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EXHIBIT 4.19
Doc. No. 1.02
Aircraft N398UA
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LEASE AGREEMENT
(1994 737 B)
Dated as of September 1, 1994
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly
provided herein, but solely as
Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
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As set forth in Section 20 hereof, Lessor has assigned to the
Indenture Trustee (as defined herein) certain of its right, title and interest
in and to this Lease. To the extent, if any, that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction) no security interest in this Lease may
be created through the transfer or possession of any counterpart other than the
original executed counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by the Indenture Trustee on the
signature page thereof.
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TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Acceptance and Lease . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Interim Term and Basic Term . . . . . . . . . . . . . . . . 18
(b) Interim Rent and Basic Rent . . . . . . . . . . . . . . . . 18
(c) Adjustments to Basic Rent, Interim Rent, Excess Amount,
Stipulated Loss Values, Termination Values and the
EBO Percentage . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Supplemental Rent . . . . . . . . . . . . . . . . . . . . . 21
(e) Payments in General . . . . . . . . . . . . . . . . . . . . 22
(f) Prepayments of Certain Rent Payments . . . . . . . . . . . . 23
SECTION 4. Lessor's Representations and Warranties . . . . . . . . . . . . 24
SECTION 5. Return of the Aircraft . . . . . . . . . . . . . . . . . . . . 25
(a) Condition Upon Return . . . . . . . . . . . . . . . . . . . 25
(b) Return of Other Engines . . . . . . . . . . . . . . . . . . 29
(c) Fuel and Manuals . . . . . . . . . . . . . . . . . . . . . . 29
(d) Storage Upon Return . . . . . . . . . . . . . . . . . . . . 30
(e) Severable Parts . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7. Registration, Maintenance and Operation; Possession and Subleases;
Insignia . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) (1) Registration and Maintenance . . . . . . . . . . . . 31
(2) Operation . . . . . . . . . . . . . . . . . . . . . . 32
(3) Reregistration . . . . . . . . . . . . . . . . . . . 33
(b) Possession and Subleases . . . . . . . . . . . . . . . . . . 34
(c) Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions . . . . . . . . . . . . . . . . . 39
(a) Replacement of Parts . . . . . . . . . . . . . . . . . . . . 39
(b) Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . 40
(c) Alterations, Modifications and Additions . . . . . . . . . . 40
SECTION 9. Early Termination . . . . . . . . . . . . . . . . . . . . . . . 42
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(a) (Intentionally Omitted) . . . . . . . . . . . . . . . . . . 42
(b) Termination for Obsolescence/Surplus . . . . . . . . . . . . 42
(c) Sale of the Aircraft . . . . . . . . . . . . . . . . . . . . 43
(d) Termination as to Engines . . . . . . . . . . . . . . . . . 45
SECTION 10. Loss, Destruction, Requisition, etc. . . . . . . . . . . . . . 45
(a) Event of Loss with Respect to the Aircraft . . . . . . . . . 45
(b) Event of Loss with Respect to an Engine . . . . . . . . . . 49
(c) Application of Payments from
Governmental Authorities for Requisition of
Title, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft . . . . 51
(e) Requisition for Use of an Engine by the
United States Government or the
Government of Registry of the Aircraft . . . . . . . . . . . 52
(f) Application of Payments During Existence
of Events of Default. . . . . . . . . . . . . . . . . . . . . 52
SECTION 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) Public Liability and Property Damage Insurance . . . . . . . 53
(b) Insurance Against Loss or Damage to the Aircraft . . . . . . 54
(c) Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . 56
(d) Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . 57
(e) Additional Insurance by Lessor and Lessee . . . . . . . . . 58
(f) Indemnification by Government in Lieu of Insurance . . . . . 58
(g) Application of Payments During Existence
of an Event of Default . . . . . . . . . . . . . . . . . . . . 58
(h) Terms of Insurance Policies . . . . . . . . . . . . . . . . 58
SECTION 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 16. Lessee's Cooperation Concerning Certain Matters . . . . . . . 67
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SECTION 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc. . . . . . . . . . . 70
SECTION 19. Renewal Options; Purchase Options; Valuation . . . . . . . . . 72
(a) Renewal Options . . . . . . . . . . . . . . . . . . . . . . 72
(1) Fixed Renewal Term . . . . . . . . . . . . . . . . . 72
(2) Fair Market Renewal Term . . . . . . . . . . . . . . 73
(3) Waiver . . . . . . . . . . . . . . . . . . . . . . . 74
(4) Conditions Precedent, Payment of Basic Rent . . . . . 74
(5) Termination Value; Stipulated Loss Value . . . . . . 74
(b) Purchase Options . . . . . . . . . . . . . . . . . . . . . . 74
(c) Valuation . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 20. Security for Lessor's Obligation to Holders of Certificates . 76
SECTION 21. Lessor's Right to Perform for Lessee . . . . . . . . . . . . . 77
SECTION 22. Investment of Security Funds; Liability of Lessor Limited . . 77
(a) Investment of Security Funds . . . . . . . . . . . . . . . . 77
(b) Liability of Lessor Limited . . . . . . . . . . . . . . . . 78
SECTION 23. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 24. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 25. Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . 80
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent, Interim Rent and Excess Amount Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Termination Value Schedule
EXHIBIT E Rent Recalculation and Indemnification Verification
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EXHIBIT F Schedule of Countries Authorized for Domicile of Permitted
Sublessees
EXHIBIT G Schedule of Countries Authorized for Aircraft Registration
EXHIBIT H Lessor's Cost, Special Purchase Option Dates, EBO Date and EBO
Percentage
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LEASE AGREEMENT (1994 737 B)
This LEASE AGREEMENT (1994 737 B), dated as of September 1, 1994,
between FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee under the Trust Agreement (as defined in
Section 1 hereof) (in such capacity, "Lessor"), and UNITED AIR LINES, INC., a
corporation organized and existing pursuant to the laws of the State of
Delaware ("Lessee").
WITNESSETH:
SECTION 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease Agreement and shall be equally applicable to both the singular and the
plural forms of the terms herein defined:
"Acceptable Alternate Engine" means a CFM International, Inc.
Model CFM-C56-3B1 or CFM-C56-3C1 engine or an engine of the same or another
manufacturer of equivalent or greater value and utility, and suitable for
installation and use on the Airframe; provided that such engine (i) shall be of
the same (it being agreed that for the purposes of this clause (i) a Model CFM-
C56-3B1 engine and a Model CFM-C56-3C1 engine is deemed to be the same model
engine) make, model and manufacturer as the other engine installed on the
Airframe and (ii) shall be an engine of a type then being utilized by Lessee on
other Boeing 737-322 aircraft operated by Lessee and shall have been
maintained, serviced, repaired and overhauled in substantially the same manner
as Lessee maintains, services, repairs and overhauls similar engines utilized
by Lessee and without in any way discriminating against such engine; and
provided further that at the time of the return of the Aircraft pursuant to
Section 5 hereof, notwithstanding the parenthetical agreement in clause (i) of
the preceding proviso, at least one of such engines shall be a CFM
International, Inc. Model CFM-C56-3C1 engine or an engine of the same or
another manufacturer of equivalent or greater value and utility, and suitable
for installation and use on the Airframe, which otherwise meets the
requirements of clauses (i) and (ii) of the preceding proviso.
"Actual Knowledge" means, (i) as it applies to the Owner Trustee
or Indenture Trustee, as the case may be, actual knowledge of a responsible
officer in the Trust Office or the Corporate Trust Department, as the case may
be, and (ii) as it applies to the Owner Participant, actual knowledge of a Vice
President or more senior officer of the Owner Participant or other officer of
the Owner Participant in each case having responsibility for the transactions
contemplated by the Operative Documents; provided that each of the Owner
Trustee, and the Indenture Trustee and the Owner Participant shall be deemed to
have "Actual Knowledge" of any matter as to which it has been given notice by
any of Lessee, the Owner Participant, any
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[Lease Agreement (1994 737 B)]
Holder, the Owner Trustee or the Indenture Trustee, such notice having been
given pursuant to and in accordance with Section 13(a) of the Participation
Agreement.
"Additional Insured" means Lessor, in its individual capacity and
as owner of the Aircraft, the Indenture Trustee, the Owner Participant, Lessee
in its capacity as sublessor under any Sublease, and the Original Loan
Participant (so long as it holds any Certificate), and each of their respective
Affiliates, successors and permitted assigns, and the respective directors,
officers and employees of each of the foregoing.
"Affiliate" means a Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under a
common control with, another Person, (ii) which beneficially owns or holds 10%
or more (by number of votes) of any class of voting securities of such other
Person or (iii) 10% or more (by number of votes) of the voting securities (or
in the case of a Person which is not a corporation, 10% or more of the equity
interest) of which is beneficially owned or held by such other Person or a
Subsidiary. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aircraft" means the Airframe together with the two Engines
whether or not such Engines are installed on the Airframe or any other
airframe.
"Airframe" means: (i) The Boeing Company Model 737-322 aircraft
(excluding Engines or engines from time to time installed thereon) specified by
United States Registration Number and Manufacturer's serial number in the Lease
Supplement; (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but
where title to which remains vested in Lessor in accordance herewith; and (iii)
any replacement airframe which may from time to time be substituted pursuant to
Section 10(a)(ii) hereof.
"Assumed Interest Rate" has the meaning set forth in Section 3(b)
hereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended from time to time.
"Base Rate" means the rate of interest announced from time to
time by The Mitsubishi Trust and Banking Corporation at its New York Branch as
its "prime or base rate" (or its equivalent successor rate if the "prime or
base rate" is no longer used).
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(b) hereof, as increased or decreased, as the
case may be, by the Rent Differential
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[Lease Agreement (1994 737 B)]
Amount (as defined in Section 3(b) hereof), and as adjusted as provided in
Section 3(c) hereof and, for a Renewal Term, Basic Rent determined pursuant to
Section 19 hereof.
"Basic Term" means the term for which the Aircraft is leased
hereunder pursuant to Section 3(a) hereof beginning on the Commencement Date
and ending on the Basic Term Expiry Date, or such earlier date as this Lease
may be terminated in accordance with the terms hereof.
"Basic Term Expiry Date" means March 28, 2016.
"Break Amount" has the meaning set forth in the Trust Indenture.
"Business Day" means any day other than a Saturday or Sunday or a
day on which commercial banks are required or authorized to close in the City
of Chicago, Illinois; New York City, New York; the city and state in which the
principal place of business of the Owner Trustee is located; and, so long as
any Certificate is outstanding, the city and state in which the Indenture
Trustee has its principal place of business and the city and state in which the
Indenture Trustee receives and disburses funds; provided, however, so long as
the Original Loan Participant holds any Certificate such day must also
constitute a Eurodollar Business Day (as defined in the Trust Indenture) in
order to be deemed a Business Day hereunder.
"Certificate" has the meaning set forth in the Trust Indenture.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air
Fleet Program administered by the United States Government pursuant to
Executive Order No. 11490, as amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended
through the Delivery Date.
"Commencement Date" means July 1, 1995.
"Commitment" means the commitment of the Original Loan
Participant or of the Owner Participant, as the case may be, to finance the
Owner Trustee's payment of Lessor's Cost for the Aircraft.
"Consent and Agreement" means the Consent and Agreement (1994 737
B) dated as of the date hereof executed by the Manufacturer, as the same may be
amended, modified or supplemented from time to time in accordance with the
applicable provisions thereof.
"Corporate Trust Department" means the principal office of the
Indenture Trustee located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust
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[Lease Agreement (1994 737 B)]
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 Lessee, the Owner Participant, the Owner
Trustee and each Holder.
"Debt Rate" means, at any time, the interest rate borne by the
Certificates then outstanding.
"Default" means any event which with the giving of notice or the
lapse of time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement
for the Aircraft, which date shall be the date the Aircraft is sold by Lessee
to Lessor and leased by Lessor to Lessee and accepted by Lessee hereunder.
"Dollars" and "$" mean the lawful currency of the United States
of America.
"EBO Date" means the date therefor specified in Exhibit H hereto.
"EBO Percentage" means the amount determined by multiplying
Lessor's Cost by the percentage specified in Exhibit H or, if Lessee elects to
pay the EBO Percentage in installments, the amounts determined by multiplying
Lessor's Cost by the percentage set forth opposite such installment payment
dates specified in Exhibit H (as such Exhibit H may be adjusted from time to
time as provided in Section 3(c) hereof).
"Engine" means (i) each of the two CFM International, Inc. Model
CFM-C56-3B1 or CFM-C56-3C1 engines listed by manufacturer's serial numbers in
the initial Lease Supplement (each of which engines, if originally a Model CFM-
C56-3B1 engine may subsequently be modified in such a manner as to constitute a
Model CFM-C56-3C1 engine), and whether or not from time to time installed on
such Airframe or any other airframe; (ii) any Acceptable Alternate Engine which
may from time to time be substituted for any of such two engines pursuant to
the terms hereof; and (iii) in either case, any and all Parts which are from
time to time incorporated or installed in or attached to any such engine and
any and all Parts removed therefrom so long as title thereto remains vested in
Lessor in accordance herewith. The term "Engines" means, as of any date of
determination, all Engines then leased hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" has the meaning specified in Section 14
hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such property: (i) the
loss of such property or of the use
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[Lease Agreement (1994 737 B)]
thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for normal
use by Lessee for any reason whatsoever; (ii) any damage to such property which
results in an insurance settlement with respect to such property on the basis
of a total loss, or a constructive or compromised total loss; (iii) the theft
or disappearance of such property, or the confiscation, condemnation, or
seizure of, or requisition of title to, or use of, such property by any
governmental or purported governmental authority (other than a requisition for
use by the United States Government or any government of registry of the
Aircraft or any agency or instrumentality thereof), which in the case of any
event referred to in this clause (iii) shall have resulted in the loss of title
or possession of such property by Lessee for a period in excess of 90
consecutive days or, if earlier, until the end of the Term; (iv) as a result of
any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft having
jurisdiction, use of such property in the normal course of the business of air
transportation shall have been prohibited for a period in excess of 180
consecutive days, unless (A) such grounding is applicable to Lessee's entire
fleet of Boeing 737-322 aircraft registered in such country, (B) Lessee, prior
to the expiration of such 180 day period, shall have undertaken and shall be
diligently carrying forward, in a manner that does not discriminate against the
Aircraft, all steps which are necessary or desirable to permit the normal use
of such property by Lessee, and (C) Lessee, within one year from the time of
grounding shall have conformed at least one such aircraft in its fleet to the
requirements of any such law, rule, regulation, order or other action and
commenced regular commercial use of the same in such jurisdiction, provided
that no such grounding shall extend beyond the expiration of the Basic Term and
any applicable Renewal Term; (v) the requisition for use by the United States
Government or any government of registry of the Aircraft or any instrumentality
or agency thereof, which in the case of any agency or instrumentality of the
United States Government, the obligations of which are guaranteed by the full
faith and credit of the United States Government, which shall have occurred
during the Basic Term (or the Interim Term or any Renewal Term) and shall have,
in the case of any government of registry of the Aircraft (other than the
United States Government, continued for more than two years (or, if earlier,
until the end of the Term), and in the case of the United States Government
shall have continued for a period that extends beyond the Term and Lessor shall
not have furnished the written notice specified in Section 10(d) hereof; (vi)
the operation of or location of the Aircraft, while under requisition for use
by any government, in any area excluded from coverage by any insurance policy
in effect with respect to the Aircraft required by the terms of Section 11,
unless in the case of a requisition by the government of the United States or
any government of registry or any agency or instrumentality thereof, Lessee
shall have obtained an indemnity in lieu thereof from such government (provided
that in the case of any indemnity provided by a government other than the
government of the United States (or any agency or instrumentality thereof),
Lessor and the Indenture Trustee (but in regard to the Indenture Trustee, only
so long as the Original Loan Participant is a Holder) shall have received an
opinion, in form and substance reasonably satisfactory to Lessor, as to the
enforceability of such indemnity within 15 Business Days of such requisition);
and (vii) any divestiture of title to an Engine treated as an
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[Lease Agreement (1994 737 B)]
Event of Loss pursuant to Section 7(b) hereof. An Event of Loss with respect
to the Aircraft shall be deemed to have occurred if an Event of Loss occurs
with respect to the Airframe.
"Excess Amount" for the Commencement Date means the amount
determined by multiplying Lessor's Cost by the percentage specified in Exhibit
B hereto opposite the Commencement Date (as such Exhibit B may be adjusted from
time to time as provided in Section 3(c) hereof); provided, however, to the
extent that the aggregate amount of interest due and payable for the period
from, and including, the Delivery Date to, but excluding, the Commencement Date
on the Certificates is less or more than the aggregate amount of interest on
the Certificates that would have been due and payable for such period if such
Certificates had borne interest at the Assumed Interest Rate during such
period, such amount shall be decreased or increased, as the case may be, by the
amount of such differential.
"Excluded Payments" has the meaning set forth in the Trust
Indenture.
"Expenses" means any and all liabilities, obligations, losses,
damages, penalties, claims (including, but not limited to, negligence, strict
or absolute liability, liability in tort and liabilities arising out of the
violation of laws or regulatory requirements of any kind), actions, suits,
costs, expenses and disbursements (including reasonable legal fees and expenses
and, to the extent not required to be paid by the Owner Trustee pursuant to
Section 16 of the Participation Agreement, Transaction Expenses, and all costs
and expenses relating to amendments, supplements, waivers and consents to and
under the Operative Documents, but excluding internal costs and expenses such
as salaries, any amounts that would be included in Break Amount and overhead of
whatsoever kind and nature).
"Fair Market Rental Value" means the fair market rental value
determined as provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value
determined as provided in Sections 19(a) and 19(c) hereof.
"Federal Aviation Administration" and "FAA" mean the United
States Federal Aviation Administration and any successor agency or agencies
thereto.
"Holder" has the meaning set forth in the Trust Indenture.
"Indemnitees" means the Owner Participant, the Owner Participant
Guarantor, the Owner Trustee, in its individual capacity and as trustee under
the Trust Agreement, the Trust Estate, the Indenture Estate, the Indenture
Trustee, in its individual capacity and as trustee under the Trust Indenture,
each Holder, the Original Loan Participant, and each of their respective
Affiliates, successors, permitted assigns, directors, officers, employees,
servants and agents.
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[Lease Agreement (1994 737 B)]
"Indenture Estate" has the meaning set forth in the Trust
Indenture.
"Indenture Trustee" has the meaning set forth in the Trust
Indenture.
"Indenture Trustee Documents" means the Participation Agreement
and the Trust Indenture.
"Interim Rent" means the amount determined by multiplying
Lessor's Cost by the percentage specified in Exhibit B hereto opposite the
Commencement Date under the heading "Interim Rent" (as such Exhibit B may be
adjusted from time to time as provided in Section 3(c) hereof).
"Interim Term" means the period commencing on the Delivery Date
and ending on and including the day immediately preceding the Commencement Date
unless earlier terminated in accordance with the provisions hereof.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby", or other like words mean
this Lease Agreement as originally executed or as modified, amended or
supplemented in accordance with the applicable provisions hereof and the terms
of the Trust Indenture, including, without limitation, supplementation hereof
by any Lease Supplement entered into in accordance with the applicable
provisions hereof and the terms of the Trust Indenture.
"Lease Period" means each of the consecutive periods throughout
the Basic Term and any Renewal Term ending on a Lease Period Date, the first
such period commencing on and including the Commencement Date.
"Lease Period Date" means, (A) with respect to the Basic Term,
each of (i) January 1, 1996, (ii) each July 1 and January 1 which occurs after
January 1, 1996 through and including January 1, 2016 and (iii) the Basic Term
Expiry Date and (B) with respect to any Renewal Term, each March 28 and
September 28 which occurs after the Basic Term Expiry Date (with respect to the
initial Renewal Term) or the last day of the preceding Renewal Term (with
respect to any subsequent Renewal Term), as the case may be, through and
including the last day of such Renewal Term.
"Lease Supplement" means a Lease Supplement (1994 737 B),
substantially in the form of Exhibit A hereto, to be entered into between
Lessor and Lessee on the Delivery Date for the purpose of leasing the Aircraft
under and pursuant to the terms of this Lease Agreement, and any subsequent
Lease Supplement entered into in accordance with the terms hereof and the terms
of the Trust Indenture.
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[Lease Agreement (1994 737 B)]
"Lessee Documents" means the Participation Agreement, the Lease,
any Lease Supplement, the Purchase Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's ▇▇▇▇ of Sale, Owner Trustee's FAA ▇▇▇▇ of Sale,
the Tax Indemnity Agreement and any other document executed by Lessee in
connection with the transactions contemplated by the Participation Agreement
and other Operative Documents.
"Lessor Liens" means any Lien or disposition of title arising as
a result of (i) claims against Lessor, First Security Bank of Utah, National
Association, in its individual capacity, or the Owner Participant not related
to the transactions contemplated by the Operative Documents, (ii) any act or
omission of the Owner Participant, Lessor, or First Security Bank of Utah,
National Association, in its individual capacity, which is not related to the
transactions contemplated by the Operative Documents or is in violation of any
of the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or First Security Bank of Utah, National Association, in
its individual capacity, with respect to Taxes or Expenses against which Lessee
is not required to indemnify the Owner Participant, Lessor or First Security
Bank of Utah, National Association, in its individual capacity or (iv) claims
against Lessor or the Owner Participant arising out of any transfer by Lessor
or the Owner Participant of all or any portion of the respective interests of
Lessor or the Owner Participant in the Aircraft, the Trust Estate or the
Operative Documents (other than a transfer of possession of the Aircraft by
Lessor pursuant to this Agreement, a transfer pursuant to the Trust Indenture
(other than a transfer pursuant to Article IV of the Trust Indenture not
attributable to a Lease Event of Default) or a transfer pursuant to Section 8,
9, 10 or 19 hereof, pursuant to Section 17 or 20 of the Participation Agreement
or pursuant to the exercise of the remedies set forth in Section 15 hereof);
provided, however, that any Lien which is attributable solely to First Security
Bank of Utah, National Association, in its individual capacity, or the Owner
Participant and would otherwise constitute a Lessor Lien hereunder shall not
constitute a Lessor Lien hereunder so long as (1) the existence of such Lien
poses no material risk of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (2) the existence of such Lien does not
interfere in any way with the use or operation of the Aircraft by Lessee (or
any Sublessee), (3) the existence of such Lien does not affect the priority or
perfection of, or otherwise jeopardize, the Lien of the Trust Indenture, (4)
First Security Bank of Utah, National Association, in its individual capacity,
or the Owner Participant, as the case may be, is diligently contesting such
Lien by appropriate proceeding and (5) the existence of such Lien does not
result in actual interruption in the payment of Rent assigned to the Indenture
Trustee for the benefit of the Holders of the Certificates.
"Lessor's Cost" for the Aircraft means the amount specified as
Lessor's Cost in Exhibit H hereto.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease or security interest.
"Loss Payment Date" has the meaning set forth in Section 10(a)
hereof.
8
14
[Lease Agreement (1994 737 B)]
"Manufacturer" means The Boeing Company, a Delaware corporation,
and its subsidiaries, successors and assigns.
"Manufacturer Documents" means the Purchase Agreement, the
Consent and Agreement and any other document executed by the Manufacturer in
connection with the transactions contemplated by the Participation Agreement.
"Net Economic Return" means the Owner Participant's net after-tax
book yield and aggregate after-tax cash flow and, with respect to any
adjustments required to maintain the Owner Participant's Net Economic Return,
no less than 100% of the Owner Participant's book income under FASB 13 for the
five year period commencing with such adjustment, 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, Excess Amount, Stipulated Loss Value percentages, EBO
Percentage and Termination Value percentages as of the Delivery Date, as such
assumptions may be revised from time to time for events which have been the
basis for adjustments to Rent pursuant to Section 3(c) hereof.
"Net Present Value of Rents" means the net present value, as of
the Delivery Date, of Basic Rent set forth in Exhibit B hereto, discounted at a
rate per Lease Period equal to (a) 11% per annum divided by (b) the number of
Lease Periods per year.
"Operative Documents" means the Lease (including any Lease
Supplement); the Participation Agreement; the Tax Indemnity Agreement; the
Trust Agreement; any Trust Supplement; the Purchase Agreement; the Owner
Trustee's ▇▇▇▇ of Sale; the Owner Trustee's FAA ▇▇▇▇ of Sale; the Owner
Trustee's Purchase Agreement; an acceptance certificate covering the Aircraft
in the form agreed to by the Participants and Lessee (the "Acceptance
Certificate"); the Trust Indenture; the Certificates outstanding at the time of
reference; the Owner Participant Guaranty Agreement; and the Consent and
Agreement.
"Original Amount" means, with respect to a Certificate, the
stated original principal amount of such Certificate and, with respect to all
the Certificates, the aggregate stated original principal amounts of such
Certificates, as the case may be.
"Original Loan Participant" means The Mitsubishi Trust and
Banking Corporation, New York Branch, and if such bank or other Original Loan
Participant sells, transfers, assigns or otherwise conveys its Certificates (or
any portion thereof) in accordance with Section 8(y) of the Participation
Agreement (other than pursuant to Section 17 or 20 of the Participation
Agreement and other than as a participation interest) to any Person, shall also
mean and include any such Person.
9
15
[Lease Agreement (1994 737 B)]
"Owner Participant" means the Person executing the Participation
Agreement as the Owner Participant and any Person to which such Person
transfers all or any portion of its right, title and interest in and to the
Trust Agreement, the Trust Estate and the Participation Agreement, to the
extent permitted thereby.
"Owner Participant Documents" means the Participation Agreement,
the Trust Agreement, the Tax Indemnity Agreement and any other documents
executed by the Owner Participant in connection with the transactions
contemplated by the Participation Agreement and the other Operative Documents.
"Owner Participant Guarantor" has the meaning set forth in
Section 1(a) of the Participation Agreement.
"Owner Participant Guaranty Agreement" means that certain
agreement, dated as of the date hereof, made by Owner Participant Guarantor in
favor of Lessee, the Indenture Trustee, the Original Loan Participant and the
Owner Trustee, as such agreement may be amended or supplemented from time to
time pursuant to the applicable provisions thereof and the terms of the Trust
Indenture.
"Owner Trustee" means the Person executing the Participation
Agreement as Owner Trustee and any Person appointed as successor Owner Trustee
in each case not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, except as otherwise expressly stated.
"Owner Trustee Documents" means the Participation Agreement, the
Trust Agreement, this Lease, any Lease Supplement, the Owner Trustee's Purchase
Agreement, the Trust Indenture, any Trust Supplement and the Certificates and
any other document executed by the Owner Trustee in connection with the
transactions contemplated by the Participation Agreement and the other
Operative Documents.
"Owner Trustee's ▇▇▇▇ of Sale" means a ▇▇▇▇ of sale for the
Aircraft, dated the Delivery Date, executed by Lessee in favor of Lessor in
form and substance satisfactory to Lessor.
"Owner Trustee's FAA ▇▇▇▇ of Sale" means a ▇▇▇▇ of sale for the
Aircraft on AC Form 8050-2 or such other form as may be approved by the FAA on
the Delivery Date executed by Lessee in favor of Lessor in form and substance
satisfactory to Lessor.
"Owner Trustee's Purchase Agreement" means the Owner Trustee's
Purchase Agreement and Assignment (1994 737 B), dated as of the date hereof,
between Lessee and the Owner Trustee, as the same may be amended, modified or
supplemented from time to time in accordance with the applicable provisions
thereof and the terms of the Trust Indenture.
10
16
[Lease Agreement (1994 737 B)]
"Participants" means and includes the Original Loan Participant
and the Owner Participant.
"Participation Agreement" means that certain Participation
Agreement (1994 737 B) dated as of the date hereof among Lessee, the Indenture
Trustee, the Owner Participant, the Original Loan Participant and the Owner
Trustee, as such Participation Agreement may be amended or supplemented from
time to time pursuant to the applicable provisions thereof.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than (i)
complete Engines or engines and (ii) appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
which Lessee is entitled to use pursuant to a lease, license or other similar
arrangement with a third party (other than Lessor under this Lease) and which
are not necessary to the operation or navigation of the Aircraft or to maintain
its airworthiness certification), which are from time to time incorporated or
installed in or attached to an Airframe or any Engine or which have been
removed therefrom, but where title to which remains vested in Lessor in
accordance with Section 8 hereof.
"Past Due Rate" means (i) with respect to the portion of any
payment of Rent that may be required by the Trust Indenture to be paid by the
Indenture Trustee to any Holder, the "Past Due Rate" as defined in the Trust
Indenture and (ii) with respect to the remaining portion of any payment of Rent
(and the entire amount of any payment of Rent after the satisfaction and
discharge of the Trust Indenture), a fluctuating rate per annum equal to 2%
over the Base Rate; provided, however, in no event shall the Past Due Rate
exceed the highest rate allowed under applicable law.
"Permitted Lien" means any Lien referred to in clauses (i)
through (vi) of Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled in a
country listed in Exhibit F hereto as in effect from time to time.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Prepaid Rent" has the meaning set forth in Section 3(f) hereof.
"Purchase Agreement" means the agreement between Lessee and the
Manufacturer relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.
11
17
[Lease Agreement (1994 737 B)]
"Reimbursement Amount" has the meaning set forth in Section 3(f)
hereof.
"Renewal Term" means the Fair Market Renewal Term or a Fixed
Renewal Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent, Interim Rent, Prepaid Rent and
Supplemental Rent, collectively.
"Replacement Airframe" means any airframe substituted for the
Airframe in accordance with Section 10(a) of this Lease.
"Replacement Engine" means any engine substituted for an Engine
in accordance with Section 9(d), 10(a) or 10(b) of this Lease.
"Special Purchase Option Date" means the dates specified as such
on Exhibit H hereto.
"Stipulated Loss Value" with respect to the Aircraft as of any
date through and including the last day of the Basic Term, means the amount
determined by multiplying Lessor's Cost for the Aircraft by the percentage
specified in Exhibit C hereto opposite the Stipulated Loss Value Date with
respect to which the amount of Stipulated Loss Value is determined (as such
Exhibit C may be adjusted from time to time as provided in Section 3(c) hereof
and in Section 8 of the Tax Indemnity Agreement). "Stipulated Loss Value" with
respect to the Aircraft, as of any date during any Renewal Term, shall be the
amount determined as provided in Section 19 hereof. To the extent that the
actual amount of interest paid and to be paid on the Certificates during the
Lease Period in which such Stipulated Loss Value Date occurs up to and
including such Stipulated Loss Value Date is greater or less than the amount
included in calculating the percentage set forth in Exhibit C with respect to
such Stipulated Loss Value Date on account of such interest, such percentage
shall be adjusted appropriately to compensate for such differential. To the
extent that an event giving rise to an obligation to pay any Stipulated Loss
Value occurs, and the actual date on which the loss of tax benefits resulting
from such event occurs shall be earlier or later than the date assumed in
calculating the Federal and New York income tax consequences reflected in the
applicable Stipulated Loss Value, such Stipulated Loss Value shall be
appropriately adjusted to reflect the actual date of such loss of tax benefits,
but shall be otherwise based on the original assumptions used in determining
such Stipulated Loss Value.
"Stipulated Loss Value Date" has the meaning set forth in the
initial Lease Supplement.
"Sublease" means any sublease permitted by the terms of Section
7(b)(viii) hereof.
12
18
[Lease Agreement (1994 737 B)]
"Sublessee" means any Person for so long, but only so long, as
such Person is in possession of the Airframe and/or any Engine pursuant to the
terms of a Sublease which is then in effect pursuant to Section 7(b)(viii)
hereof.
"Supplemental Rent" means all amounts, liabilities and
obligations (other than Interim Rent and Basic Rent) which Lessee assumes or
agrees to pay to Lessor or others hereunder or under any of the other Operative
Documents, including payments of Stipulated Loss Value and Termination Value
and amounts calculated by reference thereto, an amount equal to the Break
Amount, if any, payable in accordance with Section 3(d) hereof and indemnity
payments. The parties acknowledge that Supplemental Rent is a general category
and, accordingly, agree that any provision of any Operative Document which
calls for the payment of Supplemental Rent and also calls for the payment of
specific items which are includable in Supplemental Rent is not to be
interpreted as requiring any double payment.
"Tax Indemnity Agreement" means that certain Tax Indemnity
Agreement (1994 737 B) dated as of the date hereof between the Owner
Participant and Lessee, as originally executed or as modified, amended or
supplemented pursuant to the applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation,
license, documentation and registration fees), taxes (including, without
limitation, income, gross receipts, sales, rental, use, turnover, value added,
property (tangible and intangible), excise and stamp taxes), licenses, levies,
imposts, duties, recording charges or fees, charges, assessments, or
withholdings of any nature whatsoever, together with any assessments,
penalties, fines, additions to tax and interest thereon (each, individually, a
"Tax").
"Term" means the Interim Term, Basic Term and, if actually
entered into, any Renewal Term.
"Termination Date" has the meaning set forth in Section 9(b)
hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including the last day of the Basic Term means the amount
determined by multiplying Lessor's Cost for the Aircraft by the percentage
specified in Exhibit D hereto opposite the Termination Date with respect to
which the amount of Termination Value is determined (as such Exhibit D may be
adjusted from time to time as provided in Section 3(c) hereof and in Section 8
of the Tax Indemnity Agreement). To the extent that the actual amount of
interest paid and to be paid on the Certificates during the Lease Period in
which such Termination Date occurs up to and including such Termination Date is
greater or less than the amount included in calculating the percentage set
forth in Exhibit D hereto with respect to such Termination Date on account of
such interest, such percentage shall be adjusted appropriately to compensate
for such differential. To the extent that an event giving rise to an
obligation to pay any Termination Value occurs, and the actual date on which
the loss of tax benefits resulting from such event occurs shall be earlier
13
19
[Lease Agreement (1994 737 B)]
or later than the date assumed in calculating the Federal and New York income
tax consequences reflected in the applicable Termination Value, such
Termination Value shall be appropriately adjusted to reflect the actual date of
such loss of tax benefits, but shall be otherwise based on the original
assumptions used in determining such Termination Value.
"Transaction Expenses" means (i) with respect to the closing on
the Delivery Date and the subsequent placement of the permanent debt pursuant
to Section 20 of the Participation Agreement, the reasonable and actual fees,
expenses and disbursements of (1) ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, special counsel for
the Indenture Trustee, (2) Ray, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Owner
Trustee, (3) ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special counsel in Oklahoma City, Oklahoma,
(4) Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., special counsel for the Holders
of the Certificates, (5) Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, special counsel for
Lessee, and (6) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, special counsel for the Owner Participant and
the Owner Participant Guarantor, (ii) all fees, taxes and other charges payable
in connection with the recording or filing of instruments and financing
statements, (iii) the initial fee and reasonable and actual disbursements of
the Owner Trustee under the Trust Agreement, (iv) the initial fee and
reasonable and actual disbursements of the Indenture Trustee under the Trust
Indenture, (v) the fee of BK Associates (or of such other appraiser as shall be
acceptable to Lessee and the Owner Participant) with respect to the appraisal
of the Aircraft required on or before the Delivery Date pursuant to Section
4(a) of the Participation Agreement, (vi) the expenses of Capstar Partners,
Inc., (vii) the reasonable out-of-pocket expenses of the Original Loan
Participant, (viii) the reasonable out-of-pocket expenses of the Owner
Participant up to an aggregate of $10,000 (but excluding from Transaction
Expenses airfare charges incurred for travel on an airline other than United
Air Lines), (ix) the initial fee, if any, of the Original Loan Participant, (x)
the placement or underwriting fees, commissions and expenses, if any, in
placing the permanent debt pursuant to Section 20 of the Participation
Agreement and (xi) printing and distribution costs.
"Transportation Code" means Title 49 of the United States Code
("Transportation"), as amended.
"Trust Agreement" means that certain Trust Agreement (1994 737 B)
dated as of the date hereof between the Owner Participant and First Security
Bank of Utah, National Association, in its individual capacity, as originally
executed or as modified, amended or supplemented in accordance with the
applicable provisions thereof and the terms of the Trust Indenture, including,
without limitation, any Trust Supplement entered into pursuant to the
applicable provisions thereof.
"Trust Estate" has the meaning set forth in the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Security
Agreement (1994 737 B) dated as of the date hereof between Lessor and the
Indenture Trustee, as originally executed or as modified, amended or
supplemented in accordance with the provisions thereof
14
20
[Lease Agreement (1994 737 B)]
and the terms of the Participation Agreement, including, without limitation,
any Trust Supplement entered into pursuant to the applicable provisions
thereof.
"Trust Office" means the principal corporate trust 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 Lessee, the Owner
Participant, the Indenture Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust Agreement and
the Trust Indenture, substantially in the form of Exhibit A to the Trust
Indenture.
"U.S. Air Carrier" means any United States air carrier as to
which there is in force a certificate issued pursuant to Section 41102 of the
Transportation Code, and as to which there is in force an air carrier operating
certificate issued pursuant to Part 121 of the regulations under such Code, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"United States Government" means the federal government of the
United States of America or any instrumentality or agency thereof.
"Wet Lease" means any arrangement whereby Lessee agrees to
furnish the Airframe and Engines or engines installed thereon to a third party
pursuant to which such Airframe and Engines or engines (i) shall be operated
solely by regular employees of Lessee possessing all current certificates and
licenses that would be required under the Transportation Code (or if the
Aircraft is not registered in the United States, all certificates and licenses
required by the laws of the jurisdiction of registry) for the performance by
such employees of similar functions within the United States of America (or
such jurisdiction of registry) (it is understood that cabin attendants need not
be employees of Lessee) and (ii) shall be maintained by Lessee in accordance
with its normal maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees to accept
from Lessee the transfer of title to and simultaneously to lease to Lessee
hereunder, and Lessee hereby agrees to lease on the Delivery Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees that Lessor
will authorize one or more employees of Lessee, designated by Lessee in
writing, as the authorized representative or representatives of Lessor to
accept delivery of the Aircraft. Lessee hereby agrees that in the event
delivery of the Aircraft shall be accepted by an employee or employees of
Lessee pursuant to such authorization by Lessor, such acceptance of delivery by
such employee or employees on behalf of Lessor shall, without further act,
irrevocably constitute acceptance by Lessee of the Aircraft for all purposes of
this Lease.
15
21
[Lease Agreement (1994 737 B)]
SECTION 3. Term and Rent. (a) Interim Term and Basic Term.
The Interim Term shall commence on the Delivery Date and end on and include the
day immediately preceding the Commencement Date unless earlier terminated
pursuant to the provisions hereof. The Basic Term shall commence on the
Commencement Date and end on the Basic Term Expiry Date or such earlier date as
this Lease may be terminated in accordance with the provisions hereof.
(b) Interim Rent and Basic Rent.
(i) Lessee shall pay Interim Rent in Dollars on the
Commencement Date in the amount for such date determined in accordance
with the definition of "Interim Rent."
(ii) Lessee shall pay Basic Rent in Dollars with respect
to each Lease Period during the Basic Term on each Lease Period Date
during the Basic Term in the respective amounts for each Lease Period
Date determined in accordance with Exhibit B hereto.
Although the Basic Rent amounts set forth in Exhibit B hereto
have been computed on the assumption that the rate of interest on the
Certificates throughout the Basic Term will be 10% per annum, computed on the
basis of a 360-day year of twelve 30-day months (the "Assumed Interest Rate"),
Lessor and Lessee recognize that the actual rate of interest on the
Certificates may, from time to time during the Basic Term, be a rate from time
to time which may be greater or less than the Assumed Interest Rate and that
the related basis upon which interest on the Certificates will be computed will
be as provided in the Trust Indenture. Accordingly, Basic Rent shall be
increased or decreased (but not below zero), as the case may be, by the Rent
Differential Amount (as defined herein). For purposes hereof, "Rent
Differential Amount" shall mean, as of any Lease Period Date, the absolute
value of the difference between (i) the aggregate amount of interest actually
due and payable on such Lease Period Date on the Certificates (or due and
payable on the next following Business Day if such date shall not constitute a
Business Day (unless, so long as the Original Loan Participant shall hold a
Certificate, such succeeding Business Day is in the next calendar month, in
which case the payment date shall be the next preceding Business Day)) and (ii)
the aggregate amount of interest on the Certificates that would have been due
and payable on such date if the Certificates had borne interest at the Assumed
Interest Rate. If, as of such date, the amount determined in accordance with
clause (i) of the immediately preceding sentence shall be greater than the
amount determined in accordance with clause (ii) of such sentence, the amount
of Basic Rent payable on such date shall be increased by the Rent Differential
Amount. If, as of such date, the amount determined in accordance with such
clause (ii) shall exceed the amount determined in accordance with such clause
(i), the amount of Basic Rent due on such date shall be decreased (but not
below zero) by the Rent Differential Amount.
16
22
[Lease Agreement (1994 737 B)]
(c) Adjustments to Basic Rent, Interim Rent, Excess Amount,
Stipulated Loss Values, Termination Values and the EBO Percentage.
(i) In the event that (A) Transaction Expenses paid by
Lessor are determined to be other than 0.5% of Lessor's Cost, (B) there
shall be an optional refinancing or a refunding of the Certificates in
accordance with Section 17 or 20 of the Participation Agreement, (C) the
Delivery Date occurs other than on September 28, 1994, (D) there is an
optimization in accordance with Section 18 of the Participation
Agreement or (E) the Excess Amount is increased or decreased pursuant to
the operation of the proviso in the definition thereof; then in each
case the Basic Rent, Interim Rent and Excess Amount set forth in Exhibit
B, the Stipulated Loss Value percentages set forth in Exhibit C and the
Termination Value percentages set forth in Exhibit D and the EBO
Percentage set forth in Exhibit H shall be adjusted (upwards or
downwards as the case may be) using the same methods and assumptions (as
modified on account of the occurrence of any of the events referred to
in clauses (A)-(E)) used to calculate Basic Rent, Interim Rent and
Excess Amount and Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage as set forth in Exhibits B, C, D and H,
respectively, in each case in compliance with clauses (iv) and (v) of
this paragraph (c) and in order to: (1) maintain the Owner Participant's
Net Economic Return and (2) minimize the Net Present Value of Rents to
Lessee to the extent possible consistent with clause (1) hereof;
provided, however, in no event will the EBO Percentage be adjusted below
the greatest of (i) the Termination Value for the Aircraft as of the EBO
Date, (ii) 48.21862348% of Lessor's Cost and (iii) the present value as
of the EBO Date of (x) the remaining Basic Rent plus (y) 41.27530364% of
Lessor's Cost (i.e. the fair market value of the Aircraft as of the end
of the Basic Term as the same was determined on the Delivery Date) (for
purposes of illustration on the Delivery Date, such present value would
equal 60.44067122% of Lessor's Cost) (the present value calculation
described in this clause (iii) shall utilize a semi-annual discount rate
that on a compound basis is equal to 16.0%).
(ii) (Intentionally Omitted)
(iii) Any recalculation of Basic Rent, Interim Rent and
Excess Amount, Stipulated Loss Value and Termination Value percentages
and EBO Percentage pursuant to this Section 3(c) shall be determined by
the Owner Participant and shall be subject to the verification
procedures set forth in Exhibit E hereto. Such recalculated Basic Rent,
Interim Rent and Excess Amount, Stipulated Loss Value and Termination
Value percentages and EBO Percentage shall be set forth in an amendment
hereto.
(iv) Anything contained in the Participation Agreement
or this Lease to the contrary notwithstanding, each installment of Basic
Rent and Interim Rent payable hereunder, whether or not adjusted in
accordance with this Section 3(c), together with the
17
23
[Lease Agreement (1994 737 B)]
amount of the Excess Amount and Supplemental Rent, if any, in respect of
the date on which such installment is payable, and each payment of
Termination Value, Stipulated Loss Value and EBO Percentage, whether or
not adjusted in accordance with this Section 3(c) or Section 8 of the
Tax Indemnity Agreement, and all other amounts excluding Excluded
Payments payable simultaneously by Lessee pursuant to this Lease, in
each case, on the date on which such payment is due, shall be in an
amount at least sufficient to pay in full, and shall be available to be
applied by Lessor in payment on account of, any payments then required
to be made on account of the principal amount (and Break Amount, if any)
of and accrued and unpaid interest on the Certificates then outstanding.
It is agreed that no installment of Basic Rent or Interim Rent or
payment of Excess Amount, Termination Value, Stipulated Loss Value or
EBO Percentage shall be increased or adjusted by reason of (A) any
attachment or diversion of Rent on account of (x) Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens) or (y) any other Lien on or
against the Trust Estate, any part thereof or the Operative Documents
arising as a result of claims against the Indenture Trustee or a Holder,
not related to the transactions contemplated by the Operative Documents,
(B) any modification of the payment terms of the Certificates made
without the prior written consent of Lessee other than as required or
permitted by the Participation Agreement, the Lease and any Lease
Supplement thereto and the Trust Indenture and any Trust Supplement
thereto, or (C) the acceleration of any Certificate due to the
occurrence of an "Event of Default" (as defined in the Trust Indenture)
which does not constitute an Event of Default hereunder.
(v) All adjustments to Basic Rent under this Section
3(c) shall be consistent with the requirements of Sections 4.02(5),
4.07(1) and (2) and Section 4.08(1) of Rev. Proc. 75-28 (provided that
the requirements of Section 4.08(1) shall apply on a prospective basis),
as modified and in effect on the Delivery Date, and shall not cause the
Lease to be a "disqualified leaseback or long-term agreement" within the
meaning of Section 467 of the Code and any final, temporary or proposed
regulations thereunder or any administrative or judicial interpretation
thereof in effect on the date of such adjustment (a "Section 467
Agreement") (it being understood that any such adjustment shall not be
treated as causing the Lease to be a Section 467 Agreement to the extent
the Lease would have been a Section 467 Agreement if no such adjustment
to Basic Rent had occurred).
(d) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value, Termination Value or EBO
Percentage as the same shall become due and owing and all other amounts of
Supplemental Rent within five Business Days after demand or on such date, or
within such other relevant period, as may be provided in any Operative
18
24
[Lease Agreement (1994 737 B)]
Document, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent when due, Lessor shall have all rights, powers and remedies
provided for herein or in any other Operative Document or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall also pay on
behalf of Lessor as Supplemental Rent an amount equal to any amount payable by
Lessor as Break Amount as and when any such Break Amount shall be due and
payable and amounts payable under Section 2.17 of the Trust Indenture;
provided, however, that Lessee shall have no obligation to pay to Lessor any
Break Amount payable under Section 2.14 or 4.04(b) of the Trust Indenture due
to the occurrence of an "Event of Default" (as defined in the Trust Indenture)
which does not constitute an Event of Default hereunder. In the event that the
aggregate amount of interest actually due and payable on the Certificates on
the Commencement Date exceeds the aggregate amount of interest on the
Certificates that would have been due and payable if such Certificates had
borne interest at the Assumed Interest Rate, Lessee agrees to pay Lessor on the
Commencement Date, as Supplemental Rent, an amount equal to such excess.
Lessee also will pay to Lessor, or on behalf of Lessor to whomsoever shall be
entitled thereto, on demand, as Supplemental Rent, to the extent permitted by
applicable law, interest at the Past Due Rate with respect to any part of any
installment of Basic Rent or Interim Rent not paid when due for any period for
which the same shall be overdue and on any payment of Supplemental Rent not
paid when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent other than
Excluded Payments payable to Lessor shall be made directly by Lessee by wire
transfer of immediately available funds prior to 11:00 a.m., New York City
time, on the date of payment in Dollars, to Lessor at its office at First
Security Bank of Utah, National Association, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, Attention: Corporate Trust Department (or such other office
of Lessor in the continental United States or such other account as Lessor
shall direct in a notice to Lessee at least 10 Business Days prior to the date
such payment of Rent is due); provided, that so long as the Trust Indenture
shall not have been fully discharged, Lessor hereby directs and Lessee agrees,
that all Basic Rent (other than Excluded Payments) and all other amounts which
are required to be paid to or deposited with the Owner Trustee hereunder (other
than Excluded Payments) shall be paid directly to the Indenture Trustee at the
times and in funds specified in this Section 3(e) at the offices of the
Indenture Trustee at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust Department (or such other office of Indenture
Trustee in the continental United States or such other account as Indenture
Trustee shall direct in a notice to Lessee at least 10 Business Days prior to
the date such payment of Basic Rent is due). Excluded Payments shall be paid
in Dollars in immediately available funds to the Person to whom payable at the
address of such Person specified in Schedule I of the Participation Agreement.
Notwithstanding anything to the contrary contained herein, if any
date on which a payment of Rent becomes due and payable is not a Business Day
then such payment shall be made on the next succeeding Business Day (unless, so
long as the Original Loan Participant shall hold a Certificate, such succeeding
Business Day is in the next calendar month, in which case the payment date
shall be the next preceding Business Day) and (except, with respect to any
Certificate held by the Original Loan Participant in regard to the amount of
Rent attributable to
19
25
[Lease Agreement (1994 737 B)]
the corresponding payments on the Certificates held by the Original Loan
Participant) no interest shall accrue on the amount of such payment, if such
payment is made on such next succeeding Business Day.
(f) Prepayments of Certain Rent Payments. To the extent, if
any, that there shall not have been received by the Indenture Trustee at the
account of the Indenture Trustee referred to in Section 3(e) by 11:00 a.m., New
York time, on the Commencement Date from Lessor, an amount equal to the Excess
Amount payable for such date, Lessee shall advance to Lessor, as Prepaid Rent,
by paying to the Indenture Trustee on behalf of Lessor on the Commencement Date
an amount equal to the Excess Amount not so paid (such amount being herein
called "Prepaid Rent"); provided that Lessee will also pay to the Indenture
Trustee, on demand, as Supplemental Rent, to the extent permitted by applicable
law, interest at the Debt Rate on any Prepaid Rent not paid when due for any
period for which the same shall be overdue. Any Rent prepaid pursuant to this
Section 3(f) shall be offset against installments of Basic Rent in the order in
which they become due, subject to the last sentence of this paragraph. Lessor
agrees to reimburse Lessee in the manner and subject to the conditions provided
in the following sentence for (x) the Prepaid Rent so paid by Lessee determined
as of the date such payment was made, plus (y) the Supplemental Rent so paid by
Lessee pursuant to this Section 3(f), plus (z) accrued interest on the
unreimbursed portion thereof at a rate per annum equal to the greater of the
Base Rate plus 2% or the Debt Rate plus 2% from the date such amount is paid by
Lessee to but not including the date of each such reimbursement (such amounts
to be reimbursed being herein called the "Reimbursement Amount"). So long as
no Default or Event of Default has occurred and is continuing, Lessee may with
written notice to the Owner Participant and Indenture Trustee offset (without
duplication) against each succeeding payment (other than as limited by the
proviso to this sentence) due from Lessee to Lessor in respect of Basic Rent,
Stipulated Loss Value, Termination Value, EBO Percentage or any other amount
due hereunder to Lessor, until Lessee has been fully reimbursed for the
Reimbursement Amount; provided, however, that in the case of any payment due
from Lessee which is distributable under the terms of the Trust Indenture,
Lessee's right of offset shall be limited to amounts distributable to Lessor or
the Owner Participant thereunder. No such offset or aggregate combined effect
of separate offsets shall reduce the amount of any installment of Basic Rent to
an amount insufficient, together with all other amounts payable simultaneously
by Lessee, to pay in full the payments then required to be made on account of
the principal amount (and Break Amount, if any) of and accrued and unpaid
interest on the Certificates then outstanding.
SECTION 4. Lessor's Representations and Warranties. LESSOR
LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES
AND AGREES THAT AS BETWEEN LESSOR, ANY PARTICIPANT, THE INDENTURE TRUSTEE, AND
LESSEE (A) THE AIRFRAME AND EACH ENGINE IS OF SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT
THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (C) NEITHER LESSOR
NOR OWNER PARTICIPANT IS A
20
26
[Lease Agreement (1994 737 B)]
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR, THE
INDENTURE TRUSTEE NOR THE OWNER PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED
TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
CONDITION, DESIGN, OPERATION, VALUE, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except as set forth in Sections 8(f)(v) and 8(p)(ii) of the
Participation Agreement as to title and except that First Security Bank of
Utah, National Association, in its individual capacity, (i) represents and
warrants that on the Delivery Date, Lessor shall have received whatever title
to the Aircraft was conveyed to it by Lessee, (ii) represents and warrants that
on the Delivery Date the Aircraft shall be free of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) attributable to it in its individual capacity,
(iii) covenants that it will not, through its own actions or inactions, in such
capacity, interfere in Lessee's or any Sublessee's quiet enjoyment, use
operation or possession of the Aircraft unless this Lease shall have been
declared in default pursuant to Section 15 hereof, (iv) agrees that it will not
directly or indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it in its individual capacity on or with respect to the
Airframe or any Engine or any portion of the Trust Estate and (v) represents
and warrants that it is a "citizen of the United States" as defined in Section
40102(a)(15) of the Transportation Code and agrees that if at any time it shall
cease to be a "citizen of the United States" within the meaning of Section
40102(a)(15) of the Transportation Code, it will promptly resign as Owner
Trustee (if and so long as such citizenship is necessary under the
Transportation Code as in effect at such time or, if it is not necessary, if
and so long as the Owner Trustee's citizenship would have any adverse effect on
the Owner Participant, the Holders or Lessee), effective upon the appointment
of a successor Owner Trustee in accordance with the provisions of the Trust
Agreement. None of the provisions of this Section 4 or any other provision of
this Agreement shall be deemed to amend, modify or otherwise affect the
representations, warranties or other obligations (express or implied) of the
Manufacturer, any subcontractor or supplier of the Manufacturer with respect to
the Airframe, Engines, or any Parts, or to release the Manufacturer, or any
such subcontractor or supplier from any such representation, warranty or
obligation. Unless a Section 14(a), 14(b), 14(f) or 14(g) Default or any Event
of Default shall have occurred and be continuing, Lessor agrees to make
available to Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made by the Manufacturer or any of its subcontractors
or suppliers and any other claims against the Manufacturer or any such
subcontractor or supplier with respect to the Aircraft, all pursuant to and in
accordance with the terms of the Owner Trustee's Purchase Agreement.
21
27
[Lease Agreement (1994 737 B)]
SECTION 5. Return of the Aircraft. (a) Condition Upon Return.
Unless purchased by Lessee pursuant to Section 19(b) hereof, upon the
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(b) or 15 hereof, Lessee will at its expense return the
Aircraft to Lessor at Lessee's maintenance base located at San Francisco
International Airport (or any principal maintenance base established by Lessee
in the continental United States subsequent to the date hereof), provided,
however, that if Lessor shall have made the request for storage pursuant to
Section 5(d) hereof, Lessee shall return the Aircraft at the site of storage.
At the time of such return, (A) Lessee will, at its own cost and expense,
unless otherwise requested by Lessor to retain the existing registration of the
Aircraft, cause the Aircraft, if it is not then so registered, to be registered
under the laws of the United States with the FAA in the name of Lessor or its
designee, provided that Lessee shall be relieved of its obligations under this
sentence if such registration is prohibited by reason of the failure of Lessor,
the Owner Participant or Lessor's designee to be eligible on such date to own
an aircraft registered with the Federal Aviation Administration, and (B) the
Airframe will be fully equipped with the Engines (or Acceptable Alternate
Engines) installed thereon. Also, at the time of such return, Lessor shall
have good title to such Airframe and Engines or Acceptable Alternate Engines,
and such Airframe and Engines or Acceptable Alternate Engines (i) shall be
certified (or, if not then registered under the Transportation Code by reason
of the proviso to clause (A) in the preceding sentence or because Lessor has so
requested that the Aircraft not be so registered, shall hold a valid
certificate of airworthiness issued by the country of registry and be eligible
for certification by the FAA) as an airworthy aircraft by the Federal Aviation
Administration, (ii) shall be free and clear of all Liens (other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and rights of third parties under
pooling, interchange, overhaul, repair or other similar agreements or
arrangements, (iii) shall be in a regular passenger configuration, and in as
good a condition as when delivered by Lessee to Lessor, ordinary wear and tear
excepted, and otherwise in the condition required to be maintained under
Lessee's FAA-approved maintenance plan (notwithstanding any Sublease
theretofore in effect) and shall be in compliance with all applicable FAA
regulations airworthiness directives and Manufacturer's mandatory service
bulletins (except for regulations, directives and bulletins (A) that permit
compliance at a later time and would not, in the normal course of Lessee's
maintenance plan, be complied with by the date of return and without
discriminating on the basis of the status of the Aircraft as a leased aircraft,
or (B) that are being diligently contested in good faith by Lessee, so long as
such contest does not interrupt the normal use of the Aircraft and such contest
does not involve any material risk of criminal liability or any unindemnified
material risk of civil liability to Lessor, the Owner Participant or the
Indenture Trustee (but in regard to the Indenture Trustee, only so long as the
Original Loan Participant is a Holder), jeopardize the right, title and
interest of Lessor or the Owner Participant in and to the Airframe and/or the
Engines, or result in a claim, loss or expense for which Lessor or the Owner
Participant is not indemnified and for which Lessee is not then willing to
indemnify Lessor, the Owner Participant or the Indenture Trustee (but in regard
to the Indenture Trustee, only so long as the Original Loan Participant is a
Holder) in a manner reasonably satisfactory to such Person, provided that if
Lessee does not prevail in such contest then Lessee
22
28
[Lease Agreement (1994 737 B)]
shall, at its sole expense, cause the Aircraft to be promptly put in the
condition it would have been on the last day of the Term but for this clause
(B)), (iv) in the event that Lessee shall not then be using a continuous
maintenance program with respect to the Airframe immediately prior to such
return but instead shall have been using a block overhaul program with respect
to the Airframe, then (A) such block overhaul program shall have been approved
by the government of registry of the Aircraft and (B) the Airframe shall have
remaining until the next scheduled block overhaul at least 25% of the allowable
hours between block overhauls permitted under the block overhaul program then
used by Lessee, (v) in the event that Lessee during the period of operation of
the Aircraft immediately prior to such return shall not have been using an on-
condition maintenance program with respect to the Engines (or Acceptable
Alternate Engines), Lessee agrees that the average number of hours or cycles of
operation (whichever shall be applicable under the maintenance program then in
use with respect to such Engines (or Acceptable Alternate Engines)) on such
Engines (or Acceptable Alternate Engines) remaining until the next scheduled
engine heavy maintenance shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine heavy maintenance allowed under
the maintenance program then in use with respect to such Engines (or Acceptable
Alternate Engines), (vi) shall have all Lessee's and any Sublessee's exterior
marking removed or painted over with areas thereof refinished to match adjacent
areas, and (vii) shall be in a state of cleanliness suitable under Lessee's
normal service standards for operation in Lessee's revenue passenger service
and in all such cases the Aircraft shall not have been discriminated against
whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
In addition, the following conditions shall be complied with at
the time of the return of the Aircraft: (i) Lessee shall deliver to Lessor any
"no cost" modification kits designated for the Aircraft that Lessee has in its
possession and that have not been incorporated at the time of the return of the
Aircraft, (ii) Lessor may purchase from Lessee at Lessee's cost any service
bulletin kits purchased by Lessee for the Aircraft and (iii) without limiting
the obligations of the Lessee set forth in the preceding paragraph, in the
event the FAA shall issue a directive which would require improvements to the
Aircraft in order for the airworthiness certificate of the Aircraft to be
maintained in good standing, and if Lessee shall have not been required to
terminate such directive in accordance with the terms of this Section 5 prior
to the return of the Aircraft but such directive must be terminated on or
before one year following such return, the Lessee shall, at the sole cost and
expense of Lessor, comply with such directive but only if (x) within 180 days
prior to the return of the Aircraft Lessee receives from Lessor a written
request to comply with such directive at Lessor's sole cost and expense
(determined on the basis of what a third party would charge for comparable
services) and (y) after receipt by Lessee of such request, the Aircraft is
subject to a maintenance check of the type at which such modification is made,
in accordance with Lessee's general maintenance program, and Lessee has the
personnel, parts, facilities and other resources available to accomplish the
modification and the modification can be made without disrupting the operations
of Lessee's maintenance facility or Lessee's operations.
23
29
[Lease Agreement (1994 737 B)]
For purposes of this Section 5(a), any maintenance program used
by Lessee for airframes (including the Airframe) substantially similar to the
maintenance program described in the excerpts from "United Air Lines 737
Maintenance Program" furnished to Lessor and the Owner Participant shall be
considered a continuous maintenance program (and not a block maintenance
program) and any engine maintenance program used by Lessee for engines
(including the Engines) substantially similar to the maintenance program
described in "United Air Lines 737 Maintenance Program" shall be considered an
on-condition maintenance program.
If clause (iv) of the first paragraph of this Section 5(a) shall
be applicable but the Airframe does not meet the conditions specified in said
clause (iv), Lessee shall pay or cause to be paid to Lessor, concurrently with
the return thereof, a Dollar amount computed by multiplying (i) 120% of the
direct cost to Lessee (based upon the direct cost to Lessee for similar
aircraft in the fleet of Lessee) during the preceding 12 months of performing
an airframe block overhaul of the type referred to in such clause (iv) by (ii)
a fraction of which (x) the numerator shall be the excess of 25% of the hours
of operation allowable between such block overhauls over the actual number of
hours of operation remaining on the Airframe to the next such block overhaul
and (y) the denominator shall be the number of hours of operation allowable
between such block overhauls in accordance with such block overhaul program.
If clause (v) of the first paragraph of this Section 5(a) shall
be applicable but the Engines (or Acceptable Alternate Engines) do not meet the
conditions specified in said clause (v), Lessee shall pay or cause to be paid
to Lessor, concurrently with the return thereof, a Dollar amount computed by
multiplying (i) 120% of the direct cost to Lessee (based upon the direct cost
to Lessee for similar aircraft in the fleet of Lessee) during the preceding 12
months of performing for an engine of the same model as the Engines (or
Acceptable Alternate Engines) the scheduled engine heavy maintenance under the
maintenance program then used by Lessee for engines of the same model as the
Engines (or Acceptable Alternate Engines) by (ii) a fraction of which (x) the
numerator shall be the excess of 25% of the hours or cycles (whichever is
applicable) of operation of one Engine between engine heavy maintenance
allowable under the maintenance program then in use with respect to such
Engines (or Acceptable Alternate Engines) over the actual average number of
hours or cycles of operation of such Engines (or Acceptable Alternate Engines)
remaining until the next such scheduled engine heavy maintenance and (y) the
denominator shall be the number of hours or cycles allowable between such
scheduled engine heavy maintenance.
During the last three months of the Term (unless Lessee shall
have elected to purchase the Aircraft or renew this Lease in accordance with
the terms of this Lease), with reasonable notice, Lessee will cooperate, and
cause any Sublessee to cooperate, at Lessor's sole cost, in all reasonable
respects with the efforts of Lessor to sell or lease the Aircraft, including,
without limitation, permitting prospective purchasers or lessees to inspect the
Aircraft, any maintenance records relating to the Aircraft then required to be
retained by the FAA or by the comparable government agency of the country in
which the Aircraft is registered, all in
24
30
[Lease Agreement (1994 737 B)]
accordance with Section 12 hereof, provided that any such cooperation shall not
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee or any Sublessee.
(b) Return of Other Engines. In the event that an Acceptable
Alternate Engine shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery, will,
at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) ▇▇▇▇ of sale with respect to each such Acceptable
Alternate Engine, in form and substance reasonably satisfactory to Lessor
(together with an opinion of counsel (which may be Lessee's General Counsel) to
the effect that such full warranty ▇▇▇▇ of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that each such
Acceptable Alternate Engine is free and clear of all Liens other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)), against receipt from Lessor of a
▇▇▇▇ of sale evidencing the transfer, without recourse or warranty (except as
to the absence of Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens)) by Lessor
to Lessee or its designee of all of Lessor's right, title and interest in and
to any Engine not installed on the Airframe at the time of the return of the
Airframe.
(c) Fuel and Manuals. Upon the return of the Airframe upon
any termination of this Lease in accordance with paragraph (a) of this Section
5, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and inspection, modification and overhaul records in the English
language (if available) which (i) are required to be maintained with respect to
the Airframe, the Engines or any part thereof in accordance with Section 7(a)
hereof, (ii) have been created since the Airframe's or Engine's or Acceptable
Alternate Engine's (whichever is applicable) last heavy maintenance visit and
(iii) are required to lawfully operate the Aircraft in the United States under
a United States certificate of airworthiness without performing additional
maintenance. Lessee shall have no obligation with respect to the amount of
fuel or oil contained in the Aircraft and all fuel or oil remaining on board
the Aircraft shall be the property of Lessor without charge.
(d) Storage Upon Return. If, at any time at least 15 days
prior to the end of the Basic Term or any Renewal Term or pursuant to Section
9(c) or Section 15, Lessee receives from Lessor a written request for storage
of the Aircraft upon its return hereunder, Lessee will provide Lessor, or cause
Lessor to be provided, with storage facilities for the Aircraft (at Lessor's
risk and at Lessor's cost for insurance, maintenance and Lessee's reasonable
out-of-pocket expenses other than storage fees) for a period not exceeding
forty-five (45) days commencing on the date of such termination, at a location
in the forty-eight contiguous states of the United States selected by Lessee
and used as a location for the storage of aircraft. Lessee shall, at Lessor's
written request, maintain insurance (if available) for the Aircraft during such
period and shall be reimbursed by Lessor for the premiums thereon.
25
31
[Lease Agreement (1994 737 B)]
(e) Severable Parts. At any time after Lessee has advised
Lessor that it has determined not to renew this Lease or purchase the Aircraft,
or the Aircraft is otherwise to be returned to Lessor, Lessee shall, at
Lessor's request, advise Lessor of the nature and condition of all severable
Parts owned by Lessee which have been used by Lessee during the prior six
months and which Lessee has or intends to remove from the Aircraft as permitted
by Section 8 hereof. Lessor may, at its option, upon 30 days written notice to
Lessee, purchase any or all of such Parts from Lessee upon the expiration of
the Term at their then fair market value.
SECTION 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, title thereto or any interest therein or in this Lease, except (i)
the respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided (including any Sublease permitted pursuant to Section 7(b)), the Lien
of the Trust Indenture, and any other rights existing pursuant to the Operative
Documents, (ii) Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens), (iii)
Liens for Taxes of Lessee (or any Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such proceedings
do not involve any material risk of the sale, forfeiture or loss of the
Airframe or any Engine or any interest therein, (iv) materialmen's, mechanics',
workmen's, repairmen's, employees' or other like liens arising in the ordinary
course of Lessee's or any Sublessee's business securing obligations that are
not overdue for a period of more than 30 days or are being contested in good
faith by appropriate proceedings so long as during such 30 day period there is
not, or such proceedings do not involve, any material risk of the sale,
forfeiture or loss of the Airframe or any Engine or any interest therein, (v)
Liens arising out of any judgment or award against Lessee (or any Sublessee),
unless there exists a material risk of the sale, forfeiture or loss of the
Airframe or any Engine or any interest therein or unless the judgment secured
shall not, within 45 days after the entry thereof, have been discharged,
vacated, reversed or execution thereof stayed pending appeal or shall not have
been discharged, vacated or reversed within 45 days after the expiration of
such stay, and (vi) any other Lien with respect to which Lessee (or any
Sublessee) shall have provided a bond or other security in an amount and under
terms reasonably satisfactory to Lessor. Lessee will promptly, at its own
expense, take (or cause to be taken) such actions as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any time.
SECTION 7. Registration, Maintenance and Operation; Possession
and Subleases; Insignia. (a) (1) Registration and Maintenance. Lessee, at
its own cost and expense, shall (or shall cause any Sublessee to): (i) upon
delivery of the Aircraft, cause the Aircraft to be duly registered in the name
of Lessor, and, subject to subparagraph (3) of this Section 7(a), to remain
duly registered in the name of Lessor under the Transportation Code (except to
the extent that such registration cannot be effected because of Lessor's or the
Owner Participant's failure to comply with the citizenship requirements for
registration of aircraft under the Transportation Code), provided that Lessor
and the Owner Participant shall execute and deliver all such documents as
Lessee (or any Sublessee) may reasonably request for the purpose of effecting
and
26
32
[Lease Agreement (1994 737 B)]
continuing such registration, and Lessee shall cause the Trust Indenture to be
duly recorded and maintained of record as a first mortgage on the Aircraft;
(ii) maintain, service, repair, and overhaul (or cause to be maintained,
serviced, repaired, and overhauled) the Aircraft (and any engine which is not
an Engine but which is installed on the Aircraft) (x) so as to keep the
Aircraft in as good an operating condition as when delivered by Lessee to
Lessor, ordinary wear and tear excepted, and so as to keep the Aircraft in such
condition as may be necessary to enable the airworthiness certification for the
Aircraft to be maintained in good standing at all times (other than during
temporary periods of storage in accordance with applicable regulations) under
(I) the Transportation Code, except when all of Lessee's Boeing Model 737-322
aircraft (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of such grounding) registered in the United
States have been grounded by the FAA unless such grounding was caused by the
failure of Lessee to maintain, service, repair or overhaul the Aircraft in
accordance with this Lease, or (II) the applicable laws of any other
jurisdiction in which the Aircraft may then be registered from time to time,
except when all of Lessee's Boeing Model 737-322 aircraft (powered by engines
of the same type as those with which the Airframe shall be equipped at the time
of such grounding) registered in such jurisdiction have been grounded by the
aeronautical authority of such jurisdiction unless such grounding was caused by
the failure of Lessee to maintain, service, repair or overhaul the Aircraft in
accordance with this Lease and (y) in substantially the same manner as Lessee
(or any Sublessee) maintains, services, repairs or overhauls similar aircraft
operated by Lessee (or such Sublessee) in similar circumstances and without in
any way discriminating against the Aircraft, whether by reason of its leased
status or otherwise; or such other manner as shall have been approved by the
Owner Participant and the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Holder); (iii)
maintain or cause to be maintained all records, logs and other materials
required to be maintained in respect of the Aircraft by the FAA and the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered (which records, logs and other materials, as
between Lessor and Lessee and all parties claiming through Lessee, shall be the
property of Lessor but shall be maintained by Lessee during the Term of this
Lease and shall become the property of Lessee upon Lessee's purchase of the
Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event
of Loss and Lessee's compliance with Section 10); (iv) promptly furnish or
cause to be furnished to Lessor or the Owner Participant such information as
may be required to enable Lessor or the Owner Participant to file any reports
required to be filed by Lessor or the Owner Participant with any governmental
authority because of Lessor's ownership of the Aircraft; and (v) advise Lessor
no later than March 1 of each year through the year after the year in which the
Term shall end as to the routing of the Aircraft during the preceding calendar
year.
(2) Operation. Lessee will not (or permit any
Sublessee to) maintain, use, service, repair, overhaul or operate the
Aircraft in violation of any law or any rule, regulation, treaty, order
or certificate of any government or governmental authority (domestic or
foreign) having jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued by
any such authority, except that,
27
33
[Lease Agreement (1994 737 B)]
after Lessee shall have provided Lessor with a certificate of its
President, any Vice President, the Treasurer or any Assistant Treasurer
stating all relevant facts pertaining thereto, Lessee or any Sublessee
may contest in good faith the validity or application of any such law,
rule, regulation, order, certificate, license, registration or violation
in any reasonable manner which does not jeopardize the right, title and
interest of the Lessor, the Owner Participant or the Indenture Trustee
(but in regard to the Indenture Trustee, only so long as the Original
Loan Participant is a Holder) in and to the Airframe and/or the Engines,
result in a claim, loss or expense for which Lessor, the Owner
Participant or the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Holder) is
not indemnified and for which Lessee is not then willing to indemnify
Lessor, Owner Participant or the Indenture Trustee (but in regard to the
Indenture Trustee, only so long as the Original Loan Participant is a
Holder) in a manner reasonably satisfactory to such person or otherwise
materially adversely affect Lessor, the Indenture Trustee (but in regard
to the Indenture Trustee, only so long as the Original Loan Participant
is a Holder) or the Owner Participant, but only so long as such
proceedings do not involve any material risk of criminal liability or
any unindemnified material risk of civil liability to Lessor, the Owner
Participant or the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Holder) for
which Lessor, the Owner Participant or the Indenture Trustee (but in
regard to the Indenture Trustee only so long as the Original Loan
Participant is a Holder) is not indemnified and for which Lessee is not
then willing to indemnify Lessor, the Owner Participant or the Indenture
Trustee (but in regard to the Indenture Trustee, only so long as the
Original Loan Participant is a Holder) in a manner reasonably
satisfactory to such person. If the indemnities or insurance specified
in Section 11(f), or some combination thereof, have not been obtained,
Lessee will not operate the Aircraft, or permit any Sublessee to operate
the Aircraft, in or to any area excluded from coverage by any insurance
required to be maintained by the terms of Section 11, provided, however,
that the failure of Lessee to comply with the provisions of this
sentence shall not give rise to an Event of Default hereunder where such
failure is attributable to a hijacking, medical emergency, equipment
malfunction, weather conditions, navigational error or other isolated
extraordinary event beyond the control of Lessee and Lessee is taking
all reasonable steps to remedy such failure as soon as is reasonably
practicable.
(3) Reregistration. At any time after the close of the
calendar year in which occurs the seventh anniversary of the Delivery
Date, Lessor shall, at the request and sole expense of Lessee, cooperate
with Lessee and take all actions required to change the country of
registration of the Aircraft upon compliance by Lessee with all of the
terms of Section 8(e) of the Participation Agreement.
(4) Operating Certificates. So long as no Event of
Default has occurred and is continuing, Lessor hereby authorizes Lessee,
at Lessee's expense to act as its agent for the purpose of obtaining any
required replacement operating certificates
28
34
[Lease Agreement (1994 737 B)]
from the FAA. This authority includes, but is not limited to, obtaining
Registration Certificates, Airworthiness Certificates, Certificates of
Sanitary Construction, Ferry Permits and Experimental Operating Permits.
In particular, this authority includes the ability to make use of
Exemption No. 5318 issued by the FAA. This authority will allow duly
authorized personnel of Lessee to sign any application forms required in
the process of obtaining such operating certificates, and this authority
will also allow such personnel, where necessary and appropriate, to sign
certificates as the attorney-in-fact for Lessor. Lessee hereby agrees
that it will notify Lessor of any action that it has taken in accordance
with this Section 7(a)(4) as agent for the Lessor. Nothing in this
Section 7(a)(4) shall permit Lessee to deregister the Aircraft or change
the government of registry of the Aircraft except as provided in Section
7(a)(3) above.
(b) Possession and Subleases. Lessee will not, without the
prior written consent of Lessor and the Indenture Trustee (but in regard to the
Indenture Trustee, only so long as the Original Loan Participant is a Holder),
sublease or otherwise in any manner deliver, transfer or relinquish possession
of the Airframe or any Engine or install or permit any Engine to be installed
on any airframe other than the Airframe; provided that, so long as no Section
14(a), (b), (f) or (g) Default or, in the case of paragraph (viii) of this
Section 7(b), no Section 14(d) (solely with respect to Lessee's obligations
under Section 7(a) or (b)(viii) hereof or Section 8 hereof) Default, or any
Event of Default shall have occurred and be continuing at the time of such
sublease, delivery, transfer or relinquishment of possession or installation,
and so long as the action to be taken shall not deprive the Indenture Trustee
of the perfected lien of the Trust Indenture on the Airframe or any Engine and
Lessee and any Sublessee shall continue to comply with the provisions of
Sections 6, 7(a) and 11 hereof, Lessee may, without the prior written consent
of Lessor:
(i) subject the Engines or engines then installed on
the Airframe to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline
industry and entered into by Lessee (or any Sublessee) in the ordinary
course of its business; provided that if Lessor's title to any Engine
shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be an Event of Loss with respect to such
Engine and Lessee shall (or shall cause Sublessee to) comply with
Section 10(b) hereof in respect thereof;
(ii) deliver possession of the Airframe or any Engine to
the manufacturer thereof or to any other Person for testing, service,
repair, maintenance or overhaul work on the Airframe or Engine or any
Part of any thereof or for alterations or modifications in or additions
to such Airframe or Engine to the extent required or permitted by the
terms of Section 8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee
(or any Sublessee) which airframe is free and clear of all Liens,
except: (A) Permitted Liens and those
29
35
[Lease Agreement (1994 737 B)]
which apply only to the engines (other than Engines), appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment
(other than Parts) installed on such airframe (but not to the airframe
as an entirety), (B) the rights of third parties under interchange
agreements which would be permitted under clause (i) above, provided
that Lessor's title to such Engine shall not be divested as a result
thereof and (C) mortgage Liens or other security interests, provided,
that (as regards this clause (C)), such mortgage Liens or other security
interests effectively provide that such Engine shall not become subject
to the lien of such mortgage or security interest, notwithstanding the
installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee
(or any Sublessee) or purchased by Lessee (or any Sublessee) subject to
a conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such
lease, conditional sale or other security agreement effectively provides
that such Engine shall not become subject to the lien of such lease,
conditional sale or other security agreement, notwithstanding the
installation thereof on such airframe;
(v) install an Engine on an airframe owned by Lessee
(or any Sublessee), leased to Lessee (or any Sublessee) or purchased by
Lessee (or any Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither subparagraph (iii)
nor subparagraph (iv) of this paragraph (b) is applicable, provided that
such installation shall be deemed an Event of Loss with respect to such
Engine and Lessee shall (or shall cause any Sublessee to) comply with
Section 10(b) hereof in respect thereof, Lessor not intending hereby to
waive any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 10(b);
(vi) transfer (or permit any Sublessee to transfer)
possession of the Airframe or any Engine to the United States of America
or any instrumentality or agency thereof pursuant to the Civil Reserve
Air Fleet Program for a period, including all permissible renewal
periods (so long as such renewal options have been irrevocably exercised
by Lessee), that does not extend beyond the end of the Term so long as
Lessee (or any Sublessee) shall promptly notify Lessor (x) upon
transferring possession of the Airframe or any Engine to the United
States of America or any agency or instrumentality thereof pursuant to
the Civil Reserve Air Fleet Program and (y) of the name and the address
of the Contracting Office Representative for the Military Airlift
Command of the United States Air Force to whom notice must be given
pursuant to Section 15 hereof;
30
36
[Lease Agreement (1994 737 B)]
(vii) transfer possession of the Airframe or any Engine
to the United States of America or any instrumentality or agency thereof
pursuant to a contract, a copy of which shall be provided to Lessor
provided that the term of such contract, including all permissible
renewal periods (so long as such renewal options have been irrevocably
exercised by Lessee), shall not continue beyond the end of the Term; or
(viii) so long as the Sublessee is not subject to a
proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date the Sublease is entered into, Lessee
may, at any time in its sole discretion, enter into a sublease with (1)
a U.S. Air Carrier, (2) after the close of the calendar year in which
there occurs the seventh anniversary of the Delivery Date, any Permitted
Sublessee, or (3) after the close of the calendar year in which there
occurs the seventh anniversary of the Delivery Date, any other Person
approved in writing by the Owner Participant and the Indenture Trustee
(but in regard to the Indenture Trustee, only so long as the Original
Loan Participant is a Holder), which approval shall not be unreasonably
withheld if in regard to this subclause (3) Lessor and the Indenture
Trustee receive an opinion of counsel reasonably acceptable to Lessor
and the Indenture Trustee that the terms of the sublease and other
Operative Documents will be valid in the country where Sublessee is
domiciled and that such country would give effect to the priority and
validity of the Lien of the Trust Indenture; that no Participant is
required to register to do business in the Sublessee's country of
domicile; that there is no tort liability for owners or financiers not
in possession that is more extensive than under United States law or any
state law (it being understood that if such opinion cannot be given in a
form satisfactory to the Owner Participant or the Indenture Trustee (but
in regard to the Indenture Trustee, only so long as the Original Loan
Participant is a Holder) such opinion will be waived if insurance
reasonably satisfactory to the Owner Participant, the Indenture Trustee
(but in regard to the Indenture Trustee, only so long as the Original
Loan Participant is a Holder) and the Lessor, in its individual
capacity, is provided at Lessee's expense to cover such risk); that fair
compensation in a currency freely convertible into Dollars is mandated
if there is a requisition of use or title of the Aircraft by the country
in which the Sublessee is domiciled (it being understood that if such
opinion cannot be given in a form reasonably satisfactory to the Owner
Participant such opinion will be waived if insurance reasonably
satisfactory to the Owner Participant and the Indenture Trustee (but in
regard to the Indenture Trustee, only so long as the Original Loan
Participant is a Holder), is provided at Lessee's expense to cover such
risk); that there exist no possessory rights in favor of the Sublessee
which upon Lessee's bankruptcy or other Default hereunder (assuming the
Sublessee is not bankrupt) would prevent the return of the Aircraft in
accordance with the terms hereof or inhibit the Lessor's rights therein;
provided, however, (A) that no sublease, including all permissible
renewal periods, shall extend beyond the Basic Term or any Renewal Term
then in effect, unless Lessee shall have irrevocably committed to
purchase the Aircraft or renew this Lease in accordance with the terms
hereof at the end of the Basic Term or Renewal Term, as the case may be,
to a date beyond the latest
31
37
[Lease Agreement (1994 737 B)]
permissible expiration date of such sublease, and (B) that, on the date
of such sublease, the United States and the country in which sublessee
is domiciled and principally located maintain diplomatic relations.
The rights of any Sublessee or other transferee (other than a
transferee where the transfer is of an Engine which is deemed an Event of Loss)
shall be subject and subordinate to, all the terms of this Lease (and any
Sublease shall expressly state that it is so subject and subordinate),
including, without limitation, the covenants contained in Section 7(a) hereof,
the inspection rights contained in Section 12 hereof and Lessor's (and, so long
as the Trust Indenture is in effect, the Indenture Trustee's (as Lessor's
assignee)) rights to repossess the Aircraft and to void any Sublease upon such
repossession, and Lessee shall remain primarily liable for the performance of
all of the terms of this Lease, and the terms of any such Sublease shall not
permit any Sublessee to take any action not permitted to be taken by Lessee in
the Lease with respect to the Aircraft. No pooling agreement, Sublease or
other relinquishment of possession of the Airframe or any Engine shall in any
way discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights or remedies hereunder. Lessor agrees,
for the benefit of Lessee (and any Sublessee) and for the benefit of any
mortgagee or other holder of a security interest in any engine owned by Lessee
(or any Sublessee), any lessor of any engine other than an Engine leased to
Lessee (or any Sublessee) and any conditional vendor of any engine other than
an Engine purchased by Lessee (or any Sublessee) subject to a conditional sale
agreement or any other security agreement, that no interest shall be created
under the Lease in any engine so owned, leased or purchased and that neither
Lessor nor its successors or assigns will acquire or claim, as against Lessee
(or any Sublessee) or any such mortgagee, lessor or conditional vendor or other
holder of a security interest or any successor or assignee of any thereof, any
right, title or interest in such engine as the result of such engine being
installed on the Airframe; provided, however, that such agreement of Lessor
shall not be for the benefit of any lessor or secured party of an airframe
leased to Lessee (or any Sublessee) or purchased by Lessee (or any Sublessee)
subject to a conditional sale or other security agreement or for the benefit of
any mortgagee or any other holder of a security interest in an airframe owned
by Lessee (or any Sublessee), on which airframe Lessee (or any Sublessee) then
proposes to install an Engine, unless such lessor, conditional vendor, other
secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against Lessor, any right title or interest in an Engine as a result of such
Engine being installed on such airframe. Lessee shall provide the Owner
Participant and the Indenture Trustee written notice (which notice shall be
given no later than forty-five (45) days prior to entering into such Sublease)
of any Sublease and a copy of any Sublease which in either case has a term of
more than one (1) year. If an Event of Default shall have occurred and be
continuing, Lessee shall direct all payments under any such Sublease to be paid
to Lessor during the continuance of such Event of Default.
32
38
[Lease Agreement (1994 737 B)]
Any Wet Lease or similar arrangement under which Lessee maintains
operational control of the Aircraft shall not constitute a delivery, transfer
or relinquishment of possession for purposes of this Section. Lessor
acknowledges that any consolidation or merger of Lessee or conveyance, transfer
or lease of all or substantially all of Lessee's assets permitted by the
Operative Documents shall not be prohibited by this Section.
No Sublease permitted pursuant to this Section shall permit any
further sub-subleasing of the Aircraft.
(c) Insignia. On or prior to the Delivery Date, or as soon
thereafter as practicable, Lessee agrees to affix and maintain (or cause to be
affixed and maintained) in the cockpit of the Airframe adjacent to the
registration certificate therein and on each Engine a nameplate bearing the
inscription:
Leased From
First Security Bank of Utah, National Association, not in its
individual capacity but solely as Owner Trustee, Owner and Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien
of the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company, as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents).
Except as above provided, Lessee will not allow the name of any
person, association or corporation to be placed on the Airframe or on any
Engine as a designation that might be interpreted as a claim of ownership;
provided, that nothing herein contained shall prohibit Lessee (or any
Sublessee) from placing its customary colors and insignia on the Airframe or
any Engine.
SECTION 8. Replacement and Pooling of Parts;
Alterations, Modifications and Additions.
(a) Replacement of Parts. Lessee, at its own cost and
expense, will promptly replace or cause to be replaced all Parts which may from
time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for
33
39
[Lease Agreement (1994 737 B)]
use for any reason whatsoever, except as otherwise provided in Section 8(c).
All replacement Parts shall be owned by Lessee free and clear of all Liens
(except Permitted Liens, pooling arrangements permitted by Section 8(b) hereof
and replacement Parts temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility
substantially equal to, the Parts replaced assuming such replaced Parts were in
the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by Parts which meet the requirements for replacement Parts
specified above. Immediately upon any replacement Part becoming incorporated
or installed in or attached to the Airframe or any Engine, without further act
(subject only to Permitted Liens and any pooling arrangement permitted by
Section 8(b) hereof and except replacement Parts temporarily installed on an
emergency basis), (i) title shall vest in and such replacement Part shall
become the property of Lessor and shall become subject to this Lease and be
deemed a Part for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to the Airframe or such
Engine and shall become subject to the Lien of the Trust Indenture and (ii) the
replaced Part shall no longer be the property of Lessor and shall no longer be
deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or
any Engine as provided in Section 8(a) hereof may be subjected by Lessee (or
any Sublessee) to a pooling arrangement of the type which is permitted by
Section 7(b)(i) hereof; provided, that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 8(a) as promptly as practicable after the removal of
such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Airframe or an Engine in accordance with such
Sections may be owned by any third party subject to such a pooling arrangement,
provided, that Lessee (or any Sublessee), at its expense, as promptly
thereafter as practicable, and in any event within 90 days, either (i) causes
such replacement Part to become the property of Lessor free and clear of all
Liens other than Permitted Liens or (ii) replaces such replacement Part with a
further replacement Part owned by Lessee (or any Sublessee) which shall become
the property of Lessor, free and clear of all Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Lessee, at its
own expense, will make (or cause to be made) such alterations and modifications
in and additions to the Airframe and Engines as may be required from time to
time to be made during the Term so as to comply with any law, rule, regulation
or order of any regulatory agency or body of any jurisdiction in which the
Aircraft may then be registered; provided, however, that, after Lessee shall
have provided Lessor with a certificate of its President, any Vice President,
the Treasurer or any Assistant Treasurer stating all relevant facts pertaining
thereto, Lessee or any Sublessee may, in good faith, and by appropriate
proceedings contest the validity or application of any such law, rule,
regulation or order in any reasonable manner which does not jeopardize the
Owner Participant's right, title or interest in and to the Airframe and/or the
Engines, result in a claim,
34
40
[Lease Agreement (1994 737 B)]
loss or expense for which the Lessee is not required to indemnify the Owner
Participant pursuant to the Operative Documents and for which the Lessee is not
then willing to indemnify the Owner Participant in a manner reasonably
satisfactory to the Owner Participant or otherwise materially adversely affect
Lessor, the Owner Participant or the Indenture Trustee, but only so long as
such proceedings do not involve any material risk of criminal liability or any
unindemnified material risk of civil liability to Lessor or the Owner
Participant for which Lessor or the Owner Participant is not indemnified and
for which Lessee is not then willing to indemnify Lessor or the Owner
Participant in a manner reasonably satisfactory to such person. In addition,
Lessee (or any Sublessee), at its own expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine as
Lessee (or any Sublessee) may deem desirable in the proper conduct of its
business, including removal of Parts which Lessee (or any Sublessee) deems to
be obsolete or no longer suitable or appropriate for use on the Airframe or
such Engine (such parts, "Obsolete Parts"); provided that no such alteration,
modification, removal or addition impairs the condition or airworthiness of the
Airframe or such Engine, or materially diminishes the fair market value, the
utility or, in regard to the Airframe, remaining economic useful life of the
Airframe or such Engine below the fair market value, utility or, in regard to
the Airframe, remaining economic useful life thereof immediately prior to such
alteration, modification, removal or addition assuming the Airframe or such
Engine was then in the condition required to be maintained by the terms of this
Lease. In addition, the fair market value (but not the utility) of the
Airframe or any Engine may be reduced by the value of Obsolete Parts which
shall have been removed so long as the aggregate value of all Obsolete Parts
which shall have been removed and not replaced shall not exceed $400,000. All
Parts incorporated or installed in or attached or added to the Airframe or an
Engine as the result of such alteration, modification or addition (except those
parts which Lessee has leased from others and which may be removed by Lessee
pursuant to the next sentence) (the "Additional Parts") shall, without further
act, become the property of, and title to such Parts shall vest in, Lessor.
Notwithstanding the foregoing sentence, Lessee (or any Sublessee) may, at its
own expense, at any time during the Term, so long as no Default under Section
14(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) or an Event of Default shall
have occurred and be continuing, remove or suffer to be removed any Additional
Part, provided that such Additional Part (i) is in addition to, and not in
replacement of or substitution for, any Part originally incorporated or
installed in or attached to such Airframe or any Engine at the time of delivery
thereof hereunder or any Part in replacement of or substitution for any such
Part, (ii) is not required to be incorporated or installed in or attached or
added to the Airframe or any Engine pursuant to the terms of Section 7 hereof
or the first sentence of this paragraph (c) and (iii) can be removed from the
Airframe or such Engine without impairing the condition or airworthiness or
diminishing the fair market value, utility or, in regard to the Airframe,
remaining economic useful life of the Airframe or such Engine which the
Airframe or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed the property of Lessor or
part of the Airframe or Engine from which it was removed. Any
35
41
[Lease Agreement (1994 737 B)]
Additional Part not removed as above provided prior to the return of the
Airframe or Engine to Lessor hereunder shall remain the property of Lessor.
SECTION 9. Early Termination.
(a) (Intentionally Omitted).
(b) Termination for Obsolescence/Surplus. So long as no Event
of Default under Section 14(d) hereunder (solely with respect to Lessee's
obligations under Section 7(a)(1) hereof and Section 8 hereof) shall have
occurred and be continuing, Lessee shall have the right to terminate this Lease
on any Lease Period Date occurring on or after the close of the calendar year
in which occurs the seventh anniversary of the Delivery Date if Lessee shall
have made a good faith determination that the Aircraft is surplus to Lessee's
requirements or economically obsolete to Lessee. Lessee shall give to Lessor
and Indenture Trustee at least one hundred and eighty (180) days revocable
(except as provided below) advance written notice of Lessee's intention to so
terminate this Lease (any such notice, a "Termination Notice") (i) specifying
the Lease Period Date on which Lessee intends to terminate this Lease in
accordance with this Section 9(b) (such specified date, a "Termination Date")
and (ii) attaching a certificate of the Assistant Treasurer or any more senior
officer of Lessee which states that the Aircraft is surplus to Lessee's
requirements or economically obsolete to Lessee. The Termination Notice shall
become irrevocable twenty (20) days prior to the Termination Date. Lessee
shall exercise this option by arranging for the sale of the Aircraft pursuant
to Section 9(c), provided, however, that Lessee may not withdraw its notice if
the Lessor has elected to retain the Aircraft pursuant to Section 9(c) or if
the highest bid obtained by Lessee pursuant to Section 9(c) is greater than the
then applicable Termination Value.
(c) Sale of the Aircraft. In the event that Lessee shall have
proposed to terminate this Lease under Section 9(b), then during the period
commencing with the date of the Termination Notice until the proposed
Termination Date Lessee, as non-exclusive agent for Lessor and at no expense to
Lessor, shall use reasonable efforts to obtain bids in Dollars for the purchase
of the Aircraft and, in the event it receives any bid, Lessee shall, within
five Business Days after receipt thereof and at least ten Business Days prior
to the proposed Termination Date, advise Lessor in writing of the amount and
terms of such bid, and the name and address of the party or parties (who shall
not be Lessee or any Affiliate of Lessee or any person with whom Lessee or any
such Affiliate has an arrangement or understanding regarding the future use of
the Aircraft by Lessee or any such Affiliate but who may be the Owner
Participant, any Affiliate thereof or any Person contacted by the Owner
Participant) submitting such bid. After Lessee shall have advised Lessor of
all bids received, the Owner Participant, any Affiliate thereof or any Person
contacted by the Owner Participant may submit a further bid or bids to Lessee
not later than five Business Days prior to the Termination Date proposed by
Lessee (unless Lessee shall have revoked the Termination Notice specifying such
proposed Termination Date). Subject to the next succeeding sentence, on or
before the Termination Date, subject to the release of all
36
42
[Lease Agreement (1994 737 B)]
mortgage and security interests with respect to the Aircraft under the Trust
Indenture: (1) Lessee shall deliver the Aircraft, or cause the Aircraft to be
delivered to the highest bidder as determined below, in the same manner and in
the same condition and otherwise in accordance with all the terms of this Lease
as if delivery were made to Lessor pursuant to Section 5 hereof, and Lessee
shall duly transfer to Lessor title to any engine installed on the Airframe and
not owned by Lessor, all in accordance with the terms of Section 5 hereof, (2)
Lessor shall comply with the terms of the Trust Indenture and shall, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), subject to prior or concurrent payment by Lessee
of all amounts due under clause (3) of this sentence, sell the Aircraft for
cash in Dollars to the entity, if any, which shall have submitted the highest
bona fide bid (evaluated on a net cash basis) therefor, the total selling price
realized at such sale to be retained by Lessor, and (3) Lessee shall
simultaneously pay or cause to be paid to Lessor in the manner provided in
Section 3(e) hereof, (A) if the proceeds of the sale of the Aircraft so sold,
net of reasonable out-of-pocket costs and expenses incurred by Lessor and the
Owner Participant in connection therewith, including, without limitation,
applicable sales or transfer taxes and legal fees, are less than the
Termination Value for the Aircraft computed as of the Termination Date, the
difference in Dollars, (B) all unpaid Basic Rent due on or prior to the
Termination Date (other than Basic Rent payable in advance on the Termination
Date, if any) and all unpaid Supplemental Rent with respect to the Aircraft due
on or prior to such Termination Date, and (C) the Break Amount, if any, due on
the Certificates and upon receiving all such payments referred to in clauses
(2) and (3) above Lessor simultaneously will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and interest in and
to any Engines constituting part of the Aircraft which were not sold with the
Aircraft. Notwithstanding the preceding sentence, Lessor may, if Lessee has
not already revoked the Termination Notice, elect to retain title to the
Aircraft. If Lessor so elects, Lessor shall give to Lessee written notice of
such election at least ten Business Days prior to the Termination Date
accompanied by an irrevocable undertaking by the Owner Participant to make
available to Lessor for payment to the Indenture Trustee on the Termination
Date the amount required to pay in full the unpaid Original Amount of the
Certificates outstanding on the Termination Date together with all other
amounts due on such Termination Date thereunder less amounts to be paid by
Lessee as a result of the payment thereof as set forth in the second following
sentence. Upon receipt of notice of such an election by Lessor and the
accompanying undertaking by the Owner Participant, Lessee shall cease its
efforts to obtain bids as provided above and shall reject all bids theretofore
or thereafter received. On the Termination Date, Lessor shall (subject to the
payment by Lessee of all Rent due on or prior to such date as set forth below)
pay in full the unpaid Original Amount of the Certificates outstanding on the
Termination Date together with all other amounts due thereunder less any
amounts to be paid by Lessee as a result of the payment thereof and, provided
that the Certificates are paid as aforesaid, Lessee shall deliver the Airframe
and Engines or engines to Lessor in accordance with Section 5 and shall pay all
Basic Rent due on or prior to the Termination Date (other than Basic Rent
payable in advance on the
37
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[Lease Agreement (1994 737 B)]
Termination Date, if any) and all unpaid Supplemental Rent due on or prior to
such Termination Date, and Break Amount, if any. If no sale shall have
occurred on the Termination Date or Lessor has not, after making its election
referred to above, made the payment contemplated by the preceding sentence and
thereby caused this Lease to terminate, this Lease shall continue in full force
and effect as to the Aircraft, Lessee shall be entitled to keep any deposits or
other advances received from the proposed purchaser(s) of the Aircraft (without
in any way limiting any other rights or remedies against such proposed
purchaser(s) available to Lessor or Lessee), Lessee shall pay the reasonable
out-of-pocket costs and expenses, including legal fees, incurred by the Owner
Participant, Indenture Trustee and Lessor (unless such failure to terminate the
Lease is a consequence of the failure of Lessor or the Owner Participant
without due cause to make, or cause to be made, the payment referred to in the
immediately preceding sentence), if any, in connection with preparation for
such sale and Lessee may give one or more additional Termination Notices,
provided no more than three such notices may be given during the Term and only
one such notice may be given during any 365 day period (not counting, in either
case, any Termination Notice for a Termination Date on which this Lease does
not terminate as a consequence of the failure of Lessor or the Owner
Participant without due cause to make or cause to be made the payment referred
to in the immediately preceding sentence). In the event of any such sale or
such retention of the Aircraft by Lessor and upon compliance by Lessee with the
provisions of this paragraph, the obligation of Lessee to pay Basic Rent or any
other amounts hereunder shall cease to accrue. Upon payment of all amounts
that may then be due hereunder, this Lease shall terminate. Lessor may, but
shall be under no duty to, solicit bids, inquire into the efforts of Lessee to
obtain bids or otherwise take any action in connection with any such sale other
than to transfer (in accordance with the foregoing provisions) to the purchaser
named in the highest bid certified by Lessee to Lessor all of Lessor's right,
title and interest in the Aircraft, against receipt of the payments provided
herein.
(d) Termination as to Engines. Lessee shall have the right at
its option at any time during the Term, on at least 30 days' prior written
notice, to terminate this Lease with respect to any Engine. In such event, and
prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10(b) to the same extent as if
an Event of Loss had occurred with respect to such Engine, and Lessor shall
transfer title to the replaced Engine as provided in Section 5(b). No
termination of this Lease with respect to any Engine as contemplated by this
Section 9(d) shall result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of
Loss with Respect to the Aircraft. Upon the occurrence of an Event of Loss
with respect to the Airframe or the Airframe and the Engines and/or engines
then installed thereon, Lessee shall (1) forthwith (and in any event, within
fifteen days after such occurrence) give Lessor written notice of such Event of
Loss and (2) within 60 days after such occurrence, give Lessor written notice
of its election to perform one of the following options (it being understood
that the failure to give such notice shall be deemed to be an election of the
option set forth in clause (i) below):
38
44
[Lease Agreement (1994 737 B)]
(i) Not later than the earlier of (x) the Business Day
next succeeding the 100th day following the occurrence of such Event of
Loss or (y) the third Business Day following receipt by the loss payee
of the insurance proceeds in respect to such Event of Loss (but not
earlier than the first Business Day next succeeding the 65th day
following the occurrence of such Event of Loss) (the applicable date
being the "Loss Payment Date"), Lessee shall, to the extent not paid to
Lessor or Indenture Trustee, as the case may be, as insurance proceeds,
pay or cause to be paid to Lessor as specified in Section 3(e) hereof,
(A) the Stipulated Loss Value of the Aircraft computed as of the
Stipulated Loss Value Date occurring on or immediately following the
date of such Event of Loss, plus (B) if such Stipulated Loss Value Date
is a Lease Period Date, Basic Rent due on such Lease Period Date, plus
(C) unpaid Supplemental Rent with respect to the Aircraft due on or
prior to the date of payment, plus (D) Break Amount, if any, due on the
Certificates, plus (E) interest on such Stipulated Loss Value at the
Debt Rate from and including such Stipulated Loss Value Date to, but not
including, the date of any advance payment in respect of Stipulated Loss
Value as provided below, and thereafter on the unpaid balance of such
Stipulated Loss Value from and including the date of such advance
payment to, but excluding, the date such Stipulated Loss Value is paid
in full; provided, however, that if the Commencement Date or a Lease
Period Date shall occur after the Stipulated Loss Value Date with
respect to which Stipulated Loss Value is determined but prior to the
date of such payment of the sum of the amounts specified in clauses (A),
(B), (C), (D) and (E) above, Lessee shall pay on the Commencement Date
or such Lease Period Date an amount equal to the Basic Rent that would
have been due on the Commencement Date or such Lease Period Date if such
Event of Loss had not occurred, which amount shall be credited as an
advance against the amounts payable pursuant to clauses (A), (B), (C),
(D) and (E) above, or
(ii) Not later than the earlier of (x) the Business Day
next succeeding the 100th day following the occurrence of such Event of
Loss or (y) the third Business Day following receipt by the loss payee
of the insurance proceeds with respect to such Event of Loss (but not
earlier than the first Business Day next succeeding the 65th day
following the occurrence of such Event of Loss), Lessee shall, provided
that no Section 14(a), (b), (f) or (g) Default or any Event of Default
shall have occurred and be continuing, substitute an aircraft or an
airframe or an airframe and one or more engines, as the case may be in
accordance with the terms hereof, provided that if Lessee shall have
elected to make a substitution under this clause (ii) and shall fail for
any reason to make such substitution in accordance with the terms hereof
and of the Trust Indenture, Lessee shall make the payments required by
clause (i) above as and when due thereunder.
At such time as Lessor shall have received the sum of the amounts
specified in clauses (A), (B), (C), (D) and (E) of subparagraph (i) above,
together with all other amounts that then may be due hereunder, under the
Participation Agreement and under the Tax Indemnity Agreement, (1) the
obligation of Lessee to pay the installments of Basic Rent, Interim Rent,
39
45
[Lease Agreement (1994 737 B)]
Supplemental Rent, Stipulated Loss Value, Termination Value, EBO Percentage or
any other amount shall cease to accrue, (2) this Lease shall terminate, (3)
Lessor will comply with the terms of the Trust Indenture and transfer to or at
the direction of Lessee, without recourse or warranty (except as to the absence
of Lessor Liens (including for this purpose Liens that would be Lessor Liens
but for the proviso to the definition of Lessor Liens)), all Lessor's right,
title and interest in and to the Airframe and the Engines "as-is, where-is" and
furnish to or at the direction of Lessee, at Lessee's expense, a ▇▇▇▇ of sale
in form and substance reasonably satisfactory to Lessee (or any Sublessee),
evidencing such transfer, and (4) Lessee will be subrogated to all claims of
Lessor if any against third parties (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at its own cost
and expense in accordance with Section 11(e) hereof), but only to the extent
the same relate to physical damage to or loss of the Airframe and any Engines
which were subject to such Event of Loss.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall, not later than the Business Day next succeeding the 100th day following
the occurrence of such Event of Loss (A) convey or cause to be conveyed to
Lessor an aircraft (or an airframe or an airframe and an engine which, together
with the Engines or Engine constituting a part of the Aircraft but not
installed thereon at the time of such Event of Loss, constitute the Aircraft)
free and clear of all Liens (other than Permitted Liens) and having at least
the fair market value, utility and, with respect to the airframe, remaining
economic useful life and being in as good an operating condition as, the
Aircraft subject to such Event of Loss assuming that the Aircraft had been
maintained in accordance with this Lease; provided that any aircraft, airframe
or engine so substituted hereunder shall be of the same or improved make and
model as those initially leased hereunder and (B) prior to or at the time of
any such substitution, Lessee (or any Sublessee), at its own expense, will (1)
furnish Lessor with a full warranty ▇▇▇▇ of sale and a FAA ▇▇▇▇ of sale, in
form and substance reasonably satisfactory to Lessor, evidencing such transfer
of title, (2) cause a Lease Supplement and a Trust Supplement to be duly
executed by Lessee and filed for recording pursuant to the Transportation Code,
or the applicable laws, rules and regulations of any other jurisdiction in
which the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in
order to perfect the security interests therein created by or pursuant to the
Trust Indenture (and, with regard to precautionary filings, this Lease), (3)
furnish Lessor with such evidence of Lessor's title to such replacement
aircraft and of compliance with the insurance provisions of Section 11 with
respect to such substituted property as Lessor or the Indenture Trustee may
reasonably request, (4) provide an opinion of outside tax counsel, reasonably
satisfactory to Owner Participant, to the effect that such substitution will
not result in any adverse tax consequences (including under Section 861 of the
Code) to Lessor or the Owner Participant, (5) provide an opinion of counsel,
which counsel and opinion shall be reasonably acceptable to Lessor, the Owner
Participant and the Indenture Trustee, to the effect that Lessor and the
Indenture Trustee (as assignee of all right, title and interest of Lessor under
the Lease) shall be entitled to the benefits and protections of Section 1110 of
the Bankruptcy
40
46
[Lease Agreement (1994 737 B)]
Code with respect to the aircraft substituted hereunder and (6) provide an
opinion of counsel, which counsel and opinion shall be reasonably acceptable to
the Lessor and the Indenture Trustee, to the effect that title to such
replacement aircraft has been duly conveyed to Lessor free and clear of all
Liens except Permitted Liens and that such replacement aircraft is duly
subjected to the Lien of the Trust Indenture, and Lessor simultaneously will
comply with the terms of the Trust Indenture and transfer to or at the
direction of Lessee, without recourse or warranty (except as to the absence of
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)), all of Lessor's right,
title and interest, if any, in and to the Aircraft or the Airframe and one or
more Engines, as the case may be, "as-is, where-is" with respect to which such
Event of Loss occurred and furnish to or at the direction of Lessee, at
Lessee's expense, a ▇▇▇▇ of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer. Lessee will be subrogated to all claims
of Lessor, if any, against third parties (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at its own cost
and expense in accordance with Section 11(e) hereof) but only to the extent the
same relate to physical damage to or loss of the Airframe and any Engine which
were subject to such Event of Loss. For all purposes hereof, the property so
substituted shall after such transfer be deemed part of the property leased
hereunder and shall be deemed an "Aircraft," "Airframe" and "Engine," as the
case may be, as defined herein. No Event of Loss with respect to the Airframe
or the Airframe and the Engines or engines then installed thereon for which
substitution has been elected pursuant to Section 10(a)(ii) hereof shall result
in any reduction in Basic Rent or Interim Rent.
(b) Event of Loss with Respect to an Engine. Upon the
occurrence of an Event of Loss with respect to an Engine under circumstances in
which there has not occurred an Event of Loss with respect to the Airframe,
Lessee shall forthwith (and in any event, within fifteen days after such
occurrence) give Lessor written notice thereof and shall, within sixty (60)
days after the occurrence of such Event of Loss, convey or cause to be conveyed
to Lessor, as replacement for the Engine with respect to which such Event of
Loss occurred, title to an Acceptable Alternate Engine free and clear of all
Liens (other than Permitted Liens, which engine may upon its transfer to Lessor
become subject to any and all Permitted Liens) and having a value and utility
at least equal to, and being in as good an operating condition as and having
been maintained in the same manner as, the Engine subject to such Event of Loss
(assuming that such Engine had been maintained in accordance with this Lease).
Prior to or at the time of any such conveyance, Lessee, at its own expense,
will (i) furnish Lessor with a warranty (as to title) ▇▇▇▇ of sale, in form and
substance reasonably satisfactory to Lessor, with respect to such replacement
engine, (ii) cause a Lease Supplement and Trust Supplement to be duly executed
by Lessee and to be filed for recording pursuant to the Transportation Code, or
the applicable laws, rules and regulations of any other jurisdiction in which
the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in
order to perfect the security interests therein created by or pursuant to the
Trust Indenture (and, with regard to precautionary filings, this Lease), (iii)
furnish Lessor with such evidence of
41
47
[Lease Agreement (1994 737 B)]
Lessor's title to such Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 11 hereof with respect to such replacement
engine as Lessor may reasonably request, and (iv) provide an opinion of
Lessee's counsel to the Lessor and the Indenture Trustee to the effect that
title to such Acceptable Alternate Engine has been duly conveyed to Lessor free
and clear of all Liens except Permitted Liens and that such Acceptable
Alternate Engine is duly subjected to the Lien of the Trust Indenture, and
Lessor will comply with the terms of the Trust Indenture and transfer to or at
the direction of Lessee without recourse or warranty (except as to absence of
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)) all of Lessor's right,
title and interest, if any, in and to (A) the Engine with respect to which such
Event of Loss occurred and furnish to or at the direction of Lessee, and at
Lessee's expense, a ▇▇▇▇ of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer and (B) all claims, if any, against third
parties (other than Lessor's or the Owner Participant's insurers under policies
independently maintained at its own cost and expense in accordance with Section
11(e) hereof), for damage to or loss of the Engine subject to such Event of
Loss, and such Engine shall thereupon cease to be an Engine leased hereunder.
For all purposes hereof, each such replacement engine shall, after such
conveyance, be deemed part of the property leased hereunder, and shall be
deemed an "Engine." No Event of Loss with respect to an Engine under the
circumstances contemplated by the terms of this paragraph (b) shall result in
any reduction in Basic Rent or Interim Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with
respect to an Event of Loss, other than a requisition for use by the United
States Government or other government of registry of the Aircraft or any
instrumentality or agency of any thereof not constituting an Event of Loss,
will be applied as follows:
(i) if payments are received with respect to the
Airframe (or the Airframe and any Engine or engines then installed
thereon), (A) unless the same are replaced pursuant to the last
paragraph of Section 10(a), after reimbursement of Lessor (as provided
in Section 7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses, so much of such payments remaining as
shall not exceed the Stipulated Loss Value and the other amounts payable
under Section 10(a) hereof required to be paid by Lessee pursuant to
Section 10(a), shall be applied in reduction of Lessee's obligation to
pay Stipulated Loss Value and the other amounts payable under Section
10(a) hereof, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of
Stipulated Loss Value and such other amounts, and following the
foregoing application, the balance, if any, of such payments shall be
distributed between Lessee and Lessor as their respective interests may
appear; or (B) if such property is replaced pursuant to the last
paragraph of Section 10(a), such payments shall be paid over to or
retained by, Lessee; provided, that Lessee shall have
42
48
[Lease Agreement (1994 737 B)]
fully performed or, concurrently therewith, will fully perform the terms
of the last paragraph of Section 10(a) with respect to the Event of Loss
for which such payments are made; and
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 10(b) hereof, so much
of such payments remaining after reimbursement of Lessor (as provided
for in Section 7.01 of the Trust Agreement) and the Owner Participant
for reasonable costs and expenses shall be paid over to, or retained by,
Lessee, provided that Lessee shall have fully performed, or concurrently
therewith will perform, the terms of Section 10(b) with respect to the
Event of Loss for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other
government of registry of the Aircraft or any instrumentality or agency of any
thereof, Lessee shall promptly notify Lessor of such requisition, and all of
Lessee's obligations under this Lease Agreement with respect to the Aircraft
shall continue to the same extent as if such requisition had not occurred. If
Lessee shall fail to return the Aircraft on or before the end of the Term, such
failure shall constitute an Event of Loss which shall be deemed to have
occurred on the last day of the Term, provided, however, that Lessor may notify
Lessee in writing on or before the twentieth day prior to the last day of the
Term that, in the event Lessee shall fail by reason of such requisition to
return the Airframe and such Engines or engines on or before the end of the
Term, such failure shall not be deemed an Event of Loss. Upon the giving of
such notice and such failure to return by the end of the Term, Lessee shall be
relieved of all of its obligations pursuant to the provisions of Section 5
hereof (but not under any other Section), except that if any engine not owned
by Lessor shall then be installed on the Airframe, Lessee will, at no cost to
Lessor, furnish, or cause to be furnished, to Lessor a full warranty (as to
title) ▇▇▇▇ of sale with respect to each such engine, in form and substance
reasonably satisfactory to Lessor (together with an opinion of counsel (which
may be Lessee's General Counsel) to the effect that such full warranty ▇▇▇▇ of
sale has been duly authorized and delivered and is enforceable in accordance
with its terms and that such engines are free and clear of Liens other than
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens), against receipt from
Lessor, at Lessee's expense, of a ▇▇▇▇ of sale evidencing the transfer, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), by Lessor to Lessee or its designee of all of
Lessor's right, title and interest in and to any Engine constituting part of
the Aircraft but not then installed on the Airframe. All payments received by
Lessor or Lessee from such government for the use of such Airframe and Engines
or engines during the Term shall be paid over to, or retained by, Lessee (or,
if directed by Lessee, any Sublessee); and all payments received by Lessor or
Lessee from such government for the use of such Airframe and Engines or engines
after the end of the Term
43
49
[Lease Agreement (1994 737 B)]
shall be paid over to, or retained by, Lessor unless Lessee shall have
exercised its purchase option hereunder, or there is a deemed Event of Loss
hereunder, in which case such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft. In the event of the
requisition for use of an Engine by the United States Government or any other
government of registry of the Aircraft or any agency or instrumentality of any
thereof (other than in the circumstances contemplated by subsection (d)),
Lessee shall replace (or cause any Sublessee to replace) such Engine hereunder
and Lessor and Lessee (or Sublessee as the case may be) shall comply with the
terms of Section 10(b) hereof to the same extent as if an Event of Loss had
occurred with respect to such Engine. Upon compliance with Section 10(b)
hereof, any payments received by Lessor or Lessee from such government with
respect to such requisition shall be paid over to, or retained by Lessee.
(f) Application of Payments During Existence of Events of
Default. Any amount referred to in this Section 10 which is payable to or
retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or any Sublessee) if at the time of such payment or retention a Default
or an Event of Default shall have occurred and be continuing, but shall be held
by or paid over to Lessor as security for the obligations of Lessee (or such
Sublessee) under this Lease and applied against Lessee's obligations hereunder
as and when due. At such time as there shall not be continuing any such
Default or Event of Default, such amount shall be paid to Lessee to the extent
not previously applied in accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property
Damage Insurance. (1) Except as provided in clause (2) of this Section 11(a),
and subject to self-insurance to the extent permitted by Section 11(d) hereof,
Lessee will carry or cause to be carried with respect to the Aircraft at its or
any Sublessee's expense (i) comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury, and property damage
liability) insurance (exclusive of manufacturer's product liability insurance
and including, without limitation, aircraft war risk and hijacking insurance,
if and to the extent the same is maintained by Lessee (or any Sublessee) with
respect to other aircraft owned or leased, and operated, by Lessee (or any
Sublessee) on the same routes and (ii) cargo liability insurance, (A) in an
amount not less than the greater of (x) the amounts of comprehensive airline
liability insurance from time to time applicable to aircraft owned or leased,
and operated by Lessee of the same type as the Aircraft and (y) $300,000,000
per occurrence, (B) of the type and covering the same risks as from time to
time are applicable to aircraft owned or leased, and operated by Lessee of the
same type as the Aircraft, and (C) which is maintained in effect with insurers
of recognized reputation and responsibility; provided, however, that Lessee
need not maintain cargo liability insurance, or may maintain such insurance in
an amount less than $300,000,000 per occurrence, as long as the amount of cargo
liability insurance, if any, maintained with respect to the Aircraft is the
same as
44
50
[Lease Agreement (1994 737 B)]
the cargo liability insurance, if any, maintained for other Boeing Model
737-322 aircraft owned or leased, and operated by Lessee.
(2) During any period that the Airframe or any Engine,
as the case may be, is on the ground and not in operation, Lessee may
carry or cause to be carried as to such non-operating property, in lieu
of the insurance required by clause (1) above, and subject to
self-insurance to the extent permitted by Section 11(d) hereof,
insurance by insurers of recognized reputation and responsibility
otherwise conforming with the provisions of clause (1) except that (A)
the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable
to property owned or leased by Lessee of the same type as such non-
operating property and which is on the ground and not in operation; and
(B) the scope of the risks covered and the type of insurance shall be
the same as from time to time shall be applicable to property owned or
leased by Lessee of the same type as such non-operating property and
which is on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1)
Except as provided in clause (2) of this Section 11(b), and subject to the
provisions of Section 11(d) hereof permitting self-insurance, Lessee shall
maintain or cause to be maintained in effect, at its or any Sublessee's
expense, with insurers of recognized reputation and responsibility, all-risk
aircraft hull insurance covering the Aircraft and fire, and extended coverage
and all-risk aircraft hull insurance covering Engines and Parts while
temporarily removed from the Aircraft and not replaced by similar components
(including, without limitation, aircraft war risk and governmental confiscation
and expropriation (other than by the government of registry of the Aircraft)
and hijacking insurance, if and to the extent the same is maintained by Lessee
(or any Sublessee) with respect to other aircraft owned or leased, and operated
by Lessee (or such Sublessee) on the same routes); provided, that such
insurance shall at all times while the Aircraft is subject to this Lease be for
an amount (taking into account self-insurance to the extent permitted by
Section 11(d) hereof) not less than the Stipulated Loss Value for the Aircraft;
and provided further, that subject to compliance with Section 11(d) hereof,
such all-risk property damage insurance covering Engines and Parts while
temporarily removed from the Airframe or an airframe of (in the case of Parts)
an Engine need be obtained only to the extent available at reasonable cost (as
reasonably determined by Lessee). In the case of a loss with respect to an
engine (other than an Engine) installed on the Airframe in circumstances which
do not constitute an Event of Loss with respect to the Airframe, Lessor shall
promptly remit any payment made to it of any insurance proceeds in respect of
such loss to Lessee or any other third party that is entitled to receive such
proceeds.
All losses will be adjusted by Lessee with the insurers
giving due regard to Lessor's and, so long as the Lien of the Trust
Indenture shall not be discharged, the Indenture Trustee's interest,
provided, however, that during a period when a Section 14(a), (b), (f)
or (g) Default or an Event of Default has occurred and is continuing,
Lessee
45
51
[Lease Agreement (1994 737 B)]
shall not agree to any such adjustment without the consent of Lessor and
the Indenture Trustee (but in regard to the Indenture Trustee, only so
long as the Original Loan Participant is a Holder). As between Lessor
and Lessee, it is agreed that all proceeds of insurance maintained in
compliance with the preceding paragraph and received as the result of
the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect
to the Airframe (or the Airframe and the Engines installed
thereon), (i) unless such property is replaced pursuant to the
last paragraph of Section 10(a) hereof, so much of such payments
remaining, after reimbursement of Lessor (as provided in Section
7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses, as shall not exceed the Stipulated
Loss Value and the other amounts payable under Section 10(a)
hereof required to be paid by Lessee pursuant to Section 10(a)
hereof shall be applied in reduction of Lessee's obligation to
pay such Stipulated Loss Value and the other amounts payable
under Section 10(a) hereof, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for
its payment of such Stipulated Loss Value and the other amounts
payable under Section 10(a) hereof, and the balance, if any, of
such payments remaining thereafter will be paid over to, or
retained by, Lessee (or if directed by Lessee, any Sublessee); or
(ii) if such property is replaced pursuant to the last paragraph
of Section 10(a) hereof, such payments shall be paid over to, or
retained by, Lessee (or if directed by Lessee, any Sublessee),
provided that Lessee shall have fully performed or, concurrently
therewith, will fully perform the terms of the last paragraph of
Section 10(a) hereof with respect to the Event of Loss for which
such payments are made; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 10(b)
hereof, so much of such payments remaining after reimbursement of
Lessor and the Owner Participant for reasonable costs and
expenses shall be paid over to, or retained by, Lessee (or if
directed by Lessee, any Sublessee), provided that Lessee shall
have fully performed or, concurrently therewith, will fully
perform the terms of Section 10(b) hereof with respect to the
Event of Loss for which such payments are made.
(2) During any period that the Aircraft is on the
ground and not in operation, Lessee may carry or cause to be carried, in
lieu of the insurance required by clause (1) above, and subject to
self-insurance to the extent permitted by Section 11(d) hereof,
insurance otherwise conforming with the provisions of said clause (1)
except that the scope of the risks and the type of insurance shall be
the same as from time to time applicable to aircraft owned or leased by
Lessee of the same type as the Aircraft similarly on the ground and not
in operation, provided that, subject to the self-insurance to the extent
permitted by Section 11(d) hereof, Lessee shall maintain insurance
against risk of
46
52
[Lease Agreement (1994 737 B)]
loss or damage to the Aircraft in an amount at least equal to the
Stipulated Loss Value of the Aircraft during such period that the
Aircraft is on the ground and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be
furnished, to Lessor, the Indenture Trustee, the Owner Participant and, so long
as the Original Loan Participant shall hold any Certificate, the Original Loan
Participant, on or before the Delivery Date, and each annual anniversary of the
Delivery Date during the Term, a report, signed by ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ of
Illinois, Inc. or any other independent firm of insurance brokers reasonably
acceptable to Lessor which brokers may be in the regular employ of Lessee (the
"Insurance Broker"), describing in reasonable detail the hull and liability
insurance (and property insurance for detached engines and parts) then carried
and maintained with respect to the Aircraft and stating the opinion of such
firm that (a) such insurance complies with the terms hereof and (b) that such
insurance together with any self-insurance permitted hereby provides coverage
that are in substantially similar forms, are of such types and have limits
within the range of limits as are customarily carried by U.S. carriers;
provided, however, that the opinion set forth in clause (b) shall not be
required if the Insurance Broker then generally does not provide such an
opinion or will provide such an opinion for material additional cost; and
provided further that all information contained in the foregoing report shall
not be made available by Lessor, the Indenture Trustee, the Original Loan
Participant, or the Owner Participant to anyone except (A) to prospective and
permitted transferees of Lessor's, the Owner Participant's, the Original Loan
Participant's or the Indenture Trustee's interest or their respective counsel,
independent certified public accountants, independent insurance brokers or
other agents, who agree to hold such information confidential, (B) to Lessor's,
Owner Participant's, the Original Loan Participant's or the Indenture Trustee's
counsel or independent certified public accountants, independent insurance
brokers or other agents who agree to hold such information confidential, (C) as
may be required by any statute, court or administrative order or decree or
governmental ruling or regulation, or (D) as may be necessary for purposes of
protecting the interest of any such Person or for enforcement of this Lease by
Lessor or the Indenture Trustee; provided, however, that any and all
disclosures permitted by clauses (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted. Lessee will cause such Insurance
Broker to agree to advise Lessor, the Indenture Trustee, the Owner Participant,
and, so long as the Original Loan Participant holds any Certificate, the
Original Loan Participant, in writing of any act or omission on the part of
Lessee of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft and to advise
such Persons in writing at least 30 days (7 days in the case of war risk and
allied perils coverage) prior to the cancellation or material adverse change of
any insurance maintained pursuant to this Section 11, provided that if the
notice period specified above is not reasonably obtainable, the Insurance
Broker shall provide for as long a period of prior notice as shall then be
reasonably obtainable. In addition, Lessee will also cause such Insurance
Broker to deliver to Lessor, the Indenture Trustee, the Owner Participant and,
so long as the Original Loan Participant holds any Certificate, the Original
Loan Participant, on or prior to the date of expiration of any insurance policy
referenced in a previously delivered
47
53
[Lease Agreement (1994 737 B)]
certificate of insurance, a new certificate of insurance, substantially in the
same form as delivered by Lessee to such parties on the Delivery Date except
for the changes in the report or the coverage consistent with the terms hereof.
In the event that Lessee or any Sublessee shall fail to maintain or cause to be
maintained insurance as herein provided, Lessor, the Indenture Trustee or, so
long as the Original Loan Participant holds any Certificate, the Original Loan
Participant may at its sole option, but shall be under no duty to, provide such
insurance and, in such event, Lessee shall, upon demand, reimburse Lessor, the
Indenture Trustee or the Original Loan Participant, as Supplemental Rent, for
the cost thereof to Lessor, the Indenture Trustee or the Original Loan
Participant, as the case may be; provided, however, that no exercise by Lessor,
or the Indenture Trustee or the Original Loan Participant, as the case may be,
of said option shall affect the provisions of this Lease, including the
provisions that failure by Lessee to maintain the prescribed insurance shall
constitute an Event of Default.
(d) Self-Insurance. Lessee may self-insure the risks required
to be insured against pursuant to this Section 11 under a program applicable to
all aircraft (whether owned or leased) in Lessee's fleet, but in no case shall
the aggregate amount of such self-insurance in regard to Sections 11(a) and
11(b) hereof exceed for any calendar year, with respect to all of the aircraft
(whether owned or leased) in Lessee's fleet (including, without limitation, the
Aircraft) the lesser of (A) 50% of the highest replacement value of any single
aircraft in Lessee's fleet or (B) 1-1/2% of the average aggregate insurable
value (during the preceding calendar year) of all aircraft (including, without
limitation, the Aircraft) on which Lessee carries insurance. In addition to
the foregoing right to self-insure, Lessee (and any Sublessee) may self-insure
to the extent of any applicable mandatory minimum per aircraft (or, if
applicable, per annum or other period) hull or liability insurance deductible
imposed by the aircraft hull or liability insurer.
(e) Additional Insurance by Lessor and Lessee. Lessee (and
any Sublessee) may at its own expense carry insurance with respect to its
interest in the Aircraft in amounts in excess of that required to be maintained
by this Section 11. The Owner Participant may carry for its own account at its
sole cost and expense insurance with respect to its interest in the Aircraft,
provided that such insurance does not prevent Lessee (or any Sublessee) from
carrying the insurance required or permitted by this Section 11 or adversely
affect such insurance or the cost thereof.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance provided by, the United States
Government or any agency or instrumentality thereof, the obligations of which
are supported by the full faith and credit of the federal government of the
United States, against such risk in an amount which, when added to the amount
of insurance against such risk maintained by Lessee (or any Sublessee) shall be
at least equal to the amount of insurance against such risk otherwise required
by this Section 11 (taking into account self-insurance permitted by Section
11(d) hereof).
48
54
[Lease Agreement (1994 737 B)]
(g) Application of Payments During Existence of an Event of
Default. Any amount referred to in this Section 11 which is payable to or
retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or any Sublessee) if at the time of such payment or retention a Section
14(a), 14(b), 14(d) (solely with respect to Lessee's obligations under Section
7(a) or (b)(viii) hereof or Section 8 hereof), 14(f) or 14(g) Default or any
Event of Default shall have occurred and be continuing, but shall be held by or
paid over to Lessor as security for the obligations of Lessee under this Lease
and, if such a Default or any Event of Default shall have occurred and be
continuing, applied against Lessee's obligations hereunder as and when due. At
such time as there shall not be continuing any such Default or any Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
(h) Terms of Insurance Policies. Any policies carried in
accordance with Sections 11(a) and 11(b) hereof covering the Aircraft, and any
policies taken out in substitution or replacement for any such policies, (A)
shall name the Additional Insureds as additional insureds, or, if appropriate,
loss payees, as their respective interests may appear (but without imposing on
any such party liability to pay premiums with respect to such insurance), (B)
may provide for self-insurance to the extent permitted in Section 11(d) hereof,
(C) shall provide that if the insurers cancel such insurance for any reason
whatever, or if the same is allowed to lapse for non-payment of premium or if
any material change is made in the insurance which adversely affects the
interest of any Additional Insured, such lapse, cancellation or change shall
not be effective as to any Additional Insured for thirty days (ten days in the
case of lapse for nonpayment of premium and seven days in the case of war risk
and allied perils coverage) after receipt by such Additional Insured of written
notice by such insurers of such lapse, cancellation or change; provided,
however, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice as
shall then be reasonably obtainable, (D) shall provide that in respect of the
respective interests of each Additional Insured in such policies the insurance
shall not be invalidated by any action or inaction of Lessee (or any Sublessee)
or any other Person and shall insure the respective interests of the Additional
Insureds, as they appear, regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Lessee (or any
Sublessee) or by any other Person, (E) shall be primary without any right of
contribution from any other insurance which is carried by any Additional
Insured, (F) shall expressly provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, (G) shall waive any right of the
insurers to set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional Insured,
and (H) shall provide that (i) in the event of a loss involving the Aircraft,
Airframe, or an Engine for which proceeds are in excess of $3,000,000, the
proceeds in respect of such loss up to the amount of Stipulated Loss Value for
the Aircraft shall be payable to Lessor (or, so long as the Trust Indenture
shall be in effect, the Indenture Trustee), it being understood and agreed that
in the case of any payment to Lessor (or the Indenture Trustee) otherwise than
in respect of an Event of Loss, Lessor (or the Indenture Trustee) shall, upon
receipt of evidence reasonably
49
55
[Lease Agreement (1994 737 B)]
satisfactory to it that the damages giving rise to such payment shall have been
repaired or that such payment shall then be required to pay for repairs then
being made, pay the amount of such payment, and any interest or income earned
thereon in accordance with Section 22 hereof, to Lessee or its order, and (ii)
the entire amount of any such loss for which proceeds are $3,000,000 or less or
the amount of any proceeds of any such loss in excess of Stipulated Loss Value
for the Aircraft shall be paid to Lessee or its order unless a Section 14(a),
14(b), 14(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), 14(f) or 14(g) Default or any Event of
Default shall have occurred and be continuing and the insurers have been
notified thereof by Lessor or the Indenture Trustee.
SECTION 12. Inspection. At reasonable times, and upon at least
10 days prior written notice, the Owner Participant and the Indenture Trustee
or their respective authorized representatives, may inspect the Aircraft
(provided, however, that such inspections by the Owner Participant or the
Indenture Trustee and their respective authorized representatives shall, in
regard to each of the Owner Participant and the Indenture Trustee be limited to
one inspection of the Aircraft during any consecutive twelve-month period
except during the continuance of a Default or an Event of Default when such
inspection right shall not be so limited) and inspect and make copies of the
books and records of Lessee and any Sublessee required to be maintained by the
FAA or the regulatory agency or body of another jurisdiction in which the
Aircraft is then registered relating to the maintenance of the Aircraft (at the
Owner Participant's or the Indenture Trustee's risk and expense, as the case
may be) and shall keep any information or copies obtained thereby confidential
and shall not disclose the same to any Person, except (A) to Lessor or the
Original Loan Participant and to prospective and permitted transferees of
Lessor's, the Owner Participant's, the Original Loan Participant's, the
Original Loan Participant's or the Indenture Trustee's interest (and such
prospective and permitted transferee's counsel, independent insurance advisors
or other agents) who agree to hold such information confidential, (B) to
Lessor's, the Owner Participant's, the Original Loan Participant's or the
Indenture Trustee's counsel, independent insurance advisors or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, (D) as may be necessary for purposes of protecting the interest of
any such Person or for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures permitted by clauses
(C) and (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of Persons for whom such disclosures are hereby
permitted. Any such inspection of the Aircraft shall be subject to Lessee's
safety and security rules applicable at the location of the Aircraft, shall be
a visual, walk-around inspection of the interior and exterior of the Aircraft
and shall not include opening any panels, bays or the like without the express
consent of Lessee (except in connection with a heavy maintenance visit when a
panel, bay or the like is scheduled or required to be open), which consent
Lessee may in its sole discretion withhold; provided that no exercise of such
inspection right shall interfere with the normal operation or maintenance of
the Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt
by Lessee of a written request from the Owner Participant specifying that the
Owner Participant desires to have an authorized
50
56
[Lease Agreement (1994 737 B)]
representative observe the last scheduled heavy maintenance visit to be
performed on the Aircraft (or substantially equivalent successor type of
maintenance work) during the Term, Lessee shall cooperate with the Owner
Participant to enable the Owner Participant's representative to observe such
last scheduled heavy maintenance visit to be performed on the Aircraft during
the Term, including reasonable advance notification to the Owner Participant of
the time and place of such scheduled heavy maintenance visit; provided that the
Owner Participant's authorized representative shall merely observe such
scheduled heavy maintenance visit, shall not interfere with or extend in any
manner the normal conduct or duration of the scheduled heavy maintenance visit,
and shall not be entitled to direct any of the work performed in connection
with such scheduled heavy maintenance visit. Neither the Owner Participant nor
the Indenture Trustee shall have any duty to make any such inspection nor shall
either of them incur any liability or obligations by reason of not making any
such inspection.
SECTION 13. Assignment. Except as otherwise provided in the
Operative Documents, Lessee will not, without the prior written consent of
Lessor, assign any of its rights hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided in the Operative Documents. Subject to the
foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns.
SECTION 14. Events of Default. Each of the following events
shall constitute an Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Event of Default shall continue so long as, but only as long as, it shall not
have been remedied:
(a) Lessee shall not have made a payment of Basic Rent,
Interim Rent, Stipulated Loss Value, Termination Value, EBO Percentage or Break
Amount within 5 days (or in the event the Original Loan Participant shall no
longer be a Holder, 10 days) after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value, Termination Value, EBO Percentage,
Break Amount or any other amounts measured thereby) after the same shall have
become due and such failure shall continue for 10 days (or in the event the
Original Loan Participant shall no longer be a Holder, 15 days) after Lessee's
receipt of written demand therefor by the party entitled thereto (provided that
any failure to pay any amount owed by Lessee under the Tax Indemnity Agreement
or any failure of Lessee to pay to Lessor or the Owner Participant when due any
Excluded Payments shall not constitute an Event of Default unless written
notice is given by the Owner Participant to Lessee and the Indenture Trustee
that such failure shall constitute an Event of Default); or
51
57
[Lease Agreement (1994 737 B)]
(c) Lessee shall fail to carry and maintain on or with respect
to the Aircraft (or cause to be carried and maintained) insurance required to
be maintained in accordance with the provisions of Section 11 hereof; or
(d) Lessee shall have failed to perform or observe in any
material respect (or caused to be performed and observed) any other covenant or
agreement to be performed or observed by it under any Operative Document, and
such failure shall continue unremedied for a period of thirty days after
written notice thereof by Lessor or the Indenture Trustee; provided, however,
that if Lessee shall have undertaken to cure any such failure and,
notwithstanding the reasonable diligence of Lessee in attempting to cure such
failure, such failure is not cured within said thirty day period but is curable
with future due diligence, there shall exist no Event of Default under this
Section 14 so long as Lessee is proceeding with due diligence to cure such
failure and such failure is in fact cured within 90 days (or in the event that
the Original Loan Participant shall no longer be a Holder, one year); or
(e) any representation or warranty made by Lessee herein or in
the Participation Agreement or any document or certificate furnished by Lessee
in connection herewith or therewith or pursuant hereto or thereto (except the
representations and warranties set forth in Section 4 of the Tax Indemnity
Agreement) shall prove to have been incorrect in any material respect at the
time made and shall remain material at the time in question; provided, however,
such incorrectness shall constitute a default hereunder only if such
incorrectness shall continue uncured for a period of thirty (30) days after the
receipt by Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(f) the commencement of an involuntary case or other
proceeding in respect of Lessee in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law in the United
States or seeking the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Lessee or for all or
substantially all of its property, or seeking the winding-up or liquidation of
its affairs and the continuation of any such case or other proceeding
undismissed or unstayed for a period of 60 consecutive days (or in the event
the Original Loan Participant shall no longer be a Holder, 90 consecutive days)
or an order for relief under Chapter 11 of the Bankruptcy Code with respect to
Lessee as debtor or any other order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without the
consent of Lessee, a receiver, trustee or liquidator of Lessee, or for all or
substantially all of its property, or sequestering of all or substantially all
of the property of Lessee and any such order, judgment or decree or appointment
or sequestration shall be final or shall remain in force undismissed, unstayed
or unvacated for a period of 60 consecutive days (or in the event the Original
Loan Participant shall no longer be a Holder, 90 consecutive days) after the
date of entry thereof; or
52
58
[Lease Agreement (1994 737 B)]
(g) the commencement by Lessee of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Lessee or for all or substantially
all of its property, or the making by Lessee of any assignment for the benefit
of creditors or Lessee shall take any corporate action to authorize any of the
foregoing; or
(h) Lessee shall fail to maintain its status as a U.S. Air
Carrier and such failure shall continue for 5 consecutive Business Days;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of any event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of
Default and at any time thereafter so long as any such Event of Default shall
not have been remedied, Lessor may, at its option, declare by written notice to
Lessee this Lease Agreement to be in default; and at any time thereafter, so
long as such Event of Default shall be continuing, Lessor may do one or more of
the following with respect to all or any part of the Airframe and any or all of
the Engines as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory requirements of,
applicable law then in effect; provided, however, that during any period the
Aircraft is subject to the Civil Reserve Air Fleet Program in accordance with
the provisions of Section 7(b) hereof and in the possession of the United
States Government or an instrumentality or agency thereof, Lessor shall not, on
account of any Event of Default, be entitled to do any of the following in such
manner as to limit Lessee's control under this Lease (or any Sublessee's
control under any Sublease) of any Airframe or any Engines, unless at least 60
days' (or such lesser period as may then be applicable under the Military
Airlift Command Program of the United States Government) prior written notice
of default hereunder shall have been given by Lessor by registered or certified
mail to Lessee (and any Sublessee) with a copy addressed to the Contracting
Office Representative for the Military Airlift Command of the United States Air
Force under any contract with Lessee (or any Sublessee) relating to the
Aircraft:
(a) upon the written demand of Lessor and at Lessee's
expense, cause Lessee to return promptly, and Lessee shall return
promptly, the Airframe or any Engine as Lessor may so demand to Lessor
or its order in the manner and condition required by, and otherwise in
accordance with all the provisions of, Section 5 hereof as if such
Airframe or Engine were being returned at the end of the Term, or
Lessor, at its option, may enter upon the premises where all or any part
of the Airframe or any Engine is
53
59
[Lease Agreement (1994 737 B)]
located and take immediate possession of and remove the same by summary
proceedings or otherwise (and, at Lessor's option, store the same at
Lessee's premises until disposal thereof by Lessor), all without
liability accruing to Lessor for or by reason of such entry or taking of
possession or removing whether for the restoration of damage to property
caused by such action or otherwise;
(b) sell the Aircraft at public or private sale, as
Lessor may determine, or otherwise dispose of, hold, use, operate, lease
to others or keep idle the Aircraft as Lessor, in its sole discretion,
may determine, all free and clear of any rights of Lessee, except as
hereinafter set forth in this Section 15;
(c) hold, keep idle or lease to others the Aircraft or
any Part thereof, as Lessor in its sole discretion may determine, free
and clear of any rights of Lessee and without any duty to account to
Lessee with respect thereto, except that Lessee's obligation to pay
Basic Rent with respect to the Aircraft on Lease Period Dates subsequent
to the date upon which Lessee shall have been deprived of use of the
Aircraft pursuant to this Section 15 shall be reduced by the net
proceeds, if any, received by Lessor from leasing the Aircraft to any
Person other than Lessee;
(d) whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph
(a), (b) or (c) above with respect to the Aircraft, Lessor, by written
notice to Lessee specifying a payment date which shall be the Lease
Period Date not earlier than ten days from the date of such notice, may
demand that Lessee pay to Lessor, and Lessee shall pay Lessor, on the
payment date so specified, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the installments of Basic Rent for the
Aircraft due for Lease Periods commencing on or after the Commencement
Date or the Lease Period Date, as the case may be, specified as the
payment date in such notice), any unpaid Basic Rent due on Lease Period
Dates on or prior to the payment date so specified plus whichever of the
following amounts Lessor, in its sole discretion, shall specify in such
notice (with interest thereon at the Past Due Rate from such specified
payment date until the date of actual payment of such amount): (i) an
amount equal to the excess, if any, of the Stipulated Loss Value for the
Aircraft, computed as of the Lease Period Date specified as the payment
date in such notice over the aggregate fair market rental value
(computed as hereafter in this Section 15 provided) of such Aircraft for
the remainder of the Term, after discounting such aggregate fair market
rental value to present value as of the Lease Period Date specified as
the payment date in such notice at an annual rate equal to the Past Due
Rate; or (ii) an amount equal to the excess, if any, of the Stipulated
Loss Value for such Aircraft, computed as of the Lease Period Date
specified as the payment date in such notice, over the fair market sales
value of such Aircraft (computed as hereafter in this Section provided)
as of the Lease Period Date specified as the payment date in such
notice;
54
60
[Lease Agreement (1994 737 B)]
(e) in the event Lessor pursuant to paragraph (b)
above, shall have sold the Aircraft, Lessor, in lieu of exercising its
rights under paragraph (d) above with respect to such Aircraft, may, if
it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay
to Lessor, on the date of such sale, as liquidated damages for loss of a
bargain and not as a penalty, any unpaid Basic Rent with respect to the
Aircraft due on or prior to such date plus the amount of any deficiency
between the net proceeds of such sale (after deduction of all reasonable
costs of sale) and the Stipulated Loss Value of such Aircraft, computed
as of the Stipulated Loss Value date on or immediately following the
date of such sale, together with interest, if any, on the amount of such
deficiency, at the Past Due Rate, from the date of such sale to the date
of actual payment of such amount;
(f) rescind or terminate this Lease Agreement; and/or
(g) exercise any other right or remedy which may be
available to it under applicable law or proceed by appropriate court
action to enforce the terms hereof or to recover damages for breach
hereof.
For the purposes of paragraph (d) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, in each case based upon the actual condition and location of the Aircraft,
which value shall be determined by mutual agreement or, in the absence of
mutual written agreement, pursuant to an appraisal prepared and delivered by a
nationally recognized firm of independent aircraft appraisers nominated by
Lessor, and Lessor shall promptly notify Lessee of such nomination. Any
appraisal obtained pursuant to this Section 15 shall take into account then
prevailing market conditions for aircraft of the same type as the Aircraft.
The cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies, for the payment of Break Amount, if any, and for all reasonable and
actual legal fees and other costs and expenses incurred by Lessor, the
Indenture Trustee, the Holders and the Owner Participant in connection with any
default or the exercise of remedies hereunder including the return of the
Airframe or any Engine in accordance with the terms of Section 5 or in placing
such Airframe or Engine in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor, the Indenture Trustee, a Holder or the Owner Participant
may bid for and purchase such property. Lessor agrees to give Lessee at least
10 days' written notice of the date fixed for any
55
61
[Lease Agreement (1994 737 B)]
public sale of any Airframe or Engine or of the date on or after which will
occur the execution of any contract providing for any private sale; provided,
however, that Lessee may not bid at any such public sale. Except as otherwise
expressly provided above, no remedy referred to in this Section 15 is intended
to be exclusive, but each shall be cumulative and in addition to any other
remedy referred to above or otherwise available to Lessor at law or in equity;
and the exercise or beginning of exercise by Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by Lessor of any
or all of such other remedies. No waiver by Lessor of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. To the extent permitted by applicable
law, Lessee hereby waives any right now or hereafter conferred by statute or
otherwise which may require Lessor to sell, lease, or otherwise use the
Aircraft or Parts thereof in mitigation of Lessor's damages as set forth in
this Section 15 or which may otherwise limit or modify any of Lessor's rights
and remedies in this Section 15.
SECTION 16. Lessee's Cooperation Concerning Certain Matters.
(a) Forthwith upon the execution and delivery of each Lease Supplement and
Trust Supplement from time to time required by the terms hereof and upon the
execution and delivery of any amendment to this Lease or to the Trust Agreement
or Trust Indenture, Lessee at its expense will cause such Lease Supplement,
Trust Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well) or
amendment to be duly filed and recorded, and maintained of record, in
accordance with the applicable laws of the government of registry of the
Aircraft. In addition, Lessee at its expense will promptly and duly execute
and deliver to Lessor such further documents and take such further action as
Lessor may from time to time reasonably request in order more effectively to
carry out the intent and purpose of this Lease and to establish and protect the
rights and remedies created or intended to be created in favor of Lessor and
the Indenture Trustee hereunder, including, without limitation, if requested by
Lessor, at the expense of Lessee, the execution and delivery of supplements or
amendments hereto, each in recordable form, subjecting to this Lease and the
Trust Indenture, any airframe or engine substituted for the Airframe or any
Engine pursuant to the terms thereof and the recording or filing of
counterparts thereof, in accordance with the laws of such jurisdictions as
Lessor may from time to time deem advisable.
(b) Lessee will furnish to Lessor, the Indenture Trustee, the
Owner Participant and, so long as the Original Loan Participant holds any
Certificate, the Original Loan Participant:
(i) Quarterly Statements - As soon as practicable after
the end of the first, second, and third quarterly fiscal periods in each
fiscal year of Lessee, and in any event within 60 days thereafter,
duplicate copies of:
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[Lease Agreement (1994 737 B)]
(1) a consolidated balance sheet of Lessee as at
the end of such quarter setting forth in comparative form the
amounts for the end of the corresponding period of the preceding
fiscal year,
(2) consolidated statements of income and
retained earnings of Lessee for such quarterly period, setting
forth in comparative form the amounts for the corresponding
period of the preceding fiscal year, and
(3) consolidated statements of cash flow of
Lessee for the portion of the fiscal year ending with said
quarter, setting forth in comparative form the amounts for the
corresponding period of the preceding fiscal year;
(ii) Annual Statements - As soon as practicable after
the end of each fiscal year, and in any event within 120 days
thereafter, duplicate copies of:
(1) a consolidated balance sheet of Lessee as at
the end of such year, and
(2) consolidated statements of income and
retained earnings and of cash flow of Lessee for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the
previous fiscal year and accompanied by an auditor's report of a firm of
independent certified public accountants of recognized national standing
(which report may be adverse, qualified or disclaim an opinion);
(iii) SEC Reports - Promptly upon their becoming
available, one copy of each financial statement, report, or proxy
statement sent by UAL Corporation to its shareholders generally, and of
each regular or periodic report and any prospectus (in the form in which
it becomes effective) filed by Lessee or UAL Corporation with the
Securities and Exchange Commission or any successor agency; and
(iv) Notice of Default or Claimed Default - Immediately
upon an officer of Lessee becoming aware of the existence of a Default
or an Event of Default (or that Lessor has given notice or taken any
other action with respect to an Event of Default or a claimed default
under this Lease), a written notice specifying the nature of the
Default, Event of Default, or claimed default and any such notice given
or action taken by Lessor and what action Lessee is taking or proposes
to take with respect thereto.
(c) Commencing in 1995, on or before April 30 of each year
during the Term, Lessee will deliver to Lessor and the Indenture Trustee a
certificate of Lessee, signed by the President, a Vice President, the Chief
Financial Officer or the principal accounting officer of
57
63
[Lease Agreement (1994 737 B)]
Lessee to the effect that the signer is familiar with or has reviewed the
relevant terms of this Lease and the signer does not have knowledge of the
existence, as of the date of such certificate, of any condition or event which
constitutes a Default or an Event of Default.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be in writing (including telex, telecopier or similar
writing) and shall be effective (a) if given by telecopier when transmitted and
the appropriate confirmation received; provided, that any such notice is
confirmed by certified mail, (b) if given by certified mail, three Business
Days after being deposited in the mails, (c) if given by telex, upon receipt by
the party transmitting the telex of such party's callback code at the end of
such telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by other means, when received or
personally delivered, addressed:
(i) if to Lessee, at P. O. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (or, if given by overnight delivery service, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 60007) Attention: Vice President and
Treasurer, telecopier number (▇▇▇) ▇▇▇-▇▇▇▇, or to such other address or
telex or telecopier number as Lessee shall from time to time designate
in writing to Lessor;
(ii) if to Lessor, at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department, telecopier
number (▇▇▇) ▇▇▇-▇▇▇▇ or telex number 3789450 (Answerback: FIRSTSECBK),
or to such other address or telex or telecopier number as Lessor shall
from time to time designate in writing to Lessee; and
(iii) if to the Indenture Trustee, the Owner Participant
or the Original Loan Participant, addressed to the Indenture Trustee,
the Owner Participant or the Original Loan Participant at such address
or telex or telecopier number as the Indenture Trustee, the Owner
Participant or the Original Loan Participant shall have furnished by
notice to Lessor and to Lessee, and, until an address is so furnished,
addressed to the Indenture Trustee, the Owner Participant or the
Original Loan Participant at its address or telecopier number set forth
in Schedule I to the Participation Agreement.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant.
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc.
(a) This Lease is a net lease, and it is intended that Lessee
shall pay all costs and expenses of every character, whether seen or
unforeseen, ordinary or extraordinary or structural or non-structural, in
connection with the use, operation, maintenance, repair and reconstruction of
the Airframe and each Engine by Lessee, including the costs and expenses
particularly set forth in this Lease. Lessee shall have no right to reduce or
set-off against payments of Rent except as expressly set forth in Section 3(f)
and this Section 18(a). If at any
58
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[Lease Agreement (1994 737 B)]
time that Lessee is required (a) to make a payment of Termination Value or Fair
Market Sales Value pursuant to Section 9 or Stipulated Loss Value pursuant to
Section 10, (b) to make any indemnity payment to the Owner Participant pursuant
to Section 7 of the Participation Agreement or Section 5 of the Tax Indemnity
Agreement, or (c) to pay the EBO Percentage or other purchase price of the
Aircraft pursuant to Section 19(b), (i) there shall exist any amount paid by
Lessee as Prepaid Rent which has not been reimbursed to Lessee in full
(together with interest thereon at the applicable rate set forth in Section
3(f)), either by direct payment by Lessor, or by way of Lessee's application of
its right of set-off pursuant to Section 3(f), or (ii) there shall exist any
Lessor Liens attributable to the Owner Participant (or Lessee shall have
previously incurred a charge to discharge any Lessor Liens attributable to the
Owner Participant), then Lessee shall be entitled to deduct from the portion
required to be paid to the Owner Participant of such payment of Termination
Value or Fair Market Sales Value or payment of indemnity, or such payment of
the EBO Percentage or other purchase price, or any combination thereof, as the
case may be, an amount sufficient to so reimburse Lessee or to reimburse Lessee
for the cost of discharging such Lessor Liens, as the case may be.
Notwithstanding anything contained in this Section 18(a) to the contrary, any
payments of Fair Market Sales Value, Termination Value, Stipulated Loss Value
or EBO Percentage made to the Indenture Trustee shall be in an amount which,
together with any other amounts payable hereunder, is at least sufficient to
pay in full, as of the date of payment thereof, the amount of principal of, and
any accrued and unpaid interest on, the outstanding Certificates, together with
Break Amount, if any, thereon and amounts due the Original Loan Participant
under the Trust Indenture, if any, and, to such extent, shall not be subject to
set-off hereunder.
(b) Except as otherwise expressly provided, this Lease shall
not terminate nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension, deferment or reduction of any Rent which the
Lessee is obligated to pay hereunder, nor shall the obligations hereunder of
the Lessee be affected, by reason of (A) any damage to or the destruction or
loss of all or any portion of the Airframe or any Engine from whatever cause,
(B) the loss or theft of any portion of the Airframe or any Engine, (C) the
taking of the Airframe or any Engine or any portion thereof by condemnation,
confiscation, requisition or otherwise, (D) the prohibition, limitation or
restriction of Lessee's use of all or any part of the Airframe or any Engine,
or the interference with such use by any Person, (E) the inadequacy or
incorrectness of the description of any portion of the Airframe or any Engine
or the failure of this Lease to demise to Lessee the Airframe or any Engine or
any portion thereof, (F) Lessee's acquisition or ownership of all or any part
of the Airframe or any Engine otherwise than pursuant to an express provision
of this Lease, (G) any defect in compliance with specifications, condition,
merchantability, design, airworthiness, quality, durability, operation or
fitness for use for any purpose of the Airframe or any Engine or any portion
thereof, (H) any defect in the title to, or registration of or the existence of
any Liens or rights of others whatsoever with respect to, the Airframe or any
Engine or any portion thereof, (I) any insolvency, bankruptcy, reorganization
or similar proceedings by or against any Sublessee or any Person (J) any
breach, default or misrepresentation by Lessor, any Participant or the
Indenture Trustee under this Lease or any
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[Lease Agreement (1994 737 B)]
other Operative Document or any of the documents referred to herein or therein
or (K) any invalidity or unenforceability, in whole or in part, of this Lease
or any other Operative Document or any of the documents referred to herein or
therein, or any other infirmity herein or therein, or any lack of power or
authority of any party to this Lease or any other Operative Document or any
such documents to enter into the same, or (L) any other circumstance, happening
or act whatsoever, whether or not unforeseen or similar to any of the
foregoing, it being the intention of the parties hereto that the obligations of
the Lessee shall be absolute and unconditional and shall be separate and
independent covenants and agreements and shall continue unaffected unless and
until this Lease shall have terminated in accordance with its terms upon
payment by Lessee of all sums payable by Lessee hereunder and performance by
Lessee of all obligations required to be performed by Lessee hereunder.
Lessee covenants that it will remain obligated under this Lease
in accordance with its terms and will take no action to terminate, rescind or
avoid this lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting Lessor or the Owner Participant or any assignee of Lessor
the Owner Participant or any other action with respect to this Lease which may
be taken in any such proceeding by any trustee or receiver of Lessor or the
Owner Participant or of any assignee of Lessor or the Owner Participant or by
any court or any of the foregoing actions which may be taken by or against any
of Lessor's predecessors in interest in the Airframe or any Engine.
If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees, without limitation of the other
rights and remedies of Lessor hereunder, to pay to Lessor an amount equal to
each Rent payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part.
Except as expressly provided herein, Lessee waives all rights now
or hereafter conferred by law (x) to quit, terminate, rescind or surrender this
Lease or the Airframe or any Engine or any part thereof, or (y) to any
abatement, suspension, deferment, return or reduction of the Rent.
SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
Renewal Options.
(1) Fixed Renewal Term. Not less than 180 days before
the end of the Basic Term, Lessee may, so long as no Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) Default or any Event
of Default has occurred and is continuing, deliver to Lessor a revocable
written notice (which notice shall become irrevocable 120 days prior to
the end
60
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[Lease Agreement (1994 737 B)]
of the Basic Term) electing to renew this Lease for a term having a
duration and at a Basic Rent as determined below (the "Fixed Renewal
Term"). At least 180 days, before the end of the Basic Term Lessee
shall, as a condition to its exercise of the option set forth in this
Section 19(a)(2), notify Lessor of its demand for an appraisal pursuant
to the appraisal procedures of Section 19(c) hereof. The appraiser(s)
so appointed shall determine the total useful life, the remaining useful
life and the future residual value of the Aircraft on the expiration
date for the Fixed Renewal Term as may be set by reason of the maximum
period therefor in accordance with the constraints set forth in the
following sentence. The duration of the Fixed Renewal Term shall be a
period specified by Lessee before the end of the Basic Term which is (a)
not less than one year and not more than three years (in integral
multiples of six months) and (b) not more than the longest period of
time (i) which would cause the Term, after giving effect to such Fixed
Renewal Term, to be equal to 80% of the then estimated useful life of
the Aircraft as determined by the appraiser(s) and (ii) at the
expiration of which the residual value of the Aircraft, as estimated by
the appraiser(s), would be at least equal to 20% of Lessor's Cost
(without taking into account inflation or deflation during the Term).
The annual Basic Rent payable during the Fixed Renewal Term shall be
equal to one-half of the average annual Basic Rent payments for the
Aircraft over the Basic Term.
(2) Fair Market Renewal Term. So long as no Section
14(a), (b), (d) (solely with respect to Lessee's obligations under
Section 7(a) or (b)(viii) hereof or Section 8 hereof), (f) or (g)
Default or any Event of Default has occurred and is continuing, Lessee
shall have the right to renew this Lease for additional periods of at
least one year commencing at the end of the Basic Term, the Fixed
Renewal Term or any prior Fair Market Renewal Term for a Basic Rent
equal to the Fair Market Rental Value of the Aircraft for such period
(each such renewal term, a "Fair Market Renewal Term"); provided,
however, each Fair Market Renewal Term shall be an integral multiple of
six months. Each such option to renew shall be exercised upon delivery
by Lessee to Lessor of a revocable written notice of Lessee's intent to
renew the Lease at least 180 days prior to the commencement of such Fair
Market Renewal Term (which notice shall become irrevocable 120 days
prior to the anticipated commencement of such Fair Market Renewal Term).
(3) Waiver. If no written notice is delivered by
Lessee to Lessor pursuant to Section 19(a)(1) or (2) on or before the
day specified therefore, Lessee shall be deemed to have waived any right
to renew this Lease.
(4) Conditions Precedent, Payment of Basic Rent. At
the end of the Basic Term or any Renewal Term, if Lessee has elected to
renew this Lease as aforesaid, and provided that there shall not then
have occurred and be continuing a Default or an Event of Default and
that all necessary governmental authorizations and approvals shall have
been received and that Basic Rent for the Renewal Term has already been
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[Lease Agreement (1994 737 B)]
determined as above provided, (i) this Lease shall continue in full
force and effect during the Renewal Term, and (ii) Basic Rent for such
Renewal Term shall be payable in semi-annual installments in arrears,
each such installment being due and payable on each Lease Period Date
occurring during the Renewal Term, commencing with the Lease Period Date
immediately following the commencement of the Renewal Term.
(5) Termination Value; Stipulated Loss Value. The
amounts which are payable during any Renewal Term in respect of
Termination Value as used in Section 15 and Stipulated Loss Value with
respect to the Aircraft shall be determined on the basis of the Fair
Market Sales Value of the Aircraft as of the commencement of such
Renewal Term, amortized on a straight-line basis over such Renewal Term
to the projected Fair Market Sales Value of the Aircraft as of the
expiration of such Renewal Term, as such Fair Market Sales Value in each
case is determined prior to the commencement of such Renewal Term. In
determining Fair Market Sales Value for purposes of calculating
Stipulated Loss Value and Termination Value for any Renewal Term effect
shall be given to the encumbrance on the Aircraft of any Fixed Renewal
Term available or in force.
(b) Purchase Options. Lessee shall have the option, (i) with
respect to subsections (1) and (2) below, upon at least 120 days revocable
prior written notice to Lessor (which notice shall become irrevocable 20 days
prior to the relevant purchase date) and (ii) with respect to subsections (3)
and (4) below, upon at least 180 days revocable prior written notice to Lessor
(which notice shall become irrevocable 120 days prior to the relevant purchase
date) (each, a "Purchase Option Date"), to terminate this Lease and to purchase
the Aircraft:
(1) on any Special Purchase Option Date for a purchase
price equal to the greater of the Fair Market Sales Value or the
Termination Value of the Aircraft on such date;
(2) on the EBO Date for a purchase price equal to the
EBO Percentage;
(3) on the last Business Day of the Basic Term for a
purchase price equal to the Fair Market Sales Value of the Aircraft on
such date; and
(4) on the last Business Day of any Renewal Term for a
purchase price equal to the Fair Market Sales Value of the Aircraft on
such date.
Notwithstanding the foregoing, the purchase price on any Purchase Option Date
shall be sufficient, together with all other amounts payable simultaneously by
Lessee, to pay in full the payments then required to be made on account of the
principal amount (and Break Amount, if any) of and accrued and unpaid interest
on the Certificates then outstanding. Upon payment to Lessor in immediately
available funds of the full amount of the purchase price plus all Basic
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[Lease Agreement (1994 737 B)]
Rent due on or prior to such purchase date (unless denominated "advance"
rental), all Supplemental Rent due on or prior to such purchase date (including
amounts equal to or Break Amount, if any) and payment of any other amounts then
due hereunder (including all reasonable costs or expenses of Lessor in
connection with such purchase), Lessor will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and interest in and
to the Aircraft.
(c) Valuation. At any time not earlier than 365 days prior to
the date on which Lessee may purchase an Aircraft pursuant to Section 19(b)
hereof or renew this Lease pursuant to Section 19(a) hereof, Lessee may deliver
to Lessor a revocable notice of its intent to exercise its renewal option or
purchase option. For all purposes of this Section 19, including the appraisal
referred to in this Section 19(c), in determining Fair Market Rental Value or
Fair Market Sales Value, the Aircraft shall be valued (i) as if in the
condition and otherwise in compliance with the terms of Section 5 upon a return
of the Aircraft in the United States and as if it had been maintained at all
times as required in accordance with Sections 7(a)(1) and 8 hereof, (ii) on the
basis of the value which would obtain in an arm's-length transaction between an
informed and willing buyer-user or lessee (other than a lessee or an Affiliate
of a lessee currently in possession or a used equipment scrap dealer) under no
compulsion to buy or lease and an informed and willing seller or lessor
unaffiliated with such buyer-user or lessee and under no compulsion to sell or
lease and giving effect to the purchase and renewal options of Lessee provided
in this Lease, and (iii) in the case of such valuation for determining Fair
Market Rental Value, assuming such lessee would have substantially the same
obligations during the Fair Market Renewal Term as provided hereunder including
without limitation the obligations of Lessee to carry and maintain the
insurance required by Section 11 hereof. Upon receipt of such notice Lessor
and Lessee shall confer in good faith with a view to reaching agreement on the
Fair Market Rental Value or Fair Market Sales Value of the Aircraft. If the
parties have not so agreed by 240 days prior to the end of the Basic Term or
the Renewal Term in question, then the question shall be determined by an
appraisal mutually agreed to by two recognized independent aircraft appraisers,
one of which appraisers shall be chosen by Lessor and one by Lessee within five
Business Days after Lessor or Lessee shall have received written notice from
the other party of a demand that such an appraisal be made, which notice shall
specify the appraiser chosen by the party giving the notice or, if such
appraisers cannot agree on the amount of such appraisal within five Business
Days after the end of such five-day period, each shall render its own appraisal
and shall by mutual consent choose another appraiser within five Business Days
after the end of such five-day period. If, within such five-day period, such
two appraisers fail to appoint a third appraiser, then either Lessor or Lessee,
on behalf of both, may apply to the American Arbitration Association (or any
successor organization thereto) in Chicago, Illinois for the appointment of
such third appraiser. The decision of the third appraiser so appointed shall
be given within ten Business Days after the appointment of such third
appraiser. As soon as the third appraiser has delivered his appraisal, that
appraisal shall be compared with the appraisals given by the other two
appraisers. If the determination of one appraiser is more disparate from
63
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[Lease Agreement (1994 737 B)]
the average of all three determinations than each of the other two
determinations, then the determination of such appraiser shall be excluded, the
remaining two determinations shall be averaged and such average shall be final
and binding upon the parties hereto; otherwise the average of all three
determinations shall be final and binding upon the parties thereto. Lessee and
Lessor shall equally bear all expenses relating to such appraisal procedure,
provided, that if Lessee revokes its notice of intent to exercise its renewal
option or purchase option after an appraisal procedure has begun, then Lessee
shall bear all expenses relating to such appraisal procedure.
SECTION 20. Security for Lessor's Obligation to Holders of
Certificates. In order to secure the indebtedness evidenced by the
Certificates, Lessor has agreed in the Trust Indenture, among other things, to
assign to the Indenture Trustee this Lease and to mortgage the Aircraft in
favor of the Indenture Trustee, subject to the reservations and conditions
therein set forth. To the extent, if any, that this Lease 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
counterpart, which shall be identified as the counterpart containing the
receipt therefor executed by the Indenture Trustee as indenture trustee under
the Trust Indenture on the signature page thereof. Lessee hereby accepts and
consents to the assignment of all Lessor's right, title and interest in and to
this Lease pursuant to the terms of the Trust Indenture. Lessee agrees to pay
directly to the Indenture Trustee (or, after receipt by Lessee of notice from
the Indenture Trustee of the discharge of the Trust Indenture, to Lessor), all
amounts of Rent (other than Excluded Payments) due or to become due hereunder
and assigned to the Indenture Trustee and Lessee agrees that the Indenture
Trustee's right to such payments hereunder shall be absolute and unconditional
and shall not be affected by any circumstance. Notwithstanding the foregoing
assignment of this Lease, the obligations of Lessor to Lessee to perform the
terms and conditions of this Lease shall remain in full force and effect.
Lessee further acknowledges that the Trust Indenture provides that so long as
the Certificates are outstanding Lessor may not consent to any amendment,
modification or waiver to this Lease without the prior consent of the Indenture
Trustee (except as provided in Section 6.08 or Article IX of the Trust
Indenture) and Lessee agrees to provide to the Indenture Trustee a copy of all
notices, consents, certificates or other information provided hereunder to
Lessor.
SECTION 21. Lessor's Right to Perform for Lessee. If Lessee
fails to make any payment of Rent required to be made by it hereunder or fails
to perform or comply with any of its agreements contained herein, then (but in
each case, except in the case of failure to pay Rent or in the case of failure
to maintain insurance as required hereunder, no earlier than five Business Days
after notice as to the occurrence of such failure, whether or not it shall yet
constitute an Event of Default hereunder) Lessor may itself make such payment
or perform or comply with such agreement but shall not be obligated hereunder
to do so, and the amount of such payment and the amount of the reasonable
expenses of Lessor incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
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[Lease Agreement (1994 737 B)]
interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
Limited. (a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee shall, until paid to Lessee,
be invested by Lessor or, if the Trust Indenture shall not have been
discharged, by the Indenture Trustee, as the case may be, as Lessee (or in the
event a Default under Section 14(a), (b), (f) or (g) or an Event of Default has
occurred and is continuing, Lessor) may from time to time direct in writing
(and in absence of a written direction by Lessee, there shall be no obligation
to invest such moneys) in (i) obligations of, or guaranteed by, the United
States Government or agencies thereof, (ii) open market commercial paper of any
corporation incorporated under the laws of the United States of America or any
State thereof rated at least P-1 or its equivalent by ▇▇▇▇▇'▇ Investors
Service, Inc. or at least A-1 or its equivalent by Standard & Poor's
Corporation, (iii) certificates of deposit issued by commercial banks organized
under the laws of the United States or of any political subdivision thereof
having a combined capital and surplus in excess of $500,000,000 which banks or
their holding companies have a rating of A or its equivalent by ▇▇▇▇▇'▇
Investors Service, Inc. or Standard & Poor's Corporation; provided, however,
that the aggregate amount at any one time so invested in certificates of
deposit issued by any one bank shall not exceed 5% of such bank's capital and
surplus, (iv) U.S. dollar denominated offshore certificates of deposit issued
by, or offshore time deposits with, any commercial bank described in (iii) or
any subsidiary thereof and (v) repurchase agreements with any financial
institution having combined capital and surplus of at least $500,000,000 with
any of the obligations described in clause (i) through (iv) as collateral.
There shall be promptly remitted to Lessee or its order (but no more frequently
than monthly) any gain (including interest received) realized as a result of
any such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) unless a Default or an Event of
Default shall have occurred and be continuing. If a Default under Section
14(a), (b), (d) (solely with respect to Lessee's obligations under Section 7(a)
or (b)(viii) hereof or Section 8 hereof), (f) or (g) or an Event of Default
shall have occurred and be continuing, Lessor or if the Trust Indenture shall
not have been discharged, the Indenture Trustee as assignee of Lessor, shall
hold any such gain as security for the obligations of Lessee under this Lease
and apply it against such obligations as and when due, and once all such
Defaults and Events of Default have been remedied any gain not so applied shall
be remitted to Lessee. Lessee shall be responsible for any net loss realized
as a result of any such investment and shall reimburse Lessor (or the Indenture
Trustee, as the case may be) therefor on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that, except as expressly set forth herein and in the other
Operative Documents, all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under
the Trust Agreement, and the institution acting as Lessor shall not be liable
in its individual capacity for any breach thereof except for its gross
negligence or willful
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[Lease Agreement (1994 737 B)]
misconduct or for breach of its covenants, representations and warranties
contained herein, to the extent covenanted or made in its individual capacity.
SECTION 23. Miscellaneous. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and any assignee of Lessor's
rights hereunder. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. The section and
paragraph headings in this Lease and the table of contents are for convenience
of reference only and shall not modify, define, expand or limit any of the
terms or provisions hereof and all references herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF ILLINOIS AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 24. Successor Trustee. Lessee agrees that in the case
of the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee, succeed to all the rights, powers and title of
Lessor hereunder and shall be deemed to be Lessor and the owner of the Aircraft
for all purposes hereof without in any way altering the terms of this Lease or
Lessee's obligations hereunder. One such appointment and designation of a
successor Owner Trustee shall not exhaust the right to appoint and designate
further successor Owner Trustees pursuant to the Trust Agreement, but such
right may be executed repeatedly as long as this Lease shall be in effect.
SECTION 25. Bankruptcy. Lessee hereby acknowledges that Lessor
and the Indenture Trustee are entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft and that this Lease is a "lease"
within the meaning of said Section 1110. Lessee agrees not to take any
position in connection with any bankruptcy proceedings involving it that is
inconsistent with a lessor's rights under Section 1110 of the Bankruptcy Code
or any comparable or successor provision affording protection to lessors of
aircraft.
* * *
66
72
[Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
to be duly executed as of the day and year first above written.
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, not in its individual
capacity, except as expressly
provided in Section 4 hereof, but
solely as Owner Trustee,
Lessor
By
------------------------------------
Title
----------------------------------
UNITED AIR LINES, INC.,
Lessee
By
--------------------------------------
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on this ____ day of September, ▇▇▇▇.(▇)
▇▇▇▇▇ ▇▇▇▇▇▇ BANK AND TRUST COMPANY,
Indenture Trustee
By
-------------------------------------
Title
---------------------------------
____________________
(1) This language contained in the original counterpart only.
67
73
[Lease Agreement (1994 737 B)]
EXHIBIT A
LEASE SUPPLEMENT NO. 1 (1994 737 B)
LEASE SUPPLEMENT No. 1 (1994 737 B), dated September __, 1994
between FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement
(1994 737 B) dated as of September 1, 1994, between MS Financing Inc., as Owner
Participant, and such Owner Trustee (such Owner Trustee, in its capacity as
such Owner Trustee, being herein called "Lessor"), and UNITED AIR LINES, INC.
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement (1994 737 B) dated as of September 1, 1994 relating to one Boeing
737-322 aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease is attached hereto, and made a part hereof, and
this Lease Supplement together with such attachment, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document.(2)
The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease, attached and made a part of Lease Supplement
No. 1 (1994 737 B) dated September __, 1994, has been recorded by the Federal
Aviation Administration on September __, 1994, as one document and assigned
Conveyance No. ______________.(3)
NOW, THEREFORE, in consideration of the premises and other good
and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under
the Lease and Lessee hereby accepts and leases from Lessor under the
Lease the following described Boeing 737-322 aircraft (the "Aircraft"),
which Aircraft as of the date hereof consists of the following
components:
(i) Airframe: U.S. Registration No. N398UA and
manufacturer's serial no. 24673; and
(ii) Engines: one (1) CFM International Inc., Model
CFM-C56-3B1 engine bearing manufacturer's serial no. 724453 and
one (1) CFM International
____________________
(2) This language for Lease Supplement No. 1.
(3) This language for other Lease Supplements.
74
[Lease Agreement (1994 737 B)]
Inc., Model CFM-C56-3C1 engine bearing manufacturer's serial no.
724431 (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof. Except
as otherwise provided in the Lease, the Term for the Aircraft shall
commence on the Delivery Date and end on the Basic Term Expiry Date.
3. (a) The Commencement Date is July 1, 1995.
(b) The Stipulated Loss Value Date shall mean
the 1st calendar day of each calendar month during the Interim
Term and the Basic Term and the 28th calendar day of each
calendar month during any Renewal Term.
4. Lessee hereby confirms its agreement to pay Lessor
Basic Rent and Interim Rent for the Aircraft throughout the Term
therefor in accordance with Section 3 of the Lease.
5. Lessee hereby confirms to Lessor that Lessee has
accepted the Aircraft for all purposes hereof and of the Lease as being
airworthy, in good working order and repair and without defect or
inherent vice in title, condition, design, operation or fitness for use;
provided, however, that nothing contained herein or in the Lease shall
in any way diminish or otherwise affect any right Lessee or Lessor may
have with respect to the Aircraft against The Boeing Company, or any
subcontractor or supplier of The Boeing Company, under the Purchase
Agreement or otherwise.
6. All of the terms and provisions of the Lease are
hereby incorporated by reference in this Lease Supplement to the same
extent as if fully set forth herein.
7. This Lease Supplement may be executed by the
parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
* * *
75
[Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee,
Lessor
By:
-----------------------------------
Title:
--------------------------------
UNITED AIR LINES, INC.,
Lessee
By:
-----------------------------------
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this _____ day of September, ▇▇▇▇.(▇)
▇▇▇▇▇ ▇▇▇▇▇▇ BANK AND TRUST
COMPANY,
Indenture Trustee
By:
-----------------------------------
Authorized Officer
____________________
(4) This language contained in the original counterpart only.