Exhibit 4.
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LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N678FE)
Dated as of June 15, 1998
Amended and Restated as of September 1, 1998
between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee,
Lessor
and
FEDERAL EXPRESS CORPORATION,
Lessee
COVERING ONE AIRBUS A300F4-605R AIRCRAFT
SERIAL NO. 792, REGISTRATION NO. N678FE
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE
AGREEMENT OF STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE, HAS BEEN ASSIGNED TO AND IS SUBJECT TO A LIEN
AND SECURITY INTEREST IN FAVOR OF FIRST SECURITY BANK, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE UNDER THE TRUST INDENTURE AND SECURITY AGREEMENT (FEDERAL
EXPRESS CORPORATION TRUST NO. N678FE) DATED AS OF JUNE 15, 1998, AS AMENDED
AND RESTATED AS OF SEPTEMBER 1, 1998 FOR THE BENEFIT OF THE HOLDERS OF THE
CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE AND SECURITY AGREEMENT. THIS
LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE
CHATTEL-PAPER "ORIGINAL" COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY
FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, ON THE
SIGNATURE PAGES THEREOF.
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TABLE OF CONTENTS
Page
Initial Recitals.............................................................1
ARTICLE 1
DEFINITIONS
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Sale and Lease of Aircraft; Term......................... 2
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. [Reserved]............................................... 2
Section 3.02. Basic Rent............................................... 2
Section 3.03. Supplemental Rent........................................ 3
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value,
Termination Value and the EBO Price After the Delivery
Date..................................................... 3
Section 3.05. Minimum Basic Rent....................................... 4
Section 3.06. Payment to Indenture Trustee............................. 5
Section 3.07. Costs and Expenses....................................... 5
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01. Renewal Options.......................................... 5
Section 4.02. Purchase Options......................................... 6
Section 4.03. Appraisal Procedures..................................... 8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Disclaimer of Representations and Warranties............. 9
Section 5.02. No Modification of Other Warranties...................... 10
Section 5.03. Certain Agreements of the Lessee......................... 11
ARTICLE 6
LIENS
Section 6.01. Liens.................................................... 11
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01. Registration, Maintenance and Operation.................. 12
Section 7.02. Possession and Permitted Transfer and Sublease........... 14
Section 7.03. Insignia................................................. 19
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01. Replacement of Parts..................................... 20
Section 8.02. Pooling of Parts......................................... 21
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01. Required Alterations and Modifications................... 21
Section 9.02. Other Alterations and Modifications...................... 22
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus....... 23
Section 10.02. Retention of Aircraft by the Lessor..................... 25
Section 10.03. Voluntary Termination as to Engines..................... 27
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01. Lessee's Election Rights................................ 27
Section 11.02. Payment of Stipulated Loss Value........................ 27
Section 11.03. Replacement of Airframe and Engines..................... 28
Section 11.04. Event of Loss with Respect to an Engine................. 32
Section 11.05. Application of Payments from the Government or Others... 34
Section 11.06. Requisition of an Airframe and the Installed Engines for
Use by Government....................................... 35
Section 11.07. Requisition for Use by Government of an Engine Not
Installed on the Airframe............................... 36
Section 11.08. Application of Payments During Existence of Certain
Defaults................................................ 36
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01. Return of Aircraft...................................... 36
Section 12.02. Return of Engines....................................... 37
Section 12.03. Return of Manuals....................................... 37
Section 12.04. Condition of Aircraft................................... 38
Section 12.05. Delayed Return of Aircraft.............................. 39
Section 12.06. Storage................................................. 40
Section 12.07. Special Markings........................................ 40
Section 12.08. Lessor's Option to Purchase Parts....................... 40
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance..................................... 41
Section 13.02. Insurance Against Loss or Damage to Aircraft and
Engines................................................. 43
Section 13.03. Application of Insurance Proceeds....................... 45
Section 13.04. Reports................................................. 46
Section 13.05. Lessor's Insurance...................................... 47
Section 13.06. Self-Insurance.......................................... 47
ARTICLE 14
INSPECTION
Section 14.01. Right of Inspection..................................... 47
Section 14.02. No Obligation to Inspect................................ 48
ARTICLE 15
ASSIGNMENT
Section 15.01. Lessee's Right to Assign................................ 48
Section 15.02. Citizenship............................................. 49
ARTICLE 16
EVENTS OF DEFAULT
Section 16.01. Events of Default....................................... 49
ARTICLE 17
REMEDIES
Section 17.01. Remedies Upon Lessee's Default.......................... 51
Section 17.02. Cumulative Remedies..................................... 54
Section 17.03. Waiver.................................................. 54
Section 17.04. Lessor's Right to Perform for Lessee.................... 55
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01. Quiet Enjoyment......................................... 55
ARTICLE 19
FURTHER ASSURANCES
Section 19.01. Further Assurances...................................... 55
ARTICLE 20
NET LEASE
Section 20.01. Nature of Lease......................................... 56
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01. Successor Lessor........................................ 57
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section 22.01. Security for Lessor's Obligations to Holders............ 58
Section 22.02. [Reserved].............................................. 58
Section 22.03. Consent of Lessee to Assignment of Lease as Security.... 58
ARTICLE 23
SECURITY FUNDS
Section 23.01. Investment of Security Funds............................ 59
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01. Lessor's Entry Into Lease............................... 60
ARTICLE 25
NOTICES
Section 25.01. Notices................................................. 61
ARTICLE 26
MISCELLANEOUS
Section 26.01. Section Headings and Captions........................... 62
Section 26.02. References.............................................. 62
Section 26.03. APPLICABLE LAW.......................................... 62
Section 26.04. Severability............................................ 62
Section 26.05. No Oral Modification.................................... 62
Section 26.06. Agreement as Chattel Paper.............................. 62
Section 26.07. Counterparts............................................ 62
Section 26.08. Public Release of Information........................... 63
ARTICLE 27
TRUE LEASE
Section 27.01. Intent of the Parties................................... 63
Section 27.02. Section 1110 Compliance................................. 63
Section 27.03. Finance Lease........................................... 63
Schedule I Definitions
Schedule II Basic Rent
Schedule III Stipulated Loss Values
Schedule IV Termination Values
Schedule V Purchase Option Schedule
Exhibit A Form of Lease Supplement
Exhibit B Form of Purchase Agreement Assignment, Consent and
Agreement and AVSA Consent and Agreement
Exhibit C Form of Engine Warranty Assignment and Engine Consent
LEASE AGREEMENT
(FEDERAL EXPRESS CORPORATION TRUST NO. N678FE)
LEASE AGREEMENT (FEDERAL EXPRESS CORPORATION TRUST NO. N678FE) dated
as of June 15, 1998, as amended and restated as of September 1, 1998 (this
"Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement (as defined in Article 1
below) (the "Lessor"), and FEDERAL EXPRESS CORPORATION, a Delaware corporation
(the "Lessee").
W I T N E S S E T H :
-------------------
WHEREAS, all capitalized terms used herein shall have the meanings
assigned thereto as provided in Article 1 below;
WHEREAS, the Lessor and the Lessee have heretofore entered into the
Original Lease dated as of June 15, 1998;
WHEREAS, because the Original Lease was executed prior to delivery of
the Aircraft, the Original Lease was not filed with the Federal Aviation
Administration; and
WHEREAS, subject to the terms and conditions set forth in the
Participation Agreement (as hereinafter defined), the Lessee desires on the
Delivery Date (as hereinafter defined) to lease from the Lessor and the Lessor
is willing to lease to the Lessee the Aircraft (as hereinafter defined) in
accordance with the terms and conditions set forth in this Lease.
NOW, THEREFORE, in consideration of the mutual promises herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged by the parties, the Lessor and the Lessee agree that the
Original Lease be and the same is hereby amended and restated in its entirety
as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the capitalized terms herein
shall have the meanings given in Schedule I hereto, for all purposes of this
Lease and shall be equally applicable to both the singular and the plural
forms of the terms defined.
ARTICLE 2
ACCEPTANCE UNDER THE LEASE
Section 2.01. Sale and Lease of Aircraft; Term. The Lessor, subject
to satisfaction or waiver of the conditions set forth in this Lease and in the
Participation Agreement, hereby agrees to purchase the Aircraft from AVSA on
the Delivery Date and agrees immediately thereafter to lease the Aircraft to
the Lessee pursuant to this Lease, and the Lessee hereby agrees to lease the
Aircraft from the Lessor, such lease to be evidenced by the execution by the
Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder.
Such lease shall last for the Term, at all times during which full legal title
to the Aircraft shall remain vested with the Lessor to the exclusion of the
Lessee, notwithstanding the possession and use thereof by the Lessee or any
other Person. The Lessee agrees that the Lessor will authorize one or more
employees of the Lessee, designated by the Lessee in writing, as the
authorized representative or representatives of the Lessor to accept delivery
of the Aircraft pursuant to the sale of the Aircraft described in the
Participation Agreement. The Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of the Lessee
pursuant to such authorization by the Lessor, such acceptance of delivery by
such employee or employees on behalf of the Lessor shall, without further act,
irrevocably constitute acceptance by the Lessee of the Aircraft for all
purposes of this Lease.
ARTICLE 3
RENT AND RENT ADJUSTMENT
Section 3.01. [Reserved].
Section 3.02. Basic Rent. The Lessee agrees to pay to the Lessor in
immediately available funds, on each Rent Payment Date, Basic Rent for the
Aircraft during the Basic Term, each payment being set forth on Schedule II
hereto opposite the applicable Rent Payment Date, subject to increase or
decrease as provided in Section 3.04 of this Lease. Each payment of Basic
Rent shall be made in arrears or in advance, all as stated in Schedule II
hereto. Each payment of Basic Rent designated as advance rent shall be
allocated over the six-month period beginning on the Rent Payment Date on
which such advance rent payment is scheduled to be made, and each installment
of Basic Rent that is designated as payable in arrears shall be accrued over
the six-month period ending on and including the day immediately preceding the
Rent Payment Date on which such arrears payment is scheduled to be made, other
than the payment of Basic Rent made on the first Rent Payment Date, which
shall be allocated over the period from the Delivery Date to such first Rent
Payment Date and the payment of Basic Rent made on the final Rent Payment
Date, which shall be allocated over the period from the penultimate Rent
Payment Date to the final Rent Payment Date.
Section 3.03. Supplemental Rent. The Lessee agrees to pay or cause
to be paid to the Lessor, or to whomever shall be entitled to it, any and all
Supplemental Rent promptly as the same shall become due. If the Lessee fails
to pay any Supplemental Rent when due, the Lessor shall have all rights,
powers and remedies provided for in this Lease, or by law or equity or
otherwise in the case of nonpayment of Basic Rent. The Lessee will also pay
to the Person entitled thereto, on demand, as Supplemental Rent, to the extent
permitted by applicable law, an amount equal to interest at the Past Due Rate
on any part of any installment of Basic Rent not paid when due, for any period
until the same shall be paid and on any payment of Supplemental Rent not paid
when due, for the period until the same shall be paid. In addition, the
Lessee will pay to the Lessor, as Supplemental Rent, in the case of any
prepayment of the Certificates pursuant to Section 6.02 of the Indenture
(except in the case of any prepayment resulting from an Indenture Event of
Default in the absence of an Event of Default) or any prepayment or purchase
of the Certificates pursuant to clause (ii) of the first sentence of Section
8.02(a) of the Indenture, an amount equal to the aggregate amount of any
Make-Whole Premium payable on such prepayment or purchase. The expiration or
other termination of the Lessee's obligation to pay Basic Rent shall not limit
or otherwise modify the obligations of the Lessee with respect to the payment
of Supplemental Rent.
Section 3.04. Adjustments to Basic Rent, Stipulated Loss Value,
Termination Value and the EBO Price After the Delivery Date. The percentages
for Basic Rent referred to in Schedule II hereto and the percentages for
Stipulated Loss Value and Termination Value referred to in Schedule III and
Schedule IV hereto, and the EBO Price shall be adjusted (upward or downward)
subject to the minimum value established by Section 3.05 hereof and the
definitions of Stipulated Loss Value and Termination Value to reflect (i) any
costs and expenses paid by the Lessor or the Owner Participant pursuant to
Section 10.01 of the Participation Agreement being greater or less than the
Estimated Expense Amount, (ii) any Refinancing pursuant to Section 15.01 of
the Participation Agreement or (iii) the Delivery Date being other than
September 22, 1998. Each such adjustment pursuant to the first sentence of
this Section 3.04 shall maintain the Owner's Economic Return (and, while
maintaining such Owner's Economic Return, minimize the aggregate Net Present
Value of Rents to the Lessee) and shall not cause the EBO Price to be less
than the greater of (i) the Termination Value as of such Rent Payment Date and
(ii) the estimate set forth in the Appraisal of the Fair Market Value of the
Aircraft at the time of exercise of the purchase option under Section
4.02(a)(F) hereof. The Owner Participant shall promptly notify the Lessee and
the Lessor and the Lessee shall promptly notify the Owner Participant and the
Lessor of the need for any such adjustment pursuant to this Section 3.04. As
promptly as feasible after any such notification, the Lessor shall furnish the
Lessee with a notice setting forth the amount of any such adjustments together
with the calculations upon which the adjustments are based; provided, however,
that the Lessor and the Owner Participant shall not be required to disclose to
the Lessee in such notice any confidential or proprietary information
(including methodology or assumptions) relating to such calculations. At the
request and, subject to the next succeeding sentence, expense of the Lessee,
the accuracy of the calculation of such adjustments and the consistency of the
calculation with the calculation used to determine Basic Rent, Stipulated Loss
Values, Termination Values and the EBO Price shall be verified first, by First
Chicago Leasing Corporation or such other financial advisor chosen by the
Lessee and second, if such adjustments are still believed to be in error and
are not reconciled with the Owner Participant within fifteen (15) Business
Days, by a firm of nationally recognized independent public accountants
selected by the Lessee and reasonably acceptable to the Owner Participant and,
in order to enable them to verify such adjustments, the Owner Participant
shall make available to such accountants (for their own confidential use and
not to be disclosed to the Lessee or any other Person and subject to the
execution of a confidentiality agreement reasonably satisfactory to the Owner
Participant) all information reasonably necessary for such verification,
including the name of the lease analysis program used by the Owner Participant
to calculate such adjustments. Notwithstanding anything to the contrary
contained herein, the Owner Participant shall not be required to release its
tax returns to any verifying firm unless such firm is that Owner Participant's
regular outside accounting firm. The Lessee will pay the reasonable costs and
expenses of the verification process under this Section 3.04 unless as a
result of such verification process by the independent public accountants
Basic Rent is adjusted and such adjustment causes the Net Present Value of
Rents to decline by 10 or more basis points (in which event the Owner
Participant shall pay the reasonable costs and expenses of such verification
process). The Lessor and the Lessee shall execute and deliver an amendment
to this Lease to reflect each adjustment under this Section 3.04.
All adjustments under this Section 3.04 shall be in compliance with
the requirements of Revenue Procedure 75-21, 1975-1 C.B. 715, Sections
4.02(5), 4.07(1), 4.07(2) and 4.08(1) of Revenue Procedure 75-28, 1975-1 C.B.
752 and Section 1.467-3(c)(2)(i) of the Treasury Regulation and shall be
structured so as to not cause the Lease to be a "disqualified leaseback or
long-term agreement" within the meaning of Section 467 of the Code.
Section 3.05. Minimum Basic Rent. Notwithstanding any other
provisions of the Operative Agreements to the contrary, each installment of
Basic Rent due on each Rent Payment Date and not constituting an Excepted
Payment shall be, under any and all circumstances, an amount at least
sufficient to pay in full any installment of principal of and interest on the
Certificates required to be paid pursuant to the Certificates (other than
amounts becoming due on account of the exercise of remedies pursuant to
Article 17 hereof) on such Rent Payment Date.
Section 3.06. Payment to Indenture Trustee. All Rent payable by the
Lessee to the Lessor shall be paid to the Lessor at 225 Asylum Street, Goodwin
Square, Hartford, Connecticut 06103, Attention: Corporate/Muni Administration,
or as the Lessor may otherwise direct, by wire transfer of immediately
available funds in U.S. Dollars with sufficient information to identify
sources and applications of such funds no later than 10:30 a.m., New York time
on the due date of such payment; provided, however, that so long as the Lien
of the Indenture shall not have been discharged the Lessor hereby directs, and
the Lessee agrees, that all Rent (other than Excepted Payments not
constituting Basic Rent, which shall be paid by the Lessee directly to the
Person entitled thereto) (all without set-off or counterclaim as and to the
extent provided in Article 20 hereof) shall be paid directly to the Indenture
Trustee at its principal office at 79 South Main Street, Salt Lake City, Utah
84111, Attention: Corporate Trust Department, or as the Indenture Trustee may
otherwise direct by wire transfer of immediately available funds in U.S.
Dollars no later than 10:30 a.m., New York time, on the due date of such
payment. In any case where a scheduled Rent Payment Date shall not be a
Business Day such Rent Payment Date shall be adjourned to the next succeeding
Business Day without interest thereon for the period of such extension
(provided that payment is made on such next succeeding Business Day).
Section 3.07. Costs and Expenses. As between the Lessor and the
Lessee, all obligations under this Lease shall be done, performed and complied
with at the Lessee's cost and expense, whether or not so expressed, unless
otherwise expressly stated to the contrary.
ARTICLE 4
RENEWAL OPTIONS AND PURCHASE OPTIONS
Section 4.01. Renewal Options. (a) Election to Renew or Purchase.
The Lessee shall provide the Lessor with irrevocable written notice (the
"Preliminary Notice") not more than 360 days nor less than 180 days prior to
the end of the Basic Term or the preceding Renewal Term, as the case may be,
whether it will exercise its options either to renew this Lease pursuant to
this Section 4.01 or to purchase the Aircraft pursuant to Section 4.02(a)(B)
hereof or, if a further Renewal Term is available, pursuant to Section
4.02(a)(C) hereof.
Provided that (i) no Payment Default, Bankruptcy Default or Event of
Default shall have occurred and be continuing at the time of renewal, (ii)
this Lease has not otherwise expired or terminated, and (iii) the Lessee shall
have timely delivered the respective Preliminary Notice, the Lessee may, by
irrevocable written notice delivered to the Lessor not less than 30 days prior
to the end of the Basic Term or any prior Renewal Term, extend the Term for
one or two Fixed Renewal Terms of one (1) year not to exceed two (2) years.
The Lessee shall pay the Fixed Renewal Rent during any Fixed Renewal Term. In
addition, provided that (i) no Payment Default, Bankruptcy Default or Event of
Default shall have occurred and be continuing at the time of renewal, (ii)
this Lease has not otherwise expired or terminated, and (iii) the Lessee shall
have delivered the Preliminary Notice, the Lessee may, on no more than two
occasions, by written notice delivered to the Lessor not less than 30 days
prior to the end of the Basic Term or the preceding Renewal Term, as the case
may be, elect to extend the Term for a Renewal Term or further Renewal Term
commencing on the expiration of the Basic Term or the preceding Renewal Term
and ending one or two years thereafter for a rent equal to the then-current
Fair Market Rental of the Aircraft. The Term may be extended pursuant to this
paragraph for an aggregate of no more than two years following the Basic Term
or any Fixed Renewal Term, if applicable.
(b) Terms and Conditions. Any such renewal shall be on the same
terms and conditions as provided herein, except that (i) rent for the Aircraft
due during any Renewal Term shall be payable semi-annually in arrears on the
dates corresponding to the Rent Payment Dates during such Renewal Term, and
(ii) during any Renewal Term, the Stipulated Loss Value for the Aircraft shall
as of any Stipulated Loss Value Determination Date during the Renewal Term be
equal to the higher of the Stipulated Loss Value and the Fair Market Value of
the Aircraft as of the end of the Basic Term.
Section 4.02. Purchase Options. (a) Election to Purchase.
Provided that (i) this Lease has not otherwise expired or terminated, (ii)
either no Event of Default shall have occurred and be continuing at the time
of the notice provided below or, if an Event of Default occurs after such
notice has been given, the Lessee shall have provided evidence reasonably
satisfactory to the Lessor and the Owner Participant of its financial ability
to purchase the Aircraft and (iii) the Lessee shall have previously given the
Preliminary Notice under Section 4.01(a) hereof (in the case of paragraph (B)
below or, if a further Renewal Term is available, paragraph (C) below) or the
applicable notice for each other paragraph below, as the case may be, the
Lessee may:
(A) by written notice delivered to the Lessor, the Indenture Trustee
and the Owner Participant, not more than 360 nor less than 90 days prior to
the applicable Rent Payment Date, elect to terminate the Lease and purchase
the Aircraft on the Rent Payment Date falling on either January 15, 2015 or
July 15, 2018, for, at the Lessee's option, either (1) an amount in
immediately available funds equal to the greater of the Fair Market Value
or the Termination Value on such date or (2)(i) the assumption by the
Lessee, pursuant to Section 7.11 of the Participation Agreement, of all of
the obligations of the Lessor under the Indenture, the Certificates and
Section 7.04 of the Participation Agreement and (ii) the payment to the
Lessor of an amount equal to the excess of (A) the greater of the Fair
Market Value or the Termination Value on such date over (B) the unpaid
principal of the Certificates plus accrued interest as of such date. Such
notice (which shall be revocable by the Lessee upon at least 30 days'
written notice prior to the applicable Rent Payment Date) shall either
direct the Lessor to prepay the Certificates in full on such Termination
Date pursuant to Section 6.02 of the Indenture or state that the Lessee
shall exercise its option to assume the Certificates pursuant to Section
7.11 of the Participation Agreement; or
(B) by irrevocable written notice delivered to the Lessor and the
Owner Participant not more than 360 nor less than 30 days prior to the end
of the Basic Term, elect to purchase the Aircraft on the last day of the
Basic Term for an amount equal to the Fair Market Value thereof on such
date; or
(C) by irrevocable written notice delivered to the Lessor and the
Owner Participant not more than 360 days nor less than 180 days (30 days if
a Preliminary Notice shall have been previously given) prior to the end of
any Renewal Term, elect to terminate the Lease and purchase the Aircraft on
the last day of such Renewal Term at a price equal to the Fair Market Value
of the Aircraft on such day; provided, however, that the Lessee shall have
paid all Rent due and payable under this Lease on or prior to the
expiration of any such Renewal Term; or
(D) exercise the purchase option in this Section 4.02(a)(D) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(D) and which shall be in an amount not less than the
greater of the amount specified in Schedule V hereto and the Fair Market
Value;
(E) exercise the purchase option in this Section 4.02(a)(E) which is
more particularly described in Schedule V hereto by reference to this
Section 4.02(a)(E) and which shall be in an amount not less than the
greater of the amount specified in Schedule V hereto and the Fair Market
Value; or
(F) to terminate this Lease on January 15, 2017 and purchase the
Aircraft on such Rent Payment Date for an amount equal to the percentage of
the Purchase Price set forth in Ancillary Agreement I with respect to this
Section 4.02(a)(F) ("EBO Price") which amount shall not be less than the
greater of (i) the Termination Value as of such Rent Payment Date and (ii)
the estimate set forth in the Appraisal of the Fair Market Value at the
time of exercise of the purchase option under this Section 4.02(a)(F).
The Lessee shall give the Lessor, the Owner Participant and the
Indenture Trustee not more than 360 days and not less than 90 days' prior
written notice of its election to purchase pursuant to Section 4.02(a)(D),
4.02(a)(E) or 4.02(a)(F) hereof. Such notice shall either direct the Lessor
to prepay the Certificates in full on such Termination Date pursuant to
Section 6.02 of the Indenture or state that the Lessee shall exercise its
option to assume the Certificates pursuant to Section 7.11 of the
Participation Agreement and Section 2.12 of the Indenture. In the event that
the Lessee shall have given notice to purchase the Aircraft under Section
4.02(a)(A), 4.02(a)(D), 4.02(a)(E) or 4.02(a)(F) hereof and shall fail to make
payment (and, if applicable, assume the Certificates) on the applicable
Termination Date, the Lease shall continue and the Lessee shall pay to the
Owner Trustee any losses, costs and expenses of the Owner Participant incurred
in connection with such failure.
(b) Terms and Conditions. If the Lessee elects to purchase the
Aircraft pursuant to Section 4.02(a) hereof, the Lessee shall pay to the
Lessor on the applicable Termination Date by wire transfer of immediately
available funds any Basic Rent payable on such Termination Date (if payable in
arrears but not if in advance), the applicable purchase price together with
any other amounts past due hereunder and all other Supplemental Rent then due
under this Lease including, without limitation, the aggregate amount of any
Make-Whole Premium applicable to any Certificate (if such purchase occurs
prior to the Premium Termination Date for such Certificate) and amounts due
under the Participation Agreement and the Tax Indemnity Agreement, whereupon
(and upon discharge of the Lien of the Indenture in accordance with Section
14.01 thereof) the Lessor will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens), all of the Lessor's
right, title and interest in and to the Aircraft on an "as-is, where is"
basis. In connection with such transfer, the Lessee shall prepare and the
Lessor shall execute or arrange for the execution of a bill of sale evidencing
such transfer and such other documents as the Lessee may reasonably require.
In connection with any termination or proposed termination of this Lease, the
Lessee shall pay, at the time of the applicable Termination Date, all related
reasonable costs and expenses of the Owner Participant, the Lessor and the
Indenture Trustee.
Section 4.03. Appraisal Procedures. (a) Generally. Whenever Fair
Market Rental or Fair Market Value is required to be determined under this
Lease (unless otherwise provided herein), it shall be determined by the mutual
agreement of the Lessor and the Lessee in accordance with the definitions of
such terms in Schedule I hereto. If the Lessee and the Lessor cannot agree by
the date 60 days prior to the date for exercise of the applicable option, such
amount shall be determined by independent appraisal conducted by appraisers
selected pursuant to Section 4.03(b) hereof. At any time prior to final
determination of such amount pursuant to Section 4.03(b) hereof, the Lessee
and the Lessor shall be entitled to submit to the appraisers (and shall submit
to each other any bids submitted to the appraisers) any bids from unrelated
third parties, and such bids shall be accorded the weight such appraisers deem
appropriate. The Lessor and the Lessee shall each have an opportunity to
comment on any such bids after receiving a copy thereof.
(b) Selection. If an independent appraisal is required pursuant to
this Lease, the Lessor and the Lessee shall consult for the purpose of
appointing a mutually acceptable, qualified aircraft appraiser. If they are
unable to agree on a single appraiser within ten (10) Business Days, then the
independent appraisal shall be arrived at by mutual agreement of two
nationally recognized, independent aircraft appraisers, one chosen by the
Lessor and one chosen by the Lessee, or, if such appraisers cannot agree on
the amount of such appraisal, their appraisals shall be treated in the manner
described in Section 4.03(c) hereof with an appraisal arrived at by a third
nationally recognized, independent aircraft appraiser chosen by the mutual
consent of such two appraisers; provided, however, that if either party shall
fail to appoint an appraiser within fifteen (15) Business Days after a written
request to do so by the other party, or if such two appraisers cannot agree on
the amount of such appraisal and fail to appoint a third appraiser within
twenty (20) Business Days after the date of the appointment of the second of
such appraisers, then either party may initiate an arbitration proceeding with
the American Arbitration Association for purposes of appointing a nationally
recognized, independent aircraft appraiser.
(c) Valuation. If one appraiser is chosen, the value determined by
such appraiser shall be final and binding upon the Lessor and the Lessee. If
two appraisers are chosen, one appraiser by the Lessor and one by the Lessee,
and such appraisers agree on the value, such value shall be final and binding
upon the Lessor and the Lessee. If three appraisers shall be appointed and
the difference between the determination which is farther from the middle
determination is more than 125% of the difference between the middle
determination and the third determination, then such farther determination
shall be excluded, the remaining two determinations shall be averaged, and
such average shall be final and binding upon the Lessor and the Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon the Lessor and the Lessee.
(d) Rules of Appraisal. Any appraisal pursuant to this Section 4.03
shall be conducted in accordance with the commercial rules of the American
Arbitration Association as then in effect, as modified by this Section 4.03
and the definitions of Fair Market Value and Fair Market Rental. All expenses
of any independent appraisal shall be borne by the Lessee, except that each of
the Lessee and the Owner Participant (in the case of the Lessor) shall bear
any fees, costs and expenses of its respective attorneys in connection with
such appraisal except in the case of an Event of Default or in the case of a
revocation by the Lessee of its election to terminate the Lease under Section
4.02 hereof, in which case such expenses shall be borne by the Lessee.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Disclaimer of Representations and Warranties. THE
LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE AIRFRAME AND EACH ENGINE IS OF A
SIZE, DESIGN, AND CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE
LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE IS
SUITABLE FOR ITS PURPOSES, (iii) NEITHER THE OWNER PARTICIPANT NOR THE LESSOR
IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND AND (iv) THE AIRFRAME
AND EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS, NOW IN EFFECT OR HEREAFTER ADOPTED, WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS INDIVIDUAL
CAPACITY OR AS OWNER TRUSTEE), THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT OR
ANY HOLDER. THE LESSOR LEASES THE AIRFRAME AND EACH ENGINE, AS-IS, WHERE-IS,
AND NEITHER THE LESSOR (IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE
INDENTURE TRUSTEE, THE OWNER PARTICIPANT NOR ANY HOLDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HAS AND WILL HAVE BEEN DEEMED TO HAVE
EXPRESSLY DISCLAIMED, ANY WARRANTY OR REPRESENTATION EITHER EXPRESS OR
IMPLIED, AS TO (A) THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, VALUE,
FITNESS FOR ANY PARTICULAR USE OR PURPOSE, DESIGN, OPERATION OR MERCHANTABILITY
OF THE AIRFRAME, EACH ENGINE OR ANY PART THEREOF, (B) THE ABSENCE OF LATENT OR
OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, (C) THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (D) THE ABSENCE OF
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, (E) THE LESSOR'S TITLE THERETO,
(F) THE LESSEE'S OR ANY SUBLESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF
(EXCEPT AS PROVIDED IN ARTICLE 18 HEREOF) OR (G) ANY OTHER MATTER WHATSOEVER.
IT IS AGREED THAT ALL RISKS INCIDENT TO THE MATTERS DISCUSSED IN THE PRECEDING
SENTENCE, AS AMONG THE LESSOR, THE INDENTURE TRUSTEE, THE OWNER PARTICIPANT
AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE. The provisions of this Section
5.01 have been negotiated by the Lessor and the Lessee and, except as provided
in Article 7 of the Participation Agreement, are intended to be a complete
exclusion and negation of any representations or warranties of the Lessor, the
Indenture Trustee and the Owner Participant, express or implied, with respect
to the Airframe and each Engine that may arise pursuant to any law now or
hereafter in effect, or otherwise.
Section 5.02. No Modification of Other Warranties. None of the
provisions of this Article 5 or any other provision of this Lease shall be
deemed to amend, modify or otherwise affect the representations, warranties or
other obligations (express or implied) of the Lessee, AVSA, the Manufacturer
or the Engine Manufacturer or any of their respective subcontractors or
suppliers, with respect to the Airframe, the Engines or any Parts incorporated
or installed in or attached to the Airframe or Engines, or to release the
Lessee, AVSA, the Manufacturer or the Engine Manufacturer or any of their
respective subcontractors or suppliers from any such representation, warranty
or obligation. So long as an Event of Default shall not have occurred and be
continuing under this Lease and to the extent permitted under the applicable
warranty, patent indemnity, or service-life policy, (i) the Lessor shall
assign or otherwise make available to the Lessee such rights as the Lessor may
have under any warranty, patent indemnity, or service-life policy made or given
by the Manufacturer, AVSA or the Engine Manufacturer or any of their respective
subcontractors or suppliers, and any other claims against the Manufacturer,
AVSA and the Engine Manufacturer or any such subcontractor or supplier with
respect to the Aircraft, including all rights to demand, accept and retain all
rights in and to property (other than the Aircraft), data and services of any
kind which the Manufacturer, AVSA and the Engine Manufacturer are obligated to
provide and do provide pursuant to the Purchase Agreement or the GTA with
respect to the Aircraft; and (ii) all payments pursuant to any manufacturer's
or subcontractor's warranty, patent indemnity, or service-life policy
obligation shall be paid to the Lessee and the Lessee shall apply such
payments to the cost of repair or correction of any condition of the Aircraft
which gave rise to such payments.
Section 5.03. Certain Agreements of the Lessee. The Lessee agrees
with the Lessor for the benefit of the Owner Participant that the Lessee shall
perform the agreements, covenants and indemnities of the Lessee set forth in
the Participation Agreement to the extent the same are applicable to the Owner
Participant, as fully and to the same extent and with the same force and
effect as if set forth in full in this Article 5.
ARTICLE 6
LIENS
Section 6.01. Liens. The Lessee will not directly or indirectly
create, incur, assume or suffer to exist, and will promptly, at its own cost
and expense, take such action as may be necessary to discharge, any Lien on or
with respect to the Lessor's Estate or this Lease or the Aircraft, the
Airframe or any Engine or any Part or title thereto or any interest therein
except:
(a) the respective rights of the Lessor and the Lessee as provided
in this Lease, the security interest and Lien of the Indenture and the
rights of the Owner Participant, the Lessor and the Indenture Trustee under
the Trust Agreement, the Indenture and the Participation Agreement;
(b) the rights of any sublessee or transferee or other Person under
a sublease, transfer, assignment or other such arrangement expressly
permitted by the terms of this Lease;
(c) Lessor's Liens and Indenture Trustee's Liens to the extent
required to be discharged by the Owner Participant, the Lessor or the
Indenture Trustee, as the case may be, in accordance with Section 7.03(b),
7.04(b) or 7.05(b) of the Participation Agreement;
(d) Liens for Taxes imposed against the Lessee either not yet due or
being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein or any material risk of civil
liabilities (unless the Owner Trustee, the Indenture Trustee and the Owner
Participant shall be indemnified to its satisfaction against such
liabilities by the Lessee) or any risk of the assertion of criminal charges
against the Lessor, the Owner Participant, the Indenture Trustee or any
Holder;
(e) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising against the Lessee in the ordinary course of the
Lessee's business for amounts the payment of which is either not yet due or
is being contested in good faith by appropriate proceedings so long as such
Liens or proceedings do not involve any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, the Airframe or
any Engine or any interest therein; and
(f) Liens arising from judgments or awards against the Lessee with
respect to which (i) at the time an appeal or proceeding for review is
being prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for
review and then only for the period of such stay and (ii) there is not, and
such proceedings do not involve, any material danger of the sale,
forfeiture or loss of the Lessor's Estate, the Aircraft, Airframe or any
Engine or any interest therein.
ARTICLE 7
AIRCRAFT REGISTRATION, MAINTENANCE AND OPERATION
Section 7.01. Registration, Maintenance and Operation. The Lessee,
at its own cost and expense, shall:
(a) upon payment by the Lessor of the Purchase Price on the Delivery
Date, cause the Aircraft to be duly registered in the name of the Lessor as
owner, pursuant to the Transportation Code and, subject to the proviso to
Section 6.03(b) of the Participation Agreement, to remain at all times duly
registered pursuant to the Transportation Code and at all times act in
accordance with the rules and regulations of the Aeronautics Authority or
the applicable laws, rules and regulations of any other jurisdiction in
which the Aircraft may then be registered in accordance with Section
6.03(b) of the Participation Agreement;
(b) maintain, inspect, service, repair, test and overhaul the
Aircraft (or cause the same to be done) so as to keep the Aircraft (and any
engine which is not an Engine but is installed on the Aircraft) in as good
operating condition as when delivered to the Lessor on the Delivery Date,
ordinary wear and tear excepted, and in any event (i) in accordance with
the applicable regulations of the Aeronautics Authority or of the
regulatory agency or body of any other jurisdiction in which the Aircraft
may then be registered pursuant to Section 6.03(b) of the Participation
Agreement and the Lessee's maintenance program approved by the Aeronautics
Authority or such agency or body, (ii) in the same manner and with the same
care used by the Lessee with respect to other A300-600 series aircraft and
CF6-80C2-A5F series engines (or other engines permitted by the terms of
this Lease to be used on the Aircraft) owned, operated or leased by the
Lessee, to the extent that the same regulations, and the Lessee's
FAA-approved maintenance program shall apply to any such aircraft and
related engines, owned or leased by the Lessee, and utilized in similar
circumstances, and without discriminating against the Aircraft, with
respect to its use, operation or maintenance in contemplation of the
expiration or termination of this Lease other than withdrawal of the
Aircraft from use and operation as is necessary to prepare the Aircraft for
return to the Lessor upon such expiration or termination, and (iii) so as to
keep the Aircraft in such condition as may be necessary to enable its
airworthiness certification to be maintained in good standing at all times
under the Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered;
(c) maintain, or cause to be maintained, all records, logs and other
materials in respect of the Aircraft required by the Aeronautics
Authority, or the applicable regulatory agency or body of any other
jurisdiction in which the Aircraft may then be registered, all such records
and logs to be maintained in the English language, to the extent required
by the Transportation Code (which records, logs and other materials shall,
as between the Lessor and the Lessee and all parties claiming through the
Lessee, be the property of the Lessor but shall become the property of the
Lessee upon purchase by the Lessee of the Aircraft pursuant to the terms of
this Lease or upon the occurrence of an Event of Loss and the Lessee's
compliance with Section 11.03 hereof);
(d) promptly furnish to the Lessor such information within the
Lessee's possession as may be required to enable the Lessor to file any
reports to be filed by the Lessor with any governmental authority because
of the Lessor's ownership of or the Owner Participant's interest in the
Aircraft;
(e) not maintain, service, repair, overhaul, use or operate the
Aircraft or any Engine in violation of any airworthiness certificate or
registration relating thereto, or in violation of any law or any license,
rule, regulation or order of or by any government or governmental authority
having jurisdiction over the Lessee or the Aircraft or any Engine or for
any purpose for which the Aircraft or any Engine is not designed; provided,
however, that the Lessee (or if a sublease shall then be in effect, the
sublessee thereunder) may in good faith contest the validity or application
of any such law, license, rule, regulation or order in any manner that does
not adversely affect the Lessor, its right, title or interest in the
Aircraft or any Engine or the interests of the Indenture Trustee or the
Owner Participant therein, or in any Operative Agreement (excluding any
interests indemnified for under the Tax Indemnity Agreement) and such
contest or non-compliance will not result in any material risk of loss,
forfeiture or damage to the Aircraft or in any risk of criminal liability
to the Lessor, the Indenture Trustee or the Owner Participant; and if any
such law, license, rule, regulation or order requires alteration of the
Aircraft or any Engine, the Lessee will conform the same therewith at its
own cost and expense and will maintain the Aircraft or any Engine in
compliance with such law, license, rule, regulation or order; and
(f) not operate or locate the Airframe or any Engine, or suffer the
Airframe or any Engine to be operated or located (x) in any area excluded
from coverage by any insurance policy required by the terms of Article 13
hereof or (y) in any war zone or in the Lessee's reasonable judgment, area
of recognized hostilities, unless the Lessee has obtained, prior to the
operation or location of the Airframe or any Engine in such area,
indemnification from the Government, or other insurance, against the risks
and in the amounts required by, and in compliance with, Article 13 hereof
covering such area (except, in the case of a requisition for use by the
Government, to the extent that the Lessee certifies that such insurance is
unobtainable after diligent effort or is obtainable only at unreasonably
high rates or on unduly financially burdensome terms and conditions) (and
naming the Lessor, or so long as this Lease is assigned to the Indenture
Trustee, the Indenture Trustee, as sole loss payee in respect of
indemnification or insurance payable in respect of casualties to the
Aircraft) or unless the Aircraft is only temporarily located in such area
as a result of an isolated occurrence attributable to a hijacking, medical
emergency, equipment malfunction, weather conditions, navigational error or
other similar unforeseen circumstances and the Lessee is using its good
faith efforts to remove the Aircraft from such area.
The Lessee may, at any time during the Term, install an engine or
engines on the Airframe and operate the Aircraft with such engine or engines
installed thereon and the Lessor shall have no right, title or interest in and
to any such engine until such time, if any, that such engine is returned to
the Lessor under Section 12.02 hereof.
Section 7.02. Possession and Permitted Transfer and Sublease. (a)
Conditions. The Lessee will not, without the prior written consent of the
Lessor, sublease or otherwise in any manner deliver, transfer or relinquish
possession of the Aircraft, the Airframe or any Engine or install any Engine,
or permit any Engine to be installed, on any airframe other than the Airframe;
provided, that, so long as (i) in the case of clause (i) below, no Payment
Default, Bankruptcy Default or Event of Default shall have occurred and be
continuing, (ii) the Lien of the Indenture is not impaired thereby, (iii) all
applicable governmental approvals in connection therewith have been obtained
and (iv) the Lessee shall comply with the provisions of Article 13 hereof, the
Lessee may without the prior written consent of the Lessor:
(i) so long as the sublessee is generally meeting its material
obligations as they come due and is not subject to a proceeding or final
order under applicable bankruptcy, insolvency or reorganization laws on the
date the sublease is entered into (and on the date of notice from the
Lessee) and with 30 days' prior written notice to the Lessor and the Owner
Participant, (A) sublease the Aircraft or any Engine to a U.S. Air Carrier,
(B) sublease the Aircraft or any Engine to an Air Carrier which is
principally based in and domiciled in one of the countries listed on
Schedule III of the Participation Agreement, (C) sublease the Aircraft or
any Engine to an Air Carrier that is principally based in and a domiciliary
of a country which is a party to the International Convention on the
Recognition of Rights in Aircraft, or (D) sublease the Aircraft or any
Engine to any other Air Carrier not described in this Section which shall
be reasonably acceptable to the Lessor as evidenced by its prior written
consent; provided, that, with respect to clauses (B) and (C) above, at the
time of any such sublease the United States of America maintains full
diplomatic relations with the country in which such Air Carrier is
principally based and domiciled. In the case of any sublease (x) such
sublease shall include the provisions required by Section 7.02(b) hereof
and expressly require the sublessee to operate and maintain the Aircraft in
compliance with the applicable provisions of this Lease, (y) such sublease
shall provide that such sublessee will not transfer possession of, or any
other rights to, the subleased Airframe or any Engine to any other Person
without the prior written consent of the Lessor (except as permitted by
subparagraphs (ii) through (viii) below) and (z) such sublease shall expire
not later than the expiration of the Basic Term or any applicable Renewal
Term hereof. Prior to any sublease to an Air Carrier permitted under
Section 7.02(a)(i)(C): (I) the maintenance standards of the aeronautical
authority of the country of domicile or principal operation of the
sublessee taken as a whole shall not be materially less stringent than
those of the FAA and the sublease will provide that the maintenance
performed during such sublease will meet in all material respects such
maintenance standards; (II) the Lessee will provide opinions of counsel
(such counsel and the form and substance of such opinions to be reasonably
satisfactory to the Lessor and the Indenture Trustee) with respect to (A)
the legality, validity and enforceability of the Operative Agreements and
the sublease in such country, (B) that the laws of such country require
fair compensation by the government of such country payable in a currency
freely convertible into U.S. dollars for the loss of the use of or title to
the Aircraft in the event of a requisition of use or title by such
government, (C) the Lessor's title to the subleased equipment will be
recognized, (D) the required agreement of such foreign air carrier that its
rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such foreign air carrier under applicable
law (subject only to customary exceptions to enforceability), (E) that it
is not necessary for the Owner Participant, the Lessor or the Indenture
Trustee to register or qualify to do business in such country as a result
of the proposed sublease or in order for the Owner Participant, the Lessor
or the Indenture Trustee to enforce the terms and conditions of the
Operative Agreements, (F) there is no tort liability of the owner of an
aircraft not in possession thereof or of Persons lending money to such an
owner for the purchase of an aircraft, under the laws of such jurisdiction
other than tort liability which might have been imposed on such owner or
Persons under the laws of the United States or any state thereof (it being
understood that, in the event that such latter opinion cannot be given in a
form satisfactory to the Lessor, such opinion shall be waived if insurance
reasonably satisfactory to the Lessor is available to cover such risk to
the Owner Participant and is provided at or before the execution of such a
sublease, at the Lessee's cost and expense) and (G) that there exist no
possessory rights in favor of such sublessee under the laws of such country
which would, upon bankruptcy or insolvency of the Lessee (and assuming that
at such time such sublessee is not bankrupt or insolvent) prevent the
return of the Aircraft in accordance with the terms of this Lease; (III)
all necessary governmental approvals required for the subleased equipment,
the Airframe or any Engine, as the case may be, to be imported and, to the
extent reasonably obtainable, exported from the applicable country of
domicile upon repossession of such subleased equipment by the Lessor (and
the Lessee as sublessor), shall have been procured at the Lessee's own cost
and expense by the Lessee prior to commencement of any such sublease; (IV)
duties and tariffs, if applicable, shall be paid for by the Lessee; and (V)
the Lessee shall effect or cause to be effected at the Lessee's own cost
and expense all recordings and filings that are required to continue the
Lessor's right, title and interest to the Aircraft and rights under the
Lease (and sublease) and to perfect and maintain the priority of the Lien
of the Indenture;
(ii) subject the Airframe or permit the Airframe to be subjected to
normal interchange agreements or subject the Engines or permit any Engine
to be subjected to normal interchange or pooling agreements or
arrangements, in each case customary in the airline industry, entered into
by the Lessee in the ordinary course of its business with a vendor
domiciled in the United States or in a country with which the United States
maintains full diplomatic relations or (x) any U.S. Air Carrier or (y) any
foreign Air Carrier which is (I) organized in a country listed on Schedule
III to the Participation Agreement, (II) organized in a country with which
the United States then maintains full diplomatic relations, (III) is a
party to the Convention on the International Recognition of Rights in
Aircraft or (IV) otherwise provides equivalent protection to owners, lessors
and mortgagees of aircraft; provided that no transfer of the registration
of the Airframe or any Engine shall be effected and that throughout the
period that the Airframe or any Engine is subjected to such interchange or
pooling agreement or arrangement the terms of this Lease shall be observed;
and provided, further, that no such agreement or arrangement contemplates
or requires the transfer of title to or registration of the Airframe or any
Engine, and if the Lessor's title to any Engine shall nonetheless be
divested under any such agreement or arrangement, such divestiture shall be
deemed to be an Event of Loss with respect to such Engine and the Lessee
shall comply with Section 11.04 of this Lease in respect of such Engine;
(iii) deliver or permit the delivery of possession of the Airframe or
any Engine to their respective manufacturers or certified maintenance
providers for testing, service, repair, maintenance or overhaul work or for
alterations or modifications in or additions to the Airframe or any Engine
to the extent required or permitted by the terms of Article 9 hereof;
(iv) transfer or permit the transfer of possession of the Airframe or
any Engine pursuant to a contract or agreement with the Government or
pursuant to the Civil Reserve Air Fleet Program administered pursuant to
Executive Order No. 12056, as amended ("CRAF Program"), or any similar or
substitute programs of the Government, so long as the Lessee (or any
permitted sublessee or transferee pursuant to this Section) shall promptly
notify the Lessor upon such transfer of possession and provide the Lessor
and the Indenture Trustee with the name and address of the Contracting
Officer or representative of the Military Aircraft Command of the United
States Air Force to whom notices must be given in respect of the Aircraft,
provided, that if such transfer of possession continues beyond the end of
the Basic Term or the then-current Renewal Term, the Basic Term or the
Renewal Term, as applicable, shall be automatically extended (including the
obligation to pay Rent per diem at a rate equal to the Fair Market Rental
or such higher compensation being paid by the Government pursuant to the
CRAF Program) for six (6) months after the end of the Term (or, if shorter,
until the date of return of the Aircraft, so long as the Lessor receives at
least six (6) months' notice of such date of return);
(v) install or permit the installation of an Engine on an airframe
which is owned by the Lessee or any permitted sublessee free and clear of
all Liens, except (A) Liens of the type permitted under Section 6.01
hereof, (B) Liens which apply only to the engines (other than an Engine),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe and which do
not apply to substantially all of such airframe and (C) the rights of an
Air Carrier under normal interchange or pooling agreements which are
customary in the airline industry and do not contemplate or require the
transfer of title to such airframe or the engines installed on it;
(vi) install or permit the installation of an Engine on an airframe
leased to the Lessee or any permitted sublessee or transferee or purchased
by the Lessee subject to a conditional sale or other security agreement,
provided that (A) such lease, conditional sale or other security agreement
does not cover the Engine so installed and the Lessee shall have received
from the lessor, conditional vendor or secured party of such airframe an
agreement (which may be the lease or conditional sale or other security
agreement covering such airframe), whereby such lessor, conditional vendor
or secured party expressly agrees that neither it nor its successors or
assigns will acquire or claim any right, title or interest in any Engine by
reason of such Engine being installed on such airframe at any time, and (B)
such airframe is and remains free and clear of all Liens except the rights
of the parties to the lease or conditional sale or other security agreement
covering such airframe and Liens of the type permitted by subparagraph (v)
of this Section 7.02(a);
(vii) install or permit the installation of an Engine on an airframe
owned by the Lessee, leased to the Lessee or purchased by the Lessee
subject to a conditional sale or other security agreement under
circumstances where neither subparagraph (v) nor subparagraph (vi) of this
Section 7.02(a) is applicable, provided that such installation shall be
deemed an Event of Loss with respect to such Engine and the Lessee shall
comply with Section 11.04 hereof in respect of such Engine, the Lessor not
intending to waive any right, title or interest it may have to or in such
Engine under applicable law until compliance by the Lessee with such
Section 11.04; and
(viii) enter into a wet lease under which the Lessee has effective
control of the Aircraft in the ordinary course of the Lessee's business
which shall not be considered a transfer of possession hereunder, provided
that the Lessee's obligations under this Lease shall continue in full force
and effect notwithstanding any such wet lease.
(b) Rights of Transferee. Notwithstanding the provisions of Section
7.02(a) hereof, the rights of any transferee who takes possession of the
Aircraft, the Airframe or any Engine by reason of a transfer permitted by
Section 7.02(a) hereof shall be subject and subordinate to, and any sublease
or wet lease permitted by Section 7.02(a) hereof shall be made expressly
subject and subordinate to, all the terms of this Lease, including, without
limitation, the Lessor's right to repossession pursuant to Article 17 hereof
and to avoid such sublease upon such repossession, and the Lessee shall remain
primarily liable for the performance of all the terms of this Lease to the
same extent as if such sublease or transfer had not occurred. Any such
sublease shall include appropriate provisions for the maintenance, inspection
(as required by Section 14.01 hereof), operation, use and insurance of the
Aircraft, the Airframe and each Engine in accordance with the provisions of
this Lease and shall provide assurances reasonably satisfactory to the Lessor
that the sublessee may not further sublease any of such equipment. The Lessee
shall give the Lessor, the Owner Participant and the Indenture Trustee 10
Business Days' prior written notice of any sublease of the Airframe with a
term in excess of one year. The Lessee shall promptly provide the Lessor, the
Owner Participant and the Indenture Trustee a copy of any sublease which has a
term in excess of one year (and, if so requested by the Lessor, a copy of any
other sublease) and, prior to execution and delivery of any sublease deliver to
Lessor all other documents required hereunder relating to such sublease or
transfer of possession.
(c) No Release of Lessee/Costs of Subleasing. No sublease,
interchange or pooling agreement or other relinquishment of possession
permitted under this Article 7 of any of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of the Lessee's obligations
to the Lessor, the Indenture Trustee or the Owner Participant under this
Lease, the Participation Agreement or the Tax Indemnity Agreement or
constitute a waiver of any of the Lessor's rights and remedies hereunder or
thereunder or extend beyond the end of the Term (except as provided in Section
7.02(a)(iv) hereof). Subject to the terms and conditions of this Lease, the
Lessee will retain the right to cure any default by any sublessee permitted
pursuant to this Section 7.02 and to terminate such sublease upon such
default. The Lessee shall pay all costs of the Owner Participant, the
Indenture Trustee and the Lessor incurred in connection with any subleasing or
proposed subleasing.
(d) Certain Notifications. Prior to any sublease of the Aircraft
pursuant to Section 7.02(a) hereof, the Lessee shall deliver to Moody's
written notice identifying the Aircraft to be subleased, together with the
name of the sublessee and the country of domicile of such sublessee. In
connection with any sublease to an Air Carrier permitted under Section
7.02(a)(i)(C) hereof the Lessee shall, if so requested by Moody's, provide
Moody's with the opinions to be provided pursuant to Section 7.02(a)(i)(II)
hereof and information on the insurance coverage referred to in Section
7.02(a)(i)(II)(F) hereof.
Section 7.03. Insignia. (a) Nameplate. On or prior to the
Delivery Date or as soon thereafter as possible, the Lessee agrees to affix to
and maintain in the cockpit of the Airframe, in a clearly visible location,
and on each Engine, a clearly visible metal nameplate bearing the inscription
"STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS
OWNER TRUSTEE, OWNER AND LESSOR," and, so long as such Airframe or Engines
shall be subject to the Lien of the Indenture, the additional inscription
"FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, MORTGAGEE"
(such nameplate to be replaced, if necessary, from time to time, with a
nameplate reflecting the name of any successor Lessor or successor Indenture
Trustee, in each case as permitted by the Operative Agreements).
(b) Lessee's Marks. Except as provided in Section 7.03(a) hereof,
the Lessee will not allow the name of any Person to be placed on the Airframe
or on any Engine as a designation that might be interpreted as a claim of
ownership; provided, that during the Term, the Lessee may cause the Aircraft
to be lettered "Federal Express Corporation" or may letter, paint or mark it
in some other appropriate manner for convenience of identification of the
Lessee's interest or the interest of any permitted sublessee (including but
not limited to the Lessee's or any permitted sublessee's customary colors and
insignia) and to bear insignia plates or other markings identifying the
supplier or manufacturer of the Airframe or the Engines or any Parts of either.
ARTICLE 8
REPLACEMENT AND POOLING OF PARTS
Section 8.01. Replacement of Parts. (a) Generally. The Lessee, at
its own cost and expense, will replace or cause to be replaced as promptly as
practicable all Parts which may from time to time be incorporated or installed
in or attached to the Airframe or any Engine and which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason, except as
otherwise provided in Section 9.01 or 9.02 hereof. In addition, the Lessee
may, at its own cost and expense, remove or cause to be removed in the ordinary
course of maintenance, service, repair, overhaul or testing, any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that the Lessee,
except as otherwise provided in Sections 9.01 or 9.02 hereof, will, at its own
cost and expense, replace such Parts as promptly as practicable. All
replacement parts shall be free and clear of Liens (except for pooling
arrangements to the extent permitted by Section 8.02 hereof and Liens
permitted under Section 6.01 hereof) and shall be in at least as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced, and in any event not less than the condition and repair
required to be maintained by the provisions of this Lease.
(b) Title. All Parts at any time removed from the Airframe or any
Engine shall remain the property of the Lessor until such Parts shall be
replaced by parts which have been incorporated or installed in or attached to
the Airframe or such Engine and which meet the requirements for replacement
parts specified in Section 8.01(a) hereof. Immediately upon any replacement
part (other than, to the extent permitted by Section 8.02 hereof, a
replacement part subject to a pooling arrangement) becoming incorporated or
installed in or attached to the Airframe or any Engine, and without further
act:
(i) title to the replaced Part shall vest in the Lessee, free and
clear of all rights of the Lessor, and such replaced Part shall no longer
be deemed a Part under this Lease;
(ii) title to such replacement part shall vest in the Lessor free and
clear of all Liens (except for Liens permitted by Section 6.01 hereof) and
shall thereupon be and become a Part; and
(iii) such replacement part shall become subject to this Lease and to
the Lien of the Indenture, and shall be deemed part of the Airframe or such
Engine for all purposes to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine.
Section 8.02. Pooling of Parts. Any Part removed from the Airframe
or any Engine as permitted in Section 8.01(a) hereof may be subjected by the
Lessee to any normal pooling arrangement customary in the U.S. airline
industry and entered into with vendors and other Air Carriers in the ordinary
course of the Lessee's business, provided that the part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 8 hereof, as promptly as practicable after
the removal of such removed Part. In addition, any replacement part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 8.01(a) hereof may be owned by another Air Carrier
subject to such normal pooling arrangement, provided that the Lessee, at its
own cost and expense and as promptly as possible, either:
(a) causes title to such replacement part to vest in the Lessor in
accordance with Section 8.01(b) hereof by the Lessee acquiring title to
such replacement part for the benefit of, and transferring such title to,
the Lessor free and clear of all Liens (other than Liens permitted under
Section 6.01 hereof); or
(b) replaces such replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement part
owned by the Lessee free and clear of all Liens (other than Liens permitted
under Section 6.01 hereof) and by causing title to such further replacement
part to vest in the Lessor in accordance with Section 8.01(b) hereof.
All such replacement parts and further replacement parts shall meet
the standards set forth in the last sentence of Section 8.01(a) hereof.
ARTICLE 9
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 9.01. Required Alterations and Modifications. The Lessee,
at its own cost and expense, shall make or cause to be made such alterations
and modifications in and additions to the Airframe and each Engine as may be
required from time to time to meet the applicable requirements of the
Aeronautics Authority or any other governmental authority with jurisdiction
over the Lessee's or any sublessee's operations and aircraft; provided,
however, that the Lessee or sublessee, as the case may be, may in good faith
contest the validity or application of any such requirements in any reasonable
manner that does not involve any material risk of civil liabilities (unless
indemnified by the Lessee) or any risk of criminal penalties being imposed on
or against the Indenture Trustee, the Owner Participant or the Lessor, that
does not involve any material risk or danger of loss, forfeiture or sale of
the Aircraft or any Engine and that does not adversely affect the Lessor, its
title or interest in the Aircraft or any Engine, the first and prior perfected
Lien and security interest of the Indenture, or the interests of the Indenture
Trustee or the Owner Participant in the Airframe or any Engine, or in any
Operative Agreement (excluding any interests indemnified for under the Tax
Indemnity Agreement). All such alterations, modifications or additions shall
be made on or before the date mandated therefor, taking into account
authorized postponements resulting from a contest or otherwise and shall be
made at such time and in such a manner so as not to discriminate against the
Aircraft whether by reason of its leased status or otherwise.
Section 9.02. Other Alterations and Modifications. (a) Generally.
The Lessee, at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine
as the Lessee may deem desirable in the proper conduct of its business,
including, without limitation, removal of Obsolete Parts, provided that no
such alteration, modification, addition or removal, individually or in the
aggregate, shall create any adverse tax consequences for the Owner Participant
not otherwise indemnified for, diminish the value, remaining useful life, or
utility of the Airframe or the value or utility of any Engine or impair its
condition or state of airworthiness below its value, remaining useful life (in
the case of the Airframe only), utility, condition and state of airworthiness
immediately prior to such alteration, modification, addition or removal,
assuming that the Airframe or such Engine was then in the condition and state
of airworthiness required to be maintained by the terms of this Lease, or
cause the Airframe or any Engine to become "limited use property" within the
meaning of Revenue Procedure 76-30, 1976-2 C.B. 647, except that the value
(but not the remaining useful life, utility, condition or state of
airworthiness) of the Aircraft may be reduced by the value, if any, of any
such Obsolete Parts which shall have been removed; provided that in no event
shall the aggregate value of all such Obsolete Parts which shall have been so
removed and not replaced exceed $500,000.
(b) Title to Installed Parts. Title to each part incorporated or
installed in or attached or added to the Airframe or any Engine as the result
of any alteration, modification, removal or addition made pursuant to Section
9.01 or 9.02(a) hereof shall without further act vest in the Lessor and become
subject to this Lease; provided, however, that the Lessee may remove any such
Part at any time during the Term if:
(i) such Part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or
attached or added to the Airframe or such Engine on the Delivery Date or
any Part in replacement of, or substitution for, any such Part;
(ii) such Part is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms of
Article 7 hereof or the first sentence of Section 9.01 hereof; and
(iii) such Part can be removed from the Airframe or such Engine
without (A) causing material damage to the Airframe or such Engine (it
being understood that the Lessee shall repair any damage caused by a
permitted removal) or diminishing or impairing the value, utility,
condition or state of airworthiness or remaining useful life of the
Airframe required to be maintained by the terms of this Lease or (B)
diminishing the value, utility or remaining useful life (in the case of the
Airframe) or the value and utility (in the case of such Engine) which the
Airframe or such Engine would have had at such time had such alteration,
modification, removal or addition not occurred, assuming the Airframe or
such Engine was then in the condition required to be maintained by the
terms of this Lease.
(c) Title to Removed Parts. Upon the removal by the Lessee of any
such Part as provided in subsection (b) above, title thereto shall, without
further act, vest in the Lessee and such Part shall no longer be deemed a
Part. Any Part not removed by the Lessee as above provided prior to the
return of the Aircraft to the Lessor hereunder shall remain the property of
the Lessor and subject to this Lease.
ARTICLE 10
VOLUNTARY TERMINATION
Section 10.01. Right of Termination Upon Obsolescence or Surplus.
(a) Option to Terminate. So long as no Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing, the Lessee shall
have the right, at its option, on any Termination Date, on at least 180 days'
prior written notice (which notice shall state the proposed Termination Date
(the "Proposed Termination Date")) to the Lessor and the Owner Participant to
terminate this Lease as of a Termination Date if the Aircraft shall have
become obsolete or surplus to the operations of the Lessee; provided that the
Lessee shall have furnished to the Lessor, the Indenture Trustee and the Owner
Participant a certificate of the Lessee's President, Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer, Treasurer or Assistant
Treasurer stating the determination of the Lessee that the Aircraft is
obsolete or surplus to its needs. Unless the Lessor has elected to retain the
Aircraft as herein provided, the Lessee shall on no more than two occasions
have the right to revoke its notice of termination not less than ten (10) days
prior to the Proposed Termination Date whereupon this Lease shall continue in
full force and effect; provided that the Lessee may not revoke its notice if a
cash bid which is for an amount greater than or equal to Termination Value has
been submitted for the purchase of the Aircraft.
(b) Sale Procedure. During the period from the giving of notice
pursuant to Section 10.01(a) hereof until the Proposed Termination Date, the
Lessee, as non-exclusive agent for the Lessor, shall use its reasonable
efforts to obtain bids for the cash purchase on the Proposed Termination Date
(or such earlier date as shall be consented to in writing by the Lessor) of
the Aircraft. On the Proposed Termination Date, the Engines shall be
installed on the Airframe (provided that the Airframe may be sold with engines
meeting the requirements set forth herein for Replacement Engines in lieu of
the Engines so long as the aggregate number of Engines and Replacement Engines
being sold with the Airframe equals two). The Lessor may, if it desires to do
so, seek to obtain such bids. The Owner Participant shall not inspect any
bids received by the Lessee with respect to the Aircraft, unless the Owner
Participant has given to the Lessee binding and irrevocable notice that
neither the Owner Participant nor any of its Affiliates nor any Person acting
for the Owner Participant or such Affiliate will submit a bid for the purchase
of the Aircraft and if such notice has been given, the Lessee will provide the
Lessor with copies of bids received by the Lessee. No bid may be submitted by
the Lessee or any Person affiliated with the Lessee (or with whom or which
there is any arrangement or understanding as to the subsequent use of the
Aircraft by the Lessee or any of its Affiliates) or any agent or Person acting
on behalf of the Lessee. The Lessee may reject any bid which is less than the
sum of the applicable Termination Value, the aggregate amount of any
Make-Whole Premium and all other expenses incurred by the Lessor, the Owner
Participant and the Indenture Trustee in connection with the sale. Subject to
the provisions of Section 10.02 hereof, on the Proposed Termination Date or
such earlier date of sale as shall be consented to in writing by the Lessor,
the Lessee shall deliver the Airframe which shall have the Engines installed
on it (provided that the Airframe may be delivered with installed engines
meeting the requirements set forth herein for Replacement Engines in lieu of
the Engines so long as the aggregate number of Engines and Replacement Engines
being delivered with the Airframe equals two and the Lessee shall comply with
the provisions of Section 11.04 hereof as if an Event of Loss occurred with
regard to the Engines) to the bidder which shall have submitted the highest
cash bid (whether certified to the Lessor by the Lessee or directly received
by the Lessor and certified to the Lessee) in the same manner as if delivery
were made to the Lessor pursuant to Article 12 hereof, at a location specified
by such bidder, and shall duly transfer to the Lessor title to any such
engines not owned by the Lessor, and the Lessor shall, upon payment in full of
the bid price and all amounts due and owing pursuant to Section 10.01(c)
hereof by wire transfer of immediately available funds and upon discharge of
the Lien of the Indenture in accordance with Article XIV thereof, sell the
Airframe and Engines or engines to such bidder without recourse or warranty
(except as to the absence of Lessor's Liens).
(c) Payments to the Lessor. The total selling price realized at a
sale pursuant to Section 10.01(b) hereof net of all expenses of the sale
(including commissions and any sales or transfer taxes) (the "Net Sales
Price") shall be retained by the Lessor (or the Indenture Trustee as long as
the Indenture is in force) and, in addition, on or before the Proposed
Termination Date, the Lessee shall pay to the Lessor (or the Indenture Trustee
as long as the Indenture is in force), by wire transfer of immediately
available funds, the sum of:
(i) the excess, if any, of the Termination Value for the Aircraft
computed as of the Proposed Termination Date over the Net Sales Price; plus
(ii) the installment of Basic Rent due with respect to the Aircraft
on the Proposed Termination Date if payable in arrears but not if payable
in advance; plus
(iii) all other amounts then due and payable by the Lessee
(including, without limitation, the aggregate amount of any Make-Whole
Premium, if the Proposed Termination Date occurs prior to the applicable
Premium Termination Date) under this Lease and any other Operative
Agreement.
(d) Transfer of Uninstalled Engines. Upon payment of the amounts
described in Section 10.01(c) hereof and upon transfer to the Lessor of title
to engines which have been returned in lieu of Engines as provided in Section
10.01(b) hereof, and upon payment of all other amounts then due under this
Lease, the Lessor will transfer to the Lessee, without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to any Engines which were replaced with engines pursuant
to Section 10.01(b) hereof, and shall deliver to the Lessee such instrument as
the Lessor shall have received from the Indenture Trustee releasing such
Engines from the Lien of the Indenture.
(e) Limitation on the Lessor's Duties. The Lessor shall be under no
duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids
or otherwise to take any action in connection with any such sale other than to
transfer to the purchaser named in the highest cash bid (determined as
described in Section 10.01(b) above) as referred to above (or to such
purchaser and to the Lessee, as the case may be), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest in and to the Aircraft, against receipt by the Lessor of the
payments provided for.
(f) Termination of the Lessee's Obligations. Upon the sale of the
Aircraft pursuant to this Section 10.01 and upon compliance by the Lessee with
the further provisions of this Article 10, the obligation of the Lessee to pay
Basic Rent with respect to the Aircraft shall cease for any Rent Payment Date
occurring after the Proposed Termination Date and the Term shall end effective
as of the Proposed Termination Date. If no sale shall have occurred on or
before the Proposed Termination Date, this Lease shall continue in full force
and effect and, for purposes of Section 10.01(a) hereof, it shall be deemed
that the Lessee has rescinded its notice of termination, and the Lessee shall
pay the expenses incurred by the Lessor, the Indenture Trustee and the Owner
Participant in connection with the proposed sale.
Section 10.02. Retention of Aircraft by the Lessor. (a) Generally.
Notwithstanding Section 10.01 hereof, the Lessor may, subject to Section
10.02(b) hereof, elect to retain the Aircraft after receipt of the Lessee's
notice of termination given in accordance with Section 10.01(a) hereof, by
giving the Lessee and the Indenture Trustee written irrevocable notice of such
election not less than thirty (30) days prior to the Proposed Termination
Date. If the Lessor so elects, the Lessee shall pay to the Lessor on the
Proposed Termination Date, by wire transfer of immediately available funds the
sum of:
(i) the installment of Basic Rent due with respect to the Aircraft on
the Proposed Termination Date if payable in arrears but not if payable in
advance; plus
(ii) all other amounts then due and payable by the Lessee under this
Lease and any other Operative Agreement, including the aggregate amount of
any Make-Whole Premium (if the Proposed Termination Date occurs prior to
the applicable Premium Termination Date), on or prior to the Payment Date.
(b) Payment of the Certificates. It shall be an absolute condition
precedent to the Lessor's right to retain the Aircraft and to the termination
of the Term pursuant to this Section 10.02 that the Lessor (or the Lessee to
the extent set forth in Section 10.02(a) hereof) shall have paid to the
Holders and such Holders shall have received the entire outstanding principal
amount of, the aggregate amount of any Make-Whole Premium and accrued interest
on the Certificates on the Proposed Termination Date and all other sums due
and owing to the Indenture Trustee and the Holders on or prior to the Proposed
Termination Date under this Lease, the Indenture or any other Operative
Agreement.
(c) Delivery of Aircraft to Lessor; Title to Engines. If the Lessor
elects to retain the Aircraft pursuant to this Section 10.02, the Lessee shall
deliver the Airframe and the Engines (provided that the Airframe may be
delivered with engines meeting the requirements set forth herein for
Replacement Engines in lieu of the Engines so long as the aggregate number of
Engines and engines being delivered with the Airframe equals two and provided
that the other requirements of Section 11.04 hereof are met as if an Event of
Loss has occurred with regard to the Engines) to the Lessor in the same manner
as if delivery were made to the Lessor pursuant to Article 12 hereof, and
shall duly transfer to the Lessor right, title and interest to any such
engines not owned by the Lessor, all in accordance with Article 12 hereof.
Upon such delivery of the Airframe and Engines or engines to the Lessor and
payment by the Lessee of any amounts required to be paid by the Lessee
pursuant to Section 10.02(a) hereof, the Lessor will transfer to the Lessee,
without recourse or warranty (except as to the absence of Lessor's Liens), all
of the Lessor's right, title and interest in and to any Engines which were
replaced by engines pursuant to this Section 10.02(c), and shall deliver to
the Lessee such instrument as the Lessor shall have received from the
Indenture Trustee releasing such Engines from the Lien of the Indenture.
(d) Termination of the Lessee's Obligations. Upon compliance by the
Lessor and the Lessee with the provisions of this Section 10.02 and upon
compliance by the Lessee with the further provisions of this Article 10, the
obligation of the Lessee to pay Basic Rent with respect to the Aircraft shall
cease for any Rent Payment Date occurring after the Proposed Termination Date
and the Term shall end effective as of the Termination Date.
Section 10.03. Voluntary Termination as to Engines. The Lessee
shall have the right at its option and at any time, on at least thirty (30)
days' prior written notice to the Lessor, to terminate this Lease with respect
to any Engine not then installed or held for use on the Airframe, provided
that prior to the date of such termination, the Lessee shall comply with the
terms of Section 11.04 hereof to the same extent as if an Event of Loss had
occurred with respect to such Engine.
ARTICLE 11
LOSS, DESTRUCTION, REQUISITION
Section 11.01. Lessee's Election Rights. The Lessee shall notify
the Lessor, the Indenture Trustee and the Owner Participant as soon as
practicable but in no event more than 10 Business Days following the
occurrence of an event which constitutes, or would with the passage of time
constitute, an Event of Loss with respect to the Airframe or with respect to
the Airframe and the Engines or engines then installed on the Airframe. By
written notice to the Lessor, the Indenture Trustee and the Owner Participant
delivered within 60 days of the occurrence of any Event of Loss, the Lessee
shall have the right to elect the alternative set forth in Section 11.02
hereof or the alternative set forth in Section 11.03 hereof. The Lessee's
failure to make such election within said 60-day period shall be deemed to be
an election of the alternative set forth in Section 11.02 hereof.
Section 11.02. Payment of Stipulated Loss Value. (a) The Lessee
shall, if it has so elected or is deemed to have so elected under Section
11.01 hereof, pay to the Lessor, by wire transfer of immediately available
funds on the earlier of (i) the third Business Day following receipt in full
of insurance proceeds or requisition proceeds, described in Section 11.05
hereof, in connection with such Event of Loss and (ii) the 120th day after the
occurrence of such Event of Loss (the earlier of such dates being referred to
herein as the "Loss Payment Date"), the sum of (A) the Stipulated Loss Value
for the Aircraft, determined as of the Stipulated Loss Value Determination
Date next preceding the Loss Payment Date (or, if the Loss Payment Date occurs
on a Stipulated Loss Value Determination Date, determined as of such
Stipulated Loss Value Determination Date) together with interest on such
amount at the Debt Rate from such Stipulated Loss Value Determination Date to
the Loss Payment Date, plus (B) any and all Basic Rent due and payable on or
prior to the relevant Stipulated Loss Value Determination Date and unpaid,
plus (C) any and all Supplemental Rent due and payable on or prior to such
Loss Payment Date, plus (D) all other amounts owing by the Lessee or the Owner
Trustee to the Indenture Trustee or the Holders under the Indenture and the
other Operative Agreements, plus (E) any reasonable out-of-pocket expenses
incurred in connection with such Event of Loss and the related prepayment of
the Certificates by the Lessor, the Owner Participant and the Indenture
Trustee, minus (F) if the relevant Stipulated Loss Value Determination Date is
a Rent Payment Date, the portion, if any, of the Basic Rent installment due and
paid by the Lessee on such Stipulated Loss Value Determination Date pursuant
to Section 3.02 hereof to the extent such Basic Rent installment (or portion
thereof) is designated on Schedule II hereto as being payable in advance,
together with an imputed interest amount in respect of such advance payment of
Basic Rent (or portion thereof) at the Debt Rate from the date of payment of
such Basic Rent installment (or portion thereof) by the Lessee to the Loss
Payment Date; provided that in no event shall there be subtracted pursuant to
clause (F) an amount such that the Holders shall not be paid in full.
(b) Termination of Lease; Title Transfer. Upon payment in full of
the amounts due pursuant to Section 11.02(a) hereof, the obligation of the
Lessee to pay Basic Rent on any Rent Payment Date occurring subsequent to the
payment of such amounts shall terminate and the Term shall end. Further, upon
such payment, the Lessor will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens), all of the Lessor's
right, title and interest, if any, in and to the Airframe, Engines and engines
with respect to which such Event of Loss occurred, as well as all of the
Lessor's right, title and interest in and to any Engines constituting part of
the Aircraft but not installed on the Airframe when such Event of Loss
occurred, and will deliver to the Lessee such instrument as the Lessor shall
have received from the Indenture Trustee, releasing the Aircraft from the Lien
of the Indenture.
Section 11.03. Replacement of Airframe and Engines. (a) Generally.
So long as no Payment Default, Bankruptcy Default or Event of Default shall
have occurred and be continuing, and subject to Section 11.01 hereof, if the
Lessee has elected to replace the Airframe and Engines suffering an Event of
Loss pursuant to this Section 11.03, the Lessee shall cause to be duly
conveyed to the Lessor within one hundred twenty (120) days after the
occurrence of such Event of Loss, as replacement for the Airframe and Engines
with respect to which such Event of Loss has occurred, good and marketable
title to an Airbus A300-600 series airframe manufactured no earlier than
January 1, 1997 (the "Replacement Airframe") and good and marketable title to
a number of Replacement Engines equal to the number of Engines with respect to
which an Event of Loss has occurred, provided that following compliance with
all other terms of this Section 11.03 each Engine shall be of identical make
and model and, in the case of such Replacement Airframe and each such
Replacement Engine, owned by the Lessee free and clear of all Liens not
excepted in Sections 6.01(a), (b), (c) and (e) hereof, duly certified as an
airworthy aircraft by the Aeronautics Authority, and having in the case of the
Replacement Airframe a value, remaining useful life and utility, and in the
case of the Replacement Engines a value and utility, at least equal to, and
being in as good operating condition as, the Airframe and Engines with respect
to which such Event of Loss occurred, assuming that the Airframe and Engines
were then in the condition and state of airworthiness required to be
maintained by the terms of this Lease immediately prior to the occurrence of
such Event of Loss. In such case and as a condition to such substitution the
Lessee, at its own cost and expense, will also promptly:
(i) furnish the Indenture Trustee with originals of, and the Lessor
with copies of, full warranty bills of sale, in form and substance
satisfactory to the Lessor and the Indenture Trustee, with respect to such
Replacement Airframe and Replacement Engines together with an assignment in
form and substance satisfactory to the Lessor and the Indenture Trustee of
any and all manufacturer's warranties applicable thereto and a consent
reasonably satisfactory to the Lessor and the Indenture Trustee from such
manufacturer or manufacturers to such assignment;
(ii) cause such Replacement Airframe and Replacement Engines to be
duly registered in the name of the Lessor pursuant to the Transportation
Code or the applicable laws of any other jurisdiction in which the Aircraft
may then be registered in accordance with Section 6.03(b) of the
Participation Agreement;
(iii) cause a Lease Supplement with respect to such Replacement
Airframe and Replacement Engines to be duly executed by the Lessee and
recorded pursuant to the Transportation Code, or the applicable laws, rules
and regulations of any other jurisdiction in which the Aircraft may then be
registered as permitted by Section 6.03(b) of the Participation Agreement;
(iv) furnish the Lessor, the Indenture Trustee and the Owner
Participant with an appraisal or other report of a nationally recognized
aircraft appraiser based on an inspection of such Replacement Airframe and
Replacement Engines reasonably satisfactory to the Indenture Trustee and
the Owner Participant certifying that such Replacement Airframe has a
value, remaining useful life and utility, and such Replacement Engines have
a utility and, in the aggregate, value, at least equal to, and are in as
good operating condition as, the Airframe and Engines replaced, assuming
such Airframe and Engines were in the condition and repair required by the
terms of this Lease immediately prior to the occurrence of such Event of
Loss;
(v) furnish the Lessor, the Indenture Trustee and the Owner
Participant with such evidence as the Lessor or the Indenture Trustee may
reasonably request of compliance with the insurance provisions of Article
13 hereof with respect to such Replacement Airframe and Replacement Engines;
(vi) provide the Owner Participant and the Lessor with (A) an opinion
of counsel selected by the Owner Participant and reasonably acceptable to
the Lessee (which opinion shall be reasonably satisfactory in form and
substance to the Owner Participant and the Lessor) that the Owner
Participant and the Lessor will suffer no adverse tax consequence not
otherwise indemnified for as of the Delivery Date as a result of such
substitution or (B) an indemnity reasonably acceptable to the Lessor and
the Owner Participant against such consequences, which indemnity shall be
bonded or otherwise secured to the reasonable satisfaction of the Lessor
and the Owner Participant, together with an opinion of counsel (otherwise
complying with clause (vi)(A) above) that there is Substantial Authority
(as defined in the Tax Indemnity Agreement) that neither the Owner
Participant nor the Lessor will suffer any adverse tax consequences as a
result of such substitution or, at the Lessee's discretion, a More Likely
than Not Opinion (as so defined) to the same effect;
(vii) comply with the provisions of Section 9.08 of the Indenture;
(viii) cause an Indenture and Security Agreement Supplement with
respect to such Replacement Airframe and Replacement Engines to be duly
executed by the Lessor and the Indenture Trustee and recorded pursuant to
the Transportation Code, or the applicable laws, rules and regulations of
any other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement in order that
the Lien of the Indenture shall constitute a first priority, duly perfected
Lien and security interest on and in respect of such Replacement Airframe
and Replacement Engines;
(ix) take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as a secured party with the
Secretary of State of Connecticut and the filing of a notice with the
Secretary of State of Tennessee, as the Lessor or the Indenture Trustee may
reasonably request in order that such Replacement Airframe and Replacement
Engines shall be duly and properly titled in the Lessor, leased under this
Lease and subjected to the Lien of the Indenture to the same extent as the
replaced Airframe and Engines;
(x) furnish the Indenture Trustee with an opinion (reasonably
satisfactory in form and substance to the Lessor, the Owner Participant and
the Indenture Trustee) of counsel to the Lessee (which may be the Lessee's
General Counsel) addressed to the Indenture Trustee and the Owner
Participant to the effect that (A) the Lessor has good title to such
Replacement Airframe and Replacement Engines, and (B) such Replacement
Airframe and Replacement Engines have been validly subjected to the Lien
of the Indenture (with the effect and result that the Indenture constitutes
a first priority duly perfected security interest and Lien on such
Replacement Airframe and Replacement Engines); and
(xi) cause to be delivered to the Lessor, the Owner Participant and
the Indenture Trustee an opinion of counsel to the Lessee addressed to the
Lessor, the Owner Participant and the Indenture Trustee as to the due
registration of the Aircraft and the due recordation of the requisite
documents or instruments and the validity and perfection of the Lien in
such Replacement Airframe and Replacement Engines.
(b) Title to Replaced Equipment. Upon compliance by the Lessee with
the terms of Section 11.03(a) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest, if any, in and to the Airframe and Engines with respect to which
such Event of Loss occurred. In connection with such transfer, the Lessee
shall prepare and the Lessor shall execute or forward to the Indenture Trustee
for execution, as the case may be, all in recordable form, a bill of sale
evidencing such transfer, a release of the Airframe and Engines with respect
to which such Event of Loss occurred from the Indenture and such other
documents as the Lessee reasonably requests, all at the Lessee's sole cost and
expense. Any Engine constituting part of the Aircraft, but not installed on
the Airframe when such Event of Loss occurred, shall continue to be property
of the Lessor and leased under this Lease as part of the same equipment as the
Replacement Airframe and Replacement Engines.
(c) Definitions. Each Replacement Airframe and Replacement Engine
shall be deemed part of the property leased under this Lease, each such
Replacement Airframe shall be deemed an "Airframe," each such Replacement
Engine shall be deemed an "Engine" and each such Replacement Airframe and
Replacement Engine shall be deemed part of the same Aircraft as was the
Airframe or Engine replaced.
(d) Rent Adjustments. An Event of Loss covered by this Section
11.03 shall not result in any change in Basic Rent, Stipulated Loss Values or
Termination Values but may result in payments pursuant to the Tax Indemnity
Agreement and the Participation Agreement.
(e) Time Limitations. If the Lessee has elected to proceed under
this Section 11.03 but has not fully performed its obligations under this
Section 11.03 within 120 days of the occurrence of the applicable Event of
Loss, in the event that any amounts held by the Lessor (or, so long as the
Indenture shall be in effect, the Indenture Trustee) in respect of such Event
of Loss are less than the Stipulated Loss Value thereof, the Lessee will
deposit with the Lessor or the Indenture Trustee, as the case may be, the
amount of any deficiency as security on such 120th day. If the Lessee has
elected to proceed under this Section 11.03 but has not fully performed its
obligations under this Section 11.03 within 180 days of the occurrence of such
Event of Loss, the Lessee shall be deemed to have elected to proceed under
Section 11.02 hereof and shall immediately perform its obligations thereunder,
and the Indenture Trustee, or the Lessor if the Indenture shall have been
discharged, shall apply the amounts held by it pursuant to the preceding
sentence as a credit against such obligations.
Section 11.04. Event of Loss with Respect to an Engine. (a)
Generally. Upon the occurrence of an Event of Loss with respect to an Engine
under circumstances in which there has not occurred an Event of Loss with
respect to the Airframe, the Lessee shall give the Lessor and the Indenture
Trustee prompt written notice thereof and shall, as soon as practicable but in
any event within sixty (60) days after the occurrence of such Event of Loss,
duly convey or cause to be conveyed to the Lessor, a Replacement Engine for
the Engine with respect to which such Event of Loss occurred, good and
marketable title to a Replacement Engine, free and clear of all Liens not
excepted in Sections 6.01(a), (b), (c) and (e) hereof and having a value and
utility at least equal to, and being in as good operating condition as, the
Engine with respect to which such Event of Loss occurred, assuming such Engine
was of the value and utility and in the condition and repair required by the
terms of this Lease immediately prior to the occurrence of such Event of Loss,
provided that after any replacement, both Engines shall be of identical make
and model and any Replacement Engines of a different manufacturer than the
original Engines shall be then commonly in use in the commercial aviation
industry on Airbus A300-600 series airframes. The standards set forth in this
Section with respect to Replacement Engines shall apply upon any replacement
or substitution of an Engine with a Replacement Engine pursuant to any other
provision of this Lease.
(b) Conditions Precedent. Prior to or at the time of any conveyance
of an Engine pursuant to Section 11.04(a) hereof, the Lessee, at its own cost
and expense will:
(i) furnish the Lessor with an original of, and the Indenture Trustee
with a copy of, a full warranty bill of sale, in form and substance
satisfactory to the Lessor, with respect to such Replacement Engine
together with an assignment in form and substance satisfactory to the
Lessor and the Indenture Trustee of any and all manufacturer's warranties
applicable thereto and a consent reasonably satisfactory to the Lessor and
the Indenture Trustee from such manufacturer to such assignment;
(ii) cause a Lease Supplement covering such Replacement Engine to be
duly executed by the Lessee and filed for recordation pursuant to the
Transportation Code, or the applicable laws, rules and regulations of any
other jurisdiction in which the Aircraft may then be registered as
permitted by Section 6.03(b) of the Participation Agreement and, if the
Engine being replaced was registered under the applicable laws of the
jurisdiction in which the Aircraft is then registered, the Replacement
Engine shall be registered in the same fashion;
(iii) furnish the Lessor and the Indenture Trustee with a certificate
of a nationally recognized aircraft appraiser reasonably satisfactory to
the Lessor and the Indenture Trustee certifying that such Replacement
Engine has a value and utility at least equal to, and is in as good
operating condition as, the Engine replaced, assuming such Engine was in at
least the condition and repair required by the terms of this Lease
immediately prior to the occurrence of such Event of Loss;
(iv) furnish the Lessor with such evidence of compliance with the
insurance provisions of Article 13 hereof with respect to such Replacement
Engine as the Lessor or the Indenture Trustee may reasonably request;
(v) provide the Owner Participant and the Lessor with (A) an opinion
of counsel selected by the Owner Participant and reasonably acceptable to
the Lessee (which opinion shall be reasonably satisfactory in form and
substance to the Owner Participant and the Lessor) that it will suffer no
adverse tax consequences not otherwise indemnified for as of the effective
date of this Agreement as a result of such substitution or (B) an indemnity
reasonably acceptable to the Lessor and the Owner Participant against such
consequences, which indemnity shall be bonded or otherwise secured to the
reasonable satisfaction of the Lessor and the Owner Participant;
(vi) comply with the provisions of Section 9.08 of the Indenture;
(vii) cause an Indenture and Security Agreement Supplement with
respect to such Replacement Engine to be duly executed by the Lessor and
the Indenture Trustee and recorded pursuant to the Transportation Code, or
the applicable laws, rules and regulations of any other jurisdiction in
which the Aircraft may be registered as permitted by Section 6.03(b) of the
Participation Agreement in order that the Indenture shall constitute a
first priority duly perfected Lien and security interest on and in respect
of such Replacement Engine;
(viii) take such other action, including the filing of UCC financing
statements naming the Indenture Trustee as Secured Party with the Secretary
of State of Connecticut and a notice filing with the Secretary of State of
Tennessee, as the Lessor or the Indenture Trustee may reasonably request in
order that such Replacement Engine be duly and properly titled in the
Lessor, leased under this Lease and subjected to the Lien of the Indenture
to the same extent as the replaced Engine;
(ix) furnish the Lessor, the Owner Participant and the Indenture
Trustee with an opinion (reasonably satisfactory in form and substance to
the Lessor, the Owner Participant and the Indenture Trustee) of counsel to
the Lessee (which may be the Lessee's General Counsel) addressed to the
Lessor, the Indenture Trustee and the Owner Participant to the effect that
(A) the Lessor has good title to such Replacement Engine, and (B) such
Replacement Engine has been validly subjected to the Lien of the Indenture
(with the effect and result that the Indenture constitutes a first priority
duly perfected security interest and Lien on such Replacement Engine); and
(x) take such other action as the Indenture Trustee may reasonably
request in order that such Replacement Engine be duly and properly
subjected to the Lien of the Indenture to the same extent as the replaced
Engine.
(c) Title Transfer. Upon compliance by the Lessee with the terms of
Sections 11.04(a) and (b) hereof, the Lessor will transfer to the Lessee
(subject to any insurer's salvage rights), without recourse or warranty
(except as to the absence of Lessor's Liens), all of the Lessor's right, title
and interest, if any, in and to the Engine with respect to which such Event of
Loss occurred. In connection with such transfer, the Lessee shall prepare and
the Lessor shall execute or forward to the Indenture Trustee for execution, as
the case may be, all in recordable form, a bill of sale evidencing such
transfer, a release of the Engine with respect to which such Event of Loss
occurred from the Indenture and such other documents as the Lessee reasonably
requests, all at the Lessee's sole cost and expense. Each Replacement Engine
shall, after such conveyance, be deemed part of the property leased under this
Lease. An Event of Loss covered by this Section 11.04 shall not result in any
change in Basic Rent, Stipulated Loss Values or Termination Values, but may
result in payments to be made pursuant to the Tax Indemnity Agreement and the
Participation Agreement.
Section 11.05. Application of Payments from the Government or
Others. (a) Generally. Any payments (other than insurance proceeds the
application of which is provided for in Section 13.03 hereof) received at any
time by the Lessor or by the Lessee from any governmental authority or any
other party, foreign or domestic, with respect to an Event of Loss resulting
from the condemnation, confiscation, theft or seizure of, or requisition of
title to or use of, the Airframe or any Engine will be applied, as appropriate,
in accordance with Section 11.05(b) or Section 11.05(c) hereof.
(b) Payments of Stipulated Loss Value. If the payments described in
Section 11.05(a) hereof are received with respect to the Airframe or with
respect to the Airframe and Engines or engines then installed on the Airframe
and the Lessee has elected the alternative set forth in Section 11.02 hereof,
so much of such payments as shall not exceed the amount required to be paid by
the Lessee pursuant to Section 11.02 hereof shall be paid to the Lessor (or,
if the Lien of the Indenture has not been discharged, the Indenture Trustee)
in reduction of the Lessee's obligations under Section 11.02 hereof if not
already paid by the Lessee, or, if such obligations have already been
discharged in full by the Lessee, such payments shall be applied to reimburse
the Lessee for its payment of such Stipulated Loss Value and, if and to the
extent specifically included in such payment, to pay to the Lessee interest on
such amount of Stipulated Loss Value at the rate included in such payment if
any, or otherwise at the applicable Debt Rate, for the period from the date of
payment by the Lessee of the Stipulated Loss Value to the date of reimbursement
of the Lessee under this Section 11.05(b). The excess, if any, remaining
after such application shall be divided between the Lessor and the Lessee as
their respective interests may appear.
(c) Payment if the Lessee Elects Replacement. If the payments
described in Section 11.05(a) hereof are received with respect to the Airframe
or with respect to the Airframe and the Engines or engines then installed on
the Airframe and the Lessee has elected the alternative set forth in Section
11.03 hereof, or if such payments are received with respect to an Engine not
then installed on the Airframe under the circumstances contemplated by Section
11.04 hereof, all such payments shall, subject to Section 11.08 hereof, be
paid over to or retained by the Lessee, provided that the Lessee shall have
fully performed its obligations pursuant to Section 11.03 or Section 11.04
hereof, as the case may be, with respect to the Event of Loss for which such
payments are made.
Section 11.06. Requisition of an Airframe and the Installed Engines
for Use by Government. In the event of the requisition for use by the
Government or any other government of registry of the Aircraft, or any agency
or instrumentality of either (a "Requisitioning Government") of the Airframe
and the Engines or engines then installed on the Airframe during the Term,
which requisition does not constitute an Event of Loss, the Lessee shall
promptly notify the Lessor, the Indenture Trustee and the Owner Participant of
such requisition and all of the Lessee's obligations under this Lease with
respect to such Airframe and Engines or engines shall continue to the same
extent as if such requisition had not occurred except to the extent that any
failure or delay in the performance or observance of such obligations (other
than obligations for the payment of Rent and, subject to Section 7.01(f)
hereof, the maintenance of required insurance) by the Lessee shall have been
caused by such requisition. All payments received by the Lessor, the Lessee
or any permitted sublessee or transferee from the Requisitioning Government
for such use of the Airframe and Engines or engines during the Term (other
than any such requisition which constitutes an Event of Loss, as to which the
provisions of Section 11.05 hereof shall govern) shall, subject to Section
11.08 hereof, be paid over to, or retained by the Lessee or such permitted
sublessee or transferee unless a Payment Default, Bankruptcy Default or Event
of Default shall have occurred and be continuing (in which case such proceeds
shall be held (unless applied) pursuant to Section 23.01 hereof as security
for Lessee's obligations hereunder and under the Participation Agreement).
All payments received by the Lessor, the Lessee or any such permitted
sublessee or transferee from the Requisitioning Government for the use of the
Airframe and Engines or engines after the Term shall be paid over to, or
retained by, the Lessor (or the Lessee if it shall have purchased the Lessor's
interest therein in accordance with the provisions hereof). In the event of
any such requisition for use, the Lessee agrees to use reasonable efforts to
obtain reimbursement from the Requisitioning Government to the Lessor for
damages suffered by the Lessor and the Owner Participant as a result of such
requisition for use. The Lessee will endeavor to keep the Lessor informed as
to any negotiations between the Lessee and/or any permitted sublessee or
transferee and a Requisitioning Government with respect to any such
requisition and will consult with the Lessor regarding methods or procedures
that are appropriate to effect recovery from such Requisitioning Government
for any damages suffered by the Lessor and the Owner Participant by reason of
such requisition for use.
Section 11.07. Requisition for Use by Government of an Engine Not
Installed on the Airframe. In the event of the requisition for use by a
Requisitioning Government of registry of the Aircraft or any agency or
instrumentality thereof of any Engine not then installed on the Airframe, the
Lessee shall replace such Engine by complying with the terms of Section 11.04
hereof to the same extent as if an Event of Loss had occurred with respect to
such Engine as of the date of such requisition, and any payments received by
the Lessor or the Lessee from the Requisitioning Government with respect to
such requisition shall, subject to Section 11.08 hereof, be paid over to or
retained by the Lessee, provided that the Lessee shall have fully performed
its obligations under Section 11.04 hereof.
Section 11.08. Application of Payments During Existence of Certain
Defaults. Any amount referred to in Section 11.05, 11.06 or 11.07 hereof
which is payable to the Lessee shall not be paid to the Lessee, or, if it has
been previously paid directly to the Lessee, shall not be retained by the
Lessee, if at the time of such payment a Payment Default, Bankruptcy Default
or Event of Default shall have occurred and be continuing, but shall be paid
to and held by the Lessor (or the Indenture Trustee so long as the Lien of the
Indenture is in effect) as provided in Article 23 hereof as security for the
obligations of the Lessee under this Agreement, and at such time as there
shall not be continuing any such Payment Default, Bankruptcy Default or Event
of Default, such amount to the extent not theretofore applied as provided
herein, shall be paid to the Lessee.
ARTICLE 12
RETURN OF AIRCRAFT
Section 12.01. Return of Aircraft. Unless the Aircraft is purchased
by the Lessee as provided in Section 4.02 hereof, at the end of the Term, or
upon the termination of this Lease pursuant to Article 10 or Article 17 hereof
or otherwise, the Lessee, at its own cost and expense, will return the
Aircraft by delivering it to the Lessor on the last day of the Term or on the
Termination Date, as the case may be, at the Lessee's principal maintenance
facility in Memphis, Tennessee or such other location specified by the Lessor
pursuant to the next succeeding sentence (and reasonably acceptable to the
Lessee), within the continental United States (on the Lessee's route structure
as in effect on the return date) and the Airframe shall be fully equipped with
two Engines of the same or an improved make and model as were delivered on the
Delivery Date (or Replacement Engines), free and clear of all Liens (other
than Lessor's Liens), including any rights of third parties under pooling,
interchange, overhaul, repair or similar agreements or arrangements, it being
understood that all such Engines and Replacement Engines so returned shall be
of identical make and model and that any Replacement Engine shall be in at
least as good operating condition and have at least the same value and utility
as the Engines being replaced, assuming such Engines were in the condition
required hereunder. The Lessor will give the Lessee at least thirty (30) (or
five (5) in the case of a return pursuant to Article 17 hereof) days' prior
written notice of the place of such return; provided, however, that if the
Lessor shall have made the request for storage pursuant to Section 12.06
hereof, the Lessee shall return the Aircraft to the Lessor at the site of the
storage and provided further that if notice is not delivered the Aircraft
shall be returned in Memphis, Tennessee.
Section 12.02. Return of Engines. If any engine not owned by the
Lessor shall be delivered with the Airframe as set forth in Section 12.01
hereof, the Lessee, concurrently with such delivery, will, at its own cost and
expense furnish the Lessor with (i) a full warranty bill of sale, in form and
substance reasonably satisfactory to the Lessor, with respect to such engine,
(ii) an opinion of the Lessee's counsel to the effect that, upon such return,
the Lessor will acquire full right, title and interest to such engine free and
clear of all Liens (other than Lessor's Liens) and (iii) a certificate as
described in Section 11.04(b)(iii) hereof. The Lessee shall take such other
action as the Lessor may reasonably request in order that such Replacement
Engine shall be duly and properly titled in the Lessor free and clear of all
Liens (other than Lessor's Liens), and the Lessor will then (i) transfer to
the Lessee, without recourse or warranty (except as to the absence of Lessor's
Liens), and subject to the disclaimers provided in Section 5.01 hereof, all
the Lessor's right, title and interest in and to any Engine in lieu of which a
Replacement Engine has been delivered pursuant to Section 12.01 hereof, "as
is, where is" and (ii) deliver to the Lessee such instrument as the Lessor
shall have received from the Indenture Trustee, releasing such Engine from the
Lien of the Indenture.
Section 12.03. Return of Manuals. Upon the return of the Aircraft,
the Lessee shall deliver to the Lessor all original (or photocopied or
microfilmed copies thereof, if then permitted to be maintained in such form
under applicable law) logs, manuals (including, any service kits previously
furnished by a manufacturer at no cost to the Lessee), certificates and
technical data, and inspection, modification and overhaul records pertaining
to the Airframe, Engines or engines, which are required to be maintained under
applicable rules and regulations of the Aeronautics Authority or pursuant to
the Lessee's or any permitted sublessee's Aeronautics Authority-approved
maintenance program or which the Lessee would otherwise discard upon such
return and all original (or photocopied or microfilmed copies thereof, if then
permitted to be maintained in such form under applicable law) records
maintained with respect to the Aircraft under the maintenance program approved
by the aeronautical authority of any other country of registry of the
Aircraft. All records shall be returned in the format necessary to allow the
Lessee or any sublessee to comply with Section 12.04(a)(i) hereof.
Section 12.04. Condition of Aircraft. (a) Required Condition. The
Aircraft when returned to the Lessor shall, at the Lessee's own cost and
expense, meet the following requirements:
(i) it shall, unless otherwise requested by the Lessor not less than
90 days prior to the end of the Term to retain the then-existing
registration of the Aircraft, be duly registered in the name of the Lessor
or its designee pursuant to the Transportation Code;
(ii) it shall be clean by airline and cargo handling operating
standards;
(iii) the Airframe shall be returned with the Engines, or any
replacements thereto as herein authorized, provided that the Airframe shall
have an aggregate of two Engines or engines (as herein authorized under
Section 12.02 hereof), both of the same make and model, installed thereon,
together with the equipment, accessories or parts installed thereon on the
Delivery Date or replacements therefor (as herein authorized) and
alterations, modifications and additions thereto made in accordance with
the provisions of this Lease;
(iv) it shall be in the condition required by Section 12.04(b) hereof
and in as good operating condition as when delivered to the Lessor on the
Delivery Date, ordinary wear and tear excepted;
(v) it shall have a currently effective airworthiness certificate
issued by the Aeronautics Authority;
(vi) it shall comply with any then applicable rules and regulations
imposed by the Aeronautics Authority and, without limitation of the
foregoing, terminate all airworthiness directives of, and mandatory
modifications required by, the Aeronautics Authority (or any government or
governmental authority, domestic or foreign, having jurisdiction over the
Aircraft) to be terminated during the Term of the Lease and each Engine
(including any Replacement Engine) shall be serviceable in accordance with
the Lessee's FAA-approved maintenance program;
(vii) it shall be free and clear of all Liens and rights of others
(other than Lessor's Liens) including, without limitation, rights of third
parties under pooling, interchange, overhaul, repair and other similar
agreements or arrangements referred to in Section 7.02(a) hereof; and
(viii) it shall be in a standard cargo configuration.
(b) Remaining Time. If, at the time of return of the Aircraft, the
Airframe is not being maintained under a continuous maintenance program, then
the Airframe shall have remaining until the next scheduled "C" check at least
25% of the allowable hours between "C" checks permitted under the Lessee's
FAA-approved maintenance program. If, at the time of return of the Aircraft,
the Airframe is subject to a continuous maintenance program, there will be no
time-before-overhaul requirement. If, at the time of return of the Aircraft,
the Engines are not being maintained under an on-condition maintenance program,
then the average number of hours on such Engines remaining until the next
scheduled engine heavy maintenance visit shall be at least 25% of the
allowable hours between engine heavy maintenance visits permitted under the
Lessee's FAA-approved maintenance program. If, at the time of return of the
Aircraft, the Engines are subject to an on-condition maintenance program,
there will be no time-before-overhaul requirement. With respect to
maintenance under the Lessee's FAA-approved maintenance program, the Lessee
shall have treated the Aircraft in a nondiscriminatory manner with other
Airbus A300-600 series aircraft in the Lessee's fleet, and the Aircraft shall
be free and clear of all Liens and rights of others other than Lessor's Liens
and shall be in compliance in every material respect with the Lessee's
maintenance program as if the Term were not ending.
Section 12.05. Delayed Return of Aircraft. (a) If the return of
the Aircraft to the Lessor in compliance with the terms of this Lease shall be
delayed beyond the scheduled end of the Term because of the occurrence of an
event described in clause (iii)(2)(B) of the definition of Event of Loss, this
Lease shall not terminate but shall continue in full force and effect until
the expiration of the six-month period (or, so long as the Lessor shall have
received at least six month's notice of the date on which such shorter period
ends, such shorter period referred to in said clause (iii)(2)(B)) after the
scheduled end of the Term, provided that (i) Stipulated Loss Value and
Termination Value during such extension shall be an amount determined in
accordance with Section 4.01(b) hereof, (ii) the Lessee shall pay on demand,
as Basic Rent for each day of such delay and this Lease shall continue, an
amount equal to the daily equivalent of the average Basic Rent paid during the
Basic Term and any then expiring Renewal Term, or such higher compensation
being paid by the Government pursuant to the CRAF Program and (iii) neither
the Lessee nor any other Person shall use or operate the Aircraft in any
manner, except pursuant to the activation of such CRAF Program.
(b) In any other situation in which the Aircraft is not returned to
the Lessor upon the expiration of the Term (other than due to a purchase of
the Aircraft by the Lessee pursuant to this Lease or by a purchaser under
Article 10 hereof), the Lessee shall pay on demand as Basic Rent for each day
of such delay an amount equal to the Rent per diem at a rate equal to the Fair
Market Rental and this Lease shall continue for up to six (6) months after the
end of the Term; provided, however, that nothing in this paragraph shall be
deemed (i) to relieve the Lessee in any respect from any Default or Event of
Default or claims with respect thereto arising from the failure to return the
Aircraft at the time or in the condition required by the Operative Agreements
or (ii) to permit the Lessee or any sublessee to operate or use the Aircraft
otherwise than in connection with effecting such return.
Section 12.06. Storage. Upon any expiration or termination of this
Lease, at the written request of the Lessor given at least 15 days prior to
such expiration or termination, the Lessee will arrange, or will cause to be
arranged, at no charge to the Lessor (subject, however, to the last sentence
of this Section 12.06), storage at a ramp storage facility for the Aircraft at
the Lessee's principal maintenance facilities in Memphis, Tennessee or one of
the Lessee's other maintenance facilities or at a location selected by the
Lessee used as a location for the parking or storage of aircraft for a period
of up to 30 days; provided that if storage is available at no additional cost
or expense to the Lessee at the location at which the Lessor has specified
pursuant to Section 12.01 hereof that return of the Aircraft shall take place,
the Lessee shall provide storage at such location. At the end of such 30 day
period, if the Lessor so requests within 10 days of before the end of such
period, the Lessee will continue to provide such ramp storage facility at such
facility or location for an additional 30 days at the Lessor's expense. If
the Lessee is required to move the Aircraft from one storage facility to
another, such move shall be at the risk and expense of the Lessor. The
maintenance and risk of loss of, and responsibility for obtaining insurance
on, the Aircraft shall be the responsibility of the Lessor during any period
of storage; provided, however, the Lessee will, upon written request of the
Lessor and at the Lessor's expense, not to exceed the Lessee's incremental
cost of such service, obtain insurance for such property (including, if
possible, coverage through its fleet policy).
Section 12.07. Special Markings. If requested by the Lessor, the
Lessee shall, at the Lessee's cost, remove or paint over all insignias and
other distinctive markings of the Lessee or any sublessee on the Aircraft and
repaint the stripped down areas in a workmanlike manner to match exterior
colors.
Section 12.08. Lessor's Option to Purchase Parts. At any time after
the Lessee has advised the Lessor that it has determined not to renew this
Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to
the Lessor, the Lessee shall advise the Lessor of any Part which the Lessee
intends, and is permitted, to remove as provided in Section 9.02(b) above, and
the Lessor may, at its option, upon 30 days' notice to the Lessee, purchase
any or all of such Parts from the Lessee upon the expiration of the Term at
their then Fair Market Value determined in accordance with the provisions of
Section 4.03 hereof. Upon any return of the Aircraft pursuant to this Article
12, if the Lessor does not elect to exercise its option under this Section
12.08, the Lessee will, at its own cost and expense, remove such Parts
described in subparagraph (i), (ii) or (iii) of Section 9.02(b) hereof as the
Lessor may request.
ARTICLE 13
INSURANCE
Section 13.01. Comprehensive Airline Liability and Property Damage
Liability Insurance. (a) Comprehensive Airline Liability and Property Damage
Liability Insurance. The Lessee, at its own cost and expense, will maintain
or cause to be maintained with respect to the Aircraft, comprehensive airline
liability insurance including, without limitation, passenger legal liability
and property damage liability insurance and cargo legal liability in such
amounts, against such risks (including, without limitation, contractual
liability and war risk and allied perils liability), with such retentions as
the Lessee customarily maintains with respect to similar aircraft and engines
which comprise the fleet of the Lessee (subject to the limitations set forth
in Section 13.06 hereof), and with such insurers (which shall be insurers of
recognized responsibility), and such insurance against such other risks as is
usually carried by similar corporations engaged in the same or similar
business and similarly situated as the Lessee and owning or operating aircraft
and engines similar to the Aircraft and Engines; provided that in no event
shall the limits of liability for all comprehensive airline liability
insurance be less than the amount, per occurrence, as set forth on the
insurance certificate delivered on the Delivery Date unless and only so long as
the Aircraft is not operated and appropriate insurance for the Aircraft on the
ground is maintained. The Lessee will also be required to maintain war risk
insurance if the Aircraft is operated in a war zone if such insurance is
available on commercially reasonable terms and if it is the custom for major
international Air Carriers flying comparable routes to carry such insurance.
(b) Government Indemnification. Notwithstanding Section 13.01(a)
hereof, in the event of the requisition for use by the Government of the
Airframe or the Airframe and the Engines or engines then installed on the
Airframe, the Lessee shall maintain throughout the period of such requisition
such insurance as would otherwise be required under this Section 13.01;
provided that the Lessor shall accept, in lieu of such insurance coverage,
written indemnification or insurance from the Government which is
substantially the same as otherwise required under this Article 13.
(c) Policy Terms. Any policy of insurance carried and maintained in
accordance with this Section 13.01, and any policy taken out in substitution
or replacement for any such policy subject to the terms, conditions and
limitations thereof, shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft, the Indenture Trustee in its individual
capacity and as trustee/mortgagee of the Aircraft, the Pass Through
Trustee, each Liquidity Provider, the Owner Participant and the Owner
Participant Guarantor and each of their respective officers and directors
in their respective capacities as such as additional insureds (hereinafter
in this paragraph (c) sometimes referred to as "Additional Insured");
(ii) provide that, in respect of the interest of any Additional
Insured in such policies, the insurance shall not be invalidated by any
action or inaction of the Lessee or any Additional Insured as defined under
the policy of insurance required under this Section 13.01 (other than any
action or inaction of such Additional Insured) and shall insure each
Additional Insured regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Lessee or any
other Additional Insured (other than any breach or violation of any
warranty, declaration or condition by such Additional Insured) as defined
under the policy of insurance required under this Section 13.01;
(iii) provide that if such insurance is cancelled for any reason, or
any substantial change is made in the policies which adversely affect the
scope of the coverage required herein, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to any Additional Insured for thirty (30) days (except
in the case of war risk coverage in which event the applicable period shall
be seven (7) days or such other period as may be customary) after receipt
by each such Additional Insured of written notice from such insurers or
such insurers' broker of such cancellation, change or lapse;
(iv) provide that the insurers shall waive any rights of subrogation
against each Additional Insured, to the extent that the Lessee has waived
its rights under this Lease and the Participation Agreement; provided that
the exercise by insurers of rights of subrogation derived from rights
retained by the Lessee shall not, in any way, delay payment of any claim
that would otherwise be payable by such insurers but for the existence of
rights of subrogation derived from rights retained by the Lessee;
(v) provide that all of the provisions of such policy shall operate
in the same manner as if there were a separate policy covering each
Additional Insured; provided, that such policies shall not operate to
increase any insurer's limit of liability;
(vi) be primary, without right of contribution from any other
insurance which is carried by any Additional Insured with respect to its
interest in the Aircraft;
(vii) provide that no Additional Insured shall have any obligation or
liability for premiums or other payments, if any, in connection with such
insurance; and
(viii) provide that such insurer shall waive the right of such
insurer to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional
Insured.
Section 13.02. Insurance Against Loss or Damage to Aircraft and
Engines. (a) Hull Insurance. The Lessee, at its own cost and expense, shall
maintain or cause to be maintained in effect, with insurers of recognized
responsibility, all-risk ground and flight aircraft hull insurance covering
the Aircraft and all-risk coverage with respect to any Engines and Parts while
temporarily removed from the Aircraft and not replaced by similar Engines or
Parts, including in each case war-risk and allied perils, hijacking (air
piracy) and governmental confiscation and expropriation insurance (except in
the country of registry) with such retentions (subject to the limitations set
forth in Section 13.06 hereof) and in such form, upon such terms and
conditions (including coverage for cost of claims), and in amounts as the
Lessee customarily maintains with respect to the aircraft in the Lessee's
fleet of the same type and model and operated on the same routes as the
Aircraft (except that the Lessee shall be required to maintain war-risk,
hijacking (air piracy) and governmental confiscation and expropriation
insurance (except in the country of registry) if the Aircraft is operated on
routes where the custom is for major international Air Carriers flying
comparable routes to carry such insurance), provided that such insurance shall
at all times while the Aircraft is subject to this Lease and the Lien of the
Indenture be on an agreed-value basis for an amount not less than an amount
equal to the Stipulated Loss Value for the relevant period for the Aircraft as
set forth on Schedule III to this Lease.
(b) Policy Terms. Any policies carried and maintained in accordance
with this Section 13.02 and any policies taken out in substitution or
replacement for any such policies subject to the terms, conditions and
limitations thereof shall:
(i) name or be amended to name the Lessor in its individual capacity
and as owner of the Aircraft (or, so long as the Indenture shall not have
been discharged, the Indenture Trustee) as an additional insured and as the
sole loss payee (hereinafter in this paragraph (b) sometimes referred to as
"Loss Payee");
(ii) provide with respect to coverage provided under this Section
13.02, that (i) in the event of a loss involving proceeds in the aggregate
in excess of $6,000,000, the proceeds in respect of such loss up to an
amount equal to the Stipulated Loss Value for the Aircraft shall be payable
to the Lessor (or, so long as the Indenture shall not have been discharged,
the Indenture Trustee), it being understood and agreed that in the case of
any payment to the Lessor (or the Indenture Trustee) otherwise than in
respect of an Event of Loss, the Lessor (or the Indenture Trustee) shall,
unless a Payment Default, a Bankruptcy Default or an Event of Default shall
have occurred and be continuing, upon receipt of evidence satisfactory to
it that the damage giving rise to such payment shall have been repaired or
that such payment shall then be required to pay for repairs then being
made, pay the amount of such payment to the Lessee or its order, and (ii)
the entire amount of any loss involving proceeds in the aggregate of
$6,000,000 or less or the amount of any proceeds of any loss in excess of
the Stipulated Loss Value for the Aircraft shall be paid to the Lessee or
its order unless a Payment Default, a Bankruptcy Default or an Event of
Default shall have occurred and be continuing and the insurers have been
notified thereof by the Lessor or the Indenture Trustee (and if the
insurers have notice of a Payment Default, a Bankruptcy Default or an Event
of Default, such payment shall be made to the Indenture Trustee);
(iii) provide that if such insurance is cancelled for any reason or
any substantial change is made in the policies which adversely affect the
scope of the coverage required herein, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to the Loss Payee for thirty days (except in the case
of war-risk coverage in which event the applicable period shall be seven
(7) days or such other period as may be customary) after receipt by the Loss
Payee of written notice from such insurer of such cancellation, change or
lapse;
(iv) provide that, in respect of the interest of the Lessor (in its
individual capacity and as the Owner Trustee), the Owner Participant or the
Indenture Trustee (in their respective capacities as such) in such
policies, the insurance shall not be invalidated by any action or inaction
of the Lessee or the Loss Payee (other than any action or inaction of such
Loss Payee) and shall insure the Lessor (in its individual capacity and as
Owner Trustee), the Owner Participant and the Indenture Trustee regardless
of any breach or violation of any warranty, declaration or condition
contained in such policies by the Lessee or the Loss Payee (other than any
breach or violation of any warranty, declaration or condition by the Loss
Payee) as defined under the policy of insurance required under this Section
13.02;
(v) provide that the insurers shall waive any rights of subrogation
against the Lessor (in its individual capacity and as Owner Trustee), the
Owner Participant and the Indenture Trustee to the extent that the Lessee
has waived its rights under this Lease or the Participation Agreement;
provided that the exercise by insurers of rights of subrogation derived
from rights retained by the Lessee shall not, in any way, delay payment of
any claim that would otherwise be payable by such insurers but for the
existence of rights of subrogation derived from rights retained by the
Lessee;
(vi) be primary and without rights of contribution from any other
insurance which is carried by the Loss Payee with respect to its interest
in the Aircraft;
(vii) provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines, or spare parts, as the case may be)
such insurer shall waive any right of such insurer to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of the Loss Payee;
(viii) provide that (except in the case of insurance with respect to
Engines and spare parts that have been removed from the Aircraft and
replaced with other Engines or engines or spare parts, as the case may be)
no Loss Payee shall have any obligation or liability for premiums or other
payments, if any, in connection with such insurance; and
(ix) in the event that separate policies are maintained to cover
all-risk ground and flight aircraft, hull and war risks and allied perils
insurance, include a 50/50 provisional claims settlement clause as
contained in the policies of insurance maintained by the Lessee with
respect to all other aircraft in the Lessee's fleet, and a copy of the
50/50 provisional claims settlement clause in effect on the Delivery Date
shall be attached to the insurance certificate issued on the Delivery Date.
Section 13.03. Application of Insurance Proceeds. (a) Generally.
All insurance proceeds (other than proceeds from policies carried by the
Lessor, the Indenture Trustee or the Owner Participant) received under
policies described in Section 13.02 hereof as the result of the occurrence of
an Event of Loss with respect to the Airframe or an Engine will be applied as
follows:
(i) if such proceeds are received with respect to the Airframe or
with respect to the Airframe and the Engines or engines then installed on
the Airframe and the Lessee has elected or is deemed to have elected the
alternative set forth in Section 11.02 hereof, so much of such proceeds as
shall not exceed the amounts required to be paid by the Lessee pursuant to
said Section 11.02 hereof shall be applied in reduction of the Lessee's
obligation to pay such amounts if not already paid by the Lessee, or if
already paid by the Lessee, shall be applied to reimburse the Lessee for its
payment of such amounts, provided that no Payment Default, Bankruptcy
Default or Event of Default shall have occurred and be continuing, and the
balance, if any, of such proceeds remaining will be paid to the order of
the Lessee; if and so long as the foregoing proviso is not satisfied, such
proceeds shall be held (unless applied) pursuant to Section 23.01 hereof as
security for the Lessee's obligations hereunder and under the Participation
Agreement; or
(ii) if such proceeds are received with respect to the Airframe or
the Airframe and the Engines or engines then installed on the Airframe and
the Lessee has elected the alternative set forth in Section 11.03 hereof,
or if such proceeds are received with respect to an Engine not then
installed on the Airframe and not replaced by an Engine or engine under the
circumstances contemplated by Section 11.04 hereof, all such proceeds shall
be paid to the Indenture Trustee (unless the Indenture has been discharged
in which case paid to the Lessor) for disbursement to the order of the
Lessee, after the Lessee shall have fully performed the terms of Section
11.03 or 11.04 hereof, as applicable, with respect to the Event of Loss for
which such proceeds are paid, provided that no Payment Default, Bankruptcy
Default or Event of Default shall have occurred and be continuing; if and
so long as the foregoing proviso is not satisfied, such proceeds shall be
held (unless applied) pursuant to Section 23.01 hereof as security for the
Lessee's obligations hereunder and under the Participation Agreement.
(b) Payment if no Event of Loss. The insurance proceeds of any
property damage loss not constituting an Event of Loss with respect to the
Airframe or an Engine will be applied in payment (or to reimburse the Lessee)
for repairs or for replacement property in accordance with Articles 7 and 8
hereof, if not already paid for by the Lessee, and any balance remaining after
compliance with said Articles 7 and 8 hereof with respect to such loss shall
be paid to the order of the Lessee, provided that no Payment Default,
Bankruptcy Default or Event of Default shall have occurred and be continuing;
if and so long as the foregoing proviso is not satisfied, such proceeds shall
be held (unless applied) pursuant to Section 23.01 hereof as security for the
Lessee's obligations hereunder and under the Participation Agreement.
(c) Information. If any Additional Insured becomes subject to any
claim covered by any insurance policy maintained pursuant to this Article 13,
the Lessee shall make available any information required by such Additional
Insured in connection with such claim.
Section 13.04. Reports. On or before the Delivery Date and
thereafter annually on or before the scheduled expiration date for such policy
during the Term, the Lessee shall cause an aviation insurance broker to
furnish to the Lessor and the Indenture Trustee a signed report, stating in
reasonable detail the types of coverage and limits carried and maintained on
the Aircraft and certifying that such insurance complies with the terms and
conditions of this Lease. The Lessee will cause its aviation insurance broker
to advise the Lessor, the Owner Participant and the Indenture Trustee in
writing promptly of any default in the payment of any premium and of any other
act or omission on the part of the Lessee of which it has knowledge and which
might invalidate, cause cancellation of or render unenforceable all or any
part of any insurance carried by the Lessee with respect to the Aircraft. The
Lessee will cause such insurance broker to agree to advise the Lessor, the
Indenture Trustee and the Owner Participant in writing if and when it becomes
evident to such broker that any insurance policy carried and maintained on the
Aircraft pursuant to this Article 13 will not be renewed at the expiration
date. If the Lessee shall fail to maintain insurance as required, the Lessor
may, at its option, provide such insurance, and in such event, the Lessee
shall, upon demand, reimburse the Lessor, as Supplemental Rent, for the cost
of such insurance; provided, however, that no exercise of said option shall
affect the provisions of this Lease, including the provisions that failure by
the Lessee to maintain the prescribed insurance shall constitute an Event of
Default or otherwise constitute a waiver of any other rights the Lessor may
have against the Lessee.
Section 13.05. Lessor's Insurance. The Lessor, the Indenture
Trustee or the Owner Participant may insure the Airframe or any Engine at its
own cost and expense, including insuring the Aircraft for amounts in excess of
the Stipulated Loss Value of the Aircraft, provided that any insurance so
maintained by the Lessor, the Indenture Trustee or the Owner Participant shall
not result in a reduction of coverage or amounts payable under insurance
required or permitted to be maintained by the Lessee under this Article 13 or
increase the cost to the Lessee of maintaining such insurance; provided
further, that any insurance policies of the Lessor, the Indenture Trustee or
the Owner Participant insuring the Airframe or any Engine shall provide for a
release to the Lessee of any and all salvage rights in and to the Airframe or
any Engine.
Section 13.06. Self-Insurance. The Lessee may self-insure the risks
required to be insured against by Sections 13.01 and 13.02 hereof in such
reasonable amounts as are then applicable to other aircraft or engines of the
Lessee of value comparable to the Aircraft, but in no case shall such
self-insurance with respect to all aircraft in the Lessee's fleet in aggregate
exceed for any 12-month policy year an amount equal to the lesser of (i) 50%
of the highest insured value of any single aircraft in the Lessee's fleet and
(ii) 1.5% of the average aggregate insured value from time to time of the
Lessee's entire aircraft fleet provided that a standard deductible per
occurrence per aircraft not in excess of the amount customarily allowed as a
deductible in the industry shall be permitted in addition to the
above-mentioned self-insurance. The foregoing shall not permit the Lessee to
discriminate as between insurance coverage on the Aircraft and insurance which
the Lessee maintains with respect to similar aircraft owned or operated by the
Lessee operating on similar routes in similar locations.
ARTICLE 14
INSPECTION
Section 14.01. Right of Inspection. At reasonable times, and upon
at least five (5) Business Days' prior written notice to the Lessee, the
Lessor, the Indenture Trustee or the Owner Participant, or their respective
authorized representatives, may inspect the Aircraft and upon at least ten
(10) Business Days' prior written notice, all Aeronautics Authority required
books and records of the Lessee and any sublessee relating to the maintenance
of the Aircraft and such Persons shall keep any information obtained thereby
confidential and shall not disclose the same to any Person, except to a Person
described in Section 18.01 of the Participation Agreement. Any such
inspection of the Aircraft shall be a visual, walk-around inspection of the
interior and exterior of the Aircraft and shall not include opening any panel,
bays or the like without the express consent of the Lessee (except to the
extent any such inspection takes place when any such panel, bays or the like
are open). Notwithstanding the previous sentence, unless a Payment Default,
Bankruptcy Default, material Default relating to maintenance (without giving
effect to the provisos to Section 7.01(b) hereof) or an Event of Default shall
have occurred and be continuing, the Lessor, the Indenture Trustee, the Owner
Participant or their respective authorized representatives shall each be
entitled to inspect the Aircraft only one time during any consecutive
twelve-month period. If following any reregistration of the Aircraft, the
Aircraft is located outside the United States at the time of a proposed
inspection, the Lessee shall have thirty (30) days to relocate the Aircraft
within the United States and, if unable to do so within such time period,
shall pay the reasonable incremental out-of-pocket costs of the Lessor, the
Owner Participant or their authorized representatives incurred in connection
with any such inspection outside the United States. The Lessee shall make any
permitted sublease or transfer permitted under Section 7.02 hereof expressly
subject to inspection rights consistent with this Article 14. The Lessee
agrees to respond in a timely fashion to any of the Owner Trustee's, the
Indenture Trustee's or the Owner Participant's inquiries regarding (x) the
location of the Aircraft or any Engine or (y) the scheduling of any letter
check or heavy maintenance visit with respect to the Aircraft (at which
representatives of the Owner Participant, the Lessor or the Indenture Trustee
may be present without regard to the one-year limitation set forth above).
Section 14.02. No Obligation to Inspect. None of the Lessor, the
Indenture Trustee or the Owner Participant shall have any duty to make any
inspection pursuant to Section 14.01 hereof and no such party shall incur any
liability or obligation by reason of making or not making any such inspection.
ARTICLE 15
ASSIGNMENT
Section 15.01. Lessee's Right to Assign. The Lessee shall not, and
shall have no authority or power to assign, convey or sublease any of its
rights under this Lease without the prior written consent of the Lessor except
(i) as expressly provided in Section 7.02 hereof, or in the case of any
requisition by the Government referred to in Section 7.01 of this Lease, or
(ii) to a wholly-owned domestic subsidiary of the Lessee which shall be a
certificated U.S. Air Carrier. Any such assignment, conveyance or sublease
shall in no way relieve the Lessee from any obligation hereunder or under any
other Operative Agreement or any written agreement of the Lessee entered into
in connection with the transactions contemplated by the Operative Agreements,
which shall be and remain obligations of the Lessee. The Lessor agrees that
it will not assign or convey its right, title and interest in and to this
Lease or the Aircraft except as contemplated by or provided in this Lease, the
Trust Agreement, the Indenture or the Participation Agreement. The terms and
provisions of this Lease shall be binding upon and inure to the benefit of the
Lessor and the Lessee and their respective successors and permitted assigns,
and shall inure, to the extent expressly provided herein and therein, to the
direct benefit of, and in accordance with the provisions of the Indenture and
the Participation Agreement shall be enforceable by, the Indenture Trustee,
the Lessor and their respective successors and permitted assigns.
Section 15.02. Citizenship. The Lessee will at all times be a duly
certificated U.S. Air Carrier under the Transportation Code.
ARTICLE 16
EVENTS OF DEFAULT
Section 16.01. Events of Default. Each of the following events
shall constitute an Event of Default, whether any such event shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court
or any order, rule or regulation of any administrative or governmental body:
(a) the Lessee shall fail to make any payment of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value, as the case may be, or
any payment pursuant to Section 17.02 of the Participation Agreement,
within ten Business Days after the date when due (except that with respect
to any failure to pay Excepted Payments, such failure shall constitute an
Event of Default at the discretion of the Owner Participant); or
(b) the Lessee shall fail to make any payment of Supplemental Rent
(other than amounts described in clause (a) above) within 30 days after the
Lessee has received written notice from the Person entitled to receive such
payment stating that such payment is due (except that with respect to any
failure to pay Excepted Payments for such period, such failure shall
constitute an Event of Default at the discretion of the Owner Participant);
or
(c) (i) the Lessee shall fail to procure, carry and maintain
insurance on or in respect of the Aircraft at any time in accordance with
the provisions of Article 13 or such insurance lapses or is cancelled,
provided that no such lapse or cancellation shall constitute an Event of
Default until the earlier of (A) 20 days (or seven days or such shorter
time as may be standard in the industry with respect to war risk coverage)
after receipt by any Additional Insured of written notice of such lapse or
cancellation and (B) the date that such lapse or cancellation is effective
as to any Additional Insured and provided further that such failure shall
not constitute an Event of Default as long as the Aircraft is insured as
required while on the ground and not operated, or (ii) the Aircraft shall
be operated at any time when comprehensive airline liability insurance
required under Section 13.01 hereof shall not be in effect (it being
understood that the Lessee is not required to maintain such insurance under
Section 13.01 hereof while the indemnification or insurance referred to in
the proviso to Section 13.01(b) hereof is in effect); or
(d) the Lessee shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it under any
Operative Agreement (excluding the Tax Indemnity Agreement) or any other
written agreement of the Lessee entered into in connection with the
transactions contemplated by the Operative Agreements and such failure
shall continue unremedied for a period of thirty (30) days after the date a
Responsible Officer of the Lessee has actual knowledge of the failure or
the Lessee shall have received written notice from the Lessor or the Owner
Participant of such failure, provided, that in the event such failure is
curable and so long as (but for no longer than 150 days after such 30-day
period) the Lessee shall have promptly undertaken such cure after the
earlier of actual knowledge of a Responsible Officer of the Lessee or
notice thereof which undertaking shall be diligently and continuously
pursued using the Lessee's reasonable best efforts, such failure shall not
constitute an Event of Default; provided, further, that failure of the
Lessee to maintain the registration of the Aircraft under the
Transportation Code pursuant to the Lessee's covenants and agreement in
Section 6.03(b) of the Participation Agreement and in Section 7.01(a) of
this Lease, when the lapse of such registration is solely because the Owner
Participant or the Lessor has ceased to be a Citizen of the United States,
shall not constitute a Default or an Event of Default; or
(e) an order for relief shall be entered in respect of the Lessee by
a court having jurisdiction in the premises in an involuntary case under
the federal bankruptcy laws as now or hereafter in effect; or the Lessee
shall consent to the appointment of a custodian, receiver, trustee or
liquidator of itself or of a substantial part of its property; or the
Lessee is not paying, or shall admit in writing its inability to pay, its
debts generally as they come due or shall make a general assignment for the
benefit of creditors; or the Lessee shall file, or the Board of Directors
of the Lessee shall authorize the filing of, or grant one or more persons
authority (at their discretion) to make a filing for, a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking reorganization
in a proceeding under any bankruptcy laws (as now or hereafter in effect)
or an answer admitting the material allegations of a petition filed against
the Lessee in any such proceeding; or the Lessee shall file, or the Board
of Directors of the Lessee shall authorize the Lessee to, or grant one or
more persons authority (at their discretion) to, seek relief by voluntary
petition, answer or consent, under the provisions of any other or future
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(f) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Lessee, a
custodian, receiver, trustee, or liquidator of the Lessee or of any
substantial part of its property, or sequestering any substantial part of
the property of the Lessee, or granting any other relief in respect of the
Lessee under the federal bankruptcy laws or other insolvency laws, and any
such order, judgment or decree of appointment or sequestration shall remain
in force undismissed or unvacated for a period of ninety (90) days after
the date of its entry; or
(g) a petition against the Lessee in a proceeding under the federal
bankruptcy law or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within ninety (90)
days, or under the provisions of any law providing for reorganization or
winding-up of corporations which may apply to the Lessee, any court of
competent jurisdiction shall assume jurisdiction, custody or control of the
Lessee or of any substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished or unterminated for
a period of ninety (90) days; or
(h) any representation or warranty made by the Lessee in this Lease
or in the Participation Agreement or in any document or certificate
furnished by the Lessee in connection with or pursuant to this Lease or the
Participation Agreement (except for the Tax Indemnity Agreement) shall at
any time prove to have been incorrect at the time made in any respect
material to the transactions contemplated by this Lease and, if originally
made by the Lessee in good faith, shall remain material and unremedied for
a period of thirty (30) days after a Responsible Officer of the Lessee
shall have actual knowledge or the Lessee shall have received written
notice of such misstatement.
ARTICLE 17
REMEDIES
Section 17.01. Remedies Upon Lessee's Default. (a) Remedies
Generally. Upon the occurrence of any Event of Default and at any time after
such occurrence so long as the same shall be continuing, the Lessor may, at
its option, declare this Lease to be in default (except that no such
declaration shall be required in the case of an Event of Default pursuant to
paragraph (e), (f) or (g) of Section 16.01 hereof and this Lease shall be
deemed declared in default without any further act or notice), and at any time
thereafter the Lessor may do, and the Lessee shall comply with, one or more of
the following with respect to all or any part of the Airframe and the Engines,
as the Lessor in its sole discretion shall elect, to the extent permitted by,
and subject to compliance with, any mandatory requirements of applicable law
then in effect:
(i) Demand in writing that the Lessee shall, and upon such written
demand the Lessee shall, at the Lessee's own cost and expense, return
promptly to the Lessor all or such part of the Airframe and the Engines as
the Lessor may demand in the manner and condition required by, and
otherwise in accordance with all of the provisions of this Lease (provided
that, unless the Lessor shall require otherwise, the Aircraft shall be
returned within the continental United States), or the Lessor, at its
option, may enter upon the premises where such Airframe or Engines are
located or believed to be located and take immediate possession of and
remove such Airframe and Engines (together with any engine which is not an
Engine but is installed on the Airframe, subject to all of the rights of
the owner, lessor, Lien holder or secured party of such engine) without the
necessity for first instituting proceedings, or by summary proceedings or
otherwise, all without liability of the Lessor to the Lessee for or by
reason of such entry or taking of possession, whether for the restoration
of damage to property caused by such action or otherwise;
(ii) With or without taking possession thereof, sell or otherwise
dispose of the Airframe or any Engine, at public or private sale and with
or without advertisement or notice to the Lessee, as the Lessor may
determine, and the Lessor may hold the Lessee liable for any installment of
Basic Rent and Renewal Rent due on or before the date of such sale (and, if
Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of
the installment of Basic Rent or Renewal Rent due on the next succeeding
Rent Payment Date in respect of any period commencing on the immediately
preceding Rent Payment Date to the date of such sale), or hold, use,
operate, lease to others or keep idle all or any part of the Airframe or
any Engine as the Lessor, in its sole discretion, may determine, in any
such case free and clear of any rights of the Lessee except as otherwise
set forth in this Article 17, and without any duty to account to the Lessee
with respect to such action or inaction or for any proceeds except to the
extent required by Section 17.01(a)(iv) hereof; in the event the Lessor
elects to exercise its rights under said Section, and in connection with
any sale of the Aircraft or any part thereof pursuant to this Article 17,
the Lessor, the Indenture Trustee, the Owner Participant or any Holder may
bid for and purchase such property;
(iii) Whether or not the Lessor shall have exercised or shall later
at any time exercise any of its rights under Section 17.01(a)(i) or
17.01(a)(ii) hereof, the Lessor, by written notice to the Lessee specifying
a payment date not earlier than 10 days from the date of such notice, may
demand that the Lessee pay to the Lessor, and the Lessee shall pay to the
Lessor on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent or
Renewal Rent due on Rent Payment Dates occurring after the payment date
specified in such notice), any installment of Basic Rent, Renewal Rent and
any Supplemental Rent due on or before such payment date (and, if Basic
Rent or Renewal Rent is payable in arrears, the pro rata portion of the
installment of Basic Rent or Renewal Rent due on the next succeeding Rent
Payment Date in respect of the period commencing on the Stipulated Loss
Value Determination Date referred to below and ending on the date of such
payment), plus an amount equal to the excess, if any, of the Stipulated
Loss Value for the Aircraft, computed as of the Stipulated Loss Value
Determination Date on or next preceding the payment date specified in such
notice over the Fair Market Value of the Aircraft, computed as of such
Stipulated Loss Value Determination Date, together with (A), if Basic Rent
is payable in advance, interest, to the extent permitted by applicable law,
at the Debt Rate on the amount of such Stipulated Loss Value from such
Stipulated Loss Value Determination Date to the date for payment set forth
in such notice from the Lessor and (B) in all cases, interest, to the
extent permitted by applicable law at the Past Due Rate on the excess of
such Stipulated Loss Value over such Fair Market Value, from the date as of
which such Stipulated Loss Value is payable to the date of actual payment
of such amount; provided, however, that if (and in any event prior to the
time for payment hereunder) the Lessor is unable within a reasonable period
of time to recover possession of the Aircraft, or any portion thereof,
pursuant to clause (i) above unencumbered by this Lease and free and clear
of all Liens (other than Lessor's Liens), the Fair Market Value of the
Aircraft or such portion shall, at the option of the Lessor to the extent
legally enforceable, be zero and, if the Fair Market Value of the Aircraft
is deemed to be zero, after payment in full by the Lessee of the amount
specified above and all other amounts due from the Lessee under this Lease
and the other Operative Agreements, the Lessor shall promptly transfer
(without recourse or warranty other than as to the absence of the Lessor's
Liens) all of its right, title and interest in the Aircraft or such
portion, to the Lessee;
(iv) In the event the Lessor, pursuant to Section 17.01(a)(ii)
hereof, shall have sold the Airframe and/or any Engine, the Lessor, in lieu
of exercising its rights under Section 17.01(a)(iii) hereof, may, if it
shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall
pay to the Lessor, on the date of such sale, as liquidated damages for loss
of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal
Rent due after the date on which such sale occurs) any unpaid Basic Rent or
Renewal Rent due on or before the date on which such sale occurs (and, if
Basic Rent or Renewal Rent is payable in arrears, the pro rata portion of
the installment of Basic Rent or Renewal Rent due on the next succeeding
Rent Payment Date in respect of any period commencing on the Stipulated
Loss Value Determination Date referred to below and ending on the date of
such sale), and any Supplemental Rent due on or before the date on which
such sale occurs, plus an amount equal to the excess, if any, of (A) the
Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss
Value Determination Date next preceding the sale date, over (B) the net
proceeds of such sale (after deduction of all of the Lessor's costs and
expenses of such sale, including, without limitation, sales or transfer
taxes, costs of storage, overhaul, maintenance, preparation and
transportation of the Aircraft and brokers' and attorneys' fees) together
with (x), if Basic Rent is payable in advance, interest, to the extent
permitted by applicable law, at the Debt Rate on such Stipulated Loss Value
from such Stipulated Loss Value Determination Date to the date of such sale
and (y) in all cases, interest to the extent permitted by applicable law at
the Past Due Rate, on the amount of such excess from the date of such sale
to the date of actual payment by the Lessee;
(v) Proceed by appropriate court action to enforce the terms of this
Lease or to recover damages for its breach;
(vi) Terminate or rescind this Lease as to the Airframe or any or all
of the Engines; or
(vii) Exercise any other right or remedy which may be available to
the Lessor under applicable law.
(b) Cost of Exercise of Remedies. In addition, the Lessee shall be
liable, except as otherwise provided above, for any and all unpaid Rent due
before, after or during the exercise of any of the Lessor's remedies, for all
amounts payable by the Lessee under the Participation Agreement before or
after any termination hereof, and for all reasonable legal fees and other
costs and expenses incurred by the Lessor, the Indenture Trustee or the Owner
Participant by reason of the occurrence of any Event of Default or the
exercise of the Lessor's remedies, including, without limitation, all costs
and expenses incurred in connection with the return of the Airframe or any
Engine in accordance with the terms of Article 12 hereof or in placing the
Airframe or Engines in the condition and state of airworthiness required by
such Article or in connection with any inspection, use, operation,
maintenance, insurance, storage, or leasing carried out as part of such
exercise.
Section 17.02. Cumulative Remedies. Except as otherwise provided, no
remedy referred to in this Article 17 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies.
Section 17.03. Waiver. No express or implied waiver by the Lessor
of any Event of Default shall in any way be, or be construed to be, a waiver
of any future or subsequent Event of Default. To the extent permitted by
applicable law, the Lessee waives any rights now or in the future conferred by
statute or otherwise which may require the Lessor to sell, lease or otherwise
use the Airframe or any Engine in mitigation of the Lessor's damages or which
may otherwise limit or modify any of the Lessor's rights or remedies under
this Article 17. The Lessor's access to the Aircraft is of the essence and
shall not be impaired.
Section 17.04. Lessor's Right to Perform for Lessee. If the Lessee
fails to make any required payment of Rent or fails to perform or comply with
any of its agreements contained in this Lease, whether or not such failure
shall constitute an Event of Default hereunder, the Lessor may (but shall not
be obligated to) make such payments or perform or comply with such agreement,
and the amount of such payment and the amount of the reasonable costs and
expenses of the Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, together with interest (to
the extent permitted by applicable law) at the Past Due Rate from the date of
the making of such payment or the incurring of such costs and expenses by the
Lessor to the date of payment of such Rent or other amount by the Lessee,
shall be deemed Supplemental Rent payable by the Lessee upon demand. No such
payment or performance by the Lessor shall be deemed to waive any Default or
Event of Default or relieve the Lessee of its obligations hereunder.
ARTICLE 18
COVENANT OF QUIET ENJOYMENT
Section 18.01. Quiet Enjoyment. So long as no Event of Default
shall have occurred and be continuing, the Lessor covenants that neither it
nor any other Person lawfully claiming through it (other than the holder of a
Lien which the Lessee is obligated to discharge pursuant to Article 6 hereof,
and it being understood that the Lessor shall not be liable for any act or
omission of the Indenture Trustee or any other Person claiming through the
Indenture Trustee) shall interfere with the Lessee's right to quietly enjoy the
Aircraft without hindrance or disturbance by it or any such other Person.
ARTICLE 19
FURTHER ASSURANCES
Section 19.01. Further Assurances. Promptly upon the execution and
delivery of the Lease Supplement and the Indenture and Security Agreement
Supplement, the Lessee will cause each of them and this Lease, the Trust
Agreement and the Indenture, to be duly filed for recordation in accordance
with the Transportation Code and will maintain the recordation of the
Indenture until the Lien of the Indenture shall have been discharged pursuant
to the terms of the Indenture. In addition, the Lessee will, at the Lessee's
own cost and expense, promptly and duly execute and deliver to the Lessor, the
Owner Participant and the Indenture Trustee such further documents and
assurances to carry out the intent and purpose of this Lease and the Indenture
and to establish and protect the rights and remedies created or intended to be
created in favor of the Lessor under this Lease, and of the Owner Participant
under the Trust Agreement, and of the Indenture Trustee under the Indenture,
including, without limitation, the execution and filing of UCC financing and
continuation statements, the execution and delivery of supplements and
amendments to this Lease and the Indenture, in recordable form, subjecting to
this Lease and the Indenture any Replacement Airframe and/or Replacement
Engines delivered by the Lessee pursuant to Section 11.03 hereof and any
Replacement Engine delivered by the Lessee pursuant to Section 11.04 hereof
and the recording and filing of counterparts of this Lease and the Indenture
in accordance with the laws of such jurisdictions as the Lessor or the
Indenture Trustee may from time to time deem advisable. The foregoing does
not impose upon the Lessor any additional liabilities not otherwise
contemplated by this Lease.
ARTICLE 20
NET LEASE
Section 20.01. Nature of Lease. (a) This Lease is a net lease, it
being the intention of the parties hereto that the obligations of the Lessee
to pay all costs and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary, or structural or nonstructural, in connection with
the use, operation, maintenance, repair and reconstruction of the Airframe and
each Engine by the Lessee, including, without limitation, the costs and
expenses particularly set forth in this Lease (unless expressly excluded from
the terms hereof, the costs and expenses of the Lessor and the Owner
Participant shall include the reasonable fees and expenses of their respective
outside counsel), shall be absolute and unconditional, shall be separate and
independent covenants and agreements, and shall continue unaffected unless and
until the covenants have been terminated pursuant to an express provision of
this Lease. The obligation to pay Rent and all amounts payable by the Lessee
under this Lease or the Participation Agreement shall be absolute and
unconditional and (except as otherwise expressly provided with respect to
Supplemental Rent) shall be paid without notice or demand and such obligation
shall not be affected by any circumstance, including, without limitation:
(i) any set-off, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Owner Participant, any
Holder, the Indenture Trustee or anyone else for any reason (including,
without limitation, any breach by the Lessor or the Owner Participant or
the Indenture Trustee or any Holder of their respective representations,
warranties, agreements or covenants contained in any of the Operative
Agreements);
(ii) any defect in the title, airworthiness, registration,
eligibility for registration under the Transportation Code (and the
regulations thereunder) or under any of the laws or regulations of any
other country of registry of the Aircraft, condition, design, operation,
merchantability or fitness for use of, suitability for a particular purpose
of, or any damage to or loss or destruction of, the Aircraft or any portion
thereof, or any interruption or cessation in the use or possession of the
Aircraft by the Lessee or any sublessee for any reason including, without
limitation, by reason of governmental action or any doctrine of force
majeure or impossibility of performance;
(iii) any insolvency, bankruptcy, reorganization or similar case or
proceedings by or against the Lessor, the Lessee, the Indenture Trustee or
the Owner Participant or any other Person;
(iv) any Liens, encumbrances or rights of any other Person with
respect to the Aircraft, the invalidity or unenforceability or lack of due
authorization or other infirmity of this Lease or any other Operative
Agreement or document or instrument executed pursuant hereto or thereto, or
any lack of right, power or authority of the Lessor or the Lessee or any
sublessee or any other party to any other Operative Agreement to enter into
this Lease or any other Operative Agreement or any such document or
instrument; or
(v) any other circumstance, happening or event whatsoever, whether or
not unforeseen, or similar to any of the foregoing.
(b) To the extent permitted by applicable law, the Lessee waives any
and all rights which it may now have or which at any time it may have
conferred upon it, by statute or otherwise, to terminate, cancel, quit,
rescind or surrender this Lease, the Airframe, or any Engine or part thereof,
other than in accordance with the terms hereof.
(c) Except as expressly provided herein, each payment of Rent made
by the Lessee shall be final as to the Lessor and the Lessee, and the Lessee
will not seek to return nor to recover, abate, suspend, defer or reduce all or
any part of any such payment of Rent from the Lessor or from the Indenture
Trustee for any reason.
ARTICLE 21
SUCCESSOR LESSOR
Section 21.01. Successor Lessor. The Lessee agrees that in the case
of the appointment of any successor trustee for the Lessor pursuant to the
terms of the Participation Agreement, such successor trustee shall, upon
written notice by such successor to the Lessee, succeed to all the rights,
powers and title of the Lessor under this Lease and shall be deemed to be the
Lessor and the owner of the Aircraft for all purposes of this Lease without
the necessity of any consent or approval by the Lessee and without in any way
altering the terms of this Lease or the Lessee's obligations. One such
appointment and designation of a successor trustee shall not exhaust the right
to appoint and designate a further successor trustee pursuant to the
Participation Agreement, but such right may be exercised repeatedly so long as
this Lease shall be in effect.
ARTICLE 22
SECURITY FOR LESSOR'S OBLIGATIONS
Section 22.01. Security for Lessor's Obligations to Holders. In
order to secure the indebtedness evidenced by the Certificates, the Indenture
provides among other things, for the assignment by the Lessor to the Indenture
Trustee of this Lease and the Lease Supplement and for the creation of a first
mortgage and security interest in favor of the Indenture Trustee on the
Aircraft. The Lessee consents to and acknowledges such assignment (subject to
the reservations and conditions therein set forth) and the receipt of a copy
of the Indenture.
Section 22.02. [Reserved].
Section 22.03. Consent of Lessee to Assignment of Lease as Security.
The Lessee hereby accepts and consents, pursuant to the terms of the
Indenture, the Indenture Trustee's rights to receive payments (other than
Excepted Payments not constituting Basic Rent) due under this Lease, the right
to transfer or assign title to the Aircraft subject to this Lease, to make all
waivers and agreements except as otherwise provided in the Indenture, to give
all notices, consents and releases and to take all action upon the happening
of a Default or Event of Default under this Lease (except as otherwise
specifically provided in the Indenture), or to do any and all other things
whatsoever which the Lessor is or may become entitled to do under this Lease
(except as otherwise provided in the Indenture); all or any of which rights,
obligations, benefits and interests may, pursuant to the terms of the
Indenture, be reassigned or retransferred by the Indenture Trustee at any time
and from time to time (except as otherwise provided in the Indenture);
provided, however, that the Lessor, except to the extent, and for such time
as, it is unable to do so by virtue of the Indenture, shall remain liable for
the performance of all the terms, conditions, covenants and provisions for
which it is obligated under this Lease notwithstanding such assignment.
ARTICLE 23
SECURITY FUNDS
Section 23.01. Investment of Security Funds. (a) Any amounts
otherwise payable to the Lessee shall be held by the Lessor as security for,
and may be applied by the Lessor against, the obligations of the Lessee under
this Lease during such time as there shall have occurred and be continuing a
Payment Default, Bankruptcy Default or Event of Default, and, at such times as
there shall not be continuing a Payment Default, Bankruptcy Default or Event
of Default, such amounts, net of any amounts which have been applied by the
Lessor against the Lessee's obligations hereunder, shall be paid to the Lessee
as provided in this Lease. Any amounts which are held by the Lessor pending
payment to the Lessee shall, until paid to the Lessee or applied against the
Lessee's obligations hereunder, be invested by the Lessor, as directed from
time to time, in writing (and in the absence of a written direction by the
Lessee, the Lessor shall invest such monies in direct obligations of the
United States of America), by the Lessee and at the expense and risk of the
Lessee, in the following securities (which in the case of securities referred
to in subparagraphs (i) through (iv) of this Section 23.01(a) hereof shall
mature within ninety (90) days of the date of purchase):
(i) direct obligations of the United States of America; or
(ii) obligations fully guaranteed by the United States of America; or
(iii) certificates of deposit issued by, or bankers' acceptances of,
or time deposits or a deposit account with, any bank, trust company or
national banking association incorporated or doing business under the laws
of the United States of America or one of its States (which may include the
Owner Trustee or the Indenture Trustee in their respective individual
capacities or any Affiliate thereof), having a combined capital and surplus
of at least $500,000,000 and having a rating of "A" or better from Moody's
or S&P; or
(iv) commercial paper rated A-1/P-1 by S&P and Moody's, respectively
(or if neither such organization shall rate such commercial paper at any
time, a rating by any nationally recognized statistical rating organization
in the United States of America equal to the highest rating assigned by
such rating organization) (which may include commercial paper issued by the
Owner Trustee or the Indenture Trustee in their respective individual
capacities or any Affiliate thereof).
(b) At any time any invested funds are distributed to the Lessee,
there shall be promptly remitted to the Lessee any gain (including interest
received) realized as the result of any investment pursuant to Section
23.01(a) hereof (net of any fees, commissions and other costs and expenses, if
any, incurred by the Lessor in connection with such investment), unless a
Payment Default, Bankruptcy Default or Event of Default shall have occurred
and be continuing in which case such funds shall be applied in the same manner
as the principal so invested. The Lessee shall be responsible for and will
promptly pay to the Indenture Trustee or the Lessor, as the case may be, on
demand, the amount of any loss realized as the result of any such investment
(together with any fees, commissions and other costs and expenses, if any,
incurred by the Indenture Trustee or the Lessor in connection with such
investment), such amount to be disposed of in accordance with the terms of the
Indenture or the Lease, as the case may be.
ARTICLE 24
CONCERNING THE LESSOR
Section 24.01. Lessor's Entry Into Lease. Except as expressly
provided herein, the Lessor and the Lessee agree that this Lease is executed
by SSB not individually but solely as Owner Trustee under the Trust Agreement
in the exercise of the power and authority conferred and vested in it as such
Owner Trustee, that each and all of the representations, undertakings and
agreements by the Lessor herein are for the purpose and with the intention of
binding only the Lessor's Estate, and that in no case whatsoever shall SSB be
personally liable for any loss in respect of such representations,
undertakings and agreements, that actions to be taken by the Lessor pursuant
to its obligations hereunder may, in certain instances, be taken by the Lessor
only upon specific authority of the Owner Participant that nothing herein
contained shall be construed as creating any liability on SSB, individually or
personally, to perform any covenant, either express or implied, herein, all
such liability, if any, being expressly waived by the Lessee and by each and
every Person now or hereafter claiming by, through or under the Lessee except
with respect to the gross negligence or willful misconduct of SSB, and that so
far as SSB, individually or personally is concerned, the Lessee and any Person
claiming by, through or under the Lessee shall look solely to the Lessor's
Estate for the performance by the Lessor of any of its obligations under this
Lease; provided, that nothing in this Section 24.01 shall be construed to
limit in scope or substance those representations and warranties of SSB in its
individual capacity set forth in the Participation Agreement or the Trust
Agreement. The term "Lessor" as used in this Lease shall include any trustee
succeeding SSB as Owner Trustee under the Trust Agreement. Any obligation of
the Lessor hereunder may be performed by the Owner Participant, and any such
performance shall not be construed as revocation of the trust created by the
Trust Agreement. Nothing contained in this Lease shall restrict the operation
of the provisions of the Trust Agreement with respect to its revocation of the
resignation or removal of the Owner Trustee hereunder.
ARTICLE 25
NOTICES
Section 25.01. Notices. All notices, demands, declarations and other
communications required by this Lease shall be in writing and shall be deemed
received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, (b) if given by certified mail, return receipt
requested, postage prepaid, five Business Days after being deposited in the
United States mail and (c) if given by FedEx service (or, if a Default or
Event of Default shall have occurred and be continuing, by other comparable
courier service), when received or personally delivered, addressed:
(a) If to the Lessee, to its office at 2005 Corporate Avenue,
Memphis, Tennessee 38132, Attention: Senior Vice President and Chief
Financial Officer with a copy to Senior Vice President and General Counsel;
telephone (901) 395-3388, facsimile (901) 395-4758; or at such other
address as the Lessee shall from time to time designate in writing to the
Lessor, the Indenture Trustee and the Owner Participant;
(b) If to the Lessor or Owner Trustee, to its office at 225 Asylum
Street, Goodwin Square, Hartford, Connecticut 06103, Attention:
Corporate/Muni Administration, facsimile (860) 244-1889 with a copy to
State Street Bank and Trust Company, Two International Place, 4th Floor,
Boston, Massachusetts 02110, Attention: Corporate Trust Department,
telephone (617) 664-5526, facsimile (617) 664-5371; or to such other
address as the Lessor shall from time to time designate in writing to the
Lessee and the Indenture Trustee, with a copy to Owner Participant at the
Owner Participant's address as provided in subsection (c) below;
(c) If to the Owner Participant, in accordance with the
Participation Agreement;
(d) If to the Indenture Trustee, to its office at 79 South Main
Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department,
telephone (801) 246-5630, facsimile (801) 246-5053; or to such other
address as the Indenture Trustee shall from time to time designate in
writing to the Lessor, the Lessee and the Owner Participant; and
(e) If to Moody's, to its office at Moody's Investors Service, 99
Church Street, New York, New York 10007, Attention: Corporate
Department-Industrials, telephone (212) 553-0300, facsimile (212) 553-4661;
or to such other address as Moody's shall from time to time designate in
writing to the Lessee.
ARTICLE 26
MISCELLANEOUS
Section 26.01. Section Headings and Captions. All article and
section headings and captions used in this Lease are purely for convenience
and shall not affect the interpretation of this Lease.
Section 26.02. References. Any reference to a specific article or
section number shall be interpreted as a reference to that article or section
of this Lease unless otherwise expressly provided.
Section 26.03. APPLICABLE LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND IS BEING
DELIVERED IN NEW YORK.
Section 26.04. Severability. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 26.05. No Oral Modification. The terms and provisions of
this Lease may not be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against which enforcement
of the change, waiver, discharge or termination is sought. Any such change,
waiver, discharge or termination is also subject to the provisions of Section
8.01 and Article XIII of the Indenture.
Section 26.06. Agreement as Chattel Paper. To the extent that this
Lease constitutes chattel paper (as such term is defined in the UCC as in
effect in any applicable jurisdiction), no security interest in this Lease may
be created through the transfer or possession of any counterpart other than
the original chattel-paper counterpart, which shall be the counterpart
containing the receipt executed by the Indenture Trustee on its signature page.
Section 26.07. Counterparts. This Lease may be executed in any
number of counterparts, each of which shall be an original (except that only
the counterpart bearing the receipt executed by the Indenture Trustee shall be
the original for purposes of perfecting a security interest therein as chattel
paper under the UCC), but all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Lease by
signing any such counterpart.
Section 26.08. Public Release of Information. Provided no Event of
Default shall have occurred and be continuing, each party shall in each
instance obtain the prior written approval of each party concerning the exact
text and timing of news releases, articles and other informational releases to
the public media concerning this Lease.
ARTICLE 27
TRUE LEASE
Section 27.01. Intent of the Parties. It is the intent of the
parties to this Lease that for all purposes (including, without limitation,
U.S. Federal income tax purposes) this Lease will be a true lease, and that
this Lease conveys to the Lessee no right, title or interest in the Aircraft
except as a lessee.
Section 27.02. Section 1110 Compliance. Notwithstanding any
provision herein or elsewhere contained to the contrary, it is understood and
agreed among the parties hereto that the transactions contemplated by this
Lease and the other Operative Agreements are expressly intended to be, shall
be and should be construed so as to be, entitled to the full benefits of
Section 1110 of the Bankruptcy Code and any successor provision thereof.
Section 27.03. Finance Lease. This Lease is a "finance lease"
within the meaning of Section 2-A--103(g) of the UCC.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease to be duly executed as of the date first above written.
LESSOR: STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By:
-----------------------------------
Name: Paul D. Allen
Title: Vice President
LESSEE: FEDERAL EXPRESS CORPORATION
By:
-----------------------------------
Name: Robert D. Henning
Title: Vice President and Treasurer
Receipt of this original counterpart of the Lease is hereby
acknowledged on this __ day of September, 1998.
Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Indenture Trustee
By:
-----------------------------------
Name: Greg A. Hawley
Title: Vice President
SCHEDULE I
DEFINITIONS
(FEDERAL EXPRESS CORPORATION TRUST NO. N678FE)
GENERAL PROVISIONS
The following terms shall have the following meanings for all
purposes of the Operative Agreements (other than the Pass Through Agreement,
the Series Supplements, the Intercreditor Agreement and the Liquidity
Facilities) referred to below, unless otherwise defined in an Operative
Agreement or the context thereof shall otherwise require. In the case of any
conflict between the provisions of this Schedule and the provisions of any
Operative Agreement, the provisions of such Operative Agreement shall control
the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean and include such agreements as amended and
supplemented from time to time, and (ii) references to parties to agreements
shall be deemed to include the successors and permitted assigns of such
parties.
DEFINED TERMS:
Additional Insured. As defined in Section 13.01(c)(i) of the Lease.
Adjustment Date. The date of any decrease in the principal amount of
the Series C Certificates pursuant to Section 2.19 of the Indenture.
Aeronautics Authority. As appropriate, the Federal Aviation
Administration and/or the Administrator of the Federal Aviation
Administration, any successor to the former United States Civil Aeronautics
Board, or any Person, governmental department, bureau, commission or agency
located in the United States succeeding to the functions of any of the
foregoing.
Affidavits. The affidavits of citizenship of the Owner Trustee and
the Owner Participant.
Affiliate. With respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" (including "controlled
by" and "under common control with") shall mean the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether through the ownership of voting securities or by contract
or otherwise. In no event shall the Owner Trustee or the Lessor be deemed an
Affiliate of the Owner Participant and SSB shall not be deemed to be an
Affiliate of any of the Owner Trustee, the Lessor or the Owner Participant.
After-Tax Basis. A basis such that any payment received or deemed to
have been received by a Person (the "Original Payment") shall be supplemented
by a further payment to such Person so that the sum of the two payments shall
be equal to the Original Payment, after taking into account (x) all Taxes that
would result from the receipt or accrual of such payments and (y) any
reduction in Taxes that would result from such increased Taxes. In the case
of amounts payable to the Lessor, the Owner Participant, or any corporate
Affiliate of the Owner Participant, it shall be presumed that such Person is at
all times subject to Federal income tax at the maximum marginal rate generally
applicable to corporations from time to time and actual state, local and
foreign income taxes.
Air Carrier. Any U.S. Air Carrier and any "foreign air carrier" (as
defined in the Transportation Code) as to which there is in force a permit
granted under Section 41302 of the Transportation Code.
Airbus Guaranty. The Guaranty to be dated the Delivery Date executed
by the Manufacturer and guaranteeing AVSA's Warranty Bill of Sale.
Aircraft. The Airframe to be sold by AVSA to the Owner Trustee as
provided in the Participation Agreement and to be leased under the Lease (or
any permitted substitute airframe thereunder) together with two Engines
(whether either is an initial Engine or a Replacement Engine) whether or not
any of such initial or Replacement Engines may from time to time be installed
on such Airframe or may be installed on any other airframe or on any other
aircraft, including any aircraft substituted pursuant to Section 11.03 of the
Lease.
Airframe. The Airbus A300F4-605R aircraft (excluding the Engines or
engines from time to time installed thereon) to be leased by the Lessor to the
Lessee pursuant to the Lease and the initial Lease Supplement and having the
United States FAA Registration Number initially and manufacturer's serial
number specified in the initial Lease Supplement, including (i) all Parts in
respect thereof and (ii) any Replacement Airframe which may be substituted
pursuant to Section 11.03 of the Lease.
Ancillary Agreement. Any written agreement of the Lessee to which
the Lessor is a party or to which the Lessor has consented in writing entered
into on or prior to the Delivery Date or any date thereafter in connection
with the transactions contemplated by the Operative Agreements, as such
agreement may be amended and supplemented from time to time with the consent
of the Lessor and delivered to the Owner Trustee, the Indenture Trustee, the
Pass Through Trustee, the Subordination Agent, each Liquidity Provider and the
Owner Participant.
Ancillary Agreement I. The Ancillary Agreement I (Federal Express
Corporation Trust No. N678FE), dated the Delivery Date, among the Lessee, the
Owner Trustee, not in its individual capacity, but solely as Owner Trustee,
the Owner Participant and the Indenture Trustee not in its individual
capacity, but solely as Indenture Trustee, as originally executed or as
amended, modified or supplemented with the consent of all the parties thereto.
Application. The application for registration of the Aircraft with
the FAA in the name of the Owner Trustee.
Appraisal. The report prepared by BK Associates, Inc. and to be
delivered to the Owner Participant (with a copy of the fair market value
letter to the Lessee) on the Delivery Date pursuant to Section 4.01(h) of the
Participation Agreement.
Average Life Date. For any Certificate, the date which follows the
prepayment date by a period equal to the Remaining Weighted Average Life of
such Certificate.
AVSA. AVSA S.A.R.L., a societe a responsabilite limitee, organized
and existing under the laws of France.
AVSA Consent and Agreement. The Consent and Agreement dated as of
September 1, 1998, executed by AVSA.
AVSA's FAA Bill of Sale. The bill of sale for the Airframe on AC
Form 8050-2, or such other form as may be approved by the Aeronautics
Authority, executed by AVSA in favor of the Owner Trustee and to be dated the
Delivery Date.
AVSA's Warranty Bill of Sale. The full warranty bill of sale
covering the Aircraft (and specifically referring to each Engine) executed by
AVSA as owner of the Aircraft in favor of the Owner Trustee and to be dated
the Delivery Date.
Bankruptcy Code. The Federal Bankruptcy Code of 1978, as amended,
and any successor thereto.
Bankruptcy Default. An event specified in Section 16.01(e), (f) or
(g) of the Lease which either does or, with the giving of notice or lapse of
time or both, would constitute an Event of Default.
Basic Rent. The periodic rent payable for the Aircraft throughout
the Basic Term pursuant to Section 3.02 of the Lease, adjusted pursuant to
Article 3 of the Lease.
Basic Term. The period commencing at the beginning of the day on the
Delivery Date and ending at the end of the day on March 22, 2023, or such
earlier date on which the Lease shall be terminated as provided therein.
Beneficial Interest. The interest of the Owner Participant (or the
Initial Owner Participant, as the case may be) under the Trust Agreement.
Business Day. Any day on which commercial banks are not authorized or
required to close in New York, New York, Memphis, Tennessee and the city in
the United States in which the office or agency is maintained by the Pass
Through Trustee for the payment of the Pass Through Certificates, and after
the Lien of the Indenture is discharged, Boston, Massachusetts.
Certificate Closing Date. July 7, 1998.
Certificates. The Equipment Trust Certificates (Federal Express
Corporation Trust No. N678FE), issued by the Owner Trustee pursuant to the
Indenture and any certificate issued in exchange therefor or replacement
thereof pursuant to the Indenture.
Change in Tax Law. Any change in the Code or the Treasury regulations
promulgated thereunder or the publication of any revenue ruling, revenue
procedure or any informational release by the Internal Revenue Service or the
Department of Treasury on or before the Delivery Date, either of which would
change or would allow a change in the tax assumptions or structure upon which
the lease economics in the Commitment Letter were based; provided that the
Owner Participant or the Lessee has notified the other party of such change in
writing on or prior to the Delivery Date.
Citizen of the United States. A citizen of the United States as
defined in Section 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.
Class A Liquidity Provider. Kreditanstalt fur Wiederaufbau, a
corporation organized under the public law of the Federal Republic of Germany
together with any Replacement Liquidity Provider (as defined in the
Intercreditor Agreement).
Class B Liquidity Provider. Kreditanstalt fur Wiederaufbau, a
corporation organized under the public law of the Federal Republic of Germany
together with any Replacement Liquidity Provider (as defined in the
Intercreditor Agreement).
Code. Except as otherwise provided, the Internal Revenue Code of
1986, as amended from time to time.
Collateral Account. The deposit account established and maintained
pursuant to Section 2.13 of the Indenture.
Collateral Agreement. The Collateral Account Control Agreement
(Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998,
among State Street Bank and Trust Company, the Indenture Trustee and the Owner
Trustee.
Commitment. The amount of the Owner Participant's participation in
the Purchase Price required to be made available or paid on the Delivery Date,
as provided in Section 3.02 of the Participation Agreement and as set forth in
Schedule I of the Participation Agreement.
Commitment Letter. The Commitment Letter dated June 29, 1998 by the
Lessee to the Owner Participant.
Consent and Agreement. The Consent and Agreement dated as of
September 1, 1998 executed by the Manufacturer.
Consent and Guaranty. The Consent and Guaranty of the Manufacturer
attached to the Purchase Agreement.
Corporate Trust Administration. The Corporate Trust Administration
office of the Owner Trustee located at 225 Asylum Street, Goodwin Square,
Hartford, Connecticut 06103, Attention: Corporation Trust Administration, or
such other office at which the Owner Trustee's corporate trust business shall
be administered which the Owner Trustee shall have specified by notice in
writing to the Lessee, the Owner Participant and the Indenture Trustee.
Corporate Trust Department. The Corporate Trust Department office of
the Indenture Trustee located at 79 South Main Street, Salt Lake City, Utah
84111, Attention: Corporate Trust Department, or such other office at which
the Indenture Trustee's corporate trust business shall be administered which
the Indenture Trustee shall have specified by notice in writing to the Lessee,
the Owner Participant and the Owner Trustee.
CRAF Program. Has the meaning specified in Section 7.02(a)(iv) of
the Lease.
Cut-Off Date. December 22, 1998.
Debt Portion. The amount specified as such on Schedule I to the
Participation Agreement.
Debt Rate. The weighted average (based on Outstanding principal
amount) rate of interest on the Certificates issued pursuant to the Indenture.
Default. Any event or condition which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
Delivery Date. The date on which the Aircraft is delivered and sold
by AVSA to the Lessor and leased by the Lessor to the Lessee under the Lease,
which date shall also be the date of the initial Lease Supplement.
Delivery Notice. Notice of the Aircraft's Delivery Date, given by
the Lessee as provided in Section 3.01 of the Participation Agreement and
including any notice with respect to a postponed Delivery Date given by the
Lessee pursuant to Section 3.05(c) of the Participation Agreement.
EBO Price. Has the meaning set forth in Section 4.02(a)(F) of the
Lease.
Eligible Deposit Account. Either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution with corporate trust powers
organized under the laws of the United States or any state thereof, or the
District of Columbia, and whose deposits are insured by the Federal Deposit
Insurance Corporation, provided that such institution also has a combined
capital and surplus of at least $100,000,000 and a rating of A or better from
the Thomson Bank Watch.
Eligible Institution. A depository institution organized under the
laws of the United States or any one of the states thereof, or the District of
Columbia, or any domestic branch of a foreign bank, which in any such case at
all times (a) has either (x) a long-term unsecured debt rating of at least Aa2
by Moody's or (y) a short-term certificate of deposit rating of P-1 by
Moody's, (b) has either (x) a long-term unsecured debt rating of a least AA
by S&P or (y) a short-term certificate of deposit rating of A-1+ by S&P and
(c) is a member of the Federal Deposit Insurance Corporation.
Engine. Each of the two General Electric CF6-80C2-A5F engines listed
by its manufacturer's serial number in the initial Lease Supplement and leased
pursuant to the Lease, whether or not from time to time installed on the
Airframe or installed on any other airframe or on any other aircraft, and any
Replacement Engine which may from time to time be substituted for an Engine
pursuant to Section 7.02(a)(vii), 10.02(c), 10.03, 11.03, 11.04 or 12.02 of
the Lease, together with all Parts related thereto. Except as otherwise
provided, at such time as a Replacement Engine shall be so substituted and the
Engine for which the substitution is made shall be released from the Lien of
the Indenture, such replaced Engine shall cease to be an "Engine" under the
Lease. The term "Engines" means, as of any date of determination, both Engines
then leased to the Lessee pursuant to the Lease.
Engine Consent. The Engine Consent dated as of September 1, 1998,
executed by the Engine Manufacturer.
Engine Manufacturer. General Electric Company, a New York
corporation.
Engine Warranty Assignment. The Engine Warranty Assignment (Federal
Express Corporation Trust No. N678FE), dated as of September 1, 1998, between
the Lessor and the Lessee.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plan. An employee benefit plan subject to Title I of ERISA, or
an individual retirement account or plan subject to Section 4975 of the Code.
Estimated Expense Amount. Has the meaning specified in Section
10.01(a) of the Participation Agreement.
Event of Default. Each of the events specified in Article 16 of the
Lease.
Event of Loss. Any of the following events with respect to the
Aircraft, the Airframe or any Engine: (i) loss of such property or its use
(A) for a period in excess of 30 days due to theft or disappearance or such
longer period not to exceed 60 days from the end of such initial 30-day period
if and so long as the location of such property is known to the Lessee and the
Lessee is diligently pursuing recovery of such property, or to the end of the
Term, if less (unless such loss constitutes an Event of Loss under clause (ii)
of this definition) or (B) for a period in excess of 60 days due to the
destruction, damage beyond economic repair or rendition of such property
permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect
to such property on the basis of a total loss, or constructive or compromised
total loss; (iii) (1) condemnation, confiscation or seizure of, or requisition
of title to such property by the Government, any foreign government or
purported government or any agency or instrumentality thereof, or (2)
condemnation, confiscation, or seizure of, or requisition or taking of, use of
such property (A) by a foreign government or instrumentality or agency of any
such foreign government, for a period in excess of 180 days (or such shorter
period ending on the earlier of the expiration of the Term or on the date on
which an insurance settlement with respect to such property on the basis of a
total loss or constructive or compromised total loss shall occur) or (B) by
the Government for a period extending beyond the Term, provided that no Event
of Loss shall be deemed to have occurred, and the Term shall be extended
automatically for a period of six months (or the date of return of the
Aircraft, if shorter, so long as the Lessor receives at least six months
notice of such date of return) beyond the end of the Term in the event that
the Aircraft, the Airframe or any Engine is requisitioned by the Government
pursuant to an activation as part of the CRAF Program described in Section
7.02(a)(iv) of the Lease; and (iv) as a result of any law, rule, regulation,
order or other action by the Aeronautics Authority or other governmental body
having jurisdiction, the use of the Aircraft or Airframe in the normal course
of air transportation of cargo shall have been prohibited by virtue of a
condition affecting all Airbus A300-600 series aircraft equipped with engines
of the same make and model as the Engines for a period of six (6) consecutive
months, unless the Lessee, prior to the expiration of such six (6) month
period, shall be diligently carrying forward all steps which are necessary or
desirable to permit the normal use of the Aircraft or Airframe or, in any
event, if such use of the Aircraft or the Airframe shall have been prohibited
for a period of twelve (12) consecutive months, unless the Lessee, prior to
the expiration of such twelve (12) month period shall have conformed at least
one Airbus A300-600 series aircraft (but not necessarily the Aircraft or the
Airframe) to the requirements of any such law, rule, regulation, order, or
other action and shall have commenced regular commercial use and shall be
diligently carrying forward, on a non-discriminatory basis, all steps
necessary or desirable to permit the normal use of the Aircraft by the Lessee.
The date of such Event of Loss shall be (s) the 31st day or the 91st day, as
the case may be, following loss of such property or its use due to theft or
disappearance (or the end of the Term, if earlier); (t) the 61st day following
the date of any destruction, damage beyond economic repair or rendition of
such property permanently unfit for normal use; (u) the date of any insurance
settlement on the basis of a total loss or constructive or compromised total
loss; (v) the date of any condemnation, confiscation, seizure or requisition
of title of such property; (w) the 181st day following condemnation,
confiscation, seizure or requisition for use of such property by a foreign
government referred to in clause (iii)(2)(A) above (or the end of the Term or
the date of any insurance settlement described therein, if earlier than such
181st day); (x) the last day of the Term in the case of requisition for use of
such property by the Government; (y) the last day of the 6 month or 12 month
period, referred to in clause (iv) above. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if any Event of Loss occurs with
respect to the Airframe.
Excepted Payments. Collectively, (i) indemnity or other payments
(and interest thereon to the extent provided in the Operative Agreements) paid
or payable by the Lessee in respect of the Owner Participant, the Owner
Trustee in its individual capacity or any of their respective successors,
permitted assigns, directors, officers, employees, servants and agents or
Affiliates, pursuant to the Participation Agreement or any indemnity hereafter
granted to the Owner Participant or the Owner Trustee in its individual
capacity pursuant to the Lease or the Participation Agreement, (ii) proceeds
of public liability insurance (or government indemnities in lieu thereof) in
respect of the Aircraft payable as a result of insurance claims paid for the
benefit of, or losses suffered by, the Owner Trustee or the Indenture Trustee
in their respective individual capacities or by the Owner Participant, or
their respective successors, permitted assigns or Affiliates, (iii) proceeds
of insurance maintained with respect to the Aircraft by the Owner Participant
(whether directly or through the Owner Trustee) maintained in accordance with
the provisions of but not required under Article 13 of the Lease, (iv)
payments of Supplemental Rent by the Lessee in respect of any amounts payable
under the Tax Indemnity Agreement, (v) any amounts payable by the Lessee to
the Owner Participant or the Owner Trustee in its individual capacity, after
the release thereof from the Lien of the Indenture, (vi) the payment of
incremental out-of-pocket expenses of the Owner Trustee, the Owner Participant
or their respective authorized representatives payable by the Lessee under
Section 6.03(b) of the Participation Agreement or Section 14.01 of the Lease
following any reregistration of the Aircraft and (vii) proceeds of, and any
right to demand, collect or otherwise receive and enforce the payment of any
amount described in clauses (i) through (vii) above.
Expense; Expenses. Have the meaning specified in Section 9.01(a) of
the Participation Agreement.
FAA. The United States Federal Aviation Administration and any
successor agency or agencies thereto.
Fair Market Renewal Term. A term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the second paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
Fair Market Rental. An amount determined on the basis of, and equal
in amount to, the rental which would be obtained in an arm's-length
transaction between an informed and willing lessee and an informed and willing
lessor unaffiliated with such lessee, neither being under any compulsion to
lease. In such determination, it shall be assumed that the Aircraft is in the
condition required under the Lease in the case of return of the Aircraft
pursuant to Article 12 of the Lease. Fair Market Rental shall be determined
in accordance with the provisions of Section 4.03 of the Lease.
Fair Market Value. An amount determined on the basis of, and equal
in amount to, the value which would be obtained in an arm's-length transaction
between an informed and willing purchaser under no compulsion to buy and an
informed and willing seller unaffiliated with such purchaser and under no
compulsion to sell, assuming that the Aircraft (or other property) is
unencumbered by the Lease. Unless otherwise provided in the applicable
provisions of any Operative Agreement, in such determination it shall be
assumed that the Aircraft is in the condition required under the Lease in the
case of return of the Aircraft pursuant to Article 12 of the Lease; provided
that in connection with any determination pursuant to or for the purposes of
Article 17 of the Lease, the Aircraft shall be appraised on an "as is, where
is" basis. Fair Market Value shall be determined in accordance with the
provisions of Section 4.03 of the Lease.
Federal Aviation Administration. The United States Federal Aviation
Administration and any successor agency or agencies thereto.
FedEx. Federal Express Corporation.
Final Drawing. Has the meaning specified in Section 1.01 of the
Intercreditor Agreement.
Fixed Renewal Rent. Semi-annual payments of rent during the Fixed
Renewal Term equal to the amount set forth in Ancillary Agreement I.
Fixed Renewal Term. The term with respect to which the Lessee has
exercised its option to renew the Lease pursuant to the first paragraph of
Section 4.01(a) thereof and with respect to which the conditions set forth in
such Section 4.01(a) are met.
French Pledge Agreement. The French Pledge Agreement (Federal Express
Corporation Trust No. N678FE) dated as of September 1, 1998, between the Owner
Trustee and the Indenture Trustee.
FSB. First Security Bank, National Association, a national banking
association.
Government. The United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and
credit of the United States of America.
GTA. The General Terms Agreement dated as of July 3, 1991 between the
Engine Manufacturer and the Lessee related to the purchase by the Lessee of
the Engines as originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the General Terms
Agreement relates to the Engines, to the extent assigned to the Owner Trustee
pursuant to the Engine Warranty Assignment.
Holder of a Certificate; Certificate Holder; Holder. As of any
particular time, the Person in whose name a Certificate shall be registered
(but not including the holder of any Pass Through Certificate).
Indemnitee. Each of SSB, in its individual capacity and as Owner
Trustee and Lessor, the Owner Participant, the Indenture Trustee, in its
individual capacity and as trustee, the Subordination Agent, in its individual
capacity and in its capacity as Subordination Agent, each Liquidity Provider,
the Owner Participant Guarantor, and any successor (including any trustee
which may succeed to the Lessor's interest under the Lease), Affiliate,
assign, officer, director, employee, agent and servant of any of the
foregoing, the Lessor's Estate and the Trust Indenture Estate. Neither the
Pass Through Trustee nor any holder of a Pass Through Certificate shall be
deemed to be an Indemnitee.
Indenture. The Trust Indenture and Security Agreement (Federal
Express Corporation Trust No. N678FE), dated as of June 15, 1998, as amended
and restated as of September 1, 1998, between the Lessor and the Indenture
Trustee, as supplemented by the Indenture and Security Agreement Supplement.
Indenture and Security Agreement Supplement. The Indenture and
Security Agreement Supplement No. 1 (Federal Express Corporation Trust No.
N678FE) to be dated the Delivery Date, substantially in the form of Exhibit A
to the Indenture.
Indenture Default. Any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute an Indenture Event of
Default.
Indenture Documents. Has the meaning specified in the Granting
Clause of the Indenture.
Indenture Event of Default. Each of the events specified in Section
7.01 of the Indenture.
Indenture Trustee. First Security Bank, National Association, a
national banking association, not in its individual capacity but solely as
Indenture Trustee under the Indenture.
Indenture Trustee's Liens. Any Lien against, on or with respect to
the Aircraft, the Lessor's Estate or the Trust Indenture Estate or any part
thereof resulting from (i) claims against the Indenture Trustee not related to
the administration of the Trust Indenture Estate or any transactions pursuant
to the Indenture or any document included in the Trust Indenture Estate, (ii)
any act or omission of the Indenture Trustee which is not related to the
transactions contemplated by the Operative Agreements or is in violation of
any of the terms of the Operative Agreements or (iii) Taxes imposed against
the Indenture Trustee in its individual capacity against which the Lessee has
not indemnified (and is not obligated to indemnify) the Indenture Trustee in
such capacity.
Independent Investment Banker. An independent investment banking
institution of national standing appointed by the Lessee that is independent
in fact, does not have any direct financial interests, or any material
indirect financial interest, in the Lessee or any Affiliate of the Lessee, and
is not connected with the Lessee or any Affiliate of the Lessee, as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions; provided, that if the Indenture Trustee shall
not have received written notice of such an appointment at least 10 days prior
to the Prepayment Date, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
Initial Owner Participant. Federal Express Corporation, a Delaware
corporation.
Intercreditor Agreement. The Intercreditor Agreement dated as of
June 15, 1998, among the Pass Through Trustee, the Class A Liquidity Provider,
the Class B Liquidity Provider and the Subordination Agent.
Interest Drawing. Has the meaning specified in Section 1.01 of the
Intercreditor Agreement.
Invoice. The invoice for the Aircraft given by AVSA to the Lessor.
LC Bank. Kreditanstalt fur Wiederaufbau, a corporation organized
under the public law of the Federal Republic of Germany.
Last Cut-Off Date. The later of (i) the Cut-Off Date and (ii) the
"Cut-Off Date" (as defined in the relevant Related Indenture) for the last
Related Aircraft to be delivered.
Lease. The Lease Agreement (Federal Express Corporation Trust No.
N678FE) dated as of June 15, 1998, as amended and restated as of September 1,
1998, entered into by the Lessor and the Lessee concurrently with the
execution and delivery of the Indenture, including, without limitation,
supplementation by one or more Lease Supplements entered into pursuant to the
applicable provisions of the Lease.
Lease Supplement. The Lease Supplement No. 1 (Federal Express
Corporation Trust No. N678FE) to be dated the Delivery Date, substantially in
the form of Exhibit A to the Lease.
Lease Term. The period commencing on the Delivery Date and ending at
the end of the Basic Term.
Lessee. Federal Express Corporation, a Delaware corporation.
Lessee Documents. Has the meaning set forth in Section 6.01(b) of the
Participation Agreement.
Lessee Shortfall. Has the meaning set forth in Section 3.02(a) of the
Participation Agreement.
Lessor. State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its individual capacity
but solely as Owner Trustee under the Trust Agreement.
Lessor's Estate. All estate, right, title and interest of the Owner
Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft,
the Lease, any Lease Supplement, the Participation Agreement, AVSA's FAA Bill
of Sale, AVSA's Warranty Bill of Sale, the Airbus Guaranty, the Purchase
Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the
AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned
by the Purchase Agreement Assignment), any Ancillary Agreement, the GTA, the
Engine Warranty Assignment, the Engine Consent, any warranty with respect to
the Airframe and the Engines, all amounts of Basic Rent and Supplemental Rent,
including without limitation, insurance proceeds (other than insurance
proceeds payable to or for the benefit of the Owner Trustee in its individual
capacity, the Owner Participant or the Indenture Trustee) and requisition,
indemnity or other payments of any kind for or with respect to the Aircraft
(except amounts owing to the Owner Participant, to the Indenture Trustee, to
the Owner Trustee in its individual capacity, or to any of their respective
directors, officers, employees and agents pursuant to Articles 8 and 9 of the
Participation Agreement), and all other property of the Owner Trustee
purportedly subjected to the Lien of the Indenture by the Granting Clause
thereof; provided that in no event shall "Lessor's Estate" include any
Excepted Payment.
Lessor's Liens. Liens against, on or with respect to the Aircraft,
the Lessor's Estate or the Trust Indenture Estate or any part thereof, title
thereto or any interest therein arising as a result of (i) claims against the
Lessor, in its individual capacity or as Owner Trustee, or the Owner
Participant, in each case not related to the transactions contemplated by the
Operative Agreements, (ii) acts or omissions of the Lessor in its individual
capacity or as Owner Trustee, and, in the case of the Lessor in its individual
capacity, arising from its gross negligence or willful misconduct or expressly
prohibited under the Operative Agreements and any act or omission of the Owner
Participant which is in violation of any of the terms of the Operative
Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its
individual capacity or as Owner Trustee, the Owner Participant, Lessor's
Estate or the trust created by the Trust Agreement which are not required to
be indemnified against by the Lessee pursuant to the Participation Agreement
by reason of Section 8.01(b) or 9.01(b) thereof or which are not required to
be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement,
or (iv) claims against the Lessor or the Owner Participant arising from the
voluntary transfer by the Lessor or the Owner Participant of its interests in
the Aircraft other than a transfer of the Aircraft pursuant to Section 4.02(a)
or Article 7, 8, 9, 10 or 11 of the Lease and other than a transfer pursuant
to the exercise of the remedies set forth in Article 17 of the Lease.
Letter of Credit. The Irrevocable Standby Letter of Credit, dated
the Certificate Closing Date, in the form of Exhibit G to the Original
Participation Agreement and with a Maximum Stated Amount equal to the amount
specified under "Letter of Credit Maximum Stated Amount" on Schedule IV to the
Original Participation Agreement, from the LC Bank to and for the benefit of
the Subordination Agent.
Lien. Any mortgage, pledge, lien, charge, encumbrance, lease or
security interest or other similar interest.
Liquid Collateral. All amounts and securities deposited from time to
time in the Collateral Account and all the products, investments, earnings and
proceeds of the foregoing, including, but not limited to, all proceeds of the
investment or conversion thereof, voluntary or involuntary, into cash,
Specified Investments or other property, all rights to payment of any and
every kind, and other forms of obligations, and instruments and other property
which at any time constitute all or part or are included in the proceeds of
any of the foregoing.
Liquidity Facility. Has the meaning specified in Section 1.1 of the
Intercreditor Agreement.
Liquidity Provider. Kreditanstalt fur Wiederaufbau, a corporation
organized under the public law of the Federal Republic of Germany together
with any Replacement Liquidity Provider (as defined in the Intercreditor
Agreement).
Losses. Has the meaning specified in Section 17.02(a) of the
Participation Agreement.
Loss Payee. Has the meaning specified in Section 13.02(b)(i) of the
Lease.
Majority in Interest of Certificate Holders. As of a particular date
of determination, the Holders of more than 50% of the aggregate unpaid
principal amount of all Certificates outstanding as of such date excluding for
purposes of this definition any Certificates held by (i) the Owner Trustee or
the Owner Participant or any interests of the Owner Participant unless all
Certificates then outstanding shall be held by the Owner Participant, (ii) the
Lessee or (iii) any Affiliate of any thereof.
Make-Whole Premium. With respect to any Certificate, the amount (as
determined by an Independent Investment Banker reasonably acceptable to the
Indenture Trustee and the Owner Participant) by which (i) the present value of
the remaining scheduled payments of principal and interest to the Maturity of
such Certificate computed by discounting such payments on a semiannual basis
on each Payment Date (assuming a 360-day year of twelve 30-day months) using a
discount rate equal to the Treasury Yield exceeds (ii) the outstanding
principal amount of such Certificate plus accrued interest.
Mandatory Document Terms. The terms set forth on Schedule V to the
Original Participation Agreement.
Mandatory Economic Terms. The terms set forth on Schedule VI to the
Original Participation Agreement.
Manufacturer. Airbus Industrie G.I.E., a groupement d'interet
economique formed under the laws of France.
Maturity. With respect to any Certificate, the date on which the
final principal amount of such Certificate is scheduled to be due and payable.
Maximum Stated Amount. The amount specified under "Letter of Credit
Maximum Stated Amount" on Schedule IV to the Original Participation Agreement.
Moody's. Moody's Investors Service, Inc.
Net Present Value of Rents. The net present value, as of the
Delivery Date, of Basic Rent set forth in Schedule II of the Lease, discounted
at a rate equal to the Debt Rate per annum compounded semi-annually.
Non-U.S. Person. Any Person other than a U.S. Person.
Obsolete Parts. Parts which the Lessee in good faith determines to
be obsolete or no longer suitable or appropriate for use on the Airframe or
any Engine.
Officer's Certificate. When delivered pursuant to the Indenture, a
certificate signed by a Responsible Officer of the Lessee or the Owner
Trustee, as the case may be, and delivered to the Indenture Trustee. Each
such certificate shall include the statements provided for in Section 15.07 of
the Indenture.
Operative Agreements. The Participation Agreement, the Trust
Agreement, AVSA's FAA Bill of Sale, AVSA's Warranty Bill of Sale, the Airbus
Guaranty, the Purchase Agreement, the Purchase Agreement Assignment, the GTA,
the Engine Warranty Assignment, the French Pledge Agreement, the Lease, the
Lease Supplement, the Owner Participant Guaranty, the Owner Trustee Guaranty,
if any, any Ancillary Agreement entered into by or with the written consent of
the Indenture Trustee, which by its terms is an Operative Agreement, the
Certificates outstanding at the time of reference, the Indenture, the
Indenture and Security Agreement Supplement, the Consent and Agreement, the
AVSA Consent and Agreement, the Consent and Guaranty (to the extent assigned
by the Purchase Agreement Assignment), the Engine Consent, the Tax Indemnity
Agreement, each Liquidity Facility, the Intercreditor Agreement, the
Collateral Agreement, the Letter of Credit and the Reimbursement Agreement.
Opinion of Counsel. When delivered pursuant to the Indenture, a
written opinion of legal counsel, who in the case of counsel (a) for the
Lessee may be (i) an attorney employed by the Lessee who is generally
empowered to deliver such written opinions, (ii) Davis Polk & Wardwell or a
successor firm or (iii) other counsel designated by the Lessee and reasonably
satisfactory to the Indenture Trustee and (b) for the Owner Trustee or the
Indenture Trustee, an attorney selected by such Person and, in the case of the
Owner Trustee, reasonably satisfactory to the Indenture Trustee.
Original Agreements. The documents and instruments delivered on the
Certificate Closing Date in connection with the transactions contemplated by
the Original Participation Agreement.
Original Indenture. The Trust Indenture and Security Agreement
(Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998,
between the Owner Trustee and the Indenture Trustee originally executed and
delivered on the Certificate Closing Date.
Original Lease. The Lease Agreement (Federal Express Corporation
Trust No. N678FE), dated as of June 15, 1998, between the Owner Trustee as
lessor, and the Lessee originally executed and delivered on the Certificate
Closing Date.
Original Participation Agreement. The Participation Agreement
(Federal Express Corporation Trust No. N678FE), dated as of June 15, 1998,
among the Lessee, the Initial Owner Participant, the Indenture Trustee, the
Owner Trustee, the Pass Through Trustee and the Subordination Agent originally
executed and delivered on the Certificate Closing Date.
Original Trust Agreement. The Trust Agreement (Federal Express
Corporation Trust No. N678FE), dated as of June 15, 1998, between the Initial
Owner Participant and the Owner Trustee originally executed and delivered on
the Certificate Closing Date.
Outstanding. When used with respect to Certificates, as of the date
of determination and subject to the provisions of Section 10.04 of the
Indenture, all Certificates theretofore executed and delivered under the
Indenture, with the exception of the following:
(i) Certificates theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation pursuant to
Section 2.08 of the Indenture or otherwise;
(ii) Certificates for which prepayment money in the necessary amount
has been theretofore deposited with the Indenture Trustee in trust
for the Holders of such Certificates pursuant to Section 14.01 of the
Indenture; provided, that if such Certificates are to be prepaid,
notice of such prepayment has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Indenture Trustee
has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to Article II
of the Indenture.
Outstanding C Account. The collateral account established and
maintained under a Related Indenture relating to an undelivered aircraft.
Owner Participant. The Person to whom on the Delivery Date the
Initial Owner Participant shall transfer its Beneficial Interest pursuant to
Section 3.02 of the Original Participation Agreement and any successors
thereto, and any Person to which the Owner Participant transfers, in
accordance with the Trust Agreement, its right, title and interest in and to
the Operative Agreements and the Lessor's Estate.
Owner Participant Guarantor. The Northern Trust Company, an Illinois
banking corporation, and any other provider of an Owner Participant Guaranty.
Owner Participant Guaranty. The Owner Participant Guaranty (Federal
Express Corporation Trust No. N678FE) dated the Delivery Date, by the Owner
Participant Guarantor in favor of the Lessee, the Owner Trustee, the Indenture
Trustee and the Pass Through Trustee, and any guaranty delivered in compliance
with Article 5 of the Trust Agreement.
Owner Trust. Federal Express Corporation Trust No. N678FE.
Owner Trustee. SSB, not in its individual capacity except as
otherwise expressly stated, but solely as Owner Trustee under the Trust
Agreement.
Owner Trustee Guarantor. The provider, if any, of an Owner Trustee
Guaranty.
Owner Trustee Guaranty. Any guaranty delivered in compliance with
Section 11.01(b)(ii) of the Participation Agreement.
Owner's Economic Return. The Owner Participant's anticipated net
after-tax book yield and aggregate after-tax cash during the Basic Term
utilizing the multiple investment sinking fund method of analysis, computed on
the basis of the same methodology and assumptions as were utilized by the
Owner Participant in determining Basic Rent, Stipulated Loss Value and
Termination Value percentages and the EBO Price, as such assumptions may be
adjusted for events which have been the basis of adjustments to Rent pursuant
to Section 3.04 of the Lease.
Participation Agreement. The Participation Agreement (Federal Express
Corporation Trust No. N678FE), dated as of June 15, 1998, as amended and
restated as of September 1, 1998, among the Lessee, the Owner Trustee not in
its individual capacity except as otherwise expressly provided therein, but
solely as owner trustee, the Owner Participant, the Indenture Trustee not in
its individual capacity except as otherwise expressly provided therein, but
solely as indenture trustee, the Pass Through Trustee not in its individual
capacity except as otherwise expressly provided therein, but solely as pass
through trustee, and the Subordination Agent not in its individual capacity
except as otherwise expressly provided therein, but solely as subordination
agent.
Parts. All appliances, parts, components, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines) which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine or title to which
remains vested in the Lessor pursuant to Article 8 of the Lease.
Pass Through Agreement. The Pass Through Trust Agreement dated as of
May 1, 1997, between the Lessee and the Pass Through Trustee.
Pass Through Certificates. Any of the Pass Through Certificates,
1998-1-A, the Pass Through Certificates, 1998-1-B or the Pass Through
Certificates, 1998-1-C, in each case as issued by the related Pass Through
Trust; and "Pass Through Certificates" means all of the Pass Through
Certificates issued by each of the Pass Through Trusts.
Pass Through Closing Date. July 7, 1998.
Pass Through Trust. The Federal Express Corporation 1998-1 Pass
Through Trust Class A, Federal Express Corporation 1998-1 Pass Through Trust
Class B and Federal Express Corporation 1998-1 Pass Through Trust Class C, in
each case formed pursuant to the related Series Supplement in accordance with
the Pass Through Agreement; and "Pass Through Trusts" means all of such Pass
Through Trusts.
Pass Through Trustee. First Security Bank, National Association, a
national banking association, in its capacity as Pass Through Trustee under
the Pass Through Agreement and each Pass Through Trust.
Past Due Rate. In respect of (A) any amount payable to the Owner
Participant or the Owner Trustee a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 2% plus the Debt Rate and (B) any principal of or interest on
any Certificate or any other amount payable under the Indenture, any
Certificate or any other Operative Agreement that is not paid when due
(whether at Maturity, by acceleration, by optional or mandatory prepayment or
otherwise) to any Holder, the Indenture Trustee or the Pass Through Trustee, a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to (i) in the
case of any such amount payable to the Holder of any Certificate, 2% plus the
interest rate applicable to such Certificate and (ii) in the case of any other
such amount, 2% plus the Debt Rate.
Payment Date. Each January 15 and July 15 commencing on January 15,
1999.
Payment Default. Any event specified in Section 16.01(a) or 16.01(b)
of the Lease which with the giving of notice or lapse of time or both would
constitute an Event of Default.
Permitted Investments. Those investments enumerated in Section
23.01(a) (i), (ii), (iii) and (iv) of the Lease.
Person. Any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, entity or government (federal, state, local,
foreign or any agency, instrumentality, division or body thereof).
Pool Balance. Has the meaning specified in Article I to the Series
Supplement.
Pool Factors. Has the meaning specified in Article I to the Series
Supplement.
Preliminary Notice. Has the meaning specified in Section 4.01(a) of
the Lease.
Premium Termination Date. With respect to the Series A Certificates,
the scheduled maturity date of the Series A Certificates, with respect to the
Series B Certificates, the scheduled maturity date of the Series B
Certificates and with respect to the Series C Certificates, the scheduled
maturity date of the Series C Certificates.
Prepayment Date. Has the meaning specified in Section 6.02(b) of the
Indenture.
Prepayment Price. Has the meaning specified in Section 6.02(b) of the
Indenture.
Principal Amount. With respect to a Certificate means the stated
original principal amount of such Certificate and, with respect to all
Certificates, means the aggregate stated original principal amounts of all
Certificates.
Property. Any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
Proposed Termination Date. Has the meaning specified in Section
10.01(a) of the Lease.
Purchase Agreement. The Airbus A300-600R Freighter Purchase Agreement,
dated as of July 3, 1991 between AVSA and the Lessee, including all exhibits,
appendices and letter agreements attached thereto as originally executed or as
modified, amended or supplemented in accordance with the terms thereof, but
only to the extent that the foregoing relates to the Aircraft and to the
extent assigned pursuant to the Purchase Agreement Assignment.
Purchase Agreement Assignment. The Purchase Agreement Assignment
(Federal Express Corporation Trust No. N678FE), dated as of September 1, 1998
between the Lessor and the Lessee.
Purchase Price. Has the meaning specified in Ancillary Agreement I.
Rating Agencies. Collectively, at any time, each nationally
recognized rating agency which shall have been requested to rate the Pass
Through Certificates and which shall then be rating the Pass Through
Certificates. The initial Rating Agencies will be Moody's and S&P.
Rating Agency Confirmation. With respect to any Operative Agreement
that is to be modified in any material respect on the Delivery Date a written
confirmation from each of the Rating Agencies that the use of such Operative
Agreement with such modifications would not result in (i) a reduction of the
rating for any Class of Pass Through Certificates below the then current
rating for such Class of Pass Through Certificates or (ii) a withdrawal or
suspension of the rating of any Class of Pass Through Certificates.
Record Date. With respect to Payment Dates under the Indenture
(except a date for payment of defaulted interest), December 31 for January 15
Payment Dates and June 30 for July 15 Payment Dates, whether or not such date
is a Business Day.
Recourse Amount. Has the meaning specified in Section 17.10 of the
Participation Agreement.
Refinancing. A non-recourse loan to the Lessor arranged pursuant to
Section 15.01 of the Participation Agreement.
Register. Has the meaning set forth in Section 3.02 of the Indenture.
Registrar. Has the meaning set forth in Section 3.02 of the
Indenture.
Regulation D. Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
Reimbursement Agreement. The Standby Letter of Credit Application and
Agreement, dated the Pass Through Closing Date, between the Lessee and the LC
Bank.
Related Aircraft. Each of the aircraft relating to a Related
Indenture.
Related Indentures. Collectively, the Trust Indenture and Security
Agreement for each of Federal Express Corporation Trust Nos. N679FE, N680FE,
N681FE, N682FE, N620FE, N621FE and N623FE, each dated as of June 15, 1998,
between State Street Bank and Trust Company of Connecticut, National
Association, as owner trustee and First Security Bank, National Association,
as indenture trustee, the Trust Indenture and Security Agreement for Federal
Express Corporation Trust No. N590FE, dated as of May 1, 1998, as amended and
restated as of June 15, 1998, between State Street Bank and Trust Company of
Connecticut, National Association, as owner trustee and First Security Bank,
National Association, as indenture trustee, the Trust Indenture and Security
Agreement for Federal Express Corporation Trust No. N675FE, dated as of June
1, 1998, as amended and restated as of June 15, 1998, between State Street
Bank and Trust Company of Connecticut, National Association, as owner trustee
and First Security Bank, National Association, as indenture trustee, the Trust
Indenture and Security Agreement for Federal Express Corporation Trust No.
N676FE, dated as of June 15, 1998, as amended and restated as of July 15,
1998, between State Street Bank and Trust Company of Connecticut, National
Association, as owner trustee and First Security Bank, National Association,
as indenture trustee, the Trust Indenture and Security Agreement for Federal
Express Corporation Trust No. N677FE, dated as of June 15, 1998, as amended and
restated as of August 1, 1998, between State Street Bank and Trust Company of
Connecticut, National Association, as owner trustee and First Security Bank,
National Association, as indenture trustee, and the Trust Indenture and
Security Agreement for Federal Express Corporation Trust No. N585FE, dated as
of June 15, 1998, as amended and restated as of September 1, 1998, between
State Street Bank and Trust Company of Connecticut, National Association, as
owner trustee and First Security Bank, National Association, as indenture
trustee.
Related Participation Agreements. Collectively, with respect to each
Related Indenture, the "Participation Agreement" as defined therein.
Remaining Weighted Average Life. On a given date with respect to any
Certificate the number of days equal to the quotient obtained by dividing (i)
the sum of each of the products obtained by multiplying (a) the amount of each
then remaining scheduled payment of principal of such Certificate by (b) the
number of days from and including such prepayment date to but excluding the
dates on which each such payment of principal is scheduled to be made; by (ii)
the then outstanding principal amount of such Certificate.
Renewal Rent. The amount payable by the Lessee as rent in accordance
with Section 4.01 of the Lease during any Renewal Term.
Renewal Term. One or more terms with respect to which the Lessee has
exercised its option to renew the Lease pursuant to Section 4.01(a) thereof.
Rent. All payments due from the Lessee under the Lease as Basic Rent,
Renewal Rent and Supplemental Rent, collectively.
Rent Payment Date. Each January 15 and July 15 commencing on January
15, 1999, and the last day of the Basic Term.
Replacement Aircraft. Any aircraft substituted for the Aircraft
pursuant to Section 11.03(a) of the Lease.
Replacement Airframe. Has the meaning set forth in Section 11.03 of
the Lease.
Replacement Engine. A General Electric CF6-80C2-A5F engine (or an
engine of the same or another manufacturer) of the same or of equal or greater
value, remaining useful life and utility as the Engine being replaced,
together with all Parts relating to such engine; provided, however, that if
such replacement engine is not a General Electric CF6-80C2-A5F engine, such
replacement engine must then be commonly used in the commercial aviation
industry on Airbus A300-600 airframes.
Responsible Officer. With respect to the Owner Trustee (except for
purposes of the Trust Agreement in which case the definition of Responsible
Officer set forth in Section 3.10 of the Trust Agreement is applicable) or the
Indenture Trustee, any officer in its Corporate Trust Administration, as the
case may be, designated by such Person to perform obligations under the
Operative Agreements, and with respect to any other party, any corporate
officer or (except in the case of the Owner Participant) other employee of a
party who, in the normal performance of his or her operational
responsibilities, with respect to the subject matter of any covenant,
agreement or obligation of such party pursuant to any Operative Agreement,
would have responsibility for and knowledge of such matter and the
requirements of any Operative Agreement with respect thereto.
S&P. Standard & Poor's Ratings Group.
Scheduled Delivery Date. The Delivery Date specified in the Delivery
Notice pursuant to Section 3.01 of the Participation Agreement.
SEC. The Securities and Exchange Commission of the United States and
any successor agencies or authorities.
Secured Obligations. Has the meaning specified in the Granting
Clause of the Indenture.
Securities Act. The Securities Act of 1933, as amended.
Series "A" or "Series A Certificates". Certificates issued and
designated as "Series A" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture
under the heading "Series A".
Series "B" or "Series B Certificates". Certificates issued and
designated as "Series B" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture
under the heading "Series B".
Series "C" or "Series C Certificates". Certificates issued and
designated as "Series C" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture
under the heading "Series C".
Series C Prepayment Date. July 15, 1999 or any other date designated
by the Lessee, but in no event later than the fifteenth day after the Last
Cut-Off Date.
Series Supplement or Series Supplements. The Series Supplement
1998-1-A, the Series Supplement 1998-1-B or the Series Supplement 1998-1-C,
each dated the Certificate Closing Date, between the Lessee and the Pass
Through Trustee.
Sinking Fund Redemption Date. Has the meaning specified in Section
6.06 of the Indenture.
Sinking Fund Redemption Price. Has the meaning specified in Section
6.06 of the Indenture.
Special Aviation Counsel. Daugherty, Fowler & Peregrin.
Special Distribution Date. Has the meaning specified in Article I to
the Series Supplement.
Specified Investments. Shall mean (a) direct obligations of the
United States of America or obligations fully guaranteed by the United States
of America; (b) commercial paper rated A-1/P-1 by S&P and Moody's,
respectively or, if such ratings are unavailable, rated by any nationally
recognized rating organization in the United States equal to the highest
rating assigned by such rating organization; (c) investments in negotiable
certificates of deposit, time deposits, banker's acceptances, commercial paper
or other direct obligations of, or obligations guaranteed by, commercial banks
organized under the laws of the United States or of any political subdivision
thereof (or any U.S. branch of a foreign bank) with issuer ratings of at least
B/C by Thomson Bankwatch, having maturities no later than 90 days following
the date of such investment; (d) overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers; or
(e) overnight repurchase agreements with respect to the securities described in
clause (a) above entered into with an office of a bank or trust company which
is located in the United States of America or any bank or trust company which
is organized under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500 million.
SSB. State Street Bank and Trust Company of Connecticut, National
Association, a national banking association or any successor Owner Trustee in
its individual capacity.
Stipulated Loss Value. As of any Stipulated Loss Value Determination
Date during the Basic Term, the amount determined by multiplying the Purchase
Price by the percentage set forth in Schedule III of the Lease under the
heading "Stipulated Loss Value Factor" opposite such date (as such Schedule
III may be adjusted from time to time as provided in Section 3.04 of the
Lease), and during any Renewal Term, the amount determined pursuant to Section
4.01(b) of the Lease. Notwithstanding any other provisions of the Lease or
the Participation Agreement or the Indenture, each Stipulated Loss Value shall
be, under any circumstances and in any event, an amount, together with so much
of the arrears portion of Basic Rent due and owing through the date of payment
of Stipulated Loss Value as does not constitute an Excepted Payment, at least
sufficient to pay in full as of such date of payment the aggregate unpaid
principal amount of and accrued interest on the Certificates outstanding on
such date of payment. Subject to the immediately preceding sentence, it is
understood and agreed that the amounts set forth on Schedule III of the Lease,
for dates other than Rent Payment Dates on which arrears Basic Rent is due,
fully reflect appropriate Basic Rent accruals and credits of unearned Basic
Rent and, accordingly, no further accrual or credit shall be required whenever
Stipulated Loss Value is to be calculated with reference to any such date.
Stipulated Loss Value Determination Date. Each date set forth on
Schedule III of the Lease.
Subordination Agent. First Security Bank, National Association, a
national banking association, not in its individual capacity but solely as
Subordination Agent.
Supplemental Rent. (a) All amounts, liabilities and obligations
which the Lessee assumes or agrees to perform or pay under the Lease or under
the Participation Agreement or Tax Indemnity Agreement or any Ancillary
Agreement or any other Operative Agreement to SSB, the Lessor, the Owner
Participant, the Indenture Trustee, the Subordination Agent, any Liquidity
Provider or others, including, without limitation, payments of Stipulated Loss
Value, EBO Price and amounts calculated by reference to Termination Value and
all amounts required to be paid by Lessee under the agreements, covenants and
indemnities contained in the Lease or in the Participation Agreement or the
Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic
Rent and (b) all amounts that the Owner Trustee is obligated to pay in
accordance with clause (b) of the last paragraph of Section 2.04 of the
Indenture.
Tax. Shall have the meaning set forth in Section 8.01(a) of the
Participation Agreement.
Tax Indemnity Agreement. The Tax Indemnity Agreement (Federal
Express Corporation Trust No. N678FE), dated as of September 1, 1998, between
the Lessee and the Owner Participant.
Term. The Basic Term of the lease for the Aircraft under the Lease
and, if renewed pursuant to Section 4.01 of the Lease, each Renewal Term for
the Aircraft for which the Lease is renewed, or such earlier date on which the
Lease is terminated pursuant to its terms.
Termination Date. A Rent Payment Date during the Basic Term that is
on or after December 31, 2005 in the case of Article 10 of the Lease, and in
the case of (i) Section 4.02(a)(A) of the Lease, the Rent Payment Date falling
on January 15, 2015 or July 15, 2018, as the case may be, (ii) Section
4.02(a)(D) or (E) of the Lease, a Rent Payment Date that is on or after the
eighth anniversary of the Delivery Date and (iii) Section 4.02(a)(F) of the
Lease, January 15, 2017.
Termination Value. As of any Termination Date, the amount determined
by multiplying the Purchase Price by the percentage set forth in Schedule IV
of the Lease under the heading "Termination Value Factor" opposite such
Termination Date (as such Schedule IV may be adjusted from time to time as
provided in Section 3.04 of the Lease). Notwithstanding any other provisions
of the Lease, the Participation Agreement or the Indenture, each Termination
Value shall be, under any circumstances and in any event, an amount, together
with so much of the arrears portion of Basic Rent due and owing through the
date of payment of any amount calculated by reference to Termination Value as
does not constitute an Excepted Payment, at least sufficient to pay in full as
of such date of payment the aggregate unpaid principal amount of and accrued
interest on the Certificates outstanding on such date of payment. Subject to
the immediately preceding sentence, it is understood and agreed that the
amounts set forth on Schedule IV of the Lease, for dates other than Rent
Payment Dates on which arrears Basic Rent is due, fully reflect appropriate
Basic Rent accruals and credits of unearned Basic Rent and, accordingly, no
further accrual or credit shall be required whenever Termination Value is to
be calculated with reference to any such date.
Transaction Costs. Those costs and expenses set forth in Section
10.01(a) of the Participation Agreement.
Transportation Code. Title 49 of the United States Code, as amended
and in effect on the date of the Lease or as subsequently amended, or any
successor or substituted legislation at the time in effect and applicable, and
the regulations promulgated pursuant thereto.
Treasury Yield. At the time of determination with respect to any
Certificate, the interest rate (expressed as a semi-annual equivalent and as a
decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield) determined to be the per annum rate equal to the semi-annual
yield to maturity for United States Treasury securities maturing on the
Average Life Date on such Certificate and trading in the public securities
markets either as determined by interpolation between the most recent weekly
average yield to maturity for two series of United States Treasury securities,
trading in public securities markets, (i) one maturing as close as possible
to, but earlier than, the Average Life Date of such Certificate and (ii) the
other maturing as close as possible to, but later than, the Average Life Date
of such Certificate, in each case as published in the most recent H.15(519)
or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Certificate is reported
on the most recent H.15 (519), such weekly average yield to maturity as
published in such H.15(919). "H.15(519)" means the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. The date of determination of a
Make-Whole Premium will be the third Business Day prior to the applicable
prepayment date and the "most recent H.15(519)" means the H.15(519) published
prior to the close of business on the third Business Day prior to the
applicable prepayment date.
Trust Agreement. The Trust Agreement (Federal Express Corporation
Trust No. N678FE), dated as of June 15, 1998, as amended and restated as of
September 1, 1998, between the Owner Participant and the Owner Trustee in its
individual capacity.
Trust Estate. The Lessor's Estate.
Trust Indenture Act. The Trust Indenture Act of 1939, as amended.
Trust Indenture Estate. All estate, right, title and interest of the
Indenture Trustee in and to any of the property, rights, interests and
privileges granted to the Indenture Trustee pursuant to the Granting Clause of
the Indenture, other than Excepted Payments and any and all other rights of
the Owner Trustee or the Owner Participant expressly reserved to the Owner
Trustee or the Owner Participant pursuant to the Indenture, and the Letter of
Credit and any rights thereunder.
UCC. Uniform Commercial Code.
Underwriters. Morgan Stanley & Co. Incorporated, Chase Securities
Inc., Citicorp Securities, Inc., Credit Suisse First Boston Corporation and
J.P. Morgan Securities Inc.
Underwriting Agreement. The Underwriting Agreement dated June 30,
1998, among the Lessee and the Underwriters.
United States, U.S. or US. The United States of America.
U.S. Air Carrier. Any United States air carrier as to which there is
in force a certificate issued pursuant to Section 41102(a) or Section 41103 of
the Transportation Code, and as to which there is in force an air carrier
operating certificate issued pursuant to Chapter 447 of the Transportation
Code and Part 121 of the regulations under such Transportation Code, for
aircraft capable of carrying ten (10) or more individuals or 6,000 pounds or
more of cargo, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provision thereof or in absence
thereof.
U.S. Person. A Person described in Section 7701(a)(30) of the Code.
SCHEDULE II
BASIC RENT
(As a Percentage of Purchase Price)
Rent
Payment
Date Advance Arrears
------- ------- -------
[On each Payment Date, Lessee will pay as Basic Rent an amount that will be
at least sufficient to pay in full, as of such Payment Date, the aggregate
unpaid principal amount of due and unpaid installments on the Certificates
outstanding on such Payment Date, together with the accrued and unpaid
interest thereon.]
SCHEDULE III
STIPULATED LOSS VALUES
Stipulated Loss
Date Value Factor
---------- ---------------
[Stipulated Loss Value will be an amount at least sufficient to pay in
full, as of the date of payment thereof, the aggregate unpaid principal
amount of the Certificates outstanding on such date of payment, together
with the accrued and unpaid interest thereon.]
SCHEDULE IV
TERMINATION VALUES
Termination Termination
Date Value Factor
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[Termination Value will be an amount at least sufficient to pay in full, as
of the date of payment thereof, the aggregate unpaid principal amount of
the Certificates outstanding on such date of payment, together with the
accrued and unpaid interest thereon.]
SCHEDULE V
PURCHASE OPTION SCHEDULE
(D) Purchase Option Referred to in Section 4.02(a)(D) of the Lease.
In the event of any Significant Expenditure (as defined below) with respect
to the Aircraft, which the Lessee has certified in a certificate of the
Lessee's President, Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Treasurer or Assistant Treasurer furnished to the
Lessor, the Indenture Trustee and the Owner Participant, is (as determined
by the Lessee in its sole discretion) necessary, desirable or required to
be made at any time on or after the eighth anniversary of the Delivery
Date, the Lessee may elect to terminate the Lease and purchase the Aircraft
on the first Rent Payment Date occurring at least six months after the
Owner Participant has notified the Lessee that they will not permit such
Significant Expenditure to be financed as contemplated in clause (ii) of
the definition of "Significant Expenditure" below, for, at the Lessee's
option, either (1) the payment to the Lessor in immediately available funds
of an amount equal to the greater of the Fair Market Value of the Aircraft
and the Termination Value for the Aircraft, determined in each case as of
such Rent Payment Date, or (2) the assumption by the Lessee, pursuant to
Section 7.11 of the Participation Agreement and Section 2.12 of the
Indenture, of all of the Lessor's obligations under the Indenture, the
Certificates and Section 7.04 of the Participation Agreement, and the
payment to the Lessor in immediately available funds of an amount equal to
the excess of (A) the greater of (I) the Termination Value for the
Aircraft, and (II) the Fair Market Value of the Aircraft, both computed as
of such Rent Payment Date, over (B) the unpaid principal amount of the
Certificates outstanding plus accrued interest as of such date; it being
understood that the Fair Market Value for this purpose shall be determined
without regard to any Significant Expenditure not yet made.
For purposes of this paragraph (D) the term "Significant Expenditure"
means a single expenditure or a series of related expenditures in respect
of non-severable improvements (i.e. improvements which cannot by the terms
of Section 9.02(b) of the Lease be removed from the Aircraft) which (i) in
the Lessee's reasonable judgment would exceed $10,000,000, and (ii) the
Owner Participant will not permit to be financed on similar terms and
conditions then available for similar transactions through the issuance of
additional non-recourse notes of the Lessor or through additional equity
investments of the Owner Participant or both (it being understood that
Section 4.02(a)(D) of the Lease shall not impose any obligation on the
Owner Participant to provide such financing). The Lessee, prior to
notifying the Owner Participant and the Indenture Trustee in accordance
with Paragraph (F) of this Schedule V of its election to purchase the
Aircraft pursuant to Section 4.02(a)(D) of the Lease, shall notify the
Owner Participant of the non-severable improvements which would satisfy the
conditions described in clause (i) of the preceding sentence, and provide
the Owner Participant with a reasonable opportunity to permit the financing
thereof as contemplated in clause (ii) of such sentence. The Owner
Participant shall notify the Lessee of their decision with respect to such
financing within 60 days after the Lessee has given the notice described in
the preceding sentence.
(E) Purchase Option Referred to in Section 4.02 (a)(E) of the Lease.
In the event that a Burdensome Indemnity Payment (as defined below) shall
occur at any time on or after the eighth anniversary of the Delivery Date,
the Lessee may elect to terminate the Lease and purchase the Aircraft on
the first Rent Payment Date (the "Burdensome Indemnity Payment Date")
following the date that the Owner Participant provide the Lessee with a
written notice of any Loss (as defined in Section 5 of the Tax Indemnity
Agreement) that is a Burdensome Indemnity Payment for, at the Lessee's
option, either (1) the payment to the Lessor in immediately available funds
of an amount equal to the greater of the Fair Market Value of the Aircraft
and Termination Value for the Aircraft, determined in each case as of such
Burdensome Indemnity Payment Date, or (2) the assumption by the Lessee,
pursuant to Section 7.11 of the Participation Agreement and Section 2.12 of
the Indenture, of all of the obligations of the Lessor under the Indenture,
the Certificates and Section 7.04 of the Participation Agreement and the
payment to the Lessor in immediately available funds, of an amount equal to
the excess of (A) the greater of (I) the Termination Value for the Aircraft
and (II) the Fair Market Value of the Aircraft, both computed as of the
Burdensome Indemnity Payment Date, over (B) the unpaid principal of the
Certificates outstanding plus accrued interest as of such date.
For purposes of this paragraph (E), the term "Burdensome Indemnity
Payment" means a Loss as defined in the Tax Indemnity Agreement resulting
from any act, event or circumstance which is outside the control of the
Lessee or any Affiliate of the Lessee which causes the aggregate net
present value as of the determination date, discounted semi-annually at the
Debt Rate, of all such Losses (but excluding any Losses for which the Owner
Participant shall have waived its right to payment under the Tax Indemnity
Agreement) paid or payable by the Lessee which can be avoided through a
purchase by the Lessee of the Aircraft, to exceed 3.0% of the Purchase
Price.
(F) Notice from the Lessee. The Lessee shall give the Lessor, the
Owner Participant and the Indenture Trustee not more than 360 days nor less
than 90 days prior written notice of its election to purchase pursuant to
Section 4.02(a)(D) or 4.02(a)(E) of the Lease. Such notice shall either
direct the Lessor to prepay the Certificates in full on such Termination
Date pursuant to Section 6.02 of the Indenture or state that the Lessee
shall exercise its option to assume the Certificates pursuant to Section
7.11 of the Participation Agreement and Section 2.12 of the Indenture. The
Lessee's notice pursuant to Section 4.02(a)(D) or 4.02(a)(E) of the Lease
shall become irrevocable 10 days prior to the applicable purchase date
designated in such notice but if any such notice is revoked, the Lessee
shall no longer be entitled to purchase the Aircraft as a result of the
facts and circumstances originally giving rise to such right.
Exhibit A
to
Lease Agreement
---------------
THE INTEREST OF LESSOR UNDER THIS LEASE SUPPLEMENT
NO. __ IS SUBJECT TO A SECURITY INTEREST
LEASE SUPPLEMENT NO. __
(Federal Express Corporation Trust No. N678FE)
LEASE SUPPLEMENT NO. __ (Federal Express Corporation Trust No.
N678FE), dated ________ __, ____, between STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in
its individual capacity, but solely as Owner Trustee under the Trust Agreement
(Federal Express Corporation Trust No. N678FE) dated as of June 15, 1998, as
amended and restated as of September 1, 1998 (the "Lessor"), and FEDERAL
EXPRESS CORPORATION, a Delaware corporation (the "Lessee").
W I T N E S S E T H :
-------------------
WHEREAS, the Lessor and the Lessee have entered into that certain
Lease Agreement (Federal Express Corporation Trust No. N678FE) dated as of
June 15, 1998, as amended and restated as of September 1, 1998 (the "Lease",
the defined terms in the Lease being used in this Lease Supplement with the
same meaning as in the Lease), which provides for the execution and delivery
of a Lease Supplement, substantially in the form of this Lease Supplement No.
__, for the purpose of leasing under the Lease the aircraft and engines
described below ("Aircraft") as and when delivered by the Lessor to the Lessee
in accordance with the terms of the Lease;
WHEREAS, the Lease relates to the Aircraft;
WHEREAS, a counterpart of the Lease is attached to and made a part of
this Lease Supplement, and this Lease Supplement, together with such
attachment, is being filed for recordation on this date with the FAA as one
document.
NOW, THEREFORE, for and in consideration of the premises and other
good and sufficient consideration, the Lessor and the Lessee agree as follows:
Section 1. Delivered Aircraft. The Lessor hereby delivers and
leases to the Lessee under the Lease, and the Lessee hereby accepts and leases
from the Lessor under the Lease, the following described Airbus A300F4-605R
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
of this Lease Supplement consists of the following:
(a) Airbus A300F4-605R Airframe; U.S. Registration Number ______;
Manufacturer's Serial No. ___; and
(b) Two (2) General Electric CF6-80C2-A5F Engines bearing,
respectively, Manufacturer's Serial Nos. ___-___ and ___-___ (each of which
engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).
Section 2. Delivery Date. The Delivery Date of the Delivered
Aircraft is the date of this Lease Supplement.
Section 3. Purchase Price. The Purchase Price of the Delivered
Aircraft shall be the amount set forth in Ancillary Agreement I.
Section 4. Term. The Term for the Delivered Aircraft shall commence
on the Delivery Date, and shall terminate on ______, ____, unless earlier
terminated or extended pursuant to the terms of the Lease.
Section 5. Rent. The Lessee hereby agrees to pay the Lessor Rent
for the Delivered Aircraft throughout the Term thereof in accordance with the
terms and provisions of the Lease.
Section 6. Lessee's Acceptance of Delivered Aircraft. The Lessee
hereby confirms to the Lessor that the Delivered Aircraft has been duly marked
in accordance with Section 7.03 of the Lease and that the Lessee has accepted
the Delivered Aircraft for all purposes hereof and of the Lease, and as being
free and clear of all Liens except Lessor's Liens. Such acceptance by the
Lessee shall be without prejudice to any rights of the Lessor or the Lessee
against AVSA, the Manufacturer, the Engine Manufacturer or any vendor of
equipment included in the Aircraft.
Section 7. Incorporation of Lease By Reference. All the provisions
of the Lease are hereby incorporated by reference in this Lease Supplement to
the same extent as if fully set forth in this Lease Supplement.
Section 8. Governing Law. THIS LEASE SUPPLEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND
IS BEING DELIVERED IN THE STATE OF NEW YORK.
Section 9. Agreement as Chattel Paper. To the extent that this Lease
Supplement constitutes chattel paper (as such term is defined in the UCC as in
effect in any applicable jurisdiction), no security interest in this Lease
Supplement may be created through the transfer or possession of any
counterpart other than the original chattel-paper counterpart, which shall be
the counterpart containing the receipt executed by the Indenture Trustee on
its signature page.
Section 10. Counterparts. This Lease Supplement may be executed in
any number of counterparts, each of which shall be an original (except that
only the counterpart bearing the receipt executed by Indenture Trustee shall
be the original for purposes of perfecting a security interest therein as
chattel paper under the UCC), but all of which taken together shall constitute
one and the same instrument and any of the parties hereto may execute this
Lease Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written.
LESSOR: STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee
By:
-----------------------------------
Name: Paul D. Allen
Title: Vice President
LESSEE: FEDERAL EXPRESS CORPORATION
By:
-----------------------------------
Name: Robert D. Henning
Title: Vice President and Treasurer
Receipt of this original counterpart of the Lease Supplement is hereby
acknowledged on this ___ day of ______ 1998.
Indenture Trustee: FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Indenture Trustee
By:
-----------------------------------
Name: Greg A. Hawley
Title: Vice President
Exhibit B
to
Lease Agreement
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[See Exhibit E to the Participation Agreement]
Exhibit C
to
Lease Agreement
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[See Exhibit F to the Participation Agreement]