LEASE AGREEMENT N___AT
dated as of __________, 200_
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY, EXCEPT AS EXPRESSLY
PROVIDED HEREIN, BUT SOLELY AS OWNER TRUSTEE,
Lessor
and
AMERICAN TRANS AIR, INC.,
Lessee
One Boeing model 737-800 aircraft bearing United States registration no.
N___AT and manufacturer's serial no. _____, including two CFM International
model CFM56-7 engines bearing manufacturer's serial nos. _____ and _____
- -------------------------------------------------------------
THIS LEASE HAS BEEN EXECUTED IN COUNTERPARTS; SEE SS. 18.5 FOR INFORMATION
CONCERNING THE RIGHTS OF HOLDERS OF THE VARIOUS COUNTERPARTS.
CONTENTS
1. DEFINITIONS AND CONSTRUCTION................................................1
2. DELIVERY AND ACCEPTANCE.....................................................1
2.1 Delivery and Lease of Aircraft...........................................1
2.2 Acceptance by Lessee.....................................................1
3. TERM AND RENT...............................................................1
3.1 Term 1
3.2 Rent 1
3.3 Payments.................................................................4
4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS..............4
4.1 Disclaimer of Warranties.................................................4
4.2 Certain Agreements of Lessor.............................................5
4.3 Quiet Enjoyment..........................................................5
4.4 Investment of Funds Held as Security.....................................5
4.5 Title Transfers by Lessor................................................6
4.6 Lessor's Interest in Certain Engines.....................................7
4.7 Lease For U.S. Federal Income Tax Law Purposes; Section 1110
of Bankruptcy Code...........................................................7
5. RETURN OF AIRCRAFT..........................................................7
5.1 Compliance with Annex B..................................................7
5.2 Parking and Related Matters..............................................7
5.3 Return of Other Engines..................................................8
5.4 Fuel 8
6. LIENS 8
7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING..........................9
7.1 Registration and Operation...............................................9
7.2 Possession..............................................................11
7.3 Certain Limitations on Subleasing or Other Relinquishment of Possession.15
8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS.................. ....16
8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
Modifications, and Additions................................................16
8.2 Information, Certificates, Notices, and Reports.........................16
9. VOLUNTARY TERMINATION UPON OBSOLESCENCE....................................18
9.1 Right of Termination....................................................18
9.2 Election by Lessor to Sell..............................................19
9.3 Retention of Aircraft by Lessor.........................................21
10. LOSS, DESTRUCTION, REQUISITION, ETC.......................................22
10.1 Event of Loss to the Aircraft..........................................22
10.2 Event of Loss to an Engine; Engine Exchanges...........................25
10.3 Conditions to any Replacement..........................................26
10.4 Conveyance to Lessee...................................................28
10.5 Application of Payments................................................28
10.6 Requisition of Aircraft for Use........................................29
10.7 Requisition of an Engine for Use.......................................29
10.8 Application of Payments................................................30
10.9 Application of Payments During Default.................................30
11. INSURANCE.................................................................30
11.1 Lessee's Obligation to Insure..........................................30
11.2 Insurance for Own Account..............................................30
11.3 Indemnification by Government in Lieu of Insurance.....................31
11.4 Application of Insurance Proceeds......................................31
11.5 Application of Payments During Default.................................31
12. INSPECTION................................................................32
13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE...............................33
13.1 In General.............................................................33
13.2 Merger of Lessee.......................................................33
13.3 Assignment as Security for Lessor's Obligations........................34
13.4 Successor Owner Trustee................................................34
14. LEASE EVENTS OF DEFAULT...................................................34
14.1 Payments...............................................................35
14.2 Insurance..............................................................35
14.3 Other Covenants........................................................35
14.4 Representations and Warranties.........................................35
14.5 Bankruptcy and Insolvency..............................................36
14.6 Repudiation or Invalidity of Guarantee.................................36
15. REMEDIES AND WAIVERS......................................................37
15.1 Remedies...............................................................37
15.2 Limitations Under CRAF.................................................40
15.3 Right to Perform for Lessee............................................40
15.4 Determination of Fair Market Rental Value and Fair Market Sales Value..41
15.5 Remedies Cumulative....................................................41
16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC........................41
17. RENEWAL AND PURCHASE OPTIONS..............................................42
17.1 Notices Generally......................................................42
17.2 Renewal Options........................................................42
17.3 Purchase Options.......................................................44
17.4 Appraisals.............................................................46
18. MISCELLANEOUS.............................................................47
18.1 Amendments.............................................................47
18.2 Severability...........................................................48
18.3 Third-Party Beneficiary................................................48
18.4 Reproduction of Documents..............................................48
18.5 Counterparts...........................................................48
18.6 Notices................................................................49
18.7 Governing Law..........................................................49
18.8 No Waiver..............................................................49
18.9 Entire Agreement.......................................................49
ANNEXES, EXHIBITS, AND SCHEDULES
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
EXHIBIT A Aircraft Description
EXHIBIT B Form of Return Acceptance Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2 Basic Rent Payments
SCHEDULE 2A Basic Rent Allocations
SCHEDULE 3 Stipulated Loss Value Schedule
SCHEDULE 4 Termination Value Schedule
SCHEDULE 5 EBO Price Schedule
SCHEDULE 6 Permitted Countries
SCHEDULE 7 Placards
LEASE AGREEMENT N___AT
This Lease Agreement N___AT (this "LEASE") dated as of __________,
200_, between (1) First Security Bank, National Association, a national banking
association, not in its individual capacity (except as expressly provided
herein) but solely as Owner Trustee ("LESSOR"), and (2) American Trans Air, Inc.
("LESSEE"), an Indiana corporation.
Lessor and Lessee agree as follows:
1. DEFINITIONS AND CONSTRUCTION
The terms defined in Annex A, when capitalized as in Annex A, have the
same meanings when used in this Lease. Annex A also contains rules of usage that
control construction in this Lease.
2. DELIVERY AND ACCEPTANCE
2.1 DELIVERY AND LEASE OF AIRCRAFT
Lessor hereby leases the Aircraft to Lessee for the Term, and Lessee
hereby leases the Aircraft from Lessor for the Term.
2.2 ACCEPTANCE BY LESSEE
Lessee hereby confirms to Lessor that Lessee has duly and irrevocably
accepted delivery of the Aircraft for all purposes of this Lease.
3. TERM AND RENT
3.1 TERM
The Aircraft shall be leased hereunder for the Term, unless this Lease
or the leasing of the Aircraft is earlier terminated in accordance with any
provision of this Lease.
3.2 RENT
3.2.1 BASIC RENT; ADJUSTMENTS TO BASIC RENT AND CERTAIN OTHER AMOUNTS
(a)......During the Base Term, Lessee shall pay to Lessor, on each
Payment Date, Basic Rent in the amount equal to the percentage of Lessor's Cost
specified in Schedule 2 for such Payment Date. The amounts and periods of
Lessee's liability for Basic Rent shall be as allocated in accordance with
Schedule 2A. Such Basic Rent payments and such allocations shall be adjusted
pursuant to ss. 3.2.1(b). During any Renewal Term, Lessee shall pay to Lessor,
on each Payment Date, Basic Rent equal to the Renewal Rent for that Renewal
Term, determined pursuant to ss. 17.2.2.
(b)......Basic Rent, Basic Rent allocations, Stipulated Loss Values,
Termination Values, and EBO Price shall be subject to adjustment as follows:
(1) If Transaction Expenses paid by Lessor pursuant to ss. 9.2
of the Participation Agreement are determined to be other than 2.0% of
Lessor's Cost, then the Basic Rent percentages in Schedule 2, the Basic
Rent allocations in Schedule 2A, the Stipulated Loss Value percentages
in Schedule 3, the Termination Value percentages in Schedule 4, and the
EBO Price shall be recalculated (upwards or downwards) by Owner
Participant, on or before the 120th day after the Delivery Date using
the same methods and assumptions used to calculate original Basic Rent,
EBO Price, Stipulated Loss Value, and Termination Value percentages, in
order (aa) to maintain Owner Participant's Net Economic Return, and
(bb) to the extent possible consistent with clause (aa) of this ss.
3.2.1(b)(1), to minimize the Net Present Value of Rents to Lessee.
(2) Notwithstanding the foregoing, in no event shall any
adjustment to the EBO Price be made such that the EBO Price is less
than the greatest of (aa) the adjusted Stipulated Loss Value as of the
EBO Date, (bb) the estimated fair market value of the Aircraft on the
EBO Date as set forth in the Appraisal referred to in ss. 5.1.2(m) of
the Participation Agreement, and (cc) the sum of the present values of
(i) Basic Rent payable, as adjusted, during the Base Term after the EBO
Date, and (ii) the appraised fair market value of the Aircraft at the
end of the Base Term as estimated in the Appraisal referred to in ss.
5.1.2(m) of the Participation Agreement, each discounted back to the
EBO Date (using a discount rate of 16.5 %).
(c) All adjustments pursuant to ss. 3.2.1(b) shall be made as promptly
as practicable after either Owner Participant or Lessee gives notice to the
other that an event has occurred that requires an adjustment. Owner Participant
and Lessee shall give prompt notice to the other of any event requiring an
adjustment. Any recalculation of the percentages of Basic Rent payments, Basic
Rent allocations, Stipulated Loss Value, Termination Value, and EBO Price shall
be prepared by Owner Participant, subject to verification at the request of
Lessee in accordance with this ss. 3.2.1(c), on the basis of the same
methodology and assumptions used by Owner Participant in determining the
percentages of Basic Rent, Stipulated Loss Value, Termination Value, and EBO
Price as of the Delivery Date, except as such assumptions have been modified to
reflect the events giving rise to adjustments hereunder and taking into account
the law applicable at the time of such adjustment. Promptly after an adjustment
is made hereunder, Owner Participant shall deliver to Lessee a description of
such adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments (1) shall be made so as to avoid characterization of the Lease as a
"disqualified leaseback or long-term agreement" within the meaning of Code ss.
467 and Treasury Regulations thereunder, and (2) shall be in compliance with the
requirements of ss. 4(1) and ss. 4(6) of Revenue Procedure 75-21 and ss.ss.
4.02(5), 4.07(l), and 4.07(2) of Revenue Procedure 75-28, except to the extent
that on the Delivery Date the Lease constituted a "disqualified leaseback or
long-term agreement" or was not in compliance with the Revenue Procedure
sections referred to in clause (2). In connection with any such adjustments to
payments and allocations of Basic Rent, appropriate corresponding adjustments
shall be made to the percentages set forth on Schedules 3 and 4 in the columns
headed "Deferred Basic Rent Amount" and "Prepaid Basic Rent Amount". All of the
foregoing adjustments shall be set forth in an amendment to this Lease.
(d) If Lessee believes that any calculations by Owner Participant
pursuant to ss. 3.2.1(c) are in error, and if, after consultation, Lessee and
Owner Participant do not agree on an adjustment, then a nationally-recognized
firm of accountants selected by Lessee and reasonably satisfactory to Owner
Participant shall verify such calculations. Owner Participant will make
available to such firm (but not to Lessee or any representative of Lessee) the
methodology and assumptions referred to in ss. 3.2.1(c) and any modifications
thereto made to reflect the events giving rise to adjustments hereunder (subject
to the execution by such firm of a confidentiality agreement, reasonably
acceptable to Owner Participant, prohibiting disclosure of such methodology and
assumptions to any third party). The determination by such firm of accountants
shall be final. Lessee will pay the reasonable costs and expenses of such
verification by such accountants, except that if it results in (1) a decrease in
Basic Rent which decreases the remaining Net Present Value of Rents by ten or
more basis points from the remaining Net Present Value of Rents as recalculated
by Owner Participant, or (2) a material reduction in Stipulated Loss Values,
Termination Values, or the EBO Price, then Owner Participant will pay such costs
and expenses.
3.2.2 SUPPLEMENTAL RENT
Lessee shall pay to Lessor, or to whomever is entitled to it, any and
all Supplemental Rent when and as it becomes due and owing. Lessee will also pay
to Lessor, or to whomever is entitled to it, as Supplemental Rent, to the extent
permitted by applicable Law, interest at the Past-Due Rate on any part of any
amount of Rent (including Supplemental Rent) not paid by 11:00 a.m., New York
time, on the date when due (so long as, in the case of any Person not a party to
the Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to (but excluding) the date of payment in
full.
3.3 PAYMENTS
(a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 11:00 a.m., New York City time, on
the date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement (or to such other account in the United States as Lessor
specifies to Lessee in writing at least 10 Business Days before such payment of
Rent is due), or, in the case of any payment of Supplemental Rent expressly
payable to a Person other than Lessor, to the Person that shall be entitled
thereto, to such account in the United States as such Person specifies from time
to time to Lessee at least 10 Business Days before such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever any payment
of Rent shall be due on a day that is not a Business Day, such payment shall be
made on the next day that is a Business Day, and, if such payment is made on
such next Business Day, no interest shall accrue on the amount of such payment
during such extension.
(c) All computations of interest under this Lease shall be made on the
basis of a year of 360 days composed of twelve 30-day months.
4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS
4.1 DISCLAIMER OF WARRANTIES
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE
ACKNOWLEDGES AND AGREES THAT, AS BETWEEN LESSEE AND LESSOR AND OWNER
PARTICIPANT, (A) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF, AND
(B) NEITHER LESSOR NOR OWNER PARTICIPANT MAKES, HAS MADE, OR SHALL BE DEEMED TO
HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:
(1) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY, OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE OF THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;
(2) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;
(3) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY ENGINE,
OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(4) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR COPYRIGHT,
OR THE LIKE; OR
(5) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY
OTHER IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT TO THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF.
4.2 CERTAIN AGREEMENTS OF LESSOR
Unless an Event of Default exists, Lessor agrees to make available to
Lessee such rights as Lessor may have under any warranty with respect to the
Aircraft made, or made available, by Airframe Manufacturer or Engine
Manufacturer, or any of their subcontractors or suppliers, pursuant to and in
accordance with the terms of the Purchase Agreement Assignment.
4.3 QUIET ENJOYMENT
So long as no Event of Default exists, Lessor shall not interfere with
Lessee's rights hereunder to continued possession, use, and operation of, and
quiet enjoyment of, the Aircraft during the Term.
4.4 INVESTMENT OF FUNDS HELD AS SECURITY
4.4.1 INVESTMENT
Any money required to be paid to or retained by Lessor that is required
to be paid to Lessee or applied as provided herein shall, until paid to Lessee
as provided herein or applied as provided herein, be invested by Lessor from
time to time as directed in writing by Lessee (or, if Lessee does not so direct,
by or as directed by Lessor in its sole discretion) and at Lessee's risk and
expense in Cash Equivalents so long as such Cash Equivalents specified by Lessee
or Lessor (as applicable) can be acquired by Lessor using its reasonable best
efforts.
4.4.2 PAYMENT OF GAIN OR LOSS
Any net gain (including interest received) realized as the result of
investments pursuant to ss. 4.4.1 (net of any fees, commissions, and other
reasonable expenses incurred in connection with such investment) shall be held
and applied in the same manner as the principal amount is to be held and applied
hereunder. Lessee will promptly pay to Lessor, on demand, the amount of any loss
realized as the result of any such investment (together with any fees,
commissions, and other reasonable expenses incurred in connection with such
investment), such amount so paid to be held and applied by Lessor as
contemplated in ss. 4.4.1.
4.4.3 LIMITATION OF LIABILITY
All investments under this ss. 4.4 shall be at Lessee's risk and
expense, and Lessor shall not be liable for any loss resulting from any
investment made under this ss. 4.4 other than by reason of its willful
misconduct or gross negligence. Any such investment may be sold (without regard
to its maturity) by Lessor without instructions whenever such sale is necessary
to make a distribution required by this Lease.
4.5 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the Aircraft, the
Airframe, or any Engine to Lessee or any other Person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other Person (as
applicable) all of Lessor's right, title and interest in and to the Aircraft,
the Airframe, or such Engine (as applicable), free and clear of all Lessor Liens
attributable to Lessor, FSB, or Owner Participant, (2) assign to Lessee or such
other Person (as applicable), if and to the extent permitted under the Purchase
Agreement, all warranties of Airframe Manufacturer and Engine Manufacturer with
respect to the Aircraft, the Airframe, or such Engine, and (3) assign to Lessee
or such other Person (as applicable), if and to the extent permitted, all
claims, if any, for damage to the Aircraft, the Airframe, or such Engine, in
each case free of Lessor Liens attributable to Lessor, FSB, or Owner
Participant, and without recourse or warranty of any kind whatsoever (except as
to the transfer described in clause (1) above and as to the absence of such
Lessor Liens), and (b) Lessor shall promptly deliver to Lessee or such other
Person (as applicable), a bill of sale and agreements of assignment, evidencing
such transfer and assignment, and such other instruments of transfer, all in
form and substance reasonably satisfactory to Lessee (or such other Person, as
applicable), as Lessee (or such other Person, as applicable) may reasonably
request and furnish to Lessor.
4.6 LESSOR'S INTEREST IN CERTAIN ENGINES
Lessor hereby agrees for the benefit of each lessor, conditional
seller, or secured party of any engine (other than an Engine) leased, purchased,
or owned by Lessee or any Permitted Sublessee subject to a lease, conditional
sale, or other security agreement that Lessor will not acquire or claim, as
against such lessor, conditional seller, or secured party, any right, title, or
interest in such engine as the result of the installation of such engine on the
Airframe at any time while such engine is subject to such lease, conditional
sale, or other security agreement and owned by such lessor or conditional seller
or subject to a security interest in favor of such secured party.
4.7 LEASE FOR U.S. FEDERAL INCOME TAX LAW PURPOSES; SECTION 1110 OF
BANKRUPTCY CODE
(a) Lessee and Lessor agree that this Lease is, and shall be treated as, a
lease for U.S. federal income tax purposes of the Aircraft, Airframe, Engines,
and Parts.
(b) Lessee and Lessor intend that Lessor shall be entitled to the benefits
of Section 1110 with respect to the right to take possession of the Aircraft,
Airframe, Engines, and Parts as provided in this Lease.
5. RETURN OF AIRCRAFT
5.1 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B, which
provisions are hereby incorporated by this reference as if set forth in full
herein.
5.2 PARKING AND RELATED MATTERS
If Lessor gives written notice to Lessee, not less than 10 days nor
more than 120 days before the end of the Term, requesting parking of the
Aircraft upon its return hereunder, Lessee will assist Lessor in procuring (or
cause Lessor to be provided with) outdoor parking facilities for the Aircraft
for a storage period up to 30 days, starting on the date of such return, and
upon Lessor's request to Lessee made at least 10 days before the end of such
initial 30-day period, for an additional 90-day period commencing upon
expiration of such initial period, at such storage facility in the 48 contiguous
states of the United States as Lessee selects. Such storage shall be at Lessor's
risk, and Lessor shall pay all applicable storage fees, except that Lessee shall
pay the parking fees for the initial 30-day storage period; PROVIDED FURTHER
that Lessee's obligation to provide parking shall be subject to Lessor's
entering into an agreement with the storage facility, before the storage period
begins, providing that Lessor shall bear all maintenance charges and other costs
incurred, and that Lessee's obligations hereunder will be solely for the payment
of parking fees for the initial 30-day period pursuant to the terms of this ss.
5.2. Unless Lessor and Lessee otherwise agree, the location of such parking will
also constitute the return location for the Aircraft.
5.3 RETURN OF OTHER ENGINES
If any Engine owned by Lessor is not installed on the Airframe at the
time of return hereunder, Lessee shall return the Airframe hereunder with a
Replacement Engine meeting the requirements of, and in accordance with, ss. 10
and Annex B. Thereupon, Lessor will transfer to Lessee the Engine constituting
part of such Aircraft but not installed on such Airframe at the time of the
return of the Airframe.
5.4 FUEL
Upon the return of the Airframe upon any termination of this Lease,
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. However, if the Aircraft is being returned
in connection with the exercise of remedies pursuant to ss. 15, Lessor shall
have no obligation to make such payment to Lessee until Lessor shall have been
paid all amounts due to it pursuant to ss. 15.
6. LIENS
Lessee shall not, directly or indirectly, create, incur, assume, or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine, or any Part, title to any of the foregoing, or any interest therein, or
Lessee's rights in and to this Lease or any Permitted Sublease, except (a) the
rights of Lessor, Owner Participant, and Lessee under the Operative Agreements,
and of any Permitted Sublessee under any Permitted Sublease; (b) Lessor Liens;
(c) the rights of others under agreements or arrangements to the extent
permitted by ss. 7.2, ss. 7.3, or Annex C; (d) Liens for Taxes either not yet
due or being contested in good faith by appropriate proceedings if such Liens
and such proceedings do not involve more than a DE MINIMIS risk of the sale,
forfeiture, or loss of the Aircraft, the Airframe, any Engine, or the interest
of Owner Participant therein; (e) materialmen's, mechanics', workers',
repairers', employees', or other like Liens arising in the ordinary course of
business for amounts the payment of which either is not yet delinquent for more
than 60 days or is being contested in good faith by appropriate proceedings, if
such Liens and such proceedings do not involve any more than a DE MINIMIS risk
of the sale, forfeiture, or loss of the Aircraft, the Airframe, any Engine, or
the interest of Owner Participant therein; (f) Liens arising out of any judgment
or award against Lessee, if, within 60 days after the entry thereof, that
judgment or award is discharged or vacated, or has its execution stayed pending
appeal, or is discharged, vacated, or reversed within 60 days after the
expiration of such stay, and if during any such 60-day period there is not, or
any such judgment or award does not involve, more than a DE MINIMIS risk of the
sale, forfeiture, or loss of the Aircraft, the Airframe, any Engine, or the
interest of Owner Participant therein; and (g) any other Lien with respect to
which Lessee or any Permitted Sublessee provides a bond, cash collateral, or
other security adequate in the reasonable opinion of Lessor. Lessee shall
promptly take or cause to be taken such action as may be necessary duly to
discharge (by bonding or otherwise) any Lien not excepted above that arises in
respect of the Aircraft, the Airframe, any Engine, or any Part during the Term.
7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Subject to Lessor's and Owner Participant's compliance with their
obligations under ss. 13 of the Participation Agreement, Lessee shall cause the
Aircraft to be, and at all times during the Term to remain, duly registered with
the FAA under the Transportation Code or with such other country of registry as
shall be permitted under ss. 7.1.2 hereof, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Transportation
Code is prevented or lost because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Transportation Code). Lessor shall execute and deliver all such documents as
Lessee or any Permitted Sublessee reasonably requests for the purpose of
effecting and continuing such registration. Each of the registrations and
recordations referenced in this ss. 7.1.1 will be at Lessee's cost and expense,
except as otherwise provided in this Lease.
7.1.2 REREGISTRATION
After the Tax Attribute Period (or before such date, provided Lessee
pre-pays on a lump-sum basis any liability due under the Tax Indemnity Agreement
as a result of such registration on the assumption that such registration would
continue for the remainder of the term of the Permitted Sublease described in
ss. 7.6.11(a)(3) of the Participation Agreement, if no Special Default or Event
of Default exists, Lessee may, by written notice to Lessor (with a copy of such
notice to Owner Participant), request to change the country of registration of
the Aircraft. Any such change in registration shall be effected only in
compliance with, and subject to all of the conditions set forth in, ss. 7.6.11
of the Participation Agreement.
7.1.3 MARKINGS
If permitted by applicable Law, on or reasonably promptly after the
Delivery Date, Lessee will cause to be affixed to, and maintained in, the
cockpit of the Airframe and on each Engine, in each case in a clearly visible
location, a placard of a reasonable size and shape bearing the legend set forth
in Schedule 6. Such placards may be removed temporarily, if necessary, in the
course of maintenance of the Airframe or Engines. If any such placard is damaged
or becomes illegible, Lessee shall promptly replace it with a placard complying
with the requirements of this ss. 7.1.3.
7.1.4 COMPLIANCE WITH LAWS
Lessee shall not, and shall not allow any other Person to, operate,
use, maintain, service, repair, overhaul, improve, or modify the Aircraft (a) in
violation of any Law binding on or applicable to the Aircraft, the Airframe, or
any Engine, or (b) in violation of any airworthiness certificate, license, or
registration of any Government Entity relating to the Aircraft, the Airframe, or
any Engine, except (1) immaterial or non-recurring violations with respect to
which corrective measures are taken promptly by Lessee or a Permitted Sublessee
(as applicable) upon discovery thereof, and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement relating to any such certificate, license, or registration in good
faith in any reasonable manner which does not involve more than a DE MINIMIS
risk of the sale, forfeiture, or loss of the Aircraft, the Airframe, any Engine
or the interest of Owner Participant therein, any risk of criminal liability or
of material civil penalty against Lessor or Owner Participant.
7.1.5 OPERATION
Lessee agrees not to operate, use, or locate the Aircraft, the
Airframe, or any Engine, or allow the Aircraft, the Airframe, or any Engine to
be operated, used, or located, (a) in any area excluded from coverage by any
insurance required by the terms of ss. 11, except in the case of a requisition
by the U.S. Government where the U.S. Government provides an indemnity in lieu
of such insurance, or insurance from the U.S. Government, covering such area, in
accordance with ss. 11.3, or (b) in any recognized area of hostilities unless
fully covered in accordance with Annex D by war-risk insurance as required by
the terms of ss. 11 (including ss. 11.3), unless in any case referred to in this
ss. 7.1.5 the Aircraft is only temporarily operated, used, or located in such
area as a result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition, or other similar unforeseen circumstances, so long
as Lessee diligently and in good faith proceeds to remove the Aircraft from such
area.
7.2 POSSESSION
Lessee will not, without the prior written consent of Lessor and Owner
Participant, sublease or otherwise in any manner deliver, transfer, or
relinquish possession of the Aircraft, the Airframe, or any Engine, or install
any Engine, or permit any Engine to be installed, on any airframe other than the
Airframe; PROVIDED, that, subject to the provisions of ss. 7.3, Lessee may,
without such prior written consent:
7.2.1 INTERCHANGE AND POOLING
Subject or permit any Permitted Sublessee to subject (a) the Airframe
to normal interchange agreements (provided that (1) any such
interchange agreement does not contemplate that Lessee (or a Permitted
Sublessee) will be out of possession of the Airframe for more than five
consecutive days at a time (absent weather, maintenance, or other
exigencies), and (2) the party to such interchange agreement is a
Permitted Air Carrier, not in bankruptcy, organized and having its
principal place of business in a country with which the United States
then maintains normal diplomatic relations and which recognizes and
gives effect to the rights, title, and interests of Lessor in the
Airframe), or (b) any Engine (but only if such Engine is then installed
upon an aircraft) to normal interchange agreements or pooling
agreements or arrangements, in each case customary in the commercial
airline industry and entered into by Lessee or such Permitted Sublessee
in the ordinary course of business; PROVIDED, that (1) no such
agreement or arrangement shall require any transfer of Lessor's title
to the Airframe or such Engine, and (2) if Lessor's title to any such
Engine is nevertheless divested under any such agreement or
arrangement, then such Engine shall be deemed to have suffered an Event
of Loss as of the date of such divestiture, and Lessee shall be
required to replace such Engine with a Replacement Engine meeting the
requirements of, and in accordance with, ss. 10.
7.2.2 TESTING AND SERVICE
Deliver or permit any Permitted Sublessee to deliver possession of the
Aircraft, the Airframe, any Engine, or any Part (a) to the manufacturer
thereof or to any third-party maintenance provider, for testing,
service, repair, maintenance, or overhaul work on the Aircraft,
Airframe, any Engine, or any Part, or, to the extent required or
permitted by the terms of Annex C, for alterations or modifications in
or additions to the Aircraft, the Airframe, or any Engine, or (b) to
any Person for the purpose of transport to a Person referred to in the
preceding clause (a).
7.2.3 TRANSFER TO U.S. GOVERNMENT
Transfer or permit any Permitted Sublessee to transfer possession of
the Aircraft, the Airframe, or any Engine to the U.S. Government
pursuant to CRAF or otherwise, in which event Lessee shall promptly
notify Lessor in writing of any such transfer of possession (and, in
the case of any transfer pursuant to CRAF, in such notification shall
identify by name, address, and telephone numbers the Contracting Office
Representative(s) for the Military Airlift Command of the United States
Air Force to whom notices must be given and to whom requests or claims
must be made to the extent applicable under CRAF).
7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee free and clear of
all Liens except (a) Permitted Liens, (b) Liens that do not apply to
the Engines, and (c) the rights of third parties under normal
interchange or pooling agreements and arrangements of the type
permitted under ss. 7.2.1.
7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
Install or permit any Permitted Sublessee to install an Engine on an
airframe leased to Lessee or such Permitted Sublessee, or purchased or
owned by Lessee or such Permitted Sublessee subject to a security
agreement, conditional sale, or other secured financing arrangement,
but only if (a) such airframe is free and clear of all Liens except (1)
the rights of the parties to such lease or secured financing
arrangement, covering such airframe, and (2) Liens of the type
permitted by clauses (a) and (b) of ss. 7.2.4, and (b) Lessee or such
Permitted Sublessee has received from the lessor, secured party, or
conditional seller, in respect of such airframe, a written agreement
(which may be a copy of the lease, security agreement, conditional sale
agreement, or other agreement covering such airframe), whereby such
Person agrees that it will not acquire or claim any right, title, or
interest in, or Lien on, such Engine by reason of the installation of
such Engine on such airframe at any time while such Engine is subject
to this Lease or is owned by Lessor.
7.2.6 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, leased to Lessee
or such Permitted Sublessee, or purchased or owned by Lessee or such
Permitted Sublessee subject to a conditional sale or other security
agreement under circumstances where neither ss. 7.2.4 nor ss. 7.2.5
applies; PROVIDED, that any such installation shall be deemed an Event
of Loss with respect to such Engine, and Lessee shall comply with ss.
10.2 in respect thereof. Until ss. 10.2 has been fully complied with,
Lessor's interest in such Engine shall continue in full force and
effect.
7.2.7 SUBLEASING
With respect to the Aircraft, the Airframe, or any Engine, if no Special
Default or Event of Default exists, enter into a sublease with any Permitted Air
Carrier, but only if:
(a) Lessee provides written notice to Lessor (with a copy to Owner
Participant) (such notice in the event of a sublease to a U.S. Air Carrier to be
given promptly after entering into any such sublease, and, in the case of a
sublease to any other Permitted Air Carrier, 10 Business Days in advance of
entering into such sublease);
(b) at the time that Lessee enters into such sublease, such Permitted Air
Carrier shall not be subject to any bankruptcy, insolvency, liquidation,
reorganization, dissolution, or similar proceeding, and shall not have
substantially all of its property in the possession of any liquidator, trustee,
receiver, or similar Person;
(c) any such sublease (1) shall not extend beyond the expiration of the
Base Term or any Renewal Term then in effect or irrevocably committed to by
Lessee, or contain a purchase option, unless expressly subject to Lessee's
exercise of its renewal or purchase options in accordance with the terms of ss.
17, and in any event subject to the requirements of clause (4) of this ss.
7.2.7(c), (2) shall not contain any purchase option exercisable at a date
earlier than such date permitted under ss. 17.3, (3) shall explicitly require
that sublessee or sublessor (or both with specified allocations) will fully
comply with the Lease's maintenance, operation, possession, inspection, and
insurance requirements, and (4) shall be expressly subject and subordinate to
all the terms of this Lease and to Lessor's rights, powers, and remedies
hereunder, including Lessor's rights under ss. 15 to repossess the Aircraft and
to terminate such sublease if an Event of Default exists;
(d) in connection with a sublease to a Permitted Foreign Air Carrier, (1)
the United States maintains diplomatic relations with the country of domicile of
such Permitted Foreign Air Carrier, and (2) Lessee furnishes to Lessor and Owner
Participant a favorable opinion of counsel, reasonably satisfactory to Lessor
and Owner Participant, located in the country of domicile of such Permitted
Foreign Air Carrier, that (aa) the terms of such sublease are legal, valid, and
binding obligations of the parties thereto, enforceable under the laws of such
jurisdiction, (bb) it is not necessary for Owner Participant or Lessor to
register or qualify to do business in such jurisdiction, if not already so
registered or qualified, as a result of the proposed sublease, (cc) Lessor's
title to, the Aircraft, Airframe, and Engines will be recognized in such
jurisdiction, (dd) the Laws of such jurisdiction of domicile require fair
compensation by the government of such jurisdiction, payable in a currency
freely convertible into Dollars, for the loss of title to the Aircraft,
Airframe, or Engines in the event of the requisition by such government of such
title (unless Lessee provides insurance in the amounts required with respect to
hull insurance under ss. 11 covering the requisition of title to the Aircraft,
Airframe, or Engines by the government of such jurisdiction so long as the
Aircraft, Airframe, or Engines are subject to such sublease), (ee) such
Permitted Air Carrier's agreement that its rights under the sublease are subject
and subordinate to all the terms of this Lease is enforceable against such
Permitted Air Carrier under applicable Law, and (ff) such sublease will subject
Lessor and Owner Participant to no greater tort liability than in the United
States of America, OR, if such sublease will subject Lessor or Owner Participant
to greater tort liability than in the United States of America, Lessee (or
Permitted Sublessee) has provided insurance to insure against such additional
liability;
(e) Lessee furnishes to Lessor and Owner Participant evidence reasonably
satisfactory to Lessor that the insurance required byss. 11 remains in effect;
(f) all necessary documents are duly filed, registered, or recorded in such
public offices as are required fully to preserve the title of Lessor, in the
Aircraft, Airframe, and Engines;
(g) Lessee shall reimburse Lessor and Owner Participant for all of their
reasonable out-of-pocket fees and expenses (including reasonable fees and
disbursements of counsel) incurred in connection with any such sublease;
(h) no such sublease shall be made to a "tax exempt entity" as defined in
ss. 168(h)(2) of the Code, including a Permitted Foreign Air Carrier, before the
end of the Tax Attribute Period unless Lessee prepays on a lump-sum basis any
liability due under the Tax Indemnity Agreement as a result of such sublease
based upon the assumption that such sublease were to continue for the remainder
of the term of such sublease;
(i) no such sublease will adversely affect Lessor's protection under
Section 1110;
(j) no such sublease shall permit the Permitted Sublessee thereunder to
sub-sublease or transfer the Airframe or any Engine, except for transfers by a
Permitted sublessee permitted by the foregoing provisions of this ss. 7.2, and
except that a Permitted Sublessee who is a manufacturer may sub-sublease to any
Person to whom a sublease would be permitted under this ss. 7.2.7; PROVIDED,
that (1) such sub-sublease shall not permit any sub-sub-subleasing of the
Aircraft, the Airframe, or any Engine, and (2) such sub-sublease must meet the
requirement of a Permitted Sublease;
(k) if the term of such Sublease is greater than one year, Lessee will
assign such Sublease to Lessor as security for Lessee's obligations hereunder.
7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER RELINQUISHMENT OF POSSESSION
Notwithstanding anything to the contrary in ss. 7.2:
(a) The rights of any Person who receives possession of the Aircraft in
accordance with ss. 7.2 shall be subject and subordinate to all the terms of
this Lease, and to Lessor's rights, powers, and remedies hereunder, including
(1) Lessor's right to repossess the Aircraft pursuant to ss. 15, (2) Lessor's
right to terminate and avoid such sublease, delivery, transfer, or
relinquishment of possession if an Event of Default exists, and (3) the right to
require such Person to deliver the Aircraft, Airframe, and Engines forthwith if
an Event of Default exists.
(b) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if such transfer had not
occurred, and no transfer of possession of the Aircraft, the Airframe, any
Engine, or any Part shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or under any other Operative Agreement.
(c) Lessee shall ensure that no sublease, delivery, transfer, or
relinquishment permitted under ss. 7.2 shall affect the United States
registration of the Aircraft, unless also made in accordance with the provisions
of ss. 7.1.2.
(d) Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under clause (3), (4), or (5) of the definition of
such term (as set forth in Annex A) shall not be deemed to violate the
provisions of ss. 7.2.
(e) No Wet Lease shall constitute a delivery, transfer, or
relinquishment of possession for purposes of ss. 7.2, nor shall it be prohibited
by the terms hereof.
8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS
At all times during the Term, Lessee shall comply with (or cause to be
complied with) each of the provisions of Annex C, which provisions are hereby
incorporated by this reference as if set forth in full herein.
8.2 INFORMATION, CERTIFICATES, NOTICES, AND REPORTS
8.2.1 FINANCIAL INFORMATION
Lessee will furnish to Lessor and Owner Participant:
(a) within 90 days after the end of each of the first three
fiscal quarters in each fiscal year of Lessee, a consolidated balance
sheet of Lessee and Guarantor as of the end of such quarter, and
related statements of income and cash flows for the period commencing
at the end of the previous fiscal year and ending with the end of such
quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding
fiscal year, prepared in accordance with GAAP; PROVIDED, that while
Lessee or Guarantor is subject to the reporting requirements of the
Securities Exchange Act of 1934, a copy of Lessee's or Guarantor's
report on Form 10-Q for such fiscal quarter (excluding exhibits) will
satisfy this clause (a).
(b) within 120 days after the end of each fiscal year of
Lessee, a consolidated balance sheet of Lessee and Guarantor as of the
end of such fiscal year and related statements of income and cash flows
of Lessee and Guarantor for such fiscal year, in comparative form with
the preceding fiscal year, prepared in accordance with GAAP, together
with a report of Lessee's and Guarantor's independent certified public
accountants with respect to their audit of such financial statements;
PROVIDED, that while Lessee or Guarantor is subject to the reporting
requirements of the Securities Exchange Act of 1934, a copy of Lessee's
or Guarantor's report on Form 10-K for such fiscal year (excluding
exhibits) will satisfy this clause (b).
8.2.2 ANNUAL CERTIFICATE
Within 120 days after the close of each fiscal year of Lessee, Lessee
shall deliver to Lessor and Owner Participant an Officer's Certificate of Lessee
to the effect that such officer is familiar with or has reviewed or caused to be
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements, and that such officer does not have knowledge of the existence as at
the date of such certificate of any Event of Default (or, if any Event of
Default exists, specifying the nature and period of existence thereof and the
action Lessee has taken or is taking or proposes to take with respect thereto).
8.2.3 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Owner Participant or Lessor such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor to file in a timely manner any reports required to be
filed by it as lessor under the Lease or to enable Owner Participant to file in
a timely manner any reports required to be filed by it as the beneficiary of the
Trust Estate, in either case, with any Government Entity because of, or in
connection with, the interest of Owner Participant or Lessor in the Aircraft,
this Lease, or any other part of the Trust Estate; PROVIDED, that, with respect
to any such information which Lessee reasonably deems commercially sensitive or
confidential, Owner Participant or Lessor (as applicable) shall afford Lessee a
reasonable opportunity (to the extent reasonably obtainable) to seek from any
such Government Entity a waiver of the obligation of Owner Participant or Lessor
to file any such information, or shall consent to the filing of such information
directly by Lessee in lieu of filing by Owner Participant or Lessor, and if any
such waiver or consent is evidenced to the reasonable satisfaction of Owner
Participant or Lessor (as applicable), then Lessee shall not be required to
furnish such information to Owner Participant or Lessor.
8.2.4 OTHER INFORMATION
Lessee shall provide to Owner Participant from time to time such other
information or data as Owner Participant reasonably requests concerning the
Aircraft, Lessee's financial condition, or otherwise relating to the
transactions or matters contemplated in the Operative Agreements, in each case
to the extent within Lessee's or any Permitted Sublessee's possession, or
reasonably available to or obtainable by Lessee or such Permitted Sublessee.
9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 RIGHT OF TERMINATION
(a) Provided there is then no Special Default or Event of Default,
Lessee shall have the right at its option to terminate this Lease during the
Base Term, effective only on a Termination Date occurring on or after the
seventh anniversary of the Delivery Date, if:
(1) Lessee makes a good faith determination that the Aircraft
either has become economically obsolete or is surplus to Lessee's
requirements, and Lessee's Chief Financial Officer or Treasurer so
certifies in writing to Lessor; and
(2) Lessee provides Lessor (with a copy to Owner Participant)
with written notice of Lessee's exercise of such termination option not
less than 180 days and not more than 360 days before the Termination
Date specified in such notice.
(b) Lessor shall notify Lessee of Lessor's intention to sell or retain
the Aircraft, as provided in this ss. 9, not less than 120 days before the
Termination Date specified in the written notice pursuant to ss. 9.1(a)(2). Any
failure by Lessor to give such notice of its election shall be deemed to be an
election to sell the Aircraft, as provided in this ss. 9.
(c) In the event of any termination pursuant to this ss. 9, Lessee
shall not acquire additional 737-800 aircraft during the 24 months following
such termination, except to replace any lost or damaged aircraft or under
short-term operating leases, and Lessee shall notify Lessor in the event Lessee
plans to enter into such an operating lease to discuss the possible re-lease of
the Aircraft from Lessor to Lessee under such short-term operating lease.
9.2 ELECTION BY LESSOR TO SELL
9.2.1 BIDS; CLOSING OF SALE
Unless Lessor has notified Lessee of Lessor's election to retain the
Aircraft, Lessee, as agent for Lessor, shall, until the date ten Business Days
before the Termination Date, use commercially reasonable efforts to obtain bids
for a cash purchase of the Aircraft, and Lessor may, if it desires to do so,
also seek to obtain such bids. If Lessee receives any bid, Lessee shall
promptly, and in any event at least ten Business Days before the Termination
Date, certify to Lessor in writing the amount and terms of such bid, and the
name and address of the Person (who shall not be Lessee or any Affiliate of
Lessee or any Person with whom Lessee or any such Affiliate has an arrangement
for the future use of the Aircraft by Lessee or any such Affiliate) submitting
such bid. If Lessor receives any bid on or before the date ten Business Days
before the Termination Date, Lessor shall, at least ten Business Days before the
Termination Date, certify to Lessee in writing the amount and terms of such bid,
and the name and address of the Person submitting such bid.
9.2.2 CLOSING OF SALE
(a) On the Termination Date (1) Lessee shall deliver the Airframe and
Engines or engines constituting part of the Aircraft to the bidder (if any) who
shall have submitted the highest cash bid on or before the date ten Business
Days before such Termination Date, in the same manner as if delivery were made
to Lessor pursuant to ss. 5 and Annex B and in full compliance with the terms
thereof, and shall duly transfer to Lessor title to any such engines not owned
by Lessor, all in accordance with the terms of ss. 5 and Annex B, and (2) Lessor
shall simultaneously therewith transfer the Airframe and Engines or engines to
such bidder, in the manner described in ss. 4.5, against cash paid to Lessor in
the amount of such highest bid and in the manner and in funds of the type
specified in ss. 3.3.
(b) All proceeds of any sale described in ss. 9.2.2(a) shall be paid to
and retained by Lessor and, on such Termination Date, and as a condition
precedent to such sale and the delivery of the Aircraft and Engines or engines
to such bidder, Lessee shall pay to Lessor, in the manner and in funds of the
type specified in ss. 3.3:
(1) all unpaid Basic Rent due at any time before such Termination Date;
plus
(2) the excess (if any) of the Termination Value for the Aircraft, computed
as of such Termination Date, over the proceeds of such sale; plus
(3) as provided in ss. 3.2.2, interest on the amounts specified in the
foregoing clause (1) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full.
As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent due by Lessee to Lessor, or Owner Participant
under this Lease (including (aa) all interest charges provided for hereunder or
under any other Lessee Operative Agreement with respect to the late payment of
any amounts so payable, (bb) all reasonable and previously-invoiced
out-of-pocket fees and expenses (including reasonable fees and expenses of
counsel, but excluding brokerage commissions payable to any Person not retained
by Lessee) incurred by Lessor and Owner Participant in connection with such sale
and the related termination of this Lease), (cc) all previously-invoiced
commissions payable to any Person retained by Lessee in connection with such
sale, and (dd) all sales, transfer, or similar Taxes then due with respect to
such sale). To the extent not invoiced or due on the Termination Date, Lessee
shall pay in due course the obligations described in the foregoing clauses (cc),
(dd), and (ee).
(c) Upon and subject to any such sale and receipt of proceeds by
Lessor, and full and final payment of all amounts described in ss. 9.2.2(b), and
compliance by Lessee with all the other provisions of this ss. 9.2,
(1) Lessor will transfer to Lessee, in accordance with ss.
4.5, any Engines constituting part of the Aircraft but which were not
then installed on the Airframe and sold therewith; and
(2) the obligation of Lessee to pay Basic Rent, on or after
the Payment Date with reference to which Termination Value is computed,
shall cease, and the Term shall end effective as of the date of such
sale.
(d) A sale of the Aircraft pursuant to this ss. 9.2.2 shall take place
only on a Termination Date. Subject to ss. 9.3, if no sale shall have occurred
on or as of the proposed Termination Date, this Lease shall continue in full
force and effect, and all of Lessee's obligations shall continue, including its
obligation to pay Rent, in each case, as if the notice under ss. 9.1 shall not
have been given and, subject to ss. 9.2.3(a), Lessee may give another notice
pursuant to ss. 9.1.
(e) Lessor shall be under no duty to solicit bids, to inquire into the
efforts of Lessee to obtain bids, or otherwise to take any action in connection
with any such sale other than to transfer to the purchaser named in the highest
bid referred to above (or to such purchaser and, in the case of Engines
described in ss. 9.2.2(c), to Lessee) the Airframe and Engines or engines
against receipt of the payments described in ss. 9.2.2(b)
9.2.3 WITHDRAWAL OF NOTICE OF TERMINATION
(a) So long as Lessor has not elected to retain the Aircraft pursuant
to ss. 9.1, Lessee may withdraw any notice given pursuant to ss. 9.1 at any time
on or before the date five Business Days before the proposed Termination Date,
whereupon this Lease shall continue in full force and effect and all of Lessee's
obligations shall continue, including its obligation to pay Rent, in each case
as if the notice under ss. 9.1 were not given, and Lessee may give another
notice pursuant to ss. 9.1; PROVIDED, that Lessee shall not be entitled to give
more than three termination notices pursuant to ss. 9.1 during the Term.
(b) Lessee shall pay, on an after-tax basis, all reasonable
out-of-pocket fees and expenses of Lessor (including reasonable fees and
expenses of counsel) and Owner Participant in connection with any notice of
termination withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.
9.3 RETENTION OF AIRCRAFT BY LESSOR
(a) If Lessor elects to retain the Aircraft in accordance withss. 9.1, on
the Termination Date:
(1) Lessee shall deliver the Airframe and Engines or engines constituting
part of the Aircraft to Lessor pursuant to ss. 5 and Annex B and in full
compliance with the terms thereof, and shall duly transfer to Lessor title to
any such engines not owned by Lessor, all in accordance with the terms of ss. 5
and Annex B;
(2) Lessee shall pay to Lessor, in the manner and in funds of the type
specified inss. 3.3:
(aa) all unpaid Basic Rent due at any time before such Termination Date;
plus
(bb) as provided in ss. 3.2.2, interest on the amounts specified in the
foregoing clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and
(4) Lessee shall also pay all Supplemental Rent due and
payable by Lessee to Lessor or Owner Participant under this Lease,
including all interest charges provided for hereunder or under any
other Lessee Operative Agreement with respect to the late payment of
any amounts so payable, and the reasonable out-of-pocket fees and
expenses incurred by Lessor and Owner Participant in connection with
such termination and delivery of the Airframe and Engine or engines
(excluding brokerage commissions and similar expenses payable to any
Person(s) not retained by Lessee).
(b) Upon full and final payment to Lessor and Owner Participant of the
amounts described in ss. 9.3(a)(1), and (3) and (4), and compliance by Lessee
with all the applicable provisions of ss. 9.3(a)(2),
(1) Lessor will transfer to Lessee, in accordance with ss.
4.5, any Engines constituting part of the Aircraft but which were not
then installed on the Airframe and sold therewith; and
(2) Lessee's obligation to pay Basic Rent otherwise due on or
after the Termination Date shall cease, and the Term for the Aircraft
shall end effective as of such Termination Date.
10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS TO THE AIRCRAFT
10.1.1 NOTICE AND ELECTION
(a) If an Event of Loss to the Airframe (and any Engine(s) installed
thereon) occurs, Lessee shall promptly (and in any event within 15 days after
such occurrence) notify Lessor and Owner Participant of such Event of Loss.
Within 60 days after such occurrence, Lessee shall give to Lessor (with a copy
to Owner Participant) written notice of Lessee's election to make payment in
respect of such Event of Loss, as provided in ss. 10.1.2, or to replace the
Airframe and any such Engine(s) as provided in ss. 10.1.3.
(b) Lessee's failure to give the notice of election described in ss.
10.1.1(a) shall be deemed to be an election of the option set forth in ss.
10.1.2. In addition, Lessee shall not be entitled to elect the option set forth
in ss. 10.1.3 if, at the time Lessor receives such notice from Lessee or on the
replacement date, a Special Default or an Event of Default exists.
(c) For purposes of ss. 10.1.2, an Event of Loss to the Airframe shall
be deemed to constitute an Event of Loss to the Aircraft. For purposes of ss.
10.1.3, any Engine not actually suffering an Event of Loss shall not be required
to be replaced.
10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) If Lessee elects, in accordance with ss. 10.1.1, to make payment in
respect of any such Event of Loss, then Lessee shall pay, in the manner and in
funds of the type specified in ss. 3.3, the following amounts:
(1) on the date (the "LOSS PAYMENT DATE") that is the earlier
of (x) the Stipulated Loss Value Date first following the 75th day
following the date of the occurrence of such Event of Loss, and (y) the
Stipulated Loss Value Date first following the fourth Business Day
following the receipt of the insurance proceeds with respect to such
occurrence (but in any event not earlier than the date of Lessee's
election under ss. 10.1.1 to make payment under this ss. 10.1.2),
Lessee shall pay to Lessor:
(aa) all unpaid Basic Rent due at any time before the Loss Payment Date;
plus
[(bb) all Basic Rent due on the Loss Payment Date; plus]
(cc) the Stipulated Loss Value computed as of the Stipulated Loss Value
Date immediately preceding the Loss Payment Date (or, if the Loss Payment Date
is a Stipulated Loss Value Date, the Loss Payment Date), plus
(dd) if the Loss Payment Date is not a Stipulated Loss Value Date, an
additional amount equal to interest, at the rate per annum equal to the SLV
Rate, on the amount of the excess referred to in clause (cc) above for each day
from and including the Stipulated Loss Value Date referred to in clause [(cc)]
to but excluding the Loss Payment Date; plus
(ee) as provided in ss. 3.2.2, interest on the amount specified in the
foregoing clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and
(2) on or before the date required for payment of the amounts
specified in clause 10.1.2(a)(1), Lessee shall also pay to Lessor and
Owner Participant all other amounts due and payable by Lessee to Lessor
and Owner Participant under this Lease, the Participation Agreement, or
any other Lessee Operative Agreement and, on an after-tax basis, all
out-of-pocket fees and expenses (including reasonable fees and expenses
of counsel) incurred by Lessor and each Owner Participant in connection
with such Event of Loss.
(b) Upon payment in full of all amounts described in the foregoing ss.
10.1.2(a)(1), (1) Lessee's liability for use of the Aircraft and obligation to
pay Basic Rent hereunder with respect to the Aircraft shall terminate, (2) the
Term for the Aircraft shall end, and (3) Lessor will transfer the Aircraft to
Lessee, as-is and where-is, and subject to any insurer's salvage rights, but
otherwise in the manner described in ss. 4.5.
10.1.3 REPLACEMENT OF AIRFRAME AND ENGINES
(a) If Lessee elects, in accordance with ss. 10.1.1, to replace the
Airframe and any Engine(s) suffering the Event of Loss, then Lessee shall, as
promptly as possible and in any event within 120 days after the occurrence of
such Event of Loss, convey or cause to be conveyed to Lessor, in compliance with
ss. 10.3 and as replacement for the Airframe and any such Engine(s), title to a
Replacement Airframe (which shall comply with ss. 10.1.3(b)), and for each such
Engine a Replacement Engine, in each case free and clear of all Liens other than
Permitted Liens (PROVIDED, that if such conveyance occurs after the end of the
Term, Lessee shall pay rent for the Aircraft from the end of the Term until
return thereof pursuant to ss. 5 at a daily rate equal to the average daily
Basic Rent or Renewal Rent, as applicable, over the Base Term or then-expiring
Renewal Term, as applicable). If Lessee makes such election, but for any reason
does not effect such replacement within such time period and in compliance with
the requirements set forth in ss. 10.3, then Lessee shall be deemed to have
initially made the election set forth in ss. 10.1.2 with the effect that Lessee
shall pay, in the manner and in funds of the type specified in ss. 3.3, the
amounts required under, and in accordance with, ss. 10.1.2 (except that the time
period for payment referenced in ss. 10.1.2(a)(1) shall, for the purposes of
this ss. 10.1.3(a), in all cases be on the Stipulated Loss Value Date first
following the 120th day following the date of the occurrence of such Event of
Loss).
(b) Any such Replacement Airframe shall be an airframe manufactured by
the Airframe Manufacturer that is the same model as the Airframe to be replaced
thereby, or an improved model, and that has a current value, estimated residual
value, utility, and remaining economic useful life (without regard to hours or
cycles remaining until the next regular maintenance check, provided no Special
Default or Event of Default then exists) at least equal to the Airframe to be
replaced thereby (assuming that such Airframe had been maintained in accordance
with this Lease), immediately prior to such Event of Loss and that has a year of
manufacture no earlier than that of the Airframe to be replaced. Any such
Replacement Engine shall meet the requirements of, and be conveyed by Lessee to
Lessor in accordance with, ss. 10.2 (other than the notice requirement set forth
in ss. 10.2.1).
10.2 EVENT OF LOSS TO AN ENGINE; ENGINE EXCHANGES
10.2.1 NOTICE
If an Event of Loss to an Engine occurs under circumstances in which no
Event of Loss to the Airframe occurs, Lessee shall promptly (and in any event
within 15 days after such occurrence) notify Lessor of such Event of Loss.
10.2.2 REPLACEMENT OF ENGINE
Lessee shall, promptly and in any event within 60 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with ss. 10.3 and as replacement for the Engine with respect to which
any Event of Loss occurred, title to a Replacement Engine, free and clear of all
Liens other than Permitted Liens. Such Replacement Engine shall be an engine
manufactured by Engine Manufacturer that is the same model as the Engine to be
replaced thereby, or an improved model, and that is suitable for installation
and use on the Airframe, and that has a current value, estimated residual value,
utility, and remaining economic useful life (without regard to hours and cycles
remaining until overhaul, provided no Special Default or Event of Default then
exists) at least equal to the Engine to be replaced thereby (assuming that such
Engine had been maintained in accordance with the Lease) immediately prior to
such Event of Loss.
10.2.3 ENGINE EXCHANGE
Upon not less than five Business Days' prior written notice to Lessor
(with a copy to Owner Participant), Lessee may replace any Engine leased
hereunder with another engine (the "EXCHANGED Engine") meeting the requirements
of ss. 10.2.2. Such Exchanged Engine shall be deemed to be a "Replacement
Engine", and Lessor and Lessee shall comply with the provisions of ss. 10.3 with
regard to the Exchanged Engine and the Engine so replaced.
10.3 CONDITIONS TO ANY REPLACEMENT
10.3.1 DOCUMENTS
Before or at the time of conveyance of title to any Replacement
Airframe or Replacement Engine to Lessor, Lessee shall take each of the
following actions:
(a) furnish Lessor with a full warranty (as to title) bill of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in form and
substance reasonably satisfactory to Lessor and Owner Participant, and cause
such Replacement Airframe to be duly registered in the name of Lessor pursuant
to the Transportation Code (or such other applicable Law of a jurisdiction other
than the United States where the Aircraft is registered in accordance with ss.
7.1.2);
(b) cause (1) a supplement to this Lease, subjecting such Replacement
Airframe or Replacement Engine to this Lease, duly executed by Lessee, to be
delivered to Lessor for execution, and, upon such execution, to be filed for
recordation with the FAA pursuant to the Transportation Code (or such other
applicable Law of a jurisdiction other than the United States where the Aircraft
is registered in accordance with ss. 7.1.2), and (2) such Financing Statements
and other filings, as Owner Participant reasonably request, duly executed by
Lessee and (to the extent applicable) Lessor (and Lessor shall execute and
deliver the same), to be filed in such locations as any such party reasonably
requests;
(c) furnish such evidence of compliance with the insurance provisions
of ss. 11 with respect to such Replacement Airframe or Replacement Engine as
Owner Participant reasonably requests;
(d) furnish an opinion or opinions of Lessee's counsel (which may be
Lessee's legal department) reasonably satisfactory to Owner Participant and
addressed to Lessor and Owner Participant to the effect that (1) such full
warranty bill of sale referred to in ss. 10.3.1(a) constitutes an effective
instrument for the conveyance of title to the Replacement Airframe or
Replacement Engine, and (2) in the case of a Replacement Airframe or of a
Replacement Engine substituted under ss. 10.2.3 in the absence of an Event of
Loss, (aa) Lessor will be entitled to the benefits of Section 1110 with respect
to the Replacement Airframe, and (bb) as to the U.S. federal income tax
consequences to Owner Participant of the replacement;
(e) furnish an opinion of Lessee's aviation law counsel reasonably
satisfactory to Owner Participant and addressed to Lessor and Owner Participant
as to the due registration of any such Replacement Airframe and the due filing
for recordation of each supplement to this Lease with respect to such
Replacement Airframe or Replacement Engine under the Transportation Code (or
such other applicable Law of a jurisdiction other than the United States where
the Aircraft is registered in accordance with ss. 7.1.2);
(f) with respect to the replacement of the Airframe and any Engine(s)
installed thereon at the time of the Event of Loss, if requested by Owner
Participant and at Lessee's expense, furnish a certified report of a qualified
independent aircraft appraiser, such report and such appraiser to be reasonably
satisfactory to Owner Participant, certifying that such Replacement Airframe and
any such Replacement Engine complies with the current value, estimated residual
value, utility, and remaining economic useful life requirements set forth in ss.
10.1.3(b); and
(g) take such other actions and furnish such other certificates and
documents as Lessor or Owner Participant may reasonably request in order that
such Replacement Airframe or Replacement Engine be duly and properly titled in
Lessor, leased hereunder and subjected to the Lien of the Trust Indenture to the
same extent as initially required under the Operative Agreements with respect to
the Airframe or Engine so replaced.
Lessor and Lessee understand and agree that if, at the time of any
replacement of the Airframe or any Engine(s) as contemplated in this ss. 10, the
Airframe was registered in a jurisdiction other than the United States, then the
requirements set forth above in this ss. 10.3.1 relating to compliance with the
requirements of the Transportation Code or the FAA shall be deemed to refer to
the comparable applicable Law of, and the Aviation Authority of, such other
jurisdiction.
10.3.2 OTHER OBLIGATIONS
(a) Lessor and Lessee agree that, when and after any Replacement
Airframe becomes the Airframe hereunder, and when and after any Replacement
Engine becomes an Engine hereunder, this Lease shall continue to be, and shall
be treated as, a lease for U.S. federal income tax purposes of such Replacement
Airframe and such Replacement Engine. Without limiting the foregoing, Lessee and
Lessor intend that Lessor shall, in all events, be entitled to the benefits of
Section 1110 with respect to any Replacement Airframe or Replacement Engine, and
Lessee and Lessor shall cooperate and take such action as the other may
reasonably request so as to ensure that Lessor shall be entitled to such
benefits.
(b) No Event of Loss to an Engine, or to an Airframe, shall result in,
or otherwise allow or permit (other than as provided in ss. 10.1.2(b)), any
reduction, deferral, discharge, or other change in the timing or amount of any
Rent payable by Lessee hereunder, and (subject to such ss. 10.1.2(b)) Lessee
shall pay all such Rent and other amounts as though such Event of Loss had not
occurred.
10.4 CONVEYANCE TO LESSEE
Upon compliance by Lessee with the applicable terms of ss.ss. 10.1.3,
10.2, and 10.3.1, Lessor will transfer to Lessee the Airframe or Engine(s), as
applicable, with respect to which such Event of Loss occurred, in accordance
with ss. 4.5.
10.5 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of damage or loss
not constituting an Event of Loss (the application of which is provided for in
ss. 11), received at any time by Lessor, Lessee, or any Permitted Sublessee from
any Government Entity or any other Person in respect of any Event of Loss will
be paid over to Lessor to be held in accordance with ss. 4.5 and applied as
follows:
10.5.1 REPLACEMENT OF AIRFRAME AND ENGINES
If such amounts are received with respect to the Airframe or any
Engine(s) installed thereon at the time of such Event of Loss, upon Lessee's
compliance with the applicable terms of ss. 10.1.3 with respect to the Event of
Loss for which such amounts are received, such amounts shall (subject to ss.
10.9) be paid over to, or retained by, Lessee.
10.5.2 LOSS OF ENGINE
If such amounts are received with respect to an Engine (other than an
Engine installed on the Airframe when the Airframe suffers an Event of Loss),
upon Lessee's compliance with the applicable terms of ss. 10.2.2 with respect to
the Event of Loss for which such amounts are received, such amounts shall
(subject to ss. 10.9) be paid over to, or retained by, Lessee.
10.5.3 PAYMENT OF LOSS
If such amounts are received, in whole or in part, with respect to the
Airframe, and Lessee makes, has made or is deemed to have made the election set
forth in ss. 10.1.2, such amounts shall be applied as follows:
(a) FIRST, if the sum described in ss. 10.1.2 has not then been paid in
full by Lessee, such amounts shall be paid to Lessor to the extent necessary to
pay in full such sum; and
(b) SECOND, the remainder, if any, shall (subject toss. 10.9) be paid to
Lessee.
10.6 REQUISITION OF AIRCRAFT FOR USE
If any Government Entity requisitions the use of the Airframe and the
Engines or engines installed thereon, and if the requisition does not constitute
an Event of Loss, Lessee shall promptly notify Lessor of such requisition, and
all of Lessee's obligations under this Lease shall continue to the same extent
as if such requisition had not occurred; PROVIDED, that, if the Airframe and
Engines or engines installed thereon are not returned to Lessor by Lessee at the
end of the Term or within 30 days thereafter, then Lessee shall be deemed to
have made the election set forth in ss. 10.1.2 with the effect that Lessee shall
be obligated to pay the Stipulated Loss Value and all other amounts payable
pursuant to ss. 10.1.2 with respect to the Aircraft as if an Event of Loss had
occurred as of the end of the Term. If such requisition does not constitute an
Event of Loss, Lessee shall be obligated to return the Airframe and Engine(s) or
engine(s) to Lessor pursuant to, and in all other respects to comply with the
provisions of, ss. 5 promptly upon their return by such Government Entity, and
Lessee shall pay (or cause to be paid) to Lessor upon such return an amount
equal to the average daily Basic Rent payable by Lessee during the Term for each
day after the end of the Term to but excluding the day of such return, up to a
maximum of 30 days, which payment may be made from any payments received by
Lessor or Lessee from any Government Entity for the use of the Aircraft
(notwithstanding any language to the contrary contained in ss. 10.8).
10.7 REQUISITION OF AN ENGINE FOR USE
If any Government Entity requisitions for use any Engine but not the
Airframe, Lessee will replace such Engine by complying with ss. 10.2 and ss.
10.3 to the same extent as if an Event of Loss with respect to that Engine had
occurred, and any payments received by Lessor or Lessee from such Government
Entity with respect to such requisition shall be paid or retained in accordance
with ss. 10.5.2.
10.8 APPLICATION OF PAYMENTS
All payments received by Lessor or Lessee, or any Permitted Sublessee,
from any Government Entity for the use of the Airframe and Engine(s) or
engine(s) installed thereon during the Term shall be paid over to, or retained
by, Lessee, and all payments received by Lessor or Lessee from any Government
Entity for the use of the Airframe and Engine(s) or engine(s) installed thereon
after the Term shall be paid over to, or retained by, Lessor; PROVIDED, that, if
such requisition constitutes an Event of Loss, then all such payments shall be
paid over to Lessor and held as provided in ss. 10.5.
10.9 APPLICATION OF PAYMENTS DURING DEFAULT
Any amount described in this ss. 10 that is payable or creditable to,
or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if a Special Default or Event of Default exists when such payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor as security for Lessee's obligations under this Lease and the
other Lessee Operative Agreements, and shall be invested pursuant to ss. 4.4
hereof, unless and until such amount is applied, at the option of Lessor, or
upon Lessee's written request to Lessor, from time to time during the existence
of an Event of Default, to Lessee's obligations under this Lease as and when due
(any such application shall be made to such Lessee obligations as Lessor
determines in its sole discretion). If and when no Special Default and no Event
of Default exists, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this ss. 10.9.
11. INSURANCE
11.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
11.2 INSURANCE FOR OWN ACCOUNT
Nothing in ss. 11 shall limit or prohibit (a) Lessee from maintaining
the policies of insurance required under Annex D with higher limits than those
specified in Annex D, or (b) Lessor or Owner Participant from obtaining
insurance for its own account (and any proceeds payable under such separate
insurance shall be payable as provided in the policy relating thereto);
PROVIDED, that no insurance may be obtained or maintained that would limit or
otherwise adversely affect the coverage of or increase the cost of any insurance
required to be obtained or maintained by Lessee pursuant to this ss. 11 and
Annex D.
11.3 INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE
During the period of any Government Entity's requisition for use of the
Aircraft or any Engine, Lessor, and Owner Participant shall accept, in lieu of
insurance against any risk with respect to the Aircraft described in Annex D,
indemnification from, or insurance provided by, the U.S. Government, or upon
Owner Participant's written consent, other Government Entity, against such risk
in an amount that, when added to the amount of insurance (including permitted
self-insurance), if any, against such risk that Lessee (or any Permitted
Sublessee) may continue to maintain, in accordance with this ss. 11, during the
period of such requisition, shall be at least equal to the amount of insurance
against such risk otherwise required by this ss. 11.
11.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds received as a
result of the occurrence of an Event of Loss to the Aircraft or any Engine under
policies required to be maintained by Lessee pursuant to this ss. 11 will be
applied in accordance with ss. 10.5. All proceeds of insurance required to be
maintained by Lessee, in accordance with ss. 11 and ss. B of Annex D, in respect
of any property damage or loss not constituting an Event of Loss to the
Aircraft, the Airframe, or any Engine will be applied to pay (or to reimburse
Lessee) for repairs or for replacement property incorporated in accordance with
ss. 8.1, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Lessee.
11.5 APPLICATION OF PAYMENTS DURING DEFAULT
Any amount described in this ss. 11 that is payable or creditable to,
or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if a Special Default or Event of Default exists when such payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor as security for Lessee's obligations under this Lease, and shall
be invested pursuant to ss. 4.4 unless and until such amount is applied, at
Lessor's option, or upon Lessee's written request to Lessor, from time to time
during the existence of an Event of Default, to Lessee's obligations under this
Lease and the other Lessee Operative Agreements as and when due (any such
application to be made to such obligations of Lessee as Lessor determines in its
sole discretion). If and when no Special Default and Event of Default exists,
such amount shall be paid to Lessee to the extent not previously applied in
accordance with this ss. 11.5.
12. INSPECTION
(a) At all reasonable times Lessor, Owner Participant, or their
authorized representatives (the "INSPECTING PARTIES") may (not more than once
every 12 months by each such Person, unless an Event of Default exists or during
the last 12 months of the Base Term and any Renewal Term, then such inspection
right shall not be so limited) inspect the Aircraft and the Aircraft Documents,
and any such Inspecting Party may make copies of the Aircraft Documents not
reasonably deemed confidential by Lessee or a Permitted Sublessee.
(b) Any inspection of the Aircraft hereunder shall be limited to a
visual, walk-around inspection that may include going on board the Aircraft and
visually examining the contents of any open panels, bays, or other components of
the Airframe or Engines, but shall not include the opening of any unopened
panels, bays, or other components of the Aircraft, and no such inspection shall
interfere with Lessee's or any Permitted Sublessee's maintenance or operation of
the Aircraft, the Airframe, or any Engine.
(c) Lessor and Owner Participant shall not have any duty or liability
to make, or any duty or liability by reason of not making, any such visit,
inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection
with any such inspection (including the cost of any copies made in accordance
with ss. 12(a)), except following an Event of Default, in which case Lessee will
bear the costs of inspection and pay the same on demand.
(e) Upon Lessor's request, during the last 12 months of the Base Term
and any Renewal Term, Lessee will give 10 Business Days' prior written notice to
Lessor and Owner Participant of any scheduled maintenance checks, inspections,
surveys, or repair visits. During such period, Owner Participant or its
representative may attend any and all such maintenance checks, inspections,
surveys, or repair visits.
13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 IN GENERAL
This Lease and the other Lessee Operative Agreements shall bind and
benefit Lessor and Lessee and their successors and permitted assigns. Except as
otherwise expressly permitted by the terms of the Lease or any other Lessee
Operative Agreement, Lessee will not, without the prior written consent of Owner
Participant, assign any of its rights under this Lease.
13.2 MERGER OF LESSEE
13.2.1 IN GENERAL
Lessee shall not consolidate with or merge into any other Person under
circumstances in which Lessee is not the surviving corporation, or convey,
transfer, or lease in one or more transactions all or substantially all of its
assets to any other Person, unless:
(a) such Person is organized, existing, and in good standing under the Laws
of the United States, any state of the United States, or the District Columbia,
and, upon consummation of such transaction, such Person will be a U.S. Air
Carrier;
(b) such Person executes and delivers to Lessor and Owner Participant a
duly authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Participant, containing an effective
assumption by such Person of the due and punctual performance and observance of
each covenant, agreement, and condition in the Lessee Operative Agreements to be
performed or observed by Lessee;
(c) such Person makes such filings and recordings with the FAA pursuant to
the Transportation Code as shall be necessary to evidence such consolidation or
merger;
(d) Lessee furnishes Lessor and Owner Participant an opinion of counsel
reasonably satisfactory to Owner Participant to the effect that such
consolidation or merger has satisfied at the closing of such consolidation or
merger items (a), (b) and (c) above;
(e) immediately after giving effect to such consolidation or merger, no
Special Default or Event of Default exists;
(f) unless Owner Participant otherwise consents, immediately after
giving effect to such consolidation or merger, such Person will have a tangible
net worth of at least the lesser of (i) 100% of Lessee's tangible net worth
immediately prior to such consolidation or merger, and (ii) the greater of (aa)
the tangible net worth of Lessee as of March 31, 2000, and (bb) 65% of Lessee's
tangible net worth immediately prior to such consolidation or merger; and
(g) upon such consolidation or merger becoming effective, Lessor will
enjoy the same degree of protection under Section 1110 with respect to the
Aircraft as Lessor enjoyed prior to such merger.
13.2.2 EFFECT OF MERGER
Upon any such consolidation or merger of Lessee with or into, or the
conveyance, transfer, or lease by Lessee of all or substantially all of its
assets to, any Person in accordance with this ss. 13.2, such Person will succeed
to, and be substituted for, and may exercise every right and power of, Lessee
under the Lessee Operative Agreements with the same effect as if such Person had
been named as "Lessee" therein. No such consolidation, merger, conveyance,
transfer, or lease shall have the effect of releasing Lessee or such Person from
any of Lessee's obligations, liabilities, covenants, or undertakings under the
Lessee Operative Agreements.
13.3 SUCCESSOR OWNER TRUSTEE
If any successor is appointed to serve as Owner Trustee pursuant to the
terms of the Participation Agreement and the Trust Agreement, such successor
shall, upon written notice by such successor to Lessee, succeed to all the
rights, powers, and title of Lessor hereunder, and shall be deemed to be
"Lessor" and the owner of the Aircraft and the other assets of the Trust Estate
for all purposes hereof, without the need for any consent or approval by Lessee
and without in any way altering the terms of this Lease or Lessee's obligations
hereunder. An appointment and designation of a successor as Owner Trustee shall
not exhaust the right to appoint and designate further successors or additional
trustees as Owner Trustees pursuant to the Participation Agreement and the Trust
Agreement, and such right may be exercised repeatedly as long as this Lease
shall be in effect.
14. EVENTS OF DEFAULT
The existence of any one or more of the following circumstances,
conditions, acts, or events, for any reason whatsoever and whether any such
circumstance, condition, act, or event is voluntary or involuntary or comes
about or is effected by operation of Law or pursuant to or in compliance with
any judgment, decree, order, rule, or regulation of any Government Entity, shall
constitute an Event of Default so long as it shall not have been remedied:
14.1 PAYMENTS
Lessee fails to pay any amount of Basic Rent, Stipulated Loss Value, or
Termination Value within five Business Days after it becomes due; or Lessee
fails to pay any Supplemental Rent (other than Stipulated Loss Value or
Termination Value) when due and such failure continues for a period in excess of
ten Business Days from and after the date of any written notice to Lessee from
Lessor of the failure to make such payment when due.
14.2 INSURANCE
Lessee fails to carry and maintain, or cause to be carried and
maintained, insurance on and in respect of the Aircraft in accordance with the
provisions of ss. 11.
14.3 OTHER COVENANTS
Lessee fails to observe or perform (or cause to be observed and
performed) in any material respect any other covenant, agreement, or obligation
of Lessee in any Lessee Operative Agreement, and such failure continues
unremedied for a period of 30 days from and after the date of written notice
thereof to Lessee (or the Guarantor, as the case may be) from Lessor or Owner
Participant, unless such failure is capable of being corrected and Lessee is
diligently proceeding to correct such failure, and such failure poses no
imminent and material risk of Lessor or Owner Participant losing their
respective interests in the Aircraft, in which case there shall be no Event of
Default unless and until such failure continues unremedied for a period of 270
days after receipt of such notice; PROVIDED, that in all events Lessee must
remedy such failures within 90 days of Lessee's obtaining access to the
Aircraft.
14.4 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee in any Lessee Operative
Agreement (other than Lessee's representations and warranties in the Tax
Indemnity Agreement) (a) proves to have been untrue or inaccurate in any
material respect as of the date made, (b) is material at the time in question,
and (c) remains uncured (to the extent of the adverse impact of such
incorrectness on the interest of Owner Participant or Lessor) for a period in
excess of 30 days from and after the date of written notice thereof from Lessor
or Owner Participant to Lessee (or Guarantor, as the case may be); provided that
clause (c) above will not apply to Lessee's representations as to the financial
condition of Lessee.
14.5 BANKRUPTCY AND INSOLVENCY
(a) Lessee or Guarantor consents to the appointment of or the taking of
possession by a receiver, trustee, or liquidator of itself or of substantially
all of its property, or Lessee or Guarantor admits in writing its inability to
pay its debts generally as they come due, or does not pay its debts generally as
they become due or makes a general assignment for the benefit of creditors, or
Lessee or Guarantor files a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization, liquidation or other relief in a
case under any bankruptcy Laws or other insolvency Laws (as in effect at such
time), or Lessee or Guarantor seeks relief by voluntary petition, answer, or
consent under the provisions of any other bankruptcy or other similar Law
providing for the reorganization or winding-up of corporations (as in effect at
such time); or
(b) an order, judgment, or decree is entered by any court of competent
jurisdiction appointing, without Lessee's or Guarantor's consent, a receiver,
trustee, or liquidator of Lessee or Guarantor or of substantially all of the
property of Lessee or Guarantor, or substantially all of Lessee's or Guarantor's
property is sequestered, and any such order, judgment, or decree of appointment
or sequestration remains in force undismissed, unstayed, and unvacated for a
period of 90 days after the date of entry thereof; or
(c) a petition against Lessee or Guarantor in a case under any
bankruptcy Laws or other insolvency Laws (as in effect at such time) is filed
and not withdrawn or dismissed within 90 days thereafter, or if, under the
provisions of any Law providing for reorganization or winding-up of corporations
that applies to Lessee or Guarantor, any court of competent jurisdiction assumes
jurisdiction, custody, or control of Lessee or Guarantor or of substantially all
of its property, and such jurisdiction, custody or control remains in force
unrelinquished, unstayed, and unterminated for a period of 90 days.
14.6 REPUDIATION OR INVALIDITY OF GUARANTEE
Either (a) Guarantor repudiates its obligations, in whole or in part,
under the Guarantee; or (b) the Guarantee ceases to be in full effect, is
determined to be invalid, or becomes unenforceable for any reason.
15. REMEDIES AND WAIVERS
15.1 REMEDIES
If any Event of Default exists, Lessor may, at its option and at any
time and from time to time, exercise any one or more of the following remedies
as Lessor in its sole discretion shall elect:
15.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to Lessee, to
return promptly, and Lessee shall return promptly, the Airframe and Engines as
Lessor shall so demand, to Lessor or its order in the manner and condition
required by, and otherwise in accordance with, all the provisions of ss. 5, as
if the Airframe or Engine were being returned at the end of the Term or Lessor,
at its option, may enter upon the premises where the Airframe or any Engine, or
any Part thereof, is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing to
Lessor for or by reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise.
15.1.2 SALE AND USE
Lessor may sell the Airframe or any Engine at public or private sale,
at such time(s) and place(s), and to such Person(s) (including Owner
Participant), as Lessor determines; or Lessor may otherwise dispose of, hold,
use, operate, lease to others, or keep idle the Airframe or any Engine, as
Lessor, in its sole discretion, shall determine, all free and clear of any
rights of Lessee and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with respect thereto, except as
hereinafter set forth in this ss. 15, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor's
damages suffered or incurred as a result of the subject Event of Default. Lessor
shall give to Lessee at least 15 days' prior written notice of the date fixed
for any public sale of the Airframe or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.
15.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under ss. 15.1.1 or ss. 15.1.2 with respect to
the Airframe or any Engine, or any Part thereof, Lessor, by written notice to
Lessee specifying a payment date (which shall be the first Stipulated Loss Value
Date occurring not less than 10 days after the date of such notice), may demand
that Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the payment
date so specified and in the manner and in funds of the type specified in ss.
3.3, as liquidated damages for loss of a bargain and not as a penalty (in lieu
of the Basic Rent (as applicable) for the Aircraft in respect of all periods
commencing on or after the date specified for payment in such notice), the
following amounts:
(a) all unpaid Basic Rent due at any time before the Stipulated Loss Value
Date specified in such notice; plus
(b) whichever of the following amounts Lessor, in its sole discretion
specifies in such notice:
(1) an amount equal to the excess (if any) of the present
value, computed as of the Stipulated Loss Value Date specified in such
notice, discounted to such date at a rate equal to the SLV Rate
compounded quarterly, of all unpaid Basic Rent during the
then-remaining portion of the Base Term (or, if a Renewal Term has
commenced, of all unpaid Basic Rent during the remaining portion of
such Renewal Term) over the Fair Market Rental Value of the Aircraft
for the remainder of the Term, after discounting such Fair Market
Rental Value to present value (at a rate per annum equal to the SLV
Rate, compounded quarterly) as of the Stipulated Loss Value Date
specified in such notice, or
(2) an amount equal to the excess (if any) of the Stipulated
Loss Value for the Aircraft, computed as of the Stipulated Loss Value
Date specified in such notice, over the Fair Market Sales Value of the
Aircraft, as of the Stipulated Loss Value Date specified in such
notice; plus
(c) interest on the amounts specified in the foregoing clause (a) at
the Past-Due Rate from and including the date on which any such amount was due
to the date of payment of such amount; plus
(d) interest on the amount specified in the foregoing clause (b)(1) or
(b)(2), according to Lessor's election, at the Past-Due Rate from and including
the Stipulated Loss Value Date specified in such notice to the date of payment
of such amount.
15.1.4 LIQUIDATED DAMAGES UPON SALE
If, pursuant to ss. 15.1.2 or applicable Law, Lessor has sold the
Airframe or any Engine, then, in lieu of exercising its rights under ss. 15.1.3
with respect to the Aircraft, the Airframe, or any Engine (as applicable),
Lessor may, if Lessor so elects, upon giving written notice to Lessee, demand
that Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the date of
such sale and in the manner and in funds of the type specified in ss. 3.3, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent for the Aircraft in respect of all periods commencing on or after the
date of such sale), the following amounts:
(a) all unpaid Basic Rent due at any time before the Stipulated Loss Value
Date on or immediately preceding the date of such sale; plus
(b) an amount equal to the excess, if any, of (1) the Stipulated Loss Value
of the Aircraft, computed as of the Stipulated Loss Value Date referred to in
the foregoing clause (a), over (2) the proceeds of such sale; plus
(c) if the date of such sale is not a Stipulated Loss Value Date, an amount
equal to interest, at the rate per annum equal to the SLV Rate, on the amount of
Stipulated Loss Value referred to in clause (b)(1) above, from and including the
Stipulated Loss Value Date referred to in the foregoing clause (a) to the date
of such sale; plus
(d) all brokerage and other out-of-pocket fees and expenses incurred by
Lessor and Owner Participant in connection with such sale; plus
(e) interest on the amounts specified in the foregoing clause (a) at the
Past-Due Rate from and including the date on which any such amount was due to
the date of payment of such amount; plus
(f) interest on the sum of the amounts specified in the foregoing clauses
(b), (d) and (e) at the Past-Due Rate from and including the date of such sale
to the date of payment of such amounts.
15.1.5 RESCISSION
Lessor may (a) at its option, rescind or terminate this Lease as to the
Aircraft, the Airframe, or any Engine, or any Part thereof, or (b) exercise any
other right or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof.
15.1.6 OTHER REMEDIES
In addition to the foregoing remedies (but without duplication of
amounts otherwise paid under this ss. 15), Lessee shall be liable for any and
all unpaid Rent due hereunder before, during, or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor and Owner
Participant, including interest on overdue Rent at the rate as herein provided,
incurred by reason of the existence of any Event of Default or the exercise of
Lessor's remedies with respect thereto, including all reasonable costs and
expenses incurred in connection with the return of the Airframe or any Engine in
accordance with the terms of ss. 5, or in placing the Airframe or any Engine in
the condition and airworthiness required by ss. 5.
15.2 LIMITATIONS UNDER CRAF
Notwithstanding the provisions of ss. 15.1, during any period that the
Aircraft, the Airframe, or any Engine is subject to CRAF in accordance with the
provisions of ss. 7.2.3 and in the possession of the U.S. Government, Lessor
shall not, as a result of any Event of Default, exercise its remedies hereunder
in such manner as to limit Lessee's control under this Lease (or any Permitted
Sublessee's control under any Permitted Sublease) of the Aircraft, the Airframe,
or such Engine, unless Lessor gives at least 30 days' (or such other period as
may then apply under CRAF) written notice of default hereunder by registered or
certified mail to Lessee (and any Permitted Sublessee) with a copy to the
Contracting Officer Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given under the
contract governing Lessee's (or any Permitted Sublessee's) participation in CRAF
with respect to the Aircraft, the Airframe, or any Engine.
15.3 RIGHT TO PERFORM FOR LESSEE
If Lessee (a) fails to make any payment of Rent required to be made by
it hereunder or (b) fails to perform or comply with any of its agreements
contained herein and such failure under this clause (b) continues for a period
of 30 days after the earlier of Lessor or Owner Participant, giving written
notice thereof to Lessee, or (c) fails to maintain the insurance required
hereunder and such failure under this clause (c) continues for 10 days after
such notice, then Lessor or Owner Participant may (but shall not be obligated
to) make such payment or perform or comply with such agreement, and the amount
of such payment and the amount of the expenses of Lessor or Owner Participant
incurred in connection with such payment or the performance of or compliance
with such agreement (as applicable), together with interest thereon at the
Past-Due Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand
by Lessor or Owner Participant, whichever is entitled thereto. No such payment,
performance, or compliance shall be deemed to waive any Default or otherwise
relieve Lessee of its obligations with respect thereto.
15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE AND FAIR MARKET SALES VALUE
For the purpose of this ss. 15, the Fair Market Rental Value or the
Fair Market Sales Value of the Aircraft, the Airframe, or any Engine shall be
determined on an "as is, where is" basis and shall take into account customary
brokerage and other out-of-pocket fees and expenses which typically would be
incurred in connection with a re-lease or sale of such an aircraft, airframe, or
engine. Any such determination shall be made by an Appraiser selected by Lessor,
and the costs and expenses associated therewith shall be borne by Lessee;
PROVIDED, that, if Lessor does not obtain possession of the Aircraft pursuant to
this ss. 15, an Appraiser shall not be appointed, and Fair Market Rental Value
and Fair Market Sales Value for purposes of this ss. 15 shall be zero.
15.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit in any way
any right, power, remedy, or privilege of Lessor hereunder or under any other
Operative Agreement or now or hereafter existing at law or in equity. Each and
every right, power, remedy, and privilege hereby given to, or retained by,
Lessor in this Lease shall be in addition to and not in limitation of every
other right, power, remedy, and privilege given under the Operative Agreements
or now or hereafter existing at law or in equity. Each and every right, power,
remedy, and privilege of Lessor under this Lease and any other Operative
Agreement may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by Lessor. All such rights, powers,
remedies, and privileges shall be cumulative and not mutually exclusive, and the
exercise of one shall not be deemed a waiver of the right to exercise any other.
Lessee hereby waives to the extent permitted by applicable Law any right which
it may have to require Lessor to choose or elect remedies.
16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay all Rent payable hereunder shall be
absolute and unconditional, and shall not be affected by any event or
circumstance, including: (1) any setoff, counterclaim, recoupment, defense, or
other right that Lessee may have against Lessor, Owner Participant, or any other
Person for any reason whatsoever; (2) any defect in the title, airworthiness,
condition, design, operation, or fitness for use of, or any damage to or loss or
destruction of, the Aircraft, the Airframe, or any Engine, or any interruption
or cessation in the use or possession thereof by Lessee for any reason
whatsoever; (3) any insolvency, bankruptcy, reorganization, or similar
proceedings by or against Lessee or any other Person; or (4) any other
circumstance, happening, or event whatsoever, whether or not similar to any of
the foregoing.
(b) 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 to pay 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 that it may now have or that 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.
(c) Nothing set forth in this ss. 16 shall be construed to prohibit
Lessee from separately pursuing any claim that it may have from time to time
against Lessor or any other Person with respect to any matter (other than the
absolute and unconditional nature of Lessee's obligations hereunder to pay Rent,
and other than the matters specified in paragraphs (a) and (b) above).
17. RENEWAL AND PURCHASE OPTIONS
17.1 NOTICES GENERALLY
(a) Unless otherwise provided by this ss. 17, at least 270 days and no
more than 365 days before the Scheduled Expiration Date for the Base Term or
then-current Renewal Term, Lessee may provide irrevocable written notice to
Lessor (a "PRELIMINARY NOTICE"), with a copy of such notice to Owner
Participant, that Lessee intends to exercise the option either to extend the
leasing of the Aircraft for a Renewal Term pursuant to ss. 17.2 or to purchase
the Aircraft on the Scheduled Expiration Date pursuant to ss. 17.3.
(b) If Lessee gives a Preliminary Notice, then Lessee shall provide a
further notice, at least 30 days before the following Scheduled Expiration Date,
specifying which option it intends to elect, pursuant to ss. 17.2.1 or ss.
17.3.1 (as applicable). If Lessee fails to give such further notice at least 30
days before such Scheduled Expiration Date, Lessee shall be deemed to have
elected its option to purchase the Aircraft pursuant to ss. 17.3.1.
17.2 RENEWAL OPTIONS
17.2.1 RENEWAL NOTICE
(a) If Lessee has given a Preliminary Notice, as specified in ss. 17.1,
and subject to the terms and conditions of this ss. 17.2, Lessee may exercise
its option to extend the leasing of the Aircraft hereunder until the following
Scheduled Expiration Date, on the same terms (except as contemplated by this ss.
17) as in the Lessee Operative Agreements with respect to the Base Term, by
delivering a notice (a "RENEWAL NOTICE") to Lessor not less than 30 days before
the Scheduled Expiration Date.
(b) Notwithstanding anything to the contrary in any Operative Agreement:
(1) No Preliminary Notice or Renewal Notice shall be binding
on Lessor or oblige Lessor to extend the leasing of the Aircraft
hereunder for a Renewal Term if any Special Default or Event of Default
exists on and as of the date that such Renewal Term would otherwise
commence.
(2) A Renewal Notice shall be revocable by Lessee until 10
Business Days after the Renewal Rent is determined in accordance with
ss. 17.2.2, and unless revoked by written notice by Lessee to Lessor
shall thereafter become irrevocable and shall constitute an
unconditional obligation of Lessee to extend the leasing of the
Aircraft hereunder for the Renewal Term to which such Renewal Notice
relates. If Lessee revokes a Renewal Notice as indicated above, Lessee
will be deemed to have irrevocably elected its option to purchase the
Aircraft pursuant to ss. 17.3.1.
(3) Lessee shall not be entitled to give any Renewal Notice if
it (aa) has not delivered a Preliminary Notice to Lessor, (bb) has
delivered a Purchase Notice to Lessor, or (cc) has previously delivered
four Renewal Notices to Lessor.
17.2.2 RENEWAL RENT
(a) During each Renewal Term, Lessee shall pay to Lessor on each
Payment Date, in the manner and in the funds of the type specified in ss. 3.3,
Renewal Rent in arrears.
(b) The Renewal Rent payable by Lessee on each Payment Date during each
Renewal Term shall be the Fixed Rate (or, if less, the Applicable Percentage of
the Fair Market Rental Value). Any such Fair Market Rental Value shall be
determined not more than 120 days and not less than 100 days before the first
day of such Renewal Term by mutual agreement of Lessor and Lessee or, if they do
not agree, by an appraisal in accordance with ss. 17.4.
17.2.3 STIPULATED LOSS AND TERMINATION VALUES
(a) For any Renewal Term, Stipulated Loss Value Dates and Termination
Value Dates shall be extended throughout such Renewal Term on the same days and
for the same months as during the Base Term.
(b) Stipulated Loss Value and Termination Value amounts that are
payable during any such Renewal Term shall be determined at the same time that
the Renewal Rent for such Renewal Term is determined under ss. 17.2.2.
Stipulated Loss Values and Termination Values for any such Renewal Term shall,
commencing on the first day of such Renewal Term, be equal to the Fair Market
Sales Value of the Aircraft on such day, and shall decline ratably on a monthly
basis to the salvage value of the Aircraft as of the last day of its remaining
useful life.
(c) For purposes of calculating Stipulated Loss Value and Termination
Value amounts applicable during any Renewal Term, the "salvage value" and
"useful life" shall be determined by mutual agreement of Lessor and Lessee, or,
if they do not agree, by an appraisal in accordance with ss. 17.4.
17.3 PURCHASE OPTIONS
17.3.1 PURCHASE NOTICE
(a) Provided that at the time of such election no Special Default or Event
of Default exists, Lessee may, subject to ss. 17.1 and this ss. 17.3, elect to
purchase the Aircraft: (1) on the EBO Date as shown on Schedule 5 at the price
indicated thereon; (2) on any Purchase Date, at a purchase price equal to the
Fair Market Sales Value of the Aircraft computed as of the Purchase Date; or (3)
(aa) on any Payment Date occurring after the Tax Attribute Period, if a
Burdensome Indemnity Payment not waived by Owner Participant shall become due
and owing, if Lessee did not cause such indemnity with the intent of permitting
such purchase and if such purchase would eliminate such indemnity on a future
basis, or (bb) on any Payment Date after the EBO Date, if Lessee has committed
to (but not commenced) a Significant Expenditure, then (whether as to clause
(aa) or (bb)) at a purchase price equal to the greater of (x) the Fair Market
Sales Value of the Aircraft computed as of such Payment Date (not including any
portion of the Fair Market Sales Value of the Aircraft attributable to any
Significant Expenditure) and (y) the Termination Value for the Aircraft computed
as of such Payment Date.
(b) Lessee may exercise such option to purchase the Aircraft, by delivery
of a written notice (a "PURCHASE NOTICE") to Lessor (with a copy of such
Purchase Notice to Owner Participant) not less than 60 days and no more than 365
days before the EBO Date (for a purchase under ss. 17.3.1(a)(1)), not less than
30 days and no more than 365 days before the Purchase Date (for a purchase under
ss. 17.3.1(a)(2)), and not less than 120 days and no more than 365 days before
the Payment Date specified in such Purchase Notice (for a voluntary termination
purchase under ss. 17.3.1(a)(3)).
(c) Notwithstanding anything to the contrary in any Operative Agreement:
(1) Any Purchase Notice delivered or deemed to have been
delivered pursuant to ss. 17.3.1(a)(1) or (2) shall be irrevocable and
shall constitute an unconditional obligation of Lessee to purchase the
Aircraft under this ss. 17.3; and any Purchase Notice delivered
pursuant to ss. 17.3.1(a)(3), shall be revocable until 10 Business Days
after the determination of the Fair Market Sales Value in accordance
with ss. 17.3.2, and unless so revoked by written notice by Lessee to
Lessor (with a copy to Owner Participant) shall thereafter become
irrevocable and shall constitute an unconditional obligation of Lessee
to purchase the Aircraft under this ss. 17.3.
(2) Lessee shall not be entitled to give any Purchase Notice pursuant to
ss. 17.3.1(a)(2) if it has not delivered a Preliminary Notice.
17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE
The Fair Market Sales Value of the Aircraft shall be determined not
more than 120 days and not less than 100 days before the applicable Purchase
Date or Payment Date by mutual agreement of Lessor and Lessee, or, if they shall
be unable to agree, by an appraisal in accordance with ss. 17.4.
17.3.3 PAYMENTS BY LESSEE
(a) If Lessee elects to purchase the Aircraft pursuant to clause (1) of ss.
17.3.1(a), then on the EBO Date Lessee shall pay to Lessor in immediately
available funds:
(1) all unpaid Basic Rent due before the EBO Date; plus
(2) the EBO Price; plus
(3) all Supplemental Rent then due, and any sales or transfer tax then due
in connection with such purchase.
(b) If Lessee elects to purchase the Aircraft pursuant to clause (2) of ss.
17.3.1(a), then on the applicable Purchase Date Lessee shall pay to Lessor in
immediately available funds:
(1) all unpaid Basic Rent due on or before such Purchase Date; plus
(2) the applicable purchase price for the Aircraft; plus
(3) all Supplemental Rent then due, and any sales or transfer tax then due
in connection with such purchase.
(c) If Lessee elects to purchase the Aircraft pursuant to clause (3) of ss.
17.3.1(a), then on the Payment Date on which Lessee elects to purchase the
Aircraft, Lessee shall pay to Lessor in immediately available funds:
(1) all unpaid Basic Rent due on or before such Payment Date; plus
(2) the purchase price of the Aircraft pursuant to such clause (3); plus
(3) all Supplemental Rent then due, and any sales or transfer tax then due
in connection with such purchase.
17.3.4 TITLE
Upon full and final payment by Lessee of (a) the applicable amount
payable under ss. 17.3.3, (b) on an after-tax basis, all out-of-pocket fees and
expenses (including reasonable fees and expenses of counsel) incurred by Lessor
and Owner Participant in connection with such purchase and invoiced to Lessee
prior thereto, and (c) all other amounts then due and payable by Lessee under
the Operative Agreements, Lessor will transfer to Lessee title to the Aircraft
in accordance with ss. 4.5.
17.3.5 INSTALLMENT EBO PURCHASE
Lessee and Lessor acknowledge that at Lessee's election the EBO Price
may be payable in installments as provided in Schedule 5. Lessor and Lessee
agree that if Lessee elects to purchase the Aircraft pursuant to ss.
17.3.1(a)(1) and elects to pay the EBO Price in installments, Lessee agrees to
provide security to Lessor to secure the unpaid balance of the EBO Price, which
security shall be required to be in an amount and otherwise in form and
substance reasonably satisfactory to Lessor and Owner Participant. Subject to
the foregoing, upon payment of the initial installment of the EBO Price as set
forth in Schedule 5 together with all amounts otherwise payable pursuant to ss.
17.3.3(a) and ss. 17.3.4, Lessor will transfer title to the Aircraft in
accordance with ss. 4.5.
17.4 APPRAISALS
Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this ss. 17, Lessee
and Lessor shall appoint a mutually-satisfactory Appraiser to conduct such
appraisal. If Lessee and Lessor fail to agree upon a satisfactory Appraiser,
then each shall promptly appoint a separate Appraiser, and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor does not so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within seven days after the appointment of
the latter of such two Appraisers, they do not agree upon such amount, such two
Appraisers shall, within eight days after such latter appointment, appoint a
third Appraiser, and such amount shall be determined by such three Appraisers,
who shall make their separate appraisals within seven days following the
appointment of the third Appraiser, and any determination so made shall be
conclusive and binding upon Lessor and Lessee. If no such third Appraiser is
appointed within such eight-day period, either Lessor or Lessee may apply to the
American Arbitration Association to make such appointment, and both parties
shall be bound by such appointment. The foregoing appraisal procedure shall in
any event be completed no less than 125 days before the end of the Base Term or
any Renewal Term (unless such procedure is undertaken in connection with ss. 15
or ss. 17.3.1(a), in which case it shall be completed promptly). If three
Appraisers are appointed and the difference between the determination which is
further from the middle determination and the middle determination is more than
125% of the difference between the middle determination and the third
determination, then such further determination shall be excluded, the remaining
two determinations shall be averaged, and such average shall be final and
binding upon Lessor and Lessee. Otherwise, the average of all three
determinations shall be final and binding upon Lessor and Lessee. The fees and
expenses of all such Appraisers and such appraisal procedure shall be borne
equally by Lessee and Lessor.
18. MISCELLANEOUS
18.1 AMENDMENTS
No provision of this Lease may be amended, supplemented, waived,
modified, discharged, terminated, or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this Lease
that it purports to amend, supplement, waive, modify, discharge, terminate, or
otherwise vary and is signed by Lessor and Lessee. Each such amendment,
supplement, waiver, modification, discharge, termination, or variance shall be
effective only in the specific instance and for the specific purpose for which
it is given. No provision of this Lease shall be varied or contradicted by oral
communication, course of dealing or performance, or other manner not set forth
in an agreement, document, or instrument in writing and signed by Lessor and
Lessee.
18.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal, or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction, and (b) such invalidity, illegality, or unenforceability
shall not affect the validity, legality, or enforceability of such provision in
any other jurisdiction. If, however, any Law pursuant to which such provisions
are held invalid, illegal, or unenforceable may be waived, Lessor and Lessee
hereby waive such Law to the full extent permitted, to the end that this Lease
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
18.3 THIRD-PARTY BENEFICIARY
This Lease is not intended to provide, and shall not provide, any
Person not a party hereto (other than Owner Participant and the Persons referred
to in ss. 4.6) with any rights of any nature whatsoever against either of the
parties hereto, and no Person not a party hereto (other than Owner Participant
and the Persons referred to in ss. 4.6) shall have any right, power, or
privilege in respect of this Lease, or have any benefit or interest arising out
of this Lease.
18.4 REPRODUCTION OF DOCUMENTS
This Lease (including all annexes, schedules, and exhibits hereto) and
all agreements, instruments, and documents relating hereto, including (a)
consents, waivers, and modifications that may hereafter be executed, and (b)
financial statements, certificates, and other information previously or
hereafter furnished to any party hereto, may be reproduced by such party by any
photographic, photostatic, microfilm, micro-card, miniature photographic, or
other similar process, and such party may destroy any original documents so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by such
party in the regular course of business), and any enlargement, facsimile, or
further reproduction of such reproduction likewise is admissible in evidence.
18.5 COUNTERPARTS
This Lease and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate signature pages
bound together into one or more counterparts), each fully-executed set of which
when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument. The
single fully-executed original of this Lease marked "Original" on the signature
page hereof is the original for chattel paper purposes, and all other
counterparts are duplicates for chattel paper purposes and are marked
"duplicate" on the signature page hereof. No security interest in this Lease may
be perfected by the possession of any counterpart other than the "Original".
18.6 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers, and other
communications required or permitted to be made, given, furnished, or filed
hereunder shall be made, given, furnished, or filed, and shall become effective,
in the manner prescribed in ss. 15.7 of the Participation Agreement.
18.7 GOVERNING LAW
THIS LEASE 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 IS BEING DELIVERED IN THE
STATE OF NEW YORK.
18.8 NO WAIVER
No failure on the part of Lessor to exercise, and no delay by Lessor in
exercising, any of its rights, powers, remedies, or privileges under this Lease
or provided at Law, in equity or otherwise shall impair, prejudice, or
constitute a waiver of any such right, power, remedy, or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy, or privilege preclude any other or further exercise
thereof by Lessor or the exercise of any other right, power, remedy, or
privilege by Lessor. No notice to or demand on Lessee in any case shall, unless
otherwise required under this Lease, entitle Lessee to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lessor to any other or further action in any circumstances without
notice or demand.
18.9 ENTIRE AGREEMENT
This Lease, together with the other Operative Agreements, on and as of
the date hereof constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and thereof, and all prior understandings
or agreements, whether written or oral, between the parties hereto with respect
to such subject matter are hereby superseded in their entirety.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease
Agreement N___AT.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, NOT IN ITS
INDIVIDUAL CAPACITY, EXCEPT
AS EXPRESSLY PROVIDED
HEREIN, BUT SOLELY AS
TRUSTEE UNDER THE TRUST
AGREEMENT, as Lessor
By:
----------------------------------------
Name:
Title:
AMERICAN TRANS AIR, INC., as Lessee
By:
Name:
Title:
[This is the ORIGINAL counterpart of the Lease for chattel paper purposes]
[or]
[This is a DUPLICATE executed counterpart, and is NOT
the original counterpart, of the Lease, for
chattel paper purposes.]
AIRCRAFT DESCRIPTION
The Aircraft is a Boeing model 737-800 aircraft, consisting of (1) an airframe
bearing FAA registration no. N___AT and manufacturer's serial no. __________,
(2) two CFM International model CFM56-7 engines (each of which has 750 or more
rated takeoff horsepower or its equivalent), bearing manufacturer's serial nos.
__________ and __________, and (3) all appliances, parts, instruments,
appurtenances, accessories, furnishings, and other equipment or property
incorporated in such airframe and engines.
RETURN ACCEPTANCE SUPPLEMENT N___AT
This Supplement, dated __________, ____, is entered into between First
Security Bank, National Association, a national banking association, not in its
individual capacity but solely as Owner Trustee under Trust Agreement N___AT,
dated as of __________________, ____, with the Owner Participant named therein
(such Owner Trustee, in its capacity as trustee, being referred to as "LESSOR"),
and American Trans Air, Inc. ("LESSEE"), an Indiana corporation.
Lessor and Lessee have entered into Lease Agreement N___AT (the
"LEASE"), dated as of [_____________, ____], relating to the Boeing model
737-800 aircraft described below. Terms defined in the Lease have the same
meanings when used in this Supplement.
Lessor and Lessee hereby agree as follows:
1. Lessor and Lessee are executing this Return Acceptance Supplement to
confirm that, on the date hereof, Lessee returned the following Airframe and
Engines to Lessor:
Airframe: U.S. registration no. N___AT; manufacturer's serial no.
__________; and
Engines: two CFM International engines, bearing manufacturer's serial nos.
__________ and __________. 2. This Return Acceptance Supplement is being
delivered in _____________________.
3. Lessor and Lessee agree that the Lease is terminated, except for the
provisions thereof that expressly survive termination.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Return
Acceptance Supplement N___AT.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, NOT IN ITS
INDIVIDUAL CAPACITY, EXCEPT
AS EXPRESSLY PROVIDED
HEREIN, BUT SOLELY AS
TRUSTEE UNDER THE TRUST
AGREEMENT, as Lessor
By:
--------------------------------------------------------
Name:
Title:
AMERICAN TRANS AIR, INC., as Lessee
By:
--------------------------------------------------------
Name:
Title:
CERTAIN TERMS
DEFINED TERM DEFINITION
Commencement Date __________, 200_
Fixed Rate $__________ per quarterly Payment Date
[60% OF AVERAGE BASIC RENT DURING THE
BASE TERM]
Minimum Liability Insurance Amount (CONFIDENTIAL MATERIAL OMITTED)
Past-Due Rate (CONFIDENTIAL MATERIAL OMITTED)
Scheduled Expiration Date
(a) for the
Base Term, the
20th
anniversary of
the Delivery
Date, and (b)
for a Renewal
Term, the day
before the
first
anniversary of
the first day
of that Renewal
Term
Similar Aircraft Boeing model 737-800 aircraft
(other than the Aircraft)
SLV Rate ___________% per annum
Threshold Amount (CONFIDENTIAL MATERIAL OMITTED)
BASIC RENT PAYMENTS
PERCENTAGE OF
PAYMENT DATE LESSOR'S COST
BASIC RENT ALLOCATIONS
FROM (BUT ALLOCATION OF
NOT INCLUDING) THROUGH BASIC RENT
- -----------------------------------------------------------------------
STIPULATED LOSS VALUE
STIPULATED STIPULATED PREPAID BASIC DEFERRED BASIC
LOSS VALUE DATE LOSS VALUE RENT AMOUNT RENT AMOUNT
TERMINATION VALUE
TERMINATION TERMINATION VALUE PREPAID BASIC DEFERRED BASIC
VALUE DATE RENT AMOUNT RENT AMOUNT
- ------------------------------------------------------------------------------
EBO PRICE SCHEDULE
Unadjusted Adjusted EBO
EBO Price Rent Adjustment Amount
(Percentage of (Percentage of (Percentage of
EBO Date Lessor's Cost) Lessor's Cost) Lessor's Cost)
PERMITTED COUNTRIES
Argentina*
Australia
Austria
Bahamas
Belgium
Bermuda
Brazil*
Canada
Chile*
Denmark
Ecuador*
Egypt*
Finland
France
Germany
Greece*
Hungary*
Iceland
India*
Indonesia*
Ireland
Italy**
Jamaica*
Japan
Liechtenstein*
Luxembourg
Malaysia*
Malta*
Mexico**
Monaco
Morocco*
Netherlands
New Zealand
Norway
Paraguay*
Peoples Republic of China*
Philippines*
Portugal
Republic of China (Taiwan)*
Singapore*
South Africa*
South Korea*
Spain
Sweden
Switzerland
Thailand*
United Kingdom
Uruguay*
Venezuela*
United States of America
*SUBLEASING AND RE-REGISTRATION PERMITTED ONLY WITH OWNER PARTICIPANT'S PRIOR
WRITTEN CONSENT, WHICH CONSENT OWNER PARTICIPANT MAY WITHHOLD IN ITS SOLE AND
ABSOLUTE DISCRETION.
**APPROVED FOR SUBLEASING BUT LESSEE MAY NOT RE-REGISTER IN SUCH COUNTRY WITHOUT
OWNER PARTICIPANT'S PRIOR WRITTEN CONSENT, WHICH CONSENT OWNER PARTICIPANT MAY
WITHHOLD IN ITS SOLE AND ABSOLUTE DISCRETION..
PLACARDS
Leased from
First Security Bank, National Association,
as owner trustee
ANNEX B
RETURN CONDITIONS
This Annex B shall apply to the return of the Aircraft by or on behalf
of Lessee under the Lease, whether at a Scheduled Expiration Date, upon the
exercise of Lessee's rights under ss. 9 of the Lease, upon the exercise of
Lessor's remedies following the occurrence of an Event of Default, or otherwise.
However, this Annex B shall not apply (1) if an Event of Loss to the Aircraft
occurs (unless the Aircraft is replaced under ss. 10.1.3 of the Lease), or (2)
if Lessee buys the Aircraft in accordance with ss. 17 of the Lease.
The terms defined in Annex A to Lease Agreement N___AT, when
capitalized as in Annex A, have the same meanings when used in this "Return
Conditions" Annex. Annex A also contains rules of usage that control
construction in this "Return Conditions" Annex.
(CONFIDENTIAL MATERIAL OMITTED)
ANNEX C
MAINTENANCE
The terms defined in Annex A to Lease Agreement N___AT, when
capitalized as in Annex A, have the same meanings when used in this
"Maintenance" Annex. Annex A also contains rules of usage that control
construction in this "Maintenance" Annex.
A. MAINTENANCE.
-----------
Lessee shall maintain, service, repair, and overhaul the Aircraft (or
cause the Aircraft to be maintained, serviced, repaired, and overhauled) in
accordance with (1) maintenance standards required by, or substantially
equivalent to those required by, the FAA or the central civil aviation authority
of Canada, Japan, and the JAA for the Aircraft (the "MAINTENANCE PROGRAM"), so
as (aa) to keep the Aircraft in as good operating condition as originally
delivered hereunder, ordinary wear and tear excepted, and (bb) to keep the
Aircraft in such operating condition as may be necessary to enable the
applicable airworthiness certificate for the Aircraft to be maintained under the
regulations of the FAA or other Aviation Authority then having jurisdiction over
the operation of the Aircraft, other than during (x) temporary periods of
storage in accordance with applicable regulations, (y) maintenance and
modification permitted hereunder, and (z) periods when the FAA or such other
Aviation Authority has revoked or suspended the airworthiness certificates for
Similar Aircraft; and (2) except during periods when a Permitted Sublease is in
effect, the same standards as Lessee uses with respect to similar aircraft of
similar size in its fleet operated by Lessee in similar circumstances and,
during any period in which a Permitted Sublease is in effect, the same standards
used by the Permitted Sublessee with respect to similar aircraft of similar size
in its fleet and operated by the Permitted Sublessee in similar circumstances.
Lessee further agrees that the Aircraft will be maintained, used, serviced,
repaired, overhauled, or inspected in compliance with applicable Laws with
respect to the maintenance of the Aircraft and in compliance with each
applicable airworthiness certificate, license, and registration relating to the
Aircraft issued by the Aviation Authority, other than minor or nonrecurring
violations with respect to which corrective measures are taken upon discovery
thereof and except to the extent Lessee or Permitted Sublessee is contesting in
good faith the validity or application of any such Law or requirement relating
to any such certificate, license, or registration in any reasonable manner which
does not create a material risk of sale, loss, or forfeiture of the Aircraft,
the Airframe, or any Engine or the interest of Owner Participant therein or a
material risk of criminal liability or material civil penalty against Lessor or
Owner Participant. Lessee shall cause the Aircraft Documents to be maintained in
English and promptly furnish Lessor and Owner Participant with information
necessary for filing with applicable governmental aviation authorities.
B. REPLACEMENT OF PARTS.
--------------------
Except as otherwise provided herein, Lessee will promptly replace (or
cause to be replaced) all Parts that are from time to time incorporated or
installed in or attached to the Aircraft, and that become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair, or permanently
rendered unfit for use for any reason whatsoever. In addition, Lessee may remove
(or permit to be removed) any Parts in the ordinary course of maintenance,
service, repair, overhaul, or testing, whether or not such Parts are worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair, or
permanently rendered unfit for use; PROVIDED, that, except as otherwise provided
herein, Lessee will replace or cause the replacement of 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
ss. C below and shall be in good operating condition and (except in the case of
replacement property installed on the basis of operational exigencies) have a
value and utility not less than the value and utility of the Parts replaced
(assuming such replaced Parts were in the condition required under this Lease).
Except as otherwise provided herein, all Parts at any time removed from the
Aircraft shall remain the property of Lessor, no matter where located, until
they are replaced by Parts that have been incorporated or installed in or
attached to the Aircraft and that meet the requirements for replacement Parts
specified above. As soon as a replacement Part is incorporated or installed in
or attached to the Aircraft as above provided, without further act, (1) title to
the replaced Part shall vest in Lessee (or if a Permitted Sublease is then in
effect, in the Permitted Sublessee) free and clear of all Lessor Liens and all
rights of Lessor, and the replaced Part shall no longer be deemed a Part
hereunder, (2) title to such replacement Part shall vest in Lessor, subject only
to Permitted Liens and pooling arrangements to the extent permitted by ss. C
below and except in the case of replacement property temporarily installed on an
emergency basis, and (3) such replacement Part shall become subject to this
Lease and be deemed part of the Aircraft for all purposes hereof and thereof to
the same extent as the Parts originally incorporated or installed in or attached
to such Aircraft.
C. POOLING OF PARTS.
----------------
Any Part removed from the Aircraft may be subjected by Lessee or a
Permitted Sublessee to a normal pooling arrangement customary in the airline
industry and entered into in the ordinary course of business of Lessee or such
Permitted Sublessee, so long as a Part replacing such removed Part shall be
incorporated or installed in or attached to the Aircraft in accordance with ss.
B of this Annex C 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 Aircraft may be owned by any third party subject to such a
normal pooling arrangement, so long as Lessee or Permitted Sublessee, as
promptly thereafter as reasonably possible, either (1) causes title to such
replacement Part to vest in Lessor in accordance with ss. B of this Annex C,
free and clear of all Liens (except Permitted Liens), or (2) replaces (or causes
to be replaced) such replacement Part by incorporating or installing in or
attaching to the Aircraft a further replacement Part owned by Lessee or a
Permitted Sublessee free and clear of all Liens (except Permitted Liens) and by
causing title to such further replacement Part to vest in Lessor in accordance
with ss. B of this Annex C.
D. ALTERATIONS, MODIFICATIONS, AND ADDITIONS.
-----------------------------------------
Lessee shall make (or cause to be made) such alterations and
modifications in and additions to the Aircraft as may be required from time to
time to meet the applicable standards of the FAA or other Aviation Authority
having jurisdiction over the operation of the Aircraft, to the extent made
mandatory in respect of the Aircraft (a "MANDATORY MODIFICATION"); PROVIDED,
that Lessee or any Permitted Sublessee may, in good faith and by appropriate
procedure, contest the validity or application of any law, rule, regulation, or
order in any reasonable manner which does not have more than a DE MINIMIS risk
of adversely affecting Lessor's interest in the Aircraft and does not involve
more than a DE MINIMIS risk of sale, forfeiture, or loss of the Aircraft or the
interest of Owner Participant therein, more than a DE MINIMIS risk of material
civil penalty, or any risk of criminal liability being imposed on Lessor or
Owner Participant. In addition, Lessee may make or permit to be made such
alterations and modifications in and additions to the Aircraft (each an
"OPTIONAL MODIFICATION") as Lessee or any Permitted Sublessee deems desirable in
the proper conduct of its business, including removal of Parts which Lessee
deems are obsolete or no longer suitable or appropriate for use in the Aircraft
(PROVIDED, that Lessee's right to remove obsolete Parts will be limited to Parts
having an aggregate original cost not exceeding 1% of Lessor's Cost of the
Aircraft with Lessor having the right to request such parts be shipped to Owner
Participant upon removal at Lessee's expense; PROVIDED, that no such Optional
Modification shall (1) diminish the fair market value, estimated residual value,
utility, or economic useful life of the Aircraft or any Engine below its fair
market value, estimated residual value, utility, or economic useful life
immediately before such Optional Modification (assuming the Aircraft or such
Engine was in the condition required by the Lease immediately before such
Optional Modification), (2) cause the Aircraft to cease to have the applicable
standard airworthiness certificate, or (3) cause the Aircraft to become "limited
use property" within the meaning of Rev. Proc. 79-48. Except as otherwise
provided herein, title to all Parts (other than Removable Parts (as defined
below)) incorporated or installed in or attached to the Aircraft as the result
of such Optional Modification shall, without further act, vest in Lessor and
become subject to this Lease. Notwithstanding anything to the contrary in this
ss. D, Lessee or a Permitted Sublessee may, at any time during the Term, remove
any Part (such Part being referred to herein as a "REMOVABLE PART") if (aa) such
Part is in addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to the Aircraft at the time
of delivery thereof to Lessee or any Part in replacement of, or substitution
for, any such Part, (bb) such Part is not required to be incorporated or
installed in or attached to the Aircraft pursuant to the terms of ss. A of this
Annex C or the first sentence of this ss. D or pursuant to the terms of any
insurance policies required to be carried hereunder or any applicable law, and
(cc) such Part can be removed from the Airframe or Engine without in any
material respect diminishing the fair market value, estimated residual value,
utility, or remaining economic useful life that the Airframe or Engine would
have had at the time of removal had such removal not occurred, assuming that
such Airframe or Engine was in the condition and repair required to be
maintained by the terms hereof and such Removable Part had not been incorporated
or installed in or attached to the Aircraft. Removable Parts may be leased from
or financed by third parties other than Lessor. Title to any Removable Part
shall not vest in Lessor; except that any Part not removed before the return to
Lessor hereunder of the Airframe or Engine on which it is incorporated,
installed, or attached shall become the property of Lessor.
E. RECORDS.
-------
Lessee shall maintain (or cause to be maintained) all Aircraft
Documents. All Aircraft Documents that are specific to the Aircraft shall be the
property of Lessor, but shall become the property of Lessee upon Lessee's
purchase of the Aircraft pursuant to the terms of this Lease or upon the
occurrence of an Event of Loss and Lessee's compliance with ss. 10.
ANNEX D
INSURANCE
The terms defined in Annex A to Lease Agreement N___AT, when
capitalized as in Annex A, have the same meanings when used in this "Insurance"
Annex. Annex A also contains rules of usage that control construction in this
"Insurance" Annex.
A. LIABILITY INSURANCE
1. Except as provided in ss. A2 below, Lessee will carry or cause to be
carried at all times, at no expense to Lessor or Owner Participant,
comprehensive airline legal liability (including passenger liability, property
damage, and contractual liability insurance) with respect to the Aircraft which
is (a) in an amount not less than the greater of (x) the amount of comprehensive
airline legal liability insurance from time to time applicable to aircraft owned
or leased and operated by Lessee of the same type and operating on similar
routes as the Aircraft, and (y) the Minimum Liability Insurance Amount per
occurrence; (b) of the type and covering the same risks as from time to time
applicable to aircraft, operated by Lessee and similarly-situated carriers, of
the same type as the Aircraft; and (c) maintained in effect with insurers of
internationally recognized responsibility in the international aviation industry
(such insurers being referred to herein as "APPROVED INSURERS").
2. During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by ss. A1 above, insurance otherwise conforming with the provisions of
ss. A1 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 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 of the same type
which are on the ground and not in operation.
B. HULL INSURANCE
1. Except as provided in ss. B2 below, Lessee will carry or cause to be
carried at all times, at no expense to Lessor or Owner Participant, with
Approved Insurers "all-risk" ground and flight aircraft hull insurance covering
the Aircraft (including the Engines when they are installed on the Airframe or
any other airframe) which is of the type as from time to time applicable to
aircraft operated by Lessee of the same type as the Aircraft for an amount
denominated in United States Dollars not less than the Stipulated Loss Value of
the Aircraft
Any policies of insurance carried in accordance with this ss. B1
covering the Aircraft and any policies taken out in substitution or replacement
for any such policies shall provide that (a) in the event of a loss involving
proceeds in excess of the Threshold Amount, 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, 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
Permitted Sublessee) shall endeavor to arrange for any payment of insurance
proceeds in respect of such loss to be held for the account of Lessor, whether
such payment is made to Lessee (or any Permitted Sublessee) or any third party
[and, if or Lessor receives such a payment otherwise than in respect of an Event
of Loss, then, upon receipt of evidence reasonably satisfactory to Lessor that
the damage giving rise to such payment has been repaired or that such payment is
then required to pay for repairs then being made, Lessor shall pay the amount of
such payment to Lessee or its order], and (b) the entire amount of any loss
involving proceeds of the Threshold Amount 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 exists and the insurers
have been notified thereof by Lessor. 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 for that loss for the account of Lessee
or any other third party who is entitled to receive such proceeds.
2. During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by ss. B1 above, insurance otherwise conforming with the provisions of
ss. B1, 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 by Lessee 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. WAR-RISK, HIJACKING, AND ALLIED PERILS INSURANCE
If Lessee (or any Permitted Sublessee) operates or proposes to operate
the Aircraft, the Airframe, or any Engine (1) in any area of recognized
hostilities, or (2) on international routes and Lessee (or such Permitted
Sublessee) maintains war-risk, hijacking, or allied perils insurance for other
aircraft that it operates on such routes or in such areas, Lessee shall maintain
or cause to be maintained war-risk, hijacking, and allied perils insurance of
substantially the same type carried by similar United States commercial air
carriers operating the same or comparable models of aircraft on similar routes
or in such areas, and in no event in an amount less than the Stipulated Loss
Value.
D. GENERAL PROVISIONS
Any policies of insurance carried in accordance with ss.ss. A, B, and
C, including any policies taken out in substitution or replacement for such
policies:
(1) shall name Lessor and Owner Participant (and in respect of liability
insurances, to the extent they are available without unreimbursed additional
cost to Lessee, each of their respective successors, assigns, directors, agents,
officers, and employees) as additional insureds (the "ADDITIONAL INSUREDS"), as
their interests may appear;
(2) shall apply worldwide and have no territorial restrictions or
limitations (except only in the case of war, hijacking, and allied perils
insurance required under ss. C, which shall apply to the fullest extent
available in the international insurance market);
(3) shall provide that, in respect of the interests of the Additional
Insureds in such policies, the insurance shall not be invalidated or impaired by
any act or omission (including misrepresentation and nondisclosure) by Lessee
(or any Permitted Sublessee) or any other Person (including use for illegal
purposes of the Aircraft or any Engine), and shall insure the Additional
Insureds regardless of any breach or violation of any representation, warranty,
declaration, term, or condition contained in such policies by Lessee (or any
Permitted Sublessee);
(4) shall provide that, if the insurers cancel such insurance for any
reason whatsoever, or if it is allowed to lapse for nonpayment of premium, or if
any material change is made in the insurance which adversely affects the
interest of any of the Additional Insureds, such cancellation, lapse, or change
shall not be effective as to the Additional Insureds for 30 days (seven days in
the case of war risk, hijacking, and allied perils insurance) after receipt by
the Additional Insureds of written notice by such insurers of such cancellation,
lapse or change, PROVIDED, 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;
(5) shall waive any rights of recourse, subrogation, setoff (including for
unpaid premiums), recoupment, counterclaim, or other deduction, whether by
attachment or otherwise, against each Additional Insured;
(6) shall be primary without right of contribution from any other insurance
that may be available to any Additional Insured;
(7) shall provide that all of the liability insurance provisions thereof,
except the limits of liability, shall operate in all respects as if a separate
policy had been issued covering each party insured thereunder;
(8) shall provide that none of the Additional Insureds shall be liable for
any insurance premium; and
(9) shall contain a 50/50 Clause per Lloyd's Aviation Underwriters'
Association Standard Policy Form AVS 103;
PROVIDED, that any such endorsements may be subject to any limitations on
endorsements generally prevailing in the airline insurance marketplace at the
time (E.G., AVN67B).
E. REPORTS AND CERTIFICATES; OTHER INFORMATION
On or before the Delivery Date and on or before each renewal date of
the insurance policies required hereunder (and no less often than on an annual
basis), Lessee will furnish or cause to be furnished to Lessor and Owner
Participant insurance certificates describing in reasonable detail the insurance
maintained hereunder and a report, signed by Lessee's or a Permitted Sublessee's
regular independent insurance broker (the "INSURANCE BROKER"), stating the
opinion of such Insurance Broker that (1) all premiums for the insurance then
due have been paid, and (2) such insurance complies with the terms of this Annex
D. To the extent that such agreement is reasonably obtainable, Lessee will also
cause the Insurance Broker to agree to notify Lessor and 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 the Insurance Broker has knowledge and
which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft or Engines or cause the cancellation or termination of
such insurance, and to notify Lessor and Owner Participant in writing at least
30 days (seven days for war-risk and allied perils coverage, or such shorter
period therefor as may be available in the international insurance market, as
applicable) before the cancellation, lapse, or materially adverse change of any
insurance maintained pursuant to this Annex D.
F. RIGHT TO PAY PREMIUMS
Each Additional Insured shall have the rights but not the obligations
of an additional named insured. No Additional Insured shall have any obligation
to pay any premium, commission, assessment, or call due on any such insurance
(including reinsurance). Notwithstanding the foregoing, in the event of
cancellation of any required insurance due to the nonpayment of premium, each of
Lessor and Owner Participant shall have the option, in its sole discretion, to
pay any such premium and to maintain such coverage, as Lessor or Owner
Participant may require, until the scheduled expiry date of such insurance and,
in such event, Lessee shall, upon demand, reimburse Lessor or Owner Participant
for amounts that they so pay.
G. DEDUCTIBLES; SELF-INSURANCE
Lessee may self-insure by way of deductible, premium adjustment,
franchise provisions, or otherwise (including, with respect to insurance
maintained pursuant to ss. B, insuring for a maximum amount which is less than
the Stipulated Loss Value of the Aircraft) the insurance covering the risks
required to be insured against pursuant to ss. 11 and this Annex D under a
program applicable to all aircraft in Lessee's fleet, but in no case shall the
aggregate amount of self-insurance (including any applicable deductible) in
regard to ss. 11 and this Annex D during any policy year, with respect to the
Aircraft, exceed (CONFIDENTIAL MATERIAL OMITTED). In addition, Lessee (and any
Permitted Sublessee) may self-insure to the extent that any applicable
deductible per aircraft that does not exceed industry standards for major U.S.
airlines.