AIRCRAFT LEASE AGREEMENT
Dated as of April 15, 1993
between
TRUST COMPANY FOR USL, INC.
not in its individual capacity except
as otherwise specified herein but solely as
Owner Trustee
Lessor
and
FEDERAL EXPRESS CORPORATION
Lessee
One Boeing 727-2D4 Aircraft
U.S. Registration No. N362PA
(Mfg. Ser. #21850)
Federal Express
Boeing 727-2D4
N362PA
TABLE OF CONTENTS
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Delivery and Acceptance . . . . . . . . . . . . . . . . . . 11
2.1. Delivery and Lease of Aircraft . . . . . . . . . . . . . . 11
2.2. Confirmation; Acceptance by Lessee . . . . . . . . . . . . 11
2.3. Conditions to Lease . . . . . . . . . . . . . . . . . . . . 11
2.4. Inspection; Acceptance Test Flight on
Delivery . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5. Appointment of Lessee as Agent; Enforcement
of Modification Contract . . . . . . . . . . . . . . . . 14
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . 15
3.1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2. Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3. Supplemental Rent . . . . . . . . . . . . . . . . . . . . . 16
3.4. Adjustments to Basic Rent and Stipulated
Loss Values . . . . . . . . . . . . . . . . . . . . . . . 16
3.5. Payments . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4. Lessor's Representations and Warranties;
DISCLAIMER; Certain Agreements of Lessee . . . . . . . . . 17
4.1. Representations and Warranties of Lessor . . . . . . . . . 17
4.2. DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3. Lessee's Representations and Warranties . . . . . . . . . . 19
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . 23
5.1. General Condition upon Return . . . . . . . . . . . . . . . 23
5.2. Return of the Engines . . . . . . . . . . . . . . . . . . . 25
5.3. Fuel; Manuals . . . . . . . . . . . . . . . . . . . . . . 26
5.4. Storage Upon Return . . . . . . . . . . . . . . . . . . . . 26
5.5. Severable Parts . . . . . . . . . . . . . . . . . . . . . . 26
5.6. Failure to Return Aircraft or Engines . . . . . . . . . . . 27
Section 6. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7. Registration, Operation, Possession, Sub-
leasing and Records . . . . . . . . . . . . . . . . . . . 28
(i)
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7.1. Registration and Operation . . . . . . . . . . . . . . . . 28
(a) Registration . . . . . . . . . . . . . . . . . . . . 28
(b) Nameplate . . . . . . . . . . . . . . . . . . . . . . 28
(c) Compliance with Laws . . . . . . . . . . . . . . . . 28
(d) Operation; Insurance Requirements . . . . . . . . . . 29
7.2. Possession and Subleases . . . . . . . . . . . . . . . . . 29
7.3. Records and Reports . . . . . . . . . . . . . . . . . . . . 35
(a) Records . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Information and Reports . . . . . . . . . . . . . . . 36
Section 8. Maintenance; Replacement and Pooling
of Parts; Alterations, Modifications and
Additions . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2. Replacement of Parts . . . . . . . . . . . . . . . . . . . 36
8.3. Pooling of Parts . . . . . . . . . . . . . . . . . . . . . 37
8.4. Alterations, Modifications and Additions . . . . . . . . . 38
Section 9. Renewal Options; Purchase Options . . . . . . . . . . . . . 39
Section 10. Loss, Destruction, Requisition, Etc. . . . . . . . . . . . 41
10.1. Event of Loss with Respect to Airframe . . . . . . . . . . 41
10.2. Event of Loss with Restpect to an Engine . . . . . . . . . 41
(a) Event of Loss . . . . . . . . . . . . . . . . . . . 41
(b) Conditions; Lessee's Obligations . . . . . . . . . . 42
(c) Recordation and Opinions . . . . . . . . . . . . . . 42
(d) Conveyance; Replacement Engine . . . . . . . . . . . 42
(e) No Reduction of Basic Rent . . . . . . . . . . . . . 43
10.3. Application of Payments from Governmental
Authorities for Requisition of Title . . . . . . . . . . 43
(a) Replacement of Engine . . . . . . . . . . . . . . . 43
(b) Nonreplacement . . . . . . . . . . . . . . . . . . . 43
10.4. Application of Payments During Existence of
Default . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 44
(ii)
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(a) Public Liability and Property
Damage Insurance . . . . . . . . . . . . . . . . . 44
(b) Insurance Against Loss or Damage to
the Aircraft . . . . . . . . . . . . . . . . . . . 45
(c) Reports, etc. . . . . . . . . . . . . . . . . . . . 46
(d) Self-Insurance . . . . . . . . . . . . . . . . . . . 48
(e) Additional Insurance by Lessor and
Lessee . . . . . . . . . . . . . . . . . . . . . . 48
(f) Indemnification by Government in Lieu
of Insurance . . . . . . . . . . . . . . . . . . . 48
(g) Application of Payments During
Existence of a Lease Event of
Default . . . . . . . . . . . . . . . . . . . . . 49
(h) Terms of Insurance Policies . . . . . . . . . . . . 49
(i) Insurance Coverage Under
Certain Circumstances . . . . . . . . . . . . . . 51
(j) Non-Discrimination Against the
Aircraft in Insurance . . . . . . . . . . . . . . 51
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . 52
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 17. Net Lease; Lessee's Obligations; No
Set-Off, Counterclaim, Etc. . . . . . . . . . . . . . . . 59
Section 18. Covenants of Lessee . . . . . . . . . . . . . . . . . . . . 60
(a) Certain Assurances . . . . . . . . . . . . . . . . . 60
(b) Filing and Recordation . . . . . . . . . . . . . . . 60
(c) Existence . . . . . . . . . . . . . . . . . . . . . 60
Section 19. Right To Perform for Lessee . . . . . . . . . . . . . . . . 60
Section 20. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 61
Section 21. Financing . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 22. Section 1110 Compliance . . . . . . . . . . . . . . . . . . 63
(iii)
SCHEDULE 1 Basic Rent Schedule
EXHIBIT A Lease Supplement
EXHIBIT B Form of Receipt for Leased Aircraft
EXHIBIT C Stipulated Loss Values
EXHIBIT D Domicile of Permitted Sublessees
EXHIBIT E Schedule of Reregistration Countries
(iv)
LEASE AGREEMENT, dated as of April 15, 1993, between TRUST COMPANY FOR USL,
INC., an Illinois corporation, not in its individual capacity but solely as
owner Trustee under the Trust Agreement defined in Section 1 below ("Lessor"),
and FEDERAL EXPRESS CORPORATION, a Delaware corporation ("Lessee"),
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lessee desires to lease from Lessor and Lessor is willing to lease
to Lessee the aircraft described herein upon and subject to the terms and
conditions of this Lease.
NOW THEREFORE, in consideration of the mutual promises herein, Lessor and
Lessee agree as follows:
Section 1. Definitions.
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Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Lease and shall be equally
applicable to both the singular and the plural forms of the terms herein
defined. Any agreement referred to below shall mean such agreement as amended,
supplemented and modified from time to time.
"Act" means the Federal Aviation Act of 1958, as amended from time to time.
"Additional Insureds" means Lessor, in its individual capacity and as owner
of the Aircraft, each Owner Participant and Lessee in its capacity as sublessor
under any Sublease.
"Affiliate" means a Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under a common control with,
another Person.
"Aircraft" means the Airframe, together with the three Engines initially
installed on such Airframe when delivered and leased hereunder and all
applicable manuals and records relating thereto (or any Replacement Engine
substituted for any of such Engines hereunder), whether or not any of such
initial or Replacement Engines may from time to time thereafter be installed on
such Airframe or may be installed on any other airframe or on any other
aircraft.
"Airframe" means (i) the Boeing 727-2D4 aircraft (excluding Engines or
engines from time to time installed thereon) manufactured by Manufacturer in
1979 and currently bearing United States registration number N362PA and
manufacturer's serial number 21850 leased hereunder by Lessor to Lessee and (ii)
any and all Parts so long as the same shall be incorporated in such aircraft and
any and all parts removed from such aircraft so long as title thereto shall
remain vested in Lessor in accordance with the terms hereof.
"Base Rate" means the rate of interest publicly announced from time to time
by The First National Bank of Chicago at its principal office in Chicago as its
"corporate base rate" (or its equivalent successor rate if the corporate base
rate is no longer used). The effective date of each change to the Base Rate
shall take effect on the day specified in the public announcement of such
change.
"Basic Rent" means, for the Basic Term, the rent identified as Basic Rent
in and payable pursuant to Section 3.2 hereof, and, for any Renewal Term, Basic
Rent determined pursuant to Section 9 hereof.
"Basic Term" means the period commencing on the Delivery Date and expiring
on April 21, 2006.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in New York, New York, Memphis, Tennessee, San
Francisco, California or Chicago, Illinois are authorized or required by law to
be closed.
"Civil Reserve Air Fleet Program" shall mean the Civil Reserve Air Fleet
Program administered by the Government pursuant to Executive Order No. 11490, as
amended, or any substantially similar program.
"Conversion Letter Agreement" means the letter agreement, dated as of April
22, 1993 from Lessee to the Owner Participants.
"Delivery Date" means the date of the Lease Supplement relating to the
Aircraft, which date shall be the date on which the Aircraft is leased to Lessee
hereunder.
"Delivery Receipt" means the receipt for the Aircraft delivered by Lessee
on the Delivery Date.
"Dollars" and "$" mean the lawful currency of the United States of America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"Engine" means (i) each of the three Pratt & Whitney JT8D-15A engines
identified by manufacturer's serial number on the Lease Supplement subjecting
the Aircraft to this Lease and originally installed on the Airframe on delivery
thereof pursuant to this Lease, whether or not from time to time thereafter
installed on such Airframe or installed on any other airframe, and (ii) any
Replacement Engine, whether or not from time to time thereafter installed on the
Airframe or any other airframe, together in each case with any and all Parts
incorporated in such Engine and any and all Parts removed from such Engine so
long as title thereto shall remain vested in Lessor in accordance with the terms
hereof. At such time as a Replacement Engine shall be substituted hereunder and
the Engine for which the substitution is made shall be released, such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means as of any
date of determination, all Engines then leased hereunder.
"Event of Default" means a Lease Event of Default.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i) the loss
of such property or of the use thereof due to the destruction of or damage to
such property which renders repair uneconomic or which renders such property
permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive or compromised
total loss; (iii) the theft or disappearance of such property for a period of
120 consecutive days (or earlier if either (a) Lessee shall no longer be
diligently attempting to locate and pursue the return of such property or (b)
the last day of the Term has occurred); (iv) the confiscation, condemnation, or
seizure of, or requisition of title to, or use of, such property by any
governmental or purported governmental authority (other than a requisition for
use by the Government or by any other government of registry of the Aircraft, or
any agency or instrumentality of any thereof), which in the case of any event
referred to in this clause (iv) shall have resulted in the loss of possession of
such property by Lessee for a period in excess of 180 consecutive days (or
shorter if the last day of the Term has occurred) or shall have resulted in the
loss of title to such property by Lessor for a period in excess of 45
consecutive days (or shorter if the last day of the Term has occurred); (v) as a
result of any law, rule, regulation, order or other
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action by the FAA or other governmental body of the government of registry of
the Aircraft having jurisdiction, use of such property in the normal course of
the business shall have been prohibited for a period of 120 consecutive days,
unless Lessee, prior to the expiration of such 120-day period, shall have
undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such property by Lessee, but
in any event if such use shall have been prohibited for a period of one year;
(vi) the requisition for use by the Government or any other government of
registry of the Aircraft or, in the case of such other government, any
instrumentality or agency thereof, which shall have occurred during the Term
and, in the case of the Government, shall have continued for 30 days beyond the
Term or, in the case of any other government of registry of the Aircraft, or any
instrumentality or agency thereof, shall have continued to the end of 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 in the event that the
Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant
to an activation as part of the Civil Reserve Air Fleet Program; and (vii) with
respect to an Engine only, any divestiture of title to such Engine or other
event specified as an Event of Loss with respect to an Engine in Section 10.2
hereof. An Event of Loss with respect to the Aircraft shall be deemed to have
occurred if an Event of Loss occurs with respect to the Airframe.
"Expenses" means any and all liabilities, obligations, losses, damages,
penalties, claims (including, but not limited to, negligence, strict or absolute
liability, liability in tort and liabilities arising out of violation of laws or
regulatory requirements of any kind), actions, suits, outof-pocket costs,
expenses and disbursements (including reasonable legal fees, costs of
investigation of whatsoever kind and nature and expenses (including expenses
referred to in Section 9 of the Participation Agreement, except to the extent
required to be paid by the owner Trustee thereunder) and all costs and expenses
relating to amendments, supplements, waivers and consents to and under the
Operative Documents, but excluding internal costs and expenses such as salaries
and overhead of whatsoever kind and nature).
"FAA" means the United States Federal Aviation Administration or any
governmental person, agency or other authority succeeding to the functions of
the Federal Aviation Administration
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"Fair Market Rental Value" or "Fair Market Sales Value" of the Airframe or
any Engine shall mean the value which would be obtained in an arms'-length
transaction between an informed and willing lessee-user or buyer-user (other
than a lessee currently in possession or a used equipment dealer) under no
compulsion to lease or buy, as the case may be, and an informed and willing
lessor or seller, as the case may be, under no compulsion to lease or sell, as
the same shall be specified by agreement between Lessor and Lessee or, if not
agreed to by Lessor and Lessee within a period of 15 days after either
party requests a determination, then as specified in an appraisal prepared and
delivered in New York City mutually agreed to by two recognized independent
aircraft appraisers, one of which shall be appointed by Lessor and the other of
which shall be appointed by Lessee, or, if such appraisers cannot agree on such
appraisal within 20 days, each shall render its own appraisal and shall by
mutual consent appoint a third independent recognized aircraft appraiser within
five days after the end of such 20-day period. If the two appraisers fail to
appoint a third independent recognized aircraft appraiser within such five-day
period, then either party, on behalf of both may apply to the American
Arbitration Association (or any successor organization thereto) in New York City
for the appointment of such third appraiser. The appraisal shall be completed
within 30 days of the appointment of such third appraiser. As soon as the last
appraiser appointed has delivered his appraisal that appraisal shall be compared
with the appraisals given by the other two appraisers. If the determination of
one appraiser is more disparate from the average of all three determinations
than each of the other two determinations, then the determination of such
appraiser shall be excluded, the remaining two determinations shall be averaged
and such average shall be final and binding upon the parties hereto; otherwise
the average of all three determinations shall be final and binding upon the
parties hereto. In determining Fair Market Rental Value or Fair Market Sales
Value by appraisal or otherwise, it will be. assumed that the Aircraft, Airframe
or Engine is in the condition, location and overhaul status in which it is
required to be returned to Lessor pursuant to Section 5 hereof (except that a
determination of Fair Market Sales Value pursuant to Section 14 hereof shall be
based on "as is, where is" condition), that Lessee has removed all Parts which
it is entitled to remove pursuant to Section 8 hereof. Except as otherwise
expressly provided in this Lease, all appraisal costs will be borne by Lessee.
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"Government" means the federal government of the United States of America
or any instrumentality or agency thereof the obligations of which are supported
by the full faith and credit thereof.
"Indemnitee" means Lessor, in its individual and trust capacities, the
owner Participant and each of their respective Affiliates, successors, assigns,
transferees, directors, officers, employees and agents.
"Lease," "this Lease," "this Agreement, "hereby," "herein," "hereof,"
"hereunder," or other like words mean this Aircraft Lease Agreement, as amended
or supplemented in accordance with the terms hereof, including by way of one or
more Lease Supplements.
"Lease Default" or "Default" means any event or condition which, with
notice or lapse of time, or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of the consecutive semiannual periods throughout
the Term commencing on a Lease Period Date and continuing to, but not including,
the next succeeding Lease Period Date.
"Lease Period Date" means April 21, 1994 and each October 21 and April 21
thereafter to and including April 21, 2006.
"Lease Supplement" means a supplement to this Lease substantially in the
form attached as Exhibit A hereto, subjecting an Aircraft, Engine or other
property to this Lease.
"Lessee" means Federal Express Corporation, a Delaware corporation, and its
permitted successors and assigns hereunder.
"Lessor" means Trust Company for USL, Inc., not in its individual capacity
but solely as Owner Trustee under the Trust Agreement, and its permitted
successors and assigns thereunder and hereunder.
"Lessor Liens" means any Lien on, or disposition of title with respect to,
the Aircraft, the Airframe or any Engine arising as a result of: (i) claims
against Lessor,
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the Owner Trustee, in its individual capacity, or either Owner Participant not
related to the transactions contemplated by the Operative Documents; (ii) any
act or omission of either Owner Participant, Lessor, or the Owner Trustee, in
its individual capacity, which is not related to the transactions contemplated
by the Operative Documents or is in violation of any of the terms of the
Operative Documents; (iii) claims against either Owner Participant, Lessor, or
the Owner Trustee, in its individual capacity, with respect to Taxes or Losses
against which Lessee is not required to indemnify either Owner Participant,
Lessor or the Owner Trustee, in its individual capacity; or (iv) claims against
Lessor or such Owner Participant arising out of any transfer by Lessor or either
Owner Participant of all or any portion of the respective interests of Lessor or
such Owner Participant in the Aircraft, the Trust Estate or the Operative
Documents other than a transfer of the, Aircraft by Lessor pursuant to this
Agreement or a transfer pursuant to Section 10 hereof or pursuant to the
exercise of the remedies set forth in Section 15 hereof; provided, however, that
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any Lien which is attributable solely to Trust Company for USL, Inc. or an owner
Participant and would otherwise constitute a Lessor Lien hereunder shall not
constitute a Lessor Lien hereunder so long as (a) the existence of such Lien
poses no material risk of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (b) the existence of such Lien does not
interfere in any way with the use or operation of the Aircraft by Lessee (or any
Sublessee) and (c) Trust Company for USL, Inc. or such Owner Participant, as the
case may be, is diligently contesting such Lien by appropriate proceeding.
"Lien" means any mortgage, pledge, lien, claim, encumbrance,. lease,
security interest or any other charge of any kind of property.
"MAE' means Mobile Aerospace Engineering, Inc., an Alabama corporation.
"Maintenance Program" is defined in Section 8.1.
"Manufacturer" means (i) with respect to the Airframe, The Boeing Company,
a Delaware corporation, and (ii) with respect to the Engines, United
Technologies Corporation, a Delaware corporation, Pratt & Whitney Aircraft
Commercial Engine Business, and their respective successors and assigns.
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"Modification Contract" means the Aircraft Modification and Maintenance
Agreement between the Lessor and MAE.
"Obsolete Parts" has the meaning set forth in Section 8.4 hereof.
"Officer's Certificate" means a certificate signed by the Chairman, the
President, the Managing Director, Aircraft Financing, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Person providing such certificate.
"Operative Documents" means the Participation Agreement, the Lease, each
Lease Supplement, the Trust Agreement, the Modification Contract, the
Conversion Letter Agreement and any documents delivered in connection with a
financing arrangement pursuant to Section 22 hereof.
"Overdue Interest Rate" means a rate per annum equal from time to time to
the lesser of: (a) 2.00% over the Base Rate ox (b) the highest rate permitted by
law.
"Owner Participant" means each of United States Leasing International, Inc.
and Airlease Ltd., a California Limited Partnership, and their respective
successors and permitted assigns under the Trust Agreement.
"Participation Agreement" means that certain Participation Agreement, dated
as of the date hereof, among Lessee, each owner Participant and the Owner
Trustee, as such Participation Agreement may be amended or supplemented from
time to time pursuant to the applicable provisions thereof.
"Parts" means all appliances, parts, 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 (and
"Part" means any of the foregoing) and all such items which are subsequently
removed therefrom so long as title thereto shall remain vested in Lessor in
accordance with Section 8.2 hereof.
"Permitted Lien" means any Lien referred to in clauses (i) through (vi) of
Section 6 hereof.
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"Permitted Sublessee" means any air, carrier domiciled and principally
located in a country listed in Exhibit D hereto as in effect from time to time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Renewal Term" has the meaning set forth in Section 9(a) hereof.
"Rent" means Basic Rent and Supplemental Rent.
"Replacement Engine" means an engine which shall have been substituted for
an Engine leased hereunder pursuant to Section 10.2 or 5.2 which is a Pratt &
Whitney JT8D-15A engine or an engine of the same or another manufacturer of
equivalent or greater value, condition, utility, airworthiness, remaining useful
life and suitable for installation and use on the Airframe; provided that such
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engine shall be of the same make, model and manufacturer as the other engines
installed, on the Airframe, shall be an engine of a type then being utilized by
Lessee on other Boeing 727-2D4 aircraft operated by Lessee, and shall have been
maintained, serviced, repaired and overhauled in substantially the same manner
as Lessee maintains, services, repairs and overhauls similar engines utilized by
Lessee and without in any way discriminating against such engine.
"Stipulated Loss Value" with respect to the Aircraft means (i) as of any
date through and including the last day of the Basic Term, means the amount
specified in Exhibit C hereto opposite the Stipulated Loss Value Date with
respect to which the amount of Stipulated Loss Value is determined (as such
Exhibit C may be adjusted from time to time as provided in Section 3.4 hereof)
and (ii) with respect to the Aircraft, as of any date during any Renewal Term,
shall mean the amount determined as provided in Section 9 hereof, as such amount
may be adjusted. from time to time.
"Stipulated Loss Value Date" shall mean the respective dates set forth in
Exhibit C to this Lease.
"Sublease" means any sublease permitted by the terms of Section 7.2(viii)
hereof.
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"Sublessee" means any Person for so long, but only so long, as such Person
is in possession of the Airframe and/or any Engine pursuant to the terms of a
Sublease which is then in effect pursuant to Section 7.2(viii) hereof.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or any other
Person hereunder or under any of the Operative Documents, including, without
limitation, Stipulated Loss Value.
"Taxes" means any and all fees (including, without limitation, license,
documentation and registration fees), taxes (including without limitation,
income, gross receipts, sales, rental, use, turnover, value added, property
(tangible and intangible), excise and stamp taxes), licenses, levies, imposts,
duties, recording charges or fees, charges, assessments, or withholdings of any
nature whatsoever, together with any assessments, penalties, fines, additions to
tax and interest thereon (each, individually a "Tax").
"Term" means the Basic Term and, if actually entered into, any Renewal
Term.
"Trust Agreement" means the Trust Agreement (1987-N362PA) dated as of
November 10, 1987, among the owner Participants and Trust Company for USL, Inc.,
as such Agreement has been amended or supplemented in accordance with its terms.
"U.S. Air Carrier" means any United States air carrier as to which there is
in force a certificate issued pursuant to Section 401 or Section 418 of the
Federal Aviation Act, and as to which there is in force an air carrier operating
certificate issued pursuant to Part 121 of the regulations under such Act, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or. in the absence thereof.
"Wet Lease" means any arrangement whereby the Lessee (or a Sublessee)
agrees to furnish the Airframe and Engines or engines installed thereon to a
third party pursuant to which such Airframe and Engines or engines (i) shall be
operated solely by regular employees of Lessee (or a Sublessee) possessing all
current certificates and licenses that would be required under the Federal
Aviation Act (or if the Aircraft is not registered in the United States, all
certifi-
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cates and licenses required by the laws of the jurisdiction of registry) for the
performance by such employees of similar functions within the United States of
America (or such jurisdiction of registry) (it is understood that cabin
attendants need not be employees of Lessee) and (ii) shall be maintained by
Lessee (or a Sublessee) in accordance with its normal maintenance practices.
Section 2. Delivery and Acceptance.
-----------------------
2.1. Delivery and Lease of Aircraft. Subject to the conditions and pursuant
------------------------------
to the terms of this Lease, Lessor hereby agrees to deliver the Aircraft on the
Delivery Date and simultaneously to lease to Lessee hereunder, and Lessee hereby
agrees to lease and accept from Lessor hereunder, the Aircraft. Delivery and
acceptance of the Aircraft shall occur at the storage facility maintained by
Aero Corporation at Lake City Airport, Lake City, Florida or such other location
as the parties shall agree.
2.2. Confirmation; Acceptance by Lessee. By execution and delivery of the
-----------------------------------
Lease Supplement in respect of the Aircraft, Lessee will confirm to Lessor that
Lessee has accepted the Aircraft for all purposes hereof as being in good
working order and repair and without defect in condition, design, operation,
merchantability or fitness for use, whether or not discoverable by Lessee as of
the date thereof, except for discrepancies identified in Exhibit 2 to the
Delivery Receipt.
2.3. Conditions to Lease. Lessor's obligation to lease the Aircraft to
--------------------
Lessee shall be subject to the receipt by Lessor of the following documents or
other items on or before the Delivery Date for the Aircraft, all of which shall
be reasonably satisfactory in form and substance to Lessor:
(a) each of the Operative Documents shall have been duly authorized,
executed and delivered by the parties thereto, and shall be in full force
and effect;
(b) copies of all documents evidencing corporate action taken by the
Lessee, with respect to this Lease, the Lease Supplement and each other document
required to be executed and delivered by any such Person in accordance with the
provisions hereof and thereof, and a copy of the resolutions of the board of
directors of Lessee, certified by the Secretary or Assistant Secretary of
Lessee, evidencing the
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due authorization of the execution, delivery and performance of each such
document, together with an incumbency certificate as to the person or persons
authorized to execute and deliver such documents and the signature or signatures
of such persons;
(c) an Officer's Certificate of Lessee stating that:
(i) the representations and warranties contained in Section 4.3 hereof
are true and correct on and as of such date as though made on and as of
such time (except to the extent that such representations and warranties
relate solely to an earlier date); and
(ii) no event has occurred and is continuing, or would result from the
lease of the Aircraft, which constitutes a Lease Default or Lease Event of
Default;
(d) an opinion or report signed by an independent insurance broker or
by, an insurer acceptable to Lessor as to the due compliance with the insurance
provisions of Section 11 hereof with respect to the Aircraft, together with
certificates evidencing the insurance as required by Section 11 hereof;
(e) an opinion of Kenneth R. Masterson, Esq., counsel to the Lessee
and of Davis Polk & Wardwell, special counsel to the Lessee, each dated the
Delivery Date, and each in form and substance reasonably satisfactory to Lessor;
(f) an opinion of Daugherty, Fowler & Peregrin or other counsel
experienced in federal aviation matters, as to the due filing for recordation of
the Lease and the Lease Supplement and as to such other matters as Lessor may
reasonably request, addressed to Lessor and Lessee;
(g) since May 31, 1992, no material adverse change shall have
occurred in the financial condition of Lessee;
(h) a Uniform Commercial code financing statement or statements shall
have been executed and delivered by the Lessee, and such financing statement or
state-
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ments shall have been duly filed in all places necessary or advisable, and any
additional Uniform Commercial Code financing statements deemed necessary or
advisable by the Owner Participant shall have been executed and delivered by
Lessee and duly filed by the Owner Participant;
(i) the Owner Participant shall have received an opinion addressed to
the Owner Participant, the Owner Trustee and Lessee, from Stanley E. Gutman,
Esq., counsel for the Owner Trustee, in form and substance reasonably
satisfactory to the Owner Partcipant;
(j) the Owner Participant shall have received an opinion, in form and
substance satisfactory to the owner Participant, from B. K. Associates,
independent aircraft appraisers, or such other recognized aircraft appraiser
selected by the owner Participant;
(k) the Owner Participant and the Owner Trustee shall have received
an independent insurance broker's report, and certificates of insurance, in form
and substance reasonably satisfactory to the Owner Participant and the Owner
Trustee, as to the due compliance with the terms of the Modification Contract
relating to insurance with respect to the Aircraft; and
(1) such other documents, opinions and certificates incident to the
foregoing as Lessor may reasonably request.
2.4. Inspection; Acceptance Test Flight on Delivery. Lessee acknowledges
-----------------------------------------------
that it has performed, prior to delivery.and acceptance of the Aircraft, at its
own cost and expense, a ground inspection of the Aircraft and a boroscope
inspection of each of the Engines: Lessee acknowledges that such inspections
have not revealed any defects, includ ing defects that would cause the Aircraft
not to possess a valid certificate of airworthiness issued by the FAA, other
than those defects identified in Exhibit 2 to the Delivery Receipt. The cost of
correcting all such defects shall be for the account of Lessor. Immediately
following delivery and acceptance, Lessor and Lessee shall conduct, at Lessee's
cost and expense and with Lessee's crew, an acceptance test flight pursuant to
standard test flight procedures utilized by the Lessee, or other such procedures
as the parties agree. Lessor shall be permitted two representatives on such
flight, which shall not exceed two hours in length. If such flight
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test reveals any discrepancies that were not revealed in the ground and
boroscope inspections, Lessee shall promptly provide Lessor with a detailed list
of such discrepancies, and Lessor shall, at its expense, promptly correct any
such discrepancies or, if the cost of correcting all discrepancies would exceed
$100,000, Lessor may, at its option, elect to terminate this Lease.
2.5. Appointment of Lessee as Agent: Enforcement of Modification Contract.
--------------------------------------------------------------------
(a) Appointment. Lessor hereby appoints Lessee as its agent for the
-----------
sole purpose of (1) overseeing the modifications to be performed by MAE pursuant
to the Modification Contract, (2) determining whether such modifications have
been made in accordance with the terms of the Modification Contract, (3)
exercising, on behalf of Lessor, all rights of Lessor under the Modification
Contract (including the right to inspect the Aircraft pursuant to Article VII
thereof), and (4) performing, on behalf of Lessor, all obligations of Lessor
under the Modification Contract (including Lessor's obligation to provide
Lessor-Supplied Parts to MAE in connection with Article IV thereof). Lessee
accepts such agency and agrees to exercise all rights of Lessor, and perform all
duties and obligations imposed on Lessor, under the Modification Contract;
provided, however, that Lessee shall not (x) waive, in whole or in part, any
- -------- -------
obligation of MAE under the Modification Contract, (y) consent to any amendment
or modification to the terms of the Modification Contract or (z) take any other
action which would adversely affect Lessor without, in the case of (x), (y) and
(z), having first obtained the prior written consent of Lessor not to be
unreasonably withheld or delayed. The appointment contained in this Section
2.5(a) shall terminate automatically upon the occurrence of an Event of Default
hereunder.
(b) Certain Responsibilities. In addition to its obligations set
------------------------
forth above as Lessor's agent, Lessee shall, in connection with its appointment
as Lessor's agent, (1) at Lessor's request, provide to Lessor copies of any
progress reports prepared by MAE under the Modification Contract, (2) inform
Lessor promptly after the inspection and test flights described in Article VII
of the Modification Contract, and (3) take any other action reasonably requested
by Lessor.
(c) Indemnity. Lessee shall indemnify and hold harmless Lessor for
---------
any amounts in respect of which Lessor is
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required to indemnify MAE under the Modification Contract or damages suffered by
Lessor as a result of actions taken by Lessee as Lessor's agent pursuant to this
Section 2.5 except to the extent such damages are attributable to Lessor's gross
negligence or willful misconduct (other than any such gross negligence or
willful misconduct imputed to Lessor by law but attributable to acts or
omissions of Lessee, acting as agent of Lessor or otherwise).
(d) Enforcement of Modification Contract. So long as no Event of
-------------------------------------
Default shall have occurred and be continuing, Lessor hereby agrees that at the
request and election of Lessee, Lessor will either (1) if so directed by Lessee,
take such reasonable action as Lessee may request in order to enforce MAE's
obligations to Lessor under the Modification Contract (including enforcement of
specific performance remedies, if available) or (2) take all reasonable efforts
to enforce MAE's obligations to Lessor in respect of claims of Lessee arising
from a default by MAE thereunder to the extent that Lessee, after using
reasonable efforts, is unable to claim directly against MAE. In the event of a
Delay (as defined in the Modification Contract) that results in the delivery of
an Aircraft to Lessee being delayed by more than 210 days beyond the Scheduled
Date (as defined in the Modification Contract) therefor, Lessor may thereafter
commence remedies against MAE seeking the return of all Lessor-Supplied Parts
(as defined in the Modification Contract) which are owned and have been provided
by Lessee. Lessor agrees that it will not oppose any such efforts by Lessee to
seek the return of such Lessor-Supplied Parts; provided that (i) the foregoing
--------
shall not be construed in any manner as affecting Lessee's obligations to lease
the Aircraft and (ii) in the event that any such action results in MAE being
unable to comply with the requirements of Exhibit A to the Modification
Contract, Lessee shall be obligated to take or lease such Aircraft
notwithstanding the failure of MAE to satisfy such requirements of such Exhibit
A.
Section 3. Term and Rent.
-------------
3.1. Term. The Aircraft shall be leased hereunder for the Term; provided,
---- --------
however, that the Term of this Lease may be earlier terminated pursuant to the
- -------
provisions hereof.
3.2. Basic Rent. Lessee hereby agrees to pay to Lessor Basic Rent
----------
semiannually in arrears throughout the Term
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by paying to Lessor on each Lease Period Date the amount set forth in Schedule I
hereto (as such amounts may be adjusted pursuant to Section 3.4 below).
3.3. Supplemental Rent. Lessee also agrees to pay to Lessor, or to
------------------
whomsoever shall be entitled thereto, any and all Supplemental Rent when and as
the same shall become due and owing. Lessee shall also pay to Lessor, or to
whomsoever shall be entitled thereto, as Supplemental Rent, to the extent
permitted by applicable law, interest at the overdue Interest Rate on any part
of any installment of Basic Rent not paid when due for any period from the date
on which the same was due to but excluding the date of payment in full and on
any payment of Supplemental Rent not paid when due to Lessor, or to whosoever
shall be entitled thereto, as the case may be, for the period from and including
the date on which the same was due to but excluding the date of payment. The
expiration or other termination of Lessee's obligation to pay Basic Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent.
3.4. Adjustments to Basic Rent and Stipulated Loss Values. The Basic Rent
----------------------------------------------------
and Stipulated Loss Value payable hereunder will be adjusted as provided on the
Conversion Letter Agreement.
3.5. Payments. Payments of Rent and any and all other amounts payable to
--------
Lessor hereunder shall be paid in funds of the United States of America which
shall be immediately available prior to 1:00 p.m., New York time, on the date
due at Citibank, N.A., ABA #021-000-089, Account No.: 4052-9099, Reference:
Federal Express: 727 Lease, or as otherwise directed by Lessor in writing.
Except as otherwise expressly provided herein, whenever any payment of Rent or
other payment to be made hereunder shall be due on a day which is not a Business
Day, such payment shall be made on the next succeeding day which is a Business
Day. Any payments due and payable to either Lessor or Lessee upon termination or
expiration of the Term shall be paid within ten (10) days.
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Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain
Agreements of Lessee.
----------------------------------------------------------------
4.1. Representations and Warranties of Lessor.
----------------------------------------
Lessor warrants that:
(a) Trust Company for USL, Inc. is a corporation duly organized and
validly existing under the laws of Illinois, and this Lease has been executed by
an officer thereof who is duly authorized to do so in accordance with the terms
of the Trust Agreement.
(b) The Trust Agreement is in full force and effect and Lessor is
duly and properly authorized to execute and deliver this Lease under the Trust
Agreement.
(c) So long as Lessee shall not be in default under the terms and
provisions of this Lease, Lessor will not disturb, and will not permit anyone
claiming by, through or under Lessor to disturb, the Lessee's quiet, peaceful
use and enjoyment of the Aircraft.
4.2. DISCLAIMER. (i) THE AIRCRAFT, WHEN DELIVERED AND LEASED BY LESSOR TO
----------
LESSEE HEREUNDER, WILL BE LEASED "AS IS" AND "WHERE IS." LESSOR HAS NOT AND
SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER
THIS LEASE OR HAVING DONE OR FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO
ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS LEASE, AND LESSOR HEREBY
SPECIFICALLY DISCLAIMS, ANY GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE (EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE FOR A
PARTICULAR OR ANY PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL
OR WORKMANSHIP OF THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS
WHETHER OR NOT DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT OR AS TO ANY OTHER GUARANTY, REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT
LIMITATION ANY LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM
NEGLIGENCE, STRICT LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE OR DEALING OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE,
PROFIT, OR BUSINESS, OR OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES,
RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH
GUARANTY, REPRESENTATION OR WARRAN-
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TIES. NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY RESPONSIBILITY OR
LIABILITY TO LESSEE OR ANY OTHER PERSON, REGARDLESS OF ANY NEGLIGENCE (OTHER
THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS NOT ATTRIBUTABLE TO
ITS INTEREST IN THE AIRCRAFT) OF LESSOR OR ANY OTHER INDEMNITEE, AND LESSEE
HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS ANY RIGHTS OR REMEDIES, WITH
RESPECT TO (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR BY ANY INADEQUACY THEREOF OR
DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION
THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS
RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR
ANTICIPATED PROFITS OR DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (iv) THE
DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT
OF THE AIRCRAFT. WITHOUT LIMITING THE FOREGOING, THE WARRANTIES AND
REPRESENTATIONS EXPRESSLY SET FORTH BELOW IN THIS SECTION 4.2 ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO
THE AIRCRAFT, EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE
ANY OTHER IMPLIED WARRANTIES, OR GUARANTEES, INCLUDING BUT NOT LIMITED TO, ANY
IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, OR ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR OR ANY USE, EXCEPT THAT: Lessor represents and warrants
that, on the Delivery Date, Lessor shall have the right to lease the Aircraft
hereunder and the Aircraft shall be free of Lessor's Liens (disregarding for
this purpose the proviso to the definition thereof), other than the Lien of the
Trust Agreement; and Lessor covenants that thereafter Lessor shall not create,
incur, assume or suffer to exist any Lessor's Lien on the Aircraft, other than
the Lien of the Trust Agreement.
(ii) Modification of Other Warranties. None of the provisions of this
----------------------------------
Article 4 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, or any subcontractor or supplier of the
Lessee, 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 or
any such subcontractor or supplier 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 and the
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Lessee agree that the Lessor hereby assigns to the Lessee such rights as the
Lessor may have under any warranty, patent indemnity or service-life policy made
or given by the Lessee or any of its subcontractors or suppliers and any other
claims against the Lessee or any such subcontractor or supplier with respect to
the Aircraft; (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 for application to the cost of repair or correction
of any condition of the Aircraft which gave rise to such payment; and (iii) the
Lessee shall remit to the Lessor the excess of such payment over the amount so
used by the Lessee for repair, correction or reimbursement.
4.3. Lessee's Representations and Warranties. Lessee hereby makes the
------------------------------------------
following representations and warranties:
(a) Lessee is a corporation duly organized and validly existing in
good standing pursuant to the laws of the State of Delaware and is duly
qualified to do business as a foreign corporation in good standing in all
jurisdictions in which it has intrastate routes, or offices or major overhaul
facilities or in which other activities of the Lessee require such
qualification; is a "citizen of the United States" and an "air carrier" within
the meaning of the Federal Aviation Act operating under certificates issued
under Section 401 and Section 418 of such Act; holds all licenses, certificates,
per mits and franchises from the appropriate agencies of the United States of
America and/or all other governmental authorities having jurisdiction, material
to the oper ation of the routes flown by it and the conduct of its business and
operations as presently conducted; has its chief executive office (as such term
is defined in Article 9 of the Uniform Commercial Code) in Memphis, Tennessee;
and has the corporate power and authority to hold under lease the Aircraft and
to enter into and perform its obligations under the Operative Documents;
(b) the execution, delivery and performance by Lessee of the
Operative Documents to which Lessee is a party will, on the Delivery Date, have
been duly authorized by all necessary corporate action on the part of Lessee,
do not require any stockholder approval, or approval or consent of any trustee
or holders of any indebtedness or obligations of Lessee except such as
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have been duly obtained or by the Delivery Date will have been duly obtained,
and none of such Lessee Documents contravenes any law, judgment, government
rule, regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a default
under, or results in the creation of any Lien (other than Permitted Liens) upon
the property of Lessee under its certificate of incorporation or by-laws or any
indenture, mortgage, contract or other agreement to which Lessee is a party or
by which it or any of its properties may be bound or affected;
(c) neither the execution and delivery by Lessee of the operative
Documents to which Lessee is a party nor the performance by Lessee of its
obligations thereunder require the consent, approval or authorization of, the
giving of notice to, or the registration with, or the taking of any other action
in respect of any federal, state or foreign government authority or agency,
except for (A) the orders, permits, waivers, exemptions, authorizations and
approvals of the regulatory authorities having jurisdiction over the operation
of the Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained or will on or prior to the
Delivery Date be duly obtained, and will on the Delivery Date be in full force
and effect and (B) any normal periodic and other reporting requirements under
the applicable rules and regulations of the FAA to the extent required to be
given or obtained only after the Delivery Date;
(d) assuming due authorization, execution and delivery of the
Operative Documents by each party thereto other than the Lessee, the Operative
Documents will each constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the terms thereof;
(e) except as set forth in, and subject to, the opinion of counsel to
the Lessee referred to in Section 2.3 hereof, there is no pending or threatened
action or proceeding before any court or administrative agency which
individually (or in the aggregate in the case of any group of related lawsuits),
if adversely determined, is expected to have a material adverse effect on the
financial condition of Lessee or the ability of Lessee
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to perform its obligations under the Operative Documents;
(f) except for the filing for recording pursuant to the Act of the Lease
with the Lease Supplement covering the Aircraft, no further action, including
the giving of any notice or any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the Uniform
Commercial Code of any applicable jurisdiction), is necessary or advisable in
order to establish and perfect the Owner Trustee's title to and interest in the
Aircraft, as against the Lessee, as against any third parties in any applicable
jurisdictions in the United States;
(g) there has not occurred any event which constitutes a Lease Default
or a Lease Event of Default which is presently continuing;
(h) the statement of financial position of Lessee as of May 31, 1992 and
February 28, 1993 and the related statements of earnings and cash flow of Lessee
for the year and nine months then ended, copies of which have been furnished to
each owner Participant, fairly present the financial condition of Lessee as at
such dates and the results of operations and cash flow of Lessee for the periods
ended on such dates, in accordance with generally accepted accounting principles
consistently applied (except as may be stated in the notes thereto) and since
February 28, 1993, there has been no material adverse change in such condition
or operations, except for such matters timely disclosed in filings with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, by the Lessee, copies of which have been delivered to each Owner
Participant prior to the date hereof, or as disclosed in press releases issued
by the Lessee and copies of which have been delivered to each Owner Participant
prior to the date hereof, and except as noted in this paragraph (h), neither the
financial statements referred to in this paragraph (h) nor any other written
statement furnished to each Owner Participant, in either case in connection with
the transactions contemplated by the Operative Documents, by or on behalf of
Lessee or any Person authorized or employed by Lessee as agent, broker, dealer
or otherwise in connection with the negotiation of the transactions contemplated
by the Operative Docu-
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ments, contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading;
(i) no governmental approval of any kind is required of either Owner Parti-
cipant or Owner Trustee for their respective execution of or performance under
this Agreement or any agreement contemplated hereby solely by reason of any fact
or circumstance peculiar to (A) Lessee, (B) the nature of, or the proposed
conversion of, the Aircraft, or (C) Lessee's proposed operations or use of, or
the proposed conversion of, the Aircraft;
(j) all sales or use tax then due and for which Lessee is responsible pur-
suant to Section 4(a) of the Participation Agreement shall have been paid, other
than such taxes which are being contested by Lessee in good faith and by
appropriate proceedings (and for which Lessee shall have established adequate
reserves) so long as such proceedings do not involve any material risk of the
sale, forfeiture or loss of the Aircraft;
(k) Lessee is in compliance in all material respects with all laws, ordi-
nances or governmental rules and regulations to which Lessee is subject,
including, without limitation, the Act, the Occupational Safety and Health Act
of 1970, the Employee Retirement Income Security Act of 1974 and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which would
materially and adversely affect the properties, business, prospects, profits or
condition of the Lessee; and
(1) No "employee benefit plan" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by the Lessee or
any entity required to be aggregated with the Lessee under Section 414 (b) or
(c) of the Code (an "ERISA Affiliate") has incurred an "accumulated funding
deficiency" (within the meaning of the Employee Retirement Income Security Act
of 1974, as amended) and neither the Lessee nor any ERISA Affiliate of the
Lessee has incurred any material liability to the Pension Benefit Guaranty
Corporation.
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Section 5. Return of Aircraft.
------------------
5.1. General Condition upon Return. Unless an Event of Loss with respect to
-----------------------------
the Airframe shall have occurred, in which case Section 10.1 hereof shall apply,
upon the expiration of the Term for the Aircraft or termination of this Lease
with respect to the Aircraft, Lessee will return the Aircraft to Lessor by
delivering the same to Lake City Airport, Florida, or such other site in the
continental United States on Lessee's route system as shall be mutually agreed
between Lessee and Lessor. All costs and expenses associated with the return of
the Aircraft and compliance with this Section 5 shall be for the account of
Lessee, except as otherwise expressly provided herein. At the time of such
return, (i) Lessee will (unless Lessor at least 90 days prior to the return
hereunder has requested that Lessee retain the existing registration of the
Aircraft) cause the Aircraft, if it is not then so registered, to be registered
under the laws of the United States with the FAA in the name of the Lessor or
its designee; provided that Lessee shall be relieved of its obligations under
this sentence if such registration is prohibited by reason of the failure of
either Owner Participant, Lessor or Lessor's designee to be eligible on such
date to own an aircraft registered with the FAA, and (ii) the Airframe will be
fully equipped with the Engines (or Replacement Engines) installed thereon.
Also, at the time of such return, such Airframe and Engines or Replacement
Engines (A) shall be certified (or, if not then registered under the Act by
reason of the proviso to clause (i) in the preceding paragraph or because Lessor
has requested the retention of the existing registration of the Aircraft, shall
be eligible for certification) as an air worthy aircraft by the FAA, (B) shall
be free and clear of all Liens (other than Lessor Liens) and rights of third
parties under any arrangement including, but not limited to, pooling,
interchange, overhaul, repair or other similar agreements or arrangements, (C)
shall be in a regular configuration used by Lessee and in as good an operating
condition as when accepted by Lessee (as agent for the Lessor) under the
Modification Contract, ordinary wear and tear excepted, and otherwise in the
condition required to be maintained under Lessee's FAA-approved maintenance
plan, irrespective of whether such Airframe or Engines have been under Sublease
during the Term, and shall have had accomplished the ongoing corrosion
prevention procedures set forth in such maintenance plan, (D) in the event that
Lessee shall not then be using a
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continuous maintenance program with respect to the Airframe immediately prior to
such return but instead shall have been using a block overhaul program with
respect to the Airframe, then such block overhaul program shall have been
approved by all necessary governmental approvals of the country under the laws
of which the Aircraft shall then have been registered, (E) in the event that
Lessee during the period of operation of the Aircraft immediately prior to such
return shall not have been using an on condition maintenance program with
respect to the Engines (or Replacement Engines), Lessee agrees that the average
number of hours or cycles of operation (whichever shall be applicable under the
maintenance program then in use with respect to such Engines (or Replacement
Engines)), on such Engines (or Replacement Engines) remaining until the next
scheduled engine heavy maintenance or refurbishment shall be at least 25% of the
hours or cycles (whichever is applicable) between engine heavy maintenance or
refurbishment allowed under the FAA-approved maintenance program then in use
with respect to such engines (or Replacement Engines), (F) shall have all
exterior markings removed or painted over with the areas thereof refinished to
match adjacent areas, (G) shall be in a state of cleanliness suitable under
Lessee's normal service standards for operation in Lessee's service and (H)
shall at the time of such return have no deferred maintenance items and shall be
in compliance (without regard to permitted compliance extensions) with all
regulations, mandatory maintenance directives, Federal Air Regulations or other
instructions of the FAA or other United States governmental authorities having
jurisdiction in each case that are required with respect to the Aircraft prior
to the date of return of the Aircraft under this Section 5 and shall have no
airworthiness directives issued by the FAA requiring terminating action by the
date of return; and in all such cases the Aircraft shall not have been
discriminated against whether by reason of its leased status or otherwise in
maintenance, use, operation or in any other manner whatsoever.
If clause (E) above shall be applicable but the Engines (or Replacement
Engines) do not meet the conditions specified in said clause (E) , Lessee shall
pay or cause to be paid to Lessor a Dollar amount computed by multiplying (I)
125% of the direct cost to Lessee (based upon the direct cost to Lessee for
similar aircraft in the fleet of Lessee) during the preceding 12 months of
performing for an engine of the same model as the Engines (or Replacement
Engines) the scheduled engine heavy maintenance or refurbishment under the FAA-
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approved maintenance program then used by Lessee for engines of the same model
as the Engines (or Replacement Engines) (or in the event that Lessee has not
performed such a scheduled engine heavy maintenance or refurbishment during the
preceding 12 months, then the amount determined pursuant to this clause (I)
shall be equal to the fair market cost of the performance of such scheduled
engine heavy maintenance or refurbishment) by (II) a fraction of which (x) the
numerator shall be the excess of 25% of the hours or cycles (whichever is
applicable) of operation of one Engine between engine heavy maintenance or
refurbishment allowable under the FAA-approved maintenance program then in use
with respect to such Engines (or Replacement Engines) over the actual average
number of hours or cycles of operation on such Engines (or Replacement Engines)
remaining until the next such scheduled engine heavy maintenance or
refurbishment and (y) the denominator shall be the number of hours or cycles
allowable between the times permitted for such scheduled engine heavy
maintenance or refurbishment by (III) three.
During the last six months of the Term, with reasonable notice, Lessee
will cooperate, and cause any Sublessee to cooperate, at Lessor's sole cost, in
all reasonable respects with the efforts of Lessor to sell or lease the
Aircraft, including, without limitation, permitting prospective purchasers or
lessees to inspect the Aircraft and any records relating to the Aircraft then
required to be retained by the FAA or by the comparable government agency of the
country in which the Aircraft is registered, all in accordance with Section 12
hereof, provided that any such cooperation shall not interfere with the normal
--------
operation of the Aircraft by, or the business of, Lessee or any Sublessee.
5.2. Return of the Engines. In the event that a Replacement Engine shall
---------------------
be delivered With the returned Air frame as set forth in Section 5.1, Lessee,
concurrently with such delivery, will, at no cost to Lessor, furnish, or cause
to be furnished, to Lessor a full warranty (as to title) bill of sale with
respect to each such Replacement Engine, in form and substance reasonably
satisfactory to Lessor (together with an opinion of counsel (which may be
Lessee's General Counsel) to the effect that such full warranty bill of sale has
been duly authorized and delivered and is enforceable in accordance with its
terms and that such Replacement Engines are free and clear of all Liens other
than Lessor Liens (including for this purpose Liens that would be Lessor Liens
but for the proviso to the definition of Lessor
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Liens)), upon receipt from Lessor of a bill of sale evidencing the transfer,
without recourse or warranty (except as to the absence of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens)) by Lessor to Lessee or its designee of all
of Lessor's right, title and interest in and to any Engine not installed on the
Airframe at the time of the return of the Airframe.
5.3. Fuel; Manuals. Upon the return of the Aircraft upon any termination of
-------------
this Lease in accordance with Section 5.1, (i) Lessor shall have no obligation
with respect to the fuel or oil contained in the fuel or oil tanks of such
Aircraft, and (ii) Lessee shall deliver or cause to be delivered to Lessor all
logs, manuals and data and inspection, modification and overhaul records
required to be maintained with respect thereto under applicable rules and
regulations of each country under the laws of which the Aircraft has been
registered during the period of operation thereof.
5.4. Storage Upon Return. If, at least 15 days prior to termination
---------------------
of this Lease at the end of the Term or pursuant to Section 15, Lessee receives
from Lessor a written request for storage of the Aircraft upon its return
hereunder, Lessee will provide Lessor, or cause Lessor to be provided, with
storage facilities for the Aircraft (at Lessor's risk and at Lessor's cost for
insurance, maintenance, and Lessee's out-of-pocket expenses) for a period not
exceeding 45 days (or, if a Lease Default or a Lease Event of Default shall be
continuing at the time of Lessor's request for storage, 90 days) commencing on
the date of such termination, at a location in the continental United States
selected by Lessee (or, if a Lease Default or a Lease Event of Default shall be
continuing at the time of Lessor's request for storage, selected by Lessor) used
as a location for the parking or storage of aircraft. Lessee shall, at Lessor's
written request, maintain insurance (if available) for the Aircraft during such
period not exceeding sixty days (or, if a Lease Default or a Lease Event of
Default shall be continuing at the time of Lessor's request for storage, 120
days) and shall be reimbursed by Lessor for the premiums thereon.
5.5. Severable Parts. At any time during the last 120 days of the Term or
---------------
if the Aircraft is otherwise to be returned to Lessor, Lessee shall, at Lessor's
request, advise Lessor of the nature and condition of all severable nonpro-
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prietary Parts owned by Lessee which have been used by Lessee during the prior
six months and which Lessee has or intends to remove from the Aircraft in
accordance with Section 8 hereof. Lessor may, at its option, upon 30 days notice
to Lessee, purchase any or all of such nonproprietary Parts from Lessee upon the
expiration of the Term or upon such return at their then fair market value.
5.6. Failure to Return Aircraft or Engines. If Lessee shall, for any
--------------------------------------
reason whatsoever, fail to return the Aircraft or any Engine at the time
specified herein, the obligations of Lessee as provided in this Lease shall
continue in effect with respect to the Aircraft or such Engine until such
Aircraft or such Engine is returned to Lessor; but this Section 5.6 shall not be
construed as permitting Lessee to fail to meet its obligations to return the
Aircraft or such Engine in accordance with the requirements of this Lease or
constitute a waiver of a Lease Default or Lease Event of Default.
Section 6. Liens.
-----
Lessee will not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to the Aircraft, Airframe or Engines, title
thereto or any interest therein or in this Lease, except (i) the respective
rights of Lessor as owner of the Aircraft and Lessee as herein provided
(including any Sublease permitted pursuant to Section 7.2 hereof) and any other
rights existing pursuant to the Operative Documents, (ii) Lessor Liens
(including for the purposes of this Section 6 Liens that would be Lessor Liens
but for the proviso to the definition of Lessor Liens) , (iii) Liens for Taxes
of Lessee (or any Sublessee) either not yet due or being contested in good faith
by appropriate proceed ing so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein, (iv) materialmen's, mechanics', workmen's, repairmen's,
employees', or other like liens arising in the ordinary course of Lessee's or
any Sublessee's business securing obligations that are not overdue for a period
of more than 30 days or are being contested in good faith by appropriate
proceedings so long as during such 30 day period there is not, or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
the Airframe or any Engine or any interest therein, (v) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless the judgment secured
shall not, within 30 days after
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the entry thereof, have been discharged, vacated, reversed or execution thereof
stayed pending appeal or shall not have been discharged, vacated or reversed
within 30 days after the expiration of such stay, (vi) Liens permitted by
Section 22 hereof, and (vii) any Lien with respect to which Lessee (or any
Sublessee) shall have provided a bond or other security in an amount and under
terms reasonably satisfactory to Lessor. Lessee will promptly, at its own
expense, take (or cause to be taken) such actions as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any time.
Section 7. Registration, Operation, Possession, Sub-leasing and Records.
------------------------------------------------------------
7.1. Registration and Operation.
--------------------------
(a) Registration. Lessee, at its own cost and expense, shall (and shall
------------
cause any Sublessee to) cause the Aircraft to remain duly registered in the name
of Lessor under the Federal Aviation Action Act (except as otherwise required by
applicable law or to the extent that such registration cannot be effected
because of Lessor's or an Owner Participant's failure to comply with the
citizenship or other eligibility requirements for registration of aircraft under
such Act) at all times during the Term; provided that Lessor and the Owner
--------
Participant shall execute and deliver all such documents as Lessee (or any
Sublessee) may reasonably request for the purpose of effecting and continuing
such registration. Notwithstanding the foregoing, at any time after the fifth
anniversary of the Commencement Date, subject to compliance with the terms of
Section 5(b) of the Participation Agreement, Lessor shall, at the request and
sole expense of Lessee, cooperate with Lessee and take all action requested by
Lessee to change the country of registration of the Aircraft to another country.
(b) Nameplate. Lessor agrees to affix and Lessee agrees to maintain in
---------
the cockpit of the Aircraft and on each Engine in a clearly visible location, a
nameplate bearing the following legend: "Owned by Trust Company for USL, Inc.,
as Owner Trustee, Owner and Lessor, or such other legend as may be required by
Lessor.
(c) Compliance with Laws. Lessee agrees that it will not use or operate the
--------------------
Aircraft, Airframe or any Engine in violation of any law or any rule, regulation
or
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order of the FAA or any federal, state or foreign governmental authority having
jurisdiction or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, Airframe or any Engine issued by any such
authority. In the event that such law, rule, regulation, treaty, order or
certificate requires alteration of the Aircraft, the Lessee will conform thereto
or obtain conformance therewith at no expense to Lessor. Notwithstanding the
foregoing, after Lessee shall have provided Lessor with a certificate of its
President or any operating Vice President or the Treasurer or any Assistant
Treasurer stating all relevant facts with respect thereto, Lessee or any
Sublessee may contest in good faith the validity or application of any such law,
rule, regulation, treaty, order, certificate, license, registration or violation
in any reasonable manner which does not materially adversely affect the Lessor
or any Owner Participant or any of their respective legal and economic interests
in or to the Aircraft or the Lease. In addition, no contest with respect to the
Aircraft shall continue beyond the Term and Lessee shall comply with the
provisions of Sections 5 and 11 hereof and the other provisions of this Section
7 notwithstanding such contest; provided, that Lessee or such Sublessee may
continue such contest beyond the Term unless Lessor or either Owner Participant
shall reasonably determine that it would be adversely affected by the
continuation of such contest beyond the Term.
(d) Operation; Insurance Requirements. Lessee agrees not to operate,
-----------------------------------
use or locate the Aircraft, Airframe or any Engine, or suffer the Aircraft,
Airframe or any Engine to be operated, used or located, (i) in any area excluded
from coverage by the insurance required by the terms of Section 11, or (ii) in
any recognized or threatened area of hostilities unless fully covered by
war-risk insurance satisfying the terms of Section 11, or (iii) in any country
with which the United States does not maintain normal diplomatic relations.
7.2. Possession and Subleases. Lessee will not, without the prior written
------------------------
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the airframe; provided, that
--------
so long as no Lease Default or Lease Event of Default shall have occurred and be
continuing at the time of such sublease, delivery, transfer or relinquishment of
possession or installation, and so long as any Sublessee
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shall continue to comply with the provisions of Sections 7.1 and 11 hereof,
Lessee may, without the prior written consent of Lessor:
(i) subject the Engines or engines then installed on the Airframe to
normal interchange agreements or any Engine to normal pooling or similar
arrangements, in each case customary in the airline industry and entered
into by Lessee (or any Sublessee) in the ordinary course of its business;
provided, that if Lessor's title to any Engine shall be divested under any
--------
such agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect to such Engine and Lessee shall (or shall cause
Sublessee to) comply with Section 10.2 hereof in respect thereof;
(ii) deliver possession of the Airframe or any Engine to the manu-
facturer thereof or to any other Person for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any Part of any
thereof or for alterations or modifications in or additions to such
Airframe or Engine to the extent required or permitted by the terms of
Section 8.4 hereof;
(iii) install an Engine on an airframe owned by Lessee (or any
Sublessee) which airframe is free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of third
parties under interchange agreements which would be permitted under
subparagraph (i) of this Section 7.2; provided, that Lessor's title to such
--------
Engine shall not be divested as a result thereof, and (C) mortgage Liens or
other security interests; provided, that (as regards this clause (C)), such
--------
mortgage Liens or other security interests effectively provide that such
Engine shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other secu-
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rity agreement; provided, that (A) such airframe is free and clear of all
--------
Liens, except: (1) the right of the parties to the lease or conditional
sale or other security agreement covering such airframe, or their
assignees, and (2) Liens of the type permitted by subparagraph (iii) of
this Section 7.2 and (B) such lease, conditional sale or other security
agreement effectively provides that such Engine shall not become subject to
the lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by Lessee (or
any Sublessee) subject to a conditional sale or other security agreement
under circumstances where neither subparagraph (iii) nor subparagraph (iv)
of this Section 7.2 is applicable; provided, that such installation shall
--------
be deemed an Event of Loss with respect to such Engine and Lessee shall (or
shall cause any Sublessee to) comply with Section 10.2 hereof in respect
thereof, Lessor not intending hereby to waive any right or interest it may
have to or in such Engine under applicable law until compliance by Lessee
with such Section 10.2;
(vi) transfer (or permit any Sublessee to transfer) possession of the
Airframe or any Engine to the Government pursuant to the Civil Reserve Air
Fleet Program for a period, including all permissible renewal periods, that
does not extend beyond the end of the Term so long as Lessee (or any
Sublessee) shall promptly notify Lessor upon transferring possession of the
Airframe or any Engine to the Government pursuant to the Civil Reserve Air
Fleet Program, 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 such Renewal Term, as applicable, shall be automatically
extended (including the obligation to pay Rent at the rate then applicable)
for a period of six (6) months thereafter;
(vii) transfer possession of the Airframe or any Engine to the
Government pursuant to a contract, a copy of which shall be provided to
Lessor, provided that the term of such contract, including all permissible
renewal
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periods, shall not continue beyond the end of the Term; or
(viii) so long as the Sublessee is not subject to a proceeding or
final order under applicable bankruptcy, insolvency or reorganization laws
on the date the sublease is entered into, Lessee may, at any time (subject
to the notice requirements specified in the second to last paragraph of
this Section 7.2), in its sole discretion, enter into a sublease with (A) a
U.S. Air Carrier, (B) after the fifth anniversary of the Commencement Date,
any Permitted Sublessee or (C) any other Person approved in writing by each
owner Participant, which approval shall not be unreasonably withheld;
provided, however, that:
-------- -------
(1) no Sublease, including all permissible renewal periods,
entered into pursuant to this subparagraph (viii), shall extend beyond
the date three months prior to the expiration of the Basic Term or any
Renewal Term then in effect, unless Lessee shall have irrevocably
committed to purchase the Aircraft or renew this Lease at the end of
the Basic Term or Renewal Term, as the case may be, to a date at least
three months beyond the latest permissible expiration date of such
sublease;
(2) each Sublease, including all permissible renewal periods,
entered into pursuant to this subparagraph (viii) shall provide that
(i) the Sublessee may not operate the Aircraft (A) in countries with
which the United States does not maintain diplomatic relations or (B)
in areas of armed hostilities, and (ii) the Sublease shall terminate
if the Subleases's country of domicile and the United States terminate
normal diplomatic relations; and
(3) no Sublease, including all permissible renewal periods,
entered into pursuant to this subparagraph (viii) shall be made to a
Person described in clause (C) of this subparagraph (viii) which is
not domiciled in a country listed in Exhibit D, as in effect from time
to time, unless Lessor and each Owner Participant shall have received
reasonably satisfactory assurances
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regarding the protection of the rights of lessors under the laws of
such Person's jurisdiction and domicile, including a favorable opinion
of counsel (which counsel and opinion are reasonably satisfactory to
Lessor and each Owner Participant) in such jurisdiction (a) that the
terms (including, without limitation, the governing-law,
service-of-process and jurisdictional-submission provisions thereof)
of the Sublease and the Lease are legal, valid, binding and
enforceable in such jurisdiction against third parties to,
substantially the same extent as in the United States, and that the
Sublease is subject and subordinate to the Lease, (b) that it is not
necessary for the Owner Trustee or either Owner Participant to
register or qualify to do business in such jurisdiction, (c) that
there is no tort liability of the owner of an aircraft not in
possession thereof under the laws of such jurisdiction (it being
understood that, in the event such latter opinion cannot be given in a
form satisfactory to the Lessor and each Owner Participant, such
opinion shall be waived if insurance reasonably satisfactory to
Lessor, each Owner Participant and the Owner Trustee in its individual
capacity is available to cover such risk and is provided by Lessee or
the Sublessee), (d) unless Lessee shall have provided insurance
reasonably satisfactory to Lessor and each Owner Participant covering
the risk of requisition of use of the Aircraft by the government of
such jurisdiction so long as the Aircraft is subleased, that the laws
of such jurisdiction require fair compensation by the government of
such jurisdiction payable in a currency freely convertible into
Dollars for the loss of use of the Aircraft in the event of the
requisition by such government of such use, (e) that there exist no
possessory rights in favor of such Sublessee under the laws of such
jurisdiction which would, upon bankruptcy of Lessee or other default
by Lessee or Sublessee, prevent the return of the Aircraft to Lessor
in accordance with and where permitted by the terms of Sections 14 and
15 hereof upon the exercise by Lessor of its remedies under Section 15
hereof and the practical realization by Lessor of its rights and
benefits under Section 15, and (f) to such further effect
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with respect to such other matters as Lessor or either Owner
Participant may reasonably request or unless the Lessor and each Owner
Participant shall otherwise approve. Upon receipt of the foregoing
opinion of counsel by Lessor and each Owner Participant, Exhibit D
shall be amended to add such country. If at any time Lessor or either
Owner Participant determines (which determination shall be evidenced
by an opinion of counsel) with respect to a country then listed on
Exhibit D, that the opinion of counsel referred to in this subclause
(3) would not be obtainable or that the United States does not
maintain normal diplomatic relations with such country, Exhibit D
shall be amended to delete such country; provided, that such deletion
--------
will not impair any Sublease or any interchange agreement or pooling
or similar arrangement then in effect. If the Aircraft shall be
subject to a Sublease at any time within the last four months of the
Term, the Aircraft shall be returned to Lessee's active fleet upon the
expiration of such Sublease.
The rights of any Sublessee or other transferee who receives possession by
reason of a transfer permitted by this Section 7.2 (other than the transfer of
an engine which is deemed an Event of Loss) shall be subject and subordinate to,
and any Sublease permitted by this Section 7.2 shall be made expressly subject
and subordinate to, all the terms of this Lease, including, without limitation,
the covenants contained in Section 7.1 hereof and Lessor's rights to
repossession pursuant to Section 15 hereof and to void such Sublease upon such
repossession, and Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease, and the terms of any such
Sublease shall not permit any Sublessee to take any action not permitted to be
taken by Lessee or such Sublessee in this Lease with respect to the Aircraft. No
pooling agreement, sublease or other relinquishment of possession of the
Airframe or any Engine shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or constitute a waiver of Lessor's rights or
remedies hereunder. Lessor agrees, for the benefit of Lessee (and any Sublessee)
and for the benefit of any mortgagee or other holder of a security interest in
any engine owned by Lessee (or any Sublessee), any lessor of any engine leased
to Lessee (or any Sublessee) and any conditional vendor of any engine purchased
by Lessee (or any Sublessee)
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subject to a conditional sale agreement or any other security agreement, that no
interest shall be created hereunder in any engine so owned, leased or purchased
and that neither Lessor nor its successors or assigns will acquire or claim, as
against Lessee (or any Sublessee) or any such mortgagee, lessor or conditional
vendor or other holder of a security interest or any successor or assignee of
any thereof, any right, title or interest in such engine as the result of such
engine being installed on the Airframe; provided, however, that such agreement
-------- -------
of Lessor shall not be for the benefit of any lessor or secured party of any
airframe leased to Lessee (or any Sublessee) or purchased by Lessee (or any
Sublessee) subject to a conditional sale or other security agreement or for the
benefit of any mortgagee of or any other holder of a security interest in an
airframe owned by Lessee (or any Sublessee), unless such lessor, conditional
vendor, other secured party or mortgagee has expressly agreed (which agreement
may be contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as against
Lessor, any right, title or interest in an Engine as a result of such Engine
being installed on such airframe. Lessee shall provide each Owner Participant
written notice and a copy of any Sublease hereunder which has a term of more
than three (3) months (such notice to be given in any event promptly after
entering into such Sublease).
Lessor acknowledges that any Wet Lease or similar arrangement under which
Lessee maintains operational control of the Aircraft shall not constitute a
delivery, transfer or relinquishment of possession for purposes of this Section
7.2, provided that any Wet Lease entered into by a Sublessee shall comply with
--------
the restrictions that would otherwise be applicable under this Section 7.2 if
such Wet Lease were a Sublease. Lessor acknowledges that any consolidation or
merger of Lessee or conveyance, transfer or lease of all or substantially all of
Lessee's assets permitted hereunder shall not be prohibited by this Section 7.2.
7.3. Records and Reports. Lessee shall:
-------------------
(a) Records. Maintain or cause to be maintained in English all
-------
records, logs and other materials generally required by the FAA and any
other governmental authority having jurisdiction to be maintained in
respect of the Aircraft, the Airframe and each Engine; and
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(b) Information and Reports. Promptly furnish or cause to be furnished
-----------------------
to Lessor such information as may be required to enable Lessor to file any
reports, including tax returns, required to be filed by Lessor with any
governmental authority because of Lessor's ownership of the Aircraft,
Airframe or any Engine or because of receipt of Rent.
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations,
-----------------------------------------------------------
Modifications and Additions.
---------------------------
8.1. Maintenance. Lessee shall maintain, service, repair, overhaul,
-----------
alter, modify, add to and test or cause to be maintained, serviced, repaired,
overhauled, altered, modified, added to and tested the Aircraft, the Airframe
and each Engine, and each other engine installed from time to time on the
Airframe; in accordance with Lessee's or the Sublessee's maintenance program for
the Aircraft, Airframe and engines approved by the FAA or the applicable
regulatory agency or body of any other jurisdiction in which the Aircraft may
then be registered (the "Maintenance Program"), so as to keep the Aircraft, the
Airframe and each Engine in as good operating condition as when accepted by
Lessee under the Modification Contract, ordinary wear and tear excepted, in the
same manner as used by Lessee or the Sublessee with similar aircraft owned or
operated by Lessee or the Sublessee and so as to keep the Aircraft in such
operating condition as may be necessary to enable the airworthiness certificate
for the Aircraft to be maintained in good standing at all times under the
applicable rules and regulations of the FAA and any other applicable law. Lessee
will comply or cause Sublessee to comply with all service, inspection,
maintenance, repair and overhaul regulations, directions and instruments which
are made mandatory by the FAA or any other governmental authority upon operation
of Boeing 727 aircraft and/or Pratt & Whitney JT8D-15A engines. Lessee further
agrees that the Aircraft, Airframe and Engines will be maintained in compliance
with all laws, rules, regulations and orders of each government or governmental
authority having jurisdiction over the maintenance of the Aircraft and in
compliance with each applicable airworthiness certificate, license and
registration relating to the Aircraft, Airframe or any Engine issued by any
such authority.
8.2. Replacement of Parts. Lessee, at its sole cost and expense, will
--------------------
promptly replace or cause the replace-
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ment of all Parts which may from time to time be incorporated in the Aircraft,
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. In addition, Lessee may remove in the
ordinary course of maintenance, service, repair, overhaul or testing any Parts
as permitted by Section 8.1, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use; provided, however, Lessee, at its own cost and expense, will replace such
-------- -------
Parts as promptly as possible. All replacement Parts shall be free and clear of
all Liens (except for Permitted Liens) and shall be in good operating condition
and have a value and utility at least equal to the Parts replaced assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof. All Parts at any time removed from the Aircraft, Airframe or any
Engine shall remain the property of Lessor no matter where located, until such
time as such Parts shall be replaced by Parts which have been incorporated in
the Aircraft, Airframe or such Engine and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated in the Aircraft, Airframe or such Engine as above
provided, without further act, (i) title to the replaced Part shall thereupon
vest in Lessee free and clear of all rights of Lessor and the replaced Part
shall no longer be deemed a Part hereunder, (ii) title to such replacement Part
shall thereupon vest in Lessor (subject only to Permitted Liens), and (iii) such
replacement Part shall become subject to this Lease and be deemed part of an
Aircraft, Airframe or such Engine for all purposes hereof to the same extent as
the Parts originally incorporated in such Aircraft, Airframe or Engine.
8.3. Pooling of Parts. Any Part removed from the Aircraft, Airframe or
----------------
any Engine as provided in Section 8.2 may be subjected by Lessee to a normal
pooling arrangement customary in the U. S. commercial airline industry entered
into in the ordinary course of business of Lessee or Sublessee, so long as a
Part replacing such removed Part shall be incorporated in such Aircraft,
Airframe or Engine in accordance with Section 8.2 as promptly as possible after
the removal of such removed Part. In addition, any replacement Part when
incorporated in such Aircraft, Airframe or such Engine in accordance with
Section 8.2 may be owned by any air carrier subject to such a normal pooling
arrangement, so long as Lessee, as promptly thereafter as reasonably possible,
either
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(i) causes title to such replacement Part to vest in Lessor in accordance with
Section 8.2 by Lessee acquiring title thereto for the benefit of, and
transferring such title to, Lessor free and clear of all Liens (except Permitted
Liens), or (ii) replaces such replacement Part by incorporating in the Aircraft,
Airframe or such Engine a further replacement Part owned by Lessee free and
clear of all Liens (except Permitted Liens) and by causing title to such further
replacement Part to vest in Lessor in accordance with Section 8.2.
8.4. Alterations, Modifications and Additions. Lessee shall make or cause
-----------------------------------------
to be made, at its own expense, such alterations and modifications in and
additions to each Aircraft, Airframe and Engine as may be required from time to
time to meet the standards of the FAA or other governmental authority (domestic
or foreign) having jurisdiction and to enable the airworthiness certificate for
the Aircraft to be maintained in good standing at all times under the applicable
rules and regulations of the FAA and any other governmental authority having
jurisdiction. In addition, upon written consent of Lessor, Lessee, at it own
cost and expense, may, from time to time make such alterations and modifications
in and additions to the Aircraft, Airframe or any Engine as Lessee may deem
desirable in the proper conduct of its business, including without limitation,
removal of Parts which Lessee deems obsolete or no longer suitable or
appropriate for use in the Aircraft, Airframe or such Engine (such parts,
"Obsolete Parts"); provided, however, that no such alteration, modification or
-------- -------
addition shall materially diminish the value or utility of the Aircraft,
Airframe or such Engine, or impair the airworthiness thereof, below the value,
utility, and airworthiness thereof immediately prior to such alteration,
modification or addition assuming the Aircraft, Airframe or such Engine was
then of the value or utility and in the condition required to be maintained by
the terms of this Lease except that the value (but not the utility, condition or
airworthiness) of the Airframe or any Engine may be reduced by the value of
Obsolete Parts which shall have been removed so long as the aggregate original
cost of all Obsolete Parts which shall have been removed and not replaced shall
not exceed $300,000; provided further, that any value received by Lessee in
-----------------
respect of the sale or use of such Obsolete Parts shall be paid to Lessor on a
net after-tax basis. Title to all Parts on the Aircraft, Airframe or Engine as
the result of such alteration, modification or addition shall, without further
act, vest in Lessor. Notwithstanding the foregoing sentence of this Section
8.4, so long
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as no Lease Default under Sections 14 (a) , (b) , (h) or (i) hereof or Lease
Event of Default shall have occurred and be continuing, lessee may, at any time
during the Term, remove any Part if (i) such Part is in addition to, and not in
replacement of or substitution for, any Part originally incorporated in any
Aircraft, Airframe or Engine at the time of delivery thereof hereunder or any
Part in replacement of or substitution for any such Part, (ii) such Part is not
required to be incorporated in such Aircraft, Airframe or Engine pursuant to the
terms of this Section 8, and (iii) such Part can be removed from such Aircraft,
Airframe or Engine without diminishing or impairing the value or airworthiness
required to be maintained by the terms of this Lease which the Aircraft,
Airframe or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal by Lessee of any Part as
above provided, title thereto shall, without further act, vest in Lessee and
such Part shall no longer be deemed part of such Aircraft, Airframe or Engine
from which it was removed. Any Part not removed by Lessee as above provided
prior to the return of such Aircraft, Airframe or Engine to Lessor hereunder
shall remain the property of Lessor. Lessee hereby grants to Lessor a perpetual,
non-exclusive, royalty free license in any supplemental type certificates
relating to any of the alterations, modifications or additions performed, being
performed or to be performed on the Aircraft and which are necessary or
desirable for the operation of the Aircraft, effective on the earlier of (i) the
Redelivery Date as such term is defined in the Modification Contract or (ii) the
date upon which there shall have occurred a Lease Event of Default.
Section 9. Renewal Options; Purchase options.
----------------------------------
(a) Renewal Options. Subject to the provisions set forth herein, and
----------------
so long as no Lease Default or Lease Event of Default has occurred and is
continuing, upon the expiration of the Basic Term, Lessee shall have the right
to extend this Lease for one six month term (the "Initial Renewal Term") and,
thereafter, four successive one (1) year terms (the Initial Renewal Term and
each such successive term being hereinafter referred to as a "Renewal Term").
The Initial Renewal Term will commence at the end of the Basic Term and each
Renewal Term subsequent to the Initial Renewal Term shall commence at the end of
the preceding Renewal Term. The rental payable during any Renewal Term shall be
(i) for the Initial Renewal Term, the then applicable Basic Rent
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payable under this Lease, and (ii) for each of the remaining Renewal Terms, the
then Fair Market Rental Value for the Aircraft. Such rental during each Renewal
Term shall be payable semi-annually in arrears. The Stipulated Loss Value of the
Aircraft during each Renewal Term shall be equal to the Fair Market Sales Value
thereof at the commencement of such Renewal Term.
(b) Purchase Options. So long as no Lease Default or Lease Event of
-----------------
Default has occurred and is continuing, Lessee shall have the option to purchase
the Aircraft at the end of the Basic Term or any Renewal Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft as of such date. Upon
the payment by Lessee of the purchase price for the Aircraft, Lessor shall
convey to Lessee all right, title and interest of Lessor in and to the Aircraft
on an "as-is, where is" basis, without recourse or warranty except a warranty
against Lessor's Liens.
(c) Notice of Purchase or Renewal. In order to exercise any renewal option
-----------------------------
under Section 9(a) or any purchase option under Section 9(b), Lessee shall be
required to give not less than 180 days (or, in the case of any such notice
delivered during the Initial Renewal Term, 120 days), prior written notice to
Lessor, which notice shall be irrevocable. Not less than 120 days prior to the
date on which such renewal option or purchase option will be exercised, Lessee
shall give written notice to Lessor identifying the option to be exercised.
Notwithstanding the foregoing, in the event that Lessee is contesting the
validity or application of any law, rule, regulation, order, or registration
which relates to the Aircraft or Lessee's obligations under any Operative
Document, and Lessee has delivered to Lessor not less than 90 days prior to the
end of the Basic Term or Renewal Term, as the case may be, a certificate of a
duly authorized officer to the effect that it is reasonable to assume that such
contest may continue beyond such Basic Term or Renewal Term, then Lessee shall
be entitled to exercise any of the options available to it pursuant to Section
9(a) or 9(b) hereof by giving written notice to Lessor not less than 90 days
prior to the end of such Basic Term or Renewal Term, which notice shall be
irrevocable. If Lessee fails to exercise any renewal option under Section 9(a)
or any purchase option under Section 9(b) in accordance with the provisions of
this paragraph, all of Lessee's rights to extend the term hereof or to purchase
the Aircraft expire.
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Section 10. Loss Destruction. Requisition. Etc.
-----------------------------------
10.1. Event of Loss with Respect to Airframe. Upon the occurrence of an
--------------------------------------
Event of Loss with respect to the Aircraft, Lessee shall give Lessor prompt
written notice thereof and on or before the Business Day next preceding the
earlier of (i) the 31st day following the date of the occurrence of such Event
of Loss and (ii) five days following the receipt of insurance proceeds with
respect to such occurrence, Lessee shall pay to Lessor (A) the Stipulated Loss
Value for the Aircraft, determined as of Stipulated Loss Value Date immediately
following such date, together with interest thereon at the Overdue Rate from and
including the date of occurrence of such Event of Loss to but excluding the
payment date and (B) any other Rent which is due and payable through and
including the date of the occurrence of such Event of Loss (not including any
Basic Rent payable on or after or attributable to periods after the date of the
occurrence of such Event of Loss but including any unpaid installments of Basic
Rent due prior to such date of the occurrence of such Event of Loss and all Rent
attributable to the period from the Lease Period Date immediately preceding the
date of payment to such date of payment. In the event of payment in full of the
Stipulated Loss Value for such Aircraft pursuant to this Section 10.1 and all
other Rent and amounts then due and payable hereunder by Lessee, the obligation
of Lessee to pay Basic Rent hereunder with respect to such Aircraft for any
period commencing after the date of such payment of Stipulated Loss Value shall
terminate (but Lessee shall remain liable for all payments of Rent, including
Basic Rent for such Aircraft, due or accrued through and including the date of
such payment of Stipulated Loss Value), the Term fox such Aircraft shall end,
and Lessor will transfer the Aircraft to Lessee on an "as-is, where-is" basis,
free and clear of Lessor Liens, but otherwise without recourse, representation
or warranty, express or implied.
10.2. Event of Loss with Respect to an Engine.
---------------------------------------
(a) Event of Loss. 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 an Airframe, Lessee shall give Lessor prompt written notice
(and in any event within three days after such occurrence) thereof and shall, as
promptly as possible and in any event within 60 days after the occurrence of
such Event of Loss, convey or cause to be conveyed to Lessor as replacement for
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the Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear of all Liens, other than Permitted Liens, and
having a value and utility at least equal to 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 hereof immediately prior
to the occurrence of such Event of Loss.
(b) Conditions; Lessee's Obligations. Prior to or at the time of any
----------------------------------
such Conveyance, Lessee will promptly (all writings referred to below to be
reasonably satisfactory in form and substance to Lessor):
(i) furnish owner with a full warranty bill of sale duly conveying to
Lessor each Replacement Engine together with such evidence of title as
Lessor may reasonably request;
(ii) cause a Lease Supplement subjecting each such Replacement Engine
to this Lease, duly executed by Lessee, to be delivered to Lessor for
execution and, upon such execution, to be filed for recordation;
(iii) furnish Lessor with such evidence of compliance with the
insurance provisions of Section 11 with respect to each such Replacement
Engine as may be reasonably requested; and
(iv) furnish the documentation required to be provided pursuant to
Section 6 of the Participation Agreement and such other certificates or
documents to effect such replacement as Lessor may reasonably request.
(c) Recordation and Opinions. In the case of any Replacement Engine con-
------------------------
veyed under this Section 10.2, promptly upon the recordation of the Lease
Supplement covering such Replacement Engine pursuant to the Act, Lessee will
cause to be delivered to Lessor an opinion of counsel experienced in federal
aviation matters and reasonably satisfactory to Lessor as to the due recordation
of such Lease Supplement as Lessor may require.
(d) Conveyance; Replacement Engine. Upon full compliance by Lessee with the
------------------------------
terms of this Section 10.2,
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Lessor will transfer the Engine with respect to which such Event of Loss
occurred to Lessee on an "as-is, where-is" basis, free and clear of Lessor
Liens, but otherwise without recourse, representation or warranty, express or
implied.
(e) No Reduction of Basic Rent. No Event of Loss with respect to an
----------------------------
Engine under the circumstances contemplated by the terms of this Section 10.2
shall result in any reduction of Basic Rent.
10.3. Application of Payments from Governmental Authorities for Requisition
---------------------------------------------------------------------
of Title. Any payments received at any time by Lessor or Lessee from any
- --------
governmental authority or other Person with respect to any Event of Loss, other
than a requisition for use by the Government not constituting an Event of Loss,
will be applied as follows:
(a) Replacement of Engine. If such payments are received with respect
---------------------
to an Engine that has been or is being replaced by Lessee pursuant to
Section 10.2, so much of such payments remaining after reimbursement of
Lessor for reasonable out-of-pocket costs and expenses shall be paid over
to, or retained by, Lessee, provided Lessee shall have fully performed or,
concurrently therewith, is fully performing the terms of Section 10.2 with
respect to the Event of Loss for which such payments are made.
(b) Nonreplacement. If such payments are received with respect to an
--------------
Airframe and Engines installed thereon, if any, that has not or have not
been and will not be replaced, so much of such payments remaining after
reimbursement of Lessor for reasonable costs and expenses shall be applied
in reduction of Lessee's obligation to pay Stipulated Loss Value and other
amounts required to be paid by Lessee hereunder, if not already paid by
Lessee, or, if already paid by Lessee, shall be applied to reimburse Lessee
for its payment of such Stipulated Loss Value and other amounts. The
balance, if any, of such payment remaining thereafter shall be paid to
Lessee.
10.4. Application of Payments During Existence of Default. Any amount
-----------------------------------------------------
referred to in this Section 10 which is payable or creditable to or retainable
by Lessee shall not be paid or credited to or retained by Lessee if, at the
time of such payment, credit or retention, a Lease Default or Lease Event of
Default shall have occurred and be continuing hereunder but shall be paid to and
held by Lessor as security for
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the obligations of Lessee under this Lease and, if Lessor declares this Lease to
be in default pursuant to Section 15 or it shall otherwise become in default in
accordance with its terms, applied against Lessee's obligations hereunder as and
when due and at such time as there shall not be continuing any such Lease
Default or Lease Event of Default, such amount shall be paid to Lessee to the
extent not previously applied in accordance with the preceding sentence.
Section 11. Insurance. (a) Public Liability and Property Damage Insurance.
--------- ----------------------------------------------
(i) Except as provided in clause (ii) of this Section 11(a), and
subject to the provisions of Section 11 (d) hereof permitting self-insurance,
Lessee will carry or cause to be carried at its or any Sublessee's expense,
comprehensive airline liability (including, without limitation, contractual,
bodily injury and property damage liability) insurance (exclusive of
manufacturer's product liability insurance) with respect to the Aircraft, (A) in
an amount not less than the greater of (1) the amounts of comprehensive airline
liability insurance from time to time applicable to aircraft owned or leased,
and operated by Lessee of the same type as the Aircraft and (2) an amount per
occurrence not less than the amount per occurrence set forth in the Certificate
of Insurance of Aircraft Hull and Liability Insurance delivered by Alexander &
Alexander of Texas, Inc. to Lessor and each owner Participant on the Delivery
Date, (B) of the type and covering the same risks as from time to time
applicable to aircraft owned or leased and operated by Lessee of the same type
as the Aircraft and (C) which is maintained in effect with insurers of
recognized reputation and responsibility. Lessee shall also maintain, or cause
to be maintained at its or any Sublessee's expense, cargo legal liability
insurance in an amount and on such terms as maintained for similar aircraft
owned or leased and operated by Lessee.
(ii) During any period that the Airframe or an Engine while temporarily
removed from the Aircraft and not replaced by similar components, as the case
may be, is on the ground and not in operation, Lessee may carry or cause to be
carried as to such non-operating property, in lieu of the insurance required by
clause (i) above, and subject to the provisions of section 11(d) hereof
permitting self-insurance, insurance by insurers of recognized reputation and
responsibility otherwise conforming with the provisions of said clause (i)
except that (A) the amounts of coverage shall not be required to exceed the
amounts of comprehensive airline liability insurance from time to time
applicable to property owned
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or leased by Lessee of the same or similar type as such nonoperating property
and which is on the ground and not in operation, and (B) the scope of the risk
covered and the type of insurance shall be the same as from time to time shall
be applicable to property owned or leased by Lessee of the same or similar type
as such non-operating property and which is on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (i) Except as
--------------------------------------------------
provided in clause (ii) of this Section 11(b), and subject to the provisions of
Section 11(d) hereof permitting self-insurance, Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense, with insurers of
recognized reputation and responsibility, all-risk ground and flight aircraft
hull insurance covering the Aircraft and fire and extended coverage and all-risk
property damage insurance covering Engines and Parts while temporarily removed
from the Aircraft and not replaced by similar components (including, without
limitation, war risk and governmental confiscation and expropriation (other than
by the government of registry of the Aircraft) and hijacking insurance, if and
to the extent the same is maintained either by Lessee or any Sublessee with
respect to other aircraft owned, leased or operated by either the Lessee or such
Sublessee on the same routes); provided, that such insurance shall at all times
--------
while the Aircraft is subject to this Lease be for an amount (taking into
account self-insurance to the extent permitted by Section 11(d) hereof) not less
than the Stipulated Loss Value for the Aircraft. In the case of a loss with
respect to an engine (other than an Engine) installed on the Airframe, Lessor
shall promptly remit any payment made to it of any insurance proceeds in respect
of such loss to Lessee or any other third party that is entitled to receive such
proceeds.
Except during a period when a Default or Lease Event of Default has
occurred and is continuing, all losses will be adjusted by Lessee with the
insurers. As between Lessor and Lessee, it is agreed that all insurance payments
received as the result of the occurrence of an Event of Loss will be applied as
follows:
(A) if such payments are received with respect to the Airframe
(or the Airframe and the Engines installed thereon), so much of such pay-
ments remaining, after reimbursement of Lessor and each Owner Participant,
for reasonable costs and expenses, as shall not exceed the
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Stipulated Loss Value and the other amounts payable under Section 10.1
hereof required to be paid by Lessee pursuant to such Section 10.1
shall be applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value and the other amounts payable under such Section
10.1, if not already paid by Lessee, or, if already paid by Lessee,
shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value, and the balance, if any, of such payments
remaining thereafter will be paid over to, or retained by, Lessee (or,
if directed by Lessee, any Sublessee); and
(B) if such payments are received with respect to an Engine
under the circumstances contemplated by Section 10.2 hereof, so much
of such payments remaining, after reimbursement of Lessor and each
Owner Participant for reasonable costs and expenses, shall be paid
over to, or retained by, Lessee (or, if directed by Lessee, any
Sublessee), provided that Lessee shall have fully performed or,
--------
concurrently therewith, willfully perform the terms of Section 10.2
(b) hereof with respect to the Event of Loss for which such payments
are made.
As between Lessor and Lessee, the insurance payments for any property
damage loss to the Airframe or any Engine not constituting an Event of Loss with
respect thereto shall be paid to Lessee (or any Sublessee if directed by
Lessee).
(ii) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (A) above, and subject to the provisions of Section 11(d)
hereof permitting self-insurance, insurance otherwise conforming with the
provisions of said clause (A) except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft owned or
leased by Lessee of the same type as the Aircraft similarly on the ground and
not in operation; provided, that subject to the provisions of Section 11(d)
--------
hereof permitting self-insurance, Lessee shall maintain insurance against risk
of loss or damage to the Aircraft in an amount at least equal to the Stipulated
Loss Value of the Aircraft during such period that the Aircraft is on the ground
and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished, to
----------------
Lessor and each owner Participant on or before the Delivery Date and during each
calendar year there-
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after on or before the anniversary of the Delivery Date a report, signed by (i)
Alexander & Alexander of Texas, Inc., (ii) Arkwright Mutual Insurance Company or
(iii) any other independent firm of insurance brokers reasonably acceptable to
Lessor which brokers may be in the regular employ of Lessee (the "Insurance
Brokers"), describing in reasonable detail the hull and liability insurance (and
property insurance for detached engines and parts) then carried and maintained
with respect to the Aircraft and stating the opinion of such firm that such
insurance complies with the terms hereof; provided, that all information
--------
contained in the foregoing report shall not be made available by Lessor or each
Owner Participant to anyone except (A) to prospective and permitted transferees
of Lessor's or each Owner Participant's interest, who agree to hold such
information confidential, (B) to Lessor's or each owner Participant's counsel or
independent certified public accountants, independent insurance brokers or other
agents who agree to hold such information confidential, (C) as may be required
by any statute, court or administrative order or decree or governmental ruling
or regulation or (D) as may be necessary for purposes of protecting the
interests of any such person or for enforcement of this Lease by the Lessor;
provided, however, that any and all disclosures permitted by (C) or (D) above
- -------- -------
shall be made only to the extent necessary to meet the specific requirements or
needs of the Persons to whom such disclosures are hereby permitted. Lessee will
cause such Insurance Brokers to agree to advise Lessor and each Owner
Participant in writing of any default in the payment of any premium and of any
other act or omission on the part of Lessee of which it has actual knowledge and
which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft as required by the terms hereof and to advise such
Persons in writing at least 30 days (7 days in the case of war risk and allied
perils coverage or such longer period as may be customary) prior to the
cancellation (but not scheduled expiration) or material adverse change of any
insurance maintained pursuant to this Section 11; provided, that if the notice
--------
period specified above is not reasonably obtainable, the Insurance Brokers shall
provide for as long a period of prior notice as shall then be reasonably
obtainable. In addition, Lessee will also cause such Insurance Brokers to
deliver to Lessor and each Owner Participant, on or prior to the date of
expiration of any insurance policy referenced in a previously delivered
certificate of insurance, a new certificate of insurance, substantially in the
same form as delivered by Lessee to such parties on the Delivery Date except for
changes in the report or the coverage consistent with the
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terms hereof. In the event that Lessee or any Sublessee shall fail to maintain
or cause to be maintained insurance as herein provided, Lessor may at its sole
option provide such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, as Supplemental Rent, for the cost thereof to Lessor;
provided, however, that no exercise by the Lessor 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 a Lease Event of
Default.
(d) Self-Insurance. Lessee may self-insure the risks required to be
--------------
insured against pursuant to this Section 11 under a program applicable to all
aircraft in Lessee's fleet, but in no case shall the aggregate amount of such
self-insurance in regard to Section 11(a) and Section 11(b) hereof exceed, with
respect to all of the aircraft in Lessee's fleet (including, without limitation,
the Aircraft), the lesser of (i) 50% of the largest replacement value of any
single aircraft in Lessee's fleet or (ii) 1 1/2% of the average aggregate
insurable value (during the preceding calendar year) of all aircraft (including,
without limitation, the Aircraft) on which Lessee carries insurance; provided,
--------
however, that nothing contained in this Section 11(d) limiting Lessee's right to
- -------
self-insure shall be deemed to apply to any minimum per aircraft (or, if
applicable, per annum or other period) hull or liability insurance deductible
imposed by the aircraft hull or liability insurers.
(e) Additional Insurance by Lessor and Lessee. Lessee (and any Sublessee)
-----------------------------------------
may at its own expense carry insurance with respect to its interest in the
Aircraft in amounts in excess of that required to be maintained by this Section
11. Each Owner Participant or any Affiliate thereof may carry for its or their
own account (directly or through the owner Trustee) at its or their sole cost
and expense insurance with respect to its interest in the Aircraft, provided
--------
that such insurance does not prevent or materially impair Lessee (or any
Sublessee) from carrying the insurance required by this Section 11 or adversely
affect such insurance or the cost thereof (it being understood that all salvage
rights to the Airframe and Engines shall remain with the Lessee's insurers).
(f) Indemnification by Government in Lieu of Insurance. Notwithstanding
----------------------------------------------------
any provisions of this Section 11 requiring insurance, Lessor agrees to accept,
in lieu of insurance against any risk with respect to the Aircraft,
indemnification from, or insurance provided by, the Government, against
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such risk in an amount which, when added to the amount of insurance against such
risk maintained by Lessee (or any Sublessee) shall be at least equal to the
amount of insurance against such risk otherwise required by this Section 11
(taking into account self-insurance permitted by Section 11(d) hereof). Any such
indemnification or insurance provided by the Government shall provide
substantially similar protection as the insurance required by this Section 11.
Lessee shall furnish, in advance of attachment of such indemnity or insurance, a
certificate of a responsible financial or legal officer of Lessee confirming in
reasonable detail the amount and scope of such indemnification or insurance and
that such indemnification or insurance complies with the preceding sentence.
(g) Application of Payments During Existence of a Lease Event of Default.
----------------------------------------------------------------------
Any amount referred to in this Section 11 which is payable to or retainable by
Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or any
Sublessee) if at the time of such payment or retention a Lease Default or a
Lease Event of Default shall have occurred and be continuing, but shall be held
by or paid over to Lessor as security for the obligations of Lessee under this
Lease and, if a Lease Default or a Lease Event of Default shall have occurred
and be continuing, applied against Lessee's obligations hereunder as and when
due. At such time as there shall not be continuing any such Lease Default or
such Lease Event of Default, such amount shall be paid to Lessee to the extent
not previously applied in accordance with the preceding sentence.
(h) Terms of Insurance Policies. Any policies carried in accordance
-----------------------------
with Sections 11(a) and 11(b) hereof covering the Aircraft, and any policies
taken out in substitution or replacement for any such policies, (i) shall name
the Additional Insureds as additional insureds, and, as appropriate, loss
payees, as their respective interests may appear (but without imposing on any
such party liability to pay premiums, calls or other charges with respect to
such insurance), (ii) may provide for self-insurance to the extent permitted in
Section 11(d) hereof, (iii) shall provide that if the insurers cancel such
insurance for any reason whatever, or if the same is allowed to lapse for
nonpayment of premium or if any material change is made in the insurance which
adversely affects the interest of any Additional Insured under this Lease
Agreement, such lapse, cancellation or change shall not be effective as to any
Additional Insured for thirty days (seven days
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in the case of war risk and allied perils coverage) after receipt by such
Additional Insured of written notice by such insurers of such lapse,
cancellation or change; provided, however, that if any notice period specified
-------- -------
above is not reasonably obtainable, such policies shall provide for as long a
period of prior notice as shall then be reasonably obtainable, (iv) shall
provide that in respect of the respective interests of each Additional Insured
under this Lease Agreement in such policies the insurance shall not be
invalidated by any action or inaction of Lessee or, in the case of any
particular Additional Insured, the action or inaction of any other Additional
Insured and shall insure the respective interests of the Additional Insureds, as
they appear under this Lease Agreement, regardless of any breach or violation of
any warranty, declaration or condition contained in such policies by Lessee or,
in the case of an Additional Insured, the breach or violation by any other
Additional Insured, (v) shall be primary without any right of contribution from
any other insurance which is carried by any Additional Insured, (vi) shall
expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured, (vii) shall waive any right of the insurers to set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any ,liability of any Additional Insured, and (viii) shall provide
that (A) in the event of a loss involving the Aircraft, Airframe or an Engine
for which proceeds are in excess of $1,000,000 (or, if the Aircraft is then
under a Sublease, in excess of $500,000), the proceeds in respect of such loss
up to the amount of Stipulated Loss Value for the Aircraft shall be payable to
Lessor, it being understood and agreed that in the case of any payment to Lessor
otherwise than in respect of an Event of Loss, Lessor shall, upon receipt of
evidence reasonably 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, and any
interest or income earned thereon in accordance with Section 21 hereof, to
Lessee or its order, and (B) the entire amount of any such loss for which
proceeds are $1, 000, 000 (or, if the Aircraft is then under a Sublease, are
$500,000 or less or the amount of any proceeds of any such loss in excess of
Stipulated Loss Value for the Aircraft shall be paid to Lessee or its order
unless a Lease Event of Default shall have occurred and be continuing and the
insurers have been notified thereof by Lessor.
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(i) Insurance Coverage Under Certain Circumstances. If substantially
----------------------------------------------
all of the Boeing Model 727 aircraft in Lessee's fleet shall no longer be
insured on the same fleet policy or policies, and if subsequent hereto, Lessee
shall agree to maintain more extensive insurance on a Boeing Model 727 aircraft
than that required to be maintained pursuant hereto or shall self-insure with
respect to Boeing Model 727 aircraft in amounts less than the amount of
self-insurance permitted pursuant to Section 11(d) hereof then Lessee shall
provide to Lessor with respect to the Aircraft the same insurance coverage as is
maintained on such aircraft and may not self-insure pursuant to Sections 11(a)
and 11(b) hereof for amounts in excess of the amount of self-insurance for any
such aircraft.
(j) Non-Discrimination Against the Aircraft in Insurance. Notwith-
------------------------------------------------------
standing any provisions contained in this Section 11, (i) all insurance required
to be maintained by Lessee under this Lease shall cover at least the same risks
as that maintained on other aircraft owned, leased or operated by Lessee of the
same type as the Aircraft, and (ii) Lessee shall not discriminate against the
Aircraft in the placement, terms and conditions, or collection, of insurance
required to be maintained by Lessee under Section 11 hereof as compared with
other aircraft owned, leased or operated by Lessee of the same type as the
Aircraft.
Section 12. Inspection.
----------
At all reasonable times during the Term, on three days' prior written
notice, Lessor and each Owner Participant, or their respective authorized
representatives, may inspect the Aircraft and the books and records of Lessee or
any operator relative thereto. No such Person shall have any duty to make any
such inspection or incur any liability or obligation by reason of not making any
such inspection. Any costs or expenses relating to such inspection shall be
borne by the Person making such inspection, unless a Lease Event of Default
shall have occurred and be continuing, in which case such costs and expenses
shall be borne by Lessee.
Section 13. Assignment.
----------
Lessee will not, without the prior written consent of Lessor, assign any of
its rights under this Lease. Subject to the further provisions of the
Participation Agreement, Lessor may assign or convey any of its right, title and
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interest in and to this Lease or the Aircraft. The terms and provisions of the
Lease shall be binding upon and inure to the benefit of Lessor and Lessee and
their respective permitted successors and assigns.
Section 14. Events of Default.
-----------------
The following events shall constitute Lease Events 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 judgement, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body) and each such Lease Event of Default shall continue so long
as, but only as long as, it shall not have been remedied:
(a) Lessee shall not have made a payment of Basic Rent or Stipulated
Loss Value within 10 days after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Stipulated Loss Value) after the same shall have become due and such
failure shall continue for 15 days after the earlier of (i) Lessee's receipt of
written demand therefor or (ix) knowledge of such failure by a responsible
financial officer of Lessee; or
(c) Lessee shall fail to carry and maintain on or with respect to the
Aircraft (or cause to be carried and maintained) insurance required to be
maintained in accordance with the provisions of section 11 hereof; or
(d) Lessee shall have failed to perform or observe (or caused to be
performed and observed) any other material covenant or agreement to be performed
or observed by it hereunder, and such failure shall continue unremedied for a
period of thirty days after written notice thereof by Lessor; provided, however,
-------- -------
that if Lessee shall have undertaken to cure any such failure which arises under
Section 8.1 hereof, or under the first sentence of Section 7.1 (c) hereof as it
relates to maintenance, service, repair or overhaul, or under the first sentence
of Section 8.4 hereof and, notwithstanding the reasonable diligence of Lessee in
attempting to cure such failure, such failure is not cured within said thirty
day period but is curable with future due diligence, there shall exist no
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Lease Event of Default under this Section 14 so long as Lessee is proceeding
with due diligence to cure such failure, but if such failure is still not cured
within 180 days after Lessee shall have received written notice of such failure,
such failure shall constitute a Lease Event of Default unless (i) Lessee shall
provide a certificate from a responsible operating officer, including a
statement in reasonable detail of Lessee's program and timetable for curing such
failure indicating (A) that Lessee is proceeding with due diligence to cure such
failure, (B) that in such officer's opinion, such failure can be cured within
one full year after such 180-day period, and (C) the officer's estimate of the
costs (including direct internal costs and expenses such as salaries but
excluding indirect costs, expenses and allocations such as overhead) to cure
such failure, (ii) if the estimated costs to cure such failure shall equal or
exceed $1,000,000, such aggregate amount shall be placed in a reserve fund
established by Lessee with an institution approved by Lessor in an account as to
which Lessee has granted a first perfected security interest for the benefit of
Lessor and applied (in a manner reasonably approved by Lessor) toward the costs
of curing such failures (and once such failures are cured, the amount remaining
in the reserve fund shall be returned to Lessee) , and (iii) such failure is
cured within one full year after such 180-day period; or
(e) any representation or warranty made by Lessee herein or in any
document or certificate furnished by Lessee in connection herewith or therewith
or pursuant hereto or thereto shall prove to have been incorrect in any material
respect at the time made; provided, however, such incorrectness shall constitute
-------- -------
a default hereunder only if such incorrectness shall continue uncured for a
period of thirty days after the earlier of (i) the receipt by Lessee of a
written notice from Lessor advising Lessee of the existence of such
incorrectness, or (ii) actual knowledge of such incorrectness by a responsible
financial officer of Lessee; or
(f) Lessee shall not be an "air carrier" within the meaning of the
Federal Aviation Act; or
(g) subject to the second sentence of Section 7. 1(a) hereof, Lessee
shall fail to cause the Aircraft to be duly registered in the name of Lessor
under the
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Federal Aviation Act (except to the extent such registration cannot be effected
because of Lessor's or an Owner. Participant's failure to comply with the
citizenship or other eligibility requirements for registration of aircraft under
such Act or because Lessor or an Owner Participant shall fail to execute and
deliver all such documents as Lessee (or any Sublessee) may reasonably request
for the purpose of effecting and continuing such registration); or
(h) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law in the United States or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Lessee or for all or substantially all of
its property, or seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding undismissed or unstayed for a
period of 60 consecutive days or an order for relief under Chapter 11 of the
Bankruptcy Code with respect to Lessee as debtor or any other order, judgment or
decree shall be entered in any proceeding by any court of competent jurisdiction
appointing, without the consent of Lessee, a receiver, trustee or liquidator of
Lessee, or for all or substantially all of its property, or sequestering of all
or substantially all of the property of Lessee and any such order, judgment or
decree or appointment or sequestration shall be final or shall remain in force
undismissed, unstayed or unvacated for a period of 60 consecutive days after the
date of entry thereof; or
(i) the commencement by Lessee of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of Lessee or for all or substantially all of its
property, or the making by Lessee of any assignment for the benefit of creditors
or Lessee shall take any corporate action to authorize any of the foregoing;
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provided, however, that, notwithstanding anything to the contrary contained in
- -------- -------
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute a Lease Event of Default if such failure or error is caused solely by
reason of any event that constitutes an Event of Loss so long as Lessee is
continuing to comply, and does comply, with all of the terms of Section 10
hereof.
Section 15. Remedies.
--------
Upon the occurrence of any Lease Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare by written notice to Lessee this Lease Agreement to be in default
(provided that no such declaration shall be a condition to any suit against
Lessee for specific performance of a defaulted covenant or for damages in
respect of such default upon such occurrence or at any time thereafter); and at
any time thereafter, so long as any such Lease Event of Default shall not have
been remedied, Lessor may do one or more of the following with respect to all or
any part of the Airframe and any or all of the Engines as Lessor in its sole
discretion shall elect, to the extent permitted by, and subject to compliance
with any mandatory requirements of, applicable law then in effect:
(a) upon the written demand of Lessor and at Lessee's expense, cause
Lessee to return promptly, and Lessee shall return promptly, the Airframe or any
Engine as Lessor may so demand to Lessor or its order in the manner and
condition required by, and otherwise in accordance with all the provisions of,
Section 5 hereof as if such Airframe or Engine were being returned at the end of
the Term, or Lessor, at its option, may enter upon the premises where all or any
part of the Airframe or any Engine is located and take immediate possession of
and remove the same by summary proceedings or otherwise (and, at Lessor's
option, store the same at Lessee's premises until disposal thereof by Lessor),
all without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise;
(b) sell the Aircraft, Airframe or any Engine at public or private
sale, as Lessor may determine, or otherwise dispose of, hold, use, operate,
lease to others
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or keep idle the Aircraft, Airframe or any Engine as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee, except as
hereinafter set forth in this Section 15;
(c) hold, keep idle or lease to others the Aircraft, Airframe or any
Engine or any part thereof, as Lessor in its sole discretion may determine, free
and clear of any rights of Lessee and without any duty to account to Lessee with
respect to such action or inaction or for any proceeds with respect thereto,
except that Lessee's obligation to pay Basic Rent with respect to the Aircraft
on Lease Period Dates subsequent to the date upon which Lessee shall have been
deprived of use of the Aircraft pursuant to this Section 15 shall be reduced by
the net proceeds, if any, received by Lessor from leasing the Aircraft, Airframe
or any Engine or any part thereof to any Person other than Lessee;
(d) whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a), (b) or (c) above
with respect to the Aircraft, Lessor, by written notice to Lessee specifying a
payment date, may demand that Lessee pay to Lessor, and Lessee shall pay Lessor,
on the payment date so specified, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the installments of Basic Rent for the Aircraft
due for Lease Periods commencing after the date specified in such notice) , any
unpaid Basic Rent due on or before Lease Period Dates on or prior to the payment
date so specified plus whichever of the following amounts Lessor, in its sole
discretion, shall specify in such notice (together with interest, if any, on
such amount at the Past Due Rate from such specified payment date until the date
of actual payment of such amount): (i) an amount equal to the excess, if any, of
the stipulated Loss Value for the Aircraft, computed as of the date specified as
the payment date in such notice, over the aggregate Fair Market Rental Value of
such Aircraft for the remainder of the Term, after discounting such aggregate
Fair Market Rental Value to present value as of the date specified as the
payment date in such notice at an annual rate equal to the Past Due Rate; or
(ii) an amount equal to the excess, if any, of the Stipulated Loss Value for
such Aircraft, computed as of the date specified as the payment date in such
notice, over the
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Fair Market Sales Value of such Aircraft as of the date specified as the payment
date in such notice;
(e) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph (d)
above with respect to such Aircraft, may, if it shall so elect, demand that
Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty, any unpaid Basic
Rent with respect to the Aircraft due on or prior to such date plus the amount
of any deficiency between the net proceeds of such sale (after deduction of all
reasonable costs of sale) and the Stipulated Loss Value of such Aircraft,
computed as of the Stipulated Loss Value Date on or immediately following the
date of such sale together with interest, if any, on the amount of such
deficiency, at the Past Due Rate, from the date of such sale to the date of
actual payment of such amount; and/or
(f) Lessor may terminate this Lease Agreement, and/or may exercise
any other right or remedy which may be available to it under applicable law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for breach hereof.
In addition, Lessee shall be liable, except as otherwise provided above,
without duplication of amounts payable hereunder, for any and all unpaid Rent
due hereunder before, after or during the exercise of any of the foregoing
remedies (other than Basic Rent due after the exercise of any of the foregoing
remedies) and, for all reasonable legal fees and other costs and expenses
incurred byLessor and each Owner Participant in connection with the return of
the Airframe or any Engine in accordance with the terms of Section 5 hereof or
in placing such Airframe or Engine in the condition and airworthiness required
by such Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
15, Lessor or each Owner Participant may bid for and purchase such property.
Lessor agrees to give Lessee at least 10 days' written notice of the date fixed
for any public sale of any Airframe or Engine or of the date on or after which
will occur the execution of any contract providing for any private sale;
provided, however, that Lessee may not bid at any such public sale. Except as
- -------- -------
otherwise expressly
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provided above, no remedy referred to in this Section 15 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of such remedies
shall not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies. No waiver by Lessor of any Lease Event of Default shall in
any way be, or be construed to be, a waiver of any future or subsequent Lease
Event of Default. To the extent permitted by applicable law, Lessee hereby
waives any rights now or hereafter conferred by statute or otherwise which may
require Lessor to sell, lease, or otherwise use the Aircraft, Airframe or any
Engine or any part thereof in mitigation of Lessor's damages as set forth in
this Section 15 or which may otherwise limit or modify any of Lessor's rights
and remedies in this Section 15.
Section 16. Notices.
-------
All notices required under the terms and provisions hereof shall be in
writing and shall be given by registered mail, telecopy, telex, teletype or any
other customary means of written communication, addressed:
If to Lessee, at 2007 Corporate Avenue, Memphis, Tennessee 38132,
Attention: Vice President and Treasurer, Telephone: (901) 395-4533, Telecopier:
(910) 395-3910, or at such other address as Lessee shall from time to time
designate in writing;
If to Lessor, at 615 Battery Street, San Francisco, California 94111,
Attention: President, with copies to each Owner Participant, c/o United States
Leasing International, Inc., 615 Battery Street, San Francisco, California
94111, Attention: Executive Vice President, Transportation Financing, Telephone
(415) 627-9300, Telecopier (415) 627-9240, or at such other address as Lessor or
such other Person shall from time to time designate in writing. The effective
date of any such notice shall be, if sent by mail, five days after mailing or,
if sent by telex, telecopy or teletype, the date when such notice is sent or
dispatched, and otherwise the date on which it is received by the addressee.
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Section 17. Net Lease; Lessee's Obligations; No Set-Off,Counterclaim, Etc.
--------------------------------------------------------------
This is a net lease. Lessee's obligation to pay all Rent payable hereunder
shall be absolute and unconditional and shall not be affected by any
circumstance, including without limitation: (a) any setoff, counterclaim,
recoupment, defense or other right which Lessee may have against Lessor; (b) any
defect in the title, airworthiness, condition, design, operation or fitness for
use of, or any damage to or loss or destruction of, the Aircraft, Airframe or
any Engine, or any interruption or cessation in the use or possession thereof by
Lessee for any reason whatsoever; (c) any insolvency, bankruptcy, reorganization
or similar proceedings by or against Lessee or any other Person; (d) any change,
waiver, extension, indulgence or other action or omission in respect of any
obligation or liability of Lessee or Lessor; (e) any claim that Lessee has or
might have against any Person; or (f) any invalidity or unenforceability or
disaffirmance of this Lease or any provision hereof.
If for any reason whatsoever this Lease shall be terminated in whole or in
part by operation of law or otherwise except as specifically provided herein,
Lessee nonetheless agrees to pay an amount equal to each Basic Rent and
Supplemental Rent payment at the time such payment would have become due and
payable in accordance with the terms hereof had this Lease not been terminated
in whole or in part. All Rent payable by Lessee shall be paid without notice or
demand (except as otherwise expressly provided) and without abatement,
suspension, deferment, deduction, diminution or proration by reason of any
circumstance or occurrence whatsoever. Lessee hereby waives, to the extent
permitted by applicable law, any and all rights which it may now have or which
at any time hereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease or any part hereof, or to any
abatement, suppression, deferment, diminution, reduction or proration of Rent
except in accordance with the express terms hereof. Each payment of Rent made by
Lessee shall be final as to Lessor and Lessee. Lessee will not seek to recover
all or any part of any such payment of Rent for any reason whatsoever.
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Section 18. Covenants of Lessee
-------------------
(a) Certain Assurances. Lessee shall do, execute, acknowledge and
-------------------
deliver or cause to be done, executed, acknowledged and delivered all such
further acts, conveyances and assurances as Lessor shall reasonably request for
accomplishing the purposes of this Lease. Lessee shall also do or cause to be
done, at its own expense, any and all acts and things which may be required
under the terms of any law, rule, regulation, agreement, treaty, convention,
pact or by any practice, custom, or understanding recognized as having wide
application or control involving any jurisdiction in which the Aircraft is being
operated, or any and all other acts and things which Lessor may reasonably
request and which are necessary or advisable to perfect and preserve the rights
of Lessor in and to the Aircraft within any such jurisdiction.
(b) Filing and Recordation. Lessee will cause this Lease in respect
----------------------
of the Aircraft to be duly and timely filed and recorded, or filed for
recordation, to the extent permitted under the Act or required under any
applicable law.
(c) Existence. Lessee will preserve and maintain its corporate
---------
existence and such of its rights, privileges, licenses and franchises where
failure to maintain such rights and privileges or obtain such licensing or
qualification would have a material adverse effect upon Lessee.
Section 19. Right To Perform for Lessee.
---------------------------
If Lessee fails to make any payment required to be made by it hereunder or
fails to perform or comply with any of its agreements contained herein, Lessor
may (but shall not be obligated to) make such payment or perform or comply with
such agreement, and the amount of such payment and the amount of the expenses of
Lessor incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by
Lessee upon demand. No such payment, performance or compliance shall be deemed
to cure any default of Lessee hereunder or otherwise relieve Lessee of its
obligations with respect thereto.
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Section 20. Miscellaneous.
-------------
Any provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The prevailing party in any action to enforce its rights
hereunder shall be entitled to recover from the nonprevailing party reasonable
attorneys fees and costs. No term or provision of this Lease may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which the enforcement of the change, waiver,
discharge or termination is sought.
The Lessee irrevocably agrees, by execution and delivery of this Lease,
that any legal action or proceeding brought against the Lessee with respect to
this Lease may be brought and determined in the Supreme Court of the State of
New York, New York County, or in the United States District Court for the
Southern District of New York, and the Lessee hereby irrevocably accepts with
regard to any such action or proceeding, for itself and in respect of its
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts. The Lessee further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered airmail, postage prepaid, to the
Lessee at its address set forth in Section 16 hereof. Nothing herein shall
affect the right of Lessor to serve process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Lessee in any
other jurisdiction in which the Lessee may be subject to suit.
This Lease shall constitute an agreement of lease, and nothing herein shall
be construed as conveying to Lessee any right, title or interest in or to the
Aircraft, Airframe or any Engine except as a lessee only. The section and
paragraph headings in this Lease and the table of contents are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof and all references herein to numbered sections, unless
otherwise indicated, are to sections of this Lease. This Lease has been, and
each Lease Supplement and amendment hereto is intended to be, delivered in the
State of New York and shall in all re-
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spects be governed by, and construed in accordance with, the laws of the State
of New York applicable to contracts made in such State by residents thereof and
as if performed entirely within such State, including all matters of
construction, validity and performance. This Lease and each Lease Supplement and
amendment hereto may be executed in several counterparts, each of which shall be
deemed an original, and all such counterparts shall constitute one and the same
instrument.
Section 21. Financing. After the Delivery Date (or, in the case of an
---------
assignment by Airlease, Ltd. ("Airlease") in favor of United States Leasing
International, Inc. ("USL"), at any time), and subject to the immediately
succeeding proviso, an Owner Participant (or the Owner Trustee acting at the
direction of an Owner Participant) may, upon not less than thirty (30) days
prior written notice from an owner Participant to the Lessee, assign, for the
purpose of securing debt obligations, all or any part of its interest in the
Aircraft or in the Trust Estate to any lender(s) and/or an indenture trustee,
acting on behalf of one or more lenders, and the Lessee hereby agrees, in
connection with any such assignment or contemplated assignment, to execute and
deliver a consent and agreement relating thereto containing, in the Lessee's
reasonable judgment, customary covenants, representation, warranties and
indemnities and all such other documents and instruments (including, without
limitation, opinions of counsel and other ancillary documents), and to cooperate
generally and in such other ways, as the owner Participant may reasonably
request; provided, that: (a) such lender(s) and such indenture trustee are
--------
reasonably acceptable to the Lessee (it being understood that USL shall be
deemed to be acceptable to Lessee); (b) such financing documents include a
covenant by such lender (s) and indenture trustee, if any, agreeing that as long
as no Event of Default shall have occurred and be continuing the Lessee's quiet
enjoyment, operation, possession and use of the Aircraft shall not be
interrupted by such lender (s) or indenture trustee or by any Person claiming
through or under such lender(s) or indenture trustee; (c) no such assignment
shall materially impair the rights and benefits, or materially increase the
burdens or obligations, of the Lessee under the Operative Documents (all in the
Lessee's reasonable judgment); and (d) all out-of-pocket costs and expenses
(including reasonable legal fees and expenses) incurred by the Lessee in
connection with such assignment shall be reimbursed by the Owner-Participant.
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Section 22. Section 1110 Compliance. Notwithstanding any provision herein
-----------------------
to the contrary, it is understood and agreed between the parties hereto that the
transactions contemplated by this Lease are expressly intended to be, shall be
and should be construed so as to be, entitled to the full benefits of 11 U.S.C.
Section 1110.
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IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
FEDERAL EXPRESS CORPORATION
Lessee
By: /s/ ROBERT D. HENNING
-----------------------------------
Robert D. Henning
Managing Director, Aircraft
Financing and Assistant Secretary
TRUST COMPANY FOR USL, INC., not
in its individual capacity,
except as expressly provided
herein, but solely as Owner
Trustee,
Owner Trustee
By /s/ STANLEY E. GUTMAN
----------------------------------
Name: Stanley E. Gutman
Title: Vice President
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SCHEDULE 1
----------
Basic Rent Schedule
-------------------
Lease Period Date Basic Rent Payment
- ----------------- ------------------
April 21, 1994 $710,000
October 21, 1994 710,000
April 21, 1995 710,000
October 21, 1995 710,000
April 21, 1996 710,000
October 21, 1996 710,000
April 21, 1997 710,000
October 21, 1997 710,000
April 21, 1998 710,000
October 21, 1998 710,000
April 21, 1999 710,000
October 21, 1999 710,000
April 21, 2000 710,000
October 21, 2000 710,000
April 21, 2001 710,000
October 21, 2001 710,000
April 21, 2002 710,000
October 21, 2002 710,000
April 21, 2003 710,000
October 21, 2003 710,000
April 21, 2004 710,000
October 21, 2004 710,000
April 21, 2005 710,000
October 21, 2005 710,000
April 21,2006 710,000
EXHIBIT A
---------
LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT, dated April _____, 1993, between ___________________
_____________________ , a _____________________________________ "Lessor"), and
FEDERAL EXPRESS CORPORATION ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement, dated as of April ______, 1993 (as at any time amended, modified
or supplemented, herein called the "Lease" and the terms defined therein being
herein used with the same meanings) , which Lease provides in section 2 for the
execution of a Lease Supplement substantially in the form hereof for the purpose
of leasing the Aircraft under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof. The Lease relates, among other
matters, to the Airframe and Engines described below, and this Lease Supplement
is attached to a counterpart of the Lease for purposes of filing and
recordation.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and
Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts
and leases from Lessor, under the Lease, as herein supplemented:
The following described Boeing 727-2D4 aircraft (the "Delivered Aircraft")
which Delivered Aircraft as of the date hereof consists of the following:
Airframe: FAA Registration Number N _____________ , Manufacturer's Serial
No. __________ and manufactured in _____________; and
Engines: Three Pratt & Whitney JT8D-15A engines installed thereon bearing
Engine Manufacturer's Serial Numbers __________, ___________ and ____________.
Each of the Engines described above has 750 or more rated takeoff horsepower or
the equivalent of such horsepower.
EXHIBIT A
Page 2
2. The Delivery Date of the Delivered Aircraft and Engines is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Delivered
Aircraft and Engines for all purposes hereof and of the Lease, including its
being airworthy, in accordance with specifications, in good working order and
repair and without defect in condition, design, operation or fitness for use,
whether or not discoverable by Lessee as of the date hereof.
4. All the provisions of the Lease are hereby incorporated by reference in
this Lease Supplement, on and as of the date of this Lease Supplement, to the
same extent as if fully set forth herein.
5. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN AND SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY RESIDENTS THEREOF AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
6. This Lease Supplement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
EXHIBIT A
Page 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed and delivered as of the date and year first above written.
TRUST COMPANY FOR USL, INC.
as Owner Trustee, Lessor
By___________________________
Title:
FEDERAL EXPRESS CORPORATION, Lessee
By___________________________
Title
EXHIBIT B
---------
RECEIPT FOR LEASE AIRCRAFT
--------------------------
Date: ________________________________________
Time: ________________________________________
Place: _______________________________________
Received from ________________________________________________________________,
pursuant to the Lease Agreement between ______________________________________
and _________________________________________, as Owner Trustee, dated as of
______________________, the following:
One (1) Boeing 727-2D4 Aircraft
Federal Aviation Administration Registry No. N___________
Manufacturer's Serial No._____________
Exhibit 1, "Inventory of Aircraft and Engine Records" provided at Delivery.
Exhibit 2, "List of Open Discrepancies" at Delivery and Acceptance of the
Aircraft.
The undersigned is authorized by Lessee to accept delivery of the above
designated aircraft pursuant to the aforesaid Agreement.
FEDERAL EXPRESS CORPORATION
By____________________________
Title:
EXHIBIT C
STIPULATED LOSS VALUES
Stipulated Loss Value Date Stipulated Loss Value
- -------------------------- ---------------------
October 21, 1993 $14,601,000.00
April 21, 1994 14,313,000.00
October 21, 1994 13,999,000.00
April 21, 1995 13,663,000.00
October 21, 1995 13,305,000.00
April 21, 1996 12,927,000.00
October 21, 1996 12,530,000.00
April 21, 1997 12,115,000.00
October 21, 1997 11,687,000.00
April 21, 1998 11,246,000.00
October 21, 1998 10,793,000.00
April 21, 1999 10,328,000.00
October 21, 1999 9,851,000.00
April 21, 2000 9,362,000.00
October 21, 2000 8,863,000.00
April 21, 2001 8,353,000.00
October 21, 2001 7,835,000.00
April 21, 2002 7,309,000.00
October 21, 2002 6,775,000.00
April 21, 2003 6,233,000.00
October 21, 2003 5,683,000.00
April 21, 2004 5,125,000.00
October 21, 2004 4,560,000.00
April 21, 2005 3,987,000.00
October 21, 2005 3,407,000.00
April 21, 2006 2,819,000.00
Prior to the Induction Date (as defined in the Modification Contract),
Stipulated Loss Value shall be $6,500,000.
EXHIBIT E
---------
SCHEDULE OF REGISTRATION COUNTRIES
----------------------------------
Argentina Japan
Australia Luxembourg
Austria Malaysia
Bahamas Mexico
Belgium Netherlands
Brazil New Zealand
Canada Norway
Chile People's Republic of China
Denmark Philippines
Fiji Portugal
Finland Singapore
France Spain
Germany Sweden
Greece Switzerland
Hong Kong Thailand
Iceland Turkey
India United Kingdom
Ireland Venezuela
Italy
EXHIBIT D
---------
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
Argentina Japan
Australia Luxembourg
Austria Malaysia
Bahamas Mexico
Belgium Netherlands
Brazil New Zealand
Canada Norway
Chile People's Republic of China
Denmark Philippines
Fiji Portugal
Finland Singapore
France Spain
Germany Sweden
Greece Switzerland
Hong Kong Thailand
Iceland Turkey
India United Kingdom
Ireland Venezuela
Italy
PAPER N0. 07
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated April 22, 1993, between Trust Company
for USL, Inc., an Illinois corporation ("Lessor"), and FEDERAL EXPRESS
CORPORATION ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement, dated as of April 15, 1993 (as at any time amended, modified or
supplemented, herein called the "Lease" and the terms defined therein being
herein used with the same meanings), which Lease provides in Section 2 for the
execution of a Lease Supplement substantially in the form hereof for the purpose
of leasing the Aircraft under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof. The Lease relates, among other
matters, to the Airframe and Engines described below, and this Lease Supplement
is attached to a counterpart of the Lease for purposes of filing and
recordation.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and
Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts
and leases from Lessor, under the Lease, as herein supplemented:
The following described Boeing 727-2D4 aircraft (the "Delivered Aircraft")
which Delivered Aircraft as of the date hereof consists of the following:
Airframe: FAA Registration Number N362PA, Manufacturer's Serial No. 21850
and manufactured in 1979; and
Engines: Three Pratt & Whitney JTSD-15A engines installed thereon bearing
Engine Manufacturer's Serial Numbers 700-267, 700-360 and 708-902.
Each of the Engines described above has 750 or more rated takeoff horsepower or
the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft and Engines is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Delivered
Aircraft and Engines for all
Purposes hereof and of the Lease, including its being airworthy, in accordance
with specifications, in good working order and repair and without defect in
condition, design, operation or fitness for use, whether or not discoverable by
Lessee as of the date hereof.
4. All the provisions of the Lease are hereby incorporated by reference in
this Lease Supplement, on and as of the date of this Lease Supplement, to the
same extent as if fully set forth herein.
5. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN AND SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY RESIDENTS THEREOF AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
6. This Lease Supplement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
-2-
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
FEDERAL EXPRESS CORPORATION,
Lessee
By /s/ ROBERT D. HENNING
-----------------------------------
Robert D. Henning
Managing Director, Aircraft
Financing
TRUST COMPANY FOR USL, INC., not
in its individual capacity,
except as expressly provided
herein, but solely as Owner
Trustee,
Owner Trustee
By /s/ STANLEY E. GUTMAN
-----------------------------------
Name: Stanley E Gutman
Title: Vice President
Federal Express
Boeing 727-2D4
N362PA
PAPER NO. 42
(CERTIFIED COPY TO BE RETURNED)
ATTACHMENT NO. 1
- ----------------
Airlease Ltd.
N288FE
LEASE SUPPLEMENT N0. 2
THIS LEASE SUPPLEMENT NO. 2, dated as of October 19, 1994 between TRUST
COMPANY FOR USL, INC., as Trustee, the Trustee, in its capacity as such Trustee
being herein called Lessor (under a Trust Agreement (N362) dated as of July 27,
1993 among AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP, as Owner
Participant, Trust Company for USL, Inc., as Trustee, and United States Leasing
International, Inc., as Agent), and FEDERAL EXPRESS CORPORATION ("Lessee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Lease Agreement dated as of April 15, 1993 and the Lease
Supplement No. 1 dated April 22, 1993 covering one (1) Hoeing 727-2D4 aircraft
(Serial Number 21850) bearing U.S. Registration Number N288FE (formerly N362PA),
were recorded as one instrument by the Federal Aviation Administration on June
7, 1993 and assigned Conveyance No. JJ08133.
WHEREAS, the Trust Termination and Assignment and Assumption Agreement
(N362PA) dated as of July 27, 1993 was recorded by the Federal Aviation
Administration on August 5, 1993 and assigned Conveyance No. 5090852.
WHEREAS, the Separation of Joint Interests in Leased Aircraft and
Assignment and Assumption Agreement dated as of September 29, 1993 was recorded
by the Federal Aviation Administration on October 6, 1993 and assigned
Conveyance No RR006494.
WHEREAS, the Lessor and the Lessee desire to amend and supplement the Lease
for the purpose of adjusting the dollar amount of the Basic Rent set forth in
Schedule 1 of the Lease
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Unless the context shall otherwise require, the
-----------
capitalized terms used herein shall have the respective meanings assigned
thereto in the Lease
RECORDED
Federal Aviation Administration
Date 11-22-94 Time 6:18AM
--------------- ------
Conveyance Number JJ12723
---------------
By /s/ JEAN VAYLAND
-----------------------------
SCHEDULE IA
Basic Rent Schedule
-------------------
Lease Period Date Basic Rent Payment
- ----------------- ------------------
April 21, 1994 $710,000.00
October 21, 1994 600,375.22
April 21, 1995 655,187.61
October 21, 1995 655,187.61
April 21, 1996 655,187.61
October 21, 1996 655,187.61
April 21, 1997 655,187.61
October 21, 1997 655,187.61
April 21, 1998 655,187.61
October 21, 1998 655,187.61
April 21, 1999 655,187.61
October 21, 1999 655,187.61
April 21, 2000 655,187.61
October 21, 2000 655,187.61
April 21, 2001 655,187.61
October 21, 2001 655,187.61
April 21, 2002 655,187.61
October 21, 2002 655,187.61
April 21, 2003 655,187.61
October 21, 2003 655,187.61
April 21, 2004 655,187.61
October 21, 2004 655,187.61
April 21, 2005 655,187.61
October 21, 2005 655,187.61
April 21, 2006 655,187.61
[Federal Express Corporation]
[N288FE - Schedule 1 to Lease Supplement No. 2]