Aircraft is deemed to be zero, after payment in full by the
Lessee of the amount specified above and all other amounts due from the
Lessee under this Lease and the other Operative Agreements, the Lessor
shall promptly transfer (without recourse or warranty other than as to the
absence of the Lessor's Liens) all of its right, title and interest in the
Aircraft or such portion, to the Lessee;
(iv)In the event the Lessor, pursuant to Section 17.01(a)(ii) hereof,
shall have sold the Airframe and/or any Engine, the Lessor, in lieu of
exercising its rights under Section 17.01(a)(iii) hereof, may, if it shall
so elect, demand that the Lessee pay the Lessor, and the Lessee shall pay
to the Lessor, on the date of such sale, as liquidated damages for loss of
a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent
due after the date on which such sale occurs) any unpaid Basic Rent or
Renewal Rent due on or before the date on which such sale occurs (and, to
the extent Basic Rent or Renewal Rent is payable in arrears, the pro rata
portion of the installment of Basic Rent or Renewal Rent due on the next
succeeding Rent Payment Date in respect of any period commencing on the
Stipulated Loss Value Determination Date referred to below and ending on
the date of such sale), and any Supplemental Rent due on or before the date
on which such sale occurs, plus an amount equal to the excess, if any, of
(A) the Stipulated Loss Value for the Aircraft, computed as of the
Stipulated Loss Value Determination Date next preceding the sale date, over
(B) the net proceeds of such sale (after deduction of all of the Lessor's
costs and expenses of such sale, including, without limitation, sales or
transfer taxes, costs of storage, overhaul, maintenance, preparation and
transportation of the Aircraft and brokers' and attorneys' fees) together
with (x), if Basic Rent is payable in advance, interest, to the extent
permitted by applicable law, at the Debt Rate on such Stipulated Loss Value
from such Stipulated Loss Value Determination Date to the date of such sale
and (y) in all cases, interest to the extent permitted by applicable law at
the Past Due Rate, on the amount of such excess from the date of such sale
to the date of actual payment by the Lessee;
(v) Proceed by appropriate court action to enforce the terms of this
Lease or to recover damages for its breach;
(vi)Terminate or rescind this Lease as to the Airframe or any or all
of the Engines; or
(vii)Exercise any other right or remedy which may be available to the
Lessor under applicable law.
(b) Cost of Exercise of Remedies. In addition, the Lessee shall be
liable, except as otherwise provided above, for any and all unpaid Rent due
before, after or during the exercise of any of the Lessor's remedies, for all
amounts payable by the Lessee under the Participation Agreement before or
after any termination hereof, and for all reasonable legal fees and other
costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner
Participant by reason of the occurrence of any Event of Default or the
exercise of the Lessor's remedies, including, without limitation, all costs
and expenses incurred in connection with the return of the Airframe or any
Engine in accordance with the terms of Article 12 hereof or in placing the
Airframe or Engines in the condition and state of airworthiness required by
such Article or in connection with any inspection, use, operation,
maintenance, insurance, storage, or leasing carried out as part of such
exercise.
Section 17.02.Cumulative Remedies. Except as otherwise provided, no
remedy referred to in this Article 17 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies.
Section 17.03.Waiver. No express or implied waiver by the 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. To the extent permitted by
applicable law, the Lessee waives any rights now or in the future conferred by
statute or otherwise which may require the Lessor to sell, lease or otherwise
use the Airframe or any Engine in mitigation of the Lessor's damages or which
may otherwise limit or modify any of the Lessor's rights or remedies under
this Article 17. The Lessor's access to the Aircraft is of the essence and
shall not be impaired.
Section 17.04.Lessor's Right to Perform for Lessee. If the Lessee
fails to make any required payment of Rent or fails to perform or comply with
any of its agreements contained in this Lease, whether or not such failure
shall constitute an Event of Default hereunder, the Lessor may (but shall not
be obligated to) make such payments or perform or comply with such agreement,
and the amount of such payment and the amount of the reasonable costs and
expenses of the Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, together with interest (to
the extent permitted by applicable law) at the Past Due Rate from the date of
the making of such payment or the incurring of such costs and expenses by the
Lessor to the date of payment of such Rent or other amount by the Lessee,
shall be deemed Supplemental Rent payable by the Lessee upon demand. No such
payment or performance by the Lessor shall be deemed to waive any Default or
Event of Default or relieve the Lessee of its obligations hereunder.
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01.Quiet Enjoyment. So long as no Event of Default shall
have occurred and be continuing, the Lessor covenants that neither it nor any
other Person lawfully claiming through it (other than the holder of a Lien
which the Lessee is obligated to discharge pursuant to Article 6 hereof, and
it being understood that the Lessor shall not be liable for any act or
omission of the Indenture Trustee or any other Person claiming through the
Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy
the Aircraft without hindrance or disturbance by it or any such other Person.
ARTICLE 19
FURTHER ASSURANCES
Section 19.01.Further Assurances. Promptly upon the execution and
delivery of this Lease, the Trust Agreement and the Indenture, the Lessee will
cause each of them to be duly filed for recordation in accordance with the
Transportation Code and will maintain the recordation of the Indenture until
the Lien of the Indenture shall have been discharged pursuant to the terms of
the Indenture. In addition, the Lessee will, at the Lessee's own cost and
expense, promptly and duly execute and deliver to the Lessor, the Owner
Participant and the Indenture Trustee such further documents and assurances to
carry out the intent and purpose of this Lease and the Indenture and to
establish and protect the rights and remedies created or intended to be
created in favor of the Lessor under this Lease, and of the Owner Participant
under the Trust Agreement, and of the Indenture Trustee under the Indenture,
including, without limitation, the execution and filing of Uniform Commercial
Code financing and continuation statements, the execution and delivery of
supplements and amendments to this Lease and the Indenture, in recordable
form, subjecting to this Lease and the Indenture any Replacement Airframe
and/or Replacement Engines delivered by the Lessee pursuant to Section 11.03
hereof and any Replacement Engine delivered by the Lessee pursuant to Section
11.04 hereof and the recording and filing of counterparts of this Lease and
the Indenture in accordance with the laws of such jurisdictions as the Lessor
or the Indenture Trustee may from time to time deem advisable. The foregoing
does not impose upon the Lessor any additional liabilities not otherwise
contemplated by this Lease.
ARTICLE 20
NET LEASE
Section 20.01.Nature of Lease. (a) This Lease is a net lease, it
being the intention of the parties hereto that the obligations of the Lessee
to pay all costs and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary, or structural or nonstructural, in connection with
the use, operation, maintenance, repair and reconstruction of the Airframe and
each Engine by the Lessee, including, without limitation, the costs and
expenses particularly set forth in this Lease (unless expressly excluded from
the terms hereof, the costs and expenses of the Lessor and the Owner
Participant shall include the reasonable fees and expenses of their respective
outside counsel), shall be absolute and unconditional, shall be separate and
independent covenants and agreements, and shall continue unaffected unless and
until the covenants have been terminated pursuant to an express provision of
this Lease. The obligation to pay Rent and all amounts payable by the Lessee
under this Lease or the Participation Agreement shall be absolute and
unconditional and (except as otherwise expressly provided with respect to
Supplemental Rent) shall be paid without notice or demand and such obligation
shall not be affected by any circumstance, including, without limitation:
(i) any set-off, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Owner Participant, any
Holder, the Indenture Trustee or anyone else for any reason (including,
without limitation, any breach by the Lessor or the Owner Participant or
the Indenture Trustee or any Holder of their respective representations,
warranties, agreements or covenants contained in any of the Operative
Agreements);
(ii)any defect in the title, airworthiness, registration, eligibility
for registration under the Transportation Code (and the regulations
thereunder) or under any of the laws or regulations of any other country of
registry of the Aircraft, condition, design, operation, merchantability or
fitness for use of, suitability for a particular purpose of, or any damage
to or loss or destruction of, the Aircraft or any portion thereof, or any
interruption or cessation in the use or possession of the Aircraft by the
Lessee or any sublessee for any reason including, without limitation, by
reason of governmental action or any doctrine of force majeure or
impossibility of performance;
(iii)any insolvency, bankruptcy, reorganization or similar case or
proceedings by or against the Lessor, the Lessee, the Indenture Trustee or
the Owner Participant or any other Person;
(iv)any Liens, encumbrances or rights of any other Person with
respect to the Aircraft, the invalidity or unenforceability or lack of due
authorization or other infirmity of this Lease or any other Operative
Agreement or document or instrument executed pursuant hereto or thereto, or
any lack of right, power or authority of the Lessor or the Lessee or any
sublessee or any other party to any other Operative Agreement to enter into
this Lease or any other Operative Agreement or any such document or
instrument; or
(v) any other circumstance, happening or event whatsoever, whether or
not unforeseen, or similar to any of the foregoing.
(b) To the extent permitted by applicable law, the Lessee waives any
and all rights which it may now have or which at any time it may have
conferred upon it, by statute or otherwise, to suspend performance under,
terminate, cancel, quit, rescind or surrender this Lease, the Airframe, or any
Engine or part thereof, other than in accordance with the terms hereof.
(c) Each payment of Rent made by the Lessee shall be final as to the
Lessor and the Lessee, and the Lessee will not seek to return nor to recover,
▇▇▇▇▇, suspend, defer or reduce all or any part of any such payment of Rent
from the Lessor or from the Indenture Trustee for any reason.
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01.Successor Lessor. The Lessee agrees that in the case
of the appointment of any successor trustee for the Lessor pursuant to the
terms of the Participation Agreement, such successor trustee shall, upon
written notice by such successor to the Lessee, succeed to all the rights,
powers and title of the Lessor under this Lease and shall be deemed to be the
Lessor and the owner of the Aircraft for all purposes of this Lease without
the necessity of any consent or approval by the Lessee and without in any way
altering the terms of this Lease or the Lessee's obligations. One such
appointment and designation of a successor trustee shall not exhaust the right
to appoint and designate a further successor trustee pursuant to the
Participation Agreement, but such right may be exercised repeatedly so long as
this Lease shall be in effect.
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section ▇▇.▇▇.▇▇▇▇▇▇▇▇ for Lessor's Obligations to Holders. In order
to secure the indebtedness evidenced by the Certificates, the Indenture
provides among other things, for the assignment by the Lessor to the Indenture
Trustee of this Lease and the Lease Supplement and for the creation of a first
mortgage and security interest in favor of the Indenture Trustee on the
Aircraft. The Lessee consents to and acknowledges such assignment (subject to
the reservations and conditions therein set forth) and the receipt of a copy
of the Indenture.
Section 22.02.Intentionally Left Blank.
Section 22.03.Consent of Lessee to Assignment of Lease as Security.
The Lessee hereby acknowledges and consents to the Indenture Trustee's rights
pursuant to the terms of the Indenture to receive payments (other than
Excepted Payments not constituting Basic Rent) due under this Lease, to
transfer or assign title to the Aircraft subject to this Lease, to make
(jointly with the Lessor where provided in the Indenture) all waivers and
agreements except as otherwise provided in the Indenture (including Section
8.01 thereof), to give all notices, consents and releases and to take all
action upon the happening of a Default or Event of Default under this Lease
(except as otherwise specifically provided in the Indenture, including Section
8.01 thereof), or to do any and all other things whatsoever which the Lessor
is or may become entitled to do under this Lease (except as otherwise provided
in the Indenture, including Section 8.01 thereof); all or any of which rights,
obligations, benefits and interests may, pursuant to the terms of the
Indenture, be reassigned or retransferred by the Indenture Trustee at any time
and from time to time (except as otherwise provided in the Indenture);
provided, however, that the Lessor, except to the extent, and for such time
as, it is unable to do so by virtue of the Indenture, shall remain liable for
the performance of all the terms, conditions, covenants and provisions for
which it is obligated under this Lease notwithstanding such assignment.
ARTICLE 23
SECURITY FUNDS
Section 23.01.Investment of Security Funds. (a) Any amounts otherwise
payable to the Lessee in accordance with the terms hereof shall instead be
held by the Lessor as security for, and may be applied by the Lessor against,
the obligations of the Lessee under this Lease during such time as there shall
have occurred and be continuing a Payment Default, Bankruptcy Default or Event
of Default, and, at such times as there shall not be continuing a Payment
Default, Bankruptcy Default or Event of Default, such amounts, net of any
amounts which have been applied by the Lessor against the Lessee's obligations
hereunder, shall be paid to the Lessee as provided in this Lease. Any amounts
which are held by the Lessor pending payment to the Lessee shall, until paid
to the Lessee or applied against the Lessee's obligations hereunder, be
invested by the Lessor, as directed from time to time, in writing (and in the
absence of a written direction by the Lessee, the Lessor shall invest such
monies in direct obligations of the United States of America), by the Lessee
and at the expense and risk of the Lessee, in the following securities (which
in the case of securities referred to in subparagraphs (i) through (iv) of
this Section 23.01(a) hereof shall mature within ninety (90) days of the date
of purchase):
(i) direct obligations of the United States of America; or
(ii)obligations fully guaranteed by the United States of America; or
(iii)certificates of deposit issued by, or bankers' acceptances of,
or time deposits or a deposit account with, any bank, trust company or
national banking association incorporated or doing business under the laws
of the United States of America or one of its States (which may include the
Owner Trustee or the Indenture Trustee in their respective individual
capacities or any Affiliate thereof), having a combined capital and surplus
of at least $500,000,000 and having a rating of "A" or better from ▇▇▇▇▇'▇
or S&P; or
(iv)commercial paper rated A-1/P-1 by S&P or ▇▇▇▇▇'▇, respectively
(or if neither such organization shall rate such commercial paper at any
time, a rating by any nationally recognized statistical rating organization
in the United States of America equal to the highest rating assigned by
such rating organization) (which may include commercial paper issued by the
Owner Trustee or the Indenture Trustee in their respective individual
capacities or any Affiliate thereof).
(b) At any time any invested funds are distributed to the Lessee,
there shall be promptly remitted to the Lessee any gain (including interest
received) realized as the result of any investment pursuant to Section
23.01(a) hereof (net of any fees, commissions and other costs, Taxes and
expenses, if any, incurred by the Lessor or the Owner Participant in
connection with such investment), unless a Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing in which case such
funds shall be applied in the same manner as the principal so invested. The
Lessee shall be responsible for and will promptly pay to the Indenture Trustee
or the Lessor, as the case may be, on demand, the amount of any loss realized
as the result of any such investment (together with any fees, commissions and
other costs, Taxes and expenses, if any, incurred by the Indenture Trustee or
the Lessor or the Owner Participant in connection with such investment), such
amount to be disposed of in accordance with the terms of the Indenture or the
Lease, as the case may be.
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01.Lessor's Entry Into Lease. Except as expressly provided
herein, the Lessor and the Lessee agree that this Lease is executed by FSB not
individually but solely as Owner Trustee under the Trust Agreement in the
exercise of the power and authority conferred and vested in it as such Owner
Trustee, that each and all of the representations, undertakings and agreements
by the Lessor herein are for the purpose and with the intention of binding
only the Lessor's Estate, and that in no case whatsoever shall FSB be
personally liable for any loss in respect of such representations,
undertakings and agreements, that actions to be taken by the Lessor pursuant
to its obligations hereunder may, in certain instances, be taken by the Lessor
only upon specific authority of the Owner Participant and the Indenture
Trustee, that nothing herein contained shall be construed as creating any
liability on FSB, individually or personally, to perform any covenant, either
express or implied, herein, all such liability, if any, being expressly waived
by the Lessee and by each and every Person now or hereafter claiming by,
through or under the Lessee except with respect to the gross negligence or
willful misconduct of FSB, and that so far as FSB, individually or personally
is concerned, the Lessee and any Person claiming by, through or under the
Lessee shall look solely to the Lessor's Estate for the performance by the
Lessor of any of its obligations under this Lease; provided, that nothing in
this Section 24.01 shall be construed to limit in scope or substance those
representations and warranties of FSB in its individual capacity set forth in
the Participation Agreement and the Trust Agreement. The term "Lessor" as
used in this Lease shall include any trustee succeeding FSB as Owner Trustee
under the Trust Agreement. Any obligation of the Lessor hereunder may be
performed by the Owner Participant, and any such performance shall not be
construed as revocation of the trust created by the Trust Agreement. Nothing
contained in this Lease shall restrict the operation of the provisions of the
Trust Agreement with respect to its revocation of the resignation or removal
of the Owner Trustee hereunder.
ARTICLE 25
NOTICES
Section 25.01.Notices. All notices, demands, declarations and other
communications required by this Lease shall be in writing and shall be deemed
received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, (b) if given by certified mail, return receipt
requested, postage prepaid, five Business Days after being deposited in the
United States mail and (c) if given by FedEx service (or, if a Default or
Event of Default shall have occurred and be continuing, by other comparable
courier service), when received or personally delivered, addressed:
(a) If to the Lessee, to its office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Senior Vice President and Chief
Financial Officer with a copy to Senior Vice President and General Counsel;
telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or at such other
address as the Lessee shall from time to time designate in writing to the
Lessor, the Agent, Indenture Trustee and the Owner Participant;
(b) If to the Lessor or Owner Trustee, to its office at ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department; telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such
other address as the Lessor shall from time to time designate in writing to
the Lessee and the Indenture Trustee, with a copy to Owner Participant at
the Owner Participant's address as provided in subsection (c) below;
(c) If to the Owner Participant, in accordance with the Participation
Agreement; and
(d) If to the Indenture Trustee, to its office at Two ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Department, telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such
other address as the Indenture Trustee shall from time to time designate in
writing to the Lessor, the Lessee, the Agent and the Owner Participant.
ARTICLE 26
MISCELLANEOUS
Section 26.01.Section Heading and Captions. All article and section
headings and captions used in this Lease are purely for convenience and shall
not affect the interpretation of this Lease.
Section 26.02.References. Any reference to a specific article or
section number shall be interpreted as a reference to that article or section
of this Lease unless otherwise expressly provided.
Section 26.03.APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING
DELIVERED IN NEW YORK.
Section 26.04.Severability. 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.
Section ▇▇.▇▇.▇▇ Oral Modification. The terms and provisions of this
Lease may not be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any such change, waiver,
discharge or termination is also subject to the provisions of Section 8.01 and
Article XIII of the Indenture.
Section 26.06.Agreement as Chattel Paper. To the extent 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 chattel-paper counterpart, which shall
be the counterpart containing the receipt executed by the Indenture Trustee on
its signature page.
Section 26.07.Counterparts. This Lease may be executed in any number
of counterparts, each of which shall be an original (except that only the
counterpart bearing the receipt executed by the Indenture Trustee shall be the
original for purposes of perfecting a security interest therein as chattel
paper under the Uniform Commercial Code), but all of which taken together
shall constitute one and the same instrument and any of the parties hereto may
execute this Lease by signing any such counterpart.
Section 26.08.Public Release of Information. Provided no Event of
Default shall have occurred and be continuing, each party shall in each
instance obtain the prior written approval of each party concerning the exact
text and timing of news releases, articles and other informational releases to
the public media concerning this Lease.
ARTICLE 27
TRUE LEASE
Section 27.01.Intent of the Parties. It is the intent of the parties
to this Lease that for all purposes (including, without limitation, U.S.
Federal income tax purposes) this Lease will be a true lease, and that this
Lease conveys to the Lessee no right, title or interest in the Aircraft except
as a lessee.
Section 27.02.Section 1110 Compliance. Notwithstanding any provision
herein or elsewhere contained to the contrary, it is understood and agreed
among the parties hereto that the transactions contemplated by this Lease and
the other Operative Agreements are expressly intended to be, shall be and
should be construed so as to be, entitled to the full benefits of Section 1110
of the Bankruptcy Code and any successor provision thereof.
Section ▇▇.▇▇.▇▇▇▇▇▇▇ Lease. This Lease is a "finance lease" within
the meaning of Section 2-A--103(g) of the Uniform Commercial Code.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease to be duly executed as of the date first above written.
LESSOR: FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By: ______________________________________________
Name:
Title:
LESSEE: FEDERAL EXPRESS CORPORATION
By: _______________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer and
Managing Director - Structured Finance
Receipt of this original counterpart of the Lease is hereby
acknowledged on this __ day of October 1996.
Indenture Trustee: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Indenture Trustee
By: _____________________________________________
Name:
Title:
SCHEDULE I
DEFINITIONS
GENERAL PROVISIONS
The following terms shall have the following meanings for all
purposes of the Operative Agreements (other than the Pass Through Agreement
and the Series Supplements) referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require. In the
case of any conflict between the provisions of this Schedule and the
provisions of any Operative Agreement, the provisions of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires and except in the case of the
Original Agreements, (i) references to agreements shall be deemed to mean and
include such agreements as amended and supplemented from time to time, and
(ii) references to parties to agreements shall be deemed to include the
successors and permitted assigns of such parties.
DEFINED TERMS:
Additional Insured. As defined in Article 13 of the Lease.
Aeronautics Authority. As appropriate, the Federal Aviation
Administration and/or the Administrator of the Federal Aviation
Administration, any successor to the former United States Civil Aeronautics
Board, or any Person, governmental department, bureau, commission or agency
located in the United States succeeding to the functions of any of the
foregoing.
Affiliate. 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. In no event shall the Owner Trustee or the Lessor be deemed an
Affiliate of the Owner Participant.
After-Tax Basis. A basis such that any payment to be received by a
Person shall be supplemented by a further payment to such Person so that the
sum of the two payments, after deduction of all Taxes resulting from the
receipt or accrual of such payments, shall be equal to the payment to be
received. In the case of amounts payable to the Lessor, the Owner Participant,
or any corporate Affiliate of the Owner Participant, it shall be presumed that
such Person is at all times subject to Federal income tax at the maximum
marginal rate generally applicable to corporations from time to time and
actual state, local and foreign income taxes.
Agent. ▇▇▇▇▇▇ Guaranty Trust Company of New York and its successors
and permitted assigns as Agent for the Original Loan Participants pursuant to
Article 16 of the Original Participation Agreement.
Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as
defined in the Transportation Code) as to which there is in force a permit
granted under Section 41302 of the Transportation Code.
Airbus Guaranty. The Guaranty dated the Delivery Date executed by the
Manufacturer and guaranteeing AVSA's Warranty ▇▇▇▇ of Sale.
Aircraft. The Airframe (or any permitted substitute airframe
thereunder) together with two Engines (whether either is an initial Engine or
a Replacement Engine) whether or not any of such initial or Replacement
Engines may from time to time be installed on such Airframe or may be
installed on any other airframe or on any other aircraft, including any
aircraft substituted pursuant to Section 11.03 of the Lease.
Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or
engines from time to time installed thereon) leased by the Lessor to the Lessee
pursuant to the Lease and the initial Lease Supplement and having the United
States FAA Registration Number initially and manufacturer's serial number
specified in the initial Lease Supplement, including (i) all Parts in respect
thereof and (ii) any replacement airframe which may be substituted pursuant to
Section 11.03 of the Lease.
Amendment No. 1 to the Original Tax Indemnity Agreement. Amendment
No. 1 to the Original Tax Indemnity Agreement (Federal Express Corporation
Trust No. N667FE), dated as of October 15, 1996.
Ancillary Agreement. Any written agreement of the Lessee to which the
Lessor is a party or to which the Lessor has consented in writing entered into
on the Delivery Date or the Refunding Date or any date thereafter in
connection with the transactions contemplated by the Operative Agreements, as
such agreement may be amended and supplemented from time to time with the
consent of the Lessor and delivered to the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Owner Participant.
Ancillary Agreement I. The Ancillary Agreement I (Federal Express
Corporation Trust No. N667FE), dated the Delivery Date, as amended and
restated as of the Refunding Date, among the Lessee, the Owner Trustee, not in
its individual capacity, but solely as Owner Trustee, the Owner Participant
and the Indenture Trustee not in its individual capacity, but solely as
Indenture Trustee, as originally executed or as amended, modified or
supplemented with the consent of all the parties thereto.
Ancillary Agreement II. The Ancillary Agreement II (Federal Express
Corporation Trust No. N667FE), dated the Refunding Date, among the Lessee, the
Owner Trustee, not in its individual capacity, but solely as Owner Trustee,
the Owner Participant and the Indenture Trustee not in its individual
capacity, but solely as Indenture Trustee, as originally executed or as
amended, modified or supplemented with the consent of all the parties thereto.
Appraisal. The report prepared by BK Associates, Inc. and delivered
to the Owner Participant (with an abbreviated report to the Lessee) on the
Delivery Date pursuant to Section 4.01(n) of the Original Participation
Agreement.
Assignment and Assumption Agreement. Any agreement delivered in
compliance with Section 7.03(d) of the Participation Agreement.
AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized
and existing under the laws of France, and its successors and assigns.
AVSA Consent and Agreement. The Consent and Agreement dated as of
August 1, 1996, executed by AVSA, as the same may be amended, modified or
supplemented from time to time.
AVSA's FAA ▇▇▇▇ of Sale. The ▇▇▇▇ of sale for the Airframe on AC
Form 8050-2, or such other form as may be approved by the Aeronautics
Authority, executed by AVSA in favor of the Owner Trustee and dated the
Delivery Date.
AVSA's Warranty ▇▇▇▇ of Sale. The full warranty ▇▇▇▇ of sale
covering the Aircraft (and specifically referring to each Engine) executed by
AVSA as owner of the Aircraft in favor of the Owner Trustee and dated the
Delivery Date.
Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended, and
any successor thereto.
Bankruptcy Default. An event specified in Section 16.01(e), (f) or
(g) of the Lease which either does or, with the giving of notice or lapse of
time or both, would constitute an Event of Default.
Basic Rent. The aggregate periodic rent payable for the Aircraft
throughout the Basic Term pursuant to Section 3.02 of the Lease, adjusted
pursuant to Article 3 of the Lease.
Basic Term. The period commencing at the beginning of the day on the
Commencement Date and ending at the end of the day on November 28, 2019, or
such earlier date on which the Lease shall be terminated as provided therein.
Beneficial Interest. The interest of the Owner Participant under the
Trust Agreement.
Breakage Costs. Has the meaning specified in Schedule II to the
Original Participation Agreement.
Business Day. Any day on which commercial banks are not authorized or
required to close in New York, New York, Memphis, Tennessee and the city in
which the office or agency in the United States is maintained by the Pass
Through Trustee for the payment of the Pass Through Certificates, and after
the Lien of the Indenture is discharged, Salt Lake City, Utah.
Certificates. The Equipment Trust Certificates (Federal Express
Corporation Trust No. N667FE), issued by the Owner Trustee pursuant to the
Indenture and any certificate issued in exchange therefor or replacement
thereof pursuant to the Indenture.
Change in Tax Rate. Any amendment, modification, deletion, addition,
or change to the Code which is enacted into law after the Delivery Date which
changes the highest marginal statutory rate of Federal income tax applicable
to the Owner Participant (other than a change which is in the nature of a
minimum tax).
Citizen of the United States. A citizen of the United States as
defined in Section 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.
Closings. The closing with respect to the acquisition of the Pass
Through Certificates by the Underwriters and the closing with respect to the
refunding of the Original Loan Certificates.
Code. Except as otherwise provided, the Internal Revenue Code of
1986, as amended from time to time.
Commencement Date. January 30, 1997.
Consent and Agreement. The Consent and Agreement dated as of August
1, 1996 executed by the Manufacturer, as the same may be amended, modified or
supplemented from time to time.
Consent and Guaranty. The Consent and Guaranty of the Manufacturer
attached to the Purchase Agreement.
Corporate Trust Administration. The principal office of the
Indenture Trustee located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department, or such other
office at which the Indenture Trustee's corporate trust business shall be
administered which the Indenture Trustee shall have specified by notice in
writing to the Lessee, the Owner Participant and the Owner Trustee.
Corporate Trust Department. The principal office of the Owner Trustee
located at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Trust Department, or such other office at which the Owner Trustee's
corporate trust business shall be administered which the Owner Trustee shall
have specified by notice in writing to the Lessee, the Owner Participant and
the Indenture Trustee.
CRAF Program. Has the meaning specified in Section 7.01(a)(iv) of the
Lease.
Debt Rate. The weighted average (based on Outstanding principal
amount) rate of interest on the Certificates issued pursuant to the Indenture.
Default. Any event or condition which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
Delivery Date. August 28, 1996.
Engine. Each of the two General Electric CF6-80C2-A5F engines listed
by manufacturer's serial numbers in the initial Lease Supplement and leased
pursuant to the Lease, whether or not from time to time installed on the
Airframe or installed on any other airframe or on any other aircraft, and any
Replacement Engine which may from time to time be substituted for an Engine
pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of
the Lease, together with all Parts related thereto. Except as otherwise
provided, at such time as a Replacement Engine shall be so substituted and the
Engine for which the substitution is made shall be released from the Lien of
the Indenture, such replaced Engine shall cease to be an "Engine" under the
Lease. The term "Engines" means, as of any date of determination, both Engines
then leased to the Lessee pursuant to the Lease.
Engine Consent. The Engine Consent dated as of August 1, 1996,
executed by the Engine Manufacturer, as the same may be amended, modified or
supplemented from time to time.
Engine Manufacturer. General Electric Company, a New York
corporation.
Engine Warranty Assignment. The Engine Warranty Assignment (Federal
Express Corporation Trust No. N667FE), dated as of August 1, 1996 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plan. An employee benefit plan subject to Title I of ERISA, or
an individual retirement account or plan subject to Section 4975 of the Code.
Estimated Expense Amount. Has the meaning specified in Section
10.01(a) of the Participation Agreement.
Event of Default. Each of the events specified in Article 16 of the
Lease.
Event of Loss. Any of the following events with respect to the
Aircraft, the Airframe or any Engine: (i) loss of such property or its use (A)
for a period in excess of 60 days due to theft or disappearance or such longer
period, not to exceed 180 days from the end of such initial 60-day period, if
and so long as the location of such property is known to the Lessee and the
Lessee is diligently pursuing recovery of such property, or to the end of the
Term, if less (unless such theft or disappearance constitutes an Event of Loss
pursuant to (i)(B) or (ii) hereof) or (B) for a period in excess of 60 days
due to the destruction, damage beyond economic repair or rendition of such
property permanently unfit for normal use by Lessee 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 constructive or
compromised total loss; (iii) (1) condemnation, confiscation or seizure of, or
requisition of title to such property by the Government, any foreign
government or purported government or any agency or instrumentality thereof,
or (2) condemnation, confiscation, or seizure of, or requisition or taking of,
use of such property (A) by a foreign government or instrumentality or agency
of any such foreign government, for a period in excess of 180 days (or such
shorter period ending on the earlier of the expiration of the Term or on the
date on which an insurance settlement with respect to such property on the
basis of a total loss or constructive or compromised total loss shall occur)
or (B) by the Government for a period extending beyond the Term; and (iv) as a
result of any law, rule, regulation, order or other action by the Aeronautics
Authority or other governmental body having jurisdiction, the use of the
Aircraft or Airframe in the normal course of air transportation of cargo shall
have been prohibited by virtue of a condition affecting all Airbus A300-600
series aircraft equipped with engines of the same make and model as the
Engines for a period of twelve (12) consecutive months, unless the Lessee,
prior to the expiration of such twelve (12) month period, shall be diligently
carrying forward all steps which are necessary or desirable to permit the
normal use of the Aircraft or Airframe or, in any event, if such use of the
Aircraft or the Airframe shall have been prohibited for a period of
twenty-four (24) consecutive months or until the end of the Term, if earlier.
The date of such Event of Loss shall be (s) the 61st day or the 241st day, as
the case may be, following loss of such property or its use due to theft or
disappearance (or the end of the Term or the Lessee's abandonment of diligent
efforts to recover such property, if earlier); (t) the 61st day following the
date of any destruction, damage beyond economic repair or rendition of such
property permanently unfit for normal use; (u) the date of any insurance
settlement on the basis of a total loss or constructive or compromised total
loss; (v) the date of any condemnation, confiscation, seizure or requisition
of title of such property; (w) the 181st day following condemnation,
confiscation, seizure or requisition for use of such property by a foreign
government referred to in clause (iii)(2)(A) above (or the end of the Term or
the date of any insurance settlement described therein, if earlier than such
181st day); (x) the last day of the Term in the case of requisition for use of
such property by the Government; (y) the last day of the 12 month or 24 month
period, referred to in clause (iv) above (or if earlier, the end of the Term
or abandonment of the Lessee's efforts to restore the normal use of the
Aircraft). An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if any Event of Loss occurs with respect to the Airframe. If an
Event of Loss described in any of clauses (i) (A), (iii) or (iv) above shall
occur, Lessor may elect, within 30 days following the date upon which such
Event of Loss is deemed to have occurred, to waive such Event of Loss and the
consequences thereof.
Excepted Payments. Collectively, (i) indemnity, expense,
reimbursement or other payments paid or payable by the Lessee in respect of
the Owner Participant, the Owner Trustee in its individual capacity or any of
their respective successors, permitted assigns, directors, officers,
employees, servants and agents or Affiliates, pursuant to the Participation
Agreement or any other Operative Agreement or any indemnity hereafter granted
to the Owner Participant or the Owner Trustee in its individual capacity
pursuant to the Lease or the Participation Agreement, (ii) proceeds of public
liability insurance (or government indemnities in lieu thereof) in respect of
the Aircraft payable as a result of insurance claims paid for the benefit of,
or losses suffered by, the Owner Trustee or the Indenture Trustee in their
respective individual capacities or by the Owner Participant, or their
respective successors, permitted assigns or Affiliates, (iii) proceeds of
insurance maintained with respect to the Aircraft by the Owner Participant
(whether directly or through the Owner Trustee) maintained in accordance with
Section 13.05 of the Lease but not required under Article 13 of the Lease,
(iv) payments of Supplemental Rent by the Lessee in respect of any amounts
payable under the Tax Indemnity Agreement, (v) any purchase price paid to the
Owner Participant for its interest in the Trust Estate pursuant to Section
7.03(d) of the Participation Agreement, (vi) subject to Section 3.05 of the
Lease, payments constituting increases in Basic Rent attributable to payments
arising pursuant to Section 5 of the Tax Indemnity Agreement, (vii) any
payments in respect of interest to the extent attributable to payments
referred to in clauses (i) through (vi) above and (viii) any right to demand,
collect or otherwise receive and enforce the payment of any amount described
in clauses (i) through (v) and (vii) above (except with respect to interest
attributable to payments referred to in clause (vi) above).
Expense; Expenses. Have the meaning specified in Section 9.01(a) of
the Participation Agreement.
FPO Price. Has the meaning set forth in Section 4.02(a)(F) of the
Lease.
FSB. First Security Bank, National Association, a national banking
association.
Fair Market Renewal Term. A term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the second paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
Fair Market Rental. An amount determined on the basis of, and equal
in amount to, the rental which would be obtained in an arm's-length
transaction between an informed and willing lessee and an informed and willing
lessor unaffiliated with such lessee, neither being under any compulsion to
lease. In such determination, it shall be assumed that the Aircraft is in the
condition required under the Lease in the case of return of the Aircraft
pursuant to Article 12 of the Lease and Fair Market Rental shall be determined
in accordance with the provisions of Section 4.03 of the Lease.
Fair Market Value. An amount determined on the basis of, and equal in
amount to, the value which would be obtained in an arm's-length transaction
between an informed and willing purchaser under no compulsion to buy and an
informed and willing seller unaffiliated with such purchaser and under no
compulsion to sell, assuming the Aircraft (or other property) is unencumbered
by the Lease. In such determination, except for purposes of Section 17.01 of
the Lease (when it shall be determined based upon the actual condition and
location of the Aircraft), it shall be assumed that the Aircraft is in the
condition required under the Lease in the case of return of the Aircraft
pursuant to Article 12 of the Lease and Fair Market Value shall be determined
in accordance with the provisions of Section 4.03 of the Lease.
Federal Aviation Administration; FAA. The United States Federal
Aviation Administration and any successor agency or agencies thereto.
Fixed Renewal Rent. Semi-annual payments of rent during the Fixed
Renewal Term equal to the lesser of (i) Fair Market Rental as determined as of
the commencement of such Fixed Renewal Term and (ii) 50% of the average actual
semi-annual Basic Rent payable during the Basic Term.
Fixed Renewal Term. The term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the first paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
French Pledge Agreement. The French Pledge Agreement dated as of
August 1, 1996 between the Owner Trustee and the Indenture Trustee.
Government. The United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and
credit of the United States of America.
GTA. The General Terms Agreement dated as of July 3, 1991 between the
Engine Manufacturer and the Lessee related to the purchase by the Lessee of the
Engines as originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the General Terms
Agreement relates to the Engines, to the extent assigned to the Owner Trustee
pursuant to the Engine Warranty Assignment.
Holder of a Certificate; Certificate Holder; Holder. As of any
particular time, the Person in whose name a Certificate shall be registered
(but not including the holder of any Pass Through Certificate).
Indemnitee. Each of FSB, in its individual capacity and as Owner
Trustee and Lessor, the Agent (to the extent set forth in Articles 8 and 9 of
the Original Participation Agreement), the Owner Participant, the Original
Loan Participants (to the extent set forth in Articles 8 and 9 of the Original
Participation Agreement), the Indenture Trustee, in its individual capacity
and as trustee, any Owner Participant Guarantor, and any successor (including
any trustee which may succeed to the Lessor's interest under the Lease),
Affiliate, assign, officer, director, employee, agent and servant of any of
the foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither
the Certificate Holder nor any holder of a Pass Through Certificate shall be
deemed to be an Indemnitee.
Indenture. The Trust Indenture and Security Agreement (Federal
Express Corporation Trust No. N667FE), dated as of August 1, 1996, as amended
and restated as of October 15, 1996, between the Lessor and the Indenture
Trustee, as supplemented by the Indenture and Security Agreement Supplement,
and as said Indenture may from time to time be further supplemented or
amended, including any amendment or supplement thereto entered into from time
to time pursuant to the applicable provisions of the Indenture.
Indenture and Security Agreement Supplement. The Indenture and
Security Agreement Supplement No. 1 (Federal Express Corporation Trust No.
N667FE) dated August 28, 1996, as such Indenture and Security Agreement
Supplement shall be amended or supplemented from time to time and any other
supplement to the Indenture, substantially in the form of Exhibit A to the
Indenture.
Indenture Default. Any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute an Indenture Event of
Default.
Indenture Documents. Has the meaning specified in the Granting
Clause of the Indenture.
Indenture Event of Default. Each of the events specified in Section
7.01 of the Indenture.
Indenture Trustee. State Street Bank and Trust Company, a
Massachusetts trust company, not in its individual capacity but solely as
Indenture Trustee under the Indenture and each other Person which may from
time to time be acting as successor trustee under the Indenture.
Indenture Trustee's Liens. Any Lien on the Trust Indenture Estate
resulting from (i) claims against the Indenture Trustee not related to the
administration of the Trust Indenture Estate or any transactions pursuant to
the Indenture or any document included in the Trust Indenture Estate, (ii) any
act or omission of the Indenture Trustee which is not related to the
transactions contemplated by the Operative Agreements or is in violation of
any of the terms of the Operative Agreements or (iii) Taxes imposed against
the Indenture Trustee in its individual capacity in respect of which the Lessee
has not indemnified (and is not obligated to indemnify) the Indenture Trustee
in such capacity.
Independent Appraisal. An appraisal conducted pursuant to Section
4.03 of the Lease.
Independent Investment Banker. An independent investment banking
institution of national standing appointed by the Lessee that is independent
in fact, does not have any direct financial interests, or any material
indirect financial interest, in the Lessee or any Affiliate of the Lessee, and
is not connected with the Lessee or any Affiliate of the Lessee, as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions; provided, that if the Indenture Trustee shall
not have received written notice of such an appointment at least 10 days prior
to the Prepayment Date, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
Interim Term. The period commencing on the Delivery Date and ending
at the end of the day immediately preceding the Commencement Date.
Invoice. The invoice for the Aircraft given by AVSA to the Lessor.
Lease. The Lease Agreement (Federal Express Corporation Trust No.
N667FE) dated as of August 1, 1996, as amended and restated as of October 15,
1996, entered into by the Lessor and the Lessee concurrently with the
execution and delivery of the Indenture, as said Lease may from time to time
be supplemented or amended, or its terms waived or modified, to the extent
permitted by, and in accordance with, the terms of the Indenture, including,
without limitation, supplementation by one or more Lease Supplements entered
into pursuant to the applicable provisions of the Lease.
Lease Supplement. The Lease Supplement No. 1 (Federal Express
Corporation Trust No. N667FE) dated August 28, 1996, as such Lease Supplement
shall be amended or supplemented from time to time and any other supplement to
the Lease, substantially in the form of Exhibit A to the Lease.
Lease Term. The period commencing on the Delivery Date and ending at
the end of the Basic Term.
Lessee. Federal Express Corporation, a Delaware corporation, and its
successors and permitted assigns.
Lessee Documents. Has the meaning set forth in Section 6.01(b) of the
Participation Agreement.
Lessor. First Security Bank, National Association, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, and its successors and permitted assigns.
Lessor's Estate. All estate, right, title and interest of the Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement, the
Participation Agreement, AVSA's FAA ▇▇▇▇ of Sale, AVSA's Warranty ▇▇▇▇ of
Sale, the Airbus Guaranty, the Purchase Agreement, the Purchase Agreement
Assignment, the Consent and Agreement, the AVSA Consent and Agreement, the
Consent and Guaranty (to the extent assigned by the Purchase Agreement
Assignment), any Ancillary Agreement, the GTA, the Engine Warranty Assignment,
the Engine Consent, any warranty with respect to the Airframe and the Engines,
all amounts of Basic Rent and Supplemental Rent, including without limitation,
insurance proceeds (other than insurance proceeds payable to or for the
benefit of the Owner Trustee in its individual capacity or the Owner
Participant) and requisition, indemnity or other payments of any kind for or
with respect to the Aircraft (except amounts owing to the Owner Participant,
to the Indenture Trustee, to the Owner Trustee in its individual capacity, or
to any of their respective directors, officers, employees and agents pursuant
to Articles 8 and 9 of the Participation Agreement), and all other property of
the Owner Trustee purportedly subjected to the Lien of the Indenture by the
Granting Clause thereof; provided that in no event shall "Lessor's Estate"
include any Excepted Payment.
Lessor's Liens. Liens on the Lessor's Estate or the Trust Indenture
Estate arising as a result of (i) claims against the Lessor, in its individual
capacity or as Owner Trustee, or the Owner Participant, in each case not
related to the transactions contemplated by the Operative Agreements, (ii)
acts or omissions of the Lessor in its individual capacity or as Owner
Trustee, and, in the case of the Lessor in its individual capacity, arising
from its gross negligence or willful misconduct or expressly prohibited under
the Operative Agreements and any act or omission of the Owner Participant
which is in violation of any of the terms of the Operative Agreements, (iii)
Taxes or Expenses imposed against the Lessor, in its individual capacity or as
Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the
Trust Agreement which are not required to be indemnified against by the Lessee
pursuant to the Participation Agreement by reason of Section 8.01(b) or
9.01(b) thereof and which are not required to be indemnified against by the
Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the
Lessor or the Owner Participant arising from the voluntary transfer by the
Lessor or the Owner Participant of its interests in the Aircraft other than a
transfer of the Aircraft pursuant to Section 4.02(a) or Article 10 or 11 of the
Lease and other than a transfer pursuant to the exercise of the remedies set
forth in Article 17 of the Lease.
Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or
security interest or other similar interest.
Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the
Lease.
Majority in Interest of Certificate Holders. As of a particular date
of determination, the Holders of more than 50% of the aggregate unpaid
principal amount of all Certificates outstanding as of such date excluding for
purposes of this definition any Certificates held by (i) the Owner Trustee or
the Owner Participant or any interests of the Owner Participant unless all
Certificates then outstanding shall be held by the Owner Participant, (ii) the
Lessee or (iii) any Affiliate of any thereof.
Make-Whole Premium. An amount determined as of the day before the
applicable Prepayment Date (or date of purchase, as the case may be) which an
Independent Investment Banker determines to be equal to the excess, if any, of
(i) the present values of all remaining scheduled payments of such principal
amount or portion thereof and interest thereon (excluding interest accrued
from the immediately preceding Payment Date to such Prepayment Date or date of
purchase, as the case may be) to the Maturity of such Certificate in
accordance with generally accepted financial practices assuming a 360-day year
consisting of twelve 30-day months at a discount rate equal to the Treasury
Yield, all as determined by the Independent Investment Banker over (ii) the
unpaid principal amount of such Certificate.
Manufacturer. Airbus Industrie G.I.E., a groupement d'interet
economique formed under the laws of France, and its successors and assigns.
Maturity. With respect to any Certificate, the date on which the
final principal amount of such Certificate is scheduled to be due and payable.
Moody's. ▇▇▇▇▇'▇ Investors Service, Inc.
Net Present Value of Rents. The net present value, as of the
Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted
at a rate equal to the Debt Rate per annum compounded semi-annually.
Non-U.S. Person. Any Person other than a U.S. Person.
Obsolete Parts. Parts which are severable from the Aircraft in
accordance with clauses (ii) and (iii) of the proviso to Section 9.02(b) of
the Lease and the Lessee in good faith determines to be obsolete or no longer
suitable or appropriate for use on the Airframe or any Engine.
Officer's Certificate. When delivered pursuant to the Indenture, a
certificate signed by a Responsible Officer of the Lessee or the Owner
Trustee, as the case may be, and delivered to the Indenture Trustee. Each
such certificate shall include the statements provided for in Section 15.07 of
the Indenture.
Operative Agreements. The Participation Agreement, the Trust
Agreement, AVSA's FAA ▇▇▇▇ of Sale, AVSA's Warranty ▇▇▇▇ of Sale, the Airbus
Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA,
the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the
Lease Supplement, the Owner Participant Guaranty, if any, the Owner Trustee
Guaranty, if any, any Ancillary Agreement entered into by or with the written
consent of the Indenture Trustee, which by its terms is an Operative
Agreement, the Certificates outstanding at the time of reference, the
Indenture, the Indenture and Security Agreement Supplement, the Consent and
Agreement, the AVSA Consent and Agreement, the Consent and Guaranty (to the
extent assigned by the Purchase Agreement Assignment), the Engine Consent, the
Tax Indemnity Agreement and any Assignment and Assumption Agreement, each as
amended from time to time.
Opinion of Counsel. When delivered pursuant to the Indenture, a
written opinion of legal counsel, who in the case of counsel (a) for the
Lessee may be (i) an attorney employed by the Lessee who is generally
empowered to deliver such written opinions, (ii) ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or a
successor firm or (iii) other counsel designated by the Lessee and reasonably
satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the
Indenture Trustee, an attorney selected by such Person and, in the case of the
Owner Trustee, reasonably satisfactory to the Indenture Trustee.
Original Agreements. The documents and instruments delivered on the
Delivery Date in connection with the transactions contemplated by the Original
Participation Agreement.
Original Ancillary Agreement I. The Ancillary Agreement I (Federal
Express Corporation Trust No. N667FE), among the Lessee, the Owner
Participant, the Indenture Trustee and the Owner Trustee as it was originally
executed on the Delivery Date.
Original Indenture. The Trust Indenture, Mortgage and Security
Agreement (Federal Express Corporation Trust No. N667FE), dated as of August
1, 1996, between the Owner Trustee and the Indenture Trustee, which together
with the Indenture and Security Agreement Supplement No. 1 (Federal Express
Corporation Trust No. N667FE), dated August 28, 1996 attached thereto was
recorded as one instrument by the FAA on August 29, 1996, and assigned
Conveyance Number 2A269964.
Original Lease. The Lease Agreement (Federal Express Corporation
Trust No. N667FE), dated as of August 1, 1996, between the Owner Trustee as
lessor, and the Lessee, which together with Lease Supplement No. 1 (Federal
Express Corporation Trust No. N667FE), dated August 28, 1996 attached thereto
was recorded as one instrument by the FAA on August 29, 1996, and assigned
Conveyance Number 2A269965.
Original Loan Certificates. The loan certificates issued on the
Delivery Date to the Original Loan Participants.
Original Loan Participants. The entities listed on Schedule I to the
Original Participation Agreement and their successors and assigns (other than
any assignees in connection with the Refunding Date).
Original Participation Agreement. The Participation Agreement
(Federal Express Corporation Trust No. N667FE), among the Lessee, the Owner
Participant, the Indenture Trustee, the Owner Trustee and the Original Loan
Participants as it was originally executed as of August 1, 1996.
Original Tax Indemnity Agreement. The Tax Indemnity Agreement
(Federal Express Corporation Trust No. N667FE) between the Lessee and the
Owner Participant as it was originally executed as of August 1, 1996.
Original Trust Agreement. The Trust Agreement (Federal Express
Corporation Trust No. N667FE) between the Owner Participant and the Owner
Trustee as it was originally executed as of August 1, 1996 and filed with the
FAA on August 28, 1996.
Outstanding. When used with respect to Certificates, as of the date
of determination and subject to the provisions of Section 10.04 of the
Indenture, all Certificates theretofore executed and delivered under the
Indenture, with the exception of the following:
(i) Certificates theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation pursuant to
Section 2.08 of the Indenture or otherwise;
(ii) Certificates for which prepayment money in the necessary amount
has been theretofore deposited with the Indenture Trustee in trust
for the Holders of such Certificates pursuant to Section 14.01 of the
Indenture; provided, that if such Certificates are to be prepaid,
notice of such prepayment has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Indenture Trustee
has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to Article II
of the Indenture.
Owner Participant. The trustor originally named in the Trust
Agreement and any successor thereto, and any Person to which Owner Participant
transfers, in accordance with the Trust Agreement, its right, title and
interest in and to the Operative Agreements and the Lessor's Estate.
Owner Participant Guarantor. The provider of an Owner Participant
Guaranty.
Owner Participant Guaranty. Any guaranty delivered in compliance with
Section 7.03(d) of the Participation Agreement.
Owner Trustee. FSB, not in its individual capacity except as
otherwise expressly stated, but solely as Owner Trustee under the Trust
Agreement, and its successors and permitted assigns.
Owner Trustee Guarantor. The provider of an Owner Trustee Guaranty.
Owner Trustee Guaranty. Any guaranty delivered in compliance with
Section 11.01(b)(ii) of the Participation Agreement.
Owner's Economic Return. The Owner Participant's anticipated net
after-tax book yield and aggregate after-tax cash during the Interim Term and
the Basic Term 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, Stipulated
Loss Value and Termination Value percentages, as the case may be, as such
assumptions may be adjusted for events which have been the basis of
adjustments to Rent pursuant to Section 3.04 of the Lease.
Participation Agreement. The Participation Agreement (Federal Express
Corporation Trust No. N667FE), dated as of August 1, 1996, as amended and
restated as of October 15, 1996, among the Lessee, the Original Loan
Participants, the Owner Trustee not in its individual capacity except as
otherwise expressly provided therein, but solely as owner trustee, the Owner
Participant, the Indenture Trustee not in its individual capacity except as
otherwise expressly provided therein, but solely as indenture trustee and the
Pass Through Trustee not in its individual capacity except as otherwise
expressly provided therein, but solely as pass through trustee, as amended,
modified or supplemented, or the terms thereof waived.
Parts. All appliances, parts, components, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines) which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine or title to which
remains vested in the Lessor pursuant to Article 8 of the Lease.
Pass Through Agreement. The Pass Through Trust Agreement dated as of
June 1, 1996 between the Lessee and the Pass Through Trustee, as such Pass
Through Agreement may be modified, supplemented or amended from time to time in
accordance with the provisions thereof.
Pass Through Certificates. Any of the 1996 Pass Through Certificates,
Series B1 or 1996 Pass Through Certificates, Series B2, in each case as issued
by the related Pass Through Trust; and "Pass Through Certificates" means both
of the Pass Through Certificates issued by each of the Pass Through Trusts.
Pass Through Closing Date. The Business Day on which the sale of the
Pass Through Certificates to the Underwriters pursuant to the Underwriting
Agreement takes place.
Pass Through Trust. The Federal Express Pass Through Trust, 1996-B1
or Federal Express Pass Through Trust, 1996-B2, in each case formed pursuant
to the related Series Supplement in accordance with the Pass Through
Agreement; and "Pass Through Trusts" means both of such Pass Through Trusts.
Pass Through Trustee. State Street Bank and Trust Company, a
Massachusetts trust company, in its capacity as Pass Through Trustee under the
Pass Through Agreement and each Pass Through Trust, and its successors and
permitted assigns as Pass Through Trustee thereunder.
Past Due Rate. In respect of (A) any amount payable to the Owner
Participant or the Owner Trustee a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 2% plus the Debt Rate and (B) any principal of or interest on
any Certificate or any other amount payable under the Indenture, any
Certificate or any other Operative Agreement that is not paid when due
(whether at Maturity, by acceleration, by optional or mandatory prepayment or
otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to (i) in the
case of any such amount payable to the Holder of any Certificate, 2% plus the
interest rate applicable to such Certificate and (ii) in the case of any other
such amount, 2% plus the Debt Rate.
Payment Date. November 28, 2019 and each January 30 and July 30
commencing on January 30, 1997.
Payment Default. Any event specified in Section 16.01(a) or 16.01(b)
of the Lease which with the giving of notice or lapse of time or both would
constitute an Event of Default.
Permitted Investments. Those investments enumerated in Section
23.01(a) (i), (ii), (iii) and (iv) of the Lease.
Person. Any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, entity or government (federal, state, local, foreign
or any agency, instrumentality, division or body thereof).
Preliminary Notice. Has the meaning specified in Section 4.01(a) of
the Lease.
Premium Termination Date. With respect to the Certificates having a
Maturity in 2012, October 23, 2006 and with respect to the Certificates having
a Maturity in 2018, June 23, 2016.
Prepayment Date. Has the meaning specified in Section 6.02(b) of the
Indenture.
Prepayment Price. Has the meaning specified in Section 6.02(b) of the
Indenture.
Property. Any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
Proposed Termination Date. The proposed date of termination of the
Lease as specified by the Lessee in its notice given pursuant to Section 10.01
thereof.
Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement,
dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits,
appendices and letter agreements attached thereto as originally executed or as
modified, amended or supplemented in accordance with the terms thereof, but
only to the extent that the foregoing relates to the Aircraft and to the
extent assigned pursuant to the Purchase Agreement Assignment.
Purchase Agreement Assignment. The Purchase Agreement Assignment
(Federal Express Corporation Trust No. N667FE), dated as of August 1, 1996
between the Lessor and the Lessee, as the same may be amended, modified or
supplemented from time to time.
Purchase Price. The amount specified as such in Ancillary Agreement
II.
Record Date. With respect to Payment Dates under the Indenture
(except a date for payment of defaulted interest), January 15 for January 30
Payment Dates and July 15 for July 30 Payment Dates, whether or not such date
is a Business Day.
Recourse Amount. Has the meaning specified in Section 17.10 of the
Participation Agreement.
Refinancing. A non-recourse loan to the Lessor arranged pursuant to
Section 15.01 of the Participation Agreement.
Refunding Date. A Business Day on which the refunding of the
Original Loan Certificates occurs, the expected date thereof having been
specified by the Lessee in a written notice given to the parties to the
Participation Agreement and the Underwriters at least three (3) Business Days
prior to such expected Refunding Date.
Register. Has the meaning set forth in Section 3.02 of the Indenture.
Registrar. Has the meaning set forth in Section 3.02 of the
Indenture.
Regulation D. Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
Remaining Weighted Average Life. For any Certificate, as of any
determination date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
mandatory sinking fund redemption payment of principal, including the payment
due on the Maturity of such Certificate, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse between such
determination date, and the date on which such payment is scheduled to be
made, by (b) the then outstanding principal amount of such Certificate.
Renewal Rent. The amount payable by the Lessee as rent in accordance
with Section 4.01 of the Lease during any Renewal Term.
Renewal Term. One or more terms with respect to which the Lessee has
exercised its option to renew the Lease pursuant to Section 4.01(a) thereof.
Rent. All payments due from the Lessee under the Lease as Basic Rent,
Renewal Rent and Supplemental Rent, collectively.
Rent Payment Date. November 28, 2019 and each January 30 and July 30
commencing on January 30, 1997.
Reoptimization Date. Has the meaning specified in Section 15.02(a)
of the Participation Agreement.
Replacement Aircraft. Any aircraft substituted for the Aircraft
pursuant to Section 11.03(a) of the Lease.
Replacement Airframe. Has the meaning set forth in Section 11.03 of
the Lease.
Replacement Engine. A General Electric CF6-80C2-A5F engine (or an
engine of the same or another manufacturer) of equal or greater value,
airworthiness, remaining useful life and utility as the Engine being replaced,
together with all Parts relating to such engine; provided, however, that if
such replacement engine is not a General Electric CF6-80C2-A5F engine, such
replacement engine must then be commonly used in the commercial aviation
industry on Airbus A300-600 airframes.
Responsible Officer. With respect to the Owner Trustee (except for
purposes of the Trust Agreement in which case the definition of Responsible
Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the
Indenture Trustee, any officer in its Corporate Trust Administration, as the
case may be, designated by such Person to perform obligations under the
Operative Agreements, and with respect to any other party, any corporate
officer or (except in the case of the Owner Participant) other employee of a
party who, in the normal performance of his or her operational
responsibilities, with respect to the subject matter of any covenant,
agreement or obligation of such party pursuant to any Operative Agreement,
would have responsibility for and knowledge of such matter and the
requirements of any Operative Agreement with respect thereto.
S&P. Standard & Poor's Ratings Group.
SEC. The Securities and Exchange Commission of the United States and
any successor agencies or authorities.
SSB. State Street Bank and Trust Company, a Massachusetts trust
company.
Securities Act. The Securities Act of 1933, as amended.
Series Supplement. The Series Supplement 1996-B1 to be executed and
delivered by the Lessee and the Pass Through Trustee or the Series Supplement
1996-B2 to be executed and delivered by the Lessee and the Pass Through
Trustee, in each case as such Series Supplement may be modified, supplemented
or amended from time to time in accordance with the provisions thereof and
"Series Supplements" means both such Series Supplements.
Sinking Fund Redemption Date. Has the meaning specified in Section
6.06 of the Indenture.
Sinking Fund Redemption Price. Has the meaning specified in Section
6.06 of the Indenture.
Special Aviation Counsel. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇.
Stipulated Loss Value. As of any Stipulated Loss Value Determination
Date during the Basic Term, the amount determined by multiplying the Purchase
Price by the percentage set forth in Schedule III of the Lease under the
heading "Stipulated Loss Value Factor" opposite such date (as such Schedule
III may be adjusted from time to time as provided in Section 3.04 of the
Lease), and during any Renewal Term, the amount determined pursuant to Section
4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or
the Participation Agreement or the Indenture, each Stipulated Loss Value for
the Aircraft shall be, under any circumstances and in any event, an amount,
together with so much of the arrears portion of Basic Rent due and owing
through the date of payment of Stipulated Loss Value as does not constitute an
Excepted Payment, at least sufficient to pay in full as of such date of
payment the aggregate unpaid principal amount of and accrued interest on the
Certificates outstanding on such date of payment. Subject to the immediately
preceding sentence, it is understood and agreed that the amounts set forth on
Schedule III of the Lease, for dates other than Rent Payment Dates on which
arrears Basic Rent is due, fully reflect appropriate Basic Rent accruals and
credits of unearned Basic Rent through such date and, accordingly, no further
accrual or credit shall be required through such date whenever Stipulated Loss
Value is to be calculated with reference to any such date; provided that if
amounts in respect of Stipulated Loss Value are payable under the Operative
Agreements after the Stipulated Loss Determination Date in respect of which
such Stipulated Loss Value was determined, the Lessor shall be compensated
during the period from the Stipulated Loss Determination Date to such payment
date in accordance with the provisions of the Operative Agreements.
Stipulated Loss Value Determination Date. Each date set forth on
Schedule III of the Lease under the heading "Stipulated Loss Value Date."
Supplemental Rent. All amounts, liabilities and obligations which
the Lessee assumes or agrees to perform or pay under the Lease or under the
Participation Agreement or Tax Indemnity Agreement or any Ancillary Agreement
or any other Operative Agreement to the Lessor, the Owner Participant, the
Indenture Trustee or others, including, without limitation, payments of
Stipulated Loss Value, FPO Price and amounts calculated by reference to
Termination Value, any amounts of Make-Whole Premium payable under the
Indenture to the extent provided in Section 3.03 of the Lease, and all amounts
required to be paid by Lessee under the agreements, covenants and indemnities
contained in the Lease or in the Participation Agreement or the Tax Indemnity
Agreement or any other Operative Agreement, but excluding Basic Rent.
Tax. Has the meaning set forth in Section 8.01(a) of the
Participation Agreement.
Tax Indemnity Agreement. The Original Tax Indemnity Agreement as
amended by Amendment No. 1 to the Original Tax Indemnity Agreement, as from
time to time modified, amended or supplemented pursuant to its applicable
provisions.
Term. The Interim Term and the Basic Term of the lease for the
Aircraft under the Lease and, if renewed pursuant to Section 4.01 of the
Lease, each Renewal Term for the Aircraft for which the Lease is renewed, or
such earlier date on which the Lease is terminated pursuant to its terms.
Termination Date. A Rent Payment Date during the Basic Term that is
on or after December 31, 2003 in the case of Article 10 of the Lease, and in
the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling
on January 30, 2015, (ii) Section 4.02(a)(D) or (E) of the Lease, a Rent
Payment Date that is on or after the seventh anniversary of the Commencement
Date and (iii) Section 4.02(a)(F) of the Lease, the last day of the Basic Term.
Termination Value. As of any Termination Date, the amount determined
by multiplying the Purchase Price by the percentage set forth in Schedule IV
of the Lease under the heading "Termination Value Factor" opposite such
Termination Date (as such Schedule IV may be adjusted from time to time as
provided in Section 3.04 of the Lease). Notwithstanding any other provisions
of the Lease, the Participation Agreement or the Indenture, each Termination
Value shall be, under any circumstances and in any event, an amount, together
with so much of the arrears portion of Basic Rent due and owing through the
date of payment of any amount calculated by reference to Termination Value as
does not constitute an Excepted Payment, at least sufficient to pay in full as
of such date of payment the aggregate unpaid principal amount of and accrued
interest on the Certificates outstanding on such date of payment. Subject to
the immediately preceding sentence, it is understood and agreed that the
amounts set forth on Schedule IV of the Lease, for dates other than Rent
Payment Dates on which arrears Basic Rent is due, fully reflect appropriate
Basic Rent accruals and credits of unearned Basic Rent through such date and,
accordingly, no further accrual or credit shall be required through such date
whenever Termination Value is to be calculated with reference to any such
date; provided that if amounts in respect of Termination Value are payable
under the Operative Agreements after the Termination Date in respect of which
such Termination Value was determined, the Lessor shall be compensated during
the period from the Termination Date to such payment date in accordance with
the provisions of the Operative Agreements.
Transaction Costs. Those costs and expenses set forth in Section
10.01(a) of the Participation Agreement.
Transportation Code. Title 49 of the United States Code, as amended
and in effect on the date of the Lease or as subsequently amended, or any
successor or substituted legislation at the time in effect and applicable, and
the regulations promulgated pursuant thereto.
Treasury Yield. (i) In the case of a Certificate having a Maturity
within one year after the Prepayment Date the average yield to maturity on a
government bond equivalent basis of the applicable United States Treasury ▇▇▇▇
due the week of Maturity of such Certificate and (ii) in the case of a
Certificate having a Maturity one year or more after the Prepayment Date, the
average yield of the most actively traded United States Treasury Note (as
reported by Cantor ▇▇▇▇▇▇▇▇▇▇ Securities Corp. on page 5 of Telerate Systems,
Inc., a financial news service, or if such report is not available, a source
deemed comparable by the Independent Investment Banker selected to determine
the Make-Whole Premium and reasonably acceptable to the Lessee) corresponding
in maturity to the Remaining Weighted Average Life of such Certificate (or, if
there is no corresponding maturity, an interpolation of maturities by the
Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Make-Whole Premium based on the
average of the yields to stated maturity determined from the bid prices as of
10:00 a.m. and 2:00 p.m. New York time, on the second Business Day preceding
the Prepayment Date.
Trust Agreement. The Trust Agreement (Federal Express Corporation
Trust No. N667FE), dated as of August 1, 1996, as amended and restated as of
October 15, 1996, between the Owner Participant and the Owner Trustee in its
individual capacity, as from time to time modified, amended or supplemented
pursuant to its applicable provisions and in accordance with the Operative
Agreements.
Trust Estate. The Lessor's Estate.
Trust Indenture Act. The Trust Indenture Act of 1939, as amended.
Trust Indenture Estate. All estate, right, title and interest of the
Indenture Trustee in and to any of the property, rights, interests and
privileges granted to the Indenture Trustee pursuant to the Granting Clause of
the Indenture, other than Excepted Payments and any and all other rights of
the Owner Trustee or the Owner Participant expressly reserved to the Owner
Trustee or the Owner Participant pursuant to the Indenture.
Underwriters. ▇▇▇▇▇▇▇, Sachs & Co., ▇.▇. ▇▇▇▇▇▇ Securities Inc.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, BA Securities, Inc. and First Chicago
Capital Markets, Inc.
Underwriting Agreement. The Underwriting Agreement dated October 17,
1996 among the Lessee and the Underwriters.
United States, U.S. or US. The United States of America.
U.S. Air Carrier. Any United States air carrier as to which there is
in force a certificate issued pursuant to Section 41102(a) or Section 41103 of
the Transportation Code, and as to which there is in force an air carrier
operating certificate issued pursuant to Chapter 447 of the Transportation
Code and Part 121 of the regulations under such Transportation Code, for
aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or
more of cargo, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provision thereof or in absence
thereof.
U.S. Person. A Person described in Section 7701(a)(30) of the Code.
SCHEDULE II
BASIC RENT
(As a Percentage of Purchase Price)
Rent
Payment
Date Advance Arrears
[On each Payment Date, Lessee will pay as Basic Rent an amount
that will be at least sufficient to pay in full, as of such
Payment Date, the aggregate unpaid principal amount of due and
unpaid installments on the Certificates outstanding on such
Payment Date, together with the accrued and unpaid interest
thereon.]
SCHEDULE III
STIPULATED LOSS VALUES
Stipulated Loss
Date Value Factor
[Stipulated Loss Value will be an amount at least sufficient to
pay in full, as of the date of payment thereof, the aggregate
unpaid principal amount of the Certificates outstanding on such
date of payment, together with the accrued and unpaid interest
thereon.]
SCHEDULE IV
TERMINATION VALUES
Termination Termination
Date Value Factor
[Termination Value will be an amount at least sufficient to pay
in full, as of the date of payment thereof, the aggregate
unpaid principal amount of the Certificates outstanding on such
date of payment, together with the accrued and unpaid interest
thereon.]
SCHEDULE V
PURCHASE OPTION SCHEDULE
(D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease.
In the event of any Significant Expenditure (as defined below) with respect
to the Aircraft, which the Lessee has certified in a certificate of the
Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Treasurer or Assistant Treasurer furnished to the
Lessor, the Indenture Trustee and the Owner Participant, is (as determined
in the Lessee's sole discretion) necessary, desirable or required to be
made at any time on or after the seventh anniversary of the Commencement
Date, the Lessee may elect to terminate the Lease and purchase the Aircraft
on (and only on) the first Rent Payment Date occurring at least six months
after the Owner Participant have notified the Lessee that they will not
permit such Significant Expenditure to be financed as contemplated in
clause (ii) of the definition of "Significant Expenditure" below, for, at
the Lessee's option, either (1) the payment to the Lessor in immediately
available funds of an amount equal to the greater of the Fair Market Value
of the Aircraft and the Termination Value for the Aircraft, determined in
each case as of such Rent Payment Date, or (2) the assumption by the
Lessee, pursuant to Section 7.11 of the Participation Agreement and Section
2.12 of the Indenture, of all of the Lessor's obligations under the
Indenture, the Certificates and Section 7.04 of the Participation
Agreement, and the payment to the Lessor in immediately available funds of
an amount equal to the excess of (A) the greater of (I) the Termination
Value for the Aircraft, and (II) the Fair Market Value of the Aircraft,
both computed as of such Rent Payment Date, over (B) the unpaid principal
amount of the Certificates outstanding plus accrued interest as of such
date; it being understood that the Fair Market Value for this purpose shall
be determined without regard to any Significant Expenditure not yet made.
For purposes of this paragraph (D) the term "Significant Expenditure"
means a single expenditure or a series of related expenditures in respect
of non-severable improvements (i.e. improvements which cannot by the terms
of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in
the Lessee's reasonable judgment (or, in the event the Owner Participant
disagrees with such judgment, in accordance with the appraisal procedures
set forth in Section 4.03 of the Lease) would exceed $10,000,000 and (ii)
the Owner Participant will not permit to be financed on similar terms and
conditions then available for similar transactions for like-situated
lessees through the issuance of additional non-recourse notes of the Lessor
or through additional equity investments of the Owner Participant or both
(it being understood that Section 4.02(a)(D) of the Lease shall not impose
any obligation on the Owner Participant to provide such financing). The
Lessee, prior to notifying the Owner Participant and the Indenture Trustee
in accordance with Paragraph (F) of this Schedule V of its election to
purchase the Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall
notify the Owner Participant of the non-severable improvements which would
satisfy the conditions described in clauses (i) and (iii) of the preceding
sentence, and provide the Owner Participant with a reasonable opportunity
to permit the financing thereof as contemplated in clause (ii) of such
sentence. The Owner Participant shall notify the Lessee of their decision
with respect to such financing within 60 days after the Lessee has given
the notice described in the preceding sentence.
(E) Purchase Option Referred to in Section 4.02(a)(E) of the Lease.
In the event that a Burdensome Indemnity Payment shall occur at any time on
or after the seventh anniversary of the Commencement Date, the Lessee may
elect to terminate the Lease and purchase the Aircraft on (and only on) the
first Rent Payment Date (the "Burdensome Indemnity Payment Date") following
the date that the Owner Participant provides the Lessee with a written
notice of any Loss (as defined in Section 5 of the Tax Indemnity Agreement)
that is a Burdensome Indemnity Payment for, at the Lessee's option, either
(1) the payment to the Lessor in immediately available funds of an amount
equal to the greater of the Fair Market Value of the Aircraft and the
Termination Value for the Aircraft, determined in each case as of such
Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee,
pursuant to Section 7.11 of the Participation Agreement and Section 2.12
of the Indenture, of all of the obligations of the Lessor under the
Indenture, the Certificates and Section 7.04 of the Participation Agreement
and the payment to the Lessor in immediately available funds of an amount
equal to the excess of (A) the greater of (I) the Termination Value for the
Aircraft and (II) the Fair Market Value of the Aircraft, both computed as
of the Burdensome Indemnity Payment Date, over (B) the unpaid principal of
the Certificates outstanding plus accrued interest as of such date.
For purposes of this paragraph (E), the term "Burdensome Indemnity
Payment" means a Loss as defined in the Tax Indemnity Agreement which under
the circumstances cannot be commercially reasonably avoided by the Lessee
which causes the aggregate net present value as of the determination date,
discounted semi-annually at the Debt Rate, of all such Losses (but
excluding any Losses for which the Owner Participant shall have waived its
right to payment under the Tax Indemnity Agreement) paid or payable by the
Lessee which, in the opinion of independent tax counsel, can be avoided
through a purchase by the Lessee of the Aircraft, to exceed 3% of the
Purchase Price.
(F) Notice from the Lessee. The Lessee shall give the Lessor, the
Owner Participant and the Indenture Trustee not more than 180 days nor less
than 90 days prior written notice of its election to purchase pursuant to
Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either
direct the Lessor to prepay the Certificates in full on such Termination
Date pursuant to Section 6.02 of the Indenture or state that the Lessee
shall exercise its option to assume the Certificates pursuant to Section
7.11 of the Participation Agreement and Section 2.12 of the Indenture. The
Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) hereof shall
become irrevocable on the Business Day preceding the 15th day prior to the
applicable purchase date designated in such notice but if any such notice
is revoked, the Lessee shall no longer be entitled to purchase the Aircraft
as a result of the facts and circumstances originally giving rise to such
right and will pay all reasonable expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection therewith.
SCHEDULE VI
DESCRIPTION OF ORIGINAL LEASE
Lease Agreement (Federal Express Corporation Trust No. N667FE) dated
as of August 1, 1996 between Federal Express Corporation, as lessee and First
Security Bank, National Association, as owner trustee under Trust Agreement
(Federal Express Corporation Trust No. N667FE) dated as of August 1, 1996
between PMCC Leasing Corporation, as owner participant and First Security
Bank, National Association, recorded by the Federal Aviation Administration on
August 29, 1996 and assigned Conveyance No. 2A269965, as supplemented by the
following described instrument:
FAA FAA
Date of Recording Conveyance
Instrument Instrument Date Number
---------- ---------- --------- -----------
Lease Supplement No. 1
(Federal Express Corporation
Trust No. N667FE) 08/28/96 08/29/96 2A269965
Exhibit A
to
Lease Agreement
THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT
NO. __ IS SUBJECT TO A SECURITY INTEREST
LEASE SUPPLEMENT NO. __
(Federal Express Corporation Trust No. N667FE)
LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No.
N667FE), dated ________ __, ____, between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
but solely as Owner Trustee under the Trust Agreement (Federal Express
Corporation Trust No. N667FE) dated as of August 1, 1996, as amended and
restated as of October 15, 1996 (the "Lessor"), and FEDERAL EXPRESS
CORPORATION, a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have entered into that certain
Lease Agreement (Federal Express Corporation Trust No. N667FE) dated as of
August 1, 1996, as amended and restated as of October 15, 1996 (the "Lease",
the defined terms in the Lease being used in this Lease Supplement with the
same meaning as in the Lease), which provides for the execution and delivery
of a Lease Supplement, substantially in the form of this Lease Supplement No.
__, for the purpose of leasing under the Lease the aircraft and engines
described below ("Aircraft") as and when delivered by the Lessor to the Lessee
in accordance with the terms of the Lease;
WHEREAS, the Lease relates to the Aircraft;
WHEREAS, a counterpart of the Lease is attached to and made a part of
this Lease Supplement, and this Lease Supplement, together with such
attachment, is being filed for recordation on this date with the FAA as one
document.
NOW, THEREFORE, for and in consideration of the premises and other
good and sufficient consideration, the Lessor and the Lessee agree as follows:
Section 1. Delivered Aircraft. The Lessor hereby delivers and
leases to the Lessee under the Lease, and the Lessee hereby accepts and leases
from the Lessor under the Lease, the following described Airbus A300F4-605R
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
of this Lease Supplement consists of the following:
(a) Airbus ▇▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇; U.S. Registration Number ______;
Manufacturer's Serial No. ___; and
(b) Two (2) General Electric CF6-80C2-A5F 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).
Section 2. Delivery Date. The Delivery Date of the Delivered
Aircraft is the date of this Lease Supplement.
Section 3. Purchase Price. The Purchase Price of the Delivered
Aircraft shall be the amount set forth in Ancillary Agreement II.
Section 4. Term. The Term for the Delivered Aircraft shall commence
on the Delivery Date, and shall terminate on ______, ____, unless earlier
terminated or extended pursuant to the terms of the Lease.
Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent
for the Delivered Aircraft throughout the Term thereof in accordance with the
terms and provisions of the Lease.
Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee
hereby confirms to the Lessor that the Delivered Aircraft has been duly marked
in accordance with Section 7.03 of the Lease and that the Lessee has accepted
the Delivered Aircraft for all purposes hereof and of the Lease, and as being
free and clear of all Liens except Lessor's Liens. Such acceptance by the
Lessee shall be without prejudice to any rights of the Lessor or the Lessee
against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of
equipment included in the Aircraft.
Section 7. Incorporation of Lease By Reference. All the provisions
of the Lease are hereby incorporated by reference in this Lease Supplement to
the same extent as if fully set forth in this Lease Supplement.
Section 8. Governing Law. THIS LEASE SUPPLEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND
IS BEING DELIVERED IN THE STATE OF NEW YORK.
Section 9. Agreement as Chattel Paper. To the extent that this Lease
Supplement constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Lease Supplement may be created through the transfer or
possession of any counterpart other than the original chattel-paper
counterpart, which shall be the counterpart containing the receipt executed by
the Indenture Trustee on its signature page.
Section 10. Counterparts. This Lease Supplement may be executed in
any number of counterparts, each of which shall be an original (except that
only the counterpart bearing the receipt executed by Indenture Trustee shall
be the original for purposes of perfecting a security interest therein as
chattel paper under the Uniform Commercial Code), but all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Lease Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written.
LESSOR: FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By: __________________________________________
Name:
Title:
LESSEE: FEDERAL EXPRESS CORPORATION
By: ___________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Treasurer and
Managing Director -
Structured Finance
Receipt of this original counterpart of the Lease Supplement is hereby
acknowledged on this __ day of _________.
Indenture Trustee: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Indenture Trustee
By: _____________________________________________
Name:
Title: