EX-99(B)
EXHIBIT 99(B)
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LEASE AGREEMENT
[NW ____ _]
Dated as of
[_________________]
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity, except
as expressly provided herein, but
solely as Owner Trustee,
Lessor
AND
NORTHWEST AIRLINES, INC.,
Lessee
One [Airbus A319-114] [Boeing 757-251] Aircraft
=============================================================================
As set forth in Section 20 hereof, Lessor has assigned to the Indenture
Trustee (as defined herein) certain of its right, title and interest in and
to this Lease. To the extent, if any, that this Lease constitutes chattel
paper (as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction) no security interest in this Lease may be
created through the transfer or possession of any counterpart other than the
original executed counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by the Indenture Trustee on the
signature page thereof.
TABLE OF CONTENTS
Page
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Acceptance and Lease . . . . . . . . . . . . . . . . . . . . 18
SECTION 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Basic Term . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Intentionally Omitted] . . . . . . . . . . . . . . . . . . . 18
(c) Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Adjustments to Basic Rent . . . . . . . . . . . . . . . . . 18
(e) Supplemental Rent . . . . . . . . . . . . . . . . . . . . . 20
(f) Payments in General . . . . . . . . . . . . . . . . . . . . 21
SECTION 4. Lessor's Representations and Warranties . . . . . . . . . . . 22
SECTION 5. Return of the Aircraft . . . . . . . . . . . . . . . . . . . 23
(a) Condition Upon Return . . . . . . . . . . . . . . . . . . . 23
(b) Return of the Engines . . . . . . . . . . . . . . . . . . . 24
(c) Fuel; Manuals . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Storage Upon Return . . . . . . . . . . . . . . . . . . . . 25
SECTION 6. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia . . . . . . . . . . . . . . . . . . . . 26
(a)(I) Registration and Maintenance . . . . . . . . . . . . . . . . 26
(b) Possession and Subleases . . . . . . . . . . . . . . . . . . 27
(c) Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8. Replacement and Pooling of Parts; Alterations, Modifications
and Additions . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Replacement of Parts . . . . . . . . . . . . . . . . . . . . 32
(b) Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . 33
(c) Alterations, Modifications and Additions . . . . . . . . . . 34
SECTION 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . 35
(a) Termination Event . . . . . . . . . . . . . . . . . . . . . 35
(b) [Intentionally Omitted] . . . . . . . . . . . . . . . . . . 35
(c) Optional Sale of the Aircraft . . . . . . . . . . . . . . . 35
(d) Termination as to Engines . . . . . . . . . . . . . . . . . ▇▇
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▇▇▇▇▇▇▇ ▇▇. Loss, Destruction, Requisition, etc. . . . . . . . . . . . . 38
(a) Event of Loss with Respect to the Aircraft . . . . . . . . . 38
(b) Event of Loss with Respect to an Engine . . . . . . . . . . 40
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. . . . . . . . . . . . . . . . . 41
(d) Requisition for Use of the Aircraft by the United States
Government or the Government of Registry of the Aircraft. . 42
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft . 43
(f) Application of Payments During Existence of Event of Default 44
SECTION 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Public Liability and Property Damage Insurance . . . . . . . 44
(b) Insurance Against Loss or Damage to the Aircraft . . . . . . 46
(c) Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . 49
(d) Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Additional Insurance by Lessor and Lessee . . . . . . . . . 50
(f) Indemnification by Government in Lieu of Insurance . . . . . 50
(g) Application of Payments During Existence of an Event of
Default . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 16. Lessee's Cooperation Concerning Certain Matters . . . . . . . 58
SECTION 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 18. No Set-Off, Counterclaim, etc. . . . . . . . . . . . . . . . 60
SECTION 19. Renewal Options; Purchase Options; Valuation . . . . . . . . 60
(a) Renewal Options . . . . . . . . . . . . . . . . . . . . . . 60
(b) Purchase Options . . . . . . . . . . . . . . . . . . . . . . 62
(c) Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . 62
(d) Special Purchase Option . . . . . . . . . . . . . . . . . . 63
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 21. Lessor's Right to Perform for Lessee . . . . . . . . . . . . 65
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SECTION 22. Investment of Security Funds; Liability of Lessor Limited . . 65
(a) Investment of Security Funds . . . . . . . . . . . . . . . . 65
(b) Liability of Lessor Limited . . . . . . . . . . . . . . . . 66
SECTION 23. Service of Process . . . . . . . . . . . . . . . . . . . . . 66
SECTION 24. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 25. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 26. Covenant of Quiet Enjoyment . . . . . . . . . . . . . . . . . 67
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EXHIBITS
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Basic Rent, Lessor's Cost and Special Purchase Price Schedule
EXHIBIT C - Stipulated Loss Value Schedule
EXHIBIT D - Termination Value Schedule
EXHIBIT E - Rent Recalculation Verification
EXHIBIT F - Schedule of Domiciles of Permitted Sublessees
EXHIBIT G - Return Conditions
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LEASE AGREEMENT
[NW ____ _]
This LEASE AGREEMENT [NW ____ _], dated as of [___________],
between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity, except as expressly provided herein, but solely as Owner Trustee
under the Trust Agreement (as defined in Section 1 hereof) (in such capacity,
"Lessor"), and NORTHWEST AIRLINES, INC., a corporation organized and existing
pursuant to the laws of the State of Minnesota ("Lessee");
W I T N E S S E T H:
SECTION 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of
this Lease Agreement [NW ____ _] and shall be equally applicable to both the
singular and the plural forms of the terms herein defined:
"Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common
control with such person. For the purposes of this definition,
"control" (including "controlled by" and "under common control with")
shall mean the power, directly or indirectly, to direct or cause the
direction of the management and policies of such person whether through
the ownership of voting securities or by contract or otherwise.
"Aircraft" means the Airframe to be delivered and leased hereunder
(or any airframe from time to time substituted for such Airframe
pursuant to Section 10(a) hereof) together with the two Engines
initially leased hereunder (or any engine substituted for either of such
Engines pursuant to the terms hereof), whether or not any of such
initial or substituted Engines may from time to time be installed on
such initial or substituted Airframe or may be installed on any other
airframe or on any other aircraft.
"Airframe" means: (i) the [Airbus A319-114] [Boeing 757-251]
aircraft (except Engines or engines from time to time installed thereon)
specified in the initial Lease Supplement, which aircraft shall be
leased by Lessor to Lessee hereunder and under such Lease Supplement,
and any aircraft (except Engines or engines from time to time installed
thereon) which may from time to time be substituted for such aircraft
(except Engines or engines from time to time installed thereon) pursuant
to clause (ii) of the first paragraph of Section 10(a); and (ii) any and
all Parts (A) so long as the same shall be incorporated or installed in
or attached to such aircraft (except Engines or engines from time to
time installed thereon), or (B) so long as title thereto shall remain
vested in Lessor in accordance with the terms of Section 8 after removal
from such aircraft (except Engines or engines from time to time
installed thereon); provided, however, that at such time as an aircraft
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(except Engines or engines from time to time installed thereon) shall be
deemed part of the property leased hereunder in substitution for the
Airframe pursuant to the applicable provisions hereof, the replaced
Airframe shall cease to be an Airframe hereunder.
"Applicable Rate" means as of any date the weighted average of the
interest rates borne by the Secured Certificates then outstanding and,
if no Secured Certificates shall be outstanding, the Base Rate.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.
"Base Rate" means the rate of interest announced publicly by
Citibank, N.A. in New York, New York from time to time as its base rate.
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(c) as adjusted as provided in Section
3(d) but subject always to the provisions of Section 3(d)(v) hereof and,
for any Renewal Term, Basic Rent determined pursuant to Section 19.
"Basic Term" means the term for which the Aircraft is leased
hereunder pursuant to Section 3(a) hereof commencing on the Delivery
Date and ending on [______________________], or such earlier date as
this Lease may be terminated in accordance with the provisions hereof.
"Beneficial Interest" means the interest of the Owner Participant
under the Trust Agreement.
"▇▇▇▇ of Sale" means a full warranty ▇▇▇▇ of sale covering the
Aircraft, executed by Lessee in favor of the Owner Trustee, dated the
Delivery Date, specifically referring to the Airframe and each Engine,
which ▇▇▇▇ of Sale shall contain, among other things, a statement that
such ▇▇▇▇ of Sale thereby conveys to the Owner Trustee good title to the
Airframe and each Engine described in such ▇▇▇▇ of Sale, free and clear
of all liens, encumbrances and rights of others except Liens permitted
by clause (v) of Section 6 of the Lease.
"Business Day" means any day other than a Saturday or Sunday or a
day on which commercial banks are required or authorized to close in the
City of New York, New York; Boston, Massachusetts; or Minneapolis,
Minnesota.
"Certificate Holder" means Certificate Holder as defined in the
Trust Indenture.
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"Certificated Air Carrier" means a Citizen of the United States
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds
or more of cargo or that otherwise is certified or registered to the
extent required to fall within the purview of 11 U.S.C. Section 1110 or
any analogous successor provision of the Bankruptcy Code.
"Citizen of the United States" has the meaning specified in Section
40102(a)(15) of Title 49 of the United States Code or any similar
legislation of the United States of America enacted in substitution or
replacement therefor.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet
Program currently administered by the United States Air Force Air
Mobility Command pursuant to Executive Order No. 11490, as amended, or
any substantially similar program.
"Class G Trustee" means the Pass Through Trustee under the Pass
Through Trust Agreement, dated as of June 3, 1999, among Northwest
Airlines Corporation, Northwest Airlines, Inc., and State Street Bank
and Trust Company of Connecticut, National Association, as supplemented
by Trust Supplement No. 2000-1G, dated as of June 28, 2000 among
Northwest Airlines, Inc., Northwest Airlines Corporation and State
Street Bank and Trust Company of Connecticut, National Association.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means the amount of a Pass Through Trustee's or the
Owner Participant's, as the case may be, participation in Lessor's Cost
for the Aircraft required to be made available or paid as provided in
Section 1 of the Participation Agreement.
"Consent and Agreement" means[, collectively, the Manufacturer
Consent and Agreement to Assignment of Warranties and the Supplier
Consent and Agreement to Assignment of Warranties. -- A319's] [that
certain Consent and Agreement [NW _______], 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. -- 757's]
"Default" means any event which with the giving of notice or the
lapse of time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement for
the Aircraft, which date shall be the date the Aircraft is leased by
Lessor to Lessee and accepted by Lessee hereunder.
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"Depreciation Period" means the period commencing on the Delivery
Date and ending on [________________], or such earlier date as this
Lease may be terminated in accordance with the provisions hereof.
"Dollars" and "$" means the lawful currency of the United States of
America.
"EBO Date" means [____________] (or, if [____________] is not a
Business Day, the Business Day immediately succeeding [____________]).
"Engine" means (i) each of the two [CFM International, Inc. Model
CFM56-5A5] [▇▇▇▇▇ & Whitney Model PW2037] engines listed by
manufacturer's serial number in the initial Lease Supplement, whether or
not from time to time thereafter installed on the Airframe or installed
on any other airframe or on any other aircraft; and (ii) any engine
which may from time to time be substituted, pursuant to the terms
hereof, for any of such two engines, together in each case with any and
all Parts incorporated or installed in or attached thereto or any and
all Parts removed therefrom so long as title thereto shall remain vested
in Lessor in accordance with the terms of Section 8 after removal from
such Engine; provided, however, that at such time as an engine shall be
deemed part of the property leased hereunder in substitution for an
Engine pursuant to the applicable provisions hereof, the replaced Engine
shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines then leased hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as
in effect at the date of the Participation Agreement and any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.
"Event of Default" has the meaning specified in Section 14 hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such property:
(i) the loss of such property or of the use thereof due to the
destruction of or damage to such property which renders repair
uneconomic or which renders such property permanently unfit for normal
use by Lessee (or any Sublessee) for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with
respect to such property on the basis of a total loss, or a constructive
or compromised total loss; (iii) the theft or disappearance of such
property, or the confiscation, condemnation, or seizure of, or
requisition of title to, or use of, such property (other than a
requisition for use by the United States Government or any other
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government of registry of the Aircraft, or any agency or instrumentality
of any thereof) which in the case of any event referred to in this
clause (iii) (other than a requisition of title) shall have resulted in
the loss of possession of such property by Lessee (or any Sublessee) for
a period in excess of 180 consecutive days or, if earlier, until the end
of the Term or, in the case of a requisition of title, the requisition
of title shall not have been reversed within 90 days from the date of
such requisition of title or, if earlier, at the end of the Term; (iv)
as a result of any law, rule, regulation, order or other action by the
Federal Aviation Administration or other governmental body of the
government of registry of the Aircraft having jurisdiction, the use of
such property in the normal course of the business of air transportation
shall have been prohibited for a period of 180 consecutive days, unless
Lessee (or any Sublessee), prior to the expiration of such 180 day
period, shall have undertaken and shall be diligently carrying forward
all steps which are necessary or desirable to permit the normal use of
such property by Lessee (or such Sublessee), but in any event if such
use shall have been prohibited for a period of two consecutive years,
provided that no Event of Loss shall be deemed to have occurred if such
prohibition has been applicable to the entire U.S. registered fleet of
[Airbus Model A319-100] [Boeing Model 757-200] aircraft of Lessee (or
any Sublessee) and Lessee (or a Sublessee), prior to the expiration of
such two-year period, shall have conformed at least one such aircraft in
its fleet to the requirements of any such law, rule, regulation, order
or other action and commenced regular commercial use of the same in such
jurisdiction and shall be diligently carrying forward, in a manner which
does not discriminate against the Aircraft in so conforming the
Aircraft, all steps which are necessary or desirable to permit the
normal use of the Aircraft by Lessee (or such Sublessee), provided,
further that, notwithstanding any of the foregoing, such prohibition
shall constitute an Event of Loss if such use shall have been prohibited
for a period of three consecutive years or such use shall be prohibited
at the expiration of the Term; (v) the requisition for use by the United
States Government or any other government of registry of the Aircraft or
any instrumentality or agency of any thereof, which shall have occurred
during the Basic Term (or any Renewal Term) and shall have continued for
thirty (30) days beyond the Term, provided, however, that no Event of
Loss pursuant to this clause (v) shall exist if Lessor shall have
furnished to Lessee the written notice specified in Section 10(d)
hereof; and (vi) any divestiture of title to or interest in an Engine
treated as an Event of Loss pursuant to Section 7(b) hereof. An Event
of Loss with respect to the Aircraft shall be deemed to have occurred if
an Event of Loss occurs with respect to the Airframe.
"Expenses" has the meaning specified in Section 7(c) of the
Participation Agreement.
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"FAA ▇▇▇▇ of Sale" means a ▇▇▇▇ of sale for the Aircraft on AC Form
8050-2 or such other form as may be approved by the Federal Aviation
Administration on the Delivery Date for the Aircraft, executed by Lessee
in favor of the Owner Trustee and dated the Delivery Date.
"Federal Aviation Act" means that portion of the United States Code
comprising those provisions formerly referred to as the Federal Aviation
Act of 1958, as amended, or any subsequent legislation that amends,
supplements or supersedes such provisions.
"Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration and any agency or instrumentality of the
United States government succeeding to their functions.
"Foreign Air Carrier" means any air carrier which is not a U.S. Air
Carrier and which performs maintenance, preventative maintenance and
inspections for the Aircraft, Airframe and/or any Engine or engine to
standards which are approved by, or which are substantially equivalent
to those required by, the Federal Aviation Administration, the Civil
Aviation Authority of the United Kingdom, the Direction Generale de
l'Aviation Civile of the French Republic, the Luftfahrt Bundesamt of the
Federal Republic of Germany, the Rijksluchtvaartdienst of the Kingdom of
the Netherlands, the Ministry of Transportation of Japan or the Federal
Ministry of Transport of Canada (and any agency or instrumentality of
the applicable government succeeding to the functions of any of the
foregoing entities).
["French Pledge Agreement" means the French Pledge Agreement, dated
as of the date hereof, between the Owner Trustee and the Indenture
Trustee. -- A319's only]
"Guarantee" means that certain Guarantee [NW ____ _], dated as of
the date hereof, made by the Guarantor, as such Guarantee may be amended
or supplemented from time to time pursuant to the applicable provisions
thereof.
"Guarantor" means Northwest Airlines Corporation, a Delaware
corporation.
["Guaranty" means that certain Guaranty of the Manufacturer
attached to the Purchase Agreement. -- A319's only]
"Indemnitee" means (i) the Owner Trustee, in its individual
capacity and as trustee under the Trust Agreement, (ii) the Indenture
Trustee, (iii) the Owner Participant, (iv) the Trust Estate, (v) the
Loan Participants and each other Certificate Holder, (vi) the
Subordination Agent, (vii) the Liquidity Provider and the Policy
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Provider, (viii) the Pass Through Trustees, (ix) each Affiliate of the
Persons described in clauses (i) through (iv), inclusive, (x) each
Affiliate of the Persons described in clauses (vi), (vii) and (viii)
inclusive, (xi) the respective directors, officers, employees, agents
and servants of each of the Persons described in clauses (i) through
(viii), inclusive, (xii) the successors and permitted assigns of the
Persons described in clauses (i) through (iv), inclusive, and (xiii) the
successors and permitted assigns of the Persons described in clauses
(v), (vi), (vii) and (viii) inclusive.
"Indenture Trustee" means the Indenture Trustee under the Trust
Indenture, and any entity which may from time to time be acting as
indenture trustee under the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement and
the Trust Indenture.
"Indenture Trustee's Liens" means any Lien which arises as a result
of (A) claims against the Indenture Trustee not related to its interest
in the Aircraft or the administration of the Trust Estate pursuant to
the Trust Indenture, (B) acts of the Indenture Trustee not permitted by,
or failure of the Indenture Trustee to take any action required by, the
Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (C) claims
against the Indenture Trustee relating to Taxes or Expenses which are
excluded from the indemnification provided by Section 7 of the
Participation Agreement pursuant to said Section 7, or (D) claims
against the Indenture Trustee arising out of the transfer by the
Indenture Trustee of all or any portion of its interest in the Aircraft,
the Trust Estate, the Trust Indenture Estate or the Operative Documents
other than a transfer of the Aircraft pursuant to Section 9, 10 or 19 of
the Lease or Article IV or V of the Trust Indenture, or a transfer of
the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee
has received all amounts due pursuant to the Trust Indenture.
["Initial Installment" has the meaning set forth in Section 19(d)
hereof.]
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Liquidity Provider, the
Policy Provider and the Subordination Agent, as such Intercreditor
Agreement may be amended or supplemented from time to time pursuant to
the applicable provisions thereof.
"Issuance Date" means June 28, 2000.
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"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby" or other like
words mean this Lease Agreement [NW ____ _] as originally executed or as
modified, amended or supplemented pursuant to the applicable provisions
hereof and in accordance with the Trust Agreement and the Trust
Indenture, including, without limitation, supplementation hereof by one
or more Lease Supplements entered into pursuant to the applicable
provisions hereof.
"Lease Period" means each of the consecutive periods throughout the
Basic Term and any Renewal Term ending on a Lease Period Date, the first
such period commencing on and including the Delivery Date.
"Lease Period Date" means [_______________] and each succeeding
[April 1] and [October 1], to and including the last such date in the
Term.
"Lease Supplement" means a Lease Supplement, substantially in the
form of Exhibit A hereto, to be entered into between Lessor and Lessee
on the Delivery Date for the purpose of leasing the Aircraft under and
pursuant to the terms of this Lease Agreement, and any subsequent Lease
Supplement entered into in accordance with the terms hereof.
"Lessee Documents" means the Participation Agreement, the Lease,
the Lease Supplement covering the Aircraft, the Purchase Agreement
(insofar as it relates to the Aircraft), the FAA ▇▇▇▇ of Sale, the ▇▇▇▇
of Sale, the Purchase Agreement Assignment and the Tax Indemnity
Agreement.
"Lessor Liens" means any Lien or disposition of title or interest
arising as a result of (i) claims against Lessor, First Security Bank,
National Association, in its individual capacity, or the Owner
Participant not related to the transactions contemplated by the
Operative Documents, (ii) any act or omission of the Owner Participant,
Lessor, or First Security Bank, National Association, in its individual
capacity, which is not related to the transactions contemplated by the
Operative Documents or is in violation of any of the terms of the
Operative Documents, (iii) claims against the Owner Participant, Lessor,
or First Security Bank, National Association, in its individual
capacity, with respect to Taxes or Expenses against which Lessee is not
required to indemnify the Owner Participant, Lessor or First Security
Bank, National Association, in its individual capacity, pursuant to
Section 7 of the Participation Agreement or (iv) claims against Lessor
or the Owner Participant arising out of any transfer by Lessor or the
Owner Participant of all or any portion of the respective interests of
Lessor or the Owner Participant in the Aircraft, the Trust Estate or the
Operative Documents other than the transfer of possession of the
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Aircraft by Lessor pursuant to this Agreement, the transfer pursuant to
the Trust Indenture or a transfer of the Aircraft pursuant to Section 9,
10 or 19 hereof or pursuant to the exercise of the remedies set forth in
Section 15 hereof, provided, however, that any Lien which is
attributable solely to First Security Bank, National Association or the
Owner Participant and would otherwise constitute a Lessor Lien hereunder
shall not constitute a Lessor Lien hereunder so long as (1) the
existence of such Lien poses no material risk of the sale, forfeiture or
loss of the Aircraft, (2) the existence of such Lien does not interfere
in any way with the use, possession, operation, or quiet enjoyment of
the Aircraft by Lessee (or any Sublessee), (3) the existence of such
Lien does not affect the priority or perfection of, or otherwise
jeopardize, the Lien of the Trust Indenture, (4) First Security Bank,
National Association or the Owner Participant, as appropriate, is
diligently contesting such Lien and (5) the existence of such Lien does
not pose a material threat of interference with the payment of Rent
(other than Excluded Payments in favor of First Security Bank, National
Association or the Owner Participant, as appropriate).
"Lessor's Cost" for the Aircraft means the amount denominated as
such in Exhibit B to the Lease.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease, sublease, sub-sublease or security interest.
"Liquidity Facilities" means the two Revolving Credit Agreements
between the Subordination Agent, as borrower, and the Liquidity
Provider, including the related Liquidity Fee Letter referred to
therein, and any replacement thereof, in each case as the same may be
amended, modified or supplemented.
"Liquidity Provider" means Credit Suisse First Boston, New York
branch, as Class G Liquidity Provider and Class C Liquidity Provider
under the Liquidity Facilities, or any successor thereto.
"Loan Participant" means each Purchaser and its respective
successors and registered assigns, including any Certificate Holder.
"Loan Participant Liens" means any Lien which arises from acts or
claims against any Loan Participant not related to the transactions
contemplated by the Operative Documents.
"Loss Payment Date" has the meaning specified in Section 10(a)
hereof.
"Majority in Interest of Certificate Holders" has the meaning set
forth in the Trust Indenture.
-9-
"Make-Whole Amount" has the meaning assigned to that term in the
Trust Indenture.
"Manufacturer" means [Airbus Industrie, G.I.E.; a Groupment
d'Interet Economique established under Ordonnance 67-821, dated
September 23, 1967, of the Republic of France] [The Boeing Company, a
Delaware corporation].
["Manufacturer Consent and Agreement to Assignment of Warranties"
means the Manufacturer Consent and Agreement to Assignment of Warranties
[NW ____ __], 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 terms thereof. -- A319's only]
"Manufacturer Documents" means [the Manufacturer Consent and
Agreement to Assignment of Warranties and the Guaranty. -- A319's] [the
Purchase Agreement and the Consent and Agreement. -- 757's]
["Mortgage" means that certain Mortgage and Security Agreement,
dated as of [_______________] between Lessee and [________________].]
"Net Economic Return" shall have the meaning ascribed to such term
in paragraph 2 of Exhibit E to the Lease.
"Net Present Value of Rents" means the net present value, as of the
Delivery Date, of Basic Rent set forth in Exhibit B hereto, discounted
at an annual interest rate of [___] percent on a semi-annual basis.
"Note Purchase Agreement" means that certain Note Purchase
Agreement, dated as of the Issuance Date, among Northwest Airlines,
Inc., the Subordination Agent, First Security Bank, National
Association, as Escrow Agent, State Street Bank and Trust Company, as
Paying Agent and State Street Bank and Trust Company of Connecticut,
National Association, as the Pass Through Trustee under each Pass
Through Trust Agreement providing for, among other things, the issuance
and sale of certain secured certificates.
"Operative Documents" and "Operative Document" means each of the
Participation Agreement, the Lease, the Trust Indenture, the Trust
Agreement, an acceptance certificate covering the Aircraft in the form
agreed to by the Participants and Lessee, the Tax Indemnity Agreement,
the Lease Supplement covering the Aircraft, the Trust Supplement
covering the Aircraft, the Secured Certificates, the ▇▇▇▇ of Sale, the
FAA ▇▇▇▇ of Sale, the Purchase Agreement (insofar as it relates to the
Aircraft), the Purchase Agreement Assignment, the Consent and Agreement
and the Guarantee.
-10-
"Overall Transaction" means all the transactions contemplated by
the Operative Documents.
"Owner Participant" means the corporation executing the
Participation Agreement as the Owner Participant, and thereafter any
Person to which such corporation transfers all of its right, title and
interest in and to the Trust Agreement, the Trust Estate and the
Participation Agreement, to the extent permitted by Section 8.01 of the
Trust Agreement and Section 8 of the Participation Agreement.
"Owner Participant Documents" means the Participation Agreement,
the Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means the entity executing the Participation
Agreement as Owner Trustee and any entity appointed as successor Owner
Trustee pursuant to Section 9.01 of the Trust Agreement, and references
to a predecessor Owner Trustee in its individual capacity by name in the
Operative Documents shall include such successor Owner Trustee in its
individual capacity from and after such succession.
"Owner Trustee Documents" means the Participation Agreement, the
Trust Agreement, the Trust Supplement covering the Aircraft, the Lease,
the Lease Supplement covering the Aircraft, the Purchase Agreement
Assignment, the Trust Indenture and the Secured Certificates.
"Participants" means and includes the Loan Participants and the
Owner Participant.
"Participation Agreement" means that certain Participation
Agreement [NW ____ _], dated as of the date hereof, among Lessee, the
Guarantor, the Purchasers, the Indenture Trustee, the Subordination
Agent, the Owner Participant and Owner Trustee, as such Participation
Agreement may be amended or supplemented from time to time pursuant to
the applicable provisions thereof.
"Parties" means the Owner Trustee, the Indenture Trustee and the
Participants.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other
than (a) complete Engines or engines, (b) any items leased by Lessee
from a third party (other than Lessor) and (c) cargo containers) which
may from time to time be incorporated or installed in or attached to the
Airframe or any Engine or so long as title thereto shall remain vested
in Lessor in accordance with Section 8 after removal therefrom.
-11-
"Pass Through Certificates" means the pass through certificates to
be issued by the Pass Through Trustee in connection with the Overall
Transaction.
"Pass Through Trust" means each of the two separate pass through
trusts created under the Pass Through Trust Agreements.
"Pass Through Trust Agreement" means the pass through trust
agreement and each of the two separate pass through trust supplements
referred to on Schedule III to the Participation Agreement.
"Pass Through Trustee" means State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, in
its capacity as trustee under each Pass Through Trust Agreement, and
each other person that may from time to time be acting as successor
trustee under any such Pass Through Trust Agreement.
"Past Due Rate" means (i) with respect to the portion of any
payment of Rent that may be required by the Trust Indenture to be paid
by the Indenture Trustee to the Loan Participants, or the holders of any
outstanding Secured Certificates, the "Past Due Rate" as defined in the
Trust Indenture and (ii) with respect to the remaining portion of any
payment of Rent (and the entire amount of any payment of Rent after the
satisfaction and discharge of the Trust Indenture), a rate per annum
equal to [_]% over the Base Rate.
"Permitted Lien" means any Lien referred to in clauses (i) through
(viii) of Section 6 hereof.
"Permitted Sublessee" means any entity domiciled in a country
listed in Exhibit F hereto.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Policy Provider" means MBIA Insurance Corporation, a New York-
domiciled stock insurance company.
"Policy Provider Agreement" means the Insurance and Indemnity
Agreement dated as of June 28, 2000 among the Subordination Agent, the
Class G Trustee, Lessee and the Policy Provider, including the related
Policy Provider Fee Letter referred to therein, as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
-12-
"Purchase Agreement" means that certain [Airbus A319 Purchase
Agreement] [Purchase Agreement No. 1631], dated [as of September 19,
1997] [December 1, 1989], between the [Supplier] [Manufacturer] and
Lessee relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the
terms thereof, but only insofar as the foregoing relates to the
Aircraft.
"Purchase Agreement Assignment" means that certain Purchase
Agreement Assignment [NW ____ _], dated as of the date hereof, between
Lessee and Lessor, as the same may be amended, supplemented or modified
from time to time, with the form[s] of Consent and Agreement to be
executed by the Manufacturer [and the Supplier -- A319's only] attached
thereto.
"Purchasers" means the Pass Through Trustees under each Pass
Through Trust Agreement.
"Related Indemnitee Group" means, with respect to any Indemnitee,
any officer, director, servant, employee, agent or Affiliate thereof.
["Remaining Installments" has the meaning set forth in Section
19(d) hereof.]
"Renewal Term" means any Fixed Renewal Term or Fair Market Renewal
Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Secured Certificates" has the meaning assigned to that term in the
Trust Indenture.
"Special Purchase Price" means the amount denominated as such in
Exhibit B to the Lease.
"Stipulated Loss Value" with respect to the Aircraft as of any date
through and including [_________________], means, but subject always to
the provisions of Section 3(d)(v) hereof, the amount determined by
multiplying Lessor's Cost for the Aircraft by the percentage specified
in Exhibit C hereto opposite the Stipulated Loss Value Date with respect
to which the amount is determined (as such Exhibit C may be adjusted
from time to time as provided in Section 3(d) hereof and in Section 7 of
the Tax Indemnity Agreement).
"Stipulated Loss Value" as of any date after [_____________] shall
be the amount determined as provided in Section 19(a) hereof.
-13-
"Stipulated Loss Value Date" means the [___] calendar day of each
calendar month during the Basic Term and any Renewal Term.
"Sublease" means any sublease permitted by the terms of Section
7(b)(x) hereof.
"Sublessee" means any Person for so long, but only so long, as such
Person is in possession of the Airframe and/or any Engine pursuant to
the terms of a Sublease which is then in effect pursuant to Section
7(b)(x) hereof.
"Subordination Agent" means State Street Bank and Trust Company, a
Massachusetts trust company, as subordination agent under the
Intercreditor Agreement, or any successor thereto.
"Supplemental Rent" means, without duplication, (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent) which
Lessee assumes or agrees to pay under any Lessee Document to or on
behalf of Lessor or any other Person, (b) amounts payable by Lessor
pursuant to clauses (b) and (c) of the third paragraph of Section 2.02
of the Trust Indenture, (c) Lessor's pro rata share of all compensation
and reimbursement of expenses, disbursements and advances payable by
Lessee under the Pass Through Trust Agreements, and (d) Lessor's pro
rata share of all compensation and reimbursement of expenses and
disbursements payable to the Subordination Agent under the Intercreditor
Agreement except with respect to any income or franchise taxes incurred
by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessor's
pro rata share" means as of any time a fraction, the numerator of which
is the principal balance then outstanding of Secured Certificates and
the denominator of which is the aggregate principal balance then
outstanding of all "Equipment Notes" (as such term is defined in the
Intercreditor Agreement).
["Supplier" means AVSA, S.A.R.L., a French societe a responsabilite
limitee, organized and existing under the laws of the French Republic,
and its successors. -- A319's only]
["Supplier Consent and Agreement to Assignment of Warranties" means
the Supplier Consent and Agreement to Assignment of Warranties [NW ____
_], dated as of the date hereof, executed by the Supplier, as the same
may be amended, modified or supplemented from time to time in accordance
with the applicable terms thereof. -- A319's only]
["Supplier Documents" means the Purchase Agreement and the Supplier
Consent and Agreement to Assignment of Warranties. -- A319's only]
-14-
"Tax Indemnitee" means (i) the Owner Participant, the Owner
Trustee, in its individual capacity and as trustee under the Trust
Agreement, the Trust Estate, the Indenture Trustee, (ii) the respective
Affiliates, successors and permitted assigns of each of the entities
described in the preceding clause (i), (iii) the Policy Provider, and
(iv) the Trust Indenture Estate.
"Tax Indemnity Agreement" means that certain Tax Indemnity
Agreement [NW ____ _], dated as of the date hereof, between the Owner
Participant and Lessee, as originally executed or as modified, amended
or supplemented pursuant to the applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation,
license, recording, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales, rental,
use, turnover, value added, property (tangible and intangible), excise
and stamp taxes), license, levies, imposts, duties, charges, assessments
or withholdings of any nature whatsoever, together with any and all
penalties, fines, additions to tax and interest thereon (each,
individually a "Tax").
"Term" means the Basic Term and, if actually entered into, any
Renewal Term.
"Termination Date" has the meaning set forth in Section 9(a)
hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including [_______________], means, but subject always to
the provisions of Section 3(d)(v) hereof, the amount determined by
multiplying Lessor's Cost for the Aircraft by the percentage specified
in Exhibit D hereto opposite the Termination Date with respect to which
the amount is determined (as such Exhibit D may be adjusted from time to
time as provided in Section 3(d) hereof and in Section 7 of the Tax
Indemnity Agreement).
"Transaction Expenses" means: all of the reasonable out-of-pocket
costs, fees and expenses incurred by the Owner Trustee, the Owner
Participant, the Pass Through Trustee, the Subordination Agent and the
Indenture Trustee in connection with the transactions contemplated by
the Participation Agreement, the other Operative Documents, the Pass
Through Trust Agreements, the Intercreditor Agreement, the Liquidity
Facilities, the Policy Provider Agreement and the Underwriting Agreement
(except, in each case, as otherwise provided therein) including, without
limitation:
-15-
(1) the reasonable and actual fees, expenses and
disbursements of (A) ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, special counsel for the
Pass Through Trustee and the Indenture Trustee, (B) Ray,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel for the Owner Trustee, (C)
Shearman & Sterling, special counsel for the Underwriters, (D)
▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special counsel in Oklahoma City,
Oklahoma, and (E) [[____________________________], counsel for
the Supplier and the Manufacturer; -- A319's only]
(2) the initial fees and reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement;
(3) the initial fee and reasonable and actual
disbursements of the Indenture Trustee under the Trust
Indenture;
(4) the initial fees and expenses of the Liquidity
Provider, the Pass Through Trustee and the Subordination
Agent;
(5) underwriting fees and commissions;
(6) the fees and expenses with respect to the appraisals
of the Aircraft;
(7) the reasonable fees, expenses and disbursements of
[___________________________], special counsel to the Owner
Participant, such fees not to exceed the amount previously
agreed to by the Owner Participant and Lessee;
(8) the reasonable fees, expenses and disbursements of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇,
special counsel for Lessee;
(9) the costs of filing and recording documents with the
FAA and filing Uniform Commercial Code statements in the
United States;
(10) the reasonable fees, expenses and disbursements of
Shearman & Sterling, special counsel to the Liquidity
Provider;
(11) the reasonable fees, expenses and disbursements of
▇▇▇▇ ▇▇▇▇▇▇▇, special counsel to the Policy Provider; and
-16-
(12) the equity placement fee and reasonable
disbursements of ▇▇▇▇▇▇▇ and ▇▇▇▇▇ Financial Corporation.
"Trust Agreement" means that certain Trust Agreement [NW ____ _],
dated as of the date hereof, between the Owner Participant and First
Security Bank, National Association, in its individual capacity, as
originally executed or as modified, amended or supplemented pursuant to
the applicable provisions thereof, including, without limitation,
supplementation thereof by one or more Trust Supplements entered into
pursuant to the applicable provisions thereof.
"Trust Agreement and Indenture Supplement" or "Trust Supplement"
means a supplement to the Trust Agreement and the Trust Indenture,
substantially in the form of Exhibit A to the Trust Indenture.
"Trust Estate" means the Trust Estate as that term is defined in
the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Security
Agreement [NW ____ __], dated as of the date hereof, between Lessor and
the Indenture Trustee, as originally executed or as modified, amended or
supplemented in accordance with the provisions thereof.
"Trust Indenture Estate" has the meaning assigned to that term in
the Trust Indenture.
"Underwriting Agreement" means that certain Underwriting Agreement,
dated as of June 21, 2000, among Lessee, the Guarantor, and the
underwriters named therein.
"U.S. Air Carrier" means any Certificated Air Carrier as to which
there is in force an air carrier operating certificate issued pursuant
to Part 121 of the regulations under the Federal Aviation Act, or which
may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"Wet Lease" means any arrangement whereby the Lessee (or any
Sublessee) agrees to furnish the Airframe and Engines or engines
installed thereon to a third party pursuant to which such Airframe and
Engines or engines (i) shall be operated solely by regular employees of
Lessee (or any Sublessee) possessing all current certificates and
licenses that would be required under the Federal Aviation Act or, if
the Aircraft is not registered in the United States, all certificates
and licenses required by the laws of the jurisdiction of registry, for
the performance by such employees of similar functions within the United
States of America or such other jurisdiction of registry (it is
understood that cabin attendants need not be regular employees of Lessee
-17-
(or any Sublessee)) and (ii) shall be maintained by Lessee (or any
Sublessee) in accordance with its normal maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees (subject to
satisfaction of the conditions set forth in Section 4(a) of the Participation
Agreement) to accept the transfer of title from and simultaneously to lease
to Lessee hereunder, and Lessee hereby agrees (subject to satisfaction of the
conditions set forth in Section 4(b) of the Participation Agreement) to lease
from Lessor hereunder, the Aircraft as evidenced by the execution by Lessor
and Lessee of a Lease Supplement leasing the Aircraft hereunder. Lessee
hereby agrees that such acceptance of the Aircraft by Lessor shall, without
further act, irrevocably constitute acceptance by Lessee of such Aircraft for
all purposes of this Lease.
SECTION 3. Term and Rent. (a) Basic Term. The Basic Term shall
commence on the Delivery Date and end on [__________________], or such
earlier date as this Lease may be terminated in accordance with the
provisions hereof.
(b) [Intentionally Omitted].
(c) Basic Rent. Lessee shall pay Basic Rent with respect to each
Lease Period during the Basic Term on each Lease Period Date during the Basic
Term, in consecutive installments in the amounts as provided in the next
sentence, each such installment to cover the Lease Period specified in
Exhibit B. Each such installment of Basic Rent shall be equal to Lessor's
Cost multiplied by the percentage for the applicable Lease Period Date
specified in Exhibit B hereto. Lessor and Lessee agree that each installment
of Basic Rent that is indicated to be payable in advance shall be allocated
over the six-month period beginning on the Lease Period Date on which such
advance payment is scheduled to be made, and each installment of Basic Rent
that is indicated to be payable in arrears shall be allocated over the six-
month period ending on the Lease Period Date on which such arrears payment is
scheduled to be made.
(d) Adjustments to Basic Rent.
(i) In the event that (A) the Delivery Date occurs other than
on [____________________], (B) Transaction Expenses paid by Lessor
pursuant to Section 16(a) of the Participation Agreement are
determined to be other than [_____]% of Lessor's Cost, or (C) there
is a change in tax law (including the issuance of proposed
regulations) after [________________]and on or prior to the
Delivery Date, then in each case the Basic Rent percentages set
forth in Exhibit B, the Stipulated Loss Value percentages set forth
in Exhibit C, the Termination Value percentages set forth in
-18-
Exhibit D [, the Initial Installments, the Remaining Installments]
and the Special Purchase Price shall be recalculated by the Owner
Participant, on or prior to [__________________], using the same
methods and assumptions used to calculate original Basic Rent,
Stipulated Loss Value and Termination Value percentages [, the
Initial Installments, the Remaining Installments] and the Special
Purchase Price in order to: (1) maintain the Owner Participant's
Net Economic Return and (2) minimize the Net Present Value of Rents
to Lessee to the extent possible consistent with clause (1) hereof.
In such recalculation there will be no change in the amortization
of the Secured Certificates.
(ii)(A) In the event of a refinancing as contemplated by
Section 17 of the Participation Agreement, then the Basic Rent
percentages set forth in Exhibit B, the Stipulated Loss Value
percentages set forth in Exhibit C, the Termination Value
percentages set forth in Exhibit D [, the Initial Installments, the
Remaining Installments] and the Special Purchase Price shall be
recalculated (upwards or downwards) by the Owner Participant as
contemplated by such Section to (1) maintain the Owner
Participant's Net Economic Return and (2) to the extent possible
consistent with clause (1) hereof, minimize the Net Present Value
of Rents to Lessee and (B) in the event that Lessee elects to
satisfy any indemnity obligation under the Tax Indemnity Agreement
pursuant to Section 4(d)(ii) of the Tax Indemnity Agreement, then
the Basic Rent percentages set forth in Exhibit B, the Stipulated
Loss Value percentages set forth in Exhibit C, the Termination
Value percentages set forth in Exhibit D [, the Initial
Installments, the Remaining Installments] and the Special Purchase
Price shall be recalculated (upwards or downwards) by the Owner
Participant, using the same methods and assumptions (except to the
extent such assumptions shall be varied to take into account the
Loss (as defined in the Tax Indemnity Agreement) that is the
subject of such indemnification and any prior or contemporaneous
Loss) used to calculate the Basic Rent percentages, the Stipulated
Loss Value percentages, the Termination Value percentages [, the
Initial Installments, the Remaining Installments] and the Special
Purchase Price on the Delivery Date, in order to (1) maintain the
Owner Participant's Net Economic Return and (2) to the extent
possible consistent with clause (1) hereof, minimize the Net
Present Value of Rents to Lessee.
(iii) [Intentionally Omitted].
(iv) Any recalculation of Basic Rent, Stipulated Loss Value
and Termination Value percentages[, the Initial Installments, the
Remaining Installments] and the Special Purchase Price pursuant to
-19-
this Section 3(d) shall be determined by the Owner Participant and
shall be subject to the verification procedures set forth in
Exhibit E hereto. Such recalculated Basic Rent, Stipulated Loss
Value and Termination Value percentages and Special Purchase Price
shall be set forth in a Lease Supplement or an amendment to this
Lease.
(v) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Basic
Rent payable hereunder, whether or not adjusted in accordance with
this Section 3(d), shall, and each payment of Termination Value and
Stipulated Loss Value, whether or not adjusted in accordance with
this Section 3(d), shall, together with all other amounts
(including an amount equal to the Make-Whole Amount, if any,
payable by Lessor on the Secured Certificates) payable
simultaneously by Lessee pursuant to this Lease, in each case be,
under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the date on which such amount of Rent
is due, any payments then required to be made on account of the
principal of, Make-Whole Amount, if any, and interest on the
Secured Certificates. It is agreed that no installment of Basic
Rent or payment of Termination Value or Stipulated Loss Value shall
be increased or adjusted by reason of (i) any attachment or
diversion of Rent on account of (A) Lessor Liens or (B) any Loan
Participant Lien on or against the Trust Estate, any part thereof
or the Operative Documents arising as a result of claims against
the Indenture Trustee not related to the transactions contemplated
by the Operative Documents, (ii) any modification of the payment
terms of the Secured Certificates made without the prior written
consent of Lessee or (iii) the acceleration of any Secured
Certificate or Secured Certificates due to the occurrence of an
"Event of Default" (as defined in the Trust Indenture) which does
not constitute an Event of Default hereunder.
(vi) All adjustments to Basic Rent under this Section 3(d)
shall be (A) in compliance with the tests of Sections 4.02(5) and
4.07 of Rev. Proc. 75-28 and will not cause this Lease to
constitute a "disqualified leaseback or long-term agreement" within
the meaning of Section 467 of the Internal Revenue Code of 1986, as
amended, as each is then in effect and (B) subject to verification
pursuant to Exhibit E.
(e) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value or Termination Value as
the same shall become due and owing and all other amounts of Supplemental
Rent within five days after demand or within such other relevant period as
-20-
may be provided in any Operative Document, and in the event of any failure on
the part of Lessee to pay any Supplemental Rent when due, Lessor shall have
all rights, powers and remedies provided for herein or in any other Operative
Document or by law or equity or otherwise in the case of nonpayment of Basic
Rent. Lessee shall pay as Supplemental Rent the Make-Whole Amount, if any,
due pursuant to Section 2.10(b) or Section 2.11 of the Trust Indenture in
connection with a prepayment of the Secured Certificates upon redemption of
such Secured Certificates in accordance with Section 2.10(b) or Section 2.11
of the Trust Indenture. Lessee also will pay to Lessor, or to whomsoever
shall be entitled thereto, on demand, as Supplemental Rent, to the extent
permitted by applicable law, interest at the Past Due Rate on any part of any
installment of Basic Rent not paid when due for any period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due
for the period until the same shall be paid.
(f) Payments in General. All payments of Rent shall be made
directly by Lessee (whether or not any Sublease shall be in effect) by wire
transfer of immediately available funds prior to 10:30 A.M., New York time,
on the date of payment, to Lessor at its account at First Security Bank,
National Association, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ABA
No. ▇▇▇-▇▇▇▇-▇▇, Account No. 051-▇▇▇▇▇▇▇, Attention: Corporate Trust
Department, Credit Northwest/NW [____ __] (or such other account of Lessor in
the continental United States as Lessor shall direct in a notice to Lessee at
least 10 Business Days prior to the date such payment of Rent is due);
provided that so long as the Trust Indenture shall not have been fully
discharged, Lessor hereby irrevocably directs and Lessee agrees, that, unless
the Indenture Trustee shall otherwise direct, all Rent payable to Lessor and
assigned to the Indenture Trustee pursuant to the Trust Indenture shall be
paid prior to 10:30 A.M., New York time on the due date thereof in funds of
the type specified in this Section 3(f) directly to the Indenture Trustee at
its account at State Street Bank and Trust Company, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ABA No. ▇▇▇-▇▇▇-▇▇▇, Account No. ▇▇▇▇-▇▇▇-▇,
Attention: Corporate Trust Department, Reference: Northwest/NW [____ __]
(or such other account of the Indenture Trustee in the continental United
States as the Indenture Trustee shall direct in a notice to Lessee at least
10 Business Days prior to the date such payment of Rent is due). Lessor
hereby directs and Lessee agrees that all payments of Supplemental Rent owing
to the Indenture Trustee or to a Loan Participant or any other Certificate
Holder pursuant to the Participation Agreement shall be made in Dollars in
immediately available funds prior to 10:30 A.M., New York time, on the due
date thereof at the office of the Indenture Trustee or at such other office
of such other financial institution located in the continental United States
as the party entitled thereto may so direct at least 10 Business Days prior
to the due date thereof. All payments of Supplemental Rent payable to the
Owner Participant, to the extent that such amounts constitute Excluded
Payments (as defined in the Trust Indenture), shall be made in Dollars in
immediately available funds prior to 10:30 A.M., New York time, on the due
-21-
date thereof, to the account of the Owner Participant specified in Schedule I
to the Participation Agreement (or to such other account as may be specified
in writing by the Owner Participant from time to time).
Notwithstanding anything to the contrary contained herein, if any
date on which a payment of Rent becomes due and payable is not a Business
Day, then such payment shall not be made on such scheduled date but shall be
made on the next succeeding Business Day with the same force and effect as if
made on such scheduled date and (provided such payment is made on such next
succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES
AND LESSEE TAKES THE AIRCRAFT AND EACH PART THEREOF "AS-IS," "WHERE-IS."
NEITHER LESSOR, THE INDENTURE TRUSTEE NOR ANY PARTICIPANT MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS AND WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except
that First Security Bank, National Association, in its individual capacity,
(i) represents and warrants that on the Delivery Date, Lessor shall have
received whatever title to the Aircraft was conveyed to it by Lessee, (ii)
represents and warrants that on the Delivery Date the Aircraft shall be free
of Lessor Liens (including for this purpose Liens which would be Lessor Liens
but for the proviso in the definition of Lessor Liens) attributable to it,
(iii) covenants that it will not, through its own actions or inactions,
interfere in Lessee's quiet enjoyment of the Aircraft during the Term, (iv)
agrees that it will not directly or indirectly create, incur, assume or
suffer to exist any Lessor Lien attributable to it on or with respect to the
Airframe or any Engine or any portion of the Trust Estate and (v) represents
and warrants that it is a Citizen of the United States without making use of
a voting trust, voting powers agreement or similar arrangement, and agrees
that if at any time it shall cease to be a Citizen of the United States
without making use of a voting trust, voting powers agreement or similar
arrangement it will promptly resign as Owner Trustee (if and so long as such
citizenship is necessary under the Federal Aviation Act as in effect at such
time or, if it is not necessary, if and so long as the Owner Trustee's
citizenship would have any material adverse effect on the Loan Participants,
the Owner Participant or Lessee), effective upon the appointment of a
successor Owner Trustee in accordance with Section 9.01 of the Trust
Agreement. None of the provisions of this Lease shall be deemed to amend,
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modify or otherwise affect the representations, warranties or other
obligations (express or implied) of the Manufacturer, any subcontractor or
supplier of the Manufacturer with respect to the Airframe, the Engines or any
Parts, or to release the Manufacturer, or any such subcontractor or supplier,
from any such representation, warranty or obligation. Lessor agrees that it
will not directly or indirectly create, incur, assume or suffer to exist
any Lessor Lien attributable to it on or with respect to the Airframe or any
Engine.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return.
Unless purchased by Lessee pursuant to Section 19 hereof, upon the
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(c) or 15, Lessee, at its own expense, will return the
Airframe to Lessor at a major airport in one of the forty-eight contiguous
states of the United States chosen by Lessee, and Lessee will give Lessor at
least ten (10) days' prior written notice of the place of such return;
provided, however, that if Lessor shall have made the request for storage
pursuant to Section 5(d) hereof, Lessee shall return the Airframe to Lessor
at the site of the storage at the end of the storage period. At the time of
such return, Lessee will, unless otherwise requested by Lessor at least
ninety (90) days prior to the return hereunder, cause the Aircraft, if it is
not then so registered, to be registered under the laws of the United States
with the Federal Aviation Administration in the name of the Lessor or its
designee, provided that Lessee shall be relieved of its obligations under
this sentence if (i) such registration is prohibited by reason of the failure
of Lessor or its designee to be eligible on such date to own an aircraft
registered with the Federal Aviation Administration or (ii) such registration
is otherwise prohibited by applicable law; the Airframe will be fully
equipped with the Engines (or other [CFM International, Inc. Model CFM56-5A5]
[▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model PW2037] engines or two engines of the same or another
manufacturer of not less than equivalent utility, value and remaining useful
life, and suitable for installation and use on the Airframe without impairing
the value, utility or remaining useful life of the Aircraft; provided that
both engines shall be of the same make and model) duly installed thereon.
Also, at the time of such return, such Airframe and Engines or engines (i)
shall be certified (or, if not then registered under the Federal Aviation
Act, shall be eligible for certification) as an airworthy aircraft by the
Federal Aviation Administration, (ii) shall be free and clear of all Liens
(other than Lessor Liens (including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens),
Indenture Trustee's Liens and Loan Participant Liens) and rights of third
parties under pooling, interchange, overhaul, repair or other similar
agreements or arrangements, (iii) shall be in as good an operating condition
as when delivered to Lessee hereunder, ordinary wear and tear excepted, or,
in the case of any such engines owned by Lessee, shall have a value, utility
and remaining useful life at least equal to, and shall be in as good an
operating condition as required by the terms hereof with respect to, Engines
-23-
constituting part of the Aircraft but not then installed on the Airframe, and
(iv) shall be in compliance with the return conditions, if any, set forth in
Exhibit G.
During the last six (6) months of the Term (unless Lessee shall
have elected to purchase the Aircraft or renew this Lease in accordance with
the terms of this Lease), with reasonable notice, Lessee will cooperate, and
cause any Sublessee to cooperate, in all reasonable respects with the efforts
of Lessor to sell or lease the Aircraft, including, without limitation,
permitting prospective purchasers or lessees to inspect fully the Aircraft
and the records relating thereto, provided that such cooperation shall not
interfere with the operation or maintenance of the Aircraft by Lessee or any
Sublessee.
(b) Return of the Engines. In the event that any engine not owned
by Lessor shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery,
will, at no cost to Lessor, furnish, or cause to be furnished, to Lessor a
full warranty (as to title) ▇▇▇▇ of sale with respect to each such engine, in
form and substance satisfactory to Lessor (together with an opinion of
counsel to the effect that such full warranty ▇▇▇▇ of sale has been duly
authorized and delivered and is enforceable in accordance with its terms and
that such engines are free and clear of Liens other than Lessor Liens
(including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens), Indenture Trustee's Liens and
Loan Participant Liens), against receipt from Lessor of a ▇▇▇▇ of sale or
other instrument evidencing the transfer, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), by Lessor to Lessee or its designee of all of Lessor's right, title
and interest in and to any Engine constituting part of the Aircraft but not
installed on the Airframe at the time of the return of the Airframe.
(c) Fuel; Manuals. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessor shall pay Lessee, as compensation for any fuel or oil contained in
the fuel or oil tanks of such Airframe, the value of such fuel or oil at the
price paid by Lessee for such fuel or oil, as the case may be, and (ii)
Lessee shall deliver or cause to be delivered to Lessor all logs, manuals and
data and inspection, maintenance, modification and overhaul records required
to be maintained with respect thereto under applicable rules and regulations
of each country under the laws of which the Aircraft has been registered
during the period of operation thereof, which logs, manuals, data and
records, if not maintained in English, shall be translated into English at
Lessee's expense.
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(d) Storage Upon Return. If, at least sixty (60) days prior to
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(c), Lessee receives from Lessor a written request for
storage of the Aircraft upon its return hereunder, Lessee will provide
Lessor, or cause Lessor to be provided, with free parking facilities for the
Aircraft (maintenance costs and other out-of-pocket costs other than parking
fees to be for the account of Lessor) for a period not exceeding thirty (30)
days commencing on the date of such termination at a location in the
continental United States selected by Lessee and used as a location for the
parking or storage of aircraft; provided that Lessee shall have no obligation
to move the Aircraft from such location during or after the storage period.
Lessee, unless instructed by Lessor to the contrary, will maintain insurance
for the Aircraft during such period not exceeding thirty (30) days and be
reimbursed by Lessor for the premiums thereon.
SECTION 6. Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided, the Lien of the Trust Indenture, and any other rights existing
pursuant to the Operative Documents, (ii) the rights of others under
agreements or arrangements to the extent permitted by the terms of Sections
7(b) and 8(b) hereof, (iii) Lessor Liens (including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), Loan Participant Liens, and Indenture Trustee's Liens, (iv) Liens for
taxes of Lessee (or any Sublessee) either not yet due or being contested in
good faith by appropriate proceedings so long as such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Airframe or
any Engine or any interest therein, or, so long as any Secured Certificates
shall be outstanding, adversely affect the Lien of the Trust Indenture,
(v) materialmen's, mechanics', workmen's, repairmen's, employees' or other
like Liens arising in the ordinary course of Lessee's (or, if a Sublease is
then in effect, Sublessee's) business (including those arising under
maintenance agreements entered into in the ordinary course of business)
securing obligations that are not overdue for a period of more than sixty
(60) days or are being contested in good faith by appropriate proceedings so
long as such proceedings do not involve any material danger of the sale,
forfeiture or loss of the Airframe or any Engine or any interest therein or,
so long as any Secured Certificates shall be outstanding, adversely affect
the Lien of the Trust Indenture, (vi) Liens arising out of any judgment or
award against Lessee (or any Sublessee), unless the judgment secured shall
not, within sixty (60) days after the entry thereof, have been discharged,
vacated, reversed or execution thereof stayed pending appeal or shall not
have been discharged, vacated or reversed within sixty (60) days after the
expiration of such stay, (vii) any other Lien with respect to which Lessee
(or any Sublessee) shall have provided a bond, cash collateral or other
security adequate in the reasonable opinion of Lessor, and (viii) Liens
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approved in writing by Lessor. Lessee will promptly, at its own expense,
take (or cause to be taken) such actions as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any
time.
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia. (a)(I) Registration and Maintenance. (a) Registration
and Maintenance. Lessee, at its own cost and expense, shall (or shall cause
any Sublessee to): (i) forthwith upon the delivery thereof hereunder, cause
the Aircraft to be duly registered in the name of Lessor, and, subject to the
second paragraph of this Section 7(a) and Section 8(f) of the Participation
Agreement, to remain duly registered in the name of Lessor under the Federal
Aviation Act, provided that Lessor shall execute and deliver all such
documents as Lessee (or any Sublessee) may reasonably request for the purpose
of effecting and continuing such registration, and shall not register the
Aircraft or permit the Aircraft to be registered under any laws other than
the Federal Aviation Act at any time except as provided in Section 8(f) of
the Participation Agreement and shall cause the Trust Indenture to be duly
recorded and maintained of record as a first mortgage on the Aircraft;
(ii) maintain, service, repair and overhaul (or cause to be maintained,
serviced, repaired and overhauled) the Aircraft so as to keep the Aircraft in
as good an operating condition as when delivered to Lessee hereunder,
ordinary wear and tear excepted, and as may be necessary to enable the
applicable airworthiness certification for the Aircraft to be maintained in
good standing at all times (other than during temporary periods of storage in
accordance with applicable regulations or during maintenance or modification
permitted hereunder) under the Federal Aviation Act, except when all [Airbus
Model A319-100] [Boeing Model 757-200] aircraft powered by engines of the
same type as those with which the Airframe shall be equipped at the time of
such grounding and registered in the United States have been grounded by the
FAA (although such certification need actually be maintained only during such
periods as the Aircraft is registered in the United States), or the
applicable laws of any other jurisdiction in which the Aircraft may then be
registered from time to time in accordance with Section 8(f) of the
Participation Agreement, and utilizing, except during any period that a
Sublease is in effect, the same manner and standard of maintenance, service,
repair or overhaul used by Lessee with respect to similar aircraft operated
by Lessee in similar circumstances and utilizing, during any period that a
Sublease is in effect, the same manner and standard of maintenance, service,
repair or overhaul used by the Sublessee with respect to similar aircraft
operated by the Sublessee in similar circumstances; provided, however, that
in all circumstances the Aircraft shall be maintained by Lessee (or any
Sublessee) in accordance with maintenance standards required by, or
substantially equivalent to those required by, the FAA or the central civil
aviation authority of Canada, France, Germany, Japan, the Netherlands or the
United Kingdom; (iii) maintain or cause to be maintained all records, logs
and other materials required to be maintained in respect of the Aircraft by
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the FAA or the applicable regulatory agency or body of any other jurisdiction
in which the Aircraft may then be registered; and (iv) promptly furnish or
cause to be furnished to Lessor and the Owner Participant such information as
may be required to enable Lessor to file any reports required to be filed by
Lessor or the Owner Participant with any governmental authority because of
Lessor's ownership of the Aircraft. (II) Operation. Lessee will not
maintain, use, service, repair, overhaul or operate the Aircraft (or permit
any Sublessee to maintain, use, service, repair, overhaul or operate the
Aircraft) in violation of any law or any rule, regulation, order or
certificate of any government or governmental authority (domestic or foreign)
having jurisdiction, or in violation of any airworthiness certificate,
license or registration relating to the Aircraft issued by any such
authority, except to the extent Lessee (or, if a Sublease is then in effect,
any Sublessee) is contesting in good faith the validity or application of any
such law, rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor or, so long as any Secured Certificates
shall be outstanding, the first priority Lien of the Trust Indenture and does
not involve any material risk of sale, forfeiture or loss of the Aircraft.
Lessee will not operate the Aircraft, or permit any Sublessee to operate the
Aircraft, in any area excluded from coverage by any insurance required by the
terms of Section 11; provided, however, that the failure of Lessee to comply
with the provisions of this sentence shall not give rise to an Event of
Default hereunder where such failure is attributable to causes beyond the
reasonable control of Lessee (or any Sublessee) or to extraordinary
circumstances involving an isolated occurrence or series of incidents not in
the ordinary course of the regular operations of Lessee (or any Sublessee)
and in each such case Lessee (or such Sublessee, as the case may be) is
taking all reasonable steps to remedy such failure as soon as is reasonably
practicable.
At any time after the Depreciation Period, Lessor, upon compliance
with all of the terms of Section 8(f) of the Participation Agreement, shall,
at the request and sole expense of Lessee, cooperate with Lessee to take all
actions required to change the registration of the Aircraft to another
country.
(b) Possession and Subleases. Lessee will not, without the prior
written consent of Lessor, sublease or otherwise in any manner deliver,
transfer or relinquish possession of the Airframe or any Engine or install or
permit any Engine to be installed on any airframe other than the Airframe or
enter into any Wet Lease; provided that, so long as no Default of the type
referred to in Section 14(a), 14(b) or 14(e) or Event of Default shall have
occurred and be continuing at the time of such sublease, delivery, transfer
or relinquishment of possession or installation or such Wet Lease, and so
long as the action to be taken shall not deprive the Indenture Trustee of the
perfected first priority Lien of the Trust Indenture on the Airframe or
(subject to the further proviso (B) to clause (i) of this Section 7(b)) any
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Engine, and so long as Lessee (or any Sublessee) shall comply with the
provisions of Sections 7(a) and 11 hereof, Lessee (or, except with respect to
clause (x) below, any Sublessee) may, without the prior written consent of
Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to
normal pooling or similar arrangements, in each case customary in
the airline industry and entered into by Lessee (or, if a Sublease
is then in effect, by Sublessee) in the ordinary course of its
business; provided that (A) no such agreement or arrangement
contemplates or requires the transfer of title to the Airframe,
(B) if Lessor's title to any Engine shall be divested under any
such agreement or arrangement, such divestiture shall be deemed to
be an Event of Loss with respect to such Engine and Lessee shall
(or shall cause Sublessee to) comply with Section 10(b) hereof in
respect thereof, and (C) any interchange agreement to which the
Airframe may be subject shall be with a U.S. Air Carrier or a
Foreign Air Carrier;
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof (or for delivery thereto) or to any
organization (or for delivery thereto) for testing, service,
repair, maintenance or overhaul work on the Airframe or Engine or
any part of any thereof or for alterations or modifications in or
additions to such Airframe or Engine to the extent required or
permitted by the terms of Section 8(c) hereof;
(iii) install an Engine on an airframe which is owned by
Lessee (or any Sublessee) free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other
than Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an
entirety), (B) the rights of third parties under interchange
agreements which would be permitted under clause (i) above,
provided that Lessor's title to such Engine and, if any Secured
Certificates shall be outstanding, the first priority Lien of the
Trust Indenture shall not be divested or impaired as a result
thereof and (C) mortgage liens or other security interests,
provided that (as regards this clause (C)) such mortgage liens or
other security interests effectively provide that such Engine shall
not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such
airframe;
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(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) to the extent permitted by Section 8(b) hereof, subject
any appliances, Parts or other equipment owned by Lessor and
removed from the Airframe or any Engine to any pooling arrangement
referred to in Section 8(b) hereof;
(vii) subject (or permit any Sublessee to subject) the
Airframe or any Engine to the Civil Reserve Air Fleet Program and
transfer (or permit any Sublessee to transfer) possession of the
Airframe or any Engine to the United States of America or any
instrumentality or agency thereof pursuant to the Civil Reserve Air
Fleet Program, so long as Lessee (or any Sublessee) shall
(A) promptly notify Lessor upon subjecting the Airframe or any
Engine to the Civil Reserve Air Fleet Program in any contract year
and provide Lessor with the name and address of the Contracting
Office Representative for the Air Mobility Command of the United
States Air Force to whom notice must be given pursuant to Section
15 hereof, and (B) promptly notify Lessor upon transferring
possession of the Airframe or any Engine to the United States of
America or any agency or instrumentality thereof pursuant to such
program;
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(viii) for a period not to extend beyond the end of the Term,
enter into a Wet Lease for the Airframe and Engines or engines then
installed thereon with any third party; provided that if Lessee (or
any Sublessee) shall enter into any Wet Lease for a period of more
than one year (including renewal options) Lessee shall provide
Lessor written notice of such Wet Lease (such notice to be given
prior to entering into such Wet Lease, if practicable, but in any
event promptly after entering into such Wet Lease);
(ix) for a period not to extend beyond the end of the Term,
transfer possession of the Airframe or any Engine to the United
States of America or any instrumentality or agency thereof pursuant
to a contract, a copy of which shall be provided to Lessor; or
(x) Lessee may, at any time, enter into any sublease with (1)
a U.S. Air Carrier, (2) any Person approved in writing by Lessor,
which approval shall not be unreasonably withheld or (3) after the
Depreciation Period, any Permitted Sublessee if (A) in any such
case, the Sublessee under such sublease is not subject to a
proceeding or final order under applicable bankruptcy, insolvency
or reorganization laws on the date such sublease is entered into,
(B) in the event that the Sublessee under such sublease is a
foreign air carrier (other than a foreign air carrier principally
based in Taiwan), the United States maintains diplomatic relations
with the country in which such proposed Sublessee is principally
based at the time such sublease is entered into (or, in the case of
a sublease to a proposed Sublessee principally based in Taiwan,
maintains diplomatic relations at least as good as those in effect
on the Delivery Date) and (C) in the event that the Sublessee under
such sublease is a foreign air carrier, Lessor and the Indenture
Trustee shall have received an opinion of counsel to Lessee to the
effect that (I) the terms of the proposed sublease will be legal,
valid, binding and (subject to customary exceptions in foreign
opinions generally) enforceable against the proposed Sublessee in
the country in which the proposed Sublessee is principally based,
(II) there exist no possessory rights in favor of the Sublessee
under such Sublease under the laws of such Sublessee's country of
domicile that would, upon bankruptcy or insolvency of or other
default by Lessee and assuming at such time such Sublessee is not
insolvent or bankrupt, prevent the return or repossession of the
Aircraft in accordance with the terms of this Lease, (III) the laws
of such Sublessee's country of domicile require fair compensation
by the government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use of the Aircraft in the
event of the requisition by such government of such use, and (IV)
the laws of such Sublessee's country of domicile would give
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recognition to Lessor's title to the Aircraft, to the registry of
the Aircraft in the name of the Lessor (or Lessee, as "lessee", or
the proposed Sublessee, as "sublessee", as appropriate) and to the
Lien of the Trust Indenture, provided, however, that no sublease
entered into pursuant to this clause (x) shall extend beyond the
expiration of the Basic Term or any Renewal Term then in effect
unless Lessee shall have irrevocably committed to purchase the
Aircraft.
The rights of any Sublessee or other transferee who receives
possession by reason of a transfer permitted by this paragraph (b) (other
than the transfer of an Engine which is deemed an Event of Loss) shall be
effectively subject and subordinate to, and any Sublease permitted by this
paragraph (b) shall be expressly subject and subordinate to, all the terms of
this Lease and to the Lien of the Trust Indenture, including, without
limitation, the covenants contained in Section 7(a) hereof and Lessor's
rights to repossession pursuant to Section 15 hereof and to avoid such
Sublease upon such repossession, and Lessee shall remain primarily liable
hereunder for the performance of all of the terms of this Lease to the same
extent as if such Sublease or transfer had not occurred, and, except as
otherwise provided herein, the terms of any such Sublease shall not permit
any Sublessee to take any action not permitted to be taken by Lessee in this
Lease with respect to the Aircraft. No pooling agreement, sublease or other
relinquishment of possession of the Airframe or any Engine or Wet Lease shall
in any way discharge or diminish any of Lessee's obligations to Lessor
hereunder or constitute a waiver of Lessor's rights or remedies hereunder.
Any sublease permitted under this Section 7(b) shall expressly prohibit any
further sub-sublease by the Sublessee. Lessor agrees, for the benefit of
Lessee (and any Sublessee) and for the benefit of any mortgagee or other
holder of a security interest in any engine (other than an Engine) owned by
Lessee (or any Sublessee), any lessor of any engine (other than an Engine)
leased to Lessee (or any Sublessee) and any conditional vendor of any engine
(other than an Engine) purchased by Lessee (or any Sublessee) subject to a
conditional sale agreement or any other security agreement, that no interest
shall be created hereunder in any engine so owned, leased or purchased and
that none of Lessor, its successors or assigns will acquire or claim, as
against Lessee (or any Sublessee) or any such mortgagee, lessor or
conditional vendor or other holder of a security interest or any successor or
assignee of any thereof, any right, title or interest in such engine as the
result of such engine being installed on the Airframe; provided, however,
that such agreement of Lessor shall not be for the benefit of any lessor or
secured party of any airframe (other than the Airframe) leased to Lessee (or
any Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement or for the benefit of any
mortgagee of or any other holder of a security interest in an airframe owned
by Lessee (or any Sublessee), unless such lessor, conditional vendor, other
secured party or mortgagee has expressly agreed (which agreement may be
-31-
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against Lessor, any right, title or interest in an Engine as a result of such
Engine being installed on such airframe. Lessee shall provide to the Owner
Participant and the Indenture Trustee (i) written notice of any Sublease
hereunder (such notice to be given not later than five days prior to entering
into such Sublease, if practicable, but in any event promptly after entering
into any such Sublease) and (ii) a copy of each Sublease which has a term of
more than three months.
(c) Insignia. On or prior to the Delivery Date, or as soon as
practicable thereafter, Lessee agrees to affix and maintain (or cause to be
affixed and maintained), at its expense, in the cockpit of the Airframe
adjacent to the airworthiness certificate therein and on each Engine a
nameplate bearing the inscription:
Leased From
First Security Bank, National Association, as Owner Trustee,
Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien
of the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company,
as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents). Except as above provided, Lessee
will not allow the name of any Person to be placed on the Airframe or on any
Engine as a designation that might be interpreted as a claim of ownership;
provided that nothing herein contained shall prohibit Lessee (or any
Sublessee) from placing its customary colors and insignia on the Airframe or
any Engine.
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions. (a) Replacement of Parts. Lessee, at its own
cost and expense, will promptly replace or cause to be replaced all Parts
which may from time to time be incorporated or installed in or attached to
the Airframe or any Engine and which may from time to time become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever, except as
otherwise provided in paragraph (c) of this Section 8 or if the Airframe or
an Engine to which a Part relates has suffered an Event of Loss. In
addition, Lessee (or any Sublessee) may, at its own cost and expense, remove
in the ordinary course of maintenance, service, repair, overhaul or testing,
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any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that Lessee (or any Sublessee), except as otherwise provided in
paragraph (c) of this Section 8, will, at its own cost and expense, replace
such Parts as promptly as practicable. All replacement Parts shall be free
and clear of all Liens (except for Permitted Liens and pooling arrangements
to the extent permitted by paragraph (b) of this Section 8 and except in the
case of replacement property temporarily installed on an emergency basis) and
shall be in as good operating condition as, and shall have a value and
utility at least equal to, the Parts replaced assuming such replaced Parts
were in the condition and repair required to be maintained by the terms
hereof. Except as otherwise provided in paragraph (c) of this Section 8, all
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by Parts which have been incorporated or installed in or
attached to the Airframe or such Engine and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement part
becoming incorporated or installed in or attached to the Airframe or any
Engine as above provided, without further act (subject only to Permitted
Liens and any pooling arrangement to the extent permitted by paragraph (b) of
this Section 8 and except in the case of replacement property temporarily
installed on an emergency basis), (i) title to such replacement Part shall
thereupon vest in Lessor, (ii) such replacement Part shall become subject to
this Lease and be deemed part of the Airframe or such Engine for all purposes
hereof to the same extent as the Parts originally incorporated or installed
in or attached to the Airframe or such Engine, and (iii) title to the
replaced Part shall thereupon vest in Lessee (or, if a Sublease is then in
effect, any Sublessee), free and clear of all rights of Lessor, and shall no
longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
Engine as provided in paragraph (a) of this Section 8 may be subjected by
Lessee (or any Sublessee) to a normal pooling arrangement customary in the
airline industry of which Lessee (or, if a Sublease is then in effect, any
Sublessee) is a party entered into in the ordinary course of Lessee's (or any
Sublessee's) business; provided that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine
in accordance with such paragraph (a) as promptly as practicable after the
removal of such removed Part. In addition, any replacement Part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with such paragraph (a) may be owned by any third party subject to
such a normal pooling arrangement, provided that Lessee (or any Sublessee),
at its expense, as promptly thereafter as practicable, either (i) causes
title to such replacement Part to vest in Lessor in accordance with such
paragraph (a) by Lessee (or any Sublessee) acquiring title thereto for the
benefit of, and transferring such title to, Lessor free and clear of all
Liens except Permitted Liens (other than pooling arrangements) or (ii)
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replaces such replacement Part by incorporating or installing in or attaching
to the Airframe or Engine a further replacement Part owned by Lessee (or any
Sublessee) free and clear of all Liens except Permitted Liens (other than
pooling arrangements) and by causing title to such further replacement Part
to vest in Lessor in accordance with such paragraph (a).
(c) Alterations, Modifications and Additions. Lessee, at its own
expense, will make (or cause to be made) such alterations and modifications
in and additions to the Airframe and Engines as may be required from time to
time to meet the applicable standards of the FAA or any other governmental
authority having jurisdiction; provided, however, that Lessee (or, if a
Sublease is then in effect, any Sublessee) may, in good faith, contest the
validity or application of any such law, rule, regulation or order in any
reasonable manner which does not adversely affect Lessor or, so long as any
Secured Certificates are outstanding, the Indenture Trustee. In addition,
Lessee (or any Sublessee), at its own expense, may from time to time add
further parts or accessories and make such alterations and modifications in
and additions to the Airframe or any Engine as Lessee (or any Sublessee) may
deem desirable in the proper conduct of its business, including, without
limitation, removal of Parts which Lessee (or any Sublessee) has determined
in its reasonable judgment to be obsolete or no longer suitable or
appropriate for use on the Airframe or such Engine (such parts, "Obsolete
Parts"); provided that no such alteration, modification or addition shall
materially diminish the value, utility or remaining useful life of the
Airframe or such Engine below the value, utility or remaining useful life
thereof immediately prior to such alteration, modification or addition,
assuming the Airframe or such Engine was then in the condition required to be
maintained by the terms of this Lease, except that the value (but not the
utility or remaining useful life) of the Airframe or any Engine may be
reduced by the value of Obsolete Parts which shall have been removed so long
as the aggregate value of all Obsolete Parts which shall have been removed
and not replaced shall not exceed [$400,000 for A319's] [$500,000 for 757's].
Title to all Parts incorporated or installed in or attached or added to the
Airframe or an Engine as the result of such alteration, modification or
addition (the "Additional Parts") shall, without further act, vest in Lessor.
Notwithstanding the foregoing sentence, Lessee (or any Sublessee) may remove
or suffer to be removed any Additional Part, provided that such Additional
Part (i) is in addition to, and not in replacement of or substitution for,
any Part originally incorporated or installed in or attached to the Airframe
or any Engine at the time of delivery thereof hereunder or any Part in
replacement of, or substitution for, any such Part, (ii) is not required to
be incorporated or installed in or attached or added to the Airframe or any
Engine pursuant to the terms of Section 7 hereof or the first sentence of
this paragraph (c) and (iii) can be removed from the Airframe or such Engine
without diminishing or impairing the value, utility or remaining useful life
which the Airframe or such Engine would have had at the time of removal had
such alteration, modification or addition not occurred, assuming that such
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Airframe or Engine was in the condition and repair required to be maintained
by the terms hereof. Upon the removal by Lessee (or Sublessee) of any Part
as provided above, title thereto shall, without further act, vest in Lessee
(or any Sublessee, as the case may be) and such Part shall no longer be
deemed part of the Airframe or Engine from which it was removed. Any Part
not removed by Lessee (or any Sublessee) as above provided prior to the
return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.
SECTION 9. Voluntary Termination. (a) Termination Event.
(1) [Intentionally Omitted].
(2) Lessee shall have the right to elect to terminate this Lease
on any Lease Period Date occurring on or after the fifth anniversary of the
Delivery Date if Lessee shall have made the good faith determination, which
shall be evidenced by a resolution duly adopted by its Board of Directors (or
the Executive Committee thereof), that the Aircraft is obsolete or surplus to
its needs.
(3) Lessee shall give to Lessor at least ninety (90) days'
revocable advance written notice of Lessee's intention to so terminate this
Lease (any such notice, a "Termination Notice") specifying (i) the Lease
Period Date on which Lessee intends to terminate this Lease in accordance
with this Section 9 (such specified date, a "Termination Date") and (ii) that
Lessee has determined that the Aircraft is obsolete or surplus to its needs.
Any Termination Notice shall become irrevocable fifteen (15) days prior to
the Termination Date.
(b) [Intentionally Omitted].
(c) Optional Sale of the Aircraft. In the event that Lessee
shall have exercised its right to terminate this Lease under Section 9(a)(2),
then during the period from the giving of the notice referred to in
Section 9(a)(3) until the proposed Termination Date (unless Lessee shall
have revoked the Termination Notice specifying such proposed Termination
Date), Lessee, as agent for Lessor and at no expense to Lessor, shall
use commercially reasonable efforts to obtain all-cash bids in the worldwide
market for the purchase of the Aircraft and, in the event it receives any
bid, Lessee shall, within five Business Days after receipt thereof and
at least ten Business Days prior to the proposed Termination Date,
certify to Lessor in writing the amount and terms of such bid, and the
name and address of the party or parties (who shall not be Lessee or any
Affiliate of Lessee or any Person with whom Lessee or any such Affiliate
has an arrangement or understanding regarding the future use of the Aircraft
by Lessee or any such Affiliate but who may be the Owner
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Participant, any Affiliate thereof or any Person contacted by the Owner
Participant) submitting such bid. After Lessee shall have certified to
Lessor all bids received, the Owner Participant, any Affiliate thereof or any
Person contacted by the Owner Participant may submit a further bid or bids to
Lessee not later than five Business Days prior to the Termination Date
proposed by Lessee (unless Lessee shall have revoked the Termination Notice
specifying such proposed Termination Date). Subject to the next succeeding
sentence, on or before the Termination Date, subject to the release of all
mortgage and security interests with respect to the Aircraft under the Trust
Indenture: (1) Lessee shall deliver the Aircraft, or cause the Aircraft to
be delivered, to the bidder(s), if any, which shall have submitted the
highest all-cash bid therefor at least ten (or, in the case of the Owner
Participant, any Affiliate thereof, or Person contacted by the Owner
Participant, five) Business Days prior to such Termination Date, in the same
manner and in the same condition and otherwise in accordance with all the
terms of this Lease as if delivery were made to Lessor pursuant to Section 5,
and shall duly transfer to Lessor title to any engines not owned by Lessor
all in accordance with the terms of Section 5, (2) Lessor shall comply with
the terms of the Trust Indenture and shall, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), subject to prior or concurrent payment by Lessee of all amounts due
under clause (3) of this sentence, sell all of Lessor's right, title and
interest in and to the Aircraft for cash in Dollars to such bidder(s), the
total sales price realized at such sale to be retained by Lessor, and
(3) Lessee shall simultaneously pay or cause to be paid to Lessor in funds of
the type specified in Section 3(f) hereof, an amount equal to the sum of (A)
the excess, if any, of (i) the Termination Value for the Aircraft, computed
as of the Termination Date, over (ii) the net cash proceeds from the sale of
the Aircraft after deducting the reasonable expenses incurred by Lessor in
connection with such sale, (B) all unpaid Basic Rent with respect to the
Aircraft due prior to such Termination Date and, if such Basic Rent is
payable in arrears on such Termination Date as indicated on Exhibit B, on
such Termination Date, and all unpaid Supplemental Rent due on or prior to
the Termination Date with respect to the Aircraft, and (C) the Make-Whole
Amount, if any, due on the Secured Certificates, and upon such payment Lessor
simultaneously will transfer to Lessee, without recourse or warranty (except
as to the absence of Lessor Liens, including for this purpose Liens which
would be Lessor Liens but for the proviso in the definition of Lessor Liens),
all of Lessor's right, title and interest in and to any Engines constituting
part of the Aircraft which were not sold with the Aircraft. Notwithstanding
the preceding sentence, Lessor may, if Lessee has not revoked the Termination
Notice, elect to retain title to the Aircraft. If Lessor so elects, Lessor
shall give to Lessee written notice of such election at least five Business
Days prior to the Termination Date accompanied by an irrevocable undertaking
by the Owner Participant to make available to Lessor for payment to the
Indenture Trustee on the Termination Date the amount required to pay in full
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the unpaid principal amount of the Secured Certificates outstanding on the
Termination Date plus interest accrued thereon through the Termination Date,
together with the Make-Whole Amount, if any, due on the Secured Certificates.
Upon receipt of notice of such an election by Lessor and the accompanying
undertaking by the Owner Participant, Lessee shall cease its efforts to
obtain bids as provided above and shall reject all bids theretofore or
thereafter received. On the Termination Date, Lessor shall (subject to the
payment by Lessee of all Rent due on or prior to such date as set forth
below) pay in full the unpaid principal amount of the Secured Certificates
outstanding on the Termination Date plus interest accrued thereon through the
Termination Date together with all Make-Whole Amount, if any, due on the
Secured Certificates and, so long as the Secured Certificates are paid as
aforesaid, Lessee shall deliver the Airframe and Engines or engines to Lessor
in accordance with Section 5 and shall pay all Basic Rent due prior to the
Termination Date and, if such Basic Rent is payable in arrears on such
Termination Date as indicated on Exhibit B, on such Termination Date, and all
Supplemental Rent (other than Make-Whole Amount or Termination Value) due on
or prior to the Termination Date. If no sale shall have occurred on the
Termination Date and Lessor has not made the payment contemplated by the
preceding sentence and thereby caused this Lease to terminate, or if Lessee
revokes its Termination Notice, this Lease shall continue in full force and
effect as to the Aircraft, Lessee shall pay the reasonable costs and expenses
incurred by the Owner Participant and Lessor (unless such failure to
terminate the Lease is a consequence of the failure of Lessor or the Owner
Participant without due cause to make, or cause to be made, the payment
referred to in the immediately preceding sentence), if any, in connection
with preparation for such sale and Lessee may give one or more additional
Termination Notices in accordance with Sections 9(a)(2) and 9(a)(3), subject
to the last sentence of this Section 9(c). In the event of any such sale or
such retention of the Aircraft by Lessor and upon compliance by Lessee with
the provisions of this paragraph, the obligation of Lessee to pay Basic Rent
or any other amounts hereunder shall cease to accrue and this Lease shall
terminate. Lessor may, but shall be under no duty to, solicit bids, inquire
into the efforts of Lessee to obtain bids or otherwise take any action in
connection with any such sale other than to transfer (in accordance with the
foregoing provisions) to the purchaser named in the highest bid certified by
Lessee to Lessor all of Lessor's right, title and interest in the Aircraft,
against receipt of the payments provided herein. Lessee may revoke a
Termination Notice given pursuant to Section 9(a)(3) no more than two times
during the Term.
(d) Termination as to Engines. So long as no Event of Default
shall have occurred and be continuing, Lessee shall have the right at its
option at any time during the Term, on at least thirty (30) days' prior
written notice, to terminate this Lease with respect to any Engine. In such
event, and prior to the date of such termination, Lessee shall replace such
Engine hereunder by complying with the terms of Section 10(b) to the same
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extent as if an Event of Loss had occurred with respect to such Engine, and
Lessor shall transfer such right, title and interest as it may have to the
replaced Engine as provided in Section 5(b). No termination of this Lease
with respect to any Engine as contemplated by this Section 9(d) shall result
in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of
Loss with Respect to the Aircraft. Upon the occurrence of an Event of Loss
with respect to the Airframe or the Airframe and the Engines and/or engines
then installed thereon, Lessee shall forthwith (and in any event, within
fifteen (15) days after such occurrence) give Lessor written notice of such
Event of Loss, and within forty-five (45) days after such Event of Loss
Lessee shall give Lessor written notice of its election to perform one of the
following options (it being agreed that if Lessee shall not have given such
notice of election within such period, Lessee shall be deemed to have elected
the option set forth in clause (i) below). Lessee may elect either to:
(i) make the payments specified in this clause (i), in which
event not later than the earlier of (x) the Business Day next
succeeding the 120th day following the occurrence of such Event of
Loss or (y) an earlier Business Day irrevocably specified fifteen
(15) days in advance by notice from Lessee to Lessor and the
Indenture Trustee (the "Loss Payment Date"), Lessee shall pay or
cause to be paid to Lessor in funds of the type specified in
Section 3(f) hereof, an amount equal to the Stipulated Loss Value
of the Aircraft corresponding to the Stipulated Loss Value Date
occurring on or immediately following the Loss Payment Date;
provided, however, that if a Lease Period Date shall occur on or
prior to the Loss Payment Date with respect to which Stipulated
Loss Value is determined, Lessee shall pay on such Lease Period
Date (A) if the Lease Period Date occurs on the Loss Payment Date
with respect to which Stipulated Loss Value is determined, an
amount equal to the Basic Rent that would have been due on such
Lease Period Date (but only to the extent payable in arrears as
indicated on Exhibit B) if such Event of Loss had not occurred and
(B) if the Lease Period Date occurs prior to the Loss Payment Date
with respect to which Stipulated Loss Value is determined, an
amount equal to the Basic Rent that would have been due on such
Lease Period Date if such Event of Loss had not occurred, or
(ii) substitute an aircraft or an airframe or an airframe and
one or more engines, as the case may be;
provided that, if Lessee does not perform its obligation to effect such
substitution in accordance with this Section 10(a) during the period of time
provided herein, then Lessee shall pay or cause to be paid to Lessor on the
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Business Day next succeeding the 120th day following the occurrence of such
Event of Loss the amount specified in clause (i) above.
At such time as Lessor shall have received the amounts specified in
subparagraph (i) above, together with all other amounts that then may be due
hereunder (including, without limitation, all Basic Rent due before the date
of such payment and all Supplemental Rent), under the Participation Agreement
and under the Tax Indemnity Agreement, (1) the obligation of Lessee to pay
the installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue, (2) this Lease
shall terminate, (3) Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and
any Engines subject to such Event of Loss, as well as any Engines not subject
to such Event of Loss, and furnish to or at the direction of Lessee a ▇▇▇▇ of
sale in form and substance reasonably satisfactory to Lessee (or any
Sublessee), evidencing such transfer, and (4) Lessee will be subrogated to
all claims of Lessor, if any, against third parties, for damage to or loss of
the Airframe and any Engines which were subject to such Event of Loss to the
extent of the then insured value of the Aircraft.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall, at its sole expense, not later than the Business Day next succeeding
the 120th day following the occurrence of such Event of Loss, (A) convey or
cause to be conveyed to Lessor and to be leased by Lessee hereunder, an
aircraft (or an airframe or an airframe and one or more engines which,
together with the Engines constituting a part of the Aircraft but not
installed thereon at the time of such Event of Loss constitute the Aircraft)
free and clear of all Liens (other than Permitted Liens) and having a value,
utility and remaining useful life (without regard to hours or cycles) at
least equal to the Aircraft subject to such Event of Loss assuming no Event
of Loss had occurred and that the Aircraft had been maintained in accordance
with this Lease; provided that any aircraft, airframe or engine so
substituted hereunder shall be of the same or improved model as those
initially leased hereunder and (B) prior to or at the time of any such
substitution, Lessee (or any Sublessee), at its own expense, will (1) furnish
Lessor with a full warranty ▇▇▇▇ of sale and a Federal Aviation
Administration ▇▇▇▇ of sale, in form and substance reasonably satisfactory to
Lessor, evidencing such transfer of title, (2) cause a Lease Supplement and a
Trust Supplement to be duly executed by Lessee and filed for recording
pursuant to the Federal Aviation Act, or the applicable laws, rules and
regulations of any other jurisdiction in which the Airframe may then be
registered as permitted by Section 8(f) of the Participation Agreement, (3)
cause a financing statement or statements with respect to such substituted
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property to be filed in such place or places as are deemed necessary or
desirable by Lessor to perfect its and the Indenture Trustee's interest
therein and herein, (4) furnish Lessor with such evidence of compliance with
the insurance provisions of Section 11 with respect to such substituted
property as Lessor may reasonably request, (5) furnish Lessor with copies of
the documentation required to be provided by Lessee pursuant to Section 5.06
of the Trust Indenture (whether or not the Trust Indenture is then in
effect), and Lessor simultaneously will comply with the terms of the Trust
Indenture and transfer to or at the direction of Lessee, without recourse or
warranty (except as to the absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), all of Lessor's right, title and interest, if
any, in and to the Aircraft or the Airframe and one or more Engines, as the
case may be, with respect to which such Event of Loss occurred and furnish to
or at the direction of Lessee a ▇▇▇▇ of sale in form and substance reasonably
satisfactory to Lessee (or any Sublessee), evidencing such transfer, (6)
furnish Lessor with an opinion of counsel (which shall be Cadwalader,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ and, if not, other counsel chosen by Lessee and reasonably
acceptable to Lessor) reasonably satisfactory to Lessor to the effect that
Lessor and the Indenture Trustee as assignee of Lessor will be entitled to
the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the
substitute aircraft, provided that such opinion need not be delivered to the
extent that immediately prior to such substitution the benefits of Section
1110 of the U.S. Bankruptcy Code were not, solely by reason of a change in
law or governmental interpretation thereof, available to Lessor and, so long
as any Secured Certificates are outstanding, the Indenture Trustee as
assignee of Lessor's rights under the Lease with respect to the Aircraft, and
(7) Lessee will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of the Airframe and any Engine which were
subject to such Event of Loss to the extent of the then insured value of the
Aircraft. For all purposes hereof, the property so substituted shall after
such transfer be deemed part of the property leased hereunder and shall be
deemed an "Aircraft", "Airframe" and "Engine", as the case may be, as defined
herein. No Event of Loss with respect to the Airframe or the Airframe and
the Engines or engines then installed thereon for which substitution has been
elected pursuant to Section 10(a)(ii) hereof shall result in any reduction in
Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the occurrence
of an Event of Loss with respect to an Engine under circumstances in which
there has not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event, within fifteen days after such occurrence)
give Lessor written notice thereof and shall, within sixty (60) days after
the occurrence of such Event of Loss, convey or cause to be conveyed to
Lessor, as replacement for the Engine with respect to which such Event of
Loss occurred, title to another [CFM International, Inc. Model CFM56-5A5]
[▇▇▇▇▇ & Whitney Model PW2037] engine (or engine of the same or another
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manufacturer of the same, an equivalent or an improved model and suitable for
installation and use on the Airframe without impairing the value, utility or
remaining useful life of the Aircraft; provided that both Engines shall be of
the same make and model) free and clear of all Liens (other than Permitted
Liens, which engine may upon its transfer to Lessor become subject to any and
all Permitted Liens) and having a value, utility and remaining useful life
(without regard to hours or cycles) at least equal to the Engine subject to
such Event of Loss assuming no Event of Loss had occurred and that such
Engine had been maintained in accordance with this Lease. Prior to or at the
time of any such conveyance, Lessee, at its own expense, will (i) furnish
Lessor with a warranty (as to title) ▇▇▇▇ of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such replacement engine,
(ii) cause a Lease Supplement and Trust Supplement to be duly executed by
Lessee and to be filed for recording pursuant to the Federal Aviation Act, or
the applicable laws, rules and regulations of any other jurisdiction in which
the Airframe may then be registered as permitted by Section 8(f) of the
Participation Agreement, (iii) furnish Lessor with such evidence of
compliance with the insurance provisions of Section 11 hereof with respect to
such replacement engine as Lessor may reasonably request and furnish Lessor
with copies of the documentation required to be provided by Lessee pursuant
to Section 5.06 of the Trust Indenture (whether or not the Trust Indenture is
then in effect), and Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee without recourse or warranty
(except as to absence of Lessor Liens, including for this purpose Liens which
would be Lessor Liens but for the proviso in the definition of Lessor Liens)
all of Lessor's right, title and interest, if any, in and to (A) the Engine
with respect to which such Event of Loss occurred and furnish to or at the
direction of Lessee a ▇▇▇▇ of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if any,
against third parties, for damage to or loss of the Engine subject to such
Event of Loss, and such Engine shall thereupon cease to be the Engine leased
hereunder. For all purposes hereof, each such replacement engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Engine". No Event of Loss with respect to an Engine
under the circumstances contemplated by the terms of this paragraph (b) shall
result in any reduction in Basic Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds
the application of which is provided for in Section 11) received at any
time by Lessor or by Lessee from any governmental authority or other Person
with respect to an Event of Loss will be applied as follows:
(i) if payments are received with respect to the Airframe (or
the Airframe and any Engine or engines then installed thereon), (A)
unless the same are replaced pursuant to the last paragraph of
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Section 10(a), after reimbursement of Lessor (as provided in
Section 7.01 of the Trust Agreement) for reasonable costs and
expenses, so much of such payments remaining as shall not exceed
the Stipulated Loss Value required to be paid by Lessee pursuant to
Section 10(a), shall be applied in reduction of Lessee's obligation
to pay Stipulated Loss Value, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for
its payment of Stipulated Loss Value, and following the foregoing
application, the balance, if any, of such payments will be paid
over to, or retained by Lessee, provided that Lessor shall be
entitled to so much of the excess, if any, of such payment over the
greater of (x) the Stipulated Loss Value and (y) the fair market
value of the Aircraft as Lessor shall demonstrate to Lessee's
reasonable satisfaction is attributable to compensation for loss of
Lessor's interest in the Aircraft as distinguished from the loss of
use of the Aircraft; or (B) if such property is replaced pursuant
to the last paragraph of Section 10(a), such payments shall be paid
over to, or retained by, Lessee; provided that Lessee shall have
fully performed or, concurrently therewith, will fully perform the
terms of the last paragraph of Section 10(a) with respect to the
Event of Loss for which such payments are made; and
(ii) if such payments are received with respect to an Engine
under circumstances contemplated by Section 10(b) hereof, so much
of such payments remaining after reimbursement of Lessor (as
provided for in Section 7.01 of the Trust Agreement) for reasonable
costs and expenses shall be paid over to, or retained by, Lessee,
provided that Lessee shall have fully performed, or concurrently
therewith will perform, the terms of Section 10(b) with respect to
the Event of Loss for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or the Government of Registry of the Aircraft. In the event of
the requisition for use of the Airframe and the Engines or engines installed
on the Airframe during the Term by the United States Government or any other
government of registry of the Aircraft or any instrumentality or agency of
any thereof, Lessee shall promptly notify Lessor of such requisition, and all
of Lessee's obligations under this Lease Agreement with respect to the
Aircraft shall continue to the same extent as if such requisition had not
occurred, provided that if such Airframe and Engines or engines installed
thereon are not returned by such government (or instrumentality or agency)
prior to the end of the Term, Lessee shall be obligated to return the
Airframe and such Engines or engines to Lessor pursuant to, and in all other
respects in compliance with the provisions of, Section 5 promptly on the date
of such return by such government (or instrumentality or agency). If, in the
event of any such requisition, Lessee shall fail to return the Aircraft on or
before the thirtieth day beyond the end of the Term, such failure shall
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constitute an Event of Loss which shall be deemed to have occurred on the
last day of the Term and in such event Lessee shall make the payment
contemplated by Section 10(a)(i) in respect of such Event of Loss; provided,
however, that Lessor may notify Lessee in writing on or before the twentieth
day prior to the last day of the Term that, in the event Lessee shall fail by
reason of such requisition to return the Airframe and such Engines or engines
on or before the thirtieth day beyond the end of the Term, such failure shall
not be deemed an Event of Loss. Upon the giving of such notice and such
failure to return by the thirtieth day beyond the end of the Term, Lessee
shall be relieved of all of its obligations pursuant to the provisions of
Section 5 (including Exhibit G) but not under any other Section, except that
if any engine not owned by Lessor shall then be installed on the Airframe,
Lessee will, at no cost to Lessor, furnish, or cause to be furnished, to
Lessor a full warranty (as to title) ▇▇▇▇ of sale with respect to each such
engine, in form and substance reasonably satisfactory to Lessor (together
with an opinion of counsel to the effect that such full warranty ▇▇▇▇ of sale
has been duly authorized and delivered and is enforceable in accordance with
its terms and that such engines are free and clear of Liens other than Lessor
Liens (including for this purpose Liens which would be Lessor Liens but for
the proviso in the definition of Lessor Liens), Loan Participant Liens and
Indenture Trustee's Liens), against receipt from Lessor of a ▇▇▇▇ of sale
evidencing the transfer, without recourse or warranty (except as to the
absence of Lessor Liens, including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens), by
Lessor to Lessee or its designee of all of Lessor's right, title and interest
in and to any Engine constituting part of the Aircraft but not then installed
on the Airframe. All payments received by Lessor or Lessee from such
government (or instrumentality or agency) 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 (or instrumentality or agency) for
the use of such Airframe and Engines or engines after the end of the Term
shall be paid over to, or retained by, Lessor unless Lessee shall have
exercised its purchase option hereunder, in which case such payments shall be
made to Lessee.
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft. In the event of
the requisition for use of an Engine by the United States Government or any
other government of registry of the Aircraft or any agency or instrumentality
of any thereof (other than in the circumstances contemplated by subsection
(d)), Lessee shall replace such Engine hereunder by complying (or causing any
Sublessee to comply) with the terms of Section 10(b) to the same extent as if
an Event of Loss had occurred with respect thereto, and, upon compliance with
Section 10(b) hereof, any payments received by Lessor or Lessee from such
government (or instrumentality or agency) with respect to such requisition
shall be paid over to, or retained by, Lessee.
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(f) Application of Payments During Existence of Event of Default.
Any amount referred to in this Section 10 which is payable to or retainable
by Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or
such Sublessee) if at the time of such payment or retention an Event of
Default shall have occurred and be continuing, but shall be held by or paid
over to Lessor as security for the obligations of Lessee (or such Sublessee)
under this Lease and, if Lessor declares this Lease to be in default pursuant
to Section 15 hereof, applied against Lessee's obligations hereunder as and
when due. At such time as there shall not be continuing any such Event of
Default, such amount shall be paid to Lessee (or such Sublessee) to the
extent not previously applied in accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
Insurance. (I) Except as provided in clause (II) of this Section 11(a),
Lessee will carry or cause to be carried at its or any Sublessee's expense
(i) aircraft public liability (including, without limitation, passenger legal
liability) (and including aircraft war risk and hijacking insurance, if and
to the extent the same is maintained by Lessee (or, if a Sublease is then in
effect, if and to the extent maintained by Sublessee) with respect to other
aircraft owned or leased, and operated by Lessee (or such Sublessee) on the
same routes) insurance and property damage insurance (exclusive of
manufacturer's product liability insurance) with respect to the Aircraft, in
an amount not less than the greater of (x) the amount of public liability and
property damage insurance from time to time applicable to aircraft owned or
operated by Lessee (or, if a Sublease is then in effect, by Sublessee) of the
same type as the Aircraft and (y) such amount per occurrence as may have been
agreed to on the Delivery Date by the Owner Participant [amount shall be at
least $250,000,000 for A319's and at least $300,000,000 for 757's] and (ii)
cargo liability insurance, in the case of both clause (i) and clause (ii),
(A) of the type and covering the same risks as from time to time applicable
to aircraft operated by Lessee (or, if a Sublease is then in effect, by
Sublessee) of the same type as the Aircraft and (B) which is maintained in
effect with insurers of recognized responsibility. Any policies of insurance
carried in accordance with this paragraph (a) and any policies taken out in
substitution or replacement for any of such policies (A) shall be amended to
name Lessor, in its individual capacity and as owner trustee, the Indenture
Trustee, the Policy Provider and the Owner Participant (but without imposing
on any such parties liability to pay the premiums for such insurance) (and,
if any Sublease shall be in effect, Lessee in its capacity as sublessor under
the Sublease) as additional insureds as their respective interests may
appear, (B) shall provide that in respect of the respective interests of
Lessor, the Indenture Trustee, the Policy Provider and the Owner Participant
(and, if any Sublease shall be in effect, Lessee in its capacity as sublessor
under the Sublease) in such policies the insurance shall not be invalidated
by any action or inaction of Lessee (or, if any Sublease is then in effect,
any Sublessee) or any other Person and shall insure Lessor, the Indenture
Trustee, the Policy Provider and the Owner Participant (and, if any Sublease
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shall be in effect, Lessee in its capacity as sublessor under the Sublease)
regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by Lessee (or, if any Sublease is then
in effect, any Sublessee), (C) may provide for self-insurance to the extent
permitted by Section 11(d) and (D) shall provide that if the insurers cancel
such insurance for any reason whatever or if any material change is made in
such insurance which adversely affects the interest of Lessor, the Indenture
Trustee, the Policy Provider or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease),
or such insurance shall lapse for non-payment of premium, such cancellation,
lapse or change shall not be effective as to Lessor, the Indenture Trustee,
the Policy Provider or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease) for thirty
(30) days (seven (7) days in the case of war risk and allied perils coverage)
after issuance to Lessor, the Indenture Trustee, the Policy Provider or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease), respectively, of written notice by
such insurers of such cancellation, lapse or change; provided, however, that
if any notice period specified above is not reasonably obtainable, such
policies shall provide for as long a period of prior notice as shall then be
reasonably obtainable. Each liability policy (1) shall be primary without
right of contribution from any other insurance which is carried by Lessor,
the Indenture Trustee, the Policy Provider or the Owner Participant (or, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under
the Sublease), (2) shall expressly provide that all of the provisions
thereof, except the limits of liability, shall operate in the same manner as
if there were a separate policy covering each insured, and (3) shall waive
any right of the insurers to any set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
Lessor or the Indenture Trustee, the Policy Provider or the Owner Participant
(or, if any Sublease shall be in effect, Lessee in its capacity as sublessor
under the Sublease) to the extent of any moneys due to Lessor, the Indenture
Trustee, the Policy Provider or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease).
(II) During any period that the Aircraft is on the ground and not
in operation, Lessee may carry or cause to be carried, in lieu of the
insurance required by clause (I) above, insurance otherwise conforming with
the provisions of said clause (I) except that (A) the amounts of coverage
shall not be required to exceed the amounts of public liability and property
damage insurance from time to time applicable to aircraft owned or operated
by Lessee (or, if a Sublease is then in effect, by Sublessee) of the same
type as the Aircraft which are on the ground and not in operation; and (B)
the scope of the risks covered and the type of insurance shall be the same as
from time to time shall be applicable to aircraft owned or operated by Lessee
(or, if a Sublease is then in effect, by Sublessee) of the same type which
are on the ground and not in operation.
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(b) Insurance Against Loss or Damage to the Aircraft. (I) Except
as provided in clause (II) of this Section 11(b), Lessee shall maintain or
cause to be maintained in effect, at its or any Sublessee's expense, with
insurers of recognized responsibility, all-risk ground and flight aircraft
hull insurance covering the Aircraft and all-risk ground and flight coverage
of Engines and Parts while temporarily removed from the Aircraft and not
replaced by similar components (including, without limitation, war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance, if and to the extent the
same is maintained by Lessee (or, if a Sublease is then in effect, by
Sublessee) with respect to other aircraft owned or operated by Lessee (or
such Sublessee) on the same routes, except that Lessee (or such Sublessee)
shall maintain war risk and governmental confiscation and expropriation
(other than by the government of registry of the Aircraft) and hijacking
insurance if the Aircraft is operated on routes where the custom is for major
international air carriers flying comparable routes to carry such insurance)
which is of the type as from time to time applicable to aircraft owned or
operated by Lessee (or, if a Sublease is then in effect, by Sublessee) of the
same type as the Aircraft; provided that such insurance shall at all times
while the Aircraft is subject to this Lease be for an amount (subject to
self-insurance to the extent permitted by Section 11(d)) not less than the
Stipulated Loss Value for the Aircraft. Any policies carried in accordance
with this paragraph (b) covering the Aircraft and any policies taken out in
substitution or replacement for any such policies (i) shall name Lessor, as
owner trustee, the Indenture Trustee and the Owner Participant (and, if any
Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) as additional insureds, as their respective interests may appear
(but without imposing on any such party liability to pay premiums with
respect to such insurance), (ii) may provide for self-insurance to the extent
permitted in Section 11(d), (iii) shall provide that (A) in the event of a
loss involving proceeds in excess of $5,000,000 (or, if the Aircraft is then
under a Sublease, in excess of $3,000,000), the proceeds in respect of such
loss up to an amount equal to the Stipulated Loss Value for the Aircraft
shall be payable to Lessor (or, so long as the Trust Indenture shall not have
been discharged, the Indenture Trustee) (except in the case of a loss with
respect to an Engine installed on an airframe other than the Airframe, in
which case Lessee (or any Sublessee) shall arrange for any payment of
insurance proceeds in respect of such loss to be held for the account of
Lessor (or, so long as the Trust Indenture shall not have been discharged,
the Indenture Trustee) whether such payment is made to Lessee (or any
Sublessee) or any third party), it being understood and agreed that in the
case of any payment to Lessor (or the Indenture Trustee) otherwise than in
respect of an Event of Loss, Lessor (or the Indenture Trustee) shall, upon
receipt of evidence satisfactory to it that the damage giving rise to such
payment shall have been repaired or that such payment shall then be required
to pay for repairs then being made, pay the amount of such payment to Lessee
or its order, and (B) the entire amount of any loss involving proceeds of
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$5,000,000 (or, if the Aircraft is then under a Sublease, of $3,000,000) or
less or the amount of any proceeds of any loss in excess of the Stipulated
Loss Value for the Aircraft shall be paid to Lessee or its order unless an
Event of Default shall have occurred and be continuing and the insurers have
been notified thereof by Lessor or the Indenture Trustee, (iv) shall provide
that if the insurers cancel such insurance for any reason whatever, or such
insurance lapses for non-payment of premium or if any material change is made
in the insurance which adversely affects the interest of Lessor, the
Indenture Trustee or the Owner Participant, such cancellation, lapse or
change shall not be effective as to Lessor, the Indenture Trustee or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease) for thirty (30) days (seven (7)
days in the case of hull war risk and allied perils coverage) after issuance
to Lessor, the Indenture Trustee or the Owner Participant (or, if any
Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease), respectively, of written notice by such insurers of such
cancellation, lapse or change, provided, however, that if any notice period
specified above is not reasonably obtainable, such policies shall provide for
as long a period of prior notice as shall then be reasonably obtainable, (v)
shall provide that in respect of the respective interests of Lessor, the
Indenture Trustee and the Owner Participant (and, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease) in such
policies the insurance shall not be invalidated by any action or inaction of
Lessee (or, if a Sublease is then in effect, any Sublessee) or any other
Person and shall insure the respective interests of Lessor, the Indenture
Trustee and the Owner Participant (and, if any Sublease shall be in effect,
Lessee in its capacity as sublessor under the Sublease), as they appear,
regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by Lessee (or, if a Sublease is then in
effect, any Sublessee), (vi) shall be primary without any right of
contribution from any other insurance which is carried by Lessor, the Owner
Participant or the Indenture Trustee (or, if any Sublease shall be in effect,
Lessee in its capacity as sublessor under the Sublease), (vii) shall waive
any right of subrogation of the insurers against Lessor, the Owner
Participant and the Indenture Trustee (and, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), and (viii)
shall waive any right of the insurers to set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
Lessor, the Indenture Trustee, the Owner Participant or Lessee (or any
Sublessee) to the extent of any moneys due to Lessor, the Indenture Trustee
or the Owner Participant. In the case of a loss with respect to an engine
(other than an Engine) installed on the Airframe, Lessor shall hold any
payment to it of any insurance proceeds in respect of such loss for the
account of Lessee or any other third party that is entitled to receive such
proceeds.
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As between Lessor and Lessee, it is agreed that all insurance
payments received as the result of the occurrence of an Event of Loss will be
applied as follows:
(x) if such payments are received with respect to the
Airframe (or the Airframe and the Engines installed thereon), (i)
unless such property is replaced pursuant to the last paragraph of
Section 10(a), so much of such payments remaining, after
reimbursement of Lessor (as provided in Section 7.01 of the Trust
Agreement) for reasonable costs and expenses, as shall not exceed
the Stipulated Loss Value required to be paid by Lessee pursuant to
Section 10(a) hereof shall be applied in reduction of Lessee's
obligation to pay such Stipulated Loss Value, if not already paid
by Lessee, or, if already paid by Lessee, shall be applied to
reimburse Lessee for its payment of such Stipulated Loss Value, and
the balance, if any, of such payments remaining thereafter will be
paid over to, or retained by, Lessee (or if directed by Lessee, any
Sublessee); or (ii) if such property is replaced pursuant to the
last paragraph of Section 10(a), such payments shall be paid over
to, or retained by, Lessee (or if directed by Lessee, any
Sublessee), provided that Lessee shall have fully performed, or
concurrently therewith will fully perform, the terms of the last
paragraph of Section 10(a) with respect to the Event of Loss for
which such payments are made; and
(y) if such payments are received with respect to an Engine
under the circumstances contemplated by Section 10(b) hereof, so
much of such payments remaining, after reimbursement of Lessor (as
provided in Section 7.01 of the Trust Agreement) for reasonable
costs and expenses, shall be paid over to, or retained by, Lessee
(or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed, or concurrently therewith will fully
perform, the terms of Section 10(b) with respect to the Event of
Loss for which such payments are made.
As between Lessor and Lessee, the insurance payments for any
property damage loss to the Airframe or any Engine not constituting an Event
of Loss with respect thereto will be applied in payment for repairs or for
replacement property in accordance with the terms of Sections 7 and 8, if not
already paid for by Lessee (or any Sublessee), and any balance (or if already
paid for by Lessee (or any Sublessee), all such insurance proceeds) remaining
after compliance with such Sections with respect to such loss shall be paid
to Lessee (or any Sublessee if directed by Lessee).
(II) During any period that the Aircraft is on the ground and not
in operation, Lessee may carry or cause to be carried, in lieu of the
insurance required by clause (I) above, insurance otherwise conforming with
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the provisions of said clause (I) except that the scope of the risks and the
type of insurance shall be the same as from time to time applicable to
aircraft owned or operated by Lessee (or, if a Sublease is then in effect, by
Sublessee) of the same type similarly on the ground and not in operation,
provided that Lessee shall maintain insurance against risk of loss or damage
to the Aircraft in an amount equal to the Stipulated Loss Value of the
Aircraft during such period that the Aircraft is on the ground and not in
operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished,
to Lessor, the Indenture Trustee and the Owner Participant, on or before the
Delivery Date and on or before July 1 in each year thereafter during the Term
commencing July, _____, a report, signed by Aon Risk Services, Inc., Aon Risk
Services of Minnesota, Inc. or any other independent firm of insurance
brokers reasonably acceptable to Lessor (the "Insurance Brokers"), describing
in reasonable detail the insurance and reinsurance then carried and
maintained with respect to the Aircraft and stating the opinion of such firm
that the insurance then carried and maintained with respect to the Aircraft
complies with the terms hereof; provided, however, that all information
contained in the foregoing report shall not be made available by Lessor, the
Indenture Trustee, the Loan Participants or the Owner Participant to anyone
except (A) to permitted transferees of Lessor's, the Loan Participants', the
Owner Participant's or the Indenture Trustee's interest who agree to hold
such information confidential, (B) to Lessor's, the Loan Participants', the
Owner Participant's or the Indenture Trustee's counsel or independent
certified public accountants or independent insurance advisors who agree to
hold such information confidential or (C) as may be required by any statute,
court or administrative order or decree or governmental ruling or regulation.
Lessee will cause such Insurance Brokers to agree to advise Lessor, the
Indenture Trustee and the Owner Participant in writing of any default in the
payment of any premium and of any other act or omission on the part of Lessee
of which it has knowledge and which might invalidate or render unenforceable,
in whole or in part, any insurance on the Aircraft. To the extent such
agreement is reasonably obtainable, Lessee will also cause such Insurance
Brokers to agree to advise Lessor, the Indenture Trustee and the Owner
Participant in writing at least thirty (30) days (seven (7) days in the case
of war risk and allied perils coverage), prior to the expiration or
termination date of any insurance carried and maintained on the Aircraft
pursuant to this Section 11. In addition, Lessee will also cause such
Insurance Brokers to deliver to Lessor, the Indenture Trustee and the Owner
Participant, on or prior to the date of expiration of any insurance policy
referenced in a previously delivered certificate of insurance, a new
certificate of insurance, substantially in the same form as delivered by
Lessee to such parties on the Delivery Date. In the event that Lessee or any
Sublessee shall fail to maintain or cause to be maintained insurance as
herein provided, Lessor or the Indenture Trustee may at its sole option
provide such insurance and, in such event, Lessee shall, upon demand,
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reimburse Lessor or the Indenture Trustee, as Supplemental Rent, for the cost
thereof to Lessor or the Indenture Trustee, as the case may be, without
waiver of any other rights Lessor or the Indenture Trustee may have;
provided, however, that no exercise by Lessor or the Indenture Trustee, as
the case may be, of said option shall affect the provisions of this Lease,
including the provisions of Section 14(g) hereof.
(d) Self-Insurance. Lessee may self-insure by way of deductible,
premium adjustment or franchise provisions or otherwise (including, with
respect to insurance maintained pursuant to Section 11(b), insuring for a
maximum amount which is less than the Stipulated Loss Value of the Aircraft)
in the insurance covering the risks required to be insured against pursuant
to this Section 11 under a program applicable to all aircraft in Lessee's
fleet, but in no case shall the aggregate amount of self-insurance in regard
to Section 11(a) and Section 11(b) exceed during any policy year, with
respect to all of the aircraft in Lessee's fleet (including, without
limitation, the Aircraft), the lesser of (a) 50% of the largest replacement
value of any single aircraft in Lessee's fleet or (b) 1-1/2% of the average
aggregate insurable value (during the preceding policy year) of all aircraft
(including, without limitation, the Aircraft) on which Lessee carries
insurance. In addition, Lessee (and any Sublessee) may self-insure to the
extent of any applicable mandatory minimum per aircraft (or, if applicable,
per annum or other period) hull or liability insurance deductible imposed by
the aircraft hull or liability insurers.
(e) Additional Insurance by Lessor and Lessee. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its
interest in the Aircraft in amounts in excess of that required to be
maintained by this Section 11; the Owner Participant either directly or
through Lessor may carry for its own account at its sole cost and expense
insurance with respect to its interest in the Aircraft, provided that such
insurance does not prevent Lessee (or any Sublessee) from carrying the
insurance required or permitted by this Section 11 or adversely affect such
insurance or the cost thereof.
(f) Indemnification by Government in Lieu of
Insurance. Notwithstanding any provisions of this Section 11 requiring
insurance, Lessor agrees to accept, in lieu of insurance against any risk
with respect to the Aircraft, indemnification from, or insurance provided by,
the United States Government or any agency or instrumentality thereof or,
upon the written consent of Lessor, other government of registry of the
Aircraft or any agency or instrumentality thereof, against such risk in an
amount which, when added to the amount of insurance against such risk
maintained by Lessee (or any Sublessee) with respect to the Aircraft
(including permitted self-insurance) shall be at least equal to the amount of
insurance against such risk otherwise required by this Section 11.
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(g) Application of Payments During Existence of an Event of
Default. Any amount referred to in paragraph (b) of this Section 11 which is
payable to or retainable by Lessee (or any Sublessee) shall not be paid to or
retained by Lessee (or any Sublessee) if at the time of such payment or
retention an Event of Default shall have occurred and be continuing, but
shall be held by or paid over to Lessor as security for the obligations of
Lessee (or any Sublessee) under this Lease and, if Lessor declares this Lease
to be in default pursuant to Section 15 hereof, applied against Lessee's
obligations hereunder as and when due. At such time as there shall not be
continuing any such Event of Default, such amount shall be paid to Lessee (or
such Sublessee) to the extent not previously applied in accordance with the
preceding sentence.
SECTION 12. Inspection. At all reasonable times and upon at least
15 days' prior written notice to Lessee, Lessor, the Owner Participant or the
Indenture Trustee or their respective authorized representatives may (not
more than once every calendar year (unless an Event of Default has occurred
and is continuing when such inspection right shall not be so limited))
inspect the Aircraft and inspect and make copies (at Lessor's, the Owner
Participant's or the Indenture Trustee's expense, as the case may be) of the
books and records of Lessee relating to the maintenance of the Aircraft, and
upon any such inspection by the Indenture Trustee or its authorized
representatives of the books and records of Lessee relating to the
maintenance of the Aircraft, the Policy Provider or its authorized
representatives may also inspect and make copies (at the Policy Provider's
expense) of the books and records of Lessee relating to the maintenance of
the Aircraft; any such inspection of the Aircraft shall be limited to a
visual, walk-around inspection and shall not include opening any panels, bays
or the like without the express consent of Lessee; provided that no exercise
of such inspection right shall interfere with the operation or maintenance of
the Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt
by Lessee of a written request from the Owner Participant specifying that the
Owner Participant desires to have an authorized representative observe the
next scheduled major overhaul to be performed on the Aircraft, Lessee shall
cooperate with the Owner Participant to enable the Owner Participant's
authorized representative to observe the next scheduled major overhaul to be
performed on the Aircraft; provided that Lessee shall be required to so
cooperate only to the extent necessary to enable the Owner Participant's
authorized representative to observe (i) one scheduled major overhaul during
each three year period of the Term and (ii) (notwithstanding the foregoing
clause (i) but only if a major overhaul is scheduled during the last year of
the Term) one scheduled major overhaul during the last year of the Term;
provided, further that the Owner Participant's authorized representative
shall merely observe such major overhaul, shall not interfere with or extend
in any manner the conduct or duration of the major overhaul and shall not be
entitled to direct any of the work performed in connection with such
overhaul. None of Lessor, the Policy Provider, the Owner Participant or the
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Indenture Trustee shall have any duty to make any such inspection nor shall
any of them incur any liability or obligation by reason of not making such
inspection.
SECTION 13. Assignment. Except as otherwise provided herein,
Lessee will not, without prior written consent of Lessor, assign in whole or
in part any of its rights or obligations hereunder. Lessor agrees that it
will not assign or convey its right, title and interest in and to this Lease
or the Aircraft except as provided herein, in the Trust Agreement or in the
Participation Agreement. Subject to the foregoing, the terms and provisions
of this Lease shall be binding upon and inure to the benefit of Lessor and
Lessee and their respective successors and permitted assigns.
SECTION 14. Events of Default. Each of the following events shall
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body) and
each such Event of Default shall continue so long as, but only as long as, it
shall not have been remedied:
(a) Lessee shall not have made a payment of Basic Rent or
Stipulated Loss Value within ten (10) Business Days after the same shall
have become due; or
(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value) after the same shall have become
due and such failure shall continue for ten (10) Business Days after
Lessee's receipt of written demand therefor by the party entitled
thereto (provided that any failure to pay any amount owed by Lessee
under the Tax Indemnity Agreement or any failure of Lessee to pay to
Lessor or the Owner Participant when due any Excluded Payments (as
defined in the Trust Indenture) shall not constitute an Event of Default
unless notice is given by the Owner Participant to Lessee and the
Indenture Trustee that such failure shall constitute an Event of
Default); or
(c) Lessee shall have failed to perform or observe (or caused to
be performed and observed), in any material respect, any covenant or
agreement (except the covenants set forth in the Tax Indemnity Agreement
and in clauses (i)(B) and (ii) of the first sentence of second paragraph
of Exhibit G) to be performed or observed by it under any Operative
Document, and such failure shall continue unremedied for a period of
thirty (30) days after receipt by Lessee of written notice thereof from
Lessor or the Indenture Trustee; provided, however, that if Lessee shall
have undertaken to cure any such failure which arises under clause (ii)
or clause (iii) of the first sentence of Section 7(a), or under the
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second sentence of Section 7(a) as it relates to maintenance, service,
repair or overhaul or under Section 8 and, notwithstanding the diligence
of Lessee in attempting to cure such failure, such failure is not cured
within said thirty day period but is curable with future due diligence,
there shall exist no Event of Default under this Section 14 so long as
Lessee is proceeding with due diligence to cure such failure and such
failure is remedied not later than three hundred sixty-five (365) days
after receipt by Lessee of such written notice; or
(d) any representation or warranty made by Lessee herein or in the
Participation Agreement or any document or certificate furnished by
Lessee in connection herewith or therewith or pursuant hereto or thereto
(except the representations and warranties set forth in Section 3 of the
Tax Indemnity Agreement and such documents or certificates as are
furnished to the Owner Participant solely in connection with matters
dealt with in the Tax Indemnity Agreement and for no other purpose and
except for representations or warranties contained in the Pass Through
Trust Agreement, the Underwriting Agreement or the Note Purchase
Agreement or any document or instrument furnished pursuant to any
thereof) shall prove to have been incorrect in any material respect at
the time made and such incorrectness shall not have been cured (to the
extent of the adverse impact of such incorrectness on the interests of
the Owner Participant, Lessor or the Certificate Holders) within thirty
(30) days after the receipt by Lessee of a written notice from Lessor or
the Indenture Trustee advising Lessee of the existence of such
incorrectness; or
(e) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal
or state bankruptcy, insolvency or other similar law in the United
States or seeking the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Lessee or for
all or substantially all of its property, or seeking the winding-up or
liquidation of its affairs and the continuation of any such case or
other proceeding undismissed and unstayed for a period of ninety (90)
consecutive days or an order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without
the consent of Lessee, a receiver, trustee or liquidator of Lessee, or
of any substantial part of its property, or sequestering any substantial
part of the property of Lessee and any such order, judgment or decree or
appointment or sequestration shall be final or shall remain in force
undismissed, unstayed or unvacated for a period of ninety (90) days
after the date of entry thereof; or
(f) the commencement by Lessee of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any
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other applicable federal or state bankruptcy, insolvency or other
similar law in the United States, or the consent by Lessee to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of Lessee
or for all or substantially all of its property, or the making by Lessee
of any assignment for the benefit of creditors, or Lessee shall take any
corporate action to authorize any of the foregoing; or
(g) Lessee shall fail to carry and maintain on or with respect to
the Aircraft (or cause to be carried and maintained) insurance required
to be maintained in accordance with the provisions of Section 11 hereof;
provided, however, that, notwithstanding anything to the contrary contained
in this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of an event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor
may, at its option, declare by written notice to Lessee this Lease Agreement
to be in default, provided, that, if an Event of Default referred to in
Section 14(e) or 14(f) shall have occurred, this Lease Agreement shall be
deemed to be declared in default without further act; and at any time
thereafter, so long as any such outstanding Events of Default shall not have
been remedied, Lessor may do one or more of the following with respect to all
or any part of the Airframe and any or all of the Engines as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect;
provided, however, that during any period the Aircraft is subject to the
Civil Reserve Air Fleet Program in accordance with the provisions of Section
7(b) hereof and in possession of the United States government or an agency or
instrumentality of the United States, Lessor shall not, on account of any
Event of Default, be entitled to do any of the following in such manner as to
limit Lessee's control under this Lease (or any Sublessee's control under any
Sublease) of any Airframe or any Engines installed thereon, unless at least
sixty (60) days' (or such lesser period as may then be applicable under the
Air Mobility Command program of the United States Government) written notice
of default hereunder shall have been given by Lessor by registered or
certified mail to Lessee (and any Sublessee) with a copy addressed to the
Contracting Office Representative for the Air Mobility Command of the United
States Air Force under any contract with Lessee (or any Sublessee) relating
to the Aircraft:
(a) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
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Airframe or any Engine as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if such Airframe or Engine were
being returned at the end of the Term, or Lessor, at its option, may
enter upon the premises where all or any part of the Airframe or any
Engine is located and take immediate possession of and remove the same
by summary proceedings or otherwise (and/or, at Lessor's option, store
the same at Lessee's premises until disposal thereof by Lessor), all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removing whether for the restoration of damage
to property caused by such action or otherwise;
(b) sell the Airframe and/or any Engine at public or private sale,
as Lessor may determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle the Aircraft as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee,
except as hereinafter set forth in this Section 15;
(c) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a)
or paragraph (b) above with respect to the Airframe and/or any Engine,
Lessor, by written notice to Lessee specifying a payment date which
shall be the Lease Period Date not earlier than ten days from the date
of such notice, may demand that Lessee pay to Lessor, and Lessee shall
pay Lessor, on the payment date so specified, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the installments of
Basic Rent for the Aircraft due for Lease Periods commencing on or after
the Delivery Date or the Lease Period Date specified as the payment date
in such notice), any unpaid Basic Rent due on Lease Period Dates prior
to the payment date so specified and, if any Basic Rent is payable in
arrears on such payment date as indicated on Exhibit B, any Basic Rent
payable on such payment date (including, in each case, without
limitation, any adjustments to Basic Rent payable pursuant to Section
3(d)) plus whichever of the following amounts Lessor, in its sole
discretion, shall specify in such notice (together with interest, if
any, on such amount at the Past Due Rate from such specified payment
date until the date of actual payment of such amount): (i) an amount
equal to the excess, if any, of the Stipulated Loss Value for the
Aircraft, computed as of the Lease Period Date specified as the payment
date in such notice, over the aggregate fair market rental value
(computed as hereafter in this Section 15 provided) of such Aircraft for
the remainder of the Term, after discounting such aggregate fair market
rental value to present value as of the Lease Period Date specified as
the payment date in such notice at an annual rate equal to the Base Rate
plus 1%; or (ii) an amount equal to the excess, if any, of the
Stipulated Loss Value for such Aircraft, computed as of the Lease Period
Date specified as the payment date in such notice over the fair market
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sales value of such Aircraft (computed as hereafter in this Section
provided) as of the Lease Period Date specified as the payment date in
such notice;
(d) in the event Lessor, pursuant to paragraph (b) above, shall
have sold the Airframe and/or any Engine, Lessor, in lieu of exercising
its rights under paragraph (c) above with respect to such Aircraft, may,
if it shall so elect, demand that Lessee pay Lessor, and Lessee shall
pay to Lessor, on the date of such sale, as liquidated damages for loss
of a bargain and not as a penalty (in lieu of the installments of Basic
Rent for the Aircraft due on or after such date), any unpaid Basic Rent
with respect to the Aircraft due prior to such date (including, in each
case, without limitation, any adjustments to Basic Rent payable pursuant
to Section 3(d)) plus the amount of any deficiency between the net
proceeds of such sale (after deduction of all reasonable costs of sale)
and the Stipulated Loss Value of such Aircraft, computed as of the
Stipulated Loss Value Date on or immediately preceding the date of such
sale together with interest, if any, on the amount of such deficiency,
at the Past Due Rate, from the date of such sale to the date of actual
payment of such amount; and/or
(e) Lessor may rescind, terminate or cancel this Lease Agreement
as to the Aircraft, and/or may exercise any other right or remedy which
may be available to it under applicable law or proceed by appropriate
court action to enforce the terms hereof or to recover damages for
breach hereof.
For the purposes of paragraph (c) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession under no
compulsion to sell, as the case may be, in each case based upon the actual
condition and location of the Aircraft, which value shall be determined by
mutual agreement or, in the absence of mutual written agreement, pursuant to
an appraisal prepared and delivered by a nationally recognized firm of
independent aircraft appraisers nominated by Lessor, and Lessor shall
immediately notify Lessee of such nomination. Unless Lessee shall have
objected in writing within ten days after its receipt of Lessor's notice,
Lessor's nomination shall be conclusive and binding. If Lessee shall object,
however, Lessor and Lessee shall endeavor, within ten days after such
objection is made, to select a mutually acceptable appraiser; provided that,
if Lessee shall not so endeavor to make such selection, Lessor's nomination
referred to in the preceding sentence hereof shall be conclusive and binding.
If Lessor and Lessee fail to reach agreement (except for the reason referred
to in the proviso in the preceding sentence), or if any appraiser selected
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fails to act for any reason, then the question shall be determined by an
appraisal (applying the definitions of "fair market rental value" and "fair
market sales value" as set forth above based upon the actual condition of the
Aircraft) mutually agreed to by two recognized independent aircraft
appraisers, one of which appraisers shall be chosen by Lessor and one by
Lessee within five Business Days after Lessor or Lessee shall have received
written notice from the other party of a demand that such an appraisal be
made, which notice shall specify the appraiser chosen by the party giving the
notice or, if such appraisers cannot agree on the amount of such appraisal
within twenty Business Days after the end of such five-day period, each shall
render its own appraisal and shall by mutual consent choose another appraiser
within five Business Days after the end of such twenty-day period. If,
within such five-day period, such two appraisers fail to appoint a third
appraiser, then either Lessor or Lessee, on behalf of both, may request such
appointment by the then President of the Association of the Bar of the City
of New York (or any successor organization thereto) or, in his absence,
failure, refusal or inability to act, then either Lessor or Lessee may apply
to the American Arbitration Association (or any successor organization
thereto) in New York, New York for the appointment of such third appraiser.
The decision of the third appraiser so appointed shall be given within twenty
Business Days after the appointment of such third appraiser. As soon as the
third appraiser has delivered his appraisal, that appraisal shall be compared
with the appraisals given by the other two appraisers. If the determination
of one appraiser is more disparate from the average of all three
determinations than each of the other two determinations, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be final and binding
upon the parties hereto. If no determination is more disparate from the
average of all three determinations than each of the other determinations,
then such average shall be final and binding upon the parties thereto. The
cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above and without duplication of amounts payable hereunder, for any and all
unpaid Rent due hereunder before, after or during the exercise of any of the
foregoing remedies and for all reasonable legal fees and other costs and
expenses (including fees of the appraisers hereinabove referred to) incurred
by Lessor, the Indenture Trustee, the Loan Participants and the Owner
Participant in connection with the return of the Airframe or any Engine in
accordance with the terms of Section 5 or in placing such Airframe or Engine
in the condition and airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor (or the Indenture Trustee, any Loan Participant or the
Owner Participant) or Lessee may bid for and purchase such property. Lessor
agrees to give Lessee at least fifteen (15) days' prior written notice of the
date fixed for any public sale of the Airframe or any Engine or of the date
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on or after which will occur the execution of any contract providing for any
private sale and any such public sale shall be conducted in general so as to
afford Lessee (and any Sublessee) a reasonable opportunity to bid. Except as
otherwise expressly provided above, no remedy referred to in this Section 15
is intended to be exclusive, but each shall be cumulative and in addition to
any other remedy referred to above or otherwise available to Lessor at law or
in equity; and the exercise or beginning of exercise by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later exercise
by Lessor of any or all of such other remedies. No waiver by Lessor of any
Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default.
SECTION 16. Lessee's Cooperation Concerning Certain Matters.
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the
execution and delivery of any amendment to this Lease, to the Trust Indenture
or to the Trust Agreement, Lessee will cause such Lease Supplement, Trust
Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well)
or amendment to be duly filed and recorded, and maintained of record, in
accordance with the applicable laws of the government of registry of the
Aircraft. In addition, Lessee will promptly and duly execute and deliver to
Lessor such further documents and take such further action as Lessor or the
Indenture Trustee may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and to
establish and protect the rights and remedies created or intended to be
created in favor of Lessor and the Indenture Trustee hereunder, including,
without limitation, if requested by Lessor or the Indenture Trustee, at the
expense of Lessee, the execution and delivery of supplements or amendments
hereto or to the Trust Indenture, each in recordable form, subjecting to this
Lease and the Trust Indenture, any airframe or engine substituted for the
Airframe or any Engine pursuant to the terms thereof and the recording or
filing of counterparts thereof, in accordance with the laws of such
jurisdictions as Lessor or the Indenture Trustee may from time to time deem
advisable. Lessee agrees to furnish to Lessor and the Indenture Trustee
promptly after execution and delivery of any supplement and amendment hereto
and promptly after the execution and delivery of any supplement and amendment
to the Trust Indenture (except for any such supplement or amendment which
does not require or receive the approval of Lessee pursuant to the Operative
Documents and is not required pursuant to the terms of the Operative
Documents), an opinion of counsel reasonably satisfactory to Lessor and the
Indenture Trustee as to the due recording or filing of such supplement or
amendment. Commencing in ____, on or before April 30 of each year during the
Term, Lessee will deliver to Lessor and the Indenture Trustee a certificate
of Lessee, signed by the President, a Vice President, the Treasurer or the
Chief Financial Officer of Lessee to the effect that the signer is familiar
with or has reviewed the relevant terms of this Lease and the signer does not
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have actual knowledge of the existence, as of the date of such certificate,
of any condition or event which constitutes a Default or an Event of Default.
Lessee agrees that if the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, Treasurer or an Assistant Treasurer of Lessee has
actual knowledge of the existence of a Default, then Lessee shall promptly
give to Lessor, the Owner Participant and the Indenture Trustee notice
thereof and such other information relating thereto as Lessor, the Owner
Participant or the Indenture Trustee may reasonably request. Lessee agrees
that if an officer of Lessee has knowledge of the existence of an Event of
Default, Lessee shall promptly give to Lessor and the Indenture Trustee
notice thereof and such other information relating thereto as Lessor or the
Indenture Trustee may reasonably request. Lessee will deliver to Lessor, the
Owner Participant and the Indenture Trustee (i) within sixty (60) days after
the end of each of the first three quarterly periods of each fiscal year of
the Guarantor, the publicly filed Form 10Q report of the Guarantor; and (ii)
within one hundred twenty (120) days after the close of such fiscal year, the
publicly filed annual report and Form 10K report of the Guarantor.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be by telecopier or other telecommunication means
(with such telecopy or other telecommunication means to be confirmed in
writing), or if such notice is impracticable, by registered, first-class
airmail, with postage prepaid, or by personal delivery of written notice and
any such notice shall become effective when received, addressed:
(i) if to Lessee, for U.S. mail at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇▇▇), ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and for overnight courier
at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇), ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Treasurer (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), or to such
other address or telecopy number as Lessee shall from time to time
designate in writing to Lessor,
(ii) if to Lessor, at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department (Telecopy No.
(▇▇▇) ▇▇▇-▇▇▇▇), or to such other address or telecopy number as
Lessor shall from time to time designate in writing to Lessee, and
(iii) if to a Loan Participant, the Indenture Trustee or the
Owner Participant, addressed to such Loan Participant, the
Indenture Trustee or the Owner Participant at such address or
telecopy number as such Loan Participant, the Indenture Trustee or
the Owner Participant shall have furnished by notice to Lessor and
to Lessee, and, until an address is so furnished, addressed to such
Loan Participant, the Indenture Trustee or the Owner Participant at
its address or telecopy number set forth in Schedule I to the
Participation Agreement.
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SECTION 18. No Set-Off, Counterclaim, etc. All Rent shall be paid
by Lessee to Lessor in funds of the type specified in Section 3(f). Lessee's
obligation to pay all Rent payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense or
other right which Lessee may have against Lessor, in its individual capacity
or as Owner Trustee under the Trust Agreement, the Indenture Trustee (in its
individual capacity or as Indenture Trustee), any Loan Participant, the Owner
Participant, or anyone else for any reason whatsoever (whether in connection
with the transactions contemplated hereby or any other transactions),
including, without limitation, any breach by Lessor or the Owner Participant
of their respective warranties, agreements or covenants contained in any of
the Operative Documents, (ii) any defect in the title, registration,
airworthiness, condition, design, operation, or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any interruption or
cessation in or prohibition of the use or possession thereof by Lessee (or
any Sublessee) for any reason whatsoever, including, without limitation, any
such interruption, cessation or prohibition resulting from the act of any
government authority, (iii) any insolvency, bankruptcy, reorganization or
similar case or proceedings by or against Lessee (or any Sublessee) or any
other person, or (iv) any other circumstance, happening, or event whatsoever,
whether or not unforeseen or similar to any of the foregoing. If for any
reason whatsoever this Lease shall be terminated in whole or in part by
operation of law or otherwise except as specifically provided herein, Lessee
nonetheless agrees without limitation of the other rights or remedies of
Lessor hereunder to pay to Lessor an amount equal to each Rent payment at the
time such payment would have become due and payable in accordance with the
terms hereof had this Lease not been terminated in whole or in part. Lessee
hereby waives, to the extent permitted by applicable law, any and all rights
which it may now have or which at any time hereafter may be conferred upon
it, by statute or otherwise, to terminate, cancel, quit or surrender this
Lease except in accordance with the express terms hereof.
SECTION 19. Renewal Options; Purchase Options; Valuation.
(a) Renewal Options. (1) Fixed Renewal Term. Lessee shall have the right
to renew this Lease for a one year renewal term which shall commence only
upon the expiration of the Basic Term (the "first Fixed Renewal Term"), a one
year renewal term which shall commence only upon the expiration of the first
Fixed Renewal Term (the "second Fixed Renewal Term"), and a one year renewal
term which shall commence only upon the expiration of the second Fixed
Renewal Term (the "third Fixed Renewal Term") (the first Fixed Renewal Term,
the second Fixed Renewal Term and the third Fixed Renewal Term, each a "Fixed
Renewal Term") by delivery to Lessor at least ninety (90) days before the end
of the Basic Term, the first Fixed Renewal Term or the second Fixed Renewal
Term, as the case may be, of a written notice irrevocably electing to renew
this Lease for a Fixed Renewal Term. Basic Rent during any Fixed Renewal
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Term shall be payable in an amount and at the times specified in Section
19(a)(4).
(2) Fair Market Renewal Term. At the expiration of the third
Fixed Renewal Term or any Fair Market Renewal Term, Lessee shall have the
right to renew this Lease by delivery to Lessor of a written notice
irrevocably electing to renew this Lease for a renewal term of not less than
one year and not more than three years for a Basic Rent equal to the "fair
market rental value" of the Aircraft for such period (any such renewal term,
a "Fair Market Renewal Term"). Each such right to renew may be exercised by
Lessee delivering to Lessor, at least ninety (90) days prior to the
commencement of such Fair Market Renewal Term, a written notice irrevocably
electing to renew this Lease for a Fair Market Renewal Term (which notice
shall also specify the length of the Fair Market Renewal Term).
(3) If no written notice is delivered by Lessee to Lessor pursuant
to Section 19(a)(1) or 19(a)(2) on or before the day specified therefor,
Lessee shall be deemed to have waived any right to renew this Lease.
(4) At the end of the Basic Term or any Renewal Term, if Lessee
has elected to renew this Lease as aforesaid, and provided that there shall
not then have occurred and be continuing a Default of the type referred to in
Section 14(a), 14(b) or 14(e) or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above provided
and a Lease Supplement evidencing such renewal has been executed and filed
for recordation with the Federal Aviation Administration, this Lease shall
continue in full force and effect during the Renewal Term, except that (x)
Lessee shall pay Lessor Basic Rent for the Aircraft during the Renewal Term
in an amount equal to the "fair market rental value" thereof determined in
accordance with Section 19(c), each semi-annual installment of Basic Rent not
to exceed in the case of a Fixed Renewal Term 50% of the average Basic Rent
during the Basic Term (such average being determined as the total of all
payments of Basic Rent during the Basic Term added together and divided by
the number of payments of Basic Rent during the Basic Term), which Basic Rent
shall be payable in semi-annual installments in arrears, each such
installment being due and payable on each Lease Period Date occurring during
the Renewal Term, commencing with the Lease Period Date immediately following
the commencement of the Renewal Term, and (y) the Stipulated Loss Values
applicable during the Renewal Term shall be determined separately for each
Renewal Term by the Owner Participant in good faith to reflect Stipulated
Loss Values determined in accordance with the following sentence. Stipulated
Loss Values during a Renewal Term shall on the date on which such Renewal
Term begins be equal to the fair market sales value of the Aircraft as of
such date, determined in accordance with the provisions of this
Section 19(a)(4) and Section 19(c) hereof, and shall decline ratably on a
monthly basis to the fair market sales value of the Aircraft as of the last
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day of such Renewal Term, determined in accordance with the provisions of
this Section 19(a)(4) and Section 19(c) hereof.
In determining fair market sales value for purposes of calculating
Stipulated Loss Value for any Renewal Term effect shall be given to the
encumbrance on the Aircraft of any Renewal Term available or in force under
this Section 19.
(b) Purchase Options. Lessee shall have the option, upon at least
ninety (90) days' irrevocable prior written notice to Lessor, to purchase the
Aircraft on the last Business Day of the Basic Term or any Renewal Term for a
purchase price equal to the lesser of (x) the fair market sales value of the
Aircraft or (y) 50% of Lessor's Cost. Upon payment to Lessor in immediately
available funds of the full amount of the purchase price and payment of any
other amounts then due hereunder (including all Rent and all costs or
expenses of the Owner Participant in connection with such purchase), Lessor
will transfer to Lessee, without recourse or warranty (except as to the
absence of Lessor Liens, including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens), all of
Lessor's right, title and interest in and to the Aircraft.
(c) Valuation. At any time not earlier than three hundred sixty-
five (365) days prior to the date on which Lessee may purchase the Aircraft
pursuant to Section 19(b) hereof or renew this Lease pursuant to Section
19(a)(1) or Section 19(a)(2) hereof, Lessee may deliver to Lessor a revocable
notice of its intent to exercise its renewal option or purchase option. For
all purposes of this Section 19, including the appraisal referred to in this
Section 19(c), in determining "fair market rental value" or "fair market
sales value", the Aircraft shall be valued (i) as if in the condition and
otherwise in compliance with the terms of Section 5 upon a return of the
Aircraft to the United States and as if it had been maintained at all times
as required in accordance with Section 7(a)(I) during periods when no
Sublease was in effect, (ii) on the basis of the value which would obtain in
an arm's-length transaction between an informed and willing buyer-user or
lessee (other than a lessee or an Affiliate of a lessee currently in
possession or a used equipment scrap dealer) under no compulsion to buy or
lease and an informed and willing seller or lessor unaffiliated with such
buyer-user or lessee and under no compulsion to sell or lease and
disregarding the purchase and renewal options of the lessee provided in this
Lease, and (iii) in the case of such valuation for determining "fair market
rental value", assuming such lessee would have substantially the same
obligations during the Renewal Term as provided hereunder including without
limitation the obligations of Lessee to carry and maintain the insurance
required by Section 11 hereof and to make certain payments with reference to
Stipulated Loss Value during the applicable Renewal Term. Upon receipt of
such notice Lessor and Lessee shall confer in good faith with a view to
reaching agreement on the "fair market rental value" or "fair market sales
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value" of the Aircraft. If the parties have not so agreed by two hundred
seventy (270) days prior to the end of the Basic Term or the Renewal Term in
question, then the question shall be determined by an appraisal mutually
agreed to by two recognized independent aircraft appraisers, one of which
appraisers shall be chosen by Lessor and one by Lessee within five Business
Days after Lessor or Lessee shall have received written notice from the other
party of a demand that such an appraisal be made, which notice shall specify
the appraiser chosen by the party giving the notice or, if such appraisers
cannot agree on the amount of such appraisal within twenty Business Days
after the end of such five-day period, each shall render its own appraisal
and shall by mutual consent choose another appraiser within five Business
Days after the end of such twenty-day period. If, within such five-day
period, such two appraisers fail to appoint a third appraiser, then either
Lessor or Lessee, on behalf of both, may request such appointment by the then
President of the Association of the Bar of the City of New York (or any
successor organization thereto) or, in his absence, failure, refusal or
inability to act, then either Lessor or Lessee may apply to the American
Arbitration Association (or any successor organization thereto) in New York,
New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the appraisals
given by the other two appraisers. If the determination of one appraiser is
more disparate from the average of all three determinations than each of the
other two determinations, then the determination of such appraiser shall be
excluded, the remaining two determinations shall be averaged and such average
shall be final and binding upon the parties hereto. If no determination is
more disparate from the average of all three determinations than each of the
other determinations, then such average shall be final and binding upon the
parties thereto. Lessee and Lessor shall share equally all expenses relating
to such appraisal procedure provided if Lessee elects not to renew this Lease
or purchase the Aircraft following such appraisal, Lessee shall pay all
expenses of such appraisal.
(d) Special Purchase Option. On the EBO Date, Lessee shall have
the option, upon at least ninety (90) days' irrevocable prior notice to
Lessor and, if any Secured Certificates are then outstanding, the Indenture
Trustee, to purchase the Aircraft on such date for a purchase price equal to
[, at Lessee's option, either (a)] the Special Purchase Price [, or (b) the
amount set forth under the heading "Initial Installment" on Exhibit B (the
"Initial Installment") (payable on the EBO Date) plus the Remaining
Installments]. In addition, if on such date there shall be any Secured
Certificates outstanding, Lessee shall have the option to assume, pursuant to
Section 8(x) of the Participation Agreement and Section 2.13 of the Trust
Indenture, all of the obligations of Lessor under the Trust Indenture. If
such assumption is made, in lieu of paying the Special Purchase Price on the
EBO Date Lessee shall pay Lessor a purchase price equal to (I) [(x) in the
-63-
event Lessee has elected to pay the Special Purchase Price,] the Special
Purchase Price [or (y) in the event Lessee has elected to pay the Initial
Installment and the Remaining Installments, the Initial Installment] minus
[in either event] (II) an amount equal to principal of, and accrued but
unpaid interest on, any Secured Certificates that are outstanding on such
date. Upon such payment in full and payment of any other amounts then due
hereunder (including costs or expenses of the Owner Participant in connection
with such purchase, any installments of Basic Rent due prior to such date
and, if Basic Rent is payable in arrears on such date as indicated on Exhibit
B, on such date (but not any installment of Basic Rent due on such date if
Basic Rent is payable in advance on such date), and all unpaid Supplemental
Rent due on or prior to such date), [and, in the event that Lessee has
elected to pay the Initial Installment and the Remaining Installments, after
Lessee shall have provided Lessor with its undertaking to pay the amounts due
on the dates set forth under the heading "Remaining Installments" on Exhibit
B (the "Remaining Installments"),] Lessor will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens, including for
this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), all of Lessor's right, title and interest in and
to the Aircraft and under the Trust Indenture and, unless there shall be any
Secured Certificates outstanding after such payment, exercise such rights as
it has to cause the Aircraft to be released from the Lien of the Trust
Indenture [; provided, however, that in the event that Lessee has elected to
pay the Initial Installment and the Remaining Installments, Lessor shall
retain a Lien on the Aircraft until the Remaining Installments, together with
interest thereon at the Past Due Rate for any period from the date due to the
date paid, are paid in full, which Lien shall be evidenced by this Lease,
which after the date Lessor shall have transferred title to the Aircraft to
Lessee shall be deemed terminated as a true lease and shall continue as a
lease intended for security, mutatis mutandis, to secure the payment when due
of the Remaining Installments -- provision may be utilized only if EBO Date
occurs on or after maturity of Secured Certificates].
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates. In order to secure the indebtedness evidenced by the Secured
Certificates, Lessor has agreed in the Trust Indenture, among other things,
to assign to the Indenture Trustee this Lease, the Lease Supplements and any
amendments to this Lease and to mortgage its interest in the Aircraft in
favor of the Indenture Trustee, subject to the reservations and conditions
therein set forth. To the extent, if any, that this Lease, the Lease
Supplements and any amendments to this Lease constitute chattel paper (as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction), no security interest in this Lease, the Lease
Supplements and any amendments to this Lease may be created through the
transfer or possession of any counterpart other than the original
counterpart, which shall be identified as the counterpart containing the
receipt therefor executed by the Indenture Trustee on the signature page
-64-
thereof. Lessee hereby accepts and consents to the assignment of all
Lessor's right, title and interest in and to this Lease pursuant to the terms
of the Trust Indenture. Subject to Section 3(f) hereof, Lessee agrees to pay
directly to the Indenture Trustee (or, after receipt by Lessee of notice from
the Indenture Trustee of the discharge of the Trust Indenture, to Lessor),
all amounts of Rent due or to become due hereunder and assigned to the
Indenture Trustee and Lessee agrees that the Indenture Trustee's right to
such payments hereunder shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, the
circumstances set forth in clauses (i) through (iv) of Section 18 hereof.
Notwithstanding the foregoing assignment of this Lease, the obligations of
Lessor to Lessee to perform the terms and conditions of this Lease shall
remain in full force and effect.
SECTION 21. Lessor's Right to Perform for Lessee. If Lessee fails
to make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, then (but in
each case, except in the case of failure to pay Rent or in the case of
failure to maintain insurance as required hereunder, no earlier than the
fifteenth day after the occurrence of such failure, whether or not it shall
yet constitute an Event of Default hereunder) Lessor may itself make such
payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
Limited. (a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee at a time when there is not
continuing an Event of Default shall, until paid to Lessee, be invested by
Lessor or, if the Trust Indenture shall not have been discharged, by the
Indenture Trustee, as the case may be, as Lessee may from time to time direct
in writing (and in absence of a written direction by Lessee, there shall be
no obligation to invest such moneys) in (i) direct obligations of the United
States of America and agencies guaranteed by the United States government
having a final maturity of ninety (90) days or less from date of purchase
thereof; (ii) certificates of deposit issued by, bankers' acceptances of, or
time deposits with, any bank, trust company or national banking association
incorporated under the laws of the United States of America or one of the
states thereof having combined capital and surplus and retained earnings as
of its last report of condition of at least $500,000,000 and having a rating
of Aa or better by ▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's") or AA or
better by Standard & Poor's Ratings Services, a division of ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc. ("S&P") and having a final maturity of ninety (90) days or
less from date of purchase thereof; and (iii) commercial paper of any holding
-65-
company of a bank, trust company or national banking association described in
(ii) and commercial paper of any corporation or finance company incorporated
or doing business under the laws of the United States of America or any state
thereof having a rating assigned to such commercial paper of A1 by S&P or P1
by Moody's and having a final maturity of ninety (90) days or less from the
date of purchase thereof; provided, however, that the aggregate amount at any
one time so invested in certificates of deposit issued by any one bank shall
not be in excess of 5% of such bank's capital and surplus. Any of the
investments permitted hereunder may be made through or with, as applicable,
the entity acting as Indenture Trustee or its Affiliates. There shall be
promptly remitted to Lessee or its order (but no more frequently than
monthly) any gain (including interest received) realized as a result of any
such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) unless an Event of Default shall
have occurred and be continuing. Lessee shall be responsible for any net
loss realized as a result of any such investment and shall reimburse Lessor
(or the Indenture Trustee, as the case may be) therefor on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under
the Trust Agreement, and the institution acting as Lessor shall not be liable
in its individual capacity for any breach thereof except for its gross
negligence or willful misconduct or for breach of its covenants,
representations and warranties contained herein, to the extent covenanted or
made in its individual capacity.
SECTION 23. Service of Process. Lessor and Lessee each hereby
irrevocably submits itself to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York and to the non-
exclusive jurisdiction of the Supreme Court of the State of New York, New
York County, for the purposes of any suit, action or other proceeding arising
out of this Lease, the subject matter hereof or any of the transactions
contemplated hereby brought by Lessor, Lessee, the Indenture Trustee, the
Loan Participants or the Owner Participant or their successors or assigns.
SECTION 24. Miscellaneous. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
No term or provision of this Lease may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by Lessor,
Lessee and any assignee of Lessor's rights hereunder. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
-66-
except as a lessee only. Neither Lessee nor any affiliate of Lessee will
file any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft. The section and paragraph headings in
this Lease and the table of contents are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or provisions
hereof and all references herein to numbered sections, unless otherwise
indicated, are to sections of this Lease. THIS LEASE HAS BEEN DELIVERED IN
THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 25. Successor Trustee. Lessee agrees that in the case of
the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee, succeed to all the rights, powers and title of
Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (subject to Section 10 of the Participation Agreement) and
without in any way altering the terms of this Lease or Lessee's obligations
hereunder. One such appointment and designation of a successor Owner Trustee
shall not exhaust the right to appoint and designate further successor Owner
Trustees pursuant to the Trust Agreement, but such right may be exercised
repeatedly as long as this Lease shall be in effect.
SECTION 26. Covenant of Quiet Enjoyment. So long as no Event of
Default shall have occurred and be continuing and notwithstanding any default
by Lessor, the Owner Participant or the Indenture Trustee under the
Participation Agreement, the Trust Agreement or the Trust Indenture, Lessor
shall not interfere with Lessee's (or any Sublessee's) continued possession,
use and operation of, and quiet enjoyment of, the Aircraft or Lessee's
rights, benefits and obligations pursuant to the Overall Transaction during
the Term of this Lease, and this Lease shall not be terminated except as
expressly provided herein.
-67-
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
except as expressly provided
herein, but solely as
Owner Trustee,
Lessor
By:_______________________________
Name:
Title:
NORTHWEST AIRLINES, INC.,
Lessee
By:________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
is hereby acknowledged on the _____ day of [____________]
STATE STREET BANK AND TRUST
COMPANY,
Indenture Trustee
By:________________________________
Name:
Title:
-68-
EXHIBIT A
to
Lease Agreement
[NW ____ _]
LEASE SUPPLEMENT No.
[NW ____ _]
Lease Supplement No. __, dated [_________] between FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee under the Trust Agreement [NW ____ _], dated as of
[_____________] between _____________________, as Owner Participant, and such
Owner Trustee (such Owner Trustee, in its capacity as such Owner Trustee,
being herein called "Lessor"), and Northwest Airlines, Inc. ("Lessee").
Lessor and Lessee have heretofore entered into that certain
Lease Agreement [NW ____ _], dated as of [___________], relating to one
[Airbus A319-114] [Boeing 757-251] 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.
The Lease Agreement relates to the Airframe and
Engines described below, and a counterpart of the Lease Agreement, attached
and made a part of Lease Supplement No. 1 dated [______________] to the Lease
Agreement, has been recorded by the Federal Aviation Administration on
[_____________], as one document and assigned Conveyance No. __.
Now, Therefore, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under
the Lease and Lessee hereby accepts and leases from Lessor under the Lease
the following described [Airbus A319-114] [Boeing 757-251] aircraft (the
"Aircraft"), which Aircraft as of the date hereof consists of the following
components:
This language for Lease Supplement No. 1.
This language for other Lease Supplements.
-69-
(i) Airframe: FAA Registration No. ______;
manufacturer's serial no. _____; and
(ii) Engines: two (2) [CFM International, Inc.
Model CFM56-5A5] [▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model PW2037] engines
bearing, respectively, manufacturer's serial nos. ______ and
______ (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof. Except as
otherwise provided in the Lease, the Term for the Aircraft shall commence on
the Delivery Date and end on [_______________].
3. Lessee hereby confirms its agreement to pay Lessor
Basic Rent for the Aircraft throughout the Term therefor in accordance with
Section 3 of the Lease.
4. Lessee hereby confirms to Lessor that Lessee has
accepted the Aircraft for all purposes hereof and of the Lease as being
airworthy, in good working order and repair and without defect or inherent
vice in title, condition, design, operation or fitness for use; provided,
however, that nothing contained herein or in the Lease shall in any way
diminish or otherwise affect any right Lessee or Lessor may have with respect
to the Aircraft against [AVSA, S.A.R.L.] [The Boeing Company], or any
subcontractor or supplier of [AVSA, S.A.R.L.] [The Boeing Company], under the
Purchase Agreement or otherwise.
5. All of the terms and provisions of the Lease are
hereby incorporated by reference in this Lease Supplement to the same extent
as if fully set forth herein.
6. This Lease Supplement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument. To the extent, if any, that this Lease
Supplement constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any jurisdiction), no security interest in
this Lease Supplement may be created through the transfer or possession of
any counterpart other than the original counterpart, which shall be
identified as the counterpart containing the receipt therefor executed by the
Indenture Trustee on the signature page hereof.
-70-
In Witness Whereof, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its Individual Capacity,
but solely as Owner Trustee,
Lessor
By:_________________________________
Name:
Title:
Northwest Airlines, Inc.,
Lessee
By:___________________________________
Name:
Title:
Receipt of this original counterpart of the
foregoing Lease Supplement is hereby acknowledged on this ____ day of
[______________]
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
By:________________________________________
Name:
Title:
This language contained in the original counterpart only.
-71-
EXHIBIT B
to
Lease Agreement
[NW ____ _]
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to
contain confidential information.
Basic Rent:
Basic Rent Payable in Basic Rent Payable in Total Basic Rent
Lease Period Advance (Percentage of Arrears (Percentage (Percentage of
Date Lessor's Cost) of Lessor's Cost) Lessor's Cost)
------------ ---------------------- --------------------- ----------------
B-1
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to
contain confidential information.
Total Basic Rent
Lease Basic Rent Payable in Basic Rent Payable in (Percentage of
Period Date Advance (Percentage Arrears (Percentage Lessor's Cost)
----------- of Lessor's Cost of Lessor's Cost) ----------------
- --------------------- --------------------
B-2
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
Lessor's Cost for the Aircraft: $[___________]
Special Purchase Price: [_____________]% of Lessor's Cost on
[______________].
[Initial Installment: [__]% of Lessor's Cost on [ ].
Remaining Installments:
Date Amount
---- ------
April 15, [ ] [__]% of Lessor's Cost
June 15, [ ] [__]% of Lessor's Cost
September 15, [ ] [__]% of Lessor's Cost
December 15, [ ] [__]% of Lessor's Cost]
B-3
EXHIBIT C
to
Lease Agreement
[NW ____ _]
STIPULATED LOSS VALUE SCHEDULE
------------------------------
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to
contain confidential information.
Stipulated Stipulated Loss
Loss Value Date Value Percentage
---------------- ----------------
C-1
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
C-2
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
C-3
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
C-4
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
C-5
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
C-6
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
C-7
EXHIBIT D
to
Lease Agreement
[NW ____ _]
TERMINATION VALUE SCHEDULE
--------------------------
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to
contain confidential information.
Termination
Termination Date Value Percentage
---------------- ----------------
D-1
EXHIBIT E
to
Lease Agreement
[NW ____ _]
RENT RECALCULATION VERIFICATION
-------------------------------
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to
contain confidential information.
1. Any recalculation of Basic Rent, Stipulated Loss
Value percentages, Termination Value percentages, [the Initial Installment,
the Remaining Installments] and the Special Purchase Price pursuant to the
Lease shall be determined by the Owner Participant, and shall maintain the
Owner Participant's Net Economic Return except as assumptions have been
modified pursuant to Section 3 of the Lease or pursuant to the Tax Indemnity
Agreement or the Participation Agreement, as the case may be; provided,
however, that Lessee may request (A) Lessee's independent public accountants
to verify such calculations but without any requirement that the Owner
Participant disclose to such persons the methodology and assumptions and (B)
if Lessee believes that such calculations by the Owner Participant are in
error then a nationally recognized firm of accountants selected by Lessee and
reasonably acceptable to the Owner Participant shall be permitted to verify
such calculations and the Owner Participant will make available to such firm
(subject to the execution by such firm of a confidentiality agreement
reasonably acceptable to the Owner Participant) the methodology and
assumptions and any changes made therein pursuant to Section 3 of the Lease.
In the event of a verification under clause (B) of the first sentence of this
paragraph 1 the determination by such firm of accountants shall be final.
Lessee will pay the reasonable costs and expenses of the verification under
clause (B) of the first sentence of this paragraph 1 unless an error adverse
to Lessee is established by such firm, and if as a result of such
verification process the Basic Rent is adjusted and such adjustment causes
the Net Present Value of Rents to decline by [_] or more basis points (in
which event the Owner Participant shall pay the reasonable costs and expenses
of such verification process). Such recalculated Basic Rent, Stipulated Loss
Value percentages, Termination Value percentages [, Initial Installment,
Remaining Installments] and Special Purchase Price shall be set forth in a
Lease Supplement or an amendment to the Lease.
2. "Net Economic Return" means the Owner Participant's
net after-tax yield and aggregate after-tax cash flow, in each case computed
from the Delivery Date through the EBO Date and through
[___________________], utilizing the multiple investment sinking fund method
E-1
of analysis, computed on the basis of the same methodology and assumptions as
were utilized by the Owner Participant in determining Basic Rent, the Special
Purchase Price, [the Initial Installment, the Remaining Installments,]
Stipulated Loss Value and Termination Value percentages as of the Delivery
Date.
E-2
EXHIBIT F
to
Lease Agreement
[NW ____ _]
SCHEDULE OF DOMICILES OF PERMITTED SUBLESSEES
---------------------------------------------
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Egypt Portugal
Finland Republic of China (Taiwan)*
France Singapore
Germany South Africa
Greece South Korea
Hungary Spain
Iceland Sweden
India Switzerland
Indonesia Thailand
Ireland Trinidad and Tobago
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
* So long as on the date of entering into the proposed sublease such
country and the United States have diplomatic relations at least as good as
those in effect on the Delivery Date.
F-1
EXHIBIT G
to
Lease Agreement
[NW ____ _]
RETURN CONDITIONS
-----------------
The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.
Unless purchased by Lessee pursuant to Section 19 of the
Lease, at the time of return of the Airframe upon the expiration of the Lease
at the end of the Basic Term or any Renewal Term or upon the termination of
the Lease pursuant to Section 9(c) or 15 of the Lease: (i) in the event
that Lessee (or any Sublessee then in possession of the Aircraft) shall not
then be using a continuous maintenance program with respect to the Airframe,
Lessee agrees that during the period of operation of the Aircraft immediately
prior to such return (A) Lessee or such Sublessee, as the case may be, shall
have been using a block overhaul program with respect to the Airframe which
shall have been approved by all necessary governmental approvals of the
country under the laws of which the Aircraft shall then have been registered
and (B) the Airframe shall have remaining until the next scheduled block
overhaul at least 25% of the allowable hours between block overhauls
permitted under the block overhaul program then used by Lessee or such
Sublessee, (ii) in the event that Lessee (or any Sublessee then in possession
of the Aircraft) during the period of operation of the Aircraft immediately
prior to such return shall not have been using an on-condition maintenance
program with respect to the Engines or engines, Lessee agrees that the
average number of hours or cycles of operation (whichever shall be applicable
under the maintenance program then in use with respect to such Engines or
engines) on such Engines or engines remaining until the next scheduled engine
refurbishment shall be at least 25% of the hours or cycles (whichever shall
be applicable) between engine refurbishment allowed under the maintenance
program then in use with respect to such Engines or engines which shall have
been approved by all necessary governmental approvals of the country under
the laws of which the Aircraft shall have then been registered, (iii) the
Aircraft shall have all Lessee's and any Sublessee's exterior markings
removed or painted over and the areas where such markings were removed or
painted over refurbished as necessary to blend with adjacent areas, (iv) the
Aircraft shall have no outstanding airworthiness directives issued by the FAA
requiring terminating action by the date of return, and (v) the Aircraft
shall be in Lessee's or such Sublessee's passenger configuration and the
interior of the Airframe shall be clean in accordance with Lessee's customary
standards for a "between flights" cleaning. In the event the FAA shall issue
any directive which would require improvements to the Aircraft in order for
G-1
the airworthiness certificate of the Aircraft to be maintained in good
standing, Lessee shall not apply for an extension of the date of compliance
with the directive as to the Aircraft to a date after the date of return of
the Aircraft pursuant to Section 5 of the Lease, unless it shall previously
or concurrently have applied for such an extension with respect to all
[Airbus A319-100] [Boeing 757-200] aircraft in its fleet affected by such
directive.
If clause (i)(B) of the first sentence of the preceding
paragraph shall be applicable but the Airframe does not meet the conditions
specified in said clause (i)(B), Lessee shall pay or cause to be paid to
Lessor a Dollar amount computed by multiplying (I) 120% of the average direct
cost to Lessee (based upon the actual direct cost to Lessee for similar
aircraft in the fleet of Lessee) during the preceding 12 months of performing
an airframe block overhaul of the type referred to in such clause (i) by (II)
a fraction of which (x) the numerator shall be the excess of 25% of hours of
operation allowable between such block overhauls over the actual number of
hours of operation remaining on the Airframe to the next such block overhaul
and (y) the denominator shall be the number of hours of operation allowable
between such block overhauls in accordance with such block overhaul program.
If clause (ii) of the first sentence of the second preceding
paragraph shall be applicable but the Engines or engines do not meet the
conditions specified in said clause (ii), Lessee shall pay or cause to be
paid to Lessor a Dollar amount computed by multiplying (aa) two by (bb) 120%
of the average direct cost to Lessee (based upon the actual direct cost to
Lessee for similar aircraft in the fleet of Lessee) during the preceding 12
months of performing for an engine of the same model as the Engines the
scheduled engine refurbishment under the maintenance program then used by
Lessee or any Sublessee for engines of the same model as the Engines by (cc)
a fraction of which (x) the numerator shall be the excess of 25% of the hours
or cycles of operation (whichever is applicable) between engine refurbishment
allowable for an engine under the maintenance program then in use with
respect to such Engines or engines over the actual average number of hours or
cycles of operation on such Engines or engines remaining until the next such
scheduled engine refurbishment and (y) the denominator shall be the number of
hours or cycles allowable between such scheduled engine refurbishment.
G-2