<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ATLAS AIR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C> <C>
DELAWARE 4731 84-1207329
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
538 COMMONS DRIVE
GOLDEN, COLORADO 80401
(303) 526-5050
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
NESA E. HASSANEIN, ESQ.
SENIOR VICE PRESIDENT
AND GENERAL COUNSEL
ATLAS AIR, INC.
538 COMMONS DRIVE
GOLDEN, COLORADO 80401
(303) 526-5050
(Name, Address, including Zip Code, and Telephone Number, including
Area Code, of Agent for Service)
with a copy to:
STEPHEN A. GREENE, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED MAXIMUM
TITLE OF CLASS OF SECURITIES AMOUNT TO BE MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER UNIT PRICE(1) REGISTRATION FEE(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 3/4% Senior Notes due 2005..... $150,000,000 100% $150,000,000 $45,454.55
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1997
PROSPECTUS
ATLASAIR LOGO
ATLASAIR LOGO
OFFER TO EXCHANGE ITS 10 3/4% SENIOR NOTES DUE 2005,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ITS 10 3/4% SENIOR NOTES DUE 2005, WHICH HAVE NOT BEEN REGISTERED.
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
---------------------
Atlas Air, Inc. (the "Company"), a Delaware corporation, hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $150,000,000 aggregate principal amount of its new
10 3/4% Senior Notes due 2005 (the "New Notes"), which have been registered
under the Securities Act of 1933 as amended (the "Securities Act"), for a like
principal amount of its outstanding 10 3/4% Senior Notes due 2005 (the "Old
Notes"), which have not been so registered. The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain transfer
restrictions relating to the Old Notes. The New Notes will evidence the same
indebtedness as the Old Notes and will be issued pursuant to, and entitled to
the benefits of, the same Indenture that governs the Old Notes (the
"Indenture"). As used herein, the term "Notes" means the Old Notes and the New
Notes, treated as a single class.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1997
unless extended (as, and so extended, the "Expiration Date"). Tenders of Old
Notes may be withdrawn at any time prior to the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange pursuant to the Exchange Offer. The Exchange Offer is
subject to certain other customary conditions. See "The Exchange Offer."
The New Notes will bear interest from and including the date of
consummation of the Exchange Offer. Interest on the New Notes will be payable
semi-annually in arrears on each February 1 and August 1 of each year,
commencing February 1, 1998, at the rate of 10 3/4% per annum. The New Notes
will mature on August 1, 2005. Interest on the New Notes will accrue from the
last interest payment date on which interest was paid on the Old Notes
surrendered in exchange therefor or, if no interest has been paid on the Old
Notes, from the date of original issuance of the Old Notes. The Notes will be
redeemable, in whole or in part, at the option of the Company, on or after
August 1, 2001, at the redemption prices set forth herein, plus accrued interest
to the date of redemption. In addition, at any time on or prior to August 1,
2000 the Company, at its option, may redeem up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Public Equity Offerings (as defined), at a redemption price equal to 110.75% of
the principal amount thereof plus accrued interest to the date of redemption;
provided that at least 65% of the aggregate principal amount of the Notes
originally issued remains outstanding immediately after any such redemption.
SEE "RISK FACTORS," WHICH BEGINS ON PAGE 9, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES
IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 3
The New Notes represent general unsecured obligations of the Company
ranking pari passu in right of payment to any existing and future unsecured
senior indebtedness of the Company. The New Notes will be effectively
subordinated, however, to all secured indebtedness of the Company and to all
indebtedness of the Company's subsidiaries. As of June 30, 1997, on a pro forma
basis after giving effect to the Offering (as defined) and the Refinancings (as
defined) and the application of the proceeds thereof, the Company would have had
approximately $595.0 million of consolidated secured indebtedness outstanding
and the Company's subsidiaries would have had approximately $370.3 million of
indebtedness outstanding.
Upon a Change of Control (as defined), each holder of the Notes will have
the right to require the Company to repurchase such holder's Notes at a price
equal to 101% of the principal amount thereof plus accrued and unpaid interest
to the date of repurchase. In addition, the Company will be obligated to offer
to repurchase Notes with the net cash proceeds of certain asset sales at a
purchase price equal to 100% of the principal amount thereof, plus accrued
interest to the date of repurchase.
The holder of each Old Note accepted for exchange will receive a New Note
having a principal amount equal to that of the surrendered Old Note. Old Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders of Old Notes accepted for exchange
will not receive any payment in respect of accrued interest on such Old Notes.
Old Notes not tendered or not accepted for exchange will continue to accrue
interest from and after the date of consummation of the Exchange Offer.
The Old Notes were issued and sold on August 13, 1997 (the "Offering") in a
transaction exempt from the registration requirements of the Securities Act and
may not be offered or sold in the United States unless so registered or pursuant
to an applicable exemption under the Securities Act. The New Notes are being
offered hereunder in order to satisfy certain obligations of the Company
contained in the Registration Rights Agreement (as defined). Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") as set forth in no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and such holder has no arrangement or understanding
with any person to participate in a distribution of such New Notes. However, the
Company has not sought a no-action letter with respect to the Exchange Offer and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Each holder of Old Notes,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage or participate in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period ending on the close of business on the 180th day following
the Expiration Date (as defined herein), it will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. In the event
the Company terminates the Exchange Offer and does not accept for exchange any
Old Notes, the Company will promptly return the Old Notes to the holders
thereof. See "The Exchange Offer."
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic Linkages ("PORTAL") market. The
Company has been advised by the Initial Purchaser (as defined) that it intends
to
ii
<PAGE> 4
make a market for the New Notes; however, the Initial Purchaser is not obligated
to do so, and the Company does not currently intend to list the New Notes on any
securities exchange. Any market-making may be discontinued at any time, and
there is no assurance that an active public market for the New Notes will
develop or, that if such a market develops, that it will continue. This
Prospectus may be used by the Initial Purchaser in connection with offers and
sales of the New Notes which may be made by it from time to time in
market-making transactions at negotiated prices relating to prevailing market
prices at the time of sale. The Initial Purchaser may act as principal or agent
in such transaction.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM CONSULTANT'S
REPORTS AND INDUSTRY PUBLICATIONS. INDUSTRY PUBLICATIONS AND CONSULTANT'S
REPORTS GENERALLY STATE THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED
FROM SOURCES BELIEVED TO BE RELIABLE, BUT THAT THE ACCURACY AND COMPLETENESS OF
SUCH INFORMATION IS NOT GUARANTEED. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED
THIS MARKET DATA.
Old Notes in the aggregate principal amount of $150 million were issued
originally in global form (the "Global Old Note"). The Global Old Note was
deposited with, or on behalf of DTC, as the initial depository with respect to
the Old Notes (in such capacity, the "Depository"). The Global Old Note is
registered in the name of Cede, as nominee of DTC, and the beneficial interests
in the Global Old Note are shown on and transfers thereof are effected only
through, records maintained by the Depository and its participants. The use of
the Global Old Note to represent certain of the Old Notes permits the
Depository's participants, and anyone holding a beneficial interest in an Old
Note registered in the name of such a participant, to transfer interests in the
Old Notes electronically in accordance with the Depository's established
procedures without the need to transfer a physical certificate. Except as
provided below, the New Notes will also be issued initially as a note in global
form (the "Global New Note", and together with the Global Old Note, the "Global
Notes") and deposited with, or on behalf of, the Depository.
iii
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AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New Notes
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules thereto. Any statements made in this Prospectus concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement otherwise filed with the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, the exhibits forming a part thereof and
such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: New York Regional Office, Seven World Trade
Center, 13th Floor, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60601.
Copies of such material can be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains an Internet Web Site at
http://www.sec.gov that contains reports and other information. The Company's
common stock is traded on the NASDAQ National Market System under the symbol
"ATLS" and reports, proxy statements and other information concerning the
Company can be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K (the "Form 10-K") for the fiscal
year ended December 31, 1996, its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997 and June 30, 1997 and its Current Report on Form
8-K dated September , 1997, each of which has been filed with the Commission,
are hereby incorporated in this Prospectus by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Exchange Offer contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for all purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, on
the written or oral request, a copy of any and all of the documents incorporated
in this Prospectus by reference, other than exhibits to such documents not
incorporated by reference therein. Requests for such copies should be directed
to Atlas Air, Inc., 538 Commons Drive, Golden, Colorado 80401 Attention: Chief
Financial Officer (telephone (303) 526-5050).
iv
<PAGE> 6
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements included or incorporated by reference in this Prospectus
constitute "forward looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, levels of activity, performance or
achievements of the Company, or industry results, to be materially different
from any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "intend",
"estimate", "anticipate", "believe", or "continue" or the negative thereof or
variations thereon or similar terminology. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed under "Risk
Factors" and elsewhere in this Prospectus, including, without limitation, in
conjunction with the forward-looking statements attributable to the Company, or
persons acting on its behalf, are expressly qualified in their entirety by the
Cautionary Statements.
As a result of the foregoing and other factors, no assurance can be given
as to the future results and achievements of the Company. Neither the Company
nor any other person assumes responsibility for the accuracy and completeness of
these statements.
v
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
data, including the financial statements and the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
to the "Company" or "Atlas" shall mean Atlas Air, Inc., a Delaware corporation,
and its subsidiaries. In addition, references herein to "747-400 aircraft" means
the Boeing 747-400F freighter aircraft.
THE COMPANY
Atlas is the world's largest air cargo outsourcer, with an all Boeing fleet
of 747 freighter aircraft. The Company provides reliable airport-to-airport
cargo transportation services throughout the world to major international air
carriers generally under one-to-five-year fixed-rate contracts which typically
require that the Company supply aircraft, crew, maintenance and insurance (the
"ACMI Contracts"). The Company's customers currently include, among others,
China Airlines Ltd. ("China Airlines"), KLM Royal Dutch Airlines ("KLM"),
Lufthansa Cargo AG ("Lufthansa Cargo"), British Airways World Cargo ("British
Airways"), Scandinavian Airlines System ("SAS"), Varig Brazilian Airlines
("Varig"), Emirates Airline ("Emirates"), Thai Airways International Public
Company Limited ("Thai Airways"), Fast Air Carrier, S.A. ("Fast Air") and Lineas
Aereas Suramericanas, S.A. ("LAS"). The Company is able to provide efficient,
cost-effective service to its customers primarily as a result of its productive
and flexible work force, the outsourcing of a significant part of its regular
maintenance work on a fixed-cost basis and the advantageous cost economies
realized in the operation of its fleet, comprised solely of Boeing 747 aircraft
which are configured for service in long-haul cargo operations.
The Company's fleet currently consists of 21 Boeing 747-200 freighter
aircraft in service, one 747-200 aircraft undergoing passenger to freighter
modification at Boeing and two 747-200 passenger aircraft under lease to a third
party. On June 9, 1997, the Company entered into an agreement with Boeing to
purchase 10 new 747-400 aircraft to be powered by engines acquired from the
General Electric Company ("GE"), with an option to purchase up to 10 additional
747-400 aircraft. The 747-400 aircraft has significantly longer range, greater
payload capability, lower maintenance costs and increased fuel efficiency
compared to the 747-200 freighter aircraft. The Company expects to place the
747-400 aircraft in service with both existing and prospective customers, who
the Company believes should be willing to pay higher ACMI Contract rates to
achieve operating benefits derived from the unique performance capabilities of
the 747-400 aircraft.
747-400 AIRCRAFT ACQUISITION
On June 9, 1997 the Company entered into an agreement (the "Boeing Purchase
Contract") with Boeing to purchase 10 new 747-400 aircraft to be powered by GE
engines. The 747-400 aircraft are currently scheduled to be delivered one each
in May, June, August and September 1998; April and July 1999; February, March
and August 2000; and April 2001. The Boeing Purchase Contract also provides the
Company with an option to purchase up to 10 additional 747-400 aircraft for
delivery from 1999 through 2002. The Boeing Purchase Contract requires that the
Company pay deposits to Boeing prior to the delivery date of each 747-400
aircraft (the "Pre-Delivery Deposits") in order to secure delivery of the
747-400 aircraft and to defray a portion of the manufacturing costs. The Company
expects that the maximum total amount of Pre-Delivery Deposits at any time
outstanding will be approximately $125 million, approximately $95.2 million of
which was paid as of September 22, 1997 by the Company from short-term
indebtedness and available cash.
The proceeds from the Offering of the Old Notes and cash flow from
operations were used, among other things, to repay short-term indebtedness
incurred by the Company to pay Pre-Delivery Deposits and will continue to be
used to make additional Pre-Delivery Deposits as they become due. As the 747-400
aircraft are purchased upon delivery and Pre-Delivery Deposits are refunded by
Boeing, the remaining proceeds from the Offering of the Old Notes may be used to
fund a portion of the total purchase price of the 747-400 aircraft or,
alternatively, for general corporate purposes by the Company. Additional
third-party financing will be required at the time of delivery of each of the
747-400 aircraft. The Company intends to secure such permanent
1
<PAGE> 8
financing from a combination of aircraft financing transactions, including
long-term fixed-rate equipment trust certificates, leveraged lease financing,
other long-term purchase money security financing or debt or equity financing.
There can be no assurance that the Company will be able to obtain sufficient
financing to fund the purchase of the 747-400 aircraft, or if such financing is
available, that it will be available on commercially reasonable terms.
THE REFINANCINGS
In September 1997, the Company completed certain refinancing and
restructuring transactions (the "Refinancings") with respect to certain of the
Company's existing indebtedness in order to provide the Company with greater
financial flexibility in anticipation of the financing requirements for the
acquisition of the 747-400 aircraft by, among other things, extending maturities
of certain indebtedness, reducing interest expense and making certain covenants
less restrictive. The Refinancings included (i) a new, $185 million seven-year
amortizing term loan facility (the "AFL II Term Loan Facility") for a new
wholly-owned subsidiary of the Company formed for the sole purpose of owning and
leasing four 747-200 aircraft and nine spare engines currently owned by the
Company and financed by the Company's existing revolving credit facility (the
"Aircraft Credit Facility"); (ii) an amendment and restatement of the Aircraft
Credit Facility to (a) provide for a new two-year revolving period followed by a
three-year amortizing term loan period, (b) provide for a reduction in the
credit spread for borrowings based on financial performance and (c) make the
financial covenants less restrictive to facilitate the financings required in
connection with the acquisition of the 747-400 aircraft; and (iii) an amendment
to the financial covenants of the existing AFL Term Loan Facility (as defined),
to facilitate the financings required in connection with the acquisition of the
747-400 aircraft. See "Description of Certain Indebtedness."
---------------------
The Company is incorporated under the laws of Delaware. The address of the
Company's principal executive office is 538 Commons Drive, Golden, Colorado
80401 and the telephone number is (303) 526-5050.
THE EXCHANGE OFFER
Purpose and Effect......... The Old Notes were sold by the Company on August
13, 1997 to BT Alex. Brown Incorporated (formerly
BT Securities Corporation) (the "Initial Purchaser"
or "BT"), who privately placed the Old Notes with
certain institutional investors. In connection
therewith, the Company executed and delivered for
the benefit of the holders of the Old Notes a
registration rights agreement (the "Registration
Rights Agreement") providing for, among other
things, the Exchange Offer. See "The Exchange
Offer -- Terms of the Exchange Offer."
Terms of the Exchange
Offer.................... New Notes are being offered in exchange for a like
principal amount of Old Notes. Old Notes may be
exchanged only in integral multiples of $1,000. The
Company will issue the New Notes to holders
promptly following acceptance of the Old Notes by
the Company after the Expiration Date. See "Risk
Factors -- Consequences of Failure to Exchange."
Holders of the Old Notes do not have appraisal or
dissenters' rights in connection with the Exchange
Offer under the Delaware General Corporation Law,
the governing law of the state of incorporation of
the Company. See "The Exchange Offer -- Terms of
the Exchange Offer."
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered or accepted for exchange.
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<PAGE> 9
See "The Exchange Offer -- Certain Conditions to
the Exchange Offer."
Expiration Date............ 5:00 p.m. New York City time on , 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Terms of the
Exchange Offer."
Conditions................. The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company reserves the right to terminate or amend
the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. The Exchange Offer is also subject to
the terms and provisions of the Registration Rights
Agreement. NO VOTE OF THE COMPANY'S SECURITYHOLDERS
IS REQUIRED TO EFFECT THE EXCHANGE OFFER AND NO
SUCH VOTE (OR PROXY THEREFOR) IS BEING SOUGHT
HEREBY. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
Procedures for tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes, or a Book-Entry Confirmation
(as defined), as the case may be, and any other
required documentation to the exchange agent (the
"Exchange Agent") at the address set forth herein.
The method of delivery of such documentation is at
the election and risk of the holder. By executing
the Letter of Transmittal, each holder will
represent to the Company, among other things, that
(i) the New Notes acquired pursuant to the Exchange
Offer by the holder and any beneficial owners of
Old Notes are being obtained in the ordinary course
of business of the person receiving such New Notes,
(ii) neither the holder nor such beneficial owner
is participating in, intends to participate in or
has an arrangement or understanding with any person
to participate in, the distribution of such New
Notes and (iii) neither the holder nor such
beneficial owner is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker
or dealer as a result of market-making activities
or other trading activities (other than Old Notes
acquired directly from the Company), must
acknowledge in the Letter of Transmittal that it
will deliver a prospectus in connection with any
resale of such New Notes. See "The Exchange
Offer -- Procedures for Tendering Old Notes" and
"Plan of Distribution."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender, should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering his or her Old Notes, either make
appropriate arrangements to register ownership of
the Old Notes in such owner's
3
<PAGE> 10
name or obtain a properly completed bond power from
the registered holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer -- Procedures for Tendering Old
Notes."
Book-Entry Transfer........ Any financial institution that is a participant in
the Book-Entry Transfer Facility's (as defined)
system may make book-entry delivery of Old Notes by
causing the Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's
procedures for transfer. See "The Exchange
Offer -- Book-Entry Transfer."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m. New York City time, on the Expiration Date.
See "The Exchange Offer -- Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes.... Upon satisfaction or waiver of all conditions of
the Exchange Offer, the Company will accept for
exchange any and all Old Notes which are properly
tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered promptly following acceptance of the Old
Notes by the Company after the Expiration Date. See
"The Exchange Offer -- Acceptance of Old Notes for
Exchange; Delivery of New Notes."
Federal Income Tax
Consequences............. The exchange of Old Notes for New Notes by
tendering holders will not be a taxable exchange
for federal income tax purposes as a result of such
exchange. See "Certain Federal Income Tax
Consequences."
Regulatory Approvals....... The Company does not believe that the receipt of
any material federal or state regulatory approvals
will be necessary in connection with the Exchange
Offer. See "The Exchange Offer -- Regulatory
Approvals."
Use of Proceeds............ The Company will not receive any proceeds from the
exchange pursuant to the Exchange Offer. See "Use
of Proceeds."
Exchange Agent............. State Street Bank & Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange Agent."
Resales of the New Notes... The New Notes are being offered hereunder in order
to satisfy certain obligations of the Company
contained in the Registration Rights Agreement.
Based on positions of the Commission and no action
or interpretive letters issued to third parties,
the Company believes that the New Notes issued
pursuant to the Exchange Offer to a holder in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary
course of such holder's business and such holder is
not participating, does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
New Notes. If any holder acquires New Notes in the
Exchange Offer for the purpose of distributing or
participating in a distribution of New Notes, such
holder cannot rely on the position of the staff of
the
4
<PAGE> 11
Commission set forth in its non-action and
interpretive letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with a
secondary resale transaction, unless an exemption
from registration is otherwise available. Each
broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that (i) Old Notes tendered by it in
the Exchange Offer were acquired in the ordinary
course of its business as a result of market-making
or other trading activities and (ii) it will
deliver a prospectus in connection with any resale
of New Notes received in the Exchange Offer. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer
in connection with any resale of the New Notes
received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a
result of market-making or other trading activities
(other than Old Notes acquired directly from the
Company). The Company has agreed that, for a period
of 180 days following the consummation of the
Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in
connection with any such resale. See "The Exchange
Offer -- Resales of the New Notes" and "Plan of
Distribution."
SUMMARY DESCRIPTION OF NEW NOTES
Securities Offered......... $150,000,000 aggregate principal amount of 10 3/4%
Senior Notes due 2005.
Issuer..................... Atlas Air, Inc.
Maturity Date.............. August 1, 2005.
Interest Payment Dates..... Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on
the Old Notes surrendered in exchange therefor or,
if no interest has been paid on the Old Notes, from
the date of original issuance of the Old Notes and
will be payable semi-annually on each February 1
and August 1 of each year, commencing February 1,
1998.
Ranking.................... The New Notes will represent general unsecured
obligations of the Company ranking senior to all
subordinated indebtedness of the Company and pari
passu in right of payment to all existing and
future unsecured senior indebtedness of the
Company. The New Notes will be effectively
subordinated, however, to all secured indebtedness
of the Company and all indebtedness of the
Company's subsidiaries. As of June 30, 1997, on a
pro forma basis after giving effect to the Offering
and the Refinancings and the application of the
proceeds thereof, the Company would have had
approximately $595.0 million of consolidated
secured indebtedness outstanding, including
approximately $370.3 million of indebtedness of the
Company's subsidiaries.
Optional Redemption........ The New Notes will be redeemable, in whole or in
part, at the option of the Company on or after
August 1, 2001, at the redemption prices set forth
herein, plus accrued interest to the date of
redemption. In addition, at any time on or prior to
August 1, 2000, the Company, at its option, may
redeem up to 35% of the aggregate principal amount
of the Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings, at
a redemption price equal to 110.75% of the
principal
5
<PAGE> 12
amount thereof plus accrued interest to the date of
redemption; provided at least 65% of the aggregate
principal amount of the Notes originally issued
remains outstanding immediately after any such
redemption.
Change of Control.......... Upon a Change of Control (as defined), each holder
of the New Notes will have the right to require the
Company to repurchase such holder's New Notes at a
price equal to 101% of the principal amount thereof
plus accrued and unpaid interest to the date of
repurchase. There can be no assurance that, in the
event of a Change of Control, the Company will
have, or be able to obtain, sufficient funds to
repurchase the New Notes.
Certain Covenants.......... The Indenture governing the New Notes (the
"Indenture") contains certain limitations on the
ability of the Company and its subsidiaries to,
among other things, incur additional indebtedness,
pay dividends or make certain other restricted
payments, consummate certain asset sales, enter
into certain transactions with affiliates, incur
liens, create restrictions on the ability of a
subsidiary to pay dividends or make certain
payments, sell or issue preferred stock of
subsidiaries to third parties, merge or consolidate
with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or
substantially all of the assets of the Company.
For additional information regarding the New Notes, see "Description of the
Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders prior to tendering their Old Notes in the Exchange Offer.
6
<PAGE> 13
SUMMARY FINANCIAL DATA
The summary financial data presented below have been derived from the
consolidated financial statements of the Company. The data for the years ended
December 31, 1996, 1995 and 1994 were derived from the Company's audited
consolidated financial statements and related notes, and other financial
information incorporated herein. The data for the six months ended June 30, 1997
and 1996 were derived from the Company's unaudited consolidated financial
statements, which, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information set forth herein. The results of operations for
the interim periods presented are not indicative of the results that may be
expected for the full year. The following information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's consolidated financial statements
and notes thereto, which are incorporated in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total operating revenues........................ $102,979 $171,267 $315,659 $131,263 $175,951
-------- -------- -------- -------- --------
Operating Expenses:
Flight crew salaries and benefits............. 8,887 14,584 25,020 10,866 13,947
Other flight-related expenses................. 9,270 12,361 27,404 12,095 13,722
Maintenance................................... 24,517 42,574 84,305 32,380 55,011
Aircraft and engine rentals................... 14,044 22,902 27,341 11,673 15,485
Fuel and ground handling...................... 9,747 5,027 10,554 4,248 7,128
Depreciation and amortization................. 7,451 14,793 25,515 10,093 19,174
Other......................................... 15,169 16,352 27,457 11,831 17,896
Write-off of capital investment and other..... -- -- -- -- 27,100
-------- -------- -------- -------- --------
Total operating expenses............... 89,085 128,593 227,596 93,186 169,463
-------- -------- -------- -------- --------
Operating income................................ 13,894 42,674 88,063 38,077 6,488
Other income (expense):
Interest income............................... 490 2,025 7,102 2,751 3,491
Interest expense.............................. (10,784) (18,460) (35,577) (15,450) (23,647)
-------- -------- -------- -------- --------
Total other income (expense)........... (10,294) (16,435) (28,475) (12,699) (20,156)
-------- -------- -------- -------- --------
Income (loss) before income taxes............... 3,600 26,239 59,588 25,378 (13,668)
Income tax benefit (expense).................... (14) (8,408) (21,750) (9,138) 4,989
-------- -------- -------- -------- --------
Income (loss) before extraordinary item......... 3,586 17,831 37,838 16,240 (8,679)
Extraordinary Item: Gain from extinguishment of
debt, net of applicable taxes of $9,622....... -- -- -- -- 16,740
-------- -------- -------- -------- --------
Net income............................. $ 3,586 $ 17,831 $ 37,838 $ 16,240 $ 8,061
======== ======== ======== ======== ========
OTHER DATA:
EBITDA (1)...................................... $ 21,345 $ 57,467 $113,578 $ 48,170 $ 25,662
Ratio of EBITDA to interest expense (1)......... 1.98x 3.11x 3.19x 3.12x 1.09x
Ratio of earnings to fixed charges (2).......... 1.21x 1.86x 2.11x 2.22x --(2)
OPERATING DATA:
Total block hours flown (3)..................... 19,049 33,265 59,445 25,198 32,984
Revenue per block hour.......................... $ 5,406 $ 5,149 $ 5,310 $ 5,209 $ 5,334
EBITDA per block hour (1)....................... $ 1,121 $ 1,728 $ 1,911 $ 1,912 $ 778
Average aircraft operated (4)................... 5.2 7.7 14.7 12.4 18.4
Total aircraft (at end of period)............... 6 10 17 14 20
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 89,923
Net property and equipment.................................. 748,981
Total assets................................................ 901,761
Total debt.................................................. 589,881
Stockholders' equity........................................ 220,393
</TABLE>
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<PAGE> 14
- ---------------
(1) EBITDA represents income (loss) before income taxes, depreciation and
amortization, and total other income (expense). EBITDA is not a recognized
measure of performance under GAAP and should not be considered in isolation
or as an alternative to, or more meaningful than, operating income or
operating cash flows prepared in accordance with GAAP as an indicator of the
Company's operating performance or liquidity.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
income prior to income tax benefit (expense) and fixed charges. Fixed
charges consist of interest expense (including amounts capitalized),
amortization of debt issuance costs and one-third of rental payments on
operating leases (such interest having been deemed by the Company to
represent the interest portion of such payments). Earnings were insufficient
to cover fixed charges by $16,235,000 for the six months ended June 30,
1997.
(3) Total block hours flown for an aircraft represents the elapsed time from the
moment the aircraft first moves at the point of origin to the time it comes
to rest at its destination.
(4) Average aircraft operated represents the total number of aircraft operated
during each day of a given period divided by the number of days in such
period.
8
<PAGE> 15
RISK FACTORS
In addition to the other information in this Prospectus holders of the Old
Notes should carefully consider the following factors prior to exchanging Old
Notes for the New Notes offered hereby.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued pursuant
to the Exchange Offer to a holder in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by any holder thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder is not participating, does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 180 days
following the consummation of the Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
However, the ability of any holder to resell the New Notes is subject to
applicable state securities laws as described in "-- Blue Sky Restrictions on
Resale of New Notes" below. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for the Old Notes
not so tendered could be adversely affected. See "The Exchange Offer" and "Plan
of Distribution."
FAILURE TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer and avoid the restrictions on transfer
of the Old Notes, holders of Old Notes must transmit a properly completed Letter
of Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at one of the addresses set forth below under
"The Exchange Offer -- Exchange Agent" on or prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer of such Old Notes, if such procedure is
available, into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedure for book-entry transfer described herein, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the holder
must comply with the guaranteed delivery procedures described herein and in the
Letter of Transmittal. The method of delivery of the Old Notes and the Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the holder. See "The Exchange Offer."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company is highly leveraged. After giving pro forma effect to the
Offering and the Refinancings and the application of the proceeds thereof, as of
June 30, 1997, the Company's total indebtedness outstanding would have been
approximately $747.9 million. The Company's high degree of leverage could have
important
9
<PAGE> 16
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be diminished in
the future; (ii) a substantial portion of the Company's cash flow from
operations will be required for the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for its
operations and other purposes; (iii) the Company may be substantially more
leveraged than certain of its competitors, which may place the Company at a
competitive disadvantage; (iv) the Company's substantial degree of leverage may
hinder its ability to adjust rapidly to changing market conditions and could
make it more vulnerable in the event of a downturn in general economic
conditions or its business; and (v) substantially all of the Company's other
indebtedness will become due prior to the time the principal payment on the
Notes will become due.
The Company's ability to make scheduled payments of the principal of, or to
pay interest on, or to refinance, its indebtedness (including the Notes) and to
make scheduled payments under its lease obligations depends on its future
performance, which to a certain extent is subject to economic, financial,
competitive and other factors beyond its control. There can be no assurance,
however, that the Company's business will continue to generate sufficient cash
flow from operations in the future to service its debt. If unable to do so, the
Company may be required to refinance all or a portion of its existing debt,
including the Notes, to sell assets or to obtain additional financing. There can
be no assurance that any such refinancing or that any such sale of assets or
additional financing would be possible on terms reasonably favorable to the
Company.
AVAILABILITY OF 747-400 AIRCRAFT FINANCING
The Company has agreed to purchase 10 747-400 aircraft to be delivered
commencing in May 1998 through 2001. The aggregate value of the 10 747-400
aircraft, four installed engines per aircraft and five spare engines, based on
list prices, is approximately $1.7 billion. While the Company currently
anticipates that it will be able to obtain the necessary financing on a timely
basis to pay the Pre-Delivery Deposits for the 747-400 aircraft as they become
due and the total purchase price for the 747-400 aircraft to be acquired, there
can be no assurance that the Company will be able to obtain sufficient financing
or, if such financing is available, that it will be available on commercially
reasonable terms. If it is unable to obtain sufficient financing, the Company
could be required to modify its expansion plans, incur higher than anticipated
financing costs or incur various penalty payments under the Boeing Purchase
Contract, which could have a material adverse effect on the Company.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS; EFFECTIVE
SUBORDINATION OF THE NOTES TO SECURED INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, impose restrictions on the ability of a subsidiary
to pay dividends or make certain payments to the Company, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
certain of the Company's other debt instruments contain other more restrictive
financial and operating covenants. See "Description of Certain Indebtedness" and
"Description of Notes -- Certain Covenants." The Company's ability to meet such
financial ratios and tests may be affected by events beyond its control. There
can be no assurance that the Company will meet such tests. A breach of any of
these covenants could result in a default under certain debt instruments and/or
the Indenture. Upon the occurrence of an event of default under the various debt
instruments, the lenders thereunder could elect to declare all amounts
outstanding thereunder, together with accrued interest, to be immediately due
and payable. If the Company was unable to repay those amounts, such lenders
could proceed against the collateral granted to them to secure that
indebtedness. If such lenders accelerate the payment of such indebtedness, there
can be no assurance that the assets of the Company would be sufficient to repay
in full such indebtedness and the other indebtedness of the Company, including
the Notes.
The Notes are unsecured and thus will be effectively subordinated in right
of payment to any secured indebtedness of the Company to the extent of the value
of any assets securing such indebtedness. Following
10
<PAGE> 17
the Offering and the Refinancings, substantially all of the indebtedness of the
Company, other than the Notes, will be secured by liens on substantially all of
the fixed assets of the Company. As of June 30, 1997, on a pro forma basis after
giving effect to the Offering and the Refinancings and the application of the
proceeds thereof, the Company would have had approximately $595.0 million of
consolidated secured indebtedness outstanding. In bankruptcy, the holder of a
security interest with respect to any assets of the Company will be entitled to
have the proceeds of such assets applied to the payment of such holder's claim
before the remaining proceeds, if any, are applied to the claims of the holders
of the Notes. In addition to indebtedness of the Company outstanding on the date
of original issuance of the Old Notes, the Indenture permits the Company and its
Subsidiaries (as defined) to incur additional secured indebtedness under certain
circumstances. See "Description of the Notes -- Certain Covenants -- Limitation
on Incurrence of Additional Indebtedness."
COMPETITION
The market for air cargo services is highly competitive. A number of
airlines currently provide services for themselves and for others, similar to
the services offered by the Company, and new airlines may be formed that would
also compete with the Company. Such airlines may have substantially greater
financial resources than the Company. The Company believes that the most
important bases for competition in the air cargo business are the range, payload
and cubic capacities of the aircraft and the price, flexibility, quality and
reliability of the cargo transportation service. The ability of the Company to
achieve its strategic plan depends upon its success in convincing major
international airlines that outsourcing some portion of their air cargo business
remains more cost-effective than undertaking cargo operations with their own
incremental capacity and resources and the ability of the Company to obtain
higher ACMI Contract rates in connection with the 747-400 aircraft compared to
those currently obtained in connection with existing 747-200 aircraft.
DEPENDENCE ON SIGNIFICANT CUSTOMERS; GEOGRAPHIC CONCENTRATION
In 1996, China Airlines, KLM and Lufthansa accounted for approximately 34%,
12% and 11%, respectively, of the Company's total operating revenues. The
Company believes that its relationships with its customers are mutually
satisfactory, as evidenced by the fact that in the last three years it has
renewed eight ACMI Contracts with customers including China Airlines and KLM,
and entered into six new ACMI Contracts with its existing customers. However,
there can be no assurance that any of these agreements will be renewed upon
their expiration. The scheduled termination dates for the current ACMI Contracts
range from 1997 to 2002. See "Business -- ACMI Contracts." The failure to renew
any of these agreements, or the renewal of any of these agreements on terms less
favorable to the Company, could have a material adverse effect on the Company.
Additionally, the Company has concentrated a significant percentage of its
resources in routes between the United States and Asia and the Pacific Rim and
between Europe and Asia and the Pacific Rim. Any economic decline or any
military or political disturbance in these areas of the world might prevent or
interfere with the Company's ability to provide service to its Asian and Pacific
Rim destinations and could have a material adverse effect on the Company.
OPERATIONS DEPENDENT UPON LIMITED FLEET
The Boeing 747-200 aircraft in the existing fleet are typically dedicated
by the Company to the service of one or more ACMI Contracts. Although the
Company typically utilizes spare aircraft, in the event one or more of the
Company's aircraft were to be lost or out of service for an extended period of
time, the Company may have difficulty fulfilling its obligations under one or
more of its ACMI Contracts. While the Company believes that its insurance
coverage is sufficient to cover the replacement cost of an aircraft, there can
be no assurance that suitable replacement aircraft could be located or that, if
located, the Company could contract for the services of such an aircraft without
undertaking substantial costs therefor. While the Company carries aircraft hull
physical damage and third party liability insurance, any extended interruption
of the Company's operations due to the loss of an aircraft could have a material
adverse effect on the Company.
11
<PAGE> 18
UTILIZATION OF FUTURE AIRCRAFT
Although the Company generally does not agree to acquire aircraft unless
such aircraft can service existing needs or the Company anticipates that it will
have obtained additional ACMI Contracts for the aircraft to service, the Company
does not have long-term ACMI Contracts with respect to its two most recently
acquired aircraft and with respect to three of the aircraft being subleased from
Federal Express Corporation ("FedEx"). In addition, the Company has not yet
obtained ACMI Contracts to be serviced by the three 747-200 aircraft owned but
not yet modified from passenger to freighter configuration or for the 747-400
aircraft scheduled to be delivered commencing in May 1998. Although the Company
intends to have new ACMI Contracts in place for each of these three aircraft not
yet converted from passenger to freighter configuration by the time they are
placed in service, to the extent arrangements for such contracts have not been
made at such time, the Company would seek other revenue opportunities for such
aircraft which it believes are generally available, although there can be no
assurance that such opportunities will be available at such time. The failure to
generate adequate revenue from new aircraft pending the entering into of ACMI
Contracts, or the failure to secure ACMI Contracts for such aircraft as well as
the aircraft currently in service in the Company's fleet, could have a material
adverse effect on the Company. See "Business -- Aircraft."
AGING AIRCRAFT
The Company's fleet currently consists of 24 Boeing 747-200 aircraft,
including the one aircraft being modified and the two aircraft subject to leases
to a third party, all of which were manufactured between 1974 and 1986.
Manufacturer Service Bulletins ("Service Bulletins") and the Federal Aviation
Administration's ("FAA") Airworthiness Directives ("Directives") issued under
its "Aging Aircraft" program cause 747-200 aircraft operators to be subject to
extensive aircraft examinations and require Boeing 747-200 aircraft to undergo
structural inspections and modifications to address problems of corrosion and
structural fatigue at specified times. For instance, in November 1994, Boeing
issued Nacelle Strut Modification Service Bulletins which have been converted
into Directives by the FAA. Thirteen of the Company's 747-200 aircraft will have
to be brought into compliance with such Directives within the next three years
at an estimated aggregate cost of approximately $6.5 million. Other Directives
have been issued that require inspections and minor modifications to Boeing
747-200 aircraft. It is possible that additional Service Bulletins or Directives
applicable to the types of aircraft or engines included in the Company's fleet
could be issued in the future. The cost of compliance with Directives and of
following Service Bulletins cannot currently be estimated, but could be
substantial.
EMPLOYEE RELATIONS
The Company believes it operates with lower incremental personnel costs
than many established international airlines and cargo carriers, principally due
to the flexibility and high productivity of its workforce, arising in part as a
result of the Company's emphasis on providing financial incentives to its
personnel that are focused on the Company's financial performance rather than on
base wages. The Company's employees are not currently subject to a collective
bargaining agreement; however, many airline industry employees are subject to
such agreements and the Company's employees have been solicited from time to
time by union representatives seeking to organize them. There can be no
assurance that the Company will maintain these advantages for any extended
period of time.
REGULATORY MATTERS
Under the Federal Aviation Act of 1958, as amended and recodified (the
"Aviation Act"), the Department of Transportation ("DOT") and the FAA exercise
regulatory authority over the Company. The Company has obtained the necessary
authority to conduct flight operations, including a Certificate of Public
Convenience and Necessity from the DOT and an Air Carrier Operating Certificate
from the FAA; however, the continuation of such authority is subject to
continued compliance by the Company with applicable statutes, rules and
regulations pertaining to the airline industry, including any new rules and
regulations that may be adopted in the future. All air carriers are subject to
strict scrutiny and inspection by FAA officials and to the imposition of new
regulatory requirements that can negatively affect their operations. DOT and FAA
12
<PAGE> 19
approval is required for each of the Company's long-term ACMI Contracts. In
addition, FAA approval is required for each of the Company's short-term seasonal
ACMI Contracts. In order to provide service to foreign points, the Company must
also obtain permission for such operations from the applicable foreign
governments and certain airport authorities. See "Business -- Governmental
Regulation." In addition, DOT regulates the transportation of hazardous
materials by air cargo carriers. Although customers are required to label
shipments that contain hazardous materials, customers may not inform the Company
when their cargo includes hazardous materials. Although the Company has never
had such an incident, the transportation of unmanifested hazardous materials
could result in fines, penalties, banning hazardous materials from Company
aircraft for a period of time, possible damage to the Company's aircraft or
other liability.
CONTROL BY PRINCIPAL STOCKHOLDER
Michael A. Chowdry, the founder, Chief Executive Officer, President and
Chairman of the Board of Directors of the Company, beneficially owns
approximately 59.3% of the outstanding common stock of the Company. As a result,
Mr. Chowdry will be able to direct and control the policies of the Company,
including the election of directors and mergers, sales of assets and other such
transactions.
DEPENDENCE UPON KEY MANAGEMENT PERSONNEL
The Company believes that its success in acquiring ACMI Contracts and
managing its operations will depend substantially upon the continued services of
the present executive officers of the Company. The loss of the services of any
of such persons could have a material adverse effect on the Company. The Company
has employment agreements with such officers, which are generally terminable at
any time by either party.
SEASONALITY OF CUSTOMERS' CARGO OPERATIONS
The cargo operations of the Company's airline customers are seasonal in
nature, with peak activity traditionally in the second half of the year, and
with a significant decline occurring in the first quarter. As a result, the
Company's revenues typically decline in the first quarter of the year as its
minimum contractual aircraft utilization level temporarily decreases. The
Company's ACMI Contracts typically allow the Company's customers to cancel a
maximum of 5% of the guaranteed hours of aircraft utilization over the course of
a year. The Company's customers most often exercise such cancellation options
early in the first quarter of the year, when the demand for air cargo capacity
has been historically low or following the seasonal holiday peak in the latter
part of the fourth quarter. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
CHANGE OF CONTROL
Upon a Change of Control, the Company is required to offer to repurchase
all outstanding Notes at 101% of the principal amount thereof plus accrued
interest to the date of repurchase. The source of funds for any such repurchase
would be the Company's available cash or cash generated from other sources.
However, there can be no assurance that sufficient funds would be available at
the time of any Change of Control to make any required repurchases of Notes
tendered or, if applicable, that restrictions in certain of the Company's debt
instruments would permit the Company to make such required repurchases. See
"Description of Certain Indebtedness," "Description of Amended Aircraft Credit
Facility," "Description of AFL II Term Loan Facility" and "Description of
Notes -- Change of Control."
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The New Notes are a new issue of securities, have no
established trading market, and may not be widely distributed. The Company does
not intend to list the New Notes on any national securities exchange or to seek
the admission thereof to trading on any automated quotation system. No assurance
can be given that an active public or other market will develop for the New
Notes or as to the liquidity of or the trading market for the New Notes. If a
trading market does not develop or is not maintained, holders of the New Notes
may
13
<PAGE> 20
experience difficulty in reselling the New Notes or may be unable to sell them
at all. If a market for the New Notes develops, any such market may be
discontinued at any time. If a public trading market develops for the New Notes,
future trading prices of the New Notes will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities, and the price at which the
holders of New Notes will be able to sell such New Notes is not assured and the
New Notes could trade at a premium or discount to their purchase price or face
value. Depending on prevailing interest rates, the market for similar securities
and other factors, including the financial condition of the Company, the New
Notes may trade at a discount from their principal amount.
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any holder unless they have been
registered or qualified for sale in such jurisdictions or any exemption from
registration or qualifications is available and the requirements of such
exemption have been satisfied. The Company does not currently intend to register
or qualify the resale of the New Notes in any such jurisdictions. However, an
exemption is generally available for sales to registered broker-dealers and
certain institutional buyers. Other exemptions under applicable state securities
laws may also be available.
14
<PAGE> 21
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997 (i) on an actual basis and (ii) on a pro forma basis for the Offering
of the Old Notes, the Refinancings and, in each case, the application of the
proceeds therefrom. The information below is unaudited and should be read in
conjunction with the consolidated financial statements, including the notes
thereto, incorporated in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------
PRO FORMA
FOR OFFERING
ACTUAL AND REFINANCINGS
-------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments........... $ 89,923 $177,773(1)(2)
======== ========
Debt:
Aircraft Credit Facility.................................. $219,987 $ 65,958(2)(3)
AFL Term Loan Facility.................................... 185,000 185,000
AFL II Term Loan Facility................................. -- 185,000(2)
Other secured aircraft indebtedness....................... 55,700 55,700
Equipment Notes (4)....................................... 100,000 100,000
Old Notes................................................. -- 150,000
Other debt................................................ 29,194 6,194
-------- --------
Total debt........................................ 589,881 747,852
Stockholders' equity........................................ 220,393 220,393
-------- --------
Total capitalization.............................. $810,274 $968,245
======== ========
</TABLE>
- ---------------
(1) Reflects cash proceeds from the Refinancings net of assumed fees and
expenses.
(2) Reflects the application of the net proceeds from the $185.0 million AFL II
Term Loan Facility used to refinance assets securing $168.3 million drawn
under the Aircraft Credit Facility, the balance of such net proceeds was
paid in cash.
(3) Following the Refinancings, the Aircraft Credit Facility will have a
committed amount of $250.0 million, of which $184.0 million will be undrawn.
(4) For a description of the terms of the Equipment Notes, see "Description of
Certain Indebtedness."
15
<PAGE> 22
SELECTED FINANCIAL DATA
The selected financial data presented below have been derived from the
consolidated financial statements of the Company. The data for the years ended
December 31, 1996, 1995, 1994 and 1993, and for the period from April 22, 1992
(inception) through December 31, 1992, were derived from the Company's audited
consolidated financial statements and related notes, and other financial
information included herein. The data for the six months ended June 30, 1997 and
1996, were derived from the Company's unaudited consolidated financial
statements, which, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The results of operations for
the interim periods presented are not indicative of the results that may be
expected for the full year.
<TABLE>
<CAPTION>
THE COMPANY
AND
PREDECESSORS(1) THE COMPANY
--------------- ----------------------------------------------------------------
APRIL 22, 1992
THROUGH SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, JUNE 30,
--------------- ------------------------------------------ -------------------
1992 1993(1) 1994 1995 1996 1996 1997
--------------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total operating revenues.................. $ 19,568 $ 41,263 $102,979 $171,267 $315,659 $131,263 $175,951
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Flight crew salaries and benefits....... -- 4,243 8,887 14,584 25,020 10,866 13,947
Other flight-related expenses........... 5,751 7,844 9,270 12,361 27,404 12,095 13,722
Maintenance............................. 2,636 8,052 24,517 42,574 84,305 32,380 55,011
Aircraft and engine rentals............. -- 1,758 14,044 22,902 27,341 11,673 15,485
Fuel and ground handling................ -- 4,575 9,747 5,027 10,554 4,248 7,128
Depreciation and amortization........... 2,609 5,647 7,451 14,793 25,515 10,093 19,174
Other................................... 3,829 8,698 15,169 16,352 27,457 11,831 17,896
Write-off of capital investment and
other................................. -- -- -- -- -- -- 27,100
-------- -------- -------- -------- -------- -------- --------
Total operating expenses.......... 14,825 40,817 89,085 128,593 227,596 93,186 169,463
-------- -------- -------- -------- -------- -------- --------
Operating income.......................... 4,743 446 13,894 42,674 88,063 38,077 6,488
Other income (expense):
Interest income......................... 29 244 490 2,025 7,102 2,751 3,491
Interest expense........................ (4,746) (10,101) (10,784) (18,460) (35,577) (15,450) (23,647)
Other................................... (9,500) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total other income (expense)...... (14,217) (9,857) (10,294) (16,435) (28,475) (12,699) (20,156)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes......... (9,474) (9,411) 3,600 26,239 59,588 25,378 (13,668)
Income tax benefit (expense).............. 360 1,388 (14) (8,408) (21,750) (9,138) 4,989
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary item... (9,114) (8,023) 3,586 17,831 37,838 16,240 (8,679)
Extraordinary Item: Gain from
extinguishment of debt, net of
applicable taxes of $9,622.............. -- -- -- -- -- -- 16,740
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................. $ (9,114) $ (8,023) $ 3,586 $ 17,831 $ 37,838 $ 16,240 $ 8,061
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2)................................. $ 7,352 $ 6,093 $ 21,345 $ 57,467 $113,578 $ 48,170 $ 25,662
Ratio of EBITDA to interest expense(2).... 1.55x 0.60x 1.98x 3.11x 3.19x 3.12x 1.09x
Ratio of earnings to fixed charges(3)..... --(4) --(4) 1.21x 1.86x 2.11x 2.22x --(4)
OPERATING DATA:
Total block hours flown(5)................ NA 7,907 19,049 33,265 59,445 25,198 32,984
Revenue per block hour.................... NA $ 5,219 $ 5,406 $ 5,149 $ 5,310 $ 5,209 $ 5,334
EBITDA per block hour(2).................. NA $ 771 $ 1,121 $ 1,728 $ 1,911 $ 1,912 $ 778
Average aircraft operated(6).............. NA 2.1 5.2 7.7 14.7 12.4 18.4
Total aircraft (at end of period)......... 2 3 6 10 17 14 20
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments............................. $ 13,323 $ 6,198 $ 10,524 $ 96,990 $124,663 $149,379 $ 89,923
Net property and equipment................ 117,680 114,255 131,237 319,751 584,270 425,935 748,981
Total assets.............................. 133,410 125,005 162,731 447,323 773,707 623,540 901,761
Total debt................................ 132,438 130,690 163,615 351,261 484,429 391,447 589,881
Stockholders' equity (deficit)............ (11,316) (19,339) (15,753) 68,715 212,373 190,241 220,393
</TABLE>
- ---------------
(1) For the period April 22, 1992 (inception) through December 31, 1992, the
financial information for the Company, which was formed in August 1992, has
been combined with the financial information of the
16
<PAGE> 23
Company's predecessors in a manner similar to a pooling-of-interests
transaction. The Company received its required FAA and DOT operating
certificates in February 1993 and began operations under its own name at
that time. Prior to 1993, financial results reflect the costs associated
with the formation of the Company and the operating results from the
ownership of two Boeing 747 aircraft which were leased to another carrier
for operation by such carrier pursuant to leases with China Airlines
beginning in April 1992 and November 1992, respectively, as well as to the
United States military during November and December 1992.
(2) EBITDA represents income (loss) before income taxes, depreciation and
amortization, and total other income (expense). EBITDA is not a recognized
measure of performance under GAAP and should not be considered in isolation
or as an alternative to, or more meaningful than, operating income or
operating cash flows prepared in accordance with GAAP as an indicator of the
Company's operating performance or liquidity.
(3) In calculating the ratio of earnings to fixed charges, earnings consists of
income (loss) prior to income tax benefit (expense) and fixed charges. Fixed
charges consist of interest expense (including amounts capitalized),
amortization of debt issuance costs and one-third of rental payments on
operating leases (such interest having been deemed by the Company to
represent the interest portion of such payments).
(4) Earnings were insufficient to cover fixed charges by $16,235,000, $9,411,000
and $10,594,000, respectively, for the six months ended June 30, 1997, the
year ended December 31, 1993 and the period April 22, 1992 (inception)
through December 31, 1992.
(5) Total block hours flown for an aircraft represents the elapsed time from the
moment the aircraft first moves at the point of origin to the time it comes
to rest at its destination.
(6) Average aircraft operated represents the total number of aircraft operated
during each day of a given period divided by the number of days in such
period.
17
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company, through its predecessors, began its operations on April 22,
1992 with one Boeing 747-200 in the service of China Airlines Ltd. and expanded
its operations to a second Boeing 747-200 in November 1992. These operations
were undertaken on behalf of the Company by another carrier utilizing pilot
crews, dispatch facilities, maintenance operations and other services provided
by such carrier. As a result, the Company's operations prior to 1993 were
primarily limited to aircraft leasing and start-up activities. The Company
initiated cargo services under the name of Atlas Air, Inc. in February 1993. The
Company's fleet currently consists of 21 Boeing 747-200 aircraft in freighter
service, one 747-200 aircraft undergoing passenger to freighter modification at
Boeing and two 747-200 passenger aircraft under lease to a third party.
The cargo operations of the Company's airline customers are seasonal in
nature, with peak activity occurring traditionally in the second half of the
year, and with a significant decline occurring in the first quarter. This
decline in cargo activity is largely due to the decrease in shipping that occurs
following the December and January holiday seasons associated with the
celebration of Christmas and the Chinese New Year. Certain of the Company's
customers have, in the past, elected to use that period of the year to exercise
their contractual options to cancel a limited number (generally not more than 5%
per year) of guaranteed hours with the Company, and are expected to continue to
do so in the future. As a result, the Company's revenues typically decline in
the first quarter of the year as its contractual aircraft utilization level
temporarily decreases. The Company seeks to schedule, to the extent possible,
its major aircraft maintenance activities during this period to take advantage
of any unutilized aircraft time.
The aircraft acquisitions, lease arrangements and modification schedule are
described in Note 1 of the Company's December 31, 1996 audited consolidated
financial statements. The timing of when an aircraft enters the Company's fleet
can affect not only annual performance, but can make quarterly results vary,
thereby affecting the comparability of operations from period to period.
The tables below set forth selected financial and operating data for the
first and second quarters of 1997 and 1996, and the four quarters of the years
ended December 31, 1996, 1995 and 1994 (dollars in thousands).
<TABLE>
<CAPTION>
1997 1996
------------------------------- ------------------------------
1ST 2ND 1ST 2ND
QUARTER QUARTER CUMULATIVE QUARTER QUARTER CUMULATIVE
------- -------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total operating revenues........ $82,049 $ 93,902 $175,951 $58,649 $72,614 $131,263
Operating expenses.............. 64,907 104,556 169,463 43,239 49,947 93,186
Operating income................ 17,142 (10,654) 6,488 15,410 22,667 38,077
Other income (expense).......... (9,248) (10,908) (20,156) (5,717) (6,982) (12,699)
Net income...................... 5,013 3,048 8,061 6,203 10,037 16,240
Block hours..................... 15,443 17,541 32,984 11,125 14,073 25,198
Average aircraft operated....... 17.2 19.5 18.4 10.8 14.0 12.4
Operating margin................ 20.9% (11.4)% 3.7% 26.3% 31.2% 29.0%
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER CUMULATIVE
------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Total operating revenues............... $58,649 $72,614 $79,681 $104,715 $315,659
Operating expenses..................... 43,239 49,947 59,635 74,775 227,596
Operating income....................... 15,410 22,667 20,046 29,940 88,063
Other income (expense)................. (5,717) (6,982) (7,207) (8,569) (28,475)
Net income............................. 6,203 10,037 8,201 13,397 37,838
Block hours............................ 11,125 14,073 15,444 18,803 59,445
Average aircraft operated.............. 10.8 14.0 15.4 18.4 14.7
Operating margin....................... 26.3% 31.2% 25.2% 28.6% 27.9%
</TABLE>
18
<PAGE> 25
<TABLE>
<CAPTION>
1995
-------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER CUMULATIVE
------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Total operating revenues............... $28,938 $38,418 $47,769 $ 56,142 $171,267
Operating expenses..................... 25,397 28,370 34,844 39,982 128,593
Operating income....................... 3,541 10,048 12,925 16,160 42,674
Other income (expense)................. (3,330) (4,287) (4,805) (4,014) (16,435)
Net income............................. 50 3,861 5,568 8,352 17,831
Block hours............................ 5,812 7,568 9,076 10,809 33,265
Average aircraft operated.............. 6.1 6.9 8.2 9.4 7.7
Operating margin....................... 12.2% 26.2% 27.1% 28.8% 24.9%
</TABLE>
<TABLE>
<CAPTION>
1994
-------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER CUMULATIVE
------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Total operating revenues............... $12,177 $20,802 $34,271 $ 35,729 $102,979
Operating expenses..................... 14,094 17,743 27,400 29,848 89,085
Operating income (loss)................ (1,917) 3,059 6,871 5,881 13,894
Other income (expense)................. (2,399) (2,700) (2,635) (2,560) (10,294)
Net income (loss)...................... (4,316) 346 4,235 3,321 3,586
Block hours............................ 2,415 3,789 6,226 6,619 19,049
Average aircraft operated.............. 3.8 5.0 5.8 6.0 5.2
Operating margin....................... (15.7)% 14.7% 20.0% 16.5% 13.5%
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Operating Revenues and Results of Operations. Total operating revenues for
the quarter ended June 30, 1997 increased to $93.9 million compared to $72.6
million for the same period in 1996, an increase of approximately 29%. The
average number of aircraft in the Company's fleet during the second quarter of
1997 was 19.5 compared to 14.0 during the same period in 1996. Total block hours
for the second quarter of 1997 were 17,541 compared to 14,073 for the same
period in 1996, an increase of approximately 25%, principally reflecting the
increase in the size of the Company's fleet. Revenue per block hour increased by
approximately 4% to $5,353 for the second quarter of 1997 compared to $5,160 for
the second quarter of 1996, primarily as a result of an increase in
higher-yielding charter operations.
In the second quarter of 1997, the Company recorded a largely non-cash
charge to earnings of $27.1 million, which included the write-off of the
Company's remaining balance sheet investment in the five aircraft sub-leased
from FedEx, as well as the establishment of certain reserves associated with
costs necessary to return the aircraft in the first quarter of 1998 and other
non-recurring items. This resulted in an operating loss for the second quarter
of $10.7 million compared to operating income of $22.7 million for the second
quarter of 1996. Excluding this charge, operating income for the second quarter
of 1997 decreased approximately 27% to $16.4 million from $22.7 million for the
second quarter of 1996, principally due to the impact of maintenance costs
associated with the aircraft sub-leased from FedEx. This charge equalled $17.2
million on an after-tax basis and was virtually offset by the realization of an
extraordinary after-tax gain of $16.7 million in the second quarter of 1997,
resulting from the receipt of a prepayment incentive credit associated with the
refinancing of approximately $228 million of indebtedness during the quarter.
Net income of $10.0 million for the second quarter of 1996 declined to net
income of $3.0 million for the second quarter of 1997.
Total operating revenues for the six months ended June 30, 1997 were $176.0
million compared to $131.3 million for the year-earlier period, an increase of
approximately 34%. The average number of aircraft in the Company's fleet during
the six months ended June 30, 1997 was 18.4 compared to 12.4 during the same
period in 1996. Total block hours for the first six months of 1997 were 32,984
compared to 25,198 for the same period in 1996, an increase of approximately
31%, principally reflecting the increase in the size of the Company's fleet.
Revenue per block hour increased by approximately 2% to $5,334 for the first
half of 1997
19
<PAGE> 26
compared to $5,209 for the year-earlier period, primarily as a result of an
increase in higher-yielding charter operations. Operating income of $38.1
million for the first half of 1996 decreased to $6.5 million for the first half
of 1997, primarily due to the charge to earnings in the second quarter of 1997
discussed above. Excluding this charge, operating income was $33.6 million for
the first half of 1997 compared to $38.1 million for the year-earlier period, or
a decrease of approximately 12%. There were an average of 4.5 aircraft
sub-leased from FedEx operating in the 1997 period compared to an average of 0.5
aircraft sub-leased from FedEx operating in the 1996 period, with respect to
which maintenance costs are substantially higher than for the rest of the
Company's fleet. In addition, the Company incurred $1.2 million of costs in the
first quarter of 1997 related to the return of two leased aircraft to their
respective lessors. As discussed above for the second quarter of 1997, the
realization of an after-tax extraordinary gain of $16.7 million for the most
part offset the after-tax charge of $17.2 million with respect to the impact on
net income for the first half of 1997. For the six months ended June 30, 1997,
net income was $8.1 million compared to $16.2 million for the year-earlier
period.
Operating expenses. The Company's principal operating expenses include
flight crew salaries and benefits; other flight-related expenses; maintenance;
aircraft and engine rentals; fuel costs and ground handling; depreciation and
amortization; and selling, general and administrative expenses.
Flight crew salaries and benefits include all such expenses for the
Company's pilot work force. Flight crew salaries and benefits increased to $7.1
million in the second quarter of 1997 compared to $5.9 million in the same
period of 1996, due to increases in the number of aircraft in the Company's
fleet and aircraft block hours. While actual expense increased by approximately
21% during the second quarter of 1997, on a block hour basis this expense
declined by 3% to $406 per block hour for the second quarter of 1997 from $418
per block hour for the same period in 1996. For the first six months of 1997,
actual expense increased by approximately 28%, from $10.9 million to $13.9
million, but on a block hour basis declined to $423 per block hour from $431 per
block hour for the same period in 1996, or approximately 2%. These reductions of
approximately 3% and 2%, respectively, were due to increased efficiency in
staffing levels and scheduling resulting from the increased level of operations.
Other flight-related expenses include hull and liability insurance on the
Company's fleet of Boeing 747-200 aircraft, crew travel and meal expenses,
initial and recurring crew training costs and other expenses necessary to
conduct its flight operations.
Other flight-related expenses increased to $7.4 million in the second
quarter of 1997 compared to $6.9 million in the second quarter of 1996, and to
$13.7 million in the six months ended June 30, 1997 compared to $12.1 million in
the six months ended June 30, 1996, or approximately 6% and 13%, respectively,
due primarily to the larger fleet size. This was partially offset by a reduction
in the Company's aircraft hull and liability insurance rates based on its
increased size and favorable operating history. As a result of this and other
operating efficiencies, on a block hour basis, other flight-related expenses
declined by approximately 7% to $419 per block hour for the second quarter of
1997 compared to $449 per block hour for the same period in 1996, and by
approximately 13% to $416 per block hour for the six months ended June 30, 1997
compared to $480 per block hour for the same period in 1996.
Maintenance expenses include all expenses related to the upkeep of the
aircraft, including maintenance, labor, parts, supplies and maintenance
reserves. The costs of C Checks, significant maintenance work every 18 months,
and D checks, major maintenance events, and engine overhauls not otherwise
covered by maintenance reserves are capitalized as they are incurred and
amortized over the life of the maintenance event. In addition, in January 1995
the Company contracted with KLM Royal Dutch Airlines ("KLM") for a significant
part of its regular maintenance operations and support on a fixed cost per
flight hour basis. Effective October 1996, certain aircraft engines were
additionally accepted into the GE engine maintenance program, also on a fixed
cost per flight hour basis, pursuant to a 10 year maintenance agreement.
Maintenance expense increased to $31.7 million in the second quarter of
1997 from $17.7 million in the same period of 1996, and to $55.0 million in the
six months ended June 30, 1997 from $32.4 million in the six months ended June
30, 1996, or approximately 79% and 70%, respectively, partially due to the
increase in the Company's average fleet size and partially due to the higher
maintenance costs with respect to the aircraft sub-leased from FedEx. On a block
hour basis, maintenance expense increased by approximately 44% and
20
<PAGE> 27
30%, respectively, primarily due to higher maintenance costs associated with the
aircraft sub-leased from FedEx.
Aircraft and engine rentals include the cost of leasing aircraft and spare
engines, as well as the cost of short-term engine leases required to replace
engines removed from the Company's aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease costs.
Aircraft and engine rentals were $7.7 million in the second quarter of 1997
compared to $5.8 million in the same period of 1996, and were $15.5 million in
the first half of 1997 compared to $11.7 million in the first half of 1996, or
an increase of approximately 33% for both comparative periods. During the second
quarter of 1997 and for the first half of 1997, the Company leased one
additional aircraft as compared to the year-earlier periods. Engine rentals were
comparable for the same year over year periods.
Because of the nature of the Company's ACMI contracts with its airline
customers, under which the Company is responsible only for the ownership cost
and maintenance of the aircraft and for supplying aircraft crews and insurance,
the Company's airline customers bear all other operating expenses, including
fuel and fuel servicing; marketing costs associated with obtaining cargo;
airport cargo handling; landing fees; ground handling; aircraft push-back and
de-icing services; and specific cargo and mail insurance. As a result, the
Company incurs fuel and ground handling expenses only when it operates on its
own behalf, either in scheduled services, for ad hoc charters or for ferry
flights. Fuel expenses for the Company's non-ACMI contract services include both
the direct cost of aircraft fuel as well as the cost of delivering fuel into the
aircraft. Ground handling expenses for non-ACMI contract service include the
costs associated with servicing the Company's aircraft at the various airports
to which it operates as well as other direct flight related costs.
Fuel and ground handling costs increased to $3.9 million for the second
quarter of 1997 compared to $3.0 million for the second quarter of 1996, and to
$7.1 million for the six months ended June 30, 1997 compared to $4.2 million for
the six months ended June 30, 1996, or approximately 31% and 68%, respectively.
This was due to the relative increase in scheduled service, charter and other
non-ACMI block hours to 626 block hours in the second quarter of 1997 from 509
block hours in the year-earlier period, and to 1,242 block hours for the first
half of 1997 from 776 block hours in the first half of 1996. In addition, fuel
costs have increased year over year for the same periods.
Depreciation and amortization expense includes depreciation on aircraft,
spare parts and ground equipment, and the amortization of capitalized major
aircraft maintenance and engine overhauls.
Depreciation and amortization expense increased to $9.7 million in the
second quarter of 1997 from $5.2 million in the same period of 1996, and to
$19.2 million in the first half of 1997 from $10.1 million in the first half of
1996, or approximately 86% and 90%, respectively. This increase reflects an
increase of approximately 50% in owned aircraft, approximately 100% in spare
engines and an approximate four-fold increase in spare parts for the second
quarter of 1997 and for the first half of 1997 over the same periods in 1996. In
addition, Other Revenues include $0.4 million and $0.7 million of depreciation
for the second quarter of 1997 and the first half of 1997, respectively,
associated with the net lease of two aircraft which are currently in passenger
configuration.
Other operating expenses include salaries, wages and benefits for all
employees other than pilots; accounting and legal expenses; supplies; travel and
meal expenses, excluding those of the aircraft crews; commissions; and other
miscellaneous operating costs.
Other operating expenses increased to $9.9 million in the second quarter of
1997 from $5.5 million in the same period of 1996, and $17.9 million for the
first half of 1997 from $11.8 million in the same period of 1996, or
approximately 82% and 51% respectively, reflecting the increase in the Company's
operations. On a block hour basis, these expenses increased to $566 per block
hour in the second quarter of 1997 from $389 per block hour in the same period
of 1996, and to $543 per block hour for the first half of 1997 from $470 in the
same period of 1996, or approximately 46% and 16%, respectively. This increase
in cost was due primarily to additional personnel and other resources necessary
to properly manage the Company's increased operations.
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Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income of $1.6 million for the second quarter of
1997 was comparable to the same period in 1996, primarily due to a comparable
short-term investment level for both periods. Interest income of $3.5 million
for the first six months of 1997 increased from $2.8 million for the first six
months of 1996 relative to the increase in short-term investments between the
periods. Interest expense increased to $12.5 million in the second quarter of
1997 from $8.6 million in the same period of 1996, and to $23.6 million in the
first half of 1997 from $15.5 million in the first half of 1996, or
approximately 45% and 53%, respectively, primarily resulting from an increase of
approximately 50% in financed flight equipment between these periods.
Income Taxes. Pursuant to the provisions of SFAS No. 109 "Accounting for
Income Taxes," the Company has recorded a tax provision based on tax rates in
effect during the period. Accordingly, the Company accrued taxes at the rate of
36.5% during the second quarter and the first half of 1997 and 36.0% during the
second quarter and first half of 1996. Due to significant capital costs, which
are depreciated at an accelerated rate for tax purposes, a majority of the
Company's tax provision in these periods is deferred.
Seasonality. The cargo operations of the Company's airline customers are
seasonal in nature, with peak activity occurring traditionally in the second
half of the year, and with a significant decline occurring in the first quarter.
This decline in cargo activity is largely due to the decrease in shipping that
occurs following the December and January holiday seasons associated with the
celebration of Christmas and the Chinese New Year. Certain of the Company's
customers have, in the past, elected to use that period of the year to exercise
their contractual options to cancel a limited number (generally not more than
5%) of cargo flights with the Company, and are expected to continue to do so in
the future. As a result, the Company's revenues typically decline in the first
quarter of the year as its minimum contractual aircraft utilization level
temporarily decreases. The Company seeks to schedule, to the extent possible,
its major aircraft maintenance activities during this period to take advantage
of any unutilized aircraft time.
In the first quarter of 1997, the Company's customers opted to take the
majority of their contractual cancellations, in contrast to last year's first
quarter, when very few cancellations occurred.
1996 Compared to 1995 Compared to 1994
Operating Revenues and Results of Operations. Total operating revenues for
the year ended December 31, 1996 increased to $315.7 million compared to $171.3
million for 1995, an increase of approximately 84%. The average number of
aircraft in the Company's fleet during 1996 was 14.7, compared to 7.7 during
1995. Total block hours for 1996 were 59,445 compared to 33,265 for 1995, an
increase of approximately 79%. Revenue per block hour increased by 3% to $5,310
for 1996 compared to $5,149 for the year-earlier period reflecting a slight
increase in the level of charter and scheduled service hours. While charter and
scheduled service activity provides a higher revenue rate per block hour, costs
are also higher due to fuel and ground handling costs which the Company must
bear. The Company's operating results improved from a $42.7 million operating
profit for 1995 to an operating profit of $88.1 million for 1996, or
approximately 106%. Net income of $17.8 million for 1995 improved to a net
income of $37.8 million for 1996, or approximately 112%.
Operating levels increased during the first quarter of 1996 as a result of
placing in service four additional aircraft. In January 1996, the Company placed
in service one aircraft upon completion of its cargo modification by Hong Kong
Aircraft Engineering Company ("HAECO"). Two additional aircraft were redelivered
to the Company upon completion of their modification by Boeing in March 1996.
Finally, at the close of the first quarter, the Company took delivery of the
first aircraft sub-leased from FedEx. During the third quarter of 1996, the
Company placed in service the next three aircraft sub-leased from FedEx. At the
end of the third quarter the Company took delivery of a Boeing 747-200 passenger
aircraft acquired from Thai Airways upon completion by Boeing of its
modification to cargo configuration. In the fourth quarter of 1996, a second
Boeing 747-200 passenger aircraft acquired from Thai Airways was placed in
service upon its delivery by Boeing subsequent to modification to cargo
configuration. At the end of 1996, two leased aircraft were taken out of service
for required maintenance prior to re-delivery to the lessors.
The Company's operating levels increased significantly during 1996 as a
result of these aircraft acquisitions. Block hours increased from 11,125 in the
first quarter of 1996 to 18,803 in the fourth quarter of
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1996, relative to the growth in fleet size from 10.8 to 18.4 aircraft for the
two periods. Total operating revenue increased from $58.6 million in the first
quarter to $104.7 million in the fourth quarter, representing slightly higher
block hour rates for the fourth quarter compared to those of the first quarter
of 1996, primarily due to the seasonality of the business of the Company's
customers. The Company achieved $29.9 million operating income and $13.4 million
net income in the fourth quarter of 1996, compared to $15.4 million operating
income and $6.2 million net income in the first quarter of 1996.
The Company's operating levels increased substantially during 1995 also as
a result of aircraft acquisitions. Block hours rose from 5,812 hours in the
first quarter of 1995 to 10,809 in the fourth quarter, as the average number of
aircraft in the Company's fleet grew from 6.1 aircraft to 9.4 aircraft over the
corresponding period. Total operating revenue increased from $28.9 million in
the first quarter of 1995 to $56.1 million in the fourth quarter, with the
Company's operating income increasing from $3.5 million to $16.2 million and its
net income improving from $0.1 million to $8.4 million over that same period.
For the year 1995, total block hours were 33,265 and the average fleet size was
7.7 aircraft. Total operating revenue was $171.3 million, operating income was
$42.7 million and net income was $17.8 million.
The Company's operating levels grew substantially in the last three
quarters of 1994, with block hours increasing from 2,415 hours in the first
quarter to 6,619 hours in the fourth quarter. Over the corresponding period,
total operating revenue increased from $12.2 million in the first quarter to
$35.7 million in the fourth quarter and the Company's operating results improved
from a first quarter operating loss of approximately $1.9 million to operating
profits of $6.9 million and $5.9 million in the third and fourth quarters,
respectively. In addition, the first quarter net loss of $4.3 million improved
to third and fourth quarter net incomes of $4.2 million and $3.3 million,
respectively. For the year 1994, total block hours were 19,049 and the average
fleet size was 5.2 aircraft. Total operating revenue was $103.0 million,
operating income was $13.9 million and net income was $3.6 million.
Operating Expenses. The Company's principal operating expenses include
flight crew salaries and benefits; other flight-related expenses; maintenance;
aircraft and engine rentals; fuel costs and ground handling; depreciation and
amortization; and selling, general and administrative expenses.
Flight crew salaries and benefits include all such expenses for the
Company's pilot work force. Expenses for flight crew salaries and benefits
increased to $25.0 million in 1996 from $14.6 million in 1995, primarily as a
result of the increase in the Company's fleet of Boeing 747 aircraft from an
average of 7.7 aircraft in 1995 to 14.7 aircraft in 1996, while aircraft block
hours increased from 33,265 to 59,445, or 79%, over such period. On a block hour
basis, this expense declined to $421 per hour for 1996 from $438 per hour for
1995, or approximately 4%, due to increased staffing and scheduling efficiencies
associated with increased operations.
Flight crew salaries and benefits increased to $14.6 million in 1995
compared to $8.9 million in 1994, due to an increase in the number of aircraft
in the Company's fleet and aircraft block hours. While actual expense increased
by approximately 64% during 1995 as a result of the increase in the number of
aircraft in the Company's fleet and aircraft block hours, on a block hour basis
this expense declined to $438 per hour for 1995 from $467 per hour for 1994.
This reduction of 6% was due to increased efficiency in staffing levels and
scheduling resulting from the increased level of operations.
Other flight-related expenses include hull and liability insurance on the
Company's fleet of Boeing 747 aircraft, crew travel and meal expenses, initial
and recurring crew training costs and other expenses necessary to conduct its
flight operations.
Other flight-related expenses rose to $27.4 million in 1996 from $12.4
million in 1995, or approximately 120%, primarily due to fleet expansion and
higher travel costs associated with operational difficulties related to the
aircraft sub-leased from FedEx. On a per block hour basis, other flight-related
expenses increased from $372 per block hour in 1995 to $461 per block hour in
1996, or approximately 24%.
Other flight-related expenses increased to $12.4 million in 1995 compared
to $9.3 million in 1994, or approximately 33%, due primarily to the larger fleet
size. On a block hour basis, this expense declined to $372 per hour for 1995
compared to $487 per hour for 1994. This reduction of 24% was due primarily to
reduced insurance and training costs on a block hour basis due to cost savings
created by the larger fleet.
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<PAGE> 30
Maintenance expenses include all expenses related to the upkeep of the
aircraft, including maintenance labor, parts, supplies and maintenance reserves.
The costs of C Checks, D Checks, engine overhauls and other modifications not
otherwise covered by maintenance reserves, are capitalized as they are incurred
and amortized over the life of the maintenance event. In addition, in January
1995 the Company contracted with KLM for a significant part of its regular
maintenance operations and support on a fixed cost per flight hour basis.
Effective October 1996, certain aircraft engines were additionally accepted into
the GE engine maintenance program, also on a fixed cost per flight hour basis,
pursuant to a 10 year maintenance agreement. See "Business -- Maintenance."
Maintenance expense increased to $84.3 million in 1996 from $42.6 million
in 1995, or approximately 98%, due to the increase in average fleet size and
certain increased costs associated with introducing the aircraft sub-leased from
FedEx into the Company's fleet and higher ongoing maintenance costs. The
aircraft sub-leased from FedEx are not covered by the Company's maintenance
contracts with KLM and GE described above. On a block hour basis, maintenance
expense increased by 11%, primarily due to parts support requirements associated
with scheduled and unscheduled maintenance events, and due to the maintenance
costs for the aircraft sub-leased from FedEx discussed above.
Maintenance expense increased to $42.6 million in 1995 from $24.5 million
in 1994, or approximately 74%. On a block hour basis, maintenance expense
decreased by 1% during 1995, primarily reflecting new hourly rates negotiated in
conjunction with the long-term maintenance agreement with KLM described above
that became effective as of January 1, 1995.
Aircraft and engine rentals include the cost of leasing aircraft and spare
engines, as well as the cost of short-term engine leases required to replace
engines removed from the Company's aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease costs.
Aircraft and engine rentals were $27.3 million in 1996 compared to $22.9
million in 1995, representing an increase of 19%. Lease costs in 1996 for the
aircraft sub-leased from FedEx represented $9.7 million of this increase, offset
by a $2.4 million decrease in sub-service rentals in 1996 compared to 1995. In
addition, the lease costs for one aircraft in 1995 exceeded the lease costs in
1996 by $1.6 million, due to the Company's purchase of the aircraft in the
second quarter of 1996. Engine rentals decreased by $1.8 million in 1996 to $1.8
million, due to the purchase of eight spare engines which reduced the Company's
need for leased engines.
Aircraft and engine rentals were $22.9 million in 1995 compared to $14.0
million in 1994, or an increase of approximately 63%. Maintenance events during
1995 resulted in substitute leased engine expense of $3.7 million, and the
Company incurred $2.8 million in sublease costs for aircraft necessary to
service contract obligations which could otherwise not be met with the Company's
fleet due principally to the scheduled major maintenance events which occurred
during the period. This increase was also due to the greater mix of leased
versus owned aircraft from an average of 3.2 leased aircraft in 1994 to an
average of 3.6 leased aircraft in 1995. The Company purchased three spare
engines in 1995 in order to ensure adequate future spares levels. In each of the
first three quarters of 1994, the Company added a leased aircraft to its fleet
as the Company entered into additional ACMI Contracts for dedicated aircraft.
Because of the nature of the Company's ACMI Contracts with its airline
customers, under which the Company is responsible only for the ownership cost
and maintenance of the aircraft and for supplying aircraft crews and insurance,
the Company's airline customers bear all other operating expenses, including
fuel and fuel servicing; marketing costs associated with obtaining cargo;
airport cargo handling; landing fees; ground handling; aircraft push-back and
de-icing services; and specific cargo and mail insurance. As a result, the
Company incurs fuel and ground handling expenses only when it operates on its
own behalf, either in scheduled services, for ad hoc charters or for ferry
flights. Fuel expenses for the Company's non-ACMI Contract services include both
the direct cost of aircraft fuel as well as the cost of delivering fuel into the
aircraft. Ground handling expenses for non-ACMI Contract service include the
costs associated with servicing the Company's aircraft at the various airports
to which it operates as well as other direct flight related costs.
Fuel and ground handling costs increased to $10.6 million in 1996 from $5.0
million in 1995, or approximately 110%. This increase was primarily due to an
increase in block hours for scheduled service,
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<PAGE> 31
charters, ferry and other from 1,070 in 1995 to 2,042 in 1996, or approximately
91%. In addition, the airline industry experienced a rise in fuel costs over the
period.
Fuel and ground handling costs decreased to $5.0 million in 1995 from $9.7
million in 1994, or approximately 48%. The decrease in total fuel and ground
handling costs was caused principally by a decline of 57% in scheduled service,
charter and non-revenue hours flown.
Depreciation and amortization expense includes depreciation on aircraft,
spare parts and ground equipment, and the amortization of capitalized major
aircraft maintenance and engine overhauls.
Depreciation and amortization expense increased to $25.5 million in 1996
from $14.8 million in 1995, reflecting the increase in the number of owned
aircraft in the Company's fleet. On a per block hour basis, this expense
decreased from $445 per block hour in 1995 to $429 per block hour in 1996, or
approximately 4%. The proportion of owned aircraft to leased aircraft was
relatively the same for 1996 as it was for 1995.
Depreciation and amortization expense increased to $14.8 million in 1995
from $7.5 million in 1994, or approximately 99%. This increase primarily
reflected the impact of the owned aircraft, engines and spare parts added to the
Company's fleet and to the amortization of capitalized engine overhaul costs.
Other operating expenses include salaries, wages and benefits for all
employees other than pilots; accounting and legal expenses; supplies; travel and
meal expenses, excluding those of the aircraft crews; commissions; and other
miscellaneous operating costs.
Other operating expenses increased to $27.5 million in 1996 from $16.4
million in 1995, or approximately 68%. On a block hour basis, Other operating
expenses decreased from $492 per block hour in 1995 to $462 per block hour in
1996, or approximately 6%, reflecting a lower rate of growth in the Company's
overhead as compared to its operational growth.
Other operating expenses increased to $16.4 million in 1995 from $15.2
million in 1994, or approximately 7.9%. On a block hour basis, these expenses
declined to $492 per hour in 1995 from $796 in 1994, or 38%, as overhead growth
did not match operational growth.
Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income increased to $7.1 million for 1996 from
$2.0 million in 1995. This increase was primarily due to the investment of $99.6
million of funds received from the secondary public offering in May 1996, as
well as funds retained from the Company's initial public offering ("IPO") in
August 1995. Interest expense increased to $35.6 million in 1996 from $18.5
million in 1995, resulting from the increase in financed flight equipment
between these periods.
Interest income increased to $2.0 million for 1995 from $0.5 million in
1994 due primarily to the receipt in August 1995 of approximately $67 million of
net proceeds from the IPO and to the receipt of approximately $100 million in
proceeds from the Company's issuance of the Equipment Notes in November 1995,
approximately two thirds of which was utilized immediately to make payments with
respect to the acquisition of additional aircraft. Interest expense increased to
$18.5 million in 1995 from $10.8 million in 1994, or approximately 71%,
substantially all of which relates to a net increase in indebtedness associated
with the acquisition of flight equipment.
Income Taxes. Pursuant to the provisions of SFAS No. 109, "Accounting for
Income Taxes," the Company has recorded a tax provision based on tax rates in
effect during the period. Accordingly, the Company accrued taxes at the rate of
36.5%, 32.0% and 0.4% in 1996, 1995 and 1994, respectively. Due to significant
capital costs, which are depreciated at an accelerated rate for tax purposes, a
majority of the Company's tax provision in both 1996 and 1995 is deferred. The
Company's tax provision in 1994 was not material.
Seasonality. The cargo operations of the Company's airline customers are
seasonal in nature, with peak activity traditionally in the second half of the
year, and with a significant decline occurring in the first quarter. This
decline in cargo activity is largely due to the decrease in shipping that occurs
following the December and January holiday seasons associated with the
celebration of Christmas and the Chinese New Year. Certain of the Company's
customers have, in the past, elected to use that period of the year to exercise
their contractual
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<PAGE> 32
options to cancel a limited number (generally not more than 5% per year) of
guaranteed hours with the Company, and are expected to continue to do so in the
future. As a result, the Company's revenues typically decline in the first
quarter of the year as its contractual aircraft utilization level temporarily
decreases. The Company seeks to schedule, to the extent possible, its major
aircraft maintenance activities during this period to take advantage of any
unutilized aircraft time.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents of
approximately $9.6 million, short-term investments of approximately $80.4
million and working capital of approximately $35.1 million. During the first
half of 1997, cash and cash equivalents decreased approximately $0.2 million,
principally reflecting cash provided from operations of $24.7 million, proceeds
from equipment financings of $372.5 million and net proceeds from the sale and
purchase of short-term investments of $34.5 million, partially offset by
investments in flight and other equipment of $189.5 million, principal
reductions of indebtedness of $237.0 million and debt issuance costs of $5.4
million.
At December 31, 1996, the Company had cash and cash equivalents of
approximately $9.8 million, short-term investments of approximately $114.9
million and working capital of approximately $98.7 million. During 1996, cash
and cash equivalents decreased $87.2 million, principally reflecting investments
in flight and other equipment of $289.7 million, the net purchase of $114.9
million of short-term investments, debt issuance costs of $6.0 million and
principal reductions of indebtedness of $21.6 million, partially offset by cash
provided from operations of $84.4 million, proceeds from equipment financings of
$154.8 million and net common stock issuances of $105.8 million, including the
$99.6 million received from a secondary public offering of the Company's common
stock in the second quarter of 1996.
At December 31, 1995, the Company had cash and cash equivalents of
approximately $97.0 million and working capital of approximately $81.0 million.
During 1995, cash and cash equivalents increased by $86.5 million, principally
reflecting cash provided from operations of $43.6 million, the receipt of
approximately $66.6 million of net proceeds from the IPO, the receipt of net
proceeds of approximately $95.9 million from the Equipment Notes and proceeds
from bank financings of approximately $81.2 million, partially offset by
principal reductions on indebtedness of $7.8 million and investments in flight
equipment of $190.8 million.
In February 1997, the Aircraft Credit Facility was expanded from $175
million to $275 million for the same purposes and under substantially the same
terms and conditions as the initial facility. Certain financial tests must be
met before each purchase of aircraft and related drawdown under the facility. To
date, the Company has met these tests. If in the future, the Company cannot meet
such tests because of the difficult sequencing of aircraft acquisition, aircraft
conversion and customer contracts, the Company believes that other financing
sources would be available to the Company or the Company would acquire aircraft
using its internal cash or seek a waiver of any necessary conditions. As part of
the Refinancings, the Company repaid approximately $168.3 million of previous
draw downs under the Aircraft Credit Facility and the Aircraft Credit Facility
was amended and restated to provide for $250 million of availability a new two
year revolving period and, at the Company's option, a subsequent three year term
loan. As of September 22, 1997, the Company had approximately $66.0 million
outstanding under the Aircraft Credit Facility.
In addition, in March, 1997, the Company refinanced one of its aircraft
with Nationsbanc Leasing Corporation ("Nationsbanc"). This aircraft was
previously financed through the Aircraft Credit Facility. As such, this
refinancing increased the availability of funds under the Aircraft Credit
Facility by approximately $25 million. The Nationsbanc financing provides for a
fixed interest rate of 9.16% and a seven year term, extendable under certain
circumstances to ten years.
In May 1997, the Company acquired from Citicorp one 747-200 passenger
aircraft for a purchase price of $25 million, including two spare engines. In
connection with the purchase of the aircraft from Citicorp, the Company agreed
to assume Citicorp's lessor interest in the lease of such aircraft to PAL for
the remainder of the lease term which expires in June 1998.
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<PAGE> 33
In May 1997, AFL entered into the AFL Term Loan Facility. Concurrently with
entering into the AFL Term Loan Facility, the proceeds of the AFL Term Loan
Facility were used to repay all existing principal and interest due under an
existing term loan facility for which the Company received a significant
prepayment incentive credit. In addition, this refinancing allowed the Company
to reduce its overall indebtedness and the ongoing interest expense associated
with these aircraft.
In November 1994, Boeing issued Nacelle Strut Modification Service
Bulletins which have been converted into Directives by the FAA. Thirteen of the
Company's 747-200 aircraft will have to be brought into compliance with such
Directives within the next three years at an estimated aggregate cost of
approximately $6.5 million. As part of the FAA's overall aging aircraft program,
it has issued Directives requiring certain additional aircraft modifications to
be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the Company's 15 747-200 aircraft in service (excluding the aircraft
leased from FedEx) is 12,000 cycles and the average cycles operated per year is
800 cycles. The Company estimates that the modification costs per aircraft will
range between $2 million and $3 million. Between now and the year 2000, only one
aircraft is expected to reach the 20,000 cycle limit and the entire current
fleet will require modification prior to the year 2009. Prior to acquiring used
747-200 aircraft, the Company requires the seller to demonstrate that the
aircraft is in compliance with all Directives as of the purchase date. At the
same time, the Company examines all Directives that are known to apply to the
aircraft at a future date. The Company's freighter conversion program
incorporates any and all Directives compliance work that would otherwise have
been required prior to the next major maintenance event in order to minimize
unscheduled maintenance. Other directives have been issued that require
inspections and minor modifications to Boeing 747-200 aircraft. It is possible
that additional Service Bulletins or Directives applicable to the types of
aircraft included in the Company's fleet could be issued in the future. The cost
of compliance with such Directives cannot currently be estimated, but could be
substantial.
KLM has submitted invoices to the Company for the induction of certain
engines into its maintenance program and additional invoices for certain
services rendered aggregating approximately $7.0 million. The Company disputes
some of the charges reflected in the invoices and believes that it owes less
than the amount invoiced by KLM. The Company is actively negotiating a
resolution of this matter.
In June 1997 the Company entered into the Boeing Purchase Contract with
Boeing to purchase 10 new 747-400 aircraft. The 747-400 aircraft are currently
scheduled to be delivered one each in May, June, August and September 1998;
April and July 1999; February, March and August 2000; and April 2001. The Boeing
Purchase Contract also provides the Company with an option to purchase up to 10
additional 747-400 aircraft for delivery from 1999 through 2002. As a result of
the Company being the largest purchaser of 747-400 aircraft to date, it was able
to negotiate from Boeing a significant discount off the aggregate list price of
$1.7 billion for the 10 747-400 aircraft, four installed engines per aircraft
and five spare engines. The Boeing Purchase Contract requires that the Company
pay Pre-Delivery Deposits to Boeing prior to the delivery date of each 747-400
aircraft in order to secure delivery of the 747-400 aircraft and to defray a
portion of the manufacturing costs. The Company expects that the maximum total
amount of Pre-Delivery Deposits at any time outstanding will be approximately
$125 million, approximately $95.2 million of which was paid as of September 22,
1997 by the Company from short-term indebtedness and available cash.
In August 1997, the Company completed the Offering of the Old Notes. The
proceeds from the Offering of the Old Notes were used to, among other things,
repay short-term indebtedness incurred by the Company to make Pre-Delivery
Deposits and will be used to make additional Pre-Delivery Deposits as they
become due. As the 747-400 freighter aircraft are purchased upon delivery and
Pre-Delivery Deposits are refunded by Boeing to the Company, the proceeds from
the Offering may be used to fund a portion of the total purchase price of the
747-400 freighter aircraft or, alternatively, for general corporate purposes by
the Company. Additional third-party financing will be required at the time of
delivery of each of the 747-400 freighter aircraft. The Company intends to
secure such permanent financing from a combination of aircraft financing
transactions, including long-term fixed-rate equipment trust certificates,
leveraged lease financing, other long-term purchase money security financing or
debt or equity financing. There can be no assurance that the Company will be
able to obtain sufficient financing to fund the purchase of the 747-400
freighter aircraft, or if such financing is available, that it will be available
on commercially reasonable terms. If it is unable to do so,
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<PAGE> 34
the Company could be required to modify its expansion plans or to incur higher
than anticipated financing costs, which could have a material adverse effect on
the Company.
In September 1997, the Company completed the Refinancings with respect to
certain of the Company's existing indebtedness in order to provide the Company
with greater financial flexibility in anticipation of the financing requirements
for the acquisition of the 747-400 freighter aircraft by, among other things,
extending maturities of certain indebtedness, reducing interest expense and
making certain covenants less restrictive. The Refinancings include (i) a new,
approximately $185 million seven-year amortizing AFL II Term Loan Facility to a
new wholly-owned subsidiary of the Company formed for the sole purpose of owning
and leasing four 747-200 aircraft and nine spare engines currently owned by the
Company and financed by the Aircraft Credit Facility; (ii) an amendment and
restatement of the Aircraft Credit Facility to (a) provide for a new two-year
revolving period followed by a three-year amortizing term loan period, (b)
provide for a reduction in the credit spread for borrowings based on financial
performance and (c) make the financial covenants less restrictive to facilitate
the upcoming financings required in connection with the acquisition of the
747-400 aircraft; and (iii) an amendment to the financial covenants of the AFL
Term Loan Facility to facilitate the financings required in connection with the
acquisition of the 747-400 freighter aircraft.
Due to the contractual nature of the Company's business, the Company's
management does not consider its operations to be highly working
capital-intensive in nature. Because most of the non-ACMI costs normally
associated with operations are borne by and directly paid for by the Company's
customers, the Company does not incur significant costs in advance of the
receipt of corresponding revenues. Moreover, ACMI costs, which are the
responsibility of the Company, are generally incurred on a regular, periodic
basis ranging from flight hours to months. These costs are largely matched by
revenue receipts, as the Company's contracts require regular payments from its
customers, based upon current flight activity, generally every two to four
weeks. As a result, the Company has not in the past had a requirement for a
working capital facility. The Company is in negotiations with a lender for a $25
million revolving credit facility for general working capital purposes.
The Company believes that cash on hand, the cash flow generated from its
operations and the proceeds from the May 1996 public offering of its common
stock and the Offering of the Old Notes, coupled with availability under the
Aircraft Credit Facility, will be sufficient to meet its normal ongoing
liquidity needs for 1997.
From time to time the Company engages in discussions with third parties
regarding possible acquisitions of aircraft that could expand the Company's
operations. The Company is in negotiations for the acquisition of additional
aircraft, principally for delivery to the Company in 1998 and beyond.
RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings per Share." The purpose of SFAS No. 128 is to simplify the
computation of earnings per share ("EPS") and to make the U.S. standard for
computing EPS more compatible with the EPS standards of other countries and with
that of the International Accounting Standards Committee. The effective date for
the application of SFAS No. 128 for both interim and annual periods is after
December 15, 1997. Earlier application is not permitted. The Company does not
expect the application of SFAS No. 128 to have a material impact on its EPS
calculation.
FORWARD-LOOKING STATEMENTS
To the extent that any of the statements contained herein relating to the
Company's expectations, assumptions and other Company matters are
forward-looking, they are made in reliance upon the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such statements are based
on current expectations that involve a number of uncertainties and risks that
could cause actual results to differ materially from those projected in the
forward-looking statements, including, but not limited to, risks associated
with: worldwide business and economic conditions; product demand and the rate of
growth in the air cargo industry; the impact of competitors and competitive
aircraft and aircraft financing availability; the ability to attract and retain
new and existing customers; normalized aircraft operating costs and reliability;
management of growth; the continued productivity of its workforce; dependence on
key personnel; and regulatory matters.
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BUSINESS
THE COMPANY
Atlas is the world's largest air cargo outsourcer, with an all Boeing fleet
of 747 freighter aircraft. The Company provides reliable airport-to-airport
cargo transportation services throughout the world to major international air
carriers generally under one- to five-year fixed-rate contracts which typically
require that the Company supply aircraft, crew, maintenance and insurance. The
Company's customers currently include China Airlines, KLM, Lufthansa Cargo,
British Airways, SAS, Varig, Emirates, Thai Airways, Fast Air and LAS. The
Company is able to provide efficient, cost-effective service to its customers
primarily as a result of its productive and flexible work force, the outsourcing
of a significant part of its regular maintenance work on a fixed-cost basis and
the advantageous cost economies realized in the operation of its fleet,
comprised solely of Boeing 747 aircraft which are configured for service in
long-haul cargo operations.
The Company's fleet currently consists of 21 Boeing 747-200 freighter
aircraft in service, one 747-200 aircraft undergoing passenger to freighter
modification at Boeing and two 747-200 passenger aircraft under lease to a third
party. The Company is negotiating for the early termination of these leases and
delivery to the Company of these aircraft for conversion from passenger to
freighter configuration. Five of the aircraft in the Company's existing fleet
are leased to the Company under leases that will expire on January 1, 1998. On
June 9, 1997, the Company entered into an agreement with Boeing to purchase 10
new 747-400 aircraft to be powered by engines acquired from GE, with an option
to purchase up to 10 additional 747-400 aircraft. The 747-400 aircraft has
significantly longer range, greater payload capability, lower maintenance costs
and increased fuel efficiency compared to the 747-200 freighter aircraft. The
Company expects to place the 747-400 aircraft in service with both existing and
prospective customers, who the Company believes should be willing to pay higher
ACMI Contract rates to achieve operating benefits derived from the unique
performance capabilities of the 747-400 aircraft.
747-400 AIRCRAFT ACQUISITION
On June 9, 1997 the Company entered into the Boeing Purchase Contract with
Boeing to purchase 10 new 747-400 aircraft to be powered by GE engines. The
747-400 aircraft are currently scheduled to be delivered one each in May, June,
August and September 1998; April and July 1999; February, March and August 2000;
and April 2001. The Boeing Purchase Contract also provides the Company with an
option to purchase up to 10 additional 747-400 aircraft for delivery from 1999
through 2002. As a result of the Company being the largest purchaser of 747-400
aircraft to date, it was able to negotiate from both Boeing and GE a significant
discount off the aggregate list price of $1.7 billion for the 10 747-400
aircraft, four installed engines per aircraft and five spare engines. In
addition, the Company also obtained certain ancillary products and services at
advantageous prices. The Boeing Purchase Contract requires that the Company pay
Pre-Delivery Deposits to Boeing prior to the delivery date of each 747-400
aircraft in order to secure delivery of the 747-400 aircraft and to defray a
portion of the manufacturing costs. The Company expects that the maximum total
amount of Pre-Delivery Deposits at any time outstanding will be approximately
$125 million, approximately $95.2 million of which was paid as of September 22,
1997 by the Company from short-term indebtedness and available cash.
The proceeds from the Offering of the Old Notes and cash flow from
operations were used, among other things, to repay short-term indebtedness
incurred by the Company to pay Pre-Delivery Deposits and will continue to be
used to make additional Pre-Delivery Deposits as they become due. As the 747-400
aircraft are purchased upon delivery and Pre-Delivery Deposits are refunded by
Boeing, the remaining proceeds from the Offering of the Old Notes may be used to
fund a portion of the total purchase price of the 747-400 aircraft or,
alternatively, for general corporate purposes by the Company. Additional
third-party financing will be required at the time of delivery of each of the
747-400 aircraft. The Company intends to secure such permanent financing from a
combination of aircraft financing transactions, including long-term fixed-rate
equipment trust certificates, leveraged lease financing, other long-term
purchase money security financing or debt or equity financing. There can be no
assurance that the Company will be able to obtain sufficient financing to fund
the
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purchase of the 747-400 aircraft, or if such financing is available, that it
will be available on commercially reasonable terms.
ACMI CONTRACTS
The Company's ACMI Contracts with its customers, which accounted for 96% of
the Company's operating revenues in 1996, typically provide for its customers to
guarantee monthly minimum aircraft utilization levels at fixed hourly rates and
are typically in force for periods of one to five years, subject in certain
cases to early termination provisions. These contracts typically require that
the Company supply aircraft, crew, maintenance and insurance and that its
customers bear all other operating expenses, including fuel and fuel servicing;
marketing costs associated with obtaining cargo; airport cargo handling; landing
fees; ground handling, aircraft push-back and de-icing services; and specific
cargo and mail insurance. These contracts, therefore, minimize for the Company
the load factor and yield risk traditionally associated with the air cargo
business. The ACMI Contracts typically require minimum air freight capacity to
be provided to its customers by the Company. All of the Company's revenues, and
virtually all of its costs, are in U.S. dollars, thus avoiding currency risks
normally associated with doing business primarily overseas.
China Airlines, KLM and Lufthansa accounted for approximately 34%, 12% and
11%, of the Company's total revenues, respectively, for the year ended December
31, 1996. In addition, in the past, the Company has operated under short-term,
seasonal ACMI Contracts with FedEx and UPS and anticipates doing so in the
future from time to time.
Certain of the Company's ACMI Contracts allow the Company's customers to
cancel a maximum of 5% of the guaranteed hours of aircraft utilization over the
course of a year. The Company's customers most often exercise such cancellation
options early in the first quarter or late in the fourth quarter of the year,
when the demand for air cargo capacity has been historically low. The Company
has found that such cancellations provide a timely opportunity for the
scheduling of maintenance on its aircraft, to the extent possible. See
"-- Maintenance." The ACMI Contracts are typically in force for periods of one
to five years, subject in certain cases to early termination provisions. The
Company believes that its relationships with its customers are mutually
satisfactory, as evidenced by the fact that within the last three years, it has
renewed eight ACMI Contracts and added six ACMI Contracts with its existing
customers, although there can be no assurance that such contracts will not be
canceled in accordance with their terms.
All of the ACMI Contracts provide that each of the Company's aircraft be
deemed to be at all times under the exclusive operating control, possession and
direction of the Company and that, in order to service the routes designated by
the contract, the Company obtain the underlying authority from the governments
having jurisdiction over the route. See "-- Governmental Regulation."
Additionally, if the Company is required to use the customer's "call sign" in
identifying itself throughout its route, the customer must also have obtained
underlying authority from the governments having jurisdiction over the route.
Therefore, the Company's route structure is limited to areas in which it can
gain access from the relevant governments.
OTHER FLIGHT OPERATIONS
To the extent the Company has available excess aircraft capacity at any
time, it will seek to obtain ad hoc charter service contracts, which the Company
believes are generally readily available. In addition, in the past the Company
has provided service to FedEx and UPS pursuant to short-term, seasonal ACMI
Contracts during periods of excess aircraft capacity.
AIRCRAFT
The Company's utilization of Boeing 747 aircraft provides significant
marketing advantages because these aircraft, relative to most other cargo
aircraft that are commercially available, have higher maximum payload and cubic
capacities, and longer range. The uniformity of the Company's current Boeing
747-200 aircraft fleet allows for standardization in maintenance and crew
training, resulting in substantial cost savings in these areas. The new 747-400
aircraft are expected to have greater operational capabilities than the 747-200
aircraft and will allow the Company to continue to maintain its low cost
structure. The new aircraft's limited maintenance
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<PAGE> 37
requirements will provide a higher level of operational reliability with lower
maintenance costs during the early years of operation. This "maintenance
honeymoon" typically continues for at least five years. In addition, the
acquisition of the 10 747-400 aircraft will make Atlas the largest operator of
this aircraft type to date and will enable the Company to capitalize on
economies of scale from the standardization in maintenance and crew training.
Finally, by placing an order for 10 aircraft, the Company received a significant
discount off the aggregate list price from both Boeing and GE.
The following chart describes the Company's existing fleet, aircraft
currently undergoing or expected to undergo passenger to freighter modification
and the 747-400 aircraft subject to the Boeing Purchase Contract.
FLEET PROFILE
<TABLE>
<CAPTION>
NUMBER OF DATE OF
AIRCRAFT AIRCRAFT OWNED/LEASED MANUFACTURE
--------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Existing Fleet: 15 747-200 Owned(1) 1972-1986
5 747-200 Leased(2) 1974-1979
1 747-200 Leased(3) 1976
Modification Aircraft: 1 747-200 Owned(4) 1984
2 747-200 Owned(5) 1979
747-400 Aircraft: 10 747-400 Owned(6) 1998-2001
</TABLE>
- ---------------
(1) Six of these aircraft are leased from a wholly-owned subsidiary of the
Company, Atlas Freighter Leasing, Inc. under leases expiring May 2004. Four
of the aircraft are leased from a wholly-owned subsidiary of the Company,
Atlas Freighter Leasing II, Inc., under leases expiring May 2004. Two of
these aircraft are powered by Pratt & Whitney ("P&W") engines and thirteen
are powered by GE engines.
(2) These aircraft, all of which are powered by P&W engines, are sub-leased from
FedEx under leases expiring on January 1, 1998. While the Company does not
intend to renew these leases, it is currently discussing a short term
extension in order to operate the aircraft through the peak cargo service
season and be able to perform necessary maintenance in the first quarter
prior to returning the aircraft.
(3) This aircraft, powered by GE engines, is leased from a third party under a
lease expiring in March, 2010.
(4) This aircraft, powered by GE engines, is currently being modified to
freighter configuration by Boeing and is expected to be delivered to the
Company in the fourth quarter of 1997.
(5) These passenger aircraft, powered by GE engines, are under lease to PAL.
Upon termination of the PAL leases the aircraft will be delivered to Boeing
for conversion to freighter configuration.
(6) The Company has agreed to purchase from Boeing 10 new Boeing 747-400
aircraft, with an option to purchase an additional 10 aircraft. The first 10
aircraft are scheduled to be delivered as follows: 4 in 1998, 2 in 1999, 3
in 2000 and one in 2001. See "-- 747-400 Aircraft Acquisition."
The Company has been successful in securing new customers, or additional
arrangements with existing customers upon delivery dates of aircraft into the
fleet, or soon thereafter. However, from time to time, the Company accepts
delivery of aircraft that have not been committed to a particular ACMI Contract.
These aircraft have been utilized temporarily as replacement aircraft during
scheduled and unscheduled maintenance, as well as for ad hoc charter
arrangements. Although the Company intends to have new ACMI Contracts in place
upon delivery of aircraft, including the 747-400 aircraft, there can be no
assurance that such arrangements will have been made.
From time to time the Company engages in discussions with third parties
regarding possible acquisitions of aircraft that could expand the Company's
operations. The Company is in negotiations for the acquisition of additional
aircraft, principally for delivery to the Company in 1998 and beyond.
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SALES AND MARKETING
From its offices in Colorado, New York, Miami and London, the Company
services its air cargo customers and solicits ACMI Contract business. The
Company's efforts to obtain new ACMI Contract business focus principally on
international airlines with established air cargo customers, high operating
costs and hub and spoke systems which gather cargo at a particular location and
who have the need for long-distance capacity to move such cargo to another
distribution point. On occasion, the Company may utilize independent cargo
brokers to obtain new ACMI Contracts. The Company markets its services by
guaranteeing its customers a reliable, low-cost dedicated aircraft with the
capacity to ensure the efficient linkage of such customers' distribution points
without the customers' having to purchase and maintain additional aircraft,
schedule additional flights and add other resources. The Company expects to
place the 747-400 aircraft in service with both existing and prospective
customers, who the Company believes should be willing to pay higher ACMI
Contract rates to achieve operating benefits derived from the unique performance
capabilities of the 747-400 aircraft such as its longer range, greater payload
and increased fuel efficiency.
MAINTENANCE
Due to the average age of the Company's 747-200 aircraft, it is likely that
they will require greater maintenance than newer aircraft such as the 747-400
aircraft. See "-- Aircraft." Aircraft maintenance includes, among other things,
routine daily maintenance, maintenance every six weeks (an "A Check"),
significant maintenance work every 18 months (a "C Check") and a major
maintenance event (a "D Check") every five years or 25,000 flight hours,
whichever comes later if the aircraft is over the age of 18 years, or every 6
years or 25,000 flight hours, whichever comes later for aircraft under the age
of 18 years, with a maximum interval in either case of nine years. The Company
attempts to schedule major maintenance on its aircraft in the first quarter of
the calendar year, when the demand for air cargo capacity has historically been
low, taking advantage of cancellations of flights by the Company's customers
that generally occur most frequently during these periods.
Pursuant to a maintenance contract with KLM (the "Maintenance Contract") in
effect until January 2005, a significant part of the regular maintenance
(principally C Checks and engine overhauls, excluding D Checks) of certain of
the Company's aircraft and their GE engines is undertaken by KLM, primarily at
its headquarters located at Schiphol International Airport in Amsterdam, the
Netherlands. KLM supplies engineering and diagnostic testing for each aircraft
and its components in compliance with FAA and other applicable regulations. The
Maintenance Contract provides that KLM, subject to certain terms and conditions,
will perform repairs and maintenance of the Company's aircraft on the same basis
and order of priority as repairs to its own fleet. Such service is provided to
the Company at a cost, for which a large part is a fixed rate per flight hour,
subject to a 3.5% annual escalation factor for the first five years. P&W engines
are serviced elsewhere, each at a cost based upon the actual labor time and the
parts necessary for such service. Under the terms of the Maintenance Contract,
in the event that the Company wishes to maintain more than twelve of its
aircraft under such contract, the terms of the contract are subject to
adjustment by KLM. Twelve of the Company's aircraft are currently subject to the
Maintenance Contract. KLM has submitted invoices to the Company for the
induction of certain engines into its maintenance program and additional
invoices for certain services rendered aggregating approximately $7.0 million.
The Company disputes some of the charges reflected in these invoices and
believes that it owes less than the amount billed by KLM. The Company is
actively negotiating a resolution of this matter. In addition, FedEx provides
certain scheduled maintenance on the aircraft it sub-leases to the Company.
In June 1996, the Company entered into a ten year engine maintenance
agreement with GE for the engine maintenance of up to 15 aircraft powered by
CF6-50E2 engines at a fixed rate per flight hour, subject to an annual formula
increase. The agreement commenced in the third quarter of 1996 with the
acceptance of engines associated with aircraft acquired in the third and fourth
quarter of 1996. Effective in the year 2000, the Company has an option to add
not less that 40 engines to the program.
For certain periods, the 747-400 aircraft's airframe and engines will be
covered under manufacturer's warranties. As a result, the Company does not
expect to incur significant maintenance expense in connection
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with the 747-400 aircraft during the warranty period. In addition, the 747-400
aircraft's limited maintenance requirements will provide a higher operational
reliability with lower maintenance costs during the early years of operation.
This "maintenance honeymoon" typically continues for at least five years. The
Company will incur expenses associated with routine daily maintenance of both
the airframe and the engines. In connection with the GE engine purchase
agreement, the Company is currently in negotiations with GE to provide ongoing
maintenance on the 747-400 aircraft engines.
The Company has an agreement, subject to acceptable rates, terms and
conditions, with Alitalia to utilize, or find other parties to utilize, an
amount of Alitalia's maintenance services with an aggregate cost of $25 million
over a five-year period ending in June 2000. The Company believes that
fixed-cost contracts such as this one provides the most efficient means of
ensuring the continued service of its aircraft fleet and the most reliable way
by which to predict its maintenance costs; however, the Company believes it is
more cost effective for routine line maintenance and A Checks to be performed on
a time and labor basis due to the frequency of such maintenance. The Company
also has a contract with B.F. Goodrich Co. to perform maintenance on its brakes
and for the replacement of tires.
GOVERNMENTAL REGULATION
Under the Aviation Act, the DOT and the FAA exercise regulatory authority
over the Company. DOT's jurisdiction extends primarily to economic issues
related to the air transportation industry, including, among other things, air
carrier certification and fitness, insurance, certain leasing arrangements, the
authorization of proposed scheduled and charter operations, tariffs, consumer
protection, unfair methods of competition, unjust discrimination and deceptive
practices. The FAA's regulatory authority related primarily to air safety,
including aircraft certification and operations, crew licensing/training and
maintenance standards.
To provide air cargo transportation services under long-term contracts with
major international airlines, the Company relies primarily on its worldwide
charter authority. The Company requires separate DOT and FAA approval for each
long-term ACMI Contract. In addition, FAA approval is required for each of the
Company's short-term, seasonal ACMI Contracts.
In order to engage in its air transportation business, the Company is
required to maintain a Certificate of Public Convenience and Necessity (a
"CPCN") from DOT. Prior to issuing a CPCN, DOT examines a company's managerial
competence, financial resources and plans and compliance disposition in order to
determine whether a carrier is fit, willing and able to engage in the
transportation services it has proposed to undertake, and whether a carrier
conforms with the Aviation Act requirement that the transportation services
proposed are consistent with the public convenience and necessity. Among other
things, a company holding a CPCN must qualify as a United States citizen, which
requires that it be organized under the laws of the United States or a State,
territory or possession thereof; that its chief executive officer and at least
two-thirds of its Board of Directors and other managing officers be United
States citizens; that not more than 25% of its voting stock be owned or
controlled, directly or indirectly, by foreign nationals; and that it not
otherwise be subject to foreign control. The DOT may impose conditions or
restrictions on such a CPCN.
DOT has issued the Company a CPCN to engage in interstate and overseas air
transportation of property and mail, and a CPCN to engage in foreign air
transportation of property and mail between the U.S. and Taiwan. Both CPCNs are
subject to standard terms, conditions and limitations. By virtue of holding
those CPCNs, the Company also possesses worldwide charter authority. It also
holds limited-term DOT exemption authority to engage in scheduled air
transportation of property and mail between certain points in the U.S. and Hong
Kong.
International air services are generally governed by a network of bilateral
civil air transport agreements in which rights are exchanged between
governments, which then select and designate air carriers authorized to exercise
such rights. Insofar as scheduled service is involved, bilateral agreements may
prohibit services to certain countries. For countries in which service is
authorized these bilateral agreements specify the city-pair markets that may be
served; may restrict the number of carriers that may be designated; may provide
for prior approval by one or both governments of the prices the carriers may
charge; may limit frequencies or the amount of capacity to be offered in the
market; and, in various other ways, may impose limitations on the
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<PAGE> 40
operations of air carriers. To obtain authority under a bilateral agreement, it
is often necessary to compete against other carriers in a DOT proceeding. At the
conclusion of the proceeding, DOT awards all route authorizations. The
provisions of bilateral agreements pertaining to charter services vary
considerably from country to country. Some agreements, such that between the
U.S. and Brazil, limit the number of charter flights that carriers of each
country may operate. The Company is subject to various international bilateral
air services agreements between the U.S. and the countries to which the Company
provides service. The Company also operates on behalf of foreign flag air
carriers between various foreign points without serving the U.S. These services
are subject to the bilateral agreements of the respective governments.
Furthermore, these services require FAA approval but not DOT approval. The
Company must obtain permission from the applicable foreign governments to
provide service to foreign points.
The Company has obtained an operating certificate issued by the FAA
pursuant to Part 121 of the Federal Aviation Regulations. The FAA has
jurisdiction over the regulation of flight operations generally, including the
licensing of pilots and maintenance personnel; the establishment of minimum
standards for training and retraining; maintenance of technical standards for
flight, communications and ground equipment; security programs; and other
matters affecting air safety. In addition, the FAA mandates certain
recordkeeping procedures. The Company must obtain and maintain FAA certificates
of airworthiness for all of its aircraft. The Company's aircraft, flight
personnel and flight and emergency procedures are subject to periodic
inspections and tests by the FAA. All air carriers are subject to the strict
scrutiny of FAA officials to ensure proper compliance with FAA regulations.
The DOT and the FAA have authority under the Aviation Safety and Noise
Abatement Act of 1979, as amended and recodified, and under the Airport Noise
and Capacity Act of 1990, to monitor and regulate aircraft engine noise. All of
the Company's existing fleet of aircraft comply with Stage III Standards -- the
highest standard issued by the FAA.
Under the FAA's Directives issued under its "Aging Aircraft" program, the
Company is subject to extensive aircraft examinations and may be required to
undertake structural modifications to address the problems of corrosion and
structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification
Service Bulletins which have been converted into Directives by the FAA. Thirteen
of the Company's 747-200 aircraft will have to be brought into compliance with
such Directives within the next three years at an estimated cost of
approximately $6.5 million. As part of the FAA's overall aging aircraft program,
it has issued Directives requiring certain additional aircraft modifications to
be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the 15 aircraft in service (excluding the aircraft sub-leased from
FedEx) is 12,000 cycles and the average cycles operated per year is 800 cycles.
The Company estimates that the modification costs per aircraft will range
between $2 million and $3 million. Between now and the year 2000, only one
aircraft is expected to reach the 20,000 cycle limit and the entire current
fleet will require modification prior to the year 2009. Other Directives have
been issued that require inspections and minor modifications to Boeing 747-200
aircraft. It is possible that additional Directives applicable to the types of
aircraft or engines included in the Company's fleet could be issued in the
future, the cost of which could be substantial.
The Company is also subject to the regulations of the Environmental
Protection Agency regarding air quality in the U.S. With respect to aircraft
that it operates, the Company meets the fuel venting requirements and smoke
emissions standards established by the Environmental Protection Agency.
COMPETITION
The market for air cargo services is highly competitive. A number of
airlines currently provide services for themselves and for others similar to the
services offered by the Company and new airlines may be formed that would also
compete with the Company. Such airlines may have substantially greater financial
resources that the Company. The Company believes that the most important bases
for competition in the air cargo business are the range, payload and cubic
capacities of the aircraft and the price, flexibility, quality and reliability
of service. The ability of the Company to achieve its strategic plan depends
upon its success in convincing major international airlines that outsourcing
some portion of their air cargo business remains more cost-effective
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than undertaking cargo operations with their own incremental capacity and
resources and the ability of the Company to obtain higher ACMI Contract rates in
connection with the 747-400 aircraft compared to those currently obtained in
connection with existing 747-200 aircraft. The Company believes that such higher
rates will be available as a result of the unique operating benefits associated
with the 747-400 aircraft. These operational benefits include a longer range,
greater payload capability and increased fuel efficiency relative to the 747-200
aircraft.
FUEL
Although fuel costs are typically the largest operating expense for
companies providing air services, the Company has limited exposure to the
volatility of fuel costs and disruptions in fuel supply as a result of its ACMI
Contracts, whereby the Company's customers bear the fuel costs and concomitant
risks thereof. However, an increase in fuel costs could reduce the Company's
cost advantages because of its older 747-200 aircraft fleet, which are not as
fuel-efficient as newer cargo aircraft such as the 747-400 aircraft. In
addition, to the extent the Company operates scheduled cargo or ad hoc charter
services, or ferries its aircraft, it would be responsible for fuel and other
costs that are normally borne by its customers through its ACMI Contracts. In
1996, approximately 3% of the Company's block hours represented scheduled cargo,
ad hoc charter services or ferrying its aircraft for its own account. The
Company may, for periods of time, have excess capacity, in which case it may
deploy such aircraft in scheduled cargo or ad hoc charter services, pending
dedication of the aircraft to an ACMI Contract.
EMPLOYEES
As of June 30, 1997, the Company had 590 employees, 361 of whom were air
crew members. In connection with the increase in its fleet, the Company hired a
substantial number of additional pilots during 1996. The Company may hire more
pilots in 1997 and 1998 associated with the delivery of additional aircraft,
including the 747-400 aircraft. The Company maintains a comprehensive training
program for its pilots in compliance with FAA requirements in which each pilot
regularly attends update programs. The Company believes that its current
training program can be sufficiently modified to provide training required for
pilots for the 747-400 aircraft. In addition, as part of the Boeing Purchase
Contract, to defray a portion of the costs, Boeing will train the Company's
pilots and crew to be assigned to the 747-400 aircraft. However, the Company may
incur incremental costs associated with ongoing training with regard to the
747-400 aircraft.
The Company believes that its employees' participation in the growth and
profitability of its business is essential to maintain its productivity and low
cost structure, and has therefore established programs for that purpose such as
a profit sharing plan, a stock purchase plan, and a Company percentage
contribution of the employee deferral contribution to a retirement plan
(Internal Revenue Code of 1986, as amended, Section 401(k) plan). Such programs
are designed to allow employees to share financially in the Company's success
and to augment base salary levels and retirement income.
The Company's labor relations are covered under Title II of the Railway
Labor act of 1926, as amended, and are subject to the jurisdiction of the
National Mediation Board. None of the Company's employees is subject to a
collective bargaining agreement; however, many airline industry employees are
subject to such agreements and the Company's employees have been and are
routinely solicited by union representatives seeking to organize them. The
Company considers its relations with its employees to be good.
INSURANCE
The Company is vulnerable to potential losses which may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and its consequent temporary or permanent
loss from service, but also potential claims involving injury to persons or
property. The Company is required by DOT to carry liability insurance on each of
its aircraft, and each of the Company's aircraft leases and ACMI Contracts also
requires the Company to carry such insurance. While the Company carries this
insurance, any extended interruption of the Company's operations due to the loss
of an aircraft could have a material adverse effect on the Company. The Company
currently maintains public
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liability and property damage insurance and aircraft hull and liability
insurance for each of the aircraft in the fleet in amounts consistent with
industry standards. The Company maintains baggage and cargo liability insurance
if not provided by its customers under ACMI Contracts. Although the Company
believes that its insurance coverage is adequate, there can be no assurance that
the amount of such coverage will not be changed upon renewal or that the Company
will not be forced to bear substantial losses from accidents. Substantial claims
resulting from an accident could have a material adverse effect on the Company's
financial condition and could affect the ability of the Company to obtain
insurance in the future. The Company believes that it has good relations with
its insurance providers.
FACILITIES
The Company's principal executive offices are located in a 7,000 square
foot office building owned by the Company at 538 Commons Drive, Golden,
Colorado. The Company also rents 2,500 square feet of adjacent office space in
Golden, Colorado.
The Company presently occupies a 21,000 square foot facility located at
John F. Kennedy Airport ("JFK"). This facility includes administrative offices,
maintenance work areas and hangar and parts storage facilities, as well as
flight dispatch operations. The Company occupies this facility pursuant to a
lease agreement with Japan Airlines ("JAL") for a five-year period with two
five-year renewal rights from JAL, which began on June 1, 1995, at a monthly
rate of approximately $41,000. The Company believes the JAL facility is adequate
to support the near term growth in operations that will result from the
anticipated acquisition of additional aircraft. In addition, the Company leases
7,750 square feet of warehouse space at JFK for the storage of aircraft
components, tires and other aircraft related equipment. The monthly lease rate
is $5,000. The initial lease term expires at the end of September 1997, with
rights for two five-year renewal periods.
Due to increased operations at Miami International Airport, the Company
entered into a month-to-month office lease and a month-to-month warehouse lease
with Dade County, Florida in March 1997. The leased warehouse space will be used
to store aviation equipment and aircraft components used to maintain aircraft
operated by the Company.
LEGAL PROCEEDINGS
On February 24, 1997, the Company filed a complaint for declaratory
judgment in the Colorado District Court, Jefferson County against Israel
Aircraft Industries Ltd. ("IAI") for mechanical problems the Company experienced
with respect to the aircraft the Company sub-leased from IAI. The Company is
seeking approximately $1 million in damages against IAI to be offset by the
amount, if any, the Company owes IAI pursuant to the sub-lease. IAI had the case
removed to the U.S. District Court, District of Colorado on April 21, 1997 and
filed a separate complaint against the Company on April 24, 1997 in the U.S.
District Court, Eastern District of New York alleging damages of approximately
$9 million based on claims arising from the sub-lease. The Company intends to
vigorously defend against all of IAI's claims.
In March 1997, Air Support International, Inc. ("ASI") filed a complaint
against the Company in the U.S. District Court, Eastern District of New York
alleging actual and punitive damages of approximately $13.5 million arising from
the Company's refusal to pay commissions which ASI claims it is owed for
allegedly arranging certain ACMI Contracts. The Company intends to vigorously
defend against all of ASI's claims.
While the Company is from time to time involved in litigation in the
ordinary course of its business, there are no other material legal proceedings
pending against the Company or to which any of its property is subject.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Michael A. Chowdry................................... Chairman of the Board, Chief Executive
Officer, President and Director
Richard H. Shuyler................................... Senior Vice President -- Finance, Chief
Financial Officer, Treasurer and Director
Nesa E. Hassanein.................................... Senior Vice President and General Counsel
James T. Matheny..................................... Senior Vice President -- Operations
R. Terrence Rendleman................................ Senior Vice President -- Flight and Technical
Operations
Stanley G. Wraight................................... Senior Vice President -- Marketing Director
James J. Blanchard................................... Director
Lawrence W. Clarkson................................. Director
David T. McLaughlin.................................. Director
Brian Rowe........................................... Director
</TABLE>
Michael A. Chowdry, 42, has been Chairman of the Board of Directors and
Chief Executive Officer of the Company since its inception in August 1992, and
served as President from July 1995 to May 1996 and resumed the office of
President in September 1997. He is also Chairman of the Board (since its
inception in April 1985) of Aeronautics Leasing, Inc., an affiliate of the
Company ("ALI"). Prior to his founding of ALI, he formed a Colorado-based
certificated commuter air carrier in 1981, and was the principal stockholder of
Skybus, Inc., the certificated air carrier successor to Frontier Horizon
Airlines, from 1984 to 1985. He has been involved in the operation, acquisition,
financing and disposition of aircraft and aviation assets since 1978.
Richard H. Shuyler, 50, has been a member of the Company's Board of
Directors since March 1995 and has been Senior Vice President -- Finance, Chief
Financial Officer and Treasurer of the Company since June 1994. From January
1993 to June 1994, he was Senior Vice President -- Finance and Chief Financial
Officer at Trans World Airlines, Inc. ("TWA"). From 1975 to 1992, he held
various management and executive positions with Continental Airlines, Inc., and
various of its affiliates and corporate predecessors, including Texas
International Airlines, Inc., Texas Air Corporation and New York Air, serving as
Senior Vice President -- Finance and Chief Financial Officer at those entities.
TWA filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on
June 30, 1995.
Nesa E. Hassanein, 44, has been Senior Vice President and General Counsel
of the Company since August 1997. From January 1995 to July 1997, Ms. Hassanein
was a partner at the law firm of Morrison & Foerster LLP in their Denver,
Colorado office. Before joining Morrison & Foerster, she was a shareholder in
the law firm of Brownstein, Hyatt, Farber & Strickland in Denver from January
1992 to January 1995. Prior to that time she was associated with the law firm of
Skadden, Arps, Slate, Meagher & Flom in their New York office from September
1982 to May 1991. Throughout her legal career, Ms. Hassanein's practice has
focused on specializing in corporate and securities law.
James T. Matheny, 58, has been Senior Vice President -- Operations of the
Company since December 1992. From 1991 to 1992, he was Director -- Quality
Assurance and subsequently, Vice President -- Maintenance and Engineering for
Eastern Airlines, Inc. From 1961 to 1991, he served in the United States Navy,
rising to Commanding Officer of an aircraft squadron, two air wings and an
aircraft carrier, and Operations Officer of the Seventh Fleet based in Japan.
R. Terrence Rendleman, 52, has been Senior Vice President -- Technical
Services and Flight Operations since January 1, 1997. From June 1993 to December
1996, he was Senior Vice President for Maintenance Operations at United
Airlines. Prior to that, he served as Senior Vice President -- Technical
Operations at
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<PAGE> 44
Northwest Airlines from April 1985 to June 1993. From January 1983 to April
1985, he served as Vice President of Engineering and Maintenance at Braniff
Airlines, where he was a Boeing 727 pilot from 1979 to 1983.
Stanley G. Wraight, 50, has been Senior Vice President -- Marketing since
May 1997. From 1995 to 1997, he led KLM's worldwide sales efforts. From 1965 to
1995, he was employed by KLM in various capacities, including Vice President of
KLM's sales, marketing and operations in Asia, Australia and the Middle East.
James J. Blanchard, 55, was United States Ambassador to Canada from August
1993 until April 1996. From 1991 to 1993, he was a partner in the Washington,
D.C. law firm of Verner, Liipfert, Bernhard, McPherson and Hand. He served as
Governor of Michigan for eight years (1983-1991). From 1975 to 1983 he served as
a member of the United States House of Representatives. Before election to
Congress, Ambassador Blanchard was Assistant Attorney General of Michigan
(1969-1974). He has been awarded the State Department's Foreign Affairs Award
for Public Service and the International Freedom Festival's Freedom Award.
Lawrence W. Clarkson, 59, has been President of Boeing Enterprises since
February 1997, where he is responsible for establishing and directing new
commercial airplane-related business acquisitions, joint ventures response and
other relationships outside of the traditional business scope of Boeing. Since
April 1992 he has also been a Senior Vice President of Boeing. He previously
held various management and executive positions with Boeing which he joined in
1987. Prior to that, for twenty years he held various management and executive
positions with Pratt & Whitney. He serves as Vice Chairman of the National
Bureau of Asian Research, Chairman of U.S. -- Pacific Economic Cooperation
Council and Chairman of the National Center for APEC, and as a Director of the
U.S. -- China Business Council, the National Association of Manufacturers and
the Atlantic Council. He also serves on the U.S. -- Japan Joint High Level
Advisory Panel and is a member of the Council on Foreign Relations, the Pacific
Council on International Policy and the National Research Council -- Committee
on Japan.
David T. McLaughlin, 65, has been a member of the Company's Board of
Directors since September 1995. He has been President and Chief Executive
Officer of The Aspen Institute since his appointment in 1988, as well as
Chairman of its Board of Trustees since 1994. From 1972 to 1977 he served as
Chief Executive Officer of The Toro Company, and served as its Chairman from
1977 to 1981. From 1981 to 1987, he served as president of Dartmouth College. He
is currently a director of ARCO, Chase Manhattan Corporation, Westinghouse
Electric Corporation, CBS Inc., Standard Fusee Corporation, and PartnerRe, Inc.
and serves as a member of the Board of Trustees of the Asia Foundation Center
for Asian Pacific Affairs.
Brian Rowe, 66, has been a member of the Company's Board of Directors since
March 1995. He retired as Chairman of the General Electric Aircraft Engines
division of the General Electric Company in January 1995, a position he held
since September 1993, where he was in charge of world-wide sales of GE engines.
Prior to that, he held various management and executive positions with General
Electric, which he joined in 1957, including President of General Electric
Aircraft Engines (from 1979 to 1993), Vice President and General Manager of the
Aircraft Engineering Division (from 1976 to 1979), Vice President and General
Manager of the Airline Programs Division (from 1974 to 1976) and Vice President
and General Manager of the Commercial Engine Projects Division (from 1972 to
1974).
DESCRIPTION OF CERTAIN INDEBTEDNESS
AMENDED AIRCRAFT CREDIT FACILITY
In September 1997, the Company amended and restated the Aircraft Credit
Facility with Bankers Trust Company ("BTCo"), an affiliate of the Initial
Purchaser, as Administrative Agent and other lenders party thereto. Proceeds may
be drawn under the Aircraft Credit Facility, subject to certain conditions to
borrowing, to finance the acquisition and conversion of aircraft (including
spare engines). The aggregate amount drawn under the Aircraft Credit Facility
(including existing loans not refinanced under the AFL II Term Loan
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<PAGE> 45
Facility) shall not exceed $250 million. The Aircraft Credit Facility includes a
two-year revolving period followed by a three-year term loan period. At the time
of each borrowing, the Company has the option to select either a Base Rate Loan
(prime rate, plus 1.50% during the revolving period, thereafter 2.00%) or a
Eurodollar Rate Loan (Eurodollar rate, plus 2.50% during the revolving period,
thereafter 3.00%). Loans currently outstanding under the existing Aircraft
Credit Facility not refinanced by the AFL II Term Loan Facility were amended to
conform to the same terms. The Aircraft Credit Facility also contains provisions
for credit spread reductions of up to 0.75% based on financial performance and
credit spread reductions of up to 0.50% based upon the Company achieving ratings
upgrades with respect to its Equipment Notes.
Each loan under the Aircraft Credit Facility is secured by first priority
security interests in the flight equipment financed thereby. In addition, each
of the aircraft securing the Aircraft Credit Facility is and will be subject to
a second priority security interest securing all other obligations of the
Company under the Aircraft Credit Facility. The Aircraft Credit Facility also
contains certain preconditions and limitations to drawdown under the facility.
The Notes rank pari passu with the Aircraft Credit Facility and all other senior
indebtedness of the Company with respect to right of payment but the Notes are
subordinated in liquidation to the Aircraft Credit Facility with respect to the
assets securing the Aircraft Credit Facility.
The Aircraft Credit Facility contains certain covenants which require
specific levels of insurance, as well as requirements regarding possession,
maintenance, and lease or transfer of the flight equipment financed thereby. The
Aircraft Credit Facility also contains certain covenants, similar to those
currently existing, that will restrict the Company from taking various actions
and that will require the Company to achieve and maintain certain financial
covenants. The Aircraft Credit Facility includes financial covenants relating to
minimum interest coverage, maximum leverage and minimum net worth, and other
covenants providing for limitations on indebtedness, liens, investments,
contingent obligations, restricted junior payments, capital expenditures and
leases. The Aircraft Credit Facility also prohibits the Company from prepaying
the Notes and prohibits certain changes in control of the Company.
The Aircraft Credit Facility contains events of default similar to those
currently existing, including nonpayment of principal, interest or fees,
violation of covenants, inaccuracy of representations or warranties in any
material respect, cross default to other indebtedness, bankruptcy, ERISA,
environmental matters, material judgments and material liabilities and change of
control.
AFL TERM LOAN FACILITY
In May 1997, AFL, a wholly-owned subsidiary of the Company, entered into
the $185 million AFL Term Loan Facility to refinance six Boeing 747-200 aircraft
(the "AFL Aircraft") previously owned by the Company through another whollyowned
subsidiary of the Company. The six aircraft were previously financed via loan
agreements with International Nederlanden Bank N.V. and Deutsche Lufthansa AG,
each of which were repaid with the proceeds from the AFL Term Loan Facility and
cash from the Company. The AFL Aircraft are leased by AFL to the Company via six
separate triple-net operating leases (the "AFL Leases") for a lease term of
seven years. The Company has the right to purchase the AFL Aircraft at the end
of the term of the AFL Leases for then-current fair market value. The seven-year
AFL Term Loan Facility includes quarterly principal amortization beginning in
February 1998 and contains a balloon payment due upon maturity in May 2004. The
facility bears interest at the three-month Eurodollar rate plus 2.50%, until May
2001 and 3.00% thereafter, unless the Company has achieved certain ratings
upgrades on its Equipment Notes. The AFL Term Loan Facility is secured by a
first priority security interest in the AFL Aircraft and the rights of AFL under
the AFL Leases. The AFL Term Loan Facility contains certain covenants and
restrictions applicable to AFL, including limitations on indebtedness, liens,
investments, continent obligations, restricted junior payments, asset sales and
acquisitions, amendments to material agreements, leases, transactions with
affiliates and the conduct of business. The AFL Leases contain certain covenants
and restrictions applicable to the Company, including limitations on
indebtedness, liens, investments, contingent obligations, restricted junior
payments, asset sales and acquisitions, amendments to material agreements,
leases, transactions with affiliates and the conduct of business and the
maintenance of certain financial ratios. In connection with the Refinancings,
the financial covenants in the AFL Leases were amended to facilitate the
financing of the 747-400 aircraft.
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<PAGE> 46
AFL II TERM LOAN FACILITY
In September 1997, the Company, through a newly formed, wholly-owned
unrestricted subsidiary, Atlas Freighter Leasing II, Inc. ("AFL II"), entered
into a credit agreement providing for a new approximately seven-year amortizing
AFL II Term Loan Facility with BTCo, an affiliate of the Initial Purchaser, as
Administrative Agent and other lenders party thereto. The initial principal
amount of the AFL II Term Loan Facility was $185 million. Proceeds drawn under
the AFL II Term Loan Facility were used by the Company to refinance certain
amounts then outstanding under the existing Aircraft Credit Facility which were
secured by four Boeing 747-200 aircraft and nine spare GE engines (the "AFL II
Equipment"). The AFL II Equipment is leased by AFL II to the Company via
separate triple-net operating leases (the "AFL II Leases") for a lease term
ending May 29, 2004. The Company has the right to purchase the AFL II Equipment
at the end of the term of the AFL II Leases for then-current fair market value.
The AFL II Term Loan Facility matures concurrently with the expiration of the
lease term of the AFL II Leases on May 29, 2004 and calls for quarterly
amortization of principal beginning February 28, 1998 with a balloon payment due
at maturity. The AFL II Term Loan Facility bears interest at the three-month
Eurodollar rate plus 2.25%. The AFL II Term Loan Facility also contains a
provision for credit spread reductions of up to 0.25% based upon financial
performance.
The obligations under the AFL II Term Loan Facility are secured by a first
priority security interest in the AFL II Equipment and the rights of AFL II
under the AFL II Leases.
The AFL II Term Loan Facility contains certain covenants and restrictions
applicable to AFL II, including limitations on indebtedness, liens, investments,
contingent obligations, restricted junior payments, asset sales and
acquisitions, amendments to material agreements, leases, transactions with
affiliates and the conduct of business. The AFL II Leases contain certain
covenants and restrictions applicable to the Company, similar to those contained
in the AFL Leases, including limitations on indebtedness, liens, investments,
contingent obligations, restricted junior payments, asset sales and
acquisitions, amendments to material agreements, leases, transactions with
affiliates and the conduct of business and the maintenance of certain financial
ratios. The AFL II Leases prohibit the Company from prepaying the Notes and to
prohibit certain changes in control of the Company.
The AFL II Term Loan Facility contains events of default similar to those
in the AFL Term Loan Facility, including nonpayment of principal, interest or
fees, violation of covenants, inaccuracy of representations or warranties in any
material respect, cross default to the AFL II Leases, bankruptcy, ERISA,
environmental matters, material judgments and material liabilities and change of
control. Similarly, the AFL II Leases contain events of default similar to those
in the AFL Leases, including nonpayment of rent, failure to comply with
maintenance standards, inadequacy of insurance, violation of covenants,
inaccuracy of representations or warranties in any material respect, bankruptcy,
ERISA, material judgments, cross default to certain other indebtedness of the
Company and change of control.
EQUIPMENT NOTES
In November 1995, the Company issued $100 million of senior secured notes
due December 1, 2002 (the "Equipment Notes") through a pass through trust (the
"Pass Through Trust") formed with the sole purpose to hold the Equipment Notes.
Certificates (the "Pass Through Certificates") representing a fractional
undivided interest in the Pass Through Trust were issued concurrently with the
issuance of the Equipment Notes. The Equipment Notes bear interest at 12.25% per
annum with interest payment dates on June 1 and December 1. The Equipment Notes
are secured by three Boeing 747-200 aircraft (the "Equipment Note Aircraft")
fully modified to freighter configuration. The Company is required to provide
for the retirement of one third of the aggregate principal amount of the
Equipment Notes on December 1 in each of 2000 and 2001 through the operation of
a sinking fund at a redemption price of 100% of the principal amount thereof,
together with accrued interest thereon to the redemption date. The Equipment
Notes are redeemable, in whole or in part, at the option of the Company on or
after December 1, 1998 at redemption prices (expressed as a percentage of the
principal amount) declining annually over a three-year period from 108.000% to
100.000%, together with accrued and unpaid interest, if any, to the redemption
date. If a Change of Control
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<PAGE> 47
(as defined therein) occurs, each holder of the Pass Through Certificates has
the right to require that the Company purchase such holder's Pass Through
Certificates, in whole or in part in integral multiples of $1,000, in cash in an
amount equal to 101% of the principal amount of such Pass Through Certificates.
If an Event of Loss (as defined therein) occurs with respect to any of the
Equipment Note Aircraft, the Company is required to either redeem the Equipment
Notes issued with respect to such Equipment Note Aircraft, or provide a
Substitute Collateral Aircraft (as defined therein). The Equipment Notes are
senior secured obligations of the Company and rank pari passu in right of
payment with all other existing and future senior obligations of the Company and
rank senior in right of payment to all subordinated indebtedness of the Company.
The indenture governing the Equipment Notes contains covenants relating to the
Equipment Note Aircraft which require specific levels of insurance, as well as
requirements regarding liens on and possession, maintenance, and lease or
transfer of the Equipment Note Aircraft. In addition, the indenture contains
certain covenants, including limitations on the incurrence of debt, restricted
payments, certain investments, transactions with affiliates, asset sales and
mergers and consolidations.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF EXCHANGE OFFER
The Old Notes were sold by the Company on August 13, 1997 to the Initial
Purchaser, who placed the Old Notes with certain institutional investors. In
connection therewith, the Company and the Initial Purchaser entered into the
Registration Rights Agreement, pursuant to which the Company agreed, for the
benefit of the holders of the Old Notes, that the Company would, at its sole
cost, (i) within 45 days following the original issuance of the Old Notes, file
with the Commission the Exchange Offer Registration Statement (of which this
Prospectus is a part) under the Securities Act with respect to an issue of a
series of new notes of the Company identical in all material respects to the
series of Old Notes and (ii) use its best efforts to cause such Exchange Offer
Registration Statement to become effective under the Securities Act within 150
days following the original issuance of the Old Notes. Upon the effectiveness of
the Exchange Offer Registration Statement (of which this Prospectus is a part),
the Company will offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, to be issued
without a restrictive legend and which may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act. The term "holder"
with respect to any Note means any person in whose name such Note is registered
on the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes that are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1997; provided, however, that if the Company,
in its sole discretion, has extended the period of time during which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth below under "-- Certain Conditions to the Exchange
Offer."
The Company expressly reserves the right, at any time and from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby to delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders of the Old Notes as described
below. During any such extension, all Old Notes previously tendered will remain
subject to the Exchange Offer and
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<PAGE> 48
may be accepted for exchange by the Company. Any Old Notes not accepted for
exchange for any reason will be returned without expense to the tendering
holders thereof as promptly as practicable after the expiration or termination
of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of $1,000
or any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions to the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal, including
all other documents required by such Letter of Transmittal, to State Street Bank
& Trust Company (the "Exchange Agent") at one of the addresses set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, either
(i) certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner of Old Notes whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company, or other nominee and
who wishes to tender such Old Notes in the Exchange Offer should contact the
registered holder promptly and instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to tender on its own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of such Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
(see "-- Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be
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<PAGE> 49
guaranteed, such guaranties must be by a financial institution (including most
banks, savings and loan associations and brokerage houses) that is a participant
in the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Program or the Stock Exchanges Medallion Program (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than a signer of the Letter of Transmittal, the Old Notes surrendered for
exchange must be endorsed by or be accompanied by a written instrument or
instruments of transfer or exchange in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder exactly
as the name or names of the registered holder or holders appear on the Old Notes
with the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes not properly tendered or the acceptance of which might, in
the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation by the
Company of the terms and conditions of the Exchange Offer as to any particular
Old Notes either before or after the Expiration Date (including the Letter of
Transmittal and the instructions thereto) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes for exchange must be cured within such reasonable period of time as
the Company shall determine. None of the Company, the Exchange Agent or any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted with the Letter of Transmittal.
By tendering Old Notes for exchange, each holder will represent to the
Company that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to engage or participate in a distribution of the
New Notes. If any holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or is engaged in or intends
to engage in, or has an arrangement or understanding with any person to
participate in, a distribution of such New Notes to be acquired pursuant to the
Exchange Offer, such holder or any such other person (i) may not rely on the
applicable interpretation of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such brokerdealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company will be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
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For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid, from
August 13, 1997. Old Notes accepted for exchange will cease to accrue interest
from and after the date of consummation of the Exchange Offer. Holders whose Old
Notes are accepted for exchange will not receive any payment in respect of
accrued interest on such Old Notes otherwise payable on any interest payment
date for which the record date occurs on or after consummation of the Exchange
Offer. Old Notes not tendered or not accepted for exchange will continue to
accrue interest from and after the date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, and any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make book-entry delivery of Old Notes by causing
the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees and any other required documents, must in
any case, be transmitted to and received by the Exchange Agent at the addresses
set forth below under "-- Exchange Agent" on or prior to the Expiration Date or
the guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or prior to 5:00 P.M., New York City
time, on the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of the Old
Notes and the amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteed that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Notes, in paper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "- Exchange Agent." Any such notice of
withdrawal must specify the name of the person having tendered the Old Notes to
be withdrawn, identify the
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<PAGE> 51
Old Notes to be withdrawn (including the principal amount of such Old Notes),
and (where certificates for Old Notes have been transmitted) specify the name in
which such Old Notes are registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the release of such certificates
the withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution in which case such guarantee will not be required. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination will be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes, and may terminate or amend the Exchange Offer, if, at any time
before the acceptance of such New Notes for exchange, any of the following
events shall occur:
(a) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company;
(d) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
(e) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time in
its sole discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order is threatened by the Commission or in effect with
respect to the Registration Statement of which this Prospectus is a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
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<PAGE> 52
The Exchange Offer is not conditioned on any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
The State Street Bank & Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests or Notices of Guaranteed
Delivery should be directed to the Exchange Agent addressed as follows:
State Street Bank & Trust Company,
Exchange Agent
By Registered or Certified Mail:
State Street Bank and Trust Company
P.O. Box 778
Boston, Massachusetts 02102
Attention: Corporate Trust Department
Kellie Mullen
By Hand or Overnight Courier:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Kellie Mullen
By Hand: in Boston
State Street Bank and Trust Company
Two International Plaza
Fourth Floor, Corporate Trust
Boston, Massachusetts 02110
By Hand or Overnight Courier
in New York (as Drop Agent)
State Street Bank and Trust Company, N.A.
61 Broadway
Fifteenth Floor, Corporate Trust Window
New York, New York 10006
Confirm by Telephone:
(617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
RESALES OF THE NEW NOTES
Based on positions of the Commission set forth in Morgan Stanley & Co.
Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation
(available July 2, 1993) and K-III Communications Corporation (available May 14,
1993), and similar no-action letters issued to third parties, the Company
believes that the New Notes issued pursuant to the Exchange Offer to a holder in
exchange for Old Notes may
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<PAGE> 53
be offered for resale, resold and otherwise transferred by any holder thereof
(other than such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holder is not participating, does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such New Notes. The Company has not requested or obtained, and
does not intend to seek, an interpretive letter from the staff of the Commission
with respect to this Exchange Offer, and the Company and the holders are not
entitled to rely on interpretive advice provided by the staff of the Commission
to other persons, which advice was based on the facts and conditions represented
in such letters. Although there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer, the Exchange Offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in such letters. If any
holder acquires New Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission set forth in the above no-action and
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 180 days
following the consummation of the Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution" Under the Registration Rights Agreement, the Company is
required to allow such broker-dealers and other persons, if any, subject to
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such New Notes.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes must
accompany the tender of Old Notes.
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<PAGE> 54
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Exchange Offer
and the unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the New Notes.
REGULATORY APPROVALS
The Company does not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the Exchange
Offer.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
OTHER
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holder of the Old Notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take with respect to the Exchange
Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of the Exchange Offer, the
Company will have fulfilled a covenant contained in the terms of the Old Notes
and the Registration Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for such rights under the Registration
Rights Agreement (including rights to receive Additional Interest) which by
their terms terminate or cease to have further effect as a result of the making
and consummation of the Exchange Offer. All untendered Old Notes will continue
to be subject to the restrictions on transfer set forth in the Indenture and the
Company does not currently anticipate that it will register the Old Notes under
the Securities Act. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market, if any, for any remaining Old Notes
could be adversely affected. See "Risk Factors -- Consequences of Failure to
Exchange."
DESCRIPTION OF NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an Indenture,
dated as of August 13, 1997 (the "Indenture"), among the Company and State
Street Bank and Trust Company, as Trustee (the "Trustee"). The terms of the New
Notes are identical in all material respects to the Old Notes, except that the
New Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and will not contain certain provisions
providing for an increase in the interest rate thereon under certain
circumstances described in the Registration Rights Agreement, the provisions of
which will terminate upon the consummation of the Exchange Offer. The following
summary of certain provisions of the Indenture and the Notes does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture (including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended) and the Notes.
Principal of, premium, if any, and interest on the Notes is payable, and
the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York
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<PAGE> 55
(which initially shall be the corporate trust office of the Trustee in New York,
New York), except that, at the option of the Company, payment of interest may be
made by check mailed to the address of the holders as such address appears in
the Note register. Initially, the Trustee will act as Paying Agent and Registrar
for the Notes. The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar, which initially will be the Trustee's
corporate trust office. The Company may change any Paying Agent and Registrar
without notice to holders of the Notes.
The Old Notes were and the New Notes will be issued only in fully
registered form, without coupons, in denominations of $1,000 and any integral
multiple of $1,000. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
PRINCIPAL, MATURITY AND INTEREST
The Notes are unsecured senior obligations of the Company, limited to $150
million aggregate principal amount, and mature on August 1, 2005. Each Note
bears interest at the rate of 10 3/4% per annum from the date of issuance, or
from the most recent date to which interest has been paid or provided for, and
payable semiannually on February 1 and August 1 of each year commencing on
February 1, 1998 to holders of record at the close of business on the January 15
or July 15 immediately preceding the interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. The
Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. Except as set forth below, the Notes will not be
redeemable at the option of the Company prior to August 1, 2001. On and after
such date, the Notes will be redeemable, at the Company's option, in whole or in
part, at any time upon not less than 30 nor more than 60 days' prior notice
mailed by first-class mail to each holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), if redeemed
during the 12-month period commencing on August 1 of the years set forth below,
plus accrued and unpaid interest to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001........................................................ 105.375%
2002........................................................ 102.688%
2003 and thereafter......................................... 100.000%
</TABLE>
Optional Redemption Upon Public Offerings. In addition, at any time on or
prior to August 1, 2000, the Company, at its option, may redeem up to 35% of the
aggregate principal amount of the Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings at a redemption price equal to
110.75% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided, however, that after any
such redemption the aggregate principal amount of the Notes outstanding must
equal at least 65% of the aggregate principal amount of the Notes originally
issued. In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 90
days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten primary public offering of Qualified Capital Stock of the Company
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which such Notes are
listed, or if such Notes are not then listed on a national securities exchange,
on a pro rata basis, by lot or by
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<PAGE> 56
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided, however, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portion
thereof for redemption shall be made by the Trustee only on a pro rata basis,
unless such method is otherwise prohibited. Notes may be redeemed in part in
multiples of $1,000 principal amount only. Notice of redemption will be sent, by
first class mail, postage prepaid, at least 45 days (unless a shorter period is
acceptable to the Trustee) prior to the date fixed for redemption to each holder
whose Notes are to be redeemed at the last address for such holder then shown on
the registry books. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after any redemption date, interest
will cease to accrue on the Notes or part thereof called for redemption as long
as the Company has deposited with the Paying Agent funds in satisfaction of the
redemption price pursuant to the Indenture.
RANKING
The Notes represent senior unsecured obligations of the Company ranking
pari passu in right of payment with all other existing and future senior
obligations of the Company. The Notes, however, are effectively subordinated to
secured senior obligations of the Company with respect to the assets securing
such obligations. The Notes also are effectively subordinated to all existing
and future liabilities of the Company's Subsidiaries. As of June 30, 1997, after
giving pro forma effect to the Pro Forma Adjustments, the Offering and the
Refinancings and the application of the proceeds therefrom, the Company's total
indebtedness outstanding would have been approximately $747.9 million, of which
$595.0 million would have been consolidated secured indebtedness, and $370.3
million of which would have been indebtedness of the Company's Subsidiaries.
Subject to certain limitations, the Company and its Subsidiaries may incur
additional indebtedness in the future.
CHANGE OF CONTROL
If a Change of Control shall occur at any time, then each holder of Notes
shall have the right to require that the Company purchase such holder's Notes,
in whole or in part in integral multiples of $1,000, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued interest, if any, to the date of
purchase (the "Change of Control Purchase Date"), pursuant to the offer
described below (the "Change of Control Offer") and the other procedures set
forth in the Indenture.
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes by first-class mail, postage prepaid, at the address of such
holder shown on the security register, stating, among other things, (i) the
purchase price and the purchase date, which shall be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed, or such
later date as is necessary to comply with requirements under the Exchange Act;
(ii) that any Notes not tendered will continue to accrue interest; (iii) that,
unless the Company defaults in the payment of the purchase price, any Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and (iv) certain
other procedures that a holder of Notes must follow to accept a Change of
Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. In the event the Company is
required to purchase outstanding Notes pursuant to a Change of Control Offer,
the Company may seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing. The failure
of the Company to make or consummate the Change of Control Offer or pay the
Change of Control Purchase Price when due would result in an Event of Default
and would give the Trustee and the holders of the Notes the rights described
under "Events of Default."
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<PAGE> 57
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to purchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "-- Certain Definitions" for the definition of "Change
of Control." A transaction involving the Company's management or its affiliates,
or a transaction involving a recapitalization of the Company, would only result
in a Change of Control if it is the type of transaction specified by such
definition.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, in connection with a Change of Control Offer
and shall not be deemed in violation of this covenant by reason of any action
required to be taken to effect such compliance.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. (a) The Company will
not create, issue, assume, guarantee or in any manner become directly or
indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Indebtedness (including any Acquired Indebtedness) other than
Permitted Indebtedness unless, at the time of any such incurrence, the
Consolidated Fixed Charge Coverage Ratio would have been at least equal to 2.75
to 1.0 (after giving pro forma effect to (i) the incurrence of such Indebtedness
and (if applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred and the
application of such proceeds occurred on the first day of the period for which
the Consolidated Fixed Charge Coverage Ratio is calculated, (ii) the incurrence,
repayment or retirement of any other Indebtedness by the Company or any
Subsidiary since the first day of such period as if such Indebtedness was
incurred, repaid or retired at the beginning of such period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such period) and (iii) the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business acquired or disposed of by the Company or any
Subsidiary or ACMI Contracted Aircraft acquired by the Company or any
Subsidiary, in any such case, since the first day of such period, as if such
acquisition or disposition of a company, entity or business, or such acquisition
of an ACMI Contracted Aircraft acquired by the Company or any Subsidiary, in any
such case, since the first day of such period, as if such acquisition or
disposition of a company, entity or business, or such acquisition of an ACMI
Contracted Aircraft occurred at the beginning of such period; provided, however,
that pro forma effect shall not be given to a number of ACMI Contracted Aircraft
exceeding five in any four fiscal quarters.
(b) The Company will not permit any Subsidiary to incur any Indebtedness
(including any Acquired Indebtedness) other than Permitted Subsidiary
Indebtedness.
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Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company (other than
dividends or distributions payable solely in shares of its Qualified
Capital Stock or in options, warrants or other rights to acquire such
shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the Company or any
Subsidiary or any Affiliate of the Company, or any options, warrants or
other rights to acquire such shares of Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
or
(iv) make any Investment (other than any Permitted Investment) in any
Person
(such payments or any other actions described in (but not excluded from) clauses
(i) through (iv) are collectively referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect on a pro forma basis to, the
proposed Restricted Payment (the amount of any such Restricted Payment, if other
than cash, as determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution), (1) no
Default or Event of Default shall have occurred and be continuing, (2) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in accordance with the provisions described under the
"Limitation on Indebtedness" covenant and (3) the aggregate amount of all
Restricted Payments declared or made after the Issue Date shall not exceed the
sum of:
(A) 50% of the aggregate cumulative Consolidated Adjusted Net
Income of the Company accrued on a cumulative basis during the period
beginning on July 1, 1997 and ending on the last day of the Company's
last fiscal quarter ending prior to the date of such proposed Restricted
Payment (or, if such aggregate cumulative Consolidated Adjusted Net
Income shall be a loss, minus 100% of such amount), plus
(B) 100% of the aggregate Net Cash Proceeds received after the
Issue Date by the Company from the issuance or sale (other than to any
Subsidiary) of shares of Qualified Capital Stock of the Company or
warrants, options or rights to purchase such shares of Qualified Capital
Stock of the Company, plus
(C) 100% of the aggregate Net Cash Proceeds received after the
Issue Date by the Company from the issuance or sale (other than to any
Subsidiary) of debt securities or Redeemable Capital Stock that have
been converted into or exchanged for Qualified Capital Stock of the
Company to the extent such securities were originally sold for cash,
together with the aggregate Net Cash Proceeds received by the Company at
the time of such conversion or exchange, plus
(D) to the extent not otherwise included in the Consolidated
Adjusted Net Income of the Company, an amount equal to the net reduction
in Investments (other than reductions in Permitted Investments) in any
Person resulting from payments in cash of interest on Indebtedness,
dividends, repayments of loans or advances, or other returns of capital,
in each case to the Company or a Subsidiary after the date of the
Indenture from any such Person not to exceed the amount of Investments
(other than Permitted Investments) in such Persons by the Company and
its Subsidiaries, plus
(E) $10 million, plus
(F) without duplication, the sum of (1) the aggregate amount
returned in cash on or with respect to Investments (other than Permitted
Investments) made subsequent to the Issue Date whether through interest
payments, principal payments, dividends or other distributions or
payments, (2) the net cash proceeds received by the Company or any
Subsidiary from the disposition of all or
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any portion of such Investments (other than to a Subsidiary of the
Company) and (3) upon redesignation of an Unrestricted Subsidiary as a
Subsidiary, the fair market value of such Subsidiary; provided, however,
that with respect to all Investments made in any Unrestricted Subsidiary
or joint venture, the sum of clauses (1), (2) and (3) above with respect
to such Investment shall not exceed the aggregate amount of all such
Investments made subsequent to the Issue Date in such Unrestricted
Subsidiary or joint venture.
(b) Notwithstanding paragraph (a) above, the Company and any Subsidiary may
take the following actions so long as (with respect to clauses (ii),
(iii), (iv), (v), (vi) and (vii), below) no Default or Event of Default
shall have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment of such
dividend would have complied with the provisions of paragraph (a) above and
such payment shall be deemed to have been paid on such date of declaration
for purposes of the calculation required by paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company or any warrants, rights
or options to acquire shares of Capital Stock, in exchange for, or out of
the Net Cash Proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of, shares of Qualified Capital Stock of the
Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness or Redeemable Capital
Stock in exchange for, or out of the Net Cash Proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of, shares of
Qualified Capital Stock of the Company;
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness of the Company in
exchange for, or out of the Net Cash Proceeds of a substantially concurrent
incurrence or sale (other than to a Subsidiary) of, new Subordinated
Indebtedness of the Company so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount (or, if such Subordinated
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
of the Subordinated Indebtedness being so purchased, redeemed, defeased,
acquired or retired, (B) such new Subordinated Indebtedness is subordinated
to the Notes to the same extent as such Subordinated Indebtedness so
purchased, redeemed, defeased, acquired or retired and (C) such new
Subordinated Indebtedness does not have a scheduled principal payment
earlier than the final maturity of the Notes;
(v) the purchase, redemption or other acquisition or retirement for
value of shares of Capital Stock of the Company held by any future, present
or former employee or director of the Company or any Subsidiary issued
pursuant to any management equity or stock option plan of the Company;
provided that the aggregate consideration paid by the Company for such
shares so purchased, redeemed or otherwise acquired or retired for value
does not exceed $2.5 million in any fiscal year of the Company;
(vi) the making of any Investment (other than a Permitted Investment)
out of the Net Cash Proceeds of the substantially concurrent issuance and
sale (other than to a Subsidiary) of Qualified Capital Stock of the
Company; and
(vii) the making of Investments in an aggregate amount not to exceed
$50,000,000 in wholly-owned Unrestricted Subsidiaries to own and lease ACMI
Contracted Aircraft or other flight equipment utilized in the normal course
of business of the Company.
The actions described in clauses (i), (ii), (iii), (v) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
and the actions described in clause (iv) and (vii) of this paragraph (b) shall
be Restricted Payments that shall be
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permitted to be taken in accordance with this paragraph and shall not reduce the
amount that would otherwise be available for Restricted Payments under clause
(3) of paragraph (a) above.
(c) In computing Consolidated Adjusted Net Income of the Company under
paragraph (a) above, (1) the Company shall use audited financial statements for
the portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such period and (2) the Company shall be permitted to
rely in good faith on the financial statements and other financial data derived
from the books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment would in the good faith determination of
the Company be permitted under the requirements of the Indenture, such
Restricted Payment shall be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Adjusted Net Income of the
Company for any period.
Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The
Company (a) will not permit any Subsidiary to issue any Capital Stock (other
than to the Company or a Subsidiary) and (b) will not permit any Person (other
than the Company or a Subsidiary) to own any Capital Stock of any Subsidiary;
provided, however, that this covenant shall not prohibit (i) the issuance and
sale of all, but not less than all, of the issued and outstanding Capital Stock
of any Subsidiary owned by the Company or any Subsidiary in compliance with the
other provisions of the Indenture or (ii) the ownership by directors of
director's qualifying shares or the ownership by foreign nationals of Capital
Stock of any Subsidiary, to the extent mandated by applicable law.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Company or any
Subsidiary unless (i) such transaction or series of related transactions is
between and among the Company and wholly owned Subsidiaries or (ii) (A) such
transaction or series of related transactions is on terms that are no less
favorable to the Company, or such Subsidiary, as the case may be, than those
that could have been obtained in an arm's-length transaction with unrelated
third parties; (B) the Company shall have delivered an officer's certificate to
the Trustee certifying that such transaction or series of related transactions
complies with clause (A); (C) if such transaction or series of related
transactions involves consideration of more than $3 million the Board of
Directors (including a majority of the Disinterested Directors) has approved
such transaction or series of transactions or the Company has obtained a written
opinion from a nationally recognized investment banking firm to the effect set
forth in the preceding clause (A); and (D) if such transaction or series of
related transactions involves consideration of more than $10 million the Company
has obtained a written opinion from a nationally recognized investment banking
firm to the effect set forth in the preceding clause (A). This covenant will not
apply to (i) the payment of reasonable and customary compensation and fees to,
and indemnification of, directors of the Company or any Subsidiary who are not
employees of the Company or any Subsidiary or (ii) reasonable and customary
salaries, bonuses and other compensation paid to employees of the Company or any
Subsidiary in accordance with past practice approved by the Compensation
Committee of the Company. Clauses (ii) (C) and (ii) (D) of this covenant will
not apply to transactions pursuant to the Atlas Freighter Leasing Transactions.
Limitation on Liens. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind (other then Permitted Liens) on or with respect to any of
its property or assets including any shares of stock or indebtedness of any
Subsidiary, whether owned at the date of the Indenture or thereafter acquired,
or any income, profits or proceeds therefrom, or assign or otherwise convey any
right to receive income thereon.
Limitation on Asset Sales and Disposition of Proceeds of Asset Sales. (a)
The Company will not, and will not permit any Subsidiary to, directly or
indirectly engage in any Asset Sale involving assets unless (i) the
consideration received by the Company or such Subsidiary for such Asset Sale is
not less than the Fair Market Value of the assets sold (as determined by the
Board of Directors of the Company, whose determination shall
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<PAGE> 61
be conclusive and evidenced by a Board Resolution) and (ii) the consideration
received by the Company or the relevant Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents.
(b) If the Company or any Subsidiary engages in an Asset Sale, the Company
may use the Net Cash Proceeds thereof, within 12 months after such Asset Sale,
to (i) repay permanently any then outstanding senior Indebtedness of the Company
or Indebtedness of any Subsidiary, (ii) invest (or enter into a legally binding
agreement to invest) in properties and assets to replace the properties and
assets that were the subject of the Asset Sale or in properties and assets that
will be used in businesses of the Company or its Subsidiaries. as the case may
be, existing on the Issue Date or reasonably related thereto or involving
outsourcing for the air cargo industry ("Replacement Assets"), or (iii) a
combination of repayment and investment permitted by the foregoing clauses (b)
(i) and (b) (ii). If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, then the Company may, within 90 days of such termination
or within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clauses (i), (ii) (without regard to the parenthetical
contained in such clause (ii)) or (iii) above. Pending the final application of
any such Net Cash Proceeds, the Company or such Subsidiary may temporarily
reduce Indebtedness under a revolving credit facility, if any, or otherwise
invest such Net Cash Proceeds in Cash Equivalents. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall, within 25 business days, make an offer to purchase (an "Excess
Proceeds Offer") from the holders of Notes, on a pro rata basis, in accordance
with the procedures set forth below the maximum principal amount of Notes that
may be purchased with the Excess Proceeds. The offer price as to each Note shall
be payable in cash in an amount equal to 100% of the principal amount of such
Note (as adjusted for any prepayment of principal of the Notes), plus accrued
interest, if any (the "Offered Price"), to the date such Excess Proceeds Offer
is consummated. To the extent that the adjusted aggregate principal amount of
Notes tendered pursuant to an Excess Proceeds Offer is less than the Excess
Proceeds, the Company may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Notes to be purchased will be
selected on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset to zero.
(d) Notwithstanding the foregoing, the Company and its Subsidiaries will be
permitted to consummate an Asset Sale without complying with paragraphs (a) and
(b) above to the extent (i) at least 75% of the consideration for such Asset
Sale constitutes Replacement Assets and/or Cash Equivalents and (ii) such Asset
Sale is for Fair Market Value; provided, however, that any consideration not
constituting Replacement Assets received by the Company or any Subsidiary in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Cash Proceeds subject to the provisions of paragraphs (a)
and (b) above.
(e) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Notes shall be purchased by the Company, at the option of the
holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 30 days and not later than 60 days from the date the
notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the amount Excess Proceeds is less than the aggregate
Offered Price of all Notes tendered.
(f) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with an Excess
Proceeds Offer and shall not be deemed in violation of this covenant by reason
of any action required to be taken to effect such compliance.
Limitation on Guarantees of Indebtedness by Subsidiaries. (a) The Company
will not permit any Subsidiary, directly or indirectly, to guarantee, assume or
in any other manner become liable for the payment of any Indebtedness of the
Company or Indebtedness of any other Subsidiary unless (i) (A) such Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of payment of the Notes by such Subsidiary and (B)
with respect to any guarantee of Subordinated Indebtedness by a Subsidiary, any
such guarantee shall be subordinated to such Subsidiary's Guarantee with respect
to the Notes at least to the same extent as such Subordinated Indebtedness is
subordinated to the Notes and
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(ii) such Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Subsidiary as a
result of any payment by such Subsidiary under its Guarantee.
(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary of the
Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Capital Stock of a
Subsidiary owned by the Company or any Subsidiary in, or all or substantially
all the assets of, such Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the guarantee
which resulted in the creation of such Guarantee (and any other guarantees that
would have resulted in the creation of such a Guarantee), except a discharge or
release by or as a result of payment under such guarantee.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the ability of any
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock, (b) pay any Indebtedness
owed to the Company or any other Subsidiary, (c) make Investments in the Company
or any other Subsidiary, (d) transfer any of its properties or assets to the
Company or any other Subsidiary or (e) guarantee any Indebtedness of the Company
or any other Subsidiary, except for such encumbrances or restrictions existing
under or by reason of (i) any agreement in effect on the date of the Indenture,
(ii) the Indenture, (iii) applicable law, (iv) customary non-assignment
provisions, (x) of any lease governing a leasehold interest of the Company or
any Subsidiary or (y) of Indebtedness secured by a Lien that is permitted to be
incurred under the Indebtedness that relates to the property subject to such
Lien, (v) any agreement or other instrument of a Person acquired by the Company
or any Subsidiary in existence at the time of such acquisition (but not created
in contemplation thereof), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, (vi) any restriction with
respect to a Subsidiary of the Company imposed pursuant to an agreement relating
to the sale of all or substantially all of the Capital Stock or assets of such
Subsidiary (so long as such restriction, by its terms, terminates on the earlier
of the termination of such agreement or the consummation of such agreement), and
(vii) any restrictions existing under any agreement that refinances or replaces
any agreement containing restrictions permitted under clause (i), (ii), (iv),
(v) or (vi), provided that the terms and conditions of such restriction are not
materially less favorable to the holder of the Notes than those under or
pursuant to the agreement refinanced or replaced.
Limitations on Consolidations, Mergers and Sales of Assets. The Company
will not in a single transaction or a series of related transactions consolidate
with or merge with or into any other Person or sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of its properties and
assets as an entirety to any Person or Persons, and the Company will not permit
any Subsidiary to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
the sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a consolidated basis to any Person or Persons, unless: (i)
either (a) the Company shall be the surviving corporation or (b) the Person (if
other than the Company) formed by such consolidation or into which the Company
or such Subsidiary is merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or other disposition all or substantially all of the
properties and assets of the Company or such Subsidiary, as the case may be (the
"Surviving Entity"), (1) shall be a corporation organized and validly existing
under the laws of the United States of America, any state thereof or the
District of Columbia that is a "certificated United States air carrier" under
the Aviation Act and (2) shall expressly assume, by indenture, supplemental to
the Indenture, executed and delivered to the Trustee, in form satisfactory to
the Trustee, the Company's obligation for the due and punctual payment of the
principal of (or premium, if any, on) and interest on the Notes and the
performance and observance of every covenant of the Indenture on the part of the
Company to be performed or observed; (ii) immediately before and after giving
effect to such transaction or series of transactions on a pro forma basis and
treating any obligation of the Company or a Subsidiary in connection with or as
a result of such transaction as having been incurred at the time of such
transaction, no Default or Event of Default shall have
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occurred and be continuing; (iii) immediately before and immediately after
giving effect to such transaction or series of transactions on a pro forma basis
(on the assumption that the transaction or series of transactions occurred on
the first day of the four-quarter period immediately prior to the consummation
of such transaction or series of transactions with the appropriate adjustments
with respect to the transaction or series of transactions being included in such
pro forma calculation), the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of the "Limitation on Indebtedness" covenant; (iv) each Guarantor, if any,
unless it is the other party to the transactions described above, shall have by
supplemental indenture confirmed that its Guarantee shall apply to such Person's
obligations under the Indenture and the Notes; (v) if any of the property or
assets of the Company or any of its Subsidiaries would thereupon become subject
to any Lien, the provisions of the "Limitation on Liens" covenant are complied
with; and (vi) the Company or the Surviving Entity shall have delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger, conveyance, transfer or lease, and if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with the terms of the Indenture and that all conditions
precedent therein provided for relating to such transaction have been complied
with.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with the immediately preceding paragraph in
which the Company is not the continuing obligor under the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the Company therein. When a successor
assumes all the obligations of its predecessor under the Indenture or the Notes,
the predecessor shall be released from those obligations; provided that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Notes.
Reports. The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be required (a) to file with the Trustee, and provide to each
holder of Notes, without cost to such holder, copies of such reports and
documents within 15 days after the date on which the Company files such reports
and documents with the Commission or the date on which the Company would be
required to file such reports and documents if the Company were so required, and
(b) if filing such reports and documents with the Commission is not accepted by
the Commission or is prohibited under the Exchange Act, to supply at the
Company's cost copies of such reports and documents to any prospective holder of
Notes promptly upon written request.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on the
Notes when it becomes due and payable, and continuance of such default for
a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) the Notes at their Maturity;
(iii) (A) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company contained in the Indenture (other
than a default in the performance, or breach, of a covenant or agreement
which is specifically dealt with in the immediately preceding clauses (i)
or (ii), or in clauses (B), (C) and (D) of this clause (iii)) and
continuance of such default or breach for a period of 30 days after written
notice shall have been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Notes then outstanding; (B) there shall be a
default in the performance, or breach, of the provisions of "-- Certain
Covenants -- Limitation on Asset Sales and Disposition of Proceeds of Asset
Sales"; (C) there shall be a default in the performance or breach of the
provisions of "Consolidation, Merger and Sale of Assets"; or (D) the
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Company shall have failed to make or consummate a Change of Control Offer
in accordance with the provisions of "-- Certain Covenants -- Change of
Control";
(iv) (A) there shall have occurred one or more defaults in the payment
of principal of (or premium, if any, on) Indebtedness of the Company or any
Subsidiary aggregating $10 million or more, when the same becomes due and
payable at the stated maturity thereof, and such default or defaults shall
have continued after any applicable grace period and shall not have been
cured or waived or (B) Indebtedness of the Company or any Subsidiary
aggregating $10 million or more shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased (other
than by regularly scheduled required prepayment), prior to the stated
maturity thereof;
(v) one or more final judgments or orders rendered against the Company
or any Subsidiary which require the payment of money, either individually
or in an aggregate amount, in excess of $10 million and either (A) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment or order or (B) there shall have been a period of 30 days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, was not in effect; or
(vi) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Notes to be due and payable. Upon such a declaration, such principal and
accrued and unpaid interest shall be due and payable immediately, if an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 5 days after it occurs. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its Trust officers in good faith
determines that withholding notice is in the interests of the Noteholders. In
addition, the Company is required to deliver to the Trustee, within
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120 days after the end of each fiscal year, a certificate indicating whether the
signers thereof know of any Default that occurred during the previous year. The
Company also is required to deliver to the Trustee, within 5 days after the
occurrence thereof, written notice of any events which would constitute certain
Defaults, their status and what action the Company is taking or proposes to take
in respect thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, or stockholder of the Company or any
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Subsidiary under the Notes or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at its option by Board Resolution, at any time, terminate
the obligations of the Company with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payments in respect of the principal of (and premium, if any, on) and interest
on such Notes when such payments are due, (ii) the Company's obligations to
issue temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes, maintain an office or agency for
payments in respect of the Notes and segregate and hold such payments in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv)
the defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company with
respect to certain covenants set forth in the Indenture under "-- Certain
Covenants" above ("covenant defeasance"), and any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit or cause to be deposited with the Trustee, in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the holders of the Notes, money in an amount, or U.S. Government
Obligations (as defined in the Indenture) which through the scheduled payment of
principal and interest thereon will provide money in an amount, or a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal, premium or installment of
interest; (ii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as an event of bankruptcy
under clause (vi) of "Events of Default" above is concerned, at any time during
the period ending on the 91st day after the date of such deposit; (iii) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, the Indenture or any material agreement or
instrument to which the Company is a party or by which it is bound; (iv) in the
case of defeasance, the Company shall have delivered to the Trustee an Opinion
of Counsel stating that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date hereof,
there has been a change in applicable federal income tax law, in either case to
the effect, and based thereon such opinion shall confirm that, the holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred; (v) in the case of
covenant defeasance, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the holders of the Notes outstanding will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; (vi) in the case of defeasance or
covenant defeasance, the Company shall have delivered to the Trustee an Opinion
of Counsel in the United States to the effect that after the 91st day following
the deposit or after the date such opinion is delivered, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting
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creditors' rights generally; (vii) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the holders of the Notes over the other
creditors of the Company with the intent of hindering, delaying or defrauding
creditors of the Company; and (viii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
MODIFICATION OF INDENTURE
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the amount of
Notes whose holders must consent to an amendment, (ii) reduce the stated rate of
or extend the stated time for payment of interest on any Note, (iii) reduce the
principal of or extend the Maturity of any Note, (iv) waive a default in the
payment of the principal of or interest on any Note, (v) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "Optional Redemption" above,
(vi) make any Note payable in money other than that stated in the Note, (vii)
impair the right of any holder to receive payment of principal of and interest
on such holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such holder's Notes,
(viii) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate an offer with respect to any Asset Sale
that has been consummated or modify any of the provisions or definitions with
respect thereto, (ix) modify or change any provision of the Indenture or the
related definitions affecting the ranking of the Notes in a manner which
adversely affects the Holders or (x) make any change in the amendment provisions
which require each holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the Indenture,
to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163 (f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163 (f) (2) (B) of the Code), to
secure the Notes, to add to the covenants of the Company for the benefit of the
holders or to surrender any right or power conferred upon the Company, to make
any change that does not adversely affect the rights of any holder or to comply
with any requirement of the Commission in connection with the qualification of
the Indenture under the Trust Indenture Act.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders or any defect
therein, will not impair or affect the validity of the amendment.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim a security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined) it
must eliminate such conflict or resign.
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The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Notes issued thereunder, unless they
shall have offered to the Trustee security and indemnity satisfactory to it.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"ACMI Contracted Aircraft" means an aircraft acquired by the Company or its
Subsidiaries and dedicated to a new ACMI Contract entered into within 60 days of
the acquisition of such aircraft (which ACMI Contract shall not represent a
renewal or replacement of a prior ACMI Contract unless the aircraft dedicated to
such prior ACMI Contract was operated under an operating lease and returned to
the lessor) which is in effect on the date of calculation and has a remaining
term of three years or more on the date such aircraft was dedicated to such ACMI
Contract provided that in any calendar year two ACMI Contracts may have a term
of not less than one year (subject to cancellation terms, which may include the
right to cancel on no less than six months notice). Pro forma effect shall be
given to the acquisition of an ACMI Contracted Aircraft by adding to the
appropriate components of the Consolidated Fixed Charge Coverage Ratio (i) the
net projected annualized revenues from the operation of the ACMI Contracted
Aircraft under such ACMI Contract for that portion of the period for which the
Consolidated Fixed Charge Coverage Ratio is being calculated prior to the
acquisition of such aircraft, assuming operation for the minimum guaranteed
number of block hours (less any block hours subject to cancellation) at the
minimum guaranteed rate under such ACMI Contract less (ii) the projected
annualized cash operating expenses from such operation for the same period for
which the related projected revenues are determined in clause (i) above,
provided that such projected cash operating expenses shall not be less on a per
block hour basis than the average historical per block hour cash operating
expenses of the Company for such aircraft model for the four full fiscal
quarters immediately preceding the date of calculation, and provided, further,
that if such aircraft is of a model not then currently operated by the Company,
such projected cash operating expenses shall include maintenance costs which
shall not be less than the average for such aircraft type disclosed on the most
recently available DOT Forms 41 with respect to such aircraft type or any
summary of such data as reported in a nationally recognized industry publication
or as provided in a written estimate prepared by a nationally recognized air
transportation consulting group. For purposes of this definition, "ACMI
Contract" shall include contracts pursuant to which the Company does not pay any
crew costs, in which event pro forma effect shall be given as described above
but excluding from the projected annualized cash operating expenses all crew
costs. Cash operating expenses means for purposes of this definition
consolidated operating expenses, less consolidated depreciation and amortization
and consolidated rental expenses, to the extent included in computing
consolidated operating expenses.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such Person.
"AFL II" means a new wholly-owned Unrestricted Subsidiary to be formed for
the sole purpose of owning and leasing four 747-200 aircraft and eight spare
engines currently owned by the Company and financed by the Company's existing
revolving credit facility.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any
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executive officer or director of any such specified Person or other Persons or,
with respect to any natural Person, any Person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin. For the
purposes of this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Appraised Fair Market Value" means the Adjusted Current Market Value.
Current Market Value is the most likely trading price that, in the opinion of an
appraiser, may be generated from an aircraft under the market conditions that
are perceived to exist at the time in question. Current Market Value assumes
that the aircraft is valued for its highest, best use, that the parties to the
hypothetical transaction are willing, able, prudent and knowledgeable, and under
no unusual pressure for a prompt sale, and that the transaction would be
negotiated in an open and unrestricted market on an arm's length basis, for cash
or equivalent consideration, and given an adequate amount of time for effective
exposure to prospective buyers. Adjusted Current Market Value, in the opinion of
the appraiser, is the Current Market Value of the aircraft adjusted for the
actual technical status and maintenance condition of the aircraft.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way or merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of any Subsidiary; (ii) all or substantially all of the properties and assets of
the Company or its Subsidiaries; or (iii) any other properties or assets of the
Company or any Subsidiary, other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (A) that is governed by the provisions of the
Indenture, described under "Consolidation, Merger and Sale of Assets," (B) by
the Company to any Subsidiary, or by any Subsidiary of the Company or any
Subsidiary and in accordance with the terms of the Indenture, (C) of aircraft
engines, components, parts or spare parts pursuant to customary pooling,
exchange or similar agreements or, (D) asset swaps involving aircraft engines,
components, parts or spare parts (provided that the assets received by the
Company or any Subsidiary have a Fair Market Value at least equal to the asset
transferred (provided that with respect to any asset swap or series of related
asset swaps involving assets with a Fair Market Value exceeding $3 million, such
determination shall be made by the Board of Directors)), (E) constituting an
Investment that is permitted under the Indenture in an Unrestricted Subsidiary,
joint venture or other Person in which the Company or a Subsidiary retains an
ownership interest, or (F) having a Fair Market Value per transaction or series
of related transactions of less than $1,000,000.
"Atlas Freighter Leasing Transactions" means the transactions in which
Atlas Freighter Leasing, Inc. and AFL II, each a wholly-owned Unrestricted
Subsidiary of the Company, refinanced and will refinance six 747-200 aircraft
and four 747-200 aircraft all previously owned by the Company, respectively.
"Aviation Act" means the Federal Aviation Act of 1958, as amended, and the
applicable regulations thereunder.
"Bankruptcy Law" means Title 11, United States Code, as amended, or any
similar United States federal or state law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
"Boeing Purchase Contract" means the agreement dated June 9, 1997 between
Atlas Air, Inc. and The Boeing Company to purchase ten new 747-400 aircraft.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations, rights in or other equivalents
(however designated) of such Person's capital stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock, whether now outstanding or issued after
the date of the Indenture.
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"Capitalized Lease Obligation" of any Person means any obligation of such
Person and its subsidiaries on a consolidated basis under a lease of (or other
agreement conveying the right to sue) any property (whether real, personal or
mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of one year or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances and money market deposits
with a maturity of one year or less of any financial institution that is a
member of the Federal Reserve System, in each case having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) commercial
paper with a maturity of one year or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and rated at least A-1 by S&P or at
least P-1 by Moody's and (iv) investment in money market funds substantially all
of whose assets are comprised of Cash Equivalents described in clauses (i)
through (iii).
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total outstanding Voting Stock of the
Company; (b) the Company consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) cash, securities and other property
(other than Capital Stock of the Surviving Entity) in an amount that could be
paid by the Company as a Restricted Payment as described under the "-- Certain
Covenants -- Limitation on Restricted Payments" covenant (or a combination of
(A) and (B)) and (ii) immediately after such transaction, no "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total outstanding
Voting Stock of the surviving transferee corporation; (c) during any consecutive
two year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election to such Board of Directors, or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; or (d) the Company is liquidated or dissolved or adopts a plan
of liquidation or dissolution other than in a transaction which complies with
the provisions described under "Consolidation, Merger and Sale of Assets." For
purposes of this definition, a Permitted Holder shall be deemed to beneficially
own Voting Stock that has been pledged to a financial institution, unless the
pledgee has the present right to vote such Voting Stock in the election of
directors or has exercised remedies with respect to such Voting Stock.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and all Subsidiaries for such period as
determined in accordance with GAAP, adjusted by excluding, without duplication,
(a) any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) any net after-tax gains or losses (less, all fees and
expenses relating thereto) attributable
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to asset dispositions other than in the ordinary course of business, (c) the
portion of net income (or loss) of any Person (other than the Company or a
Subsidiary), including Unrestricted Subsidiaries, in which the Company or any
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Subsidiary
in cash during such period, (d) for purposes of calculating Consolidated
Adjusted Net Income under the "Limitation on Restricted Payments" covenant, the
net income (or loss) of any Person combined with the Company or any Subsidiary
on a "pooling of interests" basis attributable to any period prior to the date
of combination and (e) the net income of any Subsidiary, to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the date of determination permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Subsidiary or its stockholders.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of (a) the sum of Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-Cash Charges deducted in computing Consolidated Adjusted Net Income, in each
case, for such period, of the Company and all Subsidiaries as determined on a
consolidated basis in accordance with GAAP to (b) such Consolidated Interest
Expense.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes of the Company and all
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" of the Company means, for any period,
without duplication, the sum of (a) the interest expense of the Company and its
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of interest rate contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation, (iv) amortization of debt costs and (v) accrued interest and
capitalized interest, plus (b) the interest component of Capitalized Lease
Obligations of the Company and its Subsidiaries during such period, plus (c)
cash dividends due (whether or not declared) on the Redeemable Capital Stock by
the Company and any Subsidiary (to any Person other than the Company and any
wholly owned Subsidiary), in each case as determined on a consolidated basis in
accordance with GAAP; provided that (x) the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
(A) bearing a floating interest rate shall be computed as if the rate in effect
on the date of computation had been the applicable rate for the entire period
and (B) which was not outstanding during the period for which the computation is
being made but which bears, at the option of the Company, a fixed or floating
rate of interest, shall be computed by applying at the option of the Company,
either the fixed or floating rate, and (y) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness under
a revolving credit facility computed on a pro forma basis shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period. For purposes of clause (c) of the preceding sentence, dividends shall be
deemed to be an amount equal to the dividends due (whether or not declared)
divided by one minus the applicable actual combined federal, state, provincial,
local and foreign income tax rate of the Company and its Subsidiaries (expressed
as a decimal).
"Consolidated Non-Cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash items of the Company and any
Subsidiary reducing Consolidated Adjusted Net Income for such period, determined
on a consolidated basis in accordance with GAAP (excluding any such non-cash
charge which represents an accrual of or reserve for cash charges for any future
period).
"Currency Agreements" means any spot or forward foreign exchange agreements
and currency swap, currency option or other similar financial agreements or
arrangements entered into by the Company or any of its Subsidiaries in the
ordinary course of business and designed to protect against or manage exposure
to fluctuations in foreign currency exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture,
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a member of the Board of Directors who does not have any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the date of the Indenture.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent, or
otherwise. the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the Notes by any Subsidiary, in
accordance with the provisions of "Certain Covenants -- Limitation on Guarantees
of Indebtedness by Subsidiaries." When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Person that incurs a Guarantee.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money (including overdrafts) or for
the deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities (including outstanding
disbursements owed to trade creditors) incurred in the ordinary course of
business (whether or not evidenced by a note), but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit and acceptances issued under letter of
credit facilities, acceptance facilities or other similar facilities, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such Person, (e) all Indebtedness referred to in (but not
excluded from) the preceding clauses of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends and (h) all obligations of such Person under or in respect of Interest
Rate Agreements or Currency Agreements. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements or arrangements (including,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements) designed to protect against or manage exposure to fluctuations in
interest rates in respect of Indebtedness.
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"Investment" means, with respect to any Person, any direct or indirect
advance, loss or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase, acquisition or
ownership by such Person of any Capital Stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued or owned by, any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP. In addition, the Fair Market Value of the net
assets of any Subsidiary at the time that such Subsidiary is designated an
Unrestricted Subsidiary shall be deemed to be an "Investment" made by the
Company in such Unrestricted Subsidiary at such time. "Investment" shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claims, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A Person shall be deemed to own subject to a Lien any property which
such Person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale, agreement, capital lease or other title retention
agreement.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein or herein provided, whether at
the Stated Maturity with respect to such principal, by sinking fund payment or
by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations, but only when received in the form of, or stock or
other assets when disposed for, cash or Cash Equivalents (except to the extent
that such obligations are financed or sold with recourse to the Company or any
Subsidiary), net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel and investment banks) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such Asset
Sale, (iv) amounts required to be paid to any Person (other than the Company or
any Subsidiary) owning a beneficial interest in the assets subject to the Asset
Sale and (v) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
against any liabilities associated with such Asset Sale and retained by the
Company or any Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Indenture Trustee and (b) with respect
to any issuance or sale of Capital Stock or options, warrants or rights to
purchase Capital Stock, or debt securities or Redeemable Capital Stock that have
been converted into or exchanged for Qualified Capital Stock, as referred to
under "Certain Covenants -- Limitation on Restricted Payments," the proceeds of
such issuance or sale in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations when received in the form
of, or stock or other assets when disposed for, cash or Cash Equivalents (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Subsidiary of the Company), net of attorney's fees, accountant's
fees and brokerage, consultation, underwriting and other fees and expenses
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Permitted Holders" means Michael A. Chowdry, the Related Parties and/or a
trustee or other fiduciary holding Voting Stock under an employee benefit plan
of the Company.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company in an aggregate principal amount at
any one time outstanding not to exceed $100 million provided that such
Indebtedness is incurred to finance the acquisition of additional aircraft
by the Company and is secured by Liens on such aircraft;
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(b) Indebtedness of the Company outstanding on the Issue Date;
(c) Indebtedness of the Company to any wholly owned Subsidiary;
provided that any Indebtedness of the Company owing to any such Subsidiary
is made pursuant to an intercompany note and is subordinated in right of
payment from and after such time as the Notes shall become due and payable
(whether at Stated Maturity, upon acceleration or otherwise) to the payment
and performance of the Company's obligations under the Notes; provided
further, that any disposition, pledge or transfer of any such Indebtedness
to a Person (other than the Company or another wholly owned Subsidiary)
shall be deemed to be an incurrence of such Indebtedness by the Company not
permitted by this clause (c);
(d) Indebtedness of the Company under Currency Agreements and Interest
Rate Agreements entered into in the ordinary course of business, provided
that the notional amount of such obligations does not exceed the amount of
the related obligation on Indebtedness outstanding or committed to be
incurred on the date such Currency Agreement or Interest Rate Agreements
are entered into;
(e) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Indebtedness of the Company pursuant to clause (b) of this
definition, including any successive refinancings by the Company, so long
as (i) any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) so refinanced, plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (ii) in the case of any refinancing of
Subordinated Indebtedness, such new Indebtedness is made subordinate to the
Notes at least to the same extent as the Indebtedness being refinanced and
(iii) such new Indebtedness has no scheduled payment dates prior to the
final Stated Maturity of the Notes;
(f) Indebtedness of the Company in addition to any amounts listed in
clauses (a) through (e) above in an aggregate principal amount at any one
time outstanding not to exceed $20 million less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (f) of the
definition hereof;
(g) Indebtedness under the Notes and the Indenture;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence; and
(i) Indebtedness of the Company and its Restricted Subsidiaries
incurred in connection with the acquisition of ten new Boeing 747-400
aircraft pursuant to the Boeing Purchase Contract provided that
Indebtedness shall not exceed 80% of Appraised Fair Market Value of such
aircraft at the time of borrowing, neither individually nor in the
aggregate.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned Subsidiary;
(c) Investments in Subsidiaries and Unrestricted Subsidiaries in an
amount not to exceed $20 million in aggregate which Subsidiaries or
Unrestricted Subsidiaries are in the business of the Company as conducted
on the Issue Date or, a business reasonably related thereto or involved in
outsourcing for the air cargo industry or the leasing of aircraft to the
Company;
(d) Investments by the Company or any Subsidiary in another Person, if
as a result of such Investment (i) such other Person becomes a wholly owned
Subsidiary or (ii) such other Person is
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merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a wholly owned
Subsidiary;
(e) Currency Agreements and Interest Rate Agreements;
(f) Loans and advances to employees and officers of the Company and
its Subsidiaries in the ordinary course of business not in excess of $2.0
million at any one time outstanding;
(g) Investments in securities of trade creditors or customers received
pursuant to a plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(h) Investments existing on the Issue Date; or
(i) Investments by the Company in AFL II.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date of the Indenture;
(b) Liens on any property or assets of a wholly owned Subsidiary
granted in favor of the Company or any other wholly owned Subsidiary;
(c) Liens on property acquired after the date of the Indenture that
secures Indebtedness permitted to be incurred under the covenant described
under "Limitation on Indebtedness" and provided further that such Liens
shall not extend to any other property of the Company or its Subsidiaries;
(d) statutory Liens of landlords and carrier's, warehouseman's,
mechanics, supplier's, materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceeding,
if a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor;
(e) Liens for taxes, assessments, government charges or claims that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor;
(f) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money);
(g) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the business
of the Company or any Subsidiary incurred in the ordinary course of
business;
(h) Liens arising by reason of any judgment, decree or order of any
court so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; and
(i) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a) through (i); provided that any
such extension, renewal or replacement shall be no more restrictive in any
material respect than the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(a) Indebtedness of Subsidiaries outstanding on the Issue Date;
(b) Indebtedness of any Subsidiary under Currency Agreements and
Interest Rate Agreements, provided that the notional principal amount of
such obligations does not exceed the amount of
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Indebtedness outstanding or committed to be incurred on the date such
Currency Agreements or Interest Rate Agreements are entered into;
(c) Indebtedness of any wholly owned Subsidiary to any other wholly
owned Subsidiary or to the Company;
(d) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Subsidiary of any Indebtedness of such Subsidiary pursuant to clause (a) of
this definition, including any successive refinancings by such Subsidiary,
so long as any such new Indebtedness shall be in a principal amount that
does not exceed the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, such lesser
amount as of the date of determination) so refinanced plus the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of any
premium reasonably determined by such Subsidiary as necessary to accomplish
such refinancing, plus the amount of expenses of such Subsidiary incurred
in connection with such refinancing;
(e) guarantees by Subsidiaries of Indebtedness of the Company entered
into in accordance with the "Limitation on Guarantees of Indebtedness by
Subsidiaries" covenants and guarantees by Subsidiaries of Permitted
Subsidiary Indebtedness of wholly owned Subsidiaries; and
(f) Indebtedness of Subsidiaries in addition to any amounts listed in
clauses (a) through (e) above in an aggregate principal amount at any one
time outstanding not to exceed $20 million, less the amount of Permitted
Indebtedness then outstanding pursuant to clause (f) of the definition
hereof.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock whether outstanding on the date of the
Indenture, or issued thereafter, and including, without limitation, all classes
and series of preferred or preference stock of such Person.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Related Parties" means (a) the spouse, children or other descendants (by
blood or adoption), stepchildren, siblings, and in-laws of Michael A. Chowdry or
the spouse of Michael A. Chowdry; (b) the heirs, legatees, devisees,
distributees, personal representatives, or the estate of Michael A. Chowdry or
of persons listed in the foregoing clause (a); (c) any trust primarily for the
benefit of Michael A. Chowdry or any of the persons or entities listed in the
foregoing clauses of this definition; (d) any trust, corporation, limited or
general partnership limited liability company or partnership or other entity of
which Michael A. Chowdry and/or any of the other persons or entities listed in
the foregoing clauses of this definition are the beneficial owners (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time) of a controlling interest in the outstanding voting and
equity securities or interests; (e) a transferee pursuant to a decree of
dissolution of marriage relating to Michael A. Chowdry or a Person that has been
immediately prior to the disposition of a Related Person under any clause of
this definition; or (f) a transferee by disposition in an involuntary manner
without the consent of
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Michael A. Chowdry or a Person that has been immediately prior to the
disposition a Related Person under any clause of this definition, including, but
not limited to, disposition under judicial orders.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc., and its successors.
"Significant Subsidiary" means any Subsidiary of the Company that, together
with its Subsidiaries, (i) for the most recent fiscal year of the Company,
accounted for more than 10% of the consolidated revenues of the Company and its
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 10% of the consolidated assets of the Company and its Subsidiaries, all as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year.
"Stated Maturity" means, when used with respect to the Notes or any
installment of interest thereon, the date specified in the Note as the fixed
date on which the principal of the Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means any Person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company or
by one or more other Subsidiaries or by the Company and one or more other
Subsidiaries. For purposes of the Indenture, the term Subsidiary shall not
include any Unrestricted Subsidiary, except in the definition of Unrestricted
Subsidiary.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (b) any Subsidiary
of an Unrestricted Subsidiary and (c) Atlas Freighter Leasing, Inc. is an
Unrestricted Subsidiary as of the Issue Date. Atlas Freighter Leasing II, Inc.
("AFL II") may be designated an Unrestricted Subsidiary at any time on or after
the Issue Date (and such designation shall not be deemed a Restricted Payment
for purposes of "-- Limitation on Restricted Payments"), provided Investments by
the Company in AFL II since the Issue Date and outstanding on the date of
designation shall not exceed $5 million in the aggregate. The Board of Directors
of the Company may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither
the Company nor any Subsidiary is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Subsidiary
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity, (iii) any Investment in
such Subsidiary made as a result of designation of such Subsidiary an
Unrestricted Subsidiary or otherwise was permitted under paragraph (a), clause
(iv) of the "Limitation on Restricted Payments" covenant, (iv) neither the
Company nor any Subsidiary has a contract, agreement, arrangement, understanding
or obligation of any kind, whether written or oral, with such Subsidiary other
than those that might be obtained at the time from Persons who are not
affiliates of the Company, and (v) neither the Company nor any Subsidiary has
any obligation (1) to subscribe for additional shares of Capital Stock or other
equity interests in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
the Company shall be evidenced to the Indenture Trustee by filing a board
resolution with the Indenture Trustee giving effect to such designation. The
Board of Directors of the Company may designate any Unrestricted Subsidiary as a
Subsidiary if immediately after giving effect to such designation, there would
be no Default or Event of Default under the Indenture and the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Indebtedness" covenant.
"Voting Stock" means, with respect to any Person, any class or classes of
Capital Stock pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not,
at the time, stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences of (i) the exchange of Old Notes for New Notes and (ii) the
ownership and disposition of the New Notes. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. It assumes that the Old Notes and New Notes are (or will be)
held as capital assets. It does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding New
Notes as a hedge against currency risks or as a position in a "straddle" for tax
purposes, or persons whose functional currency is not the United States dollar.
It also does not deal with holders other than Holders participating in the
Exchange Offer (except where otherwise specifically noted). Persons considering
participation in the Exchange Offer should consult their own tax advisors
concerning the application of United States federal income tax laws to their
particular situations as well as any consequences of the exchange of Old Notes
for New Notes, and the ownership and disposition of the New Notes arising under
the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a New
Note that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate that is described in Section
7701(a)(30)(D) of the Internal Revenue Code of 1986, as amended (the "Code"), or
a trust that is described in Section 7701(a)(30)(E) of the Code or (iv) any
other person whose income or gain in respect of a New Note is effectively
connected with the conduct of a United States trade or business. As used herein,
the term "non-U.S. Holder" means a beneficial owner of a New Note that is not a
U.S. Holder.
FEDERAL INCOME TAX CONSEQUENCES OF TENDERING OLD NOTES FOR NEW NOTES
Exchange Offer. The exchange of Old Notes for New Notes pursuant to the
Exchange Offer should not be treated as an exchange or other taxable event for
United States federal income tax purposes because under Treasury regulations,
the New Notes should not be considered to differ materially in kind or extent
from the Old Notes. Rather, the New Notes received by a holder should be treated
as a continuation of the Old Notes in the hands of such holder. As a result,
there should be no United States federal income tax consequences to holders who
exchange Old Notes for New Notes pursuant to the Exchange Offer and any such
holder should have the same tax basis and holding period in the New Notes as it
had in the Old Notes immediately before the exchange.
FEDERAL INCOME TAX CONSEQUENCES OF OWNING NEW NOTES
U.S. Holders
Payment of Interest. The Old Notes were not issued with original issue
discount. As a result, payments of interest on a New Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received, in accordance with the U.S. Holder's regular method
of tax accounting.
Market Discount. A Note will be considered to bear "market discount" if the
U.S. Holder's tax basis for the Note is less than the principal amount of the
Note by more than a de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the lesser of (i) the amount of such payment or realized gain or (ii) the market
discount which has not previously been included in income and is treated as
having accrued on such New Note at the time of such payment or disposition.
Market discount will be considered to accrue on a straight-line basis during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a New Note with market discount until the
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maturity of the New Note or certain earlier dispositions. A U.S. Holder may
elect to include market discount in income currently as it accrues, in which
case the rules described above regarding the treatment as ordinary income of
gain upon the disposition of the Note and upon the receipt of certain cash
payments and regarding the deferral of interest deductions will not apply.
Persons considering making this election should consult their tax advisors.
Premium. If a U.S. Holder's initial tax basis in any Note is greater than
the principal amount of the Note, the Note will be considered to have
"amortizable bond premium" equal in amount to such excess. A U.S. Holder may
elect to amortize such premium using a constant yield method over the remaining
term of the New Note and may offset interest otherwise required to be included
in respect of the New Note during any taxable year by the amortized amount of
such excess for the taxable year. Any election to amortize bond premium applies
to all taxable debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange
or retirement of a New Note, a U.S. Holder generally will recognize taxable gain
or loss equal to the difference between the amount realized on the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest) and such U.S. Holder's adjusted tax basis in the New Note. A U.S.
Holder's adjusted tax basis in a New Note generally will equal such U.S.
Holder's initial investment in the Note increased by any accrued market discount
that the U.S. Holder has included in income and decreased by the amount of any
amortizable bond premium taken with respect to such Note. Such gain or loss
generally will be capital gain or loss and will, in the case of individuals, be
long-term capital gain or loss subject to a maximum rate of 20% if the Note has
been held for more than 18 months at the time of such disposition. An individual
will be taxed on his or her net capital gain at a rate of 28% for property held
for 18 months or less but more than one year. Special rates (and generally lower
maximum rates) apply to individuals in lower tax brackets.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a New Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company or a controlled foreign
corporation related to the Company. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial owner
of the New Note under penalties of perjury, (ii) certifies that such owner is
not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially similar
form, and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a New Note
is held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. Proposed Treasury
Regulations have been issued which, if adopted, could affect these withholding
rules and other U.S. federal tax rules applicable to non-U.S. Holders, and
non-U.S. Holders should therefore consult their tax advisors with respect to the
effect of such proposed Treasury Regulations.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
New Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The New Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
New Notes would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
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Backup Withholding; Information Reporting
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the New Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the New Notes to a U.S. Holder must be reported to the IRS, unless
the U.S. Holder is an exempt recipient or establishes an exemption. Compliance
with the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a New Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller is
a non-U.S. Holder (and certain other conditions are met). Such a sale must also
be reported by the broker to the IRS, unless either (a) the broker determines
that the seller is an exempt recipient or (b) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business on the 180th day
following the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Act and any profit of any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. By acceptance of the Exchange Offer, each
broker-dealer that receives New Notes pursuant to the Exchange Offer hereby
agrees to notify the Company prior to using this Prospectus in connection with
the sale or transfer of New Notes, and acknowledges and agrees that, upon
receipt of notice from the Company of the happening of any event which makes any
statement in this Prospectus untrue in any material respect or which requires
the making of any changes in this Prospectus in order to make the statements
herein not misleading (which notice the Company agrees to deliver promptly to
such broker-dealer), such broker-dealer will suspend use of this Prospectus
until the Company has amended or
73
<PAGE> 80
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented prospectus to such
broker-dealer.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of any one special
counsel for the holders of the Notes) other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the Notes participating
in the Exchange Offer (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the New Notes offered hereby will
be passed upon for the Company by Cahill Gordon & Reindel, New York, New York (a
partnership including a professional corporation).
EXPERTS
The audited consolidated financial statements incorporated by reference in
this Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said report.
74
<PAGE> 81
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF ANY OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. iv
Incorporation of Certain Documents by
Reference........................... iv
Special Note Regarding Forward-Looking
Information......................... v
Summary............................... 1
Risk Factors.......................... 9
Capitalization........................ 15
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 29
Management............................ 37
Description of Certain Indebtedness... 38
The Exchange Offer.................... 41
Description of Notes.................. 48
Certain United States Federal Income
Tax Considerations.................. 71
Plan of Distribution.................. 73
Legal Matters......................... 74
Experts............................... 74
</TABLE>
======================================================
======================================================
$150,000,000
ATLASAIR LOGO
ATLASAIR LOGO
OFFER TO EXCHANGE ITS
10 3/4% SENIOR NOTES DUE 2005,
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT, FOR
ITS 10 3/4% SENIOR NOTES DUE 2005,
WHICH HAVE NOT BEEN REGISTERED
--------------------
PROSPECTUS
--------------------
, 1997
======================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Restated Certificate of
Incorporation of Atlas Air, Inc. (the "Charter") provide for indemnification of
directors and officers for liabilities and expenses incurred in defending
actions brought against them in such capacities. The Company's Charter provides
that the Company shall indemnify directors of the Company to the maximum extent
now or hereafter permitted by law, and officers, employees and agents of the
Company to the extent required by law and may, as authorized hereafter by the
Board of Directors, provide further indemnification to officers, employees and
agents of the Company to the maximum extent now or hereafter permitted by law.
The Company maintains directors' and officers' liability insurance covering
all directors and officers of the Company against claims arising out of the
performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+2.1 -- Plan of Reorganization and Merger Agreement dated as of
July 12, 1995 by and between Holdings and the Company.
+3.2 -- Restated Certificate of Incorporation of the Company.
+3.3 -- Amended and Restated By-Laws of the Company.
++4.1 -- Form of Indenture between the Company and First Fidelity
Bank, N.A., as Trustee.
++4.2 -- Form of Second Indenture between the Company and First
Fidelity Bank, N.A., as Trustee.
++4.3 -- Form of Pass Through Trust Agreement between the Company
and First Fidelity Bank, N.A., as Trustee (with form of
Pass Through Certificate attached as exhibit thereto).
++4.4 -- Form of Pass Through Agreement between the Company and
First Fidelity Bank, N.A., as Trustee (with form of Pass
Through Certificate attached as exhibit thereto).
5.1 -- Opinion of Cahill Gordon & Reindel as to the legality of
the New Notes.
+10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995,
between the Company and KLM Royal Dutch Airlines, as
amended.
+10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award
Plan.
+10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan.
+10.17 -- Atlas Air, Inc. Profit Sharing Plan.
+10.18 -- Atlas Air, Inc. Retirement Plan.
++10.19 -- Employment Agreement between the Company and Michael A.
Chowdry.
++10.20 -- Employment Agreement between the Company and Richard H.
Shuyler.
++10.23 -- Employment Agreement between the Company and James T.
Matheny.
+10.26 -- Maintenance Agreement between the Company and Hong Kong
Aircraft Engineering Company Limited dated April 12,
1995, for the performance of certain maintenance events.
+10.30 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYS.
</TABLE>
II-1
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+10.31 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYL.
*10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996
between Langdon Asset Management, Inc. and the Company.
**10.51 -- Employment Agreement dated as of April 19, 1996 between
the Company and Mickey P. Foret.
**10.52 -- Employment Agreement dated as of November 18, 1996
between the Company and R. Terrence Rendleman.
**10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
**10.54 -- Second Amended and Restated Credit Agreement among the
Company and the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as syndication agent) and Bankers
Trust Company (as Administrative Agent) dated February
28, 1997.
***10.55 -- Engine Maintenance Agreement between the Company and
General Electric Company dated June 6, 1996.
10.56 -- Employment Agreement dated as of May 1, 1997 between the
Company and Stanley G. Wraight.
10.57 -- Employment Agreement dated as of August 18, 1997 between
the Company and Nesa E. Hassanein.
10.58 -- Third Amended and Restated Credit Agreement among the
Company, the Lenders listed therein, Goldman Sachs Credit
Partners L.P. (as Syndication Agent) and Bankers Trust
Company (as Administrative Agent) dated September 5,
1997.
10.59 -- Credit Agreement among Atlas Freight Leasing, Inc., the
Lenders listed therein and Bankers Trust Company, as
agent, dated May 29, 1997.
10.60 -- Lease Agreement between Atlas Freight Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N516MC.
10.61 -- Lease Agreement between Atlas Freight Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N508MC.
10.62 -- Lease Agreement between Atlas Freight Leasing, Inc., as
lessor, and the Company, as lessee relating to B747-200
aircraft. U.S. Registration No. N507MC.
10.63 -- Lease Agreement between Atlas Freight Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N509MC.
10.64 -- Lease Agreement between Atlas Freight Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N808MC.
10.65 -- Lease Agreement between Atlas Freight Leasing Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N505MC.
10.66 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N808MC.
10.67 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent relating to B747-200 aircraft. U.S.
Registration No. N507MC.
10.68 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N509MC.
</TABLE>
II-2
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.69 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N505MC
10.70 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N508MC.
10.71 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N516MC
10.72 -- Form of Indenture, dated August 13, 1997, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 10 3/4% Senior Notes (with form
of Note attached as exhibit thereto)
10.73 -- Purchase Agreement, dated August 8, 1997, between the
Company and BT Securities Corporation relating to the
10 3/4% Senior Notes.
10.74 -- Registration Rights Agreement, dated August 13, 1997,
between the Company and BT Securities Corporation
relating to the 10 3/4% Senior Notes.
10.75 -- Credit Agreement among Atlas Freighter Leasing II, Inc.,
the Lenders listed therein, Bankers Trust Company (as
Administrative Agent) and Goldman Sachs Credit Partners
L.P. (as Syndication Agent) dated September 5, 1997.
10.76 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N527MC and Spare Engine Nos. 517538,
517539 and 455167.
10.77 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N523MC and Spare Engine Nos. 530168 and
517530.
10.78 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N524MC and Spare Engine Nos. 517790 and
517602.
10.79 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N526MC and Spare Engine Nos. 517544 and
517547.
10.80 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N523MC and Spare
Engine Nos. 530168 and 517530.
10.81 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N524MC and Spare
Engine Nos. 517790 and 517602.
10.82 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N526MC and Spare
Engine Nos. 517544 and 517547.
10.84 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N527MC and Spare
Engine Nos. 517538, 517539 and 455167.
</TABLE>
II-3
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
10.85 -- First Amendment to Lease Agreement among Atlas Freight Leasing, Inc. and Bankers Trust
Company, as agent, dated September 5, 1997
****10.86 -- Purchase Agreement Number 2021 between The Boeing Company and the Company dated June 6,
1997.
10.87 -- Aircraft General Terms Agreement between The Boeing Company and the Company dated June
6, 1997.
+16.1 -- Letter dated July 21, 1995 from Ernst & Young to the Securities and Exchange
Commission.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Public Accountants.
23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit 5.1).
24.1 -- Powers of Attorney (set forth on the signature page of the Registration Statement).
25 -- Statement of Eligibility of Trustee.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
+ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-90304).
++ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-97892).
* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).
** Previously filed.
*** Portions of this document, for which the Company has been granted
confidential treatment, have been redacted and filed separately with the
Securities and Exchange Commission.
**** Portions of this document, for which the Company has requested
confidential treatment, have been redacted and filed separately with the
Securities and Exchange Commission.
(b) Schedules.
All schedules are omitted as the required information is presented in
the Registrant's consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of the
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 86
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the SEC under Section 305(b)(2) of the Act.
II-5
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized in the City of Denver, State of Colorado
on the 24th day of September, 1997.
ATLAS AIR, INC.
By: /s/ RICHARD H. SHUYLER
---------------------------------
Name: Richard H. Shuyler
Title: Senior Vice President
-- Finance and Chief
Financial Officer and
Treasurer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Michael A. Chowdry and Richard H. Shuyler and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements to this Registration
Statement and to file the same with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL A. CHOWDRY Chairman of the Board, Chief September 24, 1997
- ----------------------------------------------------- Executive Officer, President and
Michael A. Chowdry Director
/s/ RICHARD H. SHUYLER Senior Vice President -- Finance and September 24, 1997
- ----------------------------------------------------- Chief Financial Officer, Treasurer
Richard H. Shuyler and Director
/s/ JAMES J. BLANCHARD Director September 24, 1997
- -----------------------------------------------------
James J. Blanchard
/s/ LAWRENCE W. CLARKSON Director September 24, 1997
- -----------------------------------------------------
Lawrence W. Clarkson
/s/ DAVID T. MCLAUGHLIN Director September 24, 1997
- -----------------------------------------------------
David T. McLaughlin
/s/ BRIAN ROWE Director September 24, 1997
- -----------------------------------------------------
Brian Rowe
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF CAHILL GORDON & REINDEL]
September 24, 1997
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
(212) 701-3000
Ladies and Gentlemen:
We have examined a copy of the Registration Statement on Form S-4 (No.
333- ) (the "Registration Statement"), filed by Atlas Air, Inc. (the
"Company") with the Securities and Exchange Commission (the "Commission") on
September 24, 1997 and relating to the registration pursuant to the provisions
of the Securities Act of 1933, as amended (the "Act"), of up to $150,000,000
principal amount of 10 3/4% Notes due 2005 (the "New Notes"). The New Notes,
which upon the effectiveness of the Registration Statement will be registered
under the Act, will be issued in exchange for a like principal amount of the
Company's outstanding 10 3/4% Notes due 2005 (the "Old Notes"), which are not
registered under the Act. The New Notes will be issued pursuant to an
Indenture (the "Indenture") dated as of August 13, 1997, between the Company
and State Street Bank & Trust Company. In rendering this opinion, we have
reviewed such documents and made such investigations as we have deemed
appropriate.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
<PAGE> 2
-2-
The New Notes have been duly authorized for issuance and, when duly
executed, authenticated, registered, issued and delivered in exchange for Old
Notes of a like principal amount, in accordance with the terms of the Indenture
and as contemplated by the Registration Statement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights and remedies
generally and subject to general principles of equity.
We are members of the bar of the State of New York and do not purport
to be experts in, or to express any opinion concerning, the laws of any
jurisdiction other than the law of the State of the New York, the Delaware
General Corporation Law and the federal laws of the United States of America.
Neither this opinion nor any part hereof may be delivered to, used or
relied upon by any person other than you without our prior written consent.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and to the reference to our firm under
the caption "Legal Matters" in the Registration Statement and related
prospectus. Our consent to such reference does not constitute a consent under
Section 7 of the Securities Act, and in consenting to such reference we have
not certified any part of the Registration Statement and do not otherwise come
within the categories of persons whose consent is required under said Section 7
or under the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ CAHILL GORDON & REINDEL
--------------------------------
Cahill Gordon & Reindel
<PAGE> 1
EXHIBIT 10.56
EMPLOYMENT AGREEMENT
WHEREAS, Stanley G. Wraight (hereinafter referred to as "Employee") and
Atlas Air, Inc. ("Atlas") wish to enter an Employment Agreement; and
WHEREAS, Stanley G. Wraight warrants that he is entering voluntarily into
this Agreement, and that no promises or inducements for this Agreement have
been made outside of the terms and conditions referred to herein, and Employee
enters into this Agreement without reliance upon any statement or
representation by Atlas or any other person, concerning any fact material
hereto.
NOW, THEREFORE, in consideration of the covenants contained herein,
Employee and Atlas agree to this Employment Agreement as of this 1st day of
May, 1997 for implementation effective May 19, 1997.
1. DEFINITIONS
1.1 For purposes of this Agreement, "Cause" means (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in substantial
personal enrichment of the Employee at the expense of Atlas, (ii) repeated
violations by the Employee of the Employee's obligations under this Agreement
which are demonstrably willful and deliberate on the Employee's part and which
are not remedied in a reasonable period of time after receipt of written notice
from Atlas, (iii) the conviction of the Employee of a felony, or (iv) grievous
violations of corporate policies and procedures.
<PAGE> 2
1.2 For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred upon the happening of two of the following:
(a) Michael Chowdry ceasing to have a direct or indirect beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of at least 51% of the combined voting
power of Atlas' then outstanding voting securities entitled to vote
generally in the election of directors; or
(b) Michael Chowdry ceasing to be, on a substantially full-time basis,
the Chief Executive Officer of Atlas; or
(c) The acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (excluding, for this purpose, any Employee benefit plan of Atlas or
its subsidiaries which acquires beneficial ownership of voting securities
of Atlas) of beneficial ownership, within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, of a percentage of
the combined voting power of Atlas' then outstanding voting securities
entitled to vote generally in the election of directors which is greater
than the percentage beneficially owned directly or indirectly by Michael
Chowdry.
1.3 The "Employment Period" shall be defined as the period commencing on
the date hereof and extending until May 18, 2002, unless sooner terminated as
set forth in Section 4 below.
1.4 "Permanent Disability" as used herein shall be deemed to have been
sustained by Employee if she shall have been continuously disabled from
performing the duties assigned to her during the Employment Period for a period
of six consecutive calendar months, and such Permanent Disability shall be
deemed to have commenced on the day following the end of such six consecutive
calendar months.
-2-
<PAGE> 3
1.5 "Confidential or Proprietary" as used herein shall refer to all
information relative to Atlas' plans for going public or its structure and
practices except:
(a) information that is or becomes a matter of public knowledge
through no fault of the Employee; or
(b) information rightfully received by the Employee from a third party
without a duty of confidentiality; or
(c) information independently developed by the Employee; or
(d) information disclosed to Employee with Atlas' prior written
approval for public dissemination.
1.6 For purposes of this Agreement "Good Reason" means a reduction by
Atlas during the term of this Agreement in base salary, or substantial
reduction in the Employee's title, job authorities or responsibilities.
2. EMPLOYMENT AND OBLIGATIONS OF EMPLOYEE
2.1 Employment. During the Employment Period, Atlas agrees to employ the
Employee as Senior Vice President Marketing of Atlas. The scope of employees
responsibilities will include, but are not limited to, developing and
implementing marketing strategy for Atlas' present and potential customers in
Europe as well as their Asian airline partners. Employee shall not be entitled
to any additional compensation for serving in any other office for Atlas or any
subsidiary or affiliate of Atlas.
2.2 Obligations of Employee. During the Employment Period, the Employee
agrees, except when prevented by illness or Permanent Disability or during a
period of vacation,
-3-
<PAGE> 4
to devote substantially all of her business time and attention to the good
faith performance of such services.
2.3 Principal Residence of Employee. After a reasonable period of time,
Employee shall maintain his principal residence in the Denver, Colorado area.
If necessary, Atlas will provide financial assistance in the form of a loan to
obtain housing in Colorado.
3. COMPENSATION
During the Employment Period, Atlas will pay Employee as follows:
3.1 Base Annual Salary. Atlas will pay Employee a base annual salary (the
"Base Annual Salary") of no less than $175,000 per annum, payable in
semi-monthly installments.
3.2 Incentive Bonus Payments. The Employee will be eligible to receive an
Incentive Bonus payment based on performance for each calendar year during the
Employment Period upon approval of the Compensation Committee of the Board of
Directors at Atlas (the "Compensation Committee"). For 1997, Employee's bonus
payment may range 125 percent of base salary per Article 3.1 for the period
beginning May 19, 1997. Employe has been furnished a copy of the 1997 Bonus
Plan.
3.3 Stock Options. Employee will be entitled to a stock option grant of
20,000 Atlas Air, Inc. shares. The shares will vest starting on the first
anniversary of this Agreement and for four years thereafter in five (5) equal
portions at the rate of 4,000 options per
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year. The option price shall be the average prices per share quoted by NASDAQ
on May 1, 1997. All other terms of this grant are contained in the Stock Option
Grant which is incorporated herein and made a part hereof. A copy of such
Agreement will be provided after May 1, 1997.
3.4 Profit Sharing. Employee will be entitled to participate in the
Company's profit sharing plan beginning in calendar year 1998 on a pro-rated
basis, predicated upon one year of employment prior to eligibility.
3.5 401K Plan. After three (3) months, Employee will be eligible to
participate in the Company's 401K Plan which provides for a 50% match by the
Company of your contribution up to a maximum employee contribution of 10% of
your base salary.
3.6 Stock Purchase Plan. After one year of service, Employee will be
eligible to participate in the Company's stock purchase plan wherein Employee
may purchase company stock at a 15% discount up to 15% of Employee's base pay.
3.7 Health Care. After three (3) months of service, Employee and his
dependents shall be entitled to participate in the Atlas health insurance plan,
and Atlas will pay Employee's monthly premium. Atlas reserves the right to
discontinue participation in any health insurance plan at any time with the
understanding that Atlas will comply in full measure with all state and federal
laws regarding the changes of insurance coverage by private employers and
notification under the Consolidated Omnibus Budget Reconciliation
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Act. Employee shall also be entitled, to the same extent and at a level
commensurate with the corporate officers of Atlas, to participate in any other
benefit plans or arrangements of Atlas. Arrangements concerning Employee's
dependents are subject to further discussion with the Company.
3.8 Corporate Automobile. Employee will be entitled to professional and
personal use of a company vehicle initially blue-book valued at up to, or actual
value not to exceed, $40,000.00. The decision to lease or purchase is at the
discretion of the Company. Title to the automobile shall be in the Company's
name. Atlas will be responsible for all insurance premium payments related to
the vehicle, and all other vehicle related expenses, except that Employee will
pay the costs of fuel.
3.9 Expenses. During the Employment Period, the Employee shall be entitled
to receive promptly reimbursement for all reasonable expenses incurred by the
Employee in accordance with the most favorable expense reimbursement policies,
practices and procedures in effect with respect to key executives of Atlas and
its subsidiaries.
4. TERMINATION OF EMPLOYMENT PERIOD
The Employment Period shall terminate under the following terms and
conditions:
4.1 At-Will Arrangement. Atlas may terminate the Employment Period upon
written notice to the Employee at any time and for any reason. Both Atlas and
Employee
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expressly understand and agree that the employment relationship is at-will.
Atlas is entitled to sever the employment relationship for any reason.
4.2 Rights Following Termination. (a) If the Employment Period is
terminated by Atlas for reasons other than Cause or if the Employment Period is
terminated by the Employee for Good Reason, the Employee shall receive, in a
single lump sum payment within ten (10) business days after such termination,
an amount equal to Employee's Base Annual Salary.
(b) Upon the death or Permanent Disability of the Employee, the Employment
Period shall terminate and the Employee's Base Annual Salary which is accrued
but unpaid as of the date of such death or Permanent Disability shall be paid
to the Employee or his personal representative.
(c) If the Employment Period is terminated by Atlas for Cause or by the
Employee for other than Good Reason, the Employee shall be entitled to receive
his Base Annual Salary which is accrued by unpaid as of the date of termination.
4.3 Non-Competition Provision. Employee covenants and agrees that he will
not, at any time before five years after his termination of employment with
Atlas, reveal, divulge or make known to any third party any confidential or
proprietary records, data, trade secrets, pricing policies, strategy, rate
structure, personnel policy, management methods, financial reports, methods or
practice of obtaining or doing business, or any other confidential
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<PAGE> 8
or proprietary information of Atlas or any of its affiliates which is not in
the public domain. In addition, Employee agrees that, at no time before five
years after his termination of employment with Atlas, will he engage in any of
the following activities directly or indirectly, for any reason, whether for
his own account or for the account of any other person, firm, corporation or
other organization:
(a) solicit, employ, or otherwise interfere with any of Atlas'
contracts or relationships with any client, employee, officer, director or
any independent contractor whether the person is employed by or associated
with Atlas on the date of this Agreement or at any time thereafter, to the
extent that Employee learns of or is introduced to any such person by
virtue of her performance as an Employee of Atlas; or
(b) solicit, accept, or otherwise interfere with any of Atlas'
contracts or relationships with any independent contractor, customer,
client or supplier, or any person who is a bonafide prospective independent
contractor, customer, client or supplier of Atlas, at any time, to the
extent that Employee learns of or is introduced to any such person by
virtue of his performance as an Employee of Atlas.
The parties agree and intend that breach of this non-competition clause
shall subject Employee to the full measure of contract and equitable damages
including punitive damages.
5. EXCISE TAX GROSS-UP
5.1 (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or benefit
provided, by Atlas to or for the benefit of the Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without
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regard to any additional payments required under this Section 5.1) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue code of 1986, as amended and then in effect (the "Code") (or
any similar excise tax) or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all Federal, state, local or other taxes (including any interest or
penalties imposed with respect to any such taxes), including, without
limitation, any such income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of paragraph (c) of this Section 5.1, all
determinations required to be made under this Section 5.1, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen (the "Accounting Firm") which shall provide detailed
supporting calculations both to Atlas and the Employee within 20 calendar days
of the receipt of written notice from the Employee that there has been a
Payment, or such earlier time as is requested by Atlas. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or
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group effecting the Change in Control, the Employee shall have the right by
written notice to Atlas to appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by Atlas and shall be paid by Atlas
upon demand of the Employee as incurred or billed by the Accounting Firm. Any
Gross-Up Payment, as determined pursuant to this Section 5.1, shall be paid by
Atlas to the Employee within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Employee, it shall furnish the Employee with an unqualified written
opinion in form and substance satisfactory to the Employee that failure to
report the Excise Tax on the Employee's applicable federal income tax return
would not result in the imposition of a negligence or similar penalty. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by Atlas should
have been made ("Underpayment"), consistent with the calculations required to
be made hereunder. In the event that Atlas exhausts its remedies described in
paragraph (c) of this Section 5.1 and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
paid by Atlas to or for the benefit of the Employee within five days of the
receipt of the Accounting Firm's determination. All determinations made by the
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Accounting Firm in connection with any Gross-Up Payment or Underpayment shall
be final and binding upon Atlas and the Employee.
(c) The Employee shall notify Atlas in writing of any claim asserted in
writing by the Internal Revenue Service to the Employee that, if successful,
would require the payment by Atlas of the Gross-Up Payment. Such notification
shall be given as soon as practicable but not later than 60 days after the
Employee is informed in writing of such claim and shall apprise Atlas of the
nature of such claim and the date on which such claim is requested to be paid.
The Employee shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to Atlas (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If Atlas notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Employee
shall at Atlas' expense:
(i) give Atlas any information reasonably requested by Atlas
relating to such claim,
(ii) take such action in connection with contesting such claim as
Atlas shall reasonably requesting writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Atlas,
(iii) cooperate with Atlas in good faith in order effectively to
contest such claim, and
(iv) permit Atlas to participate in any proceedings relating to
such claim;
provided, however, that Atlas shall bear and pay directly as incurred all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and
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shall indemnify and hold the Employee harmless, on an after-tax basis, for any
Excise Tax or any Federal, state, local or other income or other tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 5.1, Atlas shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings, and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as Atlas shall determine; provided, however, that if Atlas directs the
Employee to pay such claim and sue for a refund, Atlas shall advance the amount
of such payment to the Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis, from any Excise Tax or
Federal, state, local or other income or other tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, Atlas' control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
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<PAGE> 13
hereunder and the Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by Atlas
pursuant to paragraph (c) of this Section 5.1, the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject to
Atlas' complying with the requirements of paragraph (ii) of this Section 5.1)
promptly pay to Atlas the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto) upon receipt thereof.
If, after the receipt by the Employee of an amount advanced by Atlas pursuant
to paragraph (c) of this Section 5.1, a determination is made that the Employee
shall not be entitled to any refund with respect to such claim and Atlas does
not notify the Employee in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, the such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
6. CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado, without reference to principles of conflict of
laws. Employee shall submit to jurisdiction of the courts in the State of
Colorado (state or federal as is applicable).
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<PAGE> 14
7. SEVERABILITY AND ENFORCEABILITY
It is expressly acknowledged and agreed that the covenants and provisions
hereof are separable; that the enforceability of one covenant or provision
shall in no event affect the full enforceability of any other covenant or
provision herein. Further, it is agreed that, in the event of any covenant or
provision of this Agreement is found by any court of competent jurisdiction to
be unenforceable, illegal or invalid, such invalidity, illegality or
unenforceability shall not affect any other term or condition had never been
contained herein. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any other
provision of this Agreement.
8. MISCELLANEOUS
8.1 No Mitigation. The amounts to be paid Employee are net to Employee,
without any reduction or duty to mitigate, except for taxes, other governmental
charges or amounts owed to Atlas by Employee.
8.2 Pro-Ration. In the event the Employment Period is terminated in the
middle of any calendar month, the amount due for such month shall be pro-rated
on a daily basis.
8.3 No Waiver Except in Writing. No waiver or modification of this
Agreement or any of the terms and conditions set forth herein shall be effective
unless submitted to a writing duly executed by the parties.
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<PAGE> 15
8.4 Successors and Assignees. This Agreement shall be binding on Atlas and
any successor thereto, whether by reason of merger, consolidation or otherwise.
The duties and obligations of Employee may not be assigned by Employee.
8.5 Confidentiality of Terms. Atlas and Employee agree that the terms and
conditions of this Agreement are confidential and that they will not disclose
the terms of this Agreement to any third parties, other than the Employee's
spouse, their attorneys, auditors, accountants or as required by law or as may
be necessary to enforce this Agreement.
8.6 Full Understanding. Employee declares and represents that she has
carefully read and fully understands the terms of this Agreement, has had the
opportunity to obtain advice and assistance of counsel with respect thereto, and
knowingly and of his own free will, without any duress, being fully informed and
after due deliberation, voluntarily accepts the terms of this Agreement.
8.7 Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements, and understandings between the
parties with respect to the subject matter hereof.
EMPLOYEE ATLAS AIR, INC.
/s/ Stanley Wright By: /s/ Mickey Foret
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EXHIBIT 10.57
CONFORMED COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the 18th day of August, 1997 (the
"Agreement"), is made by and between Nesa E. Hassanein (hereinafter referred to
as "Employee") and Atlas Air, Inc. ("Atlas" or the "Company").
WHEREAS, Employee warrants that she is entering voluntarily into this
Agreement, and that no promises or inducements for this Agreement have been made
outside of the terms and conditions referred to herein, and Employee enters into
this Agreement without reliance upon any statement or representation by Atlas or
any other person, concerning any fact material hereto.
NOW, THEREFORE, in consideration of the covenants contained herein,
Employee and Atlas agree to this Employment Agreement as of the date first
mentioned above for implementation effective August 18, 1997.
1. DEFINITIONS
1.1 For purposes of this Agreement, "Cause" means (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in substantial
personal enrichment of the Employee at the expense of Atlas, (ii) repeated
violations by the Employee of the Employee's obligations under this Agreement
which are demonstrably willful and deliberate on the Employee's part and which
are not remedied in a reasonable period of time after receipt of written notice
from Atlas, (iii) the conviction of the Employee of a felony, or (iv) grievous
violations of corporate policies and procedures.
1.2 For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred upon the happening of two of the following:
<PAGE> 2
(a) Michael Chowdry ceasing to have a direct or indirect beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of at least 51% of the combined voting
power of Atlas' then outstanding voting securities entitled to vote
generally in the election of directors; or
(b) Michael Chowdry ceasing to be, on a substantially full-time basis,
the Chief Executive Officer of Atlas; or
(c) The acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (excluding, for this purpose, any Employee benefit plan of Atlas or
its subsidiaries which acquires beneficial ownership of voting securities
of Atlas) of beneficial ownership, within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, of a percentage of
the combined voting power of Atlas' then outstanding voting securities
entitled to vote generally in the election of directors which is greater
than the percentage beneficially owned directly or indirectly by Michael
Chowdry.
1.3 The "Employment Period" shall be defined as the period commencing on
the date hereof and extending until August 18, 2000, unless sooner terminated
as set forth in Section 4 below, or unless extended by mutual agreement of
Atlas and Employee.
1.4 "Permanent Disability" as used herein shall be deemed to have been
sustained by Employee if she shall have been continuously disabled from
performing the duties assigned to her during the Employment Period for a period
of six consecutive calendar months, and such Permanent Disability shall be
deemed to have commenced on the day following the end of such six consecutive
calendar months.
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1.5 "Confidential or Proprietary" as used herein shall refer to all
non-public information relative to Atlas' structure and practices except:
(a) information that is or becomes a matter of public knowledge
through no fault of the Employee; or
(b) information rightfully received by the Employee from a third party
without a duty of confidentiality; or
(c) information independently developed by the Employee; or
(d) information disclosed to Employee with Atlas' prior written
approval for public dissemination. 1.6 For purposes of this Agreement "Good
Reason" means a reduction by Atlas during the term of this Agreement in
Employee's Base Annual Salary of $175,000 or participation in a bonus plan
which provides Employee with an opportunity to earn a bonus payment in a
range of 50% to 100% of Employee's then current Base Annual Salary, or a
direct or indirect reduction in the Employee's title, job authorities,
reporting relationship, or responsibilities.
2. EMPLOYMENT AND OBLIGATIONS OF EMPLOYEE
2.1 Employment. During the Employment Period, Atlas agrees to employ the
Employee as Senior Vice President and General Counsel. Employee will be the
senior legal counsel of the Company. Employee shall not be entitled to any
additional compensation for serving in any other office for Atlas or any
subsidiary or affiliate of Atlas.
2.2 Obligations of Employee. During the Employment Period, the Employee
agrees, except when prevented by illness or Permanent Disability or during a
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period of vacation, to devote substantially all of her business time and
attention to the good faith performance of such services.
2.3 Principal Residence of Employee. Employee shall maintain her principal
residence in the Denver, Colorado area.
3. COMPENSATION
During the Employment Period, Atlas will pay Employee as follows:
3.1 Base Annual Salary. Atlas will pay Employee a base annual salary (the
"Base Annual Salary") of not less than $175,000 per annum, payable in
semi-monthly installments. Officer salaries will be reviewed during 1998.
3.2 Incentive Bonus Payments. Employee will be eligible to receive an
Incentive Bonus payment based on performance for each calendar year during the
Employment Period upon approval of the Compensation Committee of the Board of
Directors at Atlas (the "Compensation Committee"). For 1997, Employee's bonus
payment will be a minimum of $60,000 payable in the first quarter of 1998. Such
Incentive Bonuses shall be calculated and paid on the same basis as other senior
executives at Atlas.
3.3.1 Stock Options. Employee will be entitled to a stock option grant of
15,000 Atlas Air, Inc. shares. The shares will vest starting on the first
anniversary of this Agreement and for two years thereafter in three (3) equal
portions at the rate of 5,000 options per year. The option price shall be the
average of the high and low sale prices per share quoted by NASDAQ on August 15,
1997 (i.e., $27.25). All other terms of this grant are contained in the Stock
Option Agreement which is incorporated herein and made a part hereof. A copy of
such Agreement will be provided after August 18, 1997.
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3.3.2 Sign-on Bonus. Employee will be paid a sign on bonus of $50,000 minus
applicable taxes during the week of August 18, 1997. If Employee terminates her
employment with Atlas during the first year of employment, she shall repay such
sign-on bonus within 30 days of such termination and if she terminates
employment during the second year of employment, she shall repay one-half of
such sign-on bonus ($25,000) within 30 days of such termination, provided that
no such repayment shall be required if Employee terminates her employment for
Good Reason.
3.4 Profit Sharing. Beginning at the end of Employee's thirteenth month of
employment (September 18, 1998), Employee will be entitled to participate in the
Company's profit sharing plan beginning in calendar year 1998 on a pro-rated
basis, and on the same basis as all other executives of Atlas; provided that
such profit sharing plan will guarantee Employee a minimum of 10% of the Base
Annual Salary per month through 1999.
3.5 401K Plan. After ninety (90) days of employment, Employee will be
eligible to participate in the Company's 401K Plan which provides for a 50%
match by the Company of Employee's contribution up to a maximum contribution of
10% of Employee's Base Annual Salary (as it may be adjusted) plus amounts
received under Section 3.4 above.
3.6 Stock Purchase Plan. After one (1) year of service, Employee will be
eligible to participate in the Company's stock purchase plan whereby Employee
may purchase Company stock at a 15% discount up to an aggregate of 15% of
Employee's Base Annual Salary.
3.7 Health Care. After ninety days of service, Employee and her dependents
shall be entitled to participate in the Atlas health insurance plan, and Atlas
will pay Employee's monthly premium. During Employee's initial ninety (90) days
of service, Atlas will pay any COBRA (as defined below) premiums for such period
for Employee and her dependents. Atlas reserves the
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<PAGE> 6
right to discontinue participation in any health insurance plan at any time
with the understanding that Atlas will comply in full measure with all state
and federal laws regarding the changes of insurance coverage by private
employers and notification under the Consolidated Omnibus Budget Reconciliation
Act ("COBRA"). In such event, Atlas shall pay all COBRA premiums on behalf of
Employee and her dependents for the Employment Period. Employee shall also be
entitled, to the same extent and at a level commensurate with the corporate
officers of Atlas, to participate in any other benefit plans or arrangements of
Atlas.
3.8 Corporate Automobile. Employee will be entitled to professional and
personal use of a company vehicle initially blue-book valued at up to, or actual
value not to exceed, $40,000.00. The decision to lease or purchase is at the
discretion of the Company. Title to the automobile shall be in the Company's
name. Atlas will be responsible for all insurance premium payments related to
the vehicle and all other vehicle related expenses, except that Employee will
pay the costs of fuel.
3.9 Expenses. During the Employment Period, the Employee shall be entitled
to receive promptly reimbursement for all reasonable expenses incurred by the
Employee in accordance with the most favorable expense reimbursement policies,
practices and procedures in effect with respect to key executives of Atlas and
its subsidiaries.
4. TERMINATION OF EMPLOYMENT PERIOD
The Employment Period shall terminate under the following terms and
conditions:
4.1 At-Will Arrangement. Atlas or Employee may terminate the Employment
Period upon written notice to the other at any time and for any reason. Both
Atlas and Employee expressly understand and agree that the employment
relationship is at-will. Each of Atlas and Employee is entitled to sever the
employment relationship for any reason.
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4.2 Rights Following Termination.
(a) If the Employment Period is terminated by Atlas for reasons other
than Cause or if the Employment Period is terminated by the Employee for
Good Reason, the Employee shall receive, in a single lump sum payment
within ten (10) business days after such termination, an amount equal to
Employee's Base Annual Salary. In addition, Employee shall be entitled to
receive profit sharing amounts under Section 3.4 above up until the date of
such termination which be calculated in the ordinary course of business and
paid at such time as such payments are made to other executives at Atlas.
Atlas will pay COBRA premiums for Employee for a period of one year
following such termination or until she is otherwise provided with medical
insurance by another employer, whichever period is shorter.
(b) Upon the death or Permanent Disability of the Employee, the
Employment Period shall terminate and the Employee's Base Annual Salary,
plus profit sharing amounts under Section 3.4 above which are accrued but
unpaid as of the date of such death or Permanent Disability, shall be paid
to the Employee or her personal representative.
(c) If the Employment Period is terminated by Atlas for Cause or by
the Employee for other than Good Reason, the Employee shall be entitled to
receive her Base Annual Salary plus profit sharing amounts under Section
3.4 above which, in each case, is accrued but unpaid as of the date of such
termination. Such profit sharing amounts shall be calculated and paid as
set forth in Section 4.2(a) above.
4.3 Non-Competition Provision. Employee covenants and agrees that she will
not, at any time before five years after her termination of employment with
Atlas, reveal, divulge or
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make known to any third party any confidential or proprietary records, data,
trade secrets, pricing policies, strategy, rate structure, personnel policy,
management methods, financial reports, methods or practice of obtaining or
doing business, or any other Confidential or Proprietary information of Atlas
or any of its affiliates which is not in the public domain, except as required
by law. In addition, Employee agrees that, at no time before five years after
her termination of employment with Atlas, will she engage in any of the
following activities directly or indirectly, for any reason, whether for her
own account or for the account of any other person, firm, corporation or other
organization:
(a) solicit, employ, or otherwise interfere with any of Atlas'
contracts or relationships with any client, Employee, officer, director or
any independent contractor whether the person is employed by or associated
with Atlas on the date of this Agreement or at any time thereafter, to the
extent that Employee learns of or is introduced to any such person by
virtue of her performance as an Employee of Atlas; or
(b) solicit, accept, or otherwise interfere with any of Atlas'
contracts or relationships with any independent contractor, customer,
client or supplier, or any person who is a bonafide prospective independent
contractor, customer, client or supplier of Atlas, at any time, to the
extent that Employee learns of or is introduced to any such person by
virtue of her performance as an Employee of Atlas.
The parties agree and intend that breach of this non-competition clause shall
subject Employee to the full measure of contract and equitable damages including
punitive damages.
5. EXCISE TAX GROSS-UP
5.1 (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or
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<PAGE> 9
benefit provided, by Atlas to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5.1) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
code of 1986, as amended and then in effect (the "Code") (or any similar
excise tax) or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all Federal, state, local or other taxes (including any
interest or penalties imposed with respect to any such taxes), including,
without limitation, any such income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this Section 5.1,
all determinations required to be made under this Section 5.1, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Arthur Andersen (the "Accounting Firm")
which shall provide detailed supporting calculations both to Atlas and the
Employee within 20 calendar days of the receipt of written notice from the
Employee that there has been a Payment, or such earlier time as is
requested by Atlas. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the
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<PAGE> 10
Change in Control, the Employee shall have the right by written notice to
Atlas to appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by Atlas and shall be paid by Atlas
upon demand of the Employee as incurred or billed by the Accounting Firm.
Any Gross-Up Payment, as determined pursuant to this Section 5.1, shall be
paid by Atlas to the Employee within five days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with
an unqualified written opinion in form and substance satisfactory to the
Employee that failure to report the Excise Tax on the Employee's applicable
federal income tax return would not result in the imposition of a
negligence or similar penalty. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by Atlas should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that Atlas exhausts its remedies described in
paragraph (c) of this Section 5.1 and the Employee thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such Underpayment
shall be paid by Atlas to or for the benefit of the Employee within five
days of the receipt of the Accounting Firm's determination. All
determinations made by the Accounting Firm in connection with any Gross-Up
Payment or Underpayment shall be final and binding upon Atlas and the
Employee.
10
<PAGE> 11
(c) The Employee shall notify Atlas in writing of any claim asserted
in writing by the Internal Revenue Service to the Employee that, if
successful, would require the payment by Atlas of the Gross-Up Payment.
Such notification shall be given as soon as practicable but not later than
60 days after the Employee is informed in writing of such claim and shall
apprise Atlas of the nature of such claim and the date on which such claim
is requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such
notice to Atlas (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If Atlas notifies the Employee
in writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall at Atlas' expense:
(i) give Atlas any information reasonably requested by Atlas
relating to such claim,
(ii) take such action in connection with contesting such claim as
Atlas shall reasonably requesting writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Atlas,
(iii) cooperate with Atlas in good faith in order effectively to
contest such claim, and
(iv) permit Atlas to participate in any proceedings relating to
such claim;
provided, however, that Atlas shall bear and pay directly as incurred all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Employee harmless,
on an after-tax basis, for
11
<PAGE> 12
any Excise Tax or any Federal, state, local or other income or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 5.1, Atlas shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings, and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as Atlas shall determine; provided, however, that if Atlas directs the
Employee to pay such claim and sue for a refund, Atlas shall advance the amount
of such payment to the Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis, from any Excise Tax or
Federal, state, local or other income or other tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, Atlas' control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
12
<PAGE> 13
(d) If, after the receipt by the Employee of an amount advanced by
Atlas pursuant to paragraph (c) of this Section 5.1, the Employee becomes
entitled to receive any refund with respect to such claim, the Employee
shall (subject to Atlas' complying with the requirements of paragraph (c)
of this Section 5.1) promptly pay to Atlas the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto) upon receipt thereof; provided that Employee shall not be required
to pay Atlas an amount of the refund in excess of any such amount advanced
by Atlas. If, after the receipt by the Employee of an amount advanced by
Atlas pursuant to paragraph (c) of this Section 5.1, a determination is
made that the Employee shall not be entitled to any refund with respect to
such claim and Atlas does not notify the Employee in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after
such determination, the such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
6. CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado, without reference to principles of conflict of
laws. Employee shall submit to jurisdiction of the courts in the State of
Colorado (state or Federal court, as applicable).
7. SEVERABILITY AND ENFORCEABILITY
It is expressly acknowledged and agreed that the covenants and provisions
hereof are separable; that the enforceability of one covenant or provision shall
in no event affect the full enforceability of any other covenant or provision
herein. Further, it is agreed that, in the event of any covenant or provision of
this Agreement is found by any court of competent jurisdiction to
13
<PAGE> 14
be unenforceable, illegal or invalid, such invalidity, illegality or
unenforceability shall not affect any other term or condition had never been
contained herein. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any other
provision of this Agreement.
8. MISCELLANEOUS
8.1 No Mitigation. The amounts to be paid Employee are net to Employee,
without any reduction or duty to mitigate, except for taxes, other governmental
charges or amounts owed to Atlas by Employee.
8.2 Pro-Ration. In the event the Employment Period is terminated in the
middle of any calendar month, the amount due for such month shall be pro-rated
on a daily basis.
8.3 No Waiver Except in Writing. No waiver or modification of this
Agreement or any of the terms and conditions set forth herein shall be effective
unless submitted to a writing duly executed by the parties.
8.4 Successors and Assignees. This Agreement shall be binding on Atlas and
any successor thereto, whether by reason of merger, consolidation or otherwise.
The duties and obligations of Employee may not be assigned by Employee.
8.5 Confidentiality of Terms. Atlas and Employee agree that the terms and
conditions of this Agreement are confidential and that they will not disclose
the terms of this Agreement to any third parties, other than the Employee's
spouse, their attorneys, auditors, accountants or as required by law or as may
be necessary to enforce this Agreement.
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<PAGE> 15
8.6 Full Understanding. Employee declares and represents that she has
carefully read and fully understands the terms of this Agreement, has had the
opportunity to obtain advice and assistance of counsel with respect thereto, and
knowingly and of her own free will, without any duress, being fully informed and
after due deliberation, voluntarily accepts the terms of this Agreement.
8.7 Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements, and understandings between the
parties with respect to the subject matter hereof.
8.8 Indemnification. Employee shall be entitled to be indemnified to the
fullest extent permitted by law for Employee's services as an executive officer
of Atlas.
EMPLOYEE: ATLAS AIR, INC.
/s/ Nesa E. Hassanein By: /s/ Mickey Foret
- --------------------------- -------------------------------------
Nesa E. Hassanein Name: Mickey Foret
Title: President
15
<PAGE> 1
EXHIBIT 10.58
EXECUTION
================================================================================
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 5, 1997
AMONG
ATLAS AIR, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent,
and
BANKERS TRUST COMPANY,
as Administrative Agent
================================================================================
<PAGE> 2
ATLAS AIR, INC.
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1.
DEFINITIONS............................... 2
1.1 Certain Defined Terms................................................. 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement....................................................... 28
1.3 Other Definitional Provisions......................................... 28
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS................... 29
2.1 Commitments; Making of Loans; Notes; Register......................... 29
2.2 Interest on the Loans................................................. 33
2.3 Fees.................................................................. 37
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments.................... 38
2.5 Use of Proceeds....................................................... 44
2.6 Special Provisions Governing Eurodollar Rate Loans.................... 44
2.7 Increased Costs; Taxes; Capital Adequacy.............................. 47
2.8 Obligation of Lenders to Mitigate..................................... 51
SECTION 3.
CONDITIONS TO LOANS.............................. 52
3.1 Conditions to Loans to Finance Aircraft Acquisition................... 52
3.2 Condition to Loans to Finance Cargo Conversion........................ 54
3.3 Conditions to All Loans............................................... 56
3.4 Conditions to Conversion of Revolving Loans Into Term Loans........... 57
3.5 Conditions to Effectiveness........................................... 58
SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES................ 59
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.......................................................... 59
4.2 Authorization of Borrowing, etc....................................... 60
4.3 Financial Condition................................................... 61
4.4 No Material Adverse Change; No Restricted Junior Payments............. 61
4.5 Title to Properties; Liens............................................ 62
4.6 Litigation; Adverse Facts............................................. 62
4.7 Payment of Taxes...................................................... 62
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.8 Performance of Agreements; Materially Adverse Agreements........... 63
4.9 Governmental Regulation............................................ 63
4.10 Securities Activities.............................................. 63
4.11 Employee Benefit Plans............................................. 63
4.12 Certain Fees....................................................... 64
4.13 Environmental Protection........................................... 64
4.14 Employee Matters................................................... 64
4.15 Solvency........................................................... 64
4.16 Disclosure......................................................... 65
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS.................... 65
5.1 Financial Statements and Other Reports............................. 65
5.2 Corporate Existence................................................ 70
5.3 Payment of Taxes and Claims; Tax Consolidation..................... 71
5.4 Maintenance of Properties; Insurance............................... 71
5.5 Inspection; Lender Meeting......................................... 71
5.6 Compliance with Laws, etc.......................................... 72
5.7 Environmental Indemnity............................................ 72
5.8 Company's Remedial Action Regarding Hazardous Materials............ 72
5.9 Further Assurances; New Subsidiaries............................... 73
5.10 Appraisals......................................................... 73
5.11 Key Man Life Insurance............................................. 74
5.12 Maintenance Contracts.............................................. 74
5.13 Employee Benefit Plans............................................. 74
SECTION 6.
COMPANY'S NEGATIVE COVENANTS...................... 74
6.1 Indebtedness....................................................... 74
6.2 Liens and Related Matters.......................................... 76
6.3 Investments; Joint Ventures........................................ 77
6.4 Contingent Obligations............................................. 78
6.5 Restricted Junior Payments......................................... 78
6.6 Financial Covenants................................................ 79
6.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions;
New Subsidiaries................................................... 82
6.8 Amendments of Material Agreements.................................. 84
6.9 Restriction on Leases.............................................. 84
6.10 Sales and Lease-Backs.............................................. 85
6.11 Sale or Discount of Receivables.................................... 85
6.12 Transactions with Shareholders and Affiliates...................... 85
6.13 Disposal of Subsidiary Stock....................................... 86
6.14 Conduct of Business................................................ 86
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 7.
EVENTS OF DEFAULT........................... 86
7.1 Failure to Make Payments When Due.................................. 86
7.2 Default in Other Agreements........................................ 87
7.3 Breach of Certain Covenants........................................ 87
7.4 Breach of Warranty................................................. 87
7.5 Other Defaults Under Loan Documents................................ 87
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc............... 88
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc................. 88
7.8 Judgments and Attachments.......................................... 89
7.9 Dissolution........................................................ 89
7.10 Change in Control.................................................. 89
7.11 Failure of Security................................................ 89
7.12 Certificated as Air Carrier........................................ 90
7.13 Material Agreements................................................ 90
SECTION 8.
AGENTS.................................. 91
8.1 Appointment........................................................ 91
8.2 Powers and Duties; General Immunity................................ 91
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness................................................... 93
8.4 Right to Indemnity................................................. 93
8.5 Collateral Documents............................................... 93
8.6 Successor Administrative Agent..................................... 94
SECTION 9.
MISCELLANEOUS.............................. 94
9.1 Assignments and Participations in Loans............................ 94
9.2 Expenses........................................................... 96
9.3 Indemnity.......................................................... 97
9.4 Set-Off............................................................ 98
9.5 Ratable Sharing.................................................... 98
9.6 Amendments and Waivers............................................. 99
9.7 Independence of Covenants..........................................100
9.8 Notices............................................................100
9.9 Survival of Representations, Warranties and Agreements.............101
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative..............101
9.11 Marshalling; Payments Set Aside....................................101
9.12 Severability.......................................................102
9.13 Obligations Several; Independent Nature of Lenders' Rights.........102
9.14 Headings...........................................................102
9.15 Applicable Law.....................................................102
9.16 Successors and Assigns.............................................102
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
9.17 Consent to Jurisdiction and Service of Process.....................102
9.18 Waiver of Jury Trial...............................................103
9.19 Confidentiality....................................................103
9.20 Counterparts; Effectiveness........................................104
9.21 Cooperation in Refinancing, Syndication and Assignment.............104
Signature pages S-1
</TABLE>
(iv)
<PAGE> 6
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
IIIA FORM OF REVOLVING NOTE
IIIB FORM OF AMENDED AND RESTATED NOTE
IV FORM OF COMPLIANCE CERTIFICATE
VA FORM OF OPINION OF CAHILL GORDON & REINDEL
VB FORM OF SECTION 1110 OPINION
VC FORM OF OPINION OF NESA HASSANEIN
VI INTENTIONALLY OMITTED
VII FORM OF ASSIGNMENT AGREEMENT
VIII FORM OF CERTIFICATE RE NON-BANK STATUS
IX FORM OF FINANCIAL CONDITION CERTIFICATE
X FORM OF FIRST AIRCRAFT CHATTEL MORTGAGE
XI FORM OF SECOND AIRCRAFT CHATTEL MORTGAGE
(v)
<PAGE> 7
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
6.1 CERTAIN EXISTING INDEBTEDNESS
6.2 CERTAIN EXISTING LIENS
6.3 CERTAIN EXISTING INVESTMENTS
6.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
(vi)
<PAGE> 8
ATLAS AIR, INC.
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is dated as of September
5, 1997 and entered into by and among ATLAS AIR, INC., a Delaware corporation
("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to herein as a "Lender" and collectively as
"Lenders"), GOLDMAN SACHS CREDIT PARTNERS L.P. (formerly known as Pearl Street
L.P.) ("Credit Partners"), as syndication agent (in such capacity, "Syndication
Agent") and BANKERS TRUST COMPANY ("Bankers Trust"), as administrative agent for
Lenders (in such capacity, "Administrative Agent").
R E C I T A L S
WHEREAS, pursuant to that certain Second Amended and Restated Credit
Agreement dated as of February 28, 1997, by and among Company, as Borrower, the
financial institutions listed on the signature pages thereof, Syndication Agent
and Administrative Agent (the "Existing Agreement"), Lenders have made certain
credit facilities available to Company for the purpose of acquisition and
modification of certain aircraft to be used in Company's air cargo business;
WHEREAS, the parties of the Existing Agreement desire to amend and restate
the Existing Agreement in order to (i) extend the maturity of the Loans, (ii)
decrease the Revolving Loan Commitments by $25,000,000 to $250,000,000, (iii)
adjust the financial covenants, and (iv) make certain other amendments to the
Existing Agreement; and
WHEREAS, it is the intention of Company, Administrative Agent and each of
the Lenders that such amendment and restatement of the Existing Agreement shall
not constitute a refinancing of the Loans outstanding on the Third Amended and
Restated Closing Date and that, with respect to the Loans outstanding as of the
Third Amended and Restated Closing Date, the First Aircraft Chattel Mortgages
shall continue to constitute purchase-money security interests subject to
Section 1110 of the Bankruptcy Code.
NOW THEREFORE, in consideration of the premises and agreements, provisions
and covenants herein contained, Company, Lenders, Syndication Agent and
Administrative Agent hereby agree that the Existing Agreement shall be amended
and restated in its entirety as follows:
1
<PAGE> 9
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"ACMI Contract" means (i) any contract entered into by Company pursuant to
which Company furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all in accordance with Company's
historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Company or its
Subsidiaries and dedicated to a new ACMI Contract entered into in connection
with the acquisition of such aircraft (which ACMI Contract shall not represent a
renewal or replacement of a prior ACMI Contract unless the aircraft dedicated to
such prior ACMI Contract was operated under an operating lease and returned to
the lessor) which is in effect on the date of calculation and has a remaining
term of one year or more on the date such aircraft was dedicated to such ACMI
Contract (subject to cancellation terms, which may include the right to cancel
on six months notice). When making any calculation on a Pro Forma Basis effect
shall be given to the acquisition of an ACMI Contracted Aircraft by adding to
the appropriate components of Consolidated Adjusted EBITDA (i) the net projected
annualized revenues from the operation of the ACMI Contracted Aircraft under
such ACMI Contract for that portion of the period for which Consolidated
Adjusted EBITDA is being calculated prior to the acquisition of such aircraft,
assuming operation for the minimum guaranteed number of block hours (less any
block hours subject to cancellation) at the minimum guaranteed rate under such
ACMI Contract less (ii) the projected annualized cash operating expenses from
such operation for the same period for which the related projected revenues are
determined in clause (i) above; provided that such projected cash operating
expenses shall not be less on a per block hour basis than the average historical
per block hour operating expenses of Company for the four full fiscal quarters
immediately preceding the date of calculation, and provided, further, that if
such aircraft is of a model other than a Boeing 747 freighter, such projected
cash operating expenses shall include maintenance costs which shall not be less
than the average for such aircraft type disclosed on the most recently available
DOT Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Company
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
2
<PAGE> 10
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date,
(x) until such time as Reference Lenders are determined in accordance with the
definition thereof, the rate per annum obtained by dividing the offered rate
(expressed as a rate per annum and rounded upward to the nearest 1/16 of one
percent) appearing on the Dow Jones/Telerate Monitor on Telerate Access Service
Page 3750 (British Bankers Association Settlement Rate) (or such other page as
may, in the opinion of Administrative Agent, replace such page on that system
for the purpose of displaying such rate) at or about 11:00 a.m. (London time) on
such Interest Rate Determination Date for U.S. dollar deposits of amounts in
same day funds comparable to the principal amount of the Eurodollar Rate Loan
for which the Adjusted Eurodollar Rate is then being determined with maturities
comparable to the Interest Period for which such Adjusted Eurodollar Rate will
apply by (ii) a percentage equal to 100% minus the stated maximum rate of all
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurodollar liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D) and (y) thereafter, the rate per
annum obtained by dividing (i) the arithmetic average (rounded upward to the
nearest 1/16 of one percent) of the offered quotation, if any, to first class
banks in the interbank Eurodollar market by each of the Reference Lenders for
U.S. dollar deposits of amounts in same day funds comparable to the principal
amount of the Eurodollar Rate Loan of that Reference Lender for which the
Adjusted Eurodollar Rate is then being determined with maturities comparable to
such Interest Period as of approximately 10:00 A.M. (New York time) on such
Interest Rate Determination Date by (ii) a percentage equal to 100% minus the
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable on
such Interest Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" as defined in Regulation D (or
any successor category of liabilities under Regulation D); provided that if any
Reference Lender fails to provide Administrative Agent with its aforementioned
quotation then the Adjusted Eurodollar Rate shall be determined based on the
quotation(s) provided to Administrative Agent by the other Reference Lender(s).
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 8.6.
"Aeronautical Authority" means, at any date, the Federal Aviation
Administration or other governmental airworthiness authority having jurisdiction
over any Eligible Aircraft or Airframe or Engine under the laws of the country
in which the Airframe is then registered.
"Affected Lender" has the meaning assigned to that term in subsection 2.6C.
3
<PAGE> 11
"Affected Loans" has the meaning assigned to that term in subsection 2.6C.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AFL" means Atlas Freighter Leasing, Inc., a Delaware corporation, whose
common stock is wholly-owned by Company, the sole business of which is the
ownership of the AFL Aircraft and the leasing of the AFL Aircraft to Company
pursuant to the AFL Leases and obtaining financing with respect thereto.
"AFL Aircraft" means (i) one Boeing 747-200 Aircraft, serial number 21048,
with four Pratt & Whitney JT9D-7J engines attached and (ii) five Boeing 747-200
Aircraft, serial numbers 21221, 21251, 21380, 21644, and 22507, each with four
General Electric CF6-50E2 engines attached.
"AFL Financing" means indebtedness in an aggregate principal amount of
$185,000,000 incurred by AFL as of May 29, 1997 pursuant to the AFL Financing
Agreement.
"AFL Financing Agreement" means that certain Credit Agreement dated as of
May 29, 1997 by and among AFL, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
"AFL Leases" means one or more triple net leases by and between Company and
AFL with respect to the AFL Aircraft providing for fair market rental rates
sufficient to provide for principal and interest payments under the AFL
Financing Agreement and a market rate of return on the equity interest of AFL,
as lessor thereunder, as such leases may be amended, modified or supplemented
from time to time in accordance with the provisions of this Agreement.
"AFL Restructuring" means the following transactions which occurred
concurrently on May 29, 1997: (i) the termination of the leases relating to the
AFL Aircraft in existence prior to May 29, 1997, (ii) the transfer, as a
dividend, of the AFL Aircraft to Company and the simultaneous contribution of
the AFL Aircraft to AFL as a capital contribution, together with approximately
$10.4 million, (iii) the incurrence of indebtedness pursuant to the AFL
Financing Agreement and the simultaneous repayment of the indebtedness
previously secured by the AFL Aircraft and (iv) the entering into of the AFL
Leases.
4
<PAGE> 12
"AFL II" means Atlas Freighter Leasing II, Inc., a Delaware corporation,
whose common stock is wholly-owned by Company, the sole business of which is the
ownership of the AFL II Aircraft, the leasing of the AFL II Aircraft to Company
pursuant to the AFL II Leases and obtaining financing with respect thereto.
"AFL II Aircraft" means (i) four Boeing 747-200 aircraft (including the
engines attached thereto) with serial numbers 21782, 21784, 22337 and 22471 and
(ii) nine General Electric CF6-50E2 engines with serial numbers 530168, 517530,
517790, 455167, 517602, 517547, 517538, 517539 and 517544.
"AFL II Financing" means indebtedness in an aggregate principal amount not
in excess of $185,000,000 incurred by AFL II as of the Third Amended and
Restated Closing Date pursuant to the AFL II Financing Agreement.
"AFL II Financing Agreement" means that certain Credit Agreement dated as
of September 5, 1997 by and among AFL II, the lenders party thereto, Goldman
Sachs Credit Partners L.P., as Syndication Agent, and Bankers Trust Company, as
Administrative Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
"AFL II Leases" means one or more triple net leases by and between Company
and AFL II with respect to the AFL II Aircraft providing for fair market rental
rates sufficient to provide for principal and interest payments under the AFL II
Financing Agreement and a market rate of return on the equity interest of AFL
II, as lessor thereunder, as such leases may be amended, modified or
supplemented from time to time in accordance with the provisions of this
Agreement.
"AFL II Restructuring" means the following transactions which shall occur
concurrently on the Third Amended and Restated Closing Date: (i) the
contribution of the AFL II Aircraft to AFL II as a capital contribution, (ii)
the incurrence of indebtedness pursuant to the AFL II Financing Agreement and
the simultaneous repayment of amounts outstanding under this Agreement which are
secured by the AFL II Aircraft and (iii) the entering into of the AFL II Leases.
"Agents" shall mean Administrative Agent and Syndication Agent
collectively.
"Agreement" means this Third Amended and Restated Credit Agreement dated as
of September 5, 1997, as it may be amended, supplemented or otherwise modified
from time to time.
"Aircraft Chattel Mortgage" means any or all of the First Aircraft Chattel
Mortgages and the Second Aircraft Chattel Mortgages.
5
<PAGE> 13
"Airframe" means, as the context requires, an Airframe as defined in a
particular Aircraft Chattel Mortgage or all Airframes as defined in all Aircraft
Chattel Mortgages.
"Amended and Restated Notes" means the promissory notes of Company amended
and restated pursuant to subsection 2.1D on the Conversion Date, substantially
in the form of Exhibit IIIB attached hereto.
"Applicable Margin" has the meaning assigned to that term in subsection
2.2A.
"Appraised Value" means, with respect to any Financed Aircraft, the average
of the appraised value of such Financed Aircraft by two Approved Appraisers as
most recently determined pursuant to subsection 5.10.
"Approved Appraiser" means any of the following: B.K. Associates, Jack B.
Feir Associates, Morton Beyer & Agnew, Airclaims, Ltd., Aircraft Information
Services, Inc., Simat, Helleisen & Eichner, Inc. and AVITAS, Inc.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Company or any of its Subsidiaries to any other Person of (i) any of the stock
of any of Company's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Company or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Company or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts (other than
any engines encumbered pursuant to an Aircraft Chattel Mortgage); provided that
the assets received by the Company or any Subsidiary have a fair market value at
least equal to the assets transferred (provided that with respect to any asset
swap or series of related asset swaps involving assets of Company or any
Subsidiary with a fair market value exceeding $3,000,000, such determination
shall be made by the Board of Directors of Company)) and (D) asset sales
involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Assignee Notes" means any promissory notes issued by Company (i) at the
request of a Lender pursuant to subsection 2.1D hereof or (ii) pursuant to the
last sentence of subsection 9.1B(i) in connection with assignments of the
Commitments, Revolving Loans or Term Loans of any Lenders, substantially in the
form of Exhibit IIIA or Exhibit IIIB annexed hereto, as the case may be, as they
may be amended, supplemented or otherwise modified from time to time.
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"Assignment Agreement" means an Assignment Agreement in substantially the
form of Exhibit VII annexed hereto.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
"Bankers Trust" has the meaning assigned to that term in the introduction
to this Agreement.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the
rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"BFE Agreement" means any agreement entered into by Company, relating to
buyer furnished equipment to be installed on any Financed Aircraft in form and
substance satisfactory to Administrative Agent, as amended, restated, supplement
or otherwise modified from time to time in accordance with this Agreement.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers'
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<PAGE> 15
acceptances maturing within one year after such date and issued or accepted by
any Lender or by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia that (a) is
at least "adequately capitalized" (as defined in the regulations of its primary
Federal banking regulator) and (b) has Tier 1 capital (as defined in such
regulations) of not less than $100,000,000; and (v) shares of any money market
mutual fund that (a) has at least 95% of its assets invested continuously in the
types of investments referred to in clauses (i) and (ii) above, (b) has net
assets of not less than $500,000,000, and (c) has the highest rating obtainable
from either S&P or Moody's.
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"Certificate re Non-Bank Status" means a certificate substantially in the
form of Exhibit VIII annexed hereto delivered by a Lender to Administrative
Agent pursuant to subsection 2.7B(iii).
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Collateral" means all of the properties and assets in which Liens are
purported to be granted by the Collateral Documents.
"Collateral Documents" means each First Aircraft Chattel Mortgage and each
Second Aircraft Chattel Mortgage and any security agreement executed pursuant to
subsection 5.9.
"Commitments" means the commitments of Lenders to make and convert Loans as
set forth in subsection 2.1A.
"Company" has the meaning assigned to that term in the introduction to this
Agreement.
"Company Common Stock" means the common stock of Company, par value $0.01
per share.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit IV annexed hereto delivered to Administrative Agent and Lenders by
Company pursuant to subsection 5.1(iv).
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"Condemnation Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(c).
"Consolidated Adjusted EBITDA" means, for any period, (1) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (2) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Company, all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Company and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Company.
"Consolidated Current Assets" means, as at any date of determination, the
total assets of Company and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP (it being
understood that Cash on hand of $65,000,000 or less shall not be taken into
account for purposes of calculating the Consolidated Working Capital
Adjustment).
"Consolidated Current Liabilities" means, as at any date of determination,
the total liabilities of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current liabilities in conformity with GAAP.
"Consolidated Excess Cash Flow" means, for any Fiscal Year, an amount equal
to the sum of Consolidated Adjusted EBITDA for such Fiscal Year and the
Consolidated Working Capital Adjustment for such Fiscal Year, minus the sum of
the amounts for such Fiscal Year of (i) scheduled repayments of principal of
Indebtedness, mandatory prepayments of the principal of Indebtedness (other than
from the proceeds of Asset Sales), voluntary prepayments of the principal of
Indebtedness to the extent that such amount is not simultaneously reborrowed,
and other permanent reductions in the availability of revolving credit
facilities (ii) Consolidated Interest Expense, (iii) permitted Consolidated
Capital Expenditures (net of any proceeds of any related financing with
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<PAGE> 17
respect to such Consolidated Capital Expenditures), and (iv) the portion of
taxes based on income or revenues actually paid in cash.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Company and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Company and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3
payable to Syndication Agent, Administrative Agent and/or Lenders on or before
the Third Amended and Restated Closing Date.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Company and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Company and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Company and its Subsidiaries on a consolidated
basis during that period under all Capital Leases and Operating Leases to which
Company or any of its Subsidiaries is a party as lessee (net of sublease income
other than income from ACMI Contracts). For the avoidance of doubt, all rental
payments to AFL II and AFL shall not be included in Consolidated Rental
Payments.
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"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" means, as at any date of determination, the
excess of Consolidated Current Assets over Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any Fiscal Year on a
consolidated basis, the amount (which may be a negative number) by which the
Consolidated Working Capital of Company and its Subsidiaries as of the beginning
of the period exceeds (or is less than) the Consolidated Working Capital of
Company and its Subsidiaries as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Third
Amended and Restated Closing Date and each other director, if such other
director's nomination for election to the Board of Directors of such Person is
recommended by a majority of the then Continuing Directors.
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"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Conversion Date" means the date on which Revolving Loans are converted to
Term Loans pursuant to subsection 2.1A(ii).
"Credit Partners" has the meaning assigned to that term in the introduction
to this Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Company or any of its Subsidiaries
against fluctuations in currency values.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the Pass
Through Trust Documents, the FINOVA Agreement, the Unsecured Revolving Credit
Facility, the Senior Note Documents, the NationsBanc Agreement, the AFL
Financing Agreement, the AFL II Financing Agreement, any Permitted Extension
Indebtedness and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
6.1(vi).
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Eligible Aircraft" means a Boeing 747-200, 747-300, 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Company or is eligible for delivery under any
Modification Agreement with a delivery slot available within a six month period
(or is leased in accordance with the Collateral Documents for a period of longer
than six months until a delivery slot is available), and (ii) has a maximum
gross take-off weight ("MTOW") of at least 800,000 pounds, in the case of any
747-200, 747-300, or 747- 400 aircraft and 630,000 pounds in the case of any
MD-11 aircraft.
"Eligible Assignee" means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof; (ii) a savings and loan
association or savings
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<PAGE> 20
bank organized under the laws of the United States or any state thereof; (iii) a
commercial bank organized under the laws of any other country or a political
subdivision thereof; provided that (x) such bank is acting through a branch or
agency located in the United States or (y) such bank is organized under the laws
of a country that is a member of the Organization for Economic Cooperation and
Development or a political subdivision of such country; and (iv) any other
entity which is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its businesses
including, but not limited to, insurance companies, mutual funds and lease
financing companies, in each case (under clauses (i) through (iv) above) that is
reasonably acceptable to Administrative Agent; and (B) any Lender and any
Affiliate of any Lender; provided that no Affiliate of Company shall be an
Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Company or any of its ERISA Affiliates.
"Engine" means, as the context requires, an Engine as defined in a
particular Aircraft Chattel Mortgage or Engines as defined in all Aircraft
Chattel Mortgages.
"Environmental Claim" means any investigation, notice, claim, suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Company including, without limitation,
additional issuances of Company Common Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service
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<PAGE> 21
group within the meaning of Section 414(m) or (o) of the Internal Revenue Code
of which that Person, any corporation described in clause (i) above or any trade
or business described in clause (ii) above is, or was at any time, a member.
"Eurodollar Rate Loans" means Loans bearing interest at rates determined by
reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
"Event of Default" means each of the events set forth in Section 7.
"Event of Loss" shall mean any of the following events with respect to any
Financed Aircraft (whether the Airframe or an Engine of such Financed Aircraft
or Spare Engine or both): (A) loss of such Financed Aircraft or Spare Engine or
the use thereof due to theft or disappearance of such Financed Aircraft or Spare
Engine which shall result in the loss of possession thereof for a period of 120
days (or for a shorter period ending on the date on which there is an insurance
settlement for a total loss on the basis of the theft or disappearance of such
Financed Aircraft or Spare Engine); (B) the destruction, damage beyond repair or
rendition of such Financed Aircraft or Spare Engine permanently unfit for normal
use for any reason whatsoever; (C) the condemnation, confiscation or seizure of,
or requisition of title to, or use or possession (other than use by the United
States Government if Company obtains adequate compensation from the United
States Government) of such Financed Aircraft or Spare Engine; (D) as a result of
any rule, regulation, order or other action by the FAA or other governmental
body having jurisdiction, the use of such Financed Aircraft or Spare Engine in
the normal course of interstate air transportation of persons or cargo shall
have been prohibited for a period of more than nine consecutive months unless
Company, prior to the expiration of such nine month 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 Company or,
in any event, if such use shall have been prohibited for a period of twelve
consecutive months; (E) the operation or location of such Financed Aircraft or
Spare Engine, while under requisition for use by the United States or any
instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Financed Aircraft or Spare
Engine, if Company shall be unable to obtain indemnity in lieu thereof from the
United States; (F) any damage which results in an insurance settlement with
respect to such Financed Aircraft or Spare Engine on the basis of an actual or
constructive total loss or (G) a divestiture of such Airframe or Spare Engine as
described in Section 4(d)(iii), Section 4(d)(vi), Section 4(d)(vii)(B) or
Section 4(d)(viii)(B) of any Aircraft Chattel Mortgage. An Event of Loss with
respect to any Financed Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the Airframe of such Financed Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
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"Existing Agreement" has the meaning assigned to that term in the Recitals
hereto.
"Facilities" means any and all real property now, hereafter or heretofore
owned, leased, operated or used by Company or any of its predecessors.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day on which is a Business Day, the average of the quotations for such day on
such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"Financed Aircraft" means all Eligible Aircraft, including the airframes
and engines, purchased by Company with proceeds of Revolving Loans made under
this Agreement and with respect to which a First Aircraft Chattel Mortgage has
been executed and delivered.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Company, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"First Aircraft Chattel Mortgage" means, with respect to each Eligible
Aircraft purchased with the proceeds of Loans, a Security Agreement and Chattel
Mortgage (Aircraft No. ___) substantially in the form of Exhibit X annexed
hereto granting to Administrative Agent for the benefit of Lenders a purchase
money first priority security interest in such Eligible Aircraft, as such First
Aircraft Chattel Mortgage may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof and thereof.
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"Fiscal Year" means (i) with respect to the financial statements to be
delivered by Company pursuant to subsection 5.1, Company's fiscal year on the
date of such delivery and (ii) for all other purposes hereunder, a calendar
year.
"Funding and Payment Office" means the office of Administrative Agent
located at 130 Liberty Street, New York, New York 10006, Attention: Marguerite
Sutton.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession. Financial statements and other information required to be delivered
by Company to Lenders pursuant to clauses (ii), (iii) and (xiii) of subsection
5.1 shall be prepared in accordance with GAAP as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 5.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 4.3.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
Facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Company.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar
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written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 9.3.
"Initial Closing Date" means the date on or before May 8, 1996 on which the
initial Loans were made.
"Insurance Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(c).
"Interest Payment Date" means (i) with respect to any Base Rate Loan, each
March 31, June 30, September 30 and December 31 of each year, commencing on the
first such date to occur after the Third Amended and Restated Closing Date, and
(ii) with respect to any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each Interest
Period of six months "Interest Payment Date" shall also include the date that is
three months after the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Company or any of its Subsidiaries against
fluctuations in interest rates.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Company or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of
Company from any Person other than Company or any of its Subsidiaries, of any
equity Securities of such Subsidiary, or (iii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Company or any of its Subsidiaries to any
other Person (other than a wholly-owned Subsidiary of Company), including
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all indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lender" and "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of this Agreement, together with their successors and
permitted assigns pursuant to subsection 9.1.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Revolving Loans or Term Loans or
any combination thereof.
"Loan Documents" means this Agreement, the Notes, any guaranty entered into
pursuant to subsection 5.9 and the Collateral Documents.
"Loan Parties" means Company and any persons who enter into guaranties
pursuant to subsection 5.9.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company or of Company and its Subsidiaries taken as a whole or (ii)
the impairment of the ability of any Loan Party to perform the Obligations, or
the impairment, as a result of actions or inaction by Company, of the ability of
Credit Partners, Syndication Agent, Administrative Agent or Lenders to enforce
the Obligations.
"Material Agreement" means any or all of the Pass Through Trust Documents,
the FINOVA Agreement, the Unsecured Revolving Credit Facility, the Senior Note
Documents, the NationsBanc Agreement, each Purchase Agreement, any Modification
Agreement, any BFE Agreement, the Philippine Lease, the Second Philippine Lease,
the
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<PAGE> 26
AFL Leases, the AFL II Leases, and agreements in respect of Permitted Extension
Indebtedness and Other Permitted Indebtedness.
"Maximum Note Amount" means, with respect to any Eligible Aircraft, 80% of
the Appraised Value of such Eligible Aircraft based on appraisals obtained
pursuant to subsection 5.10 of such Eligible Aircraft made within 30 days prior
to the purchase thereof and giving effect to the proposed modifications of such
Eligible Aircraft pursuant to a Modification Agreement.
"Modification Agreement" means any modification agreement entered into by
Company with respect to the modification of any Financed Aircraft in form and
substance satisfactory to Administrative Agent.
"Moody's" means Moody's Investors Service, Inc.
"NationsBanc Agreement" means the Loan Agreement, dated as of March 28,
1997, between Company, as Borrower and NationsBanc Leasing Corporation, as
Lender, as further amended, supplemented and modified in accordance with this
Agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including (i) income taxes
reasonably estimated to be actually payable as a result of such Asset Sale
within two years of the date of such Asset Sale and (ii) payment of the
outstanding principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets of Company and that is required to be repaid under the terms thereof as a
result of such Asset Sale.
"Non-US Lender" has the meaning assigned to that term in subsection
2.7B(iii)(a).
"Notes" means one or more of the Revolving Notes, the Amended and Restated
Notes or the Assignee Notes, as the context requires.
"Notice of Borrowing" means a notice substantially in the form of Exhibit I
annexed hereto delivered by Company to Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in the
form of Exhibit II annexed hereto delivered by Company to Administrative Agent
pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"Obligations" means all obligations of every nature of each Loan Party from
time to time owed to Syndication Agent, Administrative Agent, Lenders or any of
them
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<PAGE> 27
under the Loan Documents, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
with respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the final stated maturity of
the Notes after giving effect to the conversion of Revolving Loans into Term
Loans and (iii) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of Company and its Subsidiaries or
any less favorable, from the perspective of Lenders, than any other Designated
Indebtedness.
"Part" means, as the context requires, a Part as defined in a particular
Aircraft Chattel Mortgage or Parts as defined in all Aircraft Chattel Mortgages.
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements which related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Agreement.
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<PAGE> 28
"Performance Certificate" shall have the meaning assigned to such term in
subsection 5.1(xviii).
"Performance Reduction" means a performance reduction of the Applicable
Margin equal to 0.75% if at the end of any four fiscal quarter period commencing
on or after December 31, 1997 and ending on or prior to December 31, 1999:
The ratio of (x) Consolidated Adjusted EBITDA for such four fiscal quarter
period to (y) Consolidated Interest Expense for such period is greater than
2.30:1.00; and
The ratio of (x) Consolidated Total Debt (less Cash and Cash Equivalents in
excess of $25 million) at the end of any such period plus seven times
Consolidated Rental Payments for such period to (y) Consolidated Adjusted
EBITDA for such period plus Consolidated Rental Payments for such period is
less than 5.00:1.00.
The Performance Reduction shall be determined with reference to the most recent
Performance Certificate delivered by Company to Administrative Agent pursuant to
subsection 5.1(xviii). Any Performance Reduction shall become effective on the
day following the delivery of the relevant Performance Certificate to
Administrative Agent and subject to the next succeeding sentence, the
Performance Reduction shall remain in effect for the remainder of the term of
this Agreement. Notwithstanding anything to the contrary herein, at any time an
Event of Default shall have occurred and be continuing, the Performance
Reduction shall be zero.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 5.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehouse-men, mechanics and materialmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any Collateral, if
such reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade
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<PAGE> 29
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 7.8;
(v) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries;
(vi) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 6.9, (b) restriction or encumbrance that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(vii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(viii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(ix) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
First Aircraft Chattel Mortgages;
(x) Liens described in Schedule 6.2 annexed hereto;
(xi) Liens arising pursuant to the NationsBanc Agreement; provided
that such Liens encumber only assets acquired or refinanced with the
proceeds of Indebtedness incurred pursuant to the NationsBanc Agreement;
(xii) Liens arising pursuant to the AFL II Financing Agreement;
provided that such Liens do not encumber any assets other than the AFL II
Aircraft and other assets of AFL II;
(xiii) Liens arising pursuant to the AFL Financing Agreement; provided
that such Liens do not encumber any assets other than the AFL Aircraft and
other assets of AFL;
(xiv) Liens securing Indebtedness incurred in accordance with
subsection 6.1(xii);
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(xv) The rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of any
aircraft chattel mortgages entered into in connection with the AFL
Financing Agreement and/or the AFL II Financing Agreement; and
(xvi) Liens granted pursuant to the Collateral Documents.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Company of
any Indebtedness of Company, including any such successive transactions by
Company, so long as (i) any such Indebtedness bears interest at a rate which
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of Company reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the Obligations at least to the same extent as the Indebtedness
immediately prior to such extension, (iv) such Permitted Extension Indebtedness
has a final stated maturity later than the final stated maturity of the Notes
after giving effect to the conversion of Revolving Loans into Term Loans and (v)
the amortization and the other terms, provisions, conditions, covenants and
events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Company and its Subsidiaries or any less
favorable, from the perspective of Lenders than those contained in the
Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Philippine Lease" means, that certain Lease Agreement dated as of February
23, 1995 by and between First Security Bank of Utah, National Association and
Philippine Airlines Inc. as amended by an Amendment dated March 31, 1995, as
modified pursuant to an acknowledgement dated December 31, 1996 by and between
Philippine Airlines and Company, and as assigned to Atlas Air, Inc. pursuant to
an Assignment and Acceptance of Lease dated December 31, 1996 as the Lease
Agreement may be further amended, restated, supplemented or otherwise modified
from time to time in accordance with this Agreement.
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default.
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"Pricing Certificate" has the meaning assigned to that term in subsection
5.1(xvi).
"Pricing Reduction" means, if at any time Company's obligations in respect
of the Pass Through Trust Documents are rated by Moody's or S&P at the levels
specified below, a pricing reduction equal to the percentage corresponding to
the applicable rating set forth in the chart below:
<TABLE>
<CAPTION>
Rating Pricing Reduction
------ -----------------
<S> <C>
Ba3 or below by Moody's and
BB- or below by S&P None
Ba2 by Moody's and
BB by S&P 0.25%
Ba1 or higher by Moody's and
BB+ by S&P 0.50%
</TABLE>
In the event of a split rating, the more creditworthy of the two ratings shall
be used to determine the Pricing Reduction; provided that, if the less
creditworthy of the two ratings is two or more rating categories below the more
creditworthy rating, the more creditworthy rating shall be deemed to be the
rating category which is one rating category above the less creditworthy rating.
The Pricing Reduction shall be determined with reference to the most recent
Pricing Certificate delivered by Company to Administrative Agent pursuant to
subsection 5.1(xvi). Any changes to the Pricing Reduction shall become effective
on the day following the delivery of the relevant Pricing Certificate to
Administrative Agent and shall remain in effect through the next date a Pricing
Certificate is required to be delivered. It is understood and agreed that the
Pricing Reduction percentages provided are not cumulative. Notwithstanding
anything to the contrary herein, at any time an Event of Default shall have
occurred and be continuing, the Pricing Reduction shall be zero.
"Prime Rate" means the rate that Administrative Agent announces from time
to time as its prime lending rate, as in effect from time to time. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Administrative Agent or any other Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Rate.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Company or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Company or any of its
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<PAGE> 32
Subsidiaries or any other related action which requires compliance on a Pro
Forma Basis. In making any determination of compliance on a Pro Forma Basis,
such determination shall be performed after good faith consultation with
Administrative Agent using the consolidated financial statements of Company and
its Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition or other
related action had been consummated at the beginning of the period specified in
the covenant with respect to which Pro Forma Basis compliance is required.
"Pro Rata Share" means, with respect to each Lender, (i) prior to any
Conversion Date the percentage obtained by dividing the Revolving Loan Exposure
of that Lender by the aggregate Revolving Loan Exposure of all Lenders, and (ii)
thereafter, the percentage obtained by dividing the Term Loan Exposure of that
Lender by the aggregate Term Loan Exposure of all Lenders, in each case as such
percentage may be adjusted by assignments permitted pursuant to subsection 9.1.
The Pro Rata Share of each Lender as of the date hereof is set forth opposite
the name of that Lender in Schedule 2.1 annexed hereto.
"Proceedings" has the meaning assigned to that term in subsection 5.1(x).
"Purchase Agreement" means, with respect to the purchase of any Eligible
Aircraft to be financed with the proceeds of Revolving Loans, an aircraft
purchase agreement and any related bill of sale providing, among other things,
for the sale to Company of such Eligible Aircraft in form and substance
satisfactory to Administrative Agent.
"Reference Lenders" means Bankers Trust and one or more other Lenders
designated by Credit Partners and Administrative Agent and reasonably
satisfactory to Company.
"Register" has the meaning assigned to that term in subsection 2.1.E.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
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<PAGE> 33
"Requisite Lenders" means Lenders having or holding 50.1% or more of (i)
prior to any Conversion Date, the aggregate Revolving Loan Exposure of all
Lenders and (ii) thereafter, the aggregate Term Loan Exposure of all Lenders.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Company
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Company now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Company now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(i), and "Revolving Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means September 30, 1999.
"Revolving Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's Revolving Loan Commitment and (ii) after the termination of the
Revolving Loan Commitments, the aggregate outstanding principal amount of the
Revolving Loans of that Lender.
"Revolving Loans" means the Loans made by Lenders to Company pursuant to
subsection 2.1A(i).
"Revolving Notes" means (i) the promissory notes of Company issued pursuant
to subsection 2.1D on the Initial Closing Date and on each Funding Date on which
Company purchases an aircraft with the proceeds of Revolving Loans and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
9.1B(i) in connection with assignments of the Revolving Loan Commitments and
Revolving Loans of any Lenders, in each case substantially in the form of
Exhibit IIIA annexed hereto, as they may be amended, supplemented or otherwise
modified from time to time.
"S&P" means Standard & Poor's Rating Services.
"Second Aircraft Chattel Mortgage" means with respect to each Eligible
Aircraft purchased with the proceeds of Loans, a Second Security Agreement and
Chattel Mortgage (Aircraft No. _____) and substantially in the form of Exhibit
XI annexed
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<PAGE> 34
hereto, granting a security interest in such Eligible Aircraft and Parts
securing all Obligations that are not secured by the First Chattel Mortgage
entered into concurrently therewith, as such Second Aircraft Chattel Mortgage
may be amended, restated, supplemented or otherwise modified from time to time
in accordance with the terms hereof and thereof.
"Second Philippine Lease" means, that certain Lease Agreement dated as of
January 1, 1995 by and between Bankers Trust Company and Philippine Airlines,
Inc., as modified pursuant to an acknowledgement dated May 6, 1997 by and
between Philippine Airlines, Inc. and Company, and as assigned to Atlas Air,
Inc. pursuant to an Assignment and Acceptance of Lease dated May 6, 1997 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Senior Notes" means the 10 3/4% Senior Notes due 2005 of Company issued
pursuant to the Senior Note Documents.
"Senior Note Documents" means the Indenture, dated as of August 13, 1997
between Company and State Street Bank and Trust Company relating to the Senior
Notes and any and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Agreement.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and
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<PAGE> 35
conveyances. For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"Spare Engine" means, as the context requires, a Spare Engine as defined in
a particular Aircraft Chattel Mortgage or all Spare Engines as defined in all
Aircraft Chattel Mortgages.
"Special Purpose Subsidiary" means (i) a Subsidiary of Company formed
solely for the purpose of refinancing Notes associated with a Financed Aircraft
or acquiring or refinancing other aircraft with Other Permitted Indebtedness the
only assets of which are such Financed Aircraft and contributions to capital of
such Subsidiary, which together with all other contributions to capital made to
other such Subsidiaries, are not in excess of 15% of the consolidated book value
of the assets of the Company and its Subsidiaries, and the only liability of
which is the Permitted Extension Indebtedness incurred to refinance such Notes;
provided that Company beneficially owns and controls at least 95% of the issued
and outstanding capital stock of such Subsidiary or (ii) a wholly-owned
Subsidiary formed pursuant to subsection 9.21.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"Supplemental Type Certificates" has the meaning assigned to that term in
the First Aircraft Chattel Mortgage.
"Syndication Agent" means Credit Partners in its capacity as syndication
agent.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its lending office)
is located or in which that Person is deemed to be doing business on all or part
of the net income, profits or gains of that Person (whether worldwide, or only
insofar as such income, profits or gains are considered to arise in or to relate
to a particular jurisdiction, or otherwise).
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<PAGE> 36
"Term Loan Commitment" means the commitment of a Lender to convert
Revolving Loans into Term Loans pursuant to subsection 2.1A(ii), and "Term Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Term Loan Exposure" means, with respect to any Lender as of any date of
determination (i) prior to any Conversion Date, that Lender's Term Loan
Commitment and (ii) thereafter, the outstanding principal amount of the Term
Loan of that Lender.
"Term Loans" means the Loans converted into Term Loans pursuant to
subsection 2.1A(ii).
"Third Amended and Restated Closing Date" means the date on or before
September 5, 1997, on which the conditions set forth in subsection 3.5 are met
and this Agreement becomes effective.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any jurisdiction.
"United States Citizen" has the meaning assigned to that term in subsection
4.1B.
"Unsecured Revolving Credit Facility" means that certain credit facility
between Atlas Air, Inc. and Bank One, Colorado, N.A., which provides for a
$25,000,000 revolving working capital line of credit and a $1,000,000 term real
estate loan, on terms substantially similar to the term sheet delivered to
Administrative Agent as amended, restated, supplemented or otherwise modified
from time to time in accordance with this Agreement.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP.
1.3 Other Definitional Provisions.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
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<PAGE> 37
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes; Register.
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Company herein set forth,
each Lender hereby severally agrees to make the Loans described in this
subsection 2.1A.
(i) Revolving Loans. Prior to the Third Amended and Restated Closing
Date, Lenders have made Revolving Loans in the aggregate principal amount
of $234,222,410.60 against the Revolving Loan Commitments, the proceeds of
which were used to purchase and modify Eligible Aircraft. From and after
the Third Amended and Restated Closing Date, each Lender severally agrees,
subject to the conditions set forth in Section 3 and subject to the
limitations set forth below, to lend to Company from time to time during
the period from the Third Amended and Restated Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount, together with the amount of Revolving Loans made prior to the Third
Amended and Restated Closing Date, not exceeding its Pro Rata Share of the
aggregate amount of the Revolving Loan Commitments to be used for the
purposes identified in subsection 2.5A. The amount of each Lender's
Revolving Loan Commitment on the date hereof is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the Revolving
Loan Commitments on the date hereof is $250,000,000; provided that the
Revolving Loan Commitments of Lenders shall be adjusted to give effect to
any assignments of the Revolving Loan Commitments pursuant to subsection
9.1B; and provided, further that the amount of the Revolving Loan
Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsection 2.4B(ii). Each Lender's
Revolving Loan Commitment shall expire on the Revolving Loan Commitment
Termination Date and all Revolving Loans and all other amounts owed
hereunder with respect to the Revolving Loans and the Revolving Loan
Commitments shall be paid in full no later than that date unless converted
to Term Loans pursuant to subsection 2.1A(ii). Amounts borrowed under this
subsection 2.1A may be repaid and reborrowed to but excluding the Revolving
Loan Commitment Termination Date. Amounts reborrowed after prepayment
pursuant to subsection 2.4B(iii)(e) shall be allocated ratably among the
Revolving Notes relating to all Financed Aircraft.
Anything to the contrary in this Agreement notwithstanding, the
Revolving Loans shall be subject to the limitation that in no event shall
the Lenders lend an amount in excess of (x) on the date of acquisition of
an Eligible Aircraft the lesser of (i) an amount equal to the purchase
price of such Eligible Aircraft and (ii) 80% of the Appraised Value of such
Eligible Aircraft as of the date of acquisition (but without giving effect
to the contemplated modifications) or (y) on any date Revolving Loans are
made to finance the modification of an Eligible Aircraft, 80% of the cost
thereof as reflected in invoices delivered to Administrative Agent pursuant
to subsection 3.2A (other than the final
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Revolving Loan to finance the cost of modification of such Eligible
Aircraft which may be in an amount up to the lesser of (x) 100% of the
costs of modification associated with such final Revolving Loan and (y) an
amount which when added to all other Loans made with respect to such
Eligible Aircraft does not exceed 80% of the Appraised Value as set forth
in appraisals delivered pursuant to subsection 3.1(iv) after giving effect
to completion of modification).
(ii) Term Loans. Each Lender severally agrees, at the request of
Company, to convert all of its Revolving Loans outstanding on the Revolving
Loan Commitment Termination Date into Term Loans upon the terms and
conditions set forth in this Agreement. Any request by Company for a
conversion of Revolving Loans to Term Loans shall be made at least 30 days
prior to the Revolving Loan Commitment Termination Date and shall be
accompanied by an Officer's Certificate stating that no Potential Event of
Default or Event of Default has occurred and is continuing. On the
Conversion Date, Company shall deliver to each Lender an Amended and
Restated Note with respect to each Financed Aircraft in substantially the
form of Exhibit IIIB annexed hereto and such further documents as
Administrative Agent may reasonably request.
B. Borrowing Mechanics. Revolving Loans made on any Funding Date shall be
in an aggregate minimum amount of $1,500,000. Whenever Company desires that
Lenders make Revolving Loans it shall deliver to Administrative Agent a Notice
of Borrowing no later than 12:00 Noon (New York time) at least three Business
Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate
Loan) or at least one Business Day in advance of the proposed Funding Date (in
the case of a Base Rate Loan). The Notice of Borrowing shall specify (i) the
proposed Funding Date (which shall be a Business Day), (ii) the amount of Loans
requested, (iii) whether such Loans shall be Base Rate Loans or Eurodollar Rate
Loans, (iv) in the case of any Loans requested to be made as Eurodollar Rate
Loans, the initial Interest Period requested therefor and (v) whether such Loans
are for the purpose of the purchase or the modification of an Eligible Aircraft.
Revolving Loans and Term Loans may be continued as or converted into Base Rate
Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In
lieu of delivering the above-described Notice of Borrowing, Company may give
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of Borrowing to
Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
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<PAGE> 39
Company shall notify Administrative Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Revolving Loans under this Agreement shall be
made by Lenders simultaneously and proportionately to their respective Pro Rata
Shares, it being understood that no Lender shall be responsible for any default
by any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular type of
Loan requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder.
Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant
to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent
shall notify each Lender of the proposed borrowing. Each Lender shall make the
amount of its Loan available to Administrative Agent not later than 12:00 Noon
(New York time) on the applicable Funding Date, in each case in same day funds
in Dollars, at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
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<PAGE> 40
D. Notes.
(i) Each of the outstanding Revolving Notes shall be deemed amended
and restated to reflect the change in the maturity date from June 30, 1998
to September 30, 1999. If so requested by a Lender, or in the event of any
subsequent assignments pursuant to subsection 9.1 hereto, Assignee Notes
will be issued substantially in the form of Exhibit IIIA or Exhibit IIIB
annexed hereto, with appropriate insertions, to reflect the revised
maturity date and the new Revolving Loan Commitments and/or outstanding
Term Loans, as the case may be, of the assignee and/or the assigning
Lender.
(ii) Following the Third Amended and Restated Closing Date, on each
date on which Company delivers a Notice of Borrowing pursuant to subsection
2.1B for the purpose of financing the purchase of an Eligible Aircraft,
Company shall execute and deliver on such date to each Lender (or to
Administrative Agent for that Lender) with respect to such Eligible
Aircraft a Revolving Note substantially in the form of Exhibit IIIA annexed
hereto to evidence that Lender's Revolving Loans in respect of such
Eligible Aircraft in such Lender's Pro Rata Share of the aggregate
principal amount of such Eligible Aircraft's Maximum Note Amount with other
appropriate insertions. Company shall execute and deliver on the Conversion
Date an Amended and Restated Note substantially in the form of Exhibit IIIB
annexed hereto amending and restating each Revolving Note to evidence that
Lender's Term Loans in the principal amount of such Revolving Note and with
other appropriate insertions.
E. The Register.
(i) Administrative Agent shall maintain, at its address referred to in
subsection 9.8, a register for the recordation of the names and addresses
of Lenders and the Commitments and Loans of each Lender from time to time
(the "Register"). The Register shall be available for inspection by Company
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) Administrative Agent shall record in the Register the Revolving
Loan Commitment and the Term Loan Commitment and the Revolving Loans and
Term Loans from time to time of each Lender and each repayment or
prepayment in respect of the principal amount of the Revolving Loans or
Term Loans of each Lender. Any such recordation shall be conclusive and
binding on Company and each Lender, absent manifest error; provided that
failure to make any such recordation, or any error in such recordation,
shall not affect Company's Obligations in respect of the applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation the Notes held by such Lender) the amount of each
Revolving Loan and each Term Loan made by it and each payment in respect
thereof. Any such recordation shall be conclusive and binding on Company,
absent manifest error; provided that failure to make any such recordation,
or any error in such recordation, shall not affect Company's
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<PAGE> 41
Obligations in respect of the applicable Loans; and provided, further, that
in the event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern.
(iv) Company, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
9.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Commitment or Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and
binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.
(v) Company hereby designates Administrative Agent to serve as
Company's agent solely for purposes of maintaining the Register as provided
in this subsection 2.1E, and Company hereby agrees that, to the extent
Administrative Agent serves in such capacity, Administrative Agent and its
officers, directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 9.3.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7,
each Revolving Loan and each Term Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate, as the case may be. The applicable basis for
determining the rate of interest with respect to any Loan shall be selected by
Company initially at the time a Notice of Borrowing is given with respect to
such Loan pursuant to subsection 2.1B. The basis for determining the interest
rate with respect to any Revolving Loan or any Term Loan may be changed from
time to time pursuant to subsection 2.2D. If on any day a Revolving Loan or a
Term Loan is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, each Revolving Loan
and each Term Loan shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
Applicable Margin per annum; or
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<PAGE> 42
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin per annum.
The "Applicable Margin" for each Base Rate Loan and Eurodollar Rate Loan
shall be the percentage set forth below for that type of Loan for the periods
set forth below.
<TABLE>
<CAPTION>
Applicable Margin
-----------------
Base Eurodollar
Time Period Rate Loan Rate Loan
----------- --------- ---------
<S> <C> <C>
From the Third Amended and Restated
Closing Date through the Conversion 1.50% 2.50%
Date
Thereafter 2.00% 3.00%
</TABLE>
Notwithstanding the foregoing, the Applicable Margin shall be reduced in an
amount equal to the applicable Pricing Reduction effective from the date
following the delivery by Company to Administrative Agent of a Pricing
Certificate through the date a subsequent Pricing Certificate is required to be
delivered. If Company fails to deliver a Pricing Certificate or delivers an
incorrect Pricing Certificate, no Pricing Reduction shall be effective until
Company delivers a correct Pricing Certificate. Additionally, the Applicable
Margin shall be reduced effective the day following the delivery by Company to
Administrative Agent of a Performance Certificate demonstrating Company's
entitlement to a Performance Reduction. The Pricing Reduction and the
Performance Reduction shall be determined independently and both may be
applicable concurrently.
B. Interest Periods. In connection with each Eurodollar Rate Loan, Company
may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods applicable
to a Eurodollar Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on
the day on which the next preceding Interest Period expires;
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<PAGE> 43
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Term Loans
shall extend beyond September 30, 2002.
(vi) no Interest Period with respect to any portion of the Term Loans
shall extend beyond a date on which Company is required to make a scheduled
payment of principal of the Term Loans unless the sum of (a) the aggregate
principal amount of Term Loans that are Base Rate Loans plus (b) the
aggregate principal amount of Term Loans that are Eurodollar Rate Loans
with Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Term Loans on such date;
(vii) there shall be no more than twelve Interest Periods outstanding
at any time; and
(viii) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. Conversion or Continuation. Subject to the provisions of subsection 2.6,
Company shall have the option (i) to convert at any time all or any part of its
outstanding Revolving Loans or Term Loans equal to $3,000,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $3,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
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<PAGE> 44
Company shall deliver a Notice of Conversion/Continuation to Administrative
Agent no later than 12:00 Noon (New York time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, (iv) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and
(v) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, that no Potential Event of Default or Event of Default has occurred and is
continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. Default Rate. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans) ; provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans. Payment or acceptance of the increased rates
of interest provided for in this subsection 2.2E is not a permitted
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<PAGE> 45
alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Administrative Agent or any Lender.
F. Computation of Interest. Interest on each Loan shall be computed on the
basis of a 360-day year, in each case for the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
A. Commitment Fees. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Third Amended and Restated
Closing Date to and excluding the Revolving Loan Commitment Termination Date
equal to the average of the daily excess of the Revolving Loan Commitments over
the aggregate principal amount of Revolving Loans outstanding multiplied by
one-half of 1% (.50%) per annum, such commitment fees to be calculated on the
basis of a 360-day year and the actual number of days elapsed and to be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing on the first such date to occur after the Third Amended and
Restated Closing Date, and on the Revolving Loan Commitment Termination Date.
B. Administrative Fee. Company agrees to pay to Administrative Agent, an
Administrative Agent's fee in the amount of $75,000 on the Third Amended and
Restated Closing Date and on each anniversary thereof.
C. Other Fees. Company agrees to pay to Credit Partners and Administrative
Agent such other fees in the amounts and at the times separately agreed upon
between Company and Credit Partners and Administrative Agent.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments.
A. Scheduled Reductions of Term Loan Commitments. Company shall make
principal payments on the Term Loans in installments the last day of each fiscal
quarter commencing on December 31, 1999 in an amount equal to 1/12th of the
principal amount of Term Loans outstanding on the Conversion Date; provided that
such scheduled installments of principal of the Term Loans shall be reduced in
connection with any voluntary or mandatory
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<PAGE> 46
prepayments of the Term Loans in accordance with subsection 2.4B(iv); and
provided, further that the Term Loans and all other amounts owed hereunder with
respect to the Term Loans shall be paid in full no later than September 30,
2002, and the final installment payable by Company in respect of the Term Loans
on such date shall be in an amount, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Term Loans. Any payment
pursuant to this subsection 2.4A will be applied ratably among the Notes
relating to all Financed Aircraft; provided that, at Administrative Agent's
election, any prepayment may be deemed first to pay Loans made to finance labor
costs associated with conversion, if any, and second to pay Loans made to
finance other costs of conversion of the Financed Aircraft and thereafter to all
other Loans.
B. Prepayments and Unscheduled Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Company may, upon not less than three
Business Days' prior written or telephonic notice given to Administrative
Agent by 12:00 Noon (New York time) on the date required and, if given by
telephone, promptly confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time and
from time to time prepay, without premium or penalty (other than pursuant
to subsection 2.6D), any Term Loans or Revolving Loans on any Business Day
in whole or in part in an aggregate minimum amount of $3,000,000 and
integral multiples of $100,000 in excess of that amount; provided, however,
that a Eurodollar Rate Loan may only be prepaid on the expiration of the
Interest Period applicable thereto. Notice of prepayment having been given
as aforesaid, the principal amount of the Loans specified in such notice
shall become due and payable on the prepayment date specified therein. Any
such voluntary prepayment shall be applied as specified in subsection
2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Company may,
upon not less than three Business Days' prior written or telephonic notice
confirmed in writing to Administrative Agent (which original written or
telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time to
time terminate in whole or permanently reduce in part, without premium or
penalty (other than pursuant to subsection 2.6D), the Revolving Loan
Commitments in an amount up to the amount by which the Revolving Loan
Commitments exceed the aggregate amount of all outstanding Revolving Loans
at the time of such proposed termination or reduction; provided that any
such partial reduction of the Revolving Loan Commitments shall be in an
aggregate minimum amount of $3,000,000 and integral multiples of $100,000
in excess of that amount. Company's notice to Administrative Agent shall
designate the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial reduction, and such termination or
reduction of the Revolving Loan Commitments shall be effective on the date
specified in Company's notice and shall reduce the Revolving Loan
Commitment of each Lender proportionately to its Pro Rata Share.
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<PAGE> 47
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
Commitments.
(a) Prepayments and Reductions from Asset Sales. No later than
the second Business Day following the date of receipt by Company or
any of its Subsidiaries of Cash Proceeds of any Asset Sale, Company
shall (1) if such Asset Sale occurs prior to the Conversion Date,
prepay, without premium or penalty (other than pursuant to subsection
2.6D), the Revolving Loans in an amount equal to the Net Cash Proceeds
of such Asset Sale and (2) if such Asset Sale occurs following the
Conversion Date, prepay, without premium or penalty (other than
pursuant to subsection 2.6D), Term Loans in such amount; provided
that, with respect to Asset Sales which do not include the sale of a
Financed Aircraft, Company may retain Net Cash Proceeds in respect of
such Asset Sales of up to $10 million in any Fiscal Year and $20
million in the aggregate. Concurrently with any prepayment of the
Loans pursuant to this subsection 2.4B(iii)(a), Company shall deliver
to Administrative Agent an Officers' Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale from
the gross sales price thereof. In the event that Company shall, at any
time after receipt of Cash Proceeds of any Asset Sale requiring a
prepayment pursuant to this subsection 2.4B(iii)(a), determine that
the prepayments previously made in respect of such Asset Sale were in
an aggregate amount less than that required by the terms of this
subsection 2.4B(iii)(a), Company shall promptly make an additional
prepayment of the Revolving Loans or Term Loans, as the case may be,
in the manner described above in an amount equal to the amount of any
such deficit, and Company shall concurrently therewith deliver to
Administrative Agent an Officers' Certificate demonstrating the
derivation of the additional Net Cash Proceeds resulting in such
deficit. Any mandatory prepayments pursuant to this subsection
2.4B(iii)(a) shall be applied as specified in subsection 2.4B(iv).
Notwithstanding the foregoing, so long as (i) the AFL Financing
remains outstanding, Cash Proceeds from the sale or other disposition
of the AFL Aircraft shall not be subject to the provisions of this
subsection 2.4(B)(iii)(a) to the extent that such Cash Proceeds are
applied in accordance with the terms of the AFL Financing Agreement
and (ii) the AFL II Financing remains outstanding, Cash Proceeds from
the sale or other disposition of the AFL II Aircraft shall not be
subject to the provisions of this subsection 2.4(B)(iii)(a) to the
extent that such Cash Proceeds are applied in accordance with the
terms of the AFL II Financing Agreement.
(b) Prepayments and Reductions Due to Issuance of Certain
Indebtedness. On the date of receipt by Company of the cash proceeds
(net of underwriting discounts and commissions and other reasonable
costs associated therewith) from the issuance of Permitted Extension
Indebtedness with respect to a Financed Aircraft, Company shall (1) if
such issuance occurs prior to the Conversion Date, prepay, without
premium or penalty (other than pursuant to subsection 2.6D), the
Revolving Loans in an amount equal to such net cash proceeds and (2)
if such
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<PAGE> 48
issuance occurs following the Conversion Date, prepay, without premium
or penalty (other than pursuant to subsection 2.6D), Term Loans in
such amount. Any such mandatory prepayments shall be applied as
specified in subsection 2.4B(iv). Notwithstanding the foregoing, any
such cash proceeds received pursuant to the AFL II Financing Agreement
shall not be subject to the provisions of this subsection
2.4(B)(iii)(b).
(c) Prepayments and Reductions Due to Insurance and Condemnation
Proceeds. No later than the second Business Day following the date of
receipt by Company or any of its Subsidiaries of any cash payments
under any of the casualty insurance policies covering damage to or
loss of property maintained pursuant to subsection 5.4 resulting from
damage to or loss of all or any portion of the Collateral or any other
tangible asset (net of actual and documented reasonable costs incurred
by Company in connection with adjustment and settlement thereof,
"Insurance Proceeds") or any proceeds resulting from the taking of
assets by the power of eminent domain, condemnation or otherwise (net
of actual and documented reasonable costs incurred by Company in
connection with adjustment and settlement thereof, "Condemnation
Proceeds") (other than (x) the portion of such proceeds promptly
applied to repair or replace the property in respect of which such
proceeds were paid, (y) the portion of such proceeds required to be
paid to Lien holders on aircraft other than Financed Aircraft or (z)
proceeds applied pursuant to subsection 2.4B(iii)(d)), Company shall
(1) if such receipt of cash payments occurs prior to the Conversion
Date, prepay, without premium or penalty (other than pursuant to
subsection 2.6D), the Revolving Loans in an amount equal to such
proceeds and (2) if such receipt of cash payments occurs following the
Conversion Date, prepay, without premium or penalty (other than
pursuant to subsection 2.6D), Term Loans in such amount. Company
shall, no later than 180 days after receipt of any such Insurance
Proceeds or Condemnation Proceeds that have not theretofore been
applied to the Obligations, make an additional prepayment of Revolving
Loans or Term Loans, as the case may be, in the manner described
above, in the full amount of all such proceeds that have not then been
applied to repair or replace the property in respect of which such
proceeds were paid. Any such mandatory prepayments shall be applied as
specified in subsection 2.4B(iv). Notwithstanding the foregoing so
long as (i) the AFL Financing remains outstanding, Insurance Proceeds
and Condemnation Proceeds with respect to the AFL Aircraft shall not
be subject to the provisions of this subsection 2.4(B)(iii)(c) to the
extent such proceeds are applied in accordance with the terms of the
AFL Financing Agreement and (ii) the AFL II Financing remains
outstanding, Insurance Proceeds and Condemnation Proceeds with respect
to the AFL II Aircraft shall not be subject to the provisions of this
subsection 2.4(B)(iii)(c) to the extent such proceeds are applied in
accordance with the terms of the AFL II Financing Agreement.
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(d) Prepayments and Reductions Due to an Event of Loss. No later
than the earlier of (x) the second Business Day following the date of
receipt by Company or any of its Subsidiaries of any Insurance
Proceeds or Condemnation Proceeds with respect to a Financed Aircraft
or (y) 180 days following an Event of Loss with respect to a Financed
Aircraft, Company shall (1) if such receipt of proceeds or Event of
Loss occurs prior to the Conversion Date, prepay, without premium or
penalty (other than pursuant to subsection 2.6D), the Revolving Loans
associated with such Financed Aircraft and (2) if such receipt of
proceeds or Event of Loss occurs following the Conversion Date,
prepay, without premium or penalty (other than pursuant to subsection
2.6D), the Term Loans associated with such Financed Aircraft; provided
that Company and its Subsidiaries shall not be required to make a
prepayment pursuant to this subsection 2.4B(iii)(d) with respect to
any proceeds applied pursuant to Section 4(f)(vi)(A) or 4(f)(vi)(B) of
any Aircraft Chattel Mortgage.
(e) Prepayments and Reductions from Consolidated Excess Cash
Flow. In the event that there shall be Consolidated Excess Cash Flow
for any Fiscal Year, within 100 days after the last day of such Fiscal
Year Company shall (1) prior to the Conversion Date, prepay, without
premium or penalty (other than pursuant to subsection 2.6D), the
Revolving Loans in an amount equal to 50% of such Consolidated Excess
Cash Flow and (2) following the Conversion Date, prepay, without
premium or penalty (other than pursuant to subsection 2.6D), Term
Loans in such amount; provided that, if as of the last day of such
Fiscal Year, the aggregate principal amount of all Loans was less than
60% of the aggregate Appraised Value of all Financed Aircraft, no
prepayment will be required under this subsection 2.4B(iii)(e). Any
such mandatory prepayments shall be applied as specified in subsection
2.4B(iv).
(f) Prepayments Due to Reductions in Appraised Value. Company
shall from time to time prepay, without premium or penalty (other than
pursuant to subsection 2.6D), the Revolving Loans to the extent
necessary so that the outstanding principal amount of any Revolving
Loans made to finance the acquisition or conversion of a Financed
Aircraft shall not at any time exceed 80% of the Appraised Value of
such Financed Aircraft as most recently determined pursuant to
subsection 5.10; provided that, in lieu of making a prepayment
hereunder, Company may provide Administrative Agent for the benefit of
Lenders with cash collateral or a letter of credit in the amount of
such prepayment pursuant to arrangements in form and substance
satisfactory to Administrative Agent.
(g) Prepayments Due to Failure to Register Aircraft with the FAA.
In the event that, with respect to any Financed Aircraft,
Administrative Agent's security interest in such Financed Aircraft is
not fully perfected within five (5) Business Days of the funding of
Loans with respect to such Financed Aircraft, Company shall prepay the
full amount of such Loans.
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(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of Loans and
Order of Maturity. Any voluntary prepayments pursuant to subsection
2.4B(i) shall be applied ratably among the Notes relating to all of
the Financed Aircraft; provided that, at Administrative Agent's
election, any prepayment may be deemed first to prepay Loans made to
finance labor costs associated with conversion, if any, second to
prepay Loans made to finance other costs of conversion of a Financed
Aircraft and thereafter to all other Loans. Any voluntary prepayments
of the Term Loans pursuant to subsection 2.4B(i) shall be applied to
reduce the scheduled installments of principal of the Term Loans set
forth in subsection 2.4A in inverse order of maturity.
(b) Application of Mandatory Prepayments of Loans. Any mandatory
prepayments of the Loans pursuant to subsection 2.4B(iii) shall be
applied ratably among the Notes relating to all of the Financed
Aircraft; provided that in the event a prepayment pursuant to
subsection 2.4B(iii)(a), (b), (c), (d) (f) or (g) relates to Financed
Aircraft, such prepayment shall be applied first to the Notes relating
to such Financed Aircraft and second ratably among the Notes relating
to all other Financed Aircraft, and then, in the case of Term Loans,
to scheduled amortization payments in inverse order of maturity;
provided further that, at Administrative Agent's election, any such
prepayment may be deemed first to prepay Loans made to finance labor
costs associated with conversion, if any, second to prepay Loans made
to finance other costs of conversion of a Financed Aircraft and
thereafter to all other Loans.
(c) Application of Prepayments to Base Rate Loans and Eurodollar
Rate Loans. Any prepayment of Loans shall be applied first to Base
Rate Loans to the full extent thereof before application to Eurodollar
Rate Loans, in each case in a manner which minimizes the amount of any
payments required to be made by Company pursuant to subsection 2.6D.
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of principal,
interest, fees and other Obligations hereunder and under the Notes shall be
made in Dollars in same day funds, without defense, set-off or
counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 Noon (New York time) on the date
due at the Funding and Payment Office for the account of Lenders; funds
received by Administrative Agent after that time on such due date shall be
deemed to have been paid by Company on the next succeeding Business Day.
Company hereby authorizes Administrative Agent to charge its accounts with
Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest, fees
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and expenses due hereunder (subject to sufficient funds being available in
its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All payments
in respect of the principal amount of any Loan shall include payment of
accrued interest on the principal amount being repaid or prepaid, and all
such payments shall be applied to the payment of interest before
application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of Term Loans and Revolving Loans shall be apportioned
among all outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request, its Pro Rata Share of all such
payments received by Administrative Agent and the commitment fees of such
Lender when received by Administrative Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4C(iii), if,
pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
2.5 Use of Proceeds.
A. The proceeds of Revolving Loans shall be applied to finance (i) the
purchase of an Eligible Aircraft pursuant to a Purchase Agreement in an amount
up to the lesser of the purchase price of such Eligible Aircraft and 80% of the
Appraised Value of such Eligible Aircraft (but without giving effect to any
contemplated modifications) and/or (ii) the cost of making a Financed Aircraft
usable by Company as a cargo aircraft by paying for those modifications
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identified in any Modification Agreement and any BFE Agreement (but not for
maintenance costs) in an amount that when added to the amount financed in (i)
does not exceed 80% the Appraised Value of such modified Eligible Aircraft;
provided that the final Revolving Loan to finance the modification of such
Eligible Aircraft may be in an amount equal to the lesser of (x) 100% of the
costs of modification associated with such final Revolving Loan and (y) an
amount which, when added to all other Revolving Loans made with respect to such
Eligible Aircraft, does not exceed 80% of the Appraised Value of such Eligible
Aircraft after giving effect to the completion of modification.
B. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice
of Conversion/Continuation given by Company with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and
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Administrative Agent) that the making, maintaining or continuation of its
Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such
Lender in good faith with any law, treaty, governmental rule, regulation,
guideline or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful) or (ii) has become
impracticable, or would cause such Lender material hardship, as a result of
contingencies occurring after the date of this Agreement which materially and
adversely affect the interbank Eurodollar market or the position of such Lender
in that market, then, and in any such event, such Lender shall be an "Affected
Lender" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Company and Administrative Agent of such determination
(which notice Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Loans as, or to convert Loans
to, Eurodollar Rate Loans shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of Borrowing or a Notice of Conversion/Con-
tinuation, the Affected Lender shall make such Loan as (or convert such Loan to,
as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to
maintain its outstanding Eurodollar Rate Loans (the "Affected Loans") shall be
terminated at the earlier to occur of the expiration of the Interest Period then
in effect with respect to the Affected Loans or when required by law, and (d)
the Affected Loans shall automatically convert into Base Rate Loans on the date
of such termination. Notwithstanding the foregoing, to the extent a
determination by an Affected Lender as described above relates to a Eurodollar
Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a
Notice of Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment or
other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an
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Interest Period applicable to that Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given by Company, or (iv) as a consequence of any other default by
Company in the repayment of its Eurodollar Rate Loans when required by the terms
of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer
Eurodollar Rate Loans at, to, or for the account of any of its branch offices or
the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of
all amounts payable to a Lender under this subsection 2.6 and under subsection
2.7A shall be made as though that Lender had actually funded each of its
relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office
of that Lender to a domestic office of that Lender in the United States of
America; provided, however, that each Lender may fund each of its Eurodollar
Rate Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and during
the continuation of a Potential Event of Default or an Event of Default, (i)
Company may not elect to have a Loan be made or maintained as, or converted to,
a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions of
subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its
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applicable lending office) of principal, interest, fees or any other amount
payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Eurodollar Rate
Loans that are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under
this Agreement and the other Loan Documents shall be paid free and clear of
and (except to the extent required by law) without any deduction or
withholding on account of any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from or to which
a payment is made by or on behalf of Company or by any federation or
organization of which the United States of America or any such jurisdiction
is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person is
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by Company to Administrative Agent or any
Lender under any of the Loan Documents:
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(a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Company
becomes aware of it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on Administrative Agent or such Lender, as the case may be)
on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made; and
(d) within 30 days after paying any sum from which it is required
by law to make any deduction or withholding, and within 30 days after
the due date of payment of any Tax which it is required by clause (b)
above to pay, Company shall deliver to Administrative Agent evidence
satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the rate of such deduction, withholding or payment from that in
effect at the date of this Agreement or at the date of such Assignment
Agreement, as the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Company, on or prior to the Third Amended and
Restated Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the
determination of Company or Administrative Agent (each in the
reasonable exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor forms),
properly
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completed and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such Lender
of principal, interest, fees or other amounts payable under any of the
Loan Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to
clause (1) above, a Certificate re Non-Bank Status together with two
original copies of Internal Revenue Service Form W-8 (or any successor
form), properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required under
the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to any payments to
such Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, such Lender
shall (1) deliver to Administrative Agent for transmission to Company
two new original copies of Internal Revenue Service Form 1001 or 4224,
or a Certificate re Non-Bank Status and two original copies of
Internal Revenue Service Form W-8, as the case may be, properly
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required in order to confirm or
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to payments to such
Lender under the Loan Documents or (2) immediately notify
Administrative Agent and Company of its inability to deliver any such
forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount to
any Non-US Lender under clause (c) of subsection 2.7B(ii) if such
Lender shall have failed to satisfy the requirements of subsection
2.7B(iii)(a); provided that if such Lender shall have satisfied such
requirements on the Third Amended and Restated Closing Date (in the
case of each Lender listed on the signature pages hereof) or on the
date of the Assignment Agreement pursuant to which it became a Lender
(in the case of each other Lender), nothing in this subsection
2.7B(iii)(c) shall relieve Company of its obligation to pay any
additional amounts pursuant to clause (c) of subsection 2.7B(ii) in
the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is
no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent
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date establishing the fact that such Lender is not subject to
withholding as described in subsection 2.7B(iii)(a).
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or other obligations hereunder to a level
below that which such Lender or such controlling corporation could have achieved
but for such adoption, effectiveness, phase-in, applicability, change or
compliance (taking into consideration the policies of such Lender or such
controlling corporation with regard to capital adequacy), then from time to
time, within five Business Days after receipt by Company from such Lender of the
statement referred to in the next sentence, Company shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
D. Substitute Lenders. In the event Company is required under the
provisions of this subsection 2.7 to make payments in a material amount to any
Lender or in the event any Lender fails to lend to Company in accordance with
this Agreement, Company may, so long as no Event of Default or Potential Event
of Default shall have occurred and be continuing, elect to terminate such Lender
as a party to this Agreement; provided that, concurrently with such termination,
(i) Company shall pay that Lender all principal, interest and fees and other
amounts (including without limitation, amounts, if any, owed under this
subsection 2.7) owed to such Lender through such date of termination, (ii)
another financial institution satisfactory to Company and Administrative Agent
(or if Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of Administrative
Agent (or if Administrative Agent is also the Lender to be terminated, the
successor Administrative Agent) to evidence the substitution of such Lender
shall have been received and approved by Administrative Agent as of such date.
2.8 Obligation of Lenders to Mitigate.
Each Lender agrees that, as promptly as practicable after the officer of
such Lender responsible for administering the Loans of such Lender becomes aware
of the occurrence of an
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event or the existence of a condition that would cause such Lender to become an
Affected Lender or that would entitle such Lender to receive payments under
subsection 2.7, it will, to the extent not inconsistent with the internal
policies of such Lender and any applicable legal or regulatory restrictions, use
reasonable efforts (i) to make, issue, fund or maintain the Commitments of such
Lender or the affected Loans of such Lender through another lending office of
such Lender, or (ii) take such other measures as such Lender may deem
reasonable, if as a result thereof the circumstances which would cause such
Lender to be an Affected Lender would cease to exist or the additional amounts
which would otherwise be required to be paid to such Lender pursuant to
subsection 2.7 would be materially reduced and if, as determined by such Lender
in its sole discretion, the making, issuing, funding or maintaining of such
Commitments or Loans through such other lending office or in accordance with
such other measures, as the case may be, would not otherwise materially
adversely affect such Commitments or Loans or the interests of such Lender;
provided that such Lender will not be obligated to utilize such other lending
office pursuant to this subsection 2.8 unless Company agrees to pay all
incremental expenses incurred by such Lender as a result of utilizing such other
lending office as described in clause (i) above. A certificate as to the amount
of any such expenses payable by Company pursuant to this subsection 2.8 (setting
forth in reasonable detail the basis for requesting such amount) submitted by
such Lender to Company (with a copy to Administrative Agent) shall be conclusive
absent manifest error.
SECTION 3.
CONDITIONS TO LOANS
The obligations of Administrative Agent and Lenders to make Loans hereunder
are subject to the satisfaction of the following conditions:
3.1 Conditions to Loans to Finance Aircraft Acquisition.
The obligations of Lenders to make Loans to finance the acquisition of an
aircraft on any Funding Date are subject to the following conditions:
(i) Company shall deliver to Administrative Agent an Officer's
Certificate and such supportive documents as may be requested by
Administrative Agent, certifying that the aircraft to be acquired is an
Eligible Aircraft;
(ii) as of the date of purchase of such Eligible Aircraft,
Administrative Agent shall be reasonably satisfied that Company and its
Subsidiaries have entered into binding ACMI Contracts sufficient to ensure
the continued employment (consistent with past practices) of substantially
all other aircraft owned and operated by Company and its Subsidiaries other
than the new aircraft being acquired;
(iii) on the date of purchase of any such Eligible Aircraft,
Administrative Agent, on behalf of Lenders, shall have been granted a first
priority Lien on such Eligible
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Aircraft, spare parts and related assets (including, without limitation,
the Purchase Agreement and any Modification Agreement) and the Purchase
Agreement, any Modification Agreement and any BFE Agreements shall have
been assigned to Administrative Agent and any Persons whose consent is
necessary for an effective assignment of such agreements shall have so
consented, in each case, pursuant to documentation and procedures
acceptable to Administrative Agent;
(iv) Company shall have delivered to Administrative Agent appraisals
from two Approved Appraisers, in form and substance satisfactory to
Administrative Agent, demonstrating that the amount of the Revolving Loan
requested does not exceed 80% of the Appraised Value of the Eligible
Aircraft to be acquired as of the Funding Date and that, after giving
effect to all proposed modifications of such Eligible Aircraft, the Maximum
Note Amount shall not exceed 80% of the Appraised Value of such Eligible
Aircraft as so modified;
(v) a First Aircraft Chattel Mortgage and a Second Aircraft Chattel
Mortgage with respect to the Eligible Aircraft shall have been filed in
such order for recordation with the FAA under the Federal Aviation Act;
(vi) Uniform Commercial Code Financing Statements naming
Administrative Agent as the secured party covering such Eligible Aircraft
and spare parts shall have been duly executed and delivered and duly filed
in all jurisdictions necessary or desirable to perfect a security interest
in the Collateral;
(vii) the FAA Bill of Sale shall have been delivered for recordation
with the FAA pursuant to the Federal Aviation Act;
(viii) the Eligible Aircraft shall have been registered with the FAA
in the name of Company or if not previously registered in the United
States, an application for registration shall have been filed;
(ix) Administrative Agent shall have received originally executed
copies of one or more favorable written opinions of counsel to Company in
form and substance satisfactory to Administrative Agent dated as of the
Funding Date and setting forth the matters designated in the opinions in
Exhibits VA, VB and VC and such other matters as Administrative Agent may
reasonably request.
(x) Administrative Agent shall have received originally executed
copies of one or more favorable written opinions of FAA counsel or other
counsel in form and substance satisfactory to Administrative Agent dated as
of the Funding Date or the date such Eligible Aircraft is registered with
the FAA if such registration occurs after the Funding Date and setting
forth such matters related to the FAA or other Aeronautical Authority
having jurisdiction over the Eligible Aircraft being acquired as
Administrative Agent may reasonably request;
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(xi) Administrative Agent shall have received evidence satisfactory to
it to the effect that as of such Funding Date Company is an air carrier
certificated under Sections 401 and 604(b) of the Federal Aviation Act;
certificates of airworthiness with respect to the Eligible Aircraft shall
have been duly issued by an Aeronautical Authority pursuant to the Federal
Aviation Act and shall be in full force and effect; and each Engine shall
be in compliance with all airworthiness standards of the FAA or shall be
maintained in accordance with an FAA approved program;
(xii) Company shall have good and marketable title to and a valid
ownership interest in the Collateral free and clear of all Liens other than
Liens permitted by subsection 6.2;
(xiii) no Event of Loss with respect to the Airframe or any Engine to
be delivered shall have occurred and no event or condition which with the
giving of notice or lapse of time or both, would result in any such Event
of Loss shall have occurred and be continuing;
(xiv) Company shall have delivered to Administrative Agent
certificates of insurance naming Administrative Agent on behalf of
Administrative Agent and Lenders as loss payee under casualty insurance
policies with respect to the Eligible Aircraft to be acquired and a
broker's report evidencing compliance with the requirements of the First
Aircraft Chattel Mortgage with respect to such Eligible Aircraft;
(xv) Company shall have delivered to Administrative Agent all
documents executed in connection with the Purchase Agreement related to
such aircraft and such documents shall be in form and substance
satisfactory to Administrative Agent;
(xvi) any Revolving Loan made to finance the purchase of a Financed
Aircraft shall be made no later than ten days after the later of Company's
payment of the purchase price with respect to or acquisition of title to
such Financed Aircraft; and
(xvii) Company shall have delivered to Administrative Agent such other
documents as Administrative Agent may reasonably request and all such
documents shall be in form and substance reasonably satisfactory to
Administrative Agent.
Notwithstanding the foregoing, Administrative Agent may (provided that no
Event of Default has occurred or is continuing) in its sole and absolute
discretion waive the conditions set forth in clauses (iii), (v), (vii), (viii)
and (x) to the extent necessary by reason of the fact that Company is unable to
obtain a deregistration certificate with respect to the applicable Eligible
Aircraft prior to the purchase of such Eligible Aircraft; provided that, if
Administrative Agent's security interest in such Eligible Aircraft is not fully
perfected within five (5) Business Days of full funding of the Loans with
respect to such Eligible Aircraft, Company shall prepay such Loans in accordance
with subsection 2.4B(iii)(g); provided further, that Administrative Agent may
not waive such conditions with respect to more than one Eligible Aircraft at any
time.
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3.2 Condition to Loans to Finance Cargo Conversion.
The obligations of Lenders to make Loans to finance the costs of conversion
of a Financed Aircraft on any Funding Date are subject to the additional
conditions set forth below:
A. Conditions to Each Loan to Finance the Costs of Conversion.
(i) Administrative Agent shall have received an invoice and bill of
sale with respect to any Parts delivered in connection with the
modification of Financed Aircraft and with respect to any buyer furnished
equipment, and an invoice for any services or other costs associated with
the modification of such Financed Aircraft and/or such other information
and materials as may be reasonably requested by Administrative Agent
confirming the name of the vendor performing the service, the Parts or
service to be financed by such Revolving Loan, the amount due from or
previously paid by Company, the satisfactory completion of the services for
which such Revolving Loan proceeds shall be applied and such other
information regarding such service as Administrative Agent may request. To
the extent practicable, each Revolving Loan made shall be allocated only to
the costs of conversion other than labor costs associated with such
conversion; and
(ii) with respect to any Revolving Loan to finance the purchase of a
Part, such Revolving Loan shall be made no later than ten days after the
later of Company's payment for or acquisition of title to such Part.
B. Conditions to the Final Loan to Finance the Cost of Conversion.
(i) If there has been any material deviation from the terms of the
Modification Agreement entered into by Company with respect to a Financed
Aircraft after the date of the appraisals delivered pursuant to subsection
3.1(iv), Company shall have delivered to Administrative Agent appraisals
demonstrating that the amount of the Revolving Loans requested when added
to all previous Revolving Loans made with respect to the Financed Aircraft
which has been converted as of the Funding Date does not exceed the lesser
of (x) 100% of the remaining costs of conversion and (y) 80% of the
Appraised Value of the Financed Aircraft;
(ii) Company shall deliver to Administrative Agent an Officer's
Certificate (x) certifying that the conversion of the Financed Aircraft has
been completed and that all obligations of Company with respect to the
modifications of the Financed Aircraft under a Modification Agreement and
any BFE Agreement have been satisfied and (y) stating the total cost of the
purchase and modification of such Financed Aircraft, which shall not be
less than all Loans made in respect of such Financed Aircraft.
(iii) Company shall deliver to Administrative Agent (a) a copy of the
Aircraft re-delivery receipt and evidence of transfer of title to each Part
included in
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the modification, (b) copies of any Supplemental Types Certificates issued
by the FAA, and (c) copies of any FAA Form 337s to be filed in connection
with such modification;
(iv) Administrative Agent shall have received evidence satisfactory to
it to the effect that as of such Funding Date Company is an air carrier
certificated under Sections 401 and 604(b) of the Federal Aviation Act;
certificates of airworthiness with respect to the Eligible Aircraft shall
have been duly issued pursuant to the Federal Aviation Act and shall be in
full force and effect; and each Engine shall be in compliance with all
airworthiness standards of the FAA or shall be maintained in accordance
with an FAA approved program; and
(v) Company shall have delivered to Administrative Agent such other
documents as Administrative Agent may reasonably request and all such
documents shall be in form and substance reasonably satisfactory to
Administrative Agent.
3.3 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed Notice
of Borrowing, in each case signed by the chief executive officer, the chief
financial officer or the treasurer of Company or by any executive officer of
Company designated by any of the above-described officers on behalf of Company
in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) the representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete
in all material respects on and as of such earlier date; provided that,
with respect to any Funding Date referred to in subsection 3.2, Company's
representations and warranties shall be to its best knowledge;
(ii) no event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) Company shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall
be performed or satisfied by it on or before that Funding Date;
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(iv) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) the making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) there shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing pursuant to subsection 4.6 or 5.1(x) prior to the
making of the last preceding Loans (or, in the case of the initial Loans,
prior to the execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either
event, in the opinion of Administrative Agent or of Requisite Lenders,
would be expected to have a Material Adverse Effect; and no injunction or
other restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement or
the making of Loans hereunder.
C. With respect to any Revolving Loans made on a Funding Date for the
purpose of reborrowing prior to the Conversion Date an amount equal to the
amount of mandatory prepayments made pursuant to subsection 2.4B(iii)(e),
Administrative Agent shall have received an opinion of Cahill Gordon & Reindel,
or such other counsel as may be acceptable to Administrative Agent, dated as of
such Funding Date confirming the applicability of Section 1110 of the Bankruptcy
Code, to such Revolving Loans made on such Funding Date, in form and substance
satisfactory to Administrative Agent.
3.4 Conditions to Conversion of Revolving Loans Into Term Loans.
The obligations of Lenders to convert Revolving Loans into Term Loans on
the Conversion Date are subject to the following conditions precedent:
(i) each of the conditions set forth in Subsections 3.3B and 3.3C
shall have been satisfied as of the Conversion Date;
(ii) Company shall have delivered to Lenders (or to Administrative
Agent for Lenders) executed originals of the Amended and Restated Notes,
duly executed in accordance with subsection 2.1D, drawn to the order of
each Lender and with appropriate insertions;
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(iii) Lenders and their respective counsel shall have received
originally executed copies of one or more favorable written opinions of
counsel for Company in form and substance reasonably satisfactory to
Administrative Agent and its counsel, dated as of the Conversion Date, as
setting forth such matters as Administrative Agent may reasonably request;
and
(iv) Administrative Agent shall have received copies of such other
documents as Administrative Agent may reasonably request and all such
documents shall be in form and substance reasonably satisfactory to
Administrative Agent.
3.5 Conditions to Effectiveness.
The effectiveness of this Agreement is subject to the satisfaction of all
of the following conditions:
(i) each of the parties hereto shall have executed and delivered
counterparts of this Agreement to Administrative Agent;
(ii) Company shall have delivered to Administrative Agent a Financial
Condition Certificate dated the Third Amended and Restated Closing Date,
substantially in the form annexed hereto as Exhibit IX with appropriate
attachments demonstrating that, after giving effect to the full amounts
which will be available under this Agreement, Company and its Subsidiaries,
taken as a whole, are Solvent;
(iii) Lenders and their respective counsel shall have received (A)
originally executed copies of one or more favorable written opinions of
Cahill Gordon & Reindel, counsel for Company, in form and substance
reasonably satisfactory to Administrative Agent and its counsel, dated as
of the Third Amended and Restated Closing Date and setting forth
substantially the matters in the opinions designated in Exhibit VA annexed
hereto and as to such other matters as Administrative Agent acting on
behalf of Lenders may reasonably request, (B) the opinion of Cahill Gordon
& Reindel regarding Section 1110 of the Bankruptcy Code, dated the Third
Amended and Restated Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit VB annexed hereto, and (C)
evidence satisfactory to Administrative Agent that Company has requested
such counsel to deliver such opinions to Lenders;
(iv) Lenders and their respective counsel shall have received executed
copies of one or more favorable written opinions of Nesa Hassanein, General
Counsel of Company, in form and substance reasonably satisfactory to
Administrative Agent and its counsel, dated the Third Amended and Restated
Closing Date, and setting forth substantially the matters in the opinions
designated in Exhibit VC annexed hereto;
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(v) After giving effect to the transactions contemplated hereby
(including the payment of, or taking reserves for, all transactions fees
and expenses), Company shall not have less than $25 million cash on its
consolidated balance sheet;
(vi) Agents shall be satisfied with the capital, organization,
ownership and management structure of Company and its Subsidiaries and with
the form and substance of the ACMI Contracts, any Modification Agreements,
any BFE Agreements, aircraft lease arrangements (including, without
limitation, the Philippine Lease and the Second Philippine Lease), Purchase
Agreements, existing financing agreements and intercreditor arrangements
(including, without limitation, the Senior Note Documents and the Pass
Through Trust Documents) and the AFL II Financing Agreement shall have been
completed or shall be completed concurrently under terms and conditions
reasonably satisfactory to Agents and Lenders; and
(vii) Company shall have taken such actions and delivered to
Administrative Agent such documents as Administrative Agent may reasonably
request and all such documents shall be in form and substance reasonably
satisfactory to Administrative Agent.
SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, Company represents and warrants to each Lender, on the date of this
Agreement and on each Funding Date, that the following statements are true,
correct and complete:
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Company has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and to carry out the transactions
contemplated thereby.
B. Qualification and Good Standing; Air Carrier Certification. Company is
qualified to do business and in good standing in every jurisdiction where its
assets are located and wherever necessary to carry out its business and
operations, except in jurisdictions where the failure to be so qualified or in
good standing has not had and will not have a Material Adverse Effect. Company
is a "citizen of the United States" within the meaning of the Federal Aviation
Act (a "United States Citizen") and holds an air carrier operating certificate
under the Federal Aviation Act for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo.
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C. Subsidiaries. All of the Subsidiaries of Company as of the Third Amended
and Restated Closing Date are identified in Schedule 4.1 annexed hereto, as said
Schedule 4.1 may be supplemented from time to time pursuant to the provisions of
subsection 5.1(xvii). The capital stock of each of the Subsidiaries of Company
identified in Schedule 4.1 annexed hereto (as so supplemented) is duly
authorized, validly issued, fully paid and nonassessable and none of such
capital stock constitutes Margin Stock. Each of the Subsidiaries of Company
identified in Schedule 4.1 annexed hereto (as so supplemented) is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as proposed to be conducted, and is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or a lack of
such corporate power and authority has not had and will not have a Material
Adverse Effect. Schedule 4.1 annexed hereto (as so supplemented) correctly sets
forth the ownership interest of Company and each of its Subsidiaries in each of
the Subsidiaries of Company identified therein.
D. Collateral Documents. The security interests created in favor of
Administrative Agent under the Collateral Documents have at all times from and
after the Initial Closing Date constituted and will continue to constitute, as
security for the obligations purported to be secured thereby, a legal, valid and
enforceable security interest in and Lien on all of the Collateral referred to
therein in favor of Administrative Agent for the benefit of the Lenders,
perfected and prior to the rights of all third persons in accordance with the
requirements of all applicable Collateral Documents. Each Loan Party has good
and marketable title to its respective Collateral, and all such Collateral is
free and clear of all Liens except for Liens permitted by subsection 6.2. No
consents, filings or recordings are required in order to perfect (or maintain
the perfection or priority of) the security interests purported to be created by
any of the Collateral Documents, other than such as have been obtained and which
remain in full force and effect and UCC financing statements to be filed, or
delivered to Administrative Agent for filing, on the Third Amended and Restated
Closing Date and periodic UCC continuation filings or as is specifically
otherwise permitted by the terms of any applicable Collateral Document.
4.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents have been duly authorized by all necessary corporate action
on the part of each Loan Party.
B. No Conflict. The execution, delivery and performance by the Loan Parties
of the Loan Documents and the consummation of the transactions contemplated by
the Loan Documents do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Company or any of its Subsidiaries, (ii)
conflict with in
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any material respect, result in a material breach of or constitute (with due
notice or lapse of time or both) a material default under any Contractual
Obligation of Company or any of its Subsidiaries, (iii) result in or require the
creation or imposition of any Lien upon any of the properties or assets of
Company or any of its Subsidiaries (other than any Liens created under any of
the Loan Documents in favor of Administrative Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries,
except for such approvals or consents which will be obtained on or before the
Third Amended and Restated Closing Date and disclosed in writing to Lenders.
C. Governmental Consents. The execution, delivery and performance by the
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body which has not
been obtained or made on or prior to the date required to be obtained or made
unless waived by Administrative Agent in accordance with this Agreement.
D. Binding Obligation. Each of the Loan Documents has been duly executed
and delivered by each of the Loan Parties party thereto and is the legally valid
and binding obligation of each such Loan Party, enforceable against such Loan
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
4.3 Financial Condition.
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Company and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for the
Fiscal Year then ended and (ii) the unaudited consolidated and consolidating
balance sheets of Company and its Subsidiaries as at June 30, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for the nine
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Company does not have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition
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(financial or otherwise) or prospects of Company or of Company and its
Subsidiaries taken as a whole.
4.4 No Material Adverse Change; No Restricted Junior Payments.
Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since June 30, 1997, neither Company nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so except as permitted by
subsection 6.5.
4.5 Title to Properties; Liens.
A. Company and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 4.3 or in the most recent financial statements delivered pursuant to
subsection 5.1, in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 6.7. Except as permitted by this Agreement, all such
properties and assets are free and clear of Liens.
B. Each Financed Aircraft operated in the United States has a current and
valid airworthiness certificate issued by the FAA pursuant to the Federal
Aviation Act in effect and is in such condition as may be necessary to enable
the airworthiness certificate to be maintained in good standing. Each Engine has
a rated takeoff horsepower greater than 750 horsepower, or the equivalent of
such horsepower. Each Financed Aircraft operated in the United States is
registered with the FAA in the name of Company, and Company has authority to
operate such Financed Aircraft. Company has good title to such Financed
Aircraft, free and clear of all Liens other than Liens permitted by subsection
6.2.
4.6 Litigation; Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Company nor any of its Subsidiaries is (i) in violation of any
applicable laws that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in default
with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentali-
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ty, domestic or foreign, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
4.7 Payment of Taxes.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Company and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Company does not know of any proposed tax assessment
against Company or any of its Subsidiaries which is not being actively contested
by Company or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Company. There are no
agreements with respect to taxes between Company and any tax agency or
authority.
4.8 Performance of Agreements; Materially Adverse Agreements.
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
4.9 Governmental Regulation.
Neither Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
4.10 Securities Activities.
A. Neither Company nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than 25% of
the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated
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basis) subject to the provisions of subsection 6.2 or 6.7 or subject to any
restriction contained in any agreement or instrument, between any Loan Party, on
the one had, and any Lender or any Affiliate of any Lender, on the other hand,
relating to Indebtedness and within the scope of subsection 7.2, will be Margin
Stock.
4.11 Employee Benefit Plans.
Company maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code (the "Company 401(k) Plan"). Company's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Company is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. The Company has no Employee Benefit Plans, other than the
Company 401(k) Plan. The Company has no ERISA Affiliates that sponsor, maintain,
contribute to or are liable with respect to any Employee Benefit Plans.
4.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.13 Environmental Protection.
A. All Facilities and operations of the Company are, and have been to the
best of Company's knowledge, in compliance in all material respects with all
Environmental Laws.
B. There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity (a) arising at any Facilities or at any other location or (b)
arising in connection with the operations of Company (including the
transportation of Hazardous Materials in accordance with applicable
regulations), which conditions, occurrences or Hazardous Materials Activity
could reasonably be expected to form the basis of an Environmental Claim against
Company and which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
C. To the best of Company's knowledge, there are no pending or threatened
Environmental Claims against Company, and Company has received no notices,
inquiries, or requests for information with respect to any Environmental Claims.
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4.14 Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
4.15 Solvency.
Company and each of its Subsidiaries is and, upon the incurrence of any
Obligations by Company on any date on which this representation is made, will
be, Solvent.
4.16 Disclosure.
No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact (known to Company, in the case of any document not furnished by
Company) necessary in order to make the statements contained herein or therein
not misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There are no facts known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 5.
5.1 Financial Statements and Other Reports.
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent and Lenders:
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(i) Monthly Financials: as soon as available and in any event within
30 days after the end of each month ending after the Third Amended and
Restated Closing Date, financial statements prepared by Company in the
ordinary course of business certified by the chief financial officer of
Company that they fairly present the financial condition of Company and its
Subsidiaries for such month, subject to changes resulting from audit and
normal year-end adjustments;
(ii) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each Fiscal Year,
(a) the consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Company and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current Fiscal Year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
Fiscal Year and the corresponding figures from the consolidated plan and
financial forecast for the current Fiscal Year delivered pursuant to
subsection 5.1(xii), all in reasonable detail and certified by the chief
financial officer of Company that they fairly present the financial
condition of Company and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
and (b) a narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal quarter and for the period from the beginning of the then
current Fiscal Year to the end of such fiscal quarter; provided that
delivery of Company's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 5.1(ii);
(iii) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 5.1(xii) for the Fiscal Year covered by
such financial statements, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present the financial
condition of Company and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management for
such Fiscal Year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Company and satisfactory to Administrative Agent, which report shall be
unqualified, shall express no doubts about the ability of Company and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present
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the consolidated financial position of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; provided that
delivery of Company's Form 10-K for such Fiscal Year shall be deemed to
satisfy the requirements of clauses (a) and (b) of this subsection
5.1(iii);
(iv) Officers' and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above after the Third Amended and Restated
Closing Date, (a) an Officers' Certificate of Company stating that the
signers have reviewed the terms of this Agreement and have made, or caused
to be made under their supervision, a review in reasonable detail of the
transactions and condition of Company and its Subsidiaries during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that the signers do not have knowledge of the existence as at
the date of such Officers' Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has
taken, is taking and proposes to take with respect thereto; and (b) a
Compliance Certificate demonstrating in reasonable detail compliance during
and at the end of the applicable quarterly and annual accounting periods
with the restrictions contained in Section 6;
(v) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 4.3, the
consolidated financial statements of Company and its Subsidiaries delivered
pursuant to subdivisions (ii), (iii) or (xii) of this subsection 5.1 will
differ in any material respect from the consolidated financial statements
that would have been delivered pursuant to such subdivisions had no such
change in accounting principles and policies been made, then (a) together
with the first delivery of financial statements pursuant to subdivision
(ii), (iii) or (xii) of this subsection 5.1 following such change,
consolidated financial statements of Company and its Subsidiaries for (y)
the current Fiscal Year to the effective date of such change and (z) the
two full Fiscal Years immediately preceding the Fiscal Year in which such
change is made, in each case prepared on a pro forma basis as if such
change had been in effect during such periods, and (b) together with each
delivery of financial statements pursuant to subdivision (ii), (iii) or
(xii) of this subsection 6.1 following such change, a written statement of
the chief accounting officer or chief financial officer of Company setting
forth the differences which would have resulted if such financial
statements had been prepared without giving effect to such change;
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(vi) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, (b) stating whether, in connection with their audit examination,
any condition or event that constitutes an Event of Default or Potential
Event of Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
reason of any failure to obtain knowledge of any such Event of Default or
Potential Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to believe
either or both that the information contained in the certificates delivered
therewith pursuant to subdivision (iv) above is not correct or that the
matters set forth in the Compliance Certificates delivered therewith
pursuant to clause (b) of subdivision (iv) above for the applicable Fiscal
Year are not stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses, if
any, filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any governmental
or private regulatory authority, and (c) all press releases and other
statements made available generally by Company or any of its Subsidiaries
to the public concerning material developments in the business of Company
or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of Company
obtaining knowledge (a) of any condition or event that constitutes an Event
of Default or Potential Event of Default, or becoming aware that any Lender
has given any notice (other than to Administrative Agent) or taken any
other action with respect to a claimed Event of Default or Potential Event
of Default, (b) that any Person has given any notice to Company or any of
its Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in subsection 7.2,
(c) of any condition or event that would be required to be disclosed in a
current report filed by Company with the Securities and Exchange Commission
on Form 8-K (Items 1, 2, 4, 5 and 6 of such
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Form as in effect on the date hereof), or (d) of the occurrence of any
event or change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Company has taken, is taking
and proposes to take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of
Company obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Company or any of its Subsidiaries or any property of Company or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Company to Lenders or (Y) any material development
in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each
fiscal quarter of Company, a schedule of all Proceedings involving an
alleged liability of, or claims against or affecting, Company or any of its
Subsidiaries equal to or greater than $1,000,000 and promptly after request
by Administrative Agent such other information as may be reasonably
requested by Administrative Agent to enable Administrative Agent and its
counsel to evaluate any of such Proceedings;
(xi) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Company or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Company or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Administrative
Agent shall reasonably request;
(xii) Financial Plans and Projections: as soon as practicable after
preparation thereof by Company in the normal course of business, Company
shall provide copies of its financial plans and projections and at the
reasonable request of Administrative Agent or Requisite Lenders an
opportunity for Lenders to question and discuss such materials
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with the chief financial officer of Company; provided that, at the request
of Company, all copies of such financial plans and projections shall be
returned to Company after review thereof and the completion of such
discussion;
(xiii) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by Company and its Subsidiaries and all
material insurance coverage planned to be maintained by Company and its
Subsidiaries in the immediately succeeding Fiscal Year;
(xiv) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any Facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect;
(xv) Special Purpose Subsidiaries: promptly upon any Special Purpose
Subsidiary becoming a Subsidiary of Company, a written notice setting forth
with respect to such Special Purpose Subsidiary (a) the date on which such
Special Purpose Subsidiary became a Subsidiary of Company and (b) all of
the data required to be set forth in Schedule 4.1 annexed hereto with
respect to all Subsidiaries of Company (it being understood that such
written notice shall be deemed to supplement Schedule 4.1 annexed hereto
for all purposes of this Agreement); and
(xvi) Pricing Certificates (a) together with each delivery of
financial statements of Company and its Subsidiaries pursuant to
subdivisions (ii) and (iii) above, (b) within one Business Day after any
public release by S&P or Moody's lowering its credit rating on Company's
obligations under the Pass Through Trust Documents, and (c) at such
additional times as Company may elect, a certificate setting forth the
credit rating on Company's obligations under the Pass Through Trust
Documents (each, a "Pricing Certificate");
(xvii) Performance Certificates: in the event that Company believes it
is entitled to a Performance Reduction, consolidated financial statements
of Company and its Subsidiaries for the most recently ended four fiscal
quarter period (which shall be audited in the case of the financial
statements for year-end) and a certificate setting forth the calculation
necessary to demonstrate Company's entitlement to a Performance Reduction;
and
(xviii) Other Information: with reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries
as from time to time may be reasonably requested by any Lender.
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5.2 Corporate Existence.
Except as permitted under subsection 6.7, Company will, and will cause each
of its Subsidiaries to, at all times preserve and keep in full force and effect
its corporate existence and all rights and franchises material to its business;
provided, however, that the corporate existence of any such Subsidiary may be
terminated if such termination is in the best interests of Company and its
Subsidiaries and is not materially disadvantageous to any Lender. Company will,
and will cause each of its Subsidiaries to, at all times maintain its corporate
existence as a United States Citizen.
5.3 Payment of Taxes and Claims; Tax Consolidation.
A. Company will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Company.
B. Company will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Company or Company).
5.4 Maintenance of Properties; Insurance.
Company will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Company and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Company will maintain or
cause to be maintained, with insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage (including,
without limitation, flood insurance, if necessary or advisable) of the kinds
customarily carried or maintained under similar circumstances by corporations
engaged in similar businesses and Company will, with respect to each Financed
Aircraft, maintain the insurance specified in the First Aircraft Chattel
Mortgage with respect to such Financed Aircraft.
Company may self-insure, by way of deductible or equivalent structures or
provisions in insurance policies, the risks required to be insured against
pursuant to this subsection 5.4 in such
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reasonable amounts as are then applicable to other similar aircraft or spare
engines in Company's fleet, and as are not substantially greater than amounts
self-insured by corporations engaged in the same or similar business and
similarly situated with Company; provided, however, that Company may not
self-insure in an amount in excess of $1,000,000 per Financed Aircraft without
the prior written consent of Administrative Agent.
5.5 Inspection; Lender Meeting.
Company will, and will cause its Subsidiaries to, permit any authorized
representatives designated by any Lender to visit and inspect any of the
properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and, with the permission of Company which
shall not be unreasonably withheld, to make copies and take extracts therefrom,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that Company may, if it so
chooses, be present at or participate in any such discussion), all upon
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested; provided that so long as no Event of
Default shall have occurred and be continuing, such inspection shall not be
disruptive to Company's business, as reasonably determined by Company. Without
in any way limiting the foregoing, Company will, upon the request of Agents or
Requisite Lenders, participate in a meeting of Agents and Lenders once during
each Fiscal Year to be held at Company's corporate offices (or such other
location as may be agreed to by Company and Agents) at such time as may be
agreed to by Company and Agents.
5.6 Compliance with Laws, etc.
Company will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Company shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any Facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Company and which could reasonably be expected to have a Material Adverse
Effect.
5.7 Environmental Indemnity.
Company agrees to indemnify, defend, and hold harmless Administrative Agent
and Lenders, and the officers, directors, employees, agents and affiliates of
Administrative Agent and Lenders from and against any and all losses, claims,
liability or expenses arising in connection with Environmental Claims against
Company or with any Hazardous Materials Activity.
5.8 Company's Remedial Action Regarding Hazardous Materials.
Company will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal,
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transportation or Release of any Hazardous Materials on, under or about any
Facility in order to comply with all applicable Environmental Laws and
Governmental Authorizations. In the event Company or any of its Subsidiaries
undertakes any remedial action with respect to any Hazardous Materials on, under
or about any Facility, Company or such Subsidiary will conduct and complete such
remedial action in compliance with all applicable Environmental Laws, and in
accordance with the policies, orders and directives of all federal, state and
local governmental authorities except when, and only to the extent that,
Company's or such Subsidiary's liability for such presence, storage, use,
disposal, transportation or discharge of any Hazardous Materials is being
contested in good faith by Company or such Subsidiary.
5.9 Further Assurances; New Subsidiaries.
At any time or from time to time upon the request of Administrative Agent,
Company will, at its expense, promptly execute, acknowledge and deliver such
further documents and do such other acts and things as Administrative Agent may
reasonably request in order to effect fully the purposes of the Loan Documents
and to provide for payment of the Obligations in accordance with the terms of
this Agreement, the Notes and the other Loan Documents. In furtherance and not
in limitation of the foregoing, Company will cause any Subsidiary whose total
assets exceed 15% of the consolidated total assets of Company, in each case
determined in accordance with GAAP (other than a Special Purpose Subsidiary or
Atlas One), to take such actions as Administrative Agent may reasonably request
from time to time to ensure that the Obligations are guarantied by any such
Subsidiary. If, after the Third Amended and Restated Closing Date, Company or
any of its Subsidiaries (other than a Special Purpose Subsidiary or Atlas One)
acquires any asset, other than an aircraft financed with Loans hereunder or with
Other Permitted Indebtedness, with a fair market value in excess of $5 million,
or the value of spare parts of Company and its Subsidiaries not subject to Liens
securing Designated Indebtedness exceeds $25 million in the aggregate, Company
shall so notify Administrative Agent and take, or cause such Subsidiaries to
take, such actions as Administrative Agent may reasonably request from time to
time (including, without limitation, the execution and delivery of guaranties,
security agreements, mortgages, deeds of trust, financing statements and other
documents, the filing or recording of any of the foregoing, title insurance with
respect to any of the foregoing that relates to an interest in real property,
and the delivery of stock certificates and other collateral with respect to
which perfection is obtained by possession) to ensure that the Obligations are
secured by a first priority security interest in such asset or spare parts
(other than capital stock of a Subsidiary), as the case may be; provided that,
in the case of any engine otherwise subject to such security interest, such Lien
may be released at the request of Company in connection with a refinancing
thereof with Other Permitted Indebtedness. Notwithstanding the foregoing, so
long as (i) the AFL II Financing remains outstanding nothing herein shall cause
or give rise to an obligation on the part of the Company or AFL II to require a
guaranty or grant of security interest in the assets of AFL II and (ii) the AFL
Financing remains outstanding nothing herein shall cause or give rise to an
obligation on the part of the Company or AFL to require a guaranty or grant of
security interest in the assets of AFL. The Lenders acknowledge that the
security interest and Lien created by the Collateral Documents does not extend
to the assets of AFL or AFL II now existing or hereafter acquired.
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5.10 Appraisals.
Upon Administrative Agent's request after the occurrence and during the
continuance of an Event of Default and in any event no less than once each
calendar year, Company will obtain appraisals of each of the Financed Aircraft
from two Approved Appraisers, in form and substance satisfactory to
Administrative Agent.
5.11 Key Man Life Insurance.
Company shall use its best efforts to obtain Key Man Life Insurance with
respect to Michael A. Chowdry in an amount and for a period to be agreed upon by
Company and Administrative Agent, and with respect to which Administrative
Agent, on behalf of Lenders, shall be named beneficiary.
5.12 Maintenance Contracts.
Company shall maintain contracts with respect to the maintenance of each
Financed Aircraft sufficient to insure compliance with the Federal Aviation Act,
in form and substance reasonably satisfactory to Administrative Agent.
5.13 Employee Benefit Plans.
Company will not establish or permit to be established any Employee Benefit
Plans for Company or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
result in a liability for Company, under ERISA, in excess of $10 million.
SECTION 6.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 6.
6.1 Indebtedness.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the Obliga-
tions;
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(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 6.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 6.9;
(iv) Company and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 6.1 annexed hereto;
(v) Company may become and remain liable with respect to Permitted
Extension Indebtedness; provided, that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Notes associated with such
Financed Aircraft;
(vi) so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or would result therefrom and Company
delivers an Officers' Certificate to Administrative Agent and Lenders, in
form and substance reasonably satisfactory to Administrative Agent,
confirming that, on a Pro Forma Basis after giving effect to such
incurrence of Indebtedness, (i) the ratio of Consolidated Total Debt (less
Cash and Cash Equivalents held by Company in excess of $25 million) as of
the last day of the most recently ended fiscal quarter (the "Determination
Date") plus seven times Consolidated Rental Payments to Consolidated
Adjusted EBITDA plus Consolidated Rental Payments for the four fiscal
quarter period ending on such Determination Date does not exceed the ratio
set forth in subsection 6.6B for the fiscal quarter in which such
Indebtedness is to be incurred, (ii) the ratio of Consolidated Adjusted
EBITDA for such four fiscal quarter period to Consolidated Interest Expense
for such four-fiscal quarter period is not less than the ratio set forth in
subsection 6.6A for the fiscal quarter in which such Indebtedness is to be
incurred;
(vii) Company may become and remain liable with respect to
Indebtedness under the Unsecured Revolving Credit Facility in an aggregate
principal amount not to exceed $26 million at any time outstanding;
(viii) Company may become and remain liable with respect to
Indebtedness under the NationsBanc Agreement;
(ix) AFL may become and remain liable with respect to all of the
obligations under the AFL Financing documents and Company may become and
remain liable with respect to the AFL Leases;
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(x) AFL II may become and remain liable with respect to all of the
obligations under the AFL II Financing documents and Company may become and
remain liable with respect to the AFL II Leases;
(xi) Company may become and remain liable with respect to the Senior
Notes; and
(xii) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed, without duplication, when added to the maximum aggregate liability,
contingent or otherwise, of Company and its Subsidiaries outstanding in
accordance with subsection 6.4(vi), $30 million at any time outstanding.
6.2 Liens and Related Matters.
A. Prohibition on Liens. Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding.
B. Equitable Lien in Favor of Lenders. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 6.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 6.2A.
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an
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executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except (i) as provided herein, as (ii) described on Schedule 6.2
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL Financing Agreement or the AFL II Financing Agreement,
Company will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(i) pay dividends or make any other distributions on any of such Subsidiary's
capital stock owned by Company or any other Subsidiary of Company, (ii) repay or
prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to Company
or any other Subsidiary of Company.
6.3 Investments; Joint Ventures.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company may make and own Investments in Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the Investments
owned by them as of the Third Amended and Restated Closing Date in any
Subsidiaries of Company;
(iii) Company may make and own Investments in Special Purpose
Subsidiaries; provided that Company delivers to Administrative Agent an
Officer's Certificate in form and substance satisfactory to Administrative
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
(iv) Company may make Investments in Joint Ventures in an aggregate
amount not to exceed in any Fiscal Year, (A) the lesser of 25% of
Consolidated Net Income for such Fiscal Year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on Company Common Stock
declared or paid in such Fiscal Year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such Fiscal Year;
provided that Company shall not incur liabilities related to any such Joint
Venture in excess of Company's Investment therein;
(v) Company and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 6.3 annexed hereto and Investments
made in compliance with subsection 6.3(iv);
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(vi) Company may make the contributions to AFL of the AFL Aircraft and
cash contemplated pursuant to the AFL Restructuring;
(vii) Company may make the contribution to AFL II of the AFL II
Aircraft contemplated pursuant to the AFL II Restructuring; and
(viii) Company and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed $15 million at any time outstanding.
Notwithstanding the foregoing, except in connection with the AFL
Restructuring or the AFL II Restructuring, Company may not make any direct or
indirect loan, advance or capital contribution to AFL or AFL II, respectively.
6.4 Contingent Obligations.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) any Subsidiary may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the Obligations;
(ii) Company may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements with a
Lender;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(iv) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 6.4 annexed
hereto;
(v) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations to the extent such Contingent Obligations
are permitted pursuant to subsections 6.9 and 6.10; and
(vi) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with subsection 6.1(xii) shall at no time exceed
$30 million.
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6.5 Restricted Junior Payments.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Company may make scheduled payments of
principal and interest or mandatory prepayments of principal (including through
the exercise of remedies) from time to time on Designated Indebtedness; and
provided, further, that so long as no Event of Default or Potential Event of
Default has occurred and is continuing, or would result therefrom:
(i) Company may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(ii) Company may make Restricted Junior Payments with respect to
Company Common Stock not to exceed in any Fiscal Year, the lesser of 25% of
Consolidated Net Income for such Fiscal Year and $10 million;
(iii) Company may repurchase Company Common Stock in an amount not to
exceed in any Fiscal Year $15 million for purposes of establishing or
contributing to an employee compensation plan; provided that any such
repurchased Company Common Stock resold to employees of Company shall, to
the extent of the price paid for such Company Common Stock by such
employee, be excluded from the calculation of the $15 million limit set
forth above;
(iv) Company may apply Equity Proceeds to prepay Designated
Indebtedness;
(v) Company and AFL shall be permitted to consummate the AFL
Restructuring; and
(vi) Company and AFL II shall be permitted to consummate the AFL II
Restructuring.
6.6 Financial Covenants.
A. Minimum Interest Coverage Ratio. Company shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for the
four fiscal quarter period ending as of the last day of any fiscal quarter of
Company set forth below to be less than the correlative ratio indicated:
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<TABLE>
<CAPTION>
=======================================================================
Minimum
Fiscal Quarter Ending Interest
Coverage
Ratio
=======================================================================
<S> <C>
June 30, 1997 1.90:1.00
- -----------------------------------------------------------------------
September 30, 1997 1.90:1.00
- -----------------------------------------------------------------------
December 31, 1997 1.90:1.00
- -----------------------------------------------------------------------
March 31, 1998 1.90:1.00
- -----------------------------------------------------------------------
June 30, 1998 1.90:1.00
- -----------------------------------------------------------------------
September 30, 1998 1.90:1.00
- -----------------------------------------------------------------------
December 31, 1998 1.90:1.00
- -----------------------------------------------------------------------
March 31, 1999 1.90:1.00
- -----------------------------------------------------------------------
June 30, 1999 1.90:1.00
- -----------------------------------------------------------------------
September 30, 1999 2.00:1.00
- -----------------------------------------------------------------------
December 31, 1999 2.00:1.00
- -----------------------------------------------------------------------
March 31, 2000 2.10:1.00
- -----------------------------------------------------------------------
June 30, 2000 2.10:1.00
- -----------------------------------------------------------------------
September 30, 2000 2.20:1.00
- -----------------------------------------------------------------------
December 31, 2000 2.20:1.00
- -----------------------------------------------------------------------
March 31, 2001 2.20:1.00
- -----------------------------------------------------------------------
June 30, 2001 2.20:1.00
- -----------------------------------------------------------------------
September 30, 2001 2.30:1.00
- -----------------------------------------------------------------------
December 31, 2001 2.30:1.00
- -----------------------------------------------------------------------
March 31, 2002 2.40:1.00
- -----------------------------------------------------------------------
June 30, 2002 2.40:1.00
- -----------------------------------------------------------------------
September 30, 2002 2.50:1.00
=======================================================================
</TABLE>
B. Maximum Leverage Ratio. Company shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Company in excess of $25 million as of such date) plus seven
times Consolidated
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Rental Payments (for the four fiscal quarter period ending with the most
recently ended fiscal quarter) to (ii) Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending as of the
last day of any fiscal quarter of Company set forth below to exceed the
correlative ratio indicated:
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<TABLE>
<CAPTION>
======================================================================
Maximum
Fiscal Quarter Ending Leverage
Ratio
======================================================================
<S> <C>
June 30, 1997 5.75:1.00
- ----------------------------------------------------------------------
September 30, 1997 6.25:1.00
- ----------------------------------------------------------------------
December 31, 1997 6.75:1.00
- ----------------------------------------------------------------------
March 31, 1998 6.75:1.00
- ----------------------------------------------------------------------
June 30, 1998 7.00:1.00
- ----------------------------------------------------------------------
September 30, 1998 7.00:1.00
- ----------------------------------------------------------------------
December 31, 1998 6.75:1.00
- ----------------------------------------------------------------------
March 31, 1999 6.50:1.00
- ----------------------------------------------------------------------
June 30, 1999 6.25:1.00
- ----------------------------------------------------------------------
September 30, 1999 5.75:1.00
- ----------------------------------------------------------------------
December 31, 1999 5.75:1.00
- ----------------------------------------------------------------------
March 31, 2000 5.75:1.00
- ----------------------------------------------------------------------
June 30, 2000 5.50:1.00
- ----------------------------------------------------------------------
September 30, 2000 5.50:1.00
- ----------------------------------------------------------------------
December 31, 2000 5.25:1.00
- ----------------------------------------------------------------------
March 31, 2001 5.25:1.00
- ----------------------------------------------------------------------
June 30, 2001 5.25:1.00
- ----------------------------------------------------------------------
September 30, 2001 5.00:1.00
- ----------------------------------------------------------------------
December 31, 2001 5.00:1.00
- ----------------------------------------------------------------------
March 31, 2002 4.75:1.00
- ----------------------------------------------------------------------
June 30, 2002 4.75:1.00
- ----------------------------------------------------------------------
September 30, 2002 4.50:1.00
======================================================================
</TABLE>
C. Minimum Consolidated Net Worth. Company shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
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<TABLE>
<CAPTION>
====================================================================
Minimum Consolidated
Fiscal Year Ending Net Worth
====================================================================
<S> <C>
1997 $215 million
- --------------------------------------------------------------------
1998 $225 million
- --------------------------------------------------------------------
1999 $250 million
- --------------------------------------------------------------------
2000 $275 million
- --------------------------------------------------------------------
2001 $300 million
- --------------------------------------------------------------------
2002 $350 million
====================================================================
</TABLE>
6.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Company shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(i) any Subsidiary of Company may be merged with or into Company or
any wholly-owned Subsidiary of Company that has entered into a valid and
effective guaranty and security agreement to the extent required by
subsection 5.9, or be liquidated, wound up or dissolved, or all or any part
of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to Company or any such wholly-owned Subsidiary of Company;
provided that, in the case of such a merger, Company or such wholly-owned
Subsidiary shall be the continuing or surviving corporation;
(ii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(iii) subject to subsection 6.13, Company and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess of $100
million in any Fiscal Year or $500 million in the aggregate; provided that
(w) with respect to the sale of any Financed Aircraft, the cash proceeds of
the sale of such Financed Aircraft are sufficient to repay in full the
Notes associated with such Financed Aircraft; (x) the consideration
received for such assets shall be in an amount at least equal to
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the fair market value thereof; (y) the consideration received shall be at
least 75% cash; and (z) the proceeds of such Asset Sales shall be applied
as required by subsection 2.4B(iii)(a);
(iv) Company may lease or transfer any Financed Aircraft to the extent
expressly permitted by Section 4(d) of the First Aircraft Chattel Mortgage
with respect to such Financed Aircraft or as contemplated by subsection
9.21;
(v) Company may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of a division or line of
business of another Person provided that, (a) the acquisition primarily
involves the acquisition of assets to be used in the business of Company,
(b) with respect to such acquisition any newly acquired or created
Subsidiary of Company shall be a wholly-owned Subsidiary and, to the extent
required by subsection 5.9, shall execute a guaranty of the Obligations and
grant a security interest in the assets acquired to Administrative Agent
for the benefit of Lenders which may be subordinate to debt incurred in
such acquisition, (c) immediately before and after giving effect thereto,
no Potential Event of Default or Event of Default shall have occurred and
be continuing, (d) immediately after giving effect to the acquisition,
Company shall be in compliance on a Pro Forma Basis with financial
covenants in subsection 6.6 and such compliance shall be evidenced by an
Officer's Certificate demonstrating such compliance, (e) Administrative
Agent shall have reviewed and be reasonably satisfied with the nature and
amount of all contingent liabilities or other liabilities not on the
balance sheet of Company assumed in connection with such acquisition and a
business plan prepared by Company with respect to such acquisition and (f)
the aggregate amount of cash payments made in connection with all such
acquisitions, other than with the proceeds from sales or issuances of
equity by Company, does not exceed $100,000,000;
(vi) Company and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each Fiscal Year, such number of Eligible Aircraft
permitted during any Fiscal Year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
Fiscal Year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next Fiscal Year be carried forward to any
Fiscal Year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(vii) Company and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business;
(viii) Company and its Subsidiaries may make other Consolidated
Capital Expenditures not in excess of $10 million during any Fiscal Year;
provided that, any amount of such other Consolidated Capital Expenditures
permitted, but not made, in any Fiscal Year may be carried forward to and
made during the immediately succeeding Fiscal
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Year (but no amount once carried forward to the next Fiscal Year may be
carried forward to any Fiscal Year thereafter);
(ix) Company and AFL shall be permitted to consummate the AFL
Restructuring;
(x) Company and AFL II shall be permitted to consummate the AFL II
Restructuring; and
(xi) Company shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and operations
to Colorado; provided that the aggregate consideration paid with respect to
the acquisition of assets shall be in an amount not to exceed $20 million.
6.8 Amendments of Material Agreements.
Company shall not permit (i) the certificate or articles of incorporation
or bylaws of any Loan Party to be amended or otherwise modified in any manner
which could reasonably be expected to have a Material Adverse Effect or (ii) any
Material Agreement to be amended or otherwise modified in any manner with
respect to any provision providing material representations and warranties to
Company, indemnification rights to Company, or limiting Company's remedies or
rights upon the other party to such agreements failure to perform or which could
otherwise reasonably be expected to have Material Adverse Effect on the value of
any Financed Aircraft.
6.9 Restriction on Leases.
Company shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Company and its
wholly-owned Subsidiaries); provided however that Company may become so
obligated to the extent that, and only to the extent that, immediately after
giving effect to the incurrence of liability with respect to such lease, the
Consolidated Rental Payments at the time in effect during the then current
Fiscal Year do not exceed $60 million plus the amount of Consolidated Rental
Payments made during such Fiscal Year in respect of up to four 747-400F
aircraft, subject to the agreement dated June 9, 1997 between Company and The
Boeing Company regarding the purchase of 10 new 747-400F aircraft, leased by the
Company within twelve months following the Third Amended and Restated Closing
Date, plus an amount not to exceed $12 million during any Fiscal Year, equal to
Consolidated Rental Payments incurred in connection with sale and leaseback
transactions described in subsection 6.10, plus Consolidated Rental Payments
assumed pursuant to acquisitions permitted under subsection 6.7(v).
Notwithstanding the foregoing, the AFL Leases and the AFL II Leases shall be
permitted hereunder and shall not be taken into account for purposes of
determining compliance with the foregoing provisions of this subsection 6.9.
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6.10 Sales and Lease-Backs.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease; provided that Company and its Subsidiaries may become and remain
liable as lessee, guarantor or other surety with respect to any such lease if
and to the extent that Company or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease under subsection 6.9.
Notwithstanding the foregoing provisions of this subsection 6.10, this
subsection 6.10 shall not restrict or prohibit in any manner consummation of the
AFL Restructuring or the AFL II Restructuring.
6.11 Sale or Discount of Receivables.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.
6.12 Transactions with Shareholders and Affiliates.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and indemnification
of members of the Boards of Directors of Company and its Subsidiaries, (ii)
reasonable and customary salaries, bonuses and other compensation paid to and
indemnification of employees of Company or any of its Subsidiaries in accordance
with past practice or approved by the compensation committee of Company or (iii)
transactions contemplated in connection with the AFL Restructuring or the AFL II
Restructuring.
6.13 Disposal of Subsidiary Stock.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except
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to qualify directors if required by applicable law or to a wholly-owned
Subsidiary of Company; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Company, another wholly-owned Subsidiary of Company,
or to qualify directors if required by applicable law.
Notwithstanding the foregoing, each of AFL and AFL II shall be permitted to
issue preferred stock in an amount not to exceed $100,000 each to a third party.
6.14 Conduct of Business.
From and after the Third Amended and Restated Closing Date, Company shall
not, and shall not permit any of its Subsidiaries to, engage in any business
other than (i) the businesses engaged in by Company and its Subsidiaries on the
Third Amended and Restated Closing Date and similar or related businesses and
(ii) such other lines of business as may be consented to by Requisite Lenders.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
7.1 Failure to Make Payments When Due.
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; or failure by Company to pay
any interest on any Loan or any fee or any other amount due under this Agreement
within five days after the date due; or
7.2 Default in Other Agreements.
(i) Failure of Company or any of its Subsidiaries to pay when due following
applicable grace periods (a) any principal of or interest on any Indebtedness
(other than Indebtedness referred to in subsection 7.1) in an individual
principal amount of $5 million or more or any items of Indebtedness with an
aggregate principal amount of $10 million or more or (b) any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million or
more, in each case beyond the end of any grace period provided therefor; or (ii)
breach or default by Company or any of its Subsidiaries with respect to any
other material term of (a) any evidence of any Indebtedness in an individual
principal amount of $5 million or more or any items of Indebtedness with an
aggre-
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gate principal amount of 10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent Obligations
with an aggregate principal amount of $10 million or more or (b) any loan
agreement, mortgage, indenture or other agreement relating to such Indebtedness
or Contingent Obligation(s), if the effect of such breach or default is to
cause, or to permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse of
time, both, or otherwise); provided that the foregoing shall not apply to
Indebtedness under the AFL Financing Agreement or the AFL II Financing
Agreement; or
7.3 Breach of Certain Covenants.
Failure of Company to perform or comply in any material respect with any
term or condition contained in subsection 2.5 or 5.2 or subsection 6.1, 6.2 (as
it relates to prohibitions on Liens on Financed Aircraft), 6.5, 6.7 (as it
relates to the sale of any Financed Aircraft or all or substantially all of the
assets of Company or to the merger of Company into any other Person), 6.8, 6.10
and 6.13 of this Agreement or in clauses (i) and (ii) of Section 4(c), Section
4(d) or Section 4(g) of any First Aircraft Chattel Mortgage; or
7.4 Breach of Warranty.
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
7.5 Other Defaults Under Loan Documents.
(i) Any Loan Party shall default in the performance of or compliance with
any term contained in this Agreement or any of the other Loan Documents, other
than any such term referred to in any other subsection of this Section 7, and
such default shall not have been remedied or waived (x) within 15 days after the
earlier of (a) an officer of Company becoming aware of such default or (b)
receipt by Company of notice from Administrative Agent or any Lender of such
default or (y) with respect to a default under subsection 6.6, the earlier of
(a) an officer of Company becoming aware of the default after the applicable
measurement date and (b) the delivery of financial statements pursuant to
subsection 5.1 or (ii) a guaranty, if any, of the Obligations for any reason
ceases to be in full force and effect; or
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect,
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which decree or order is not stayed; or any other similar relief shall be
granted under any applicable federal or state law; or (ii) an involuntary case
shall be commenced against Company or any of its material Subsidiaries under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Company or any of its Subsidiaries, or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Company or any
of its Subsidiaries for all or a substantial part of its property; or a warrant
of attachment, execution or similar process shall have been issued against any
substantial part of the property of Company or any of its Subsidiaries, and any
such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; or
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Company or any of its material Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due; or the Board of
Directors of Company or any of its Subsidiaries (or any committee thereof) shall
adopt any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or
7.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $5 million or (ii)
in the aggregate at any time an amount in excess of $10 million (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or
in any event later than five days prior to the date of any proposed sale
thereunder); or
7.9 Dissolution.
Any order, judgment or decree shall be entered against Company or any of
its material Subsidiaries decreeing the dissolution or split up of Company or
that Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 30 days; or
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7.10 Change in Control.
(i) (a) Michael A. Chowdry, his spouse, descendants or an entity controlled
by any of the foregoing, or a trust for the benefit of any of the foregoing,
shall cease to beneficially own and control shares of capital stock of Company
representing at least 40% of the combined voting power of all Securities of
Company entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency, or (b) any
Person or any two or more Persons acting in concert (in any such case, excluding
Mr. Chowdry) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act),
directly or indirectly, of Securities of Company (or other Securities
convertible into such Securities) representing 20% or more of the combined
voting power of all Securities of Company entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency or (c) the Board of Directors of Company shall not
consist of a majority of Continuing Directors or (ii) a "Change of Control"
shall occur under the Pass Through Trust Documents, the Senior Note Documents or
any other Material Agreement (as in effect on the date of such occurrence); or
7.11 Failure of Security.
Upon execution and delivery thereof, any Collateral Document shall, at any
time, cease to be in full force and effect (other than by reason of a release of
Collateral thereunder in accordance with the terms hereof or thereof, the
satisfaction in full of the Obligations or any other termination of such
Collateral Document in accordance with the terms hereof or thereof) or shall be
declared null and void, or the validity or enforceability thereof shall be
contested in writing by any Loan Party, or Administrative Agent shall not have
or shall cease to have a valid security interest in any Collateral purported to
be covered thereby, perfected and with the priority required by the relevant
Collateral Document, for any reason other than the failure of Administrative
Agent or any Lender to take any action within its control, subject only to Liens
permitted under the applicable Collateral Documents; or
7.12 Certificated as Air Carrier.
Company for any reason ceases to be a United States Citizen or to hold an
air carrier operating certificate under the Federal Aviation Act for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo; or
7.13 Material Agreements.
Any Material Agreement, other than the Philippine Lease and the Second
Philippine Lease, shall at any time be terminated other than by its terms or
cease to be in full force and effect other than by its terms, or any party to
any Modification Agreement or any Purchase Agreement shall default in the
observance or performance of any material covenants or agreements contained in
any such agreement; provided that the foregoing shall not be deemed to prohibit
the repayment or refinancing of debt otherwise permitted under this Agreement:
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THEN (i) upon the occurrence of any Event of Default described in subsection 7.6
or 7.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans and (b) all other Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Company, and the obligation of
each Lender to make any Loan shall thereupon terminate and (ii) upon the
occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written consent
of Requisite Lenders, by written notice to Company, declare all or any portion
of the amounts described in clauses (a) and (b) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender
to make any Loan shall thereupon terminate.
Notwithstanding anything contained in the second preceding paragraph, if at
any time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 9.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision which may be made at the
election of Requisite Lenders and are not intended to benefit Company and do not
grant Company the right to require Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are met.
SECTION 8.
AGENTS
8.1 Appointment.
Credit Partners is hereby appointed Syndication Agent hereunder and each
Lender hereby authorizes Syndication Agent to act as its agent in accordance
with the terms of this Agreement and the other Loan Documents. Bankers Trust is
hereby appointed Administrative Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Administrative Agent to act as its
agent in accordance with the terms of this Agreement and the other Loan
Documents. Agents agree to act upon the express conditions contained in this
Agreement and the other Loan Documents, as applicable. The provisions of this
Section 8 are solely for the benefit of Agents and Lenders and Company shall
have no rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, each Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Company or any of its Subsidiaries. Syndication Agent, without consent of or
notice to any party hereto, may
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assign any and all of its rights or obligations hereunder to any of its
Affiliates, including, without limitation, Credit Partners. As of the Third
Amended and Restated Closing Date, all obligations of Syndication Agent
hereunder shall terminate.
8.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes each of the
Agents to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Agents shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Agents may
each exercise such powers, rights and remedies and perform such duties by or
through their agents or employees. Agents shall not have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon Agents any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. Agents shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by Agents to Lenders or by or on behalf of Company
to Agents or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall Agents be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any Event
of Default or Potential Event of Default. Anything contained in this Agreement
to the contrary notwithstanding, Agents shall not have any liability arising
from confirmations of the amount of outstanding Loans or the component amounts
thereof.
C. Exculpatory Provisions. None of Agents nor any of their respective
officers, directors, partners, employees or agents shall be liable to Lenders
for any action taken or omitted by Agents under or in connection with any of the
Loan Documents except to the extent caused by their respective gross negligence
or willful misconduct. If Agents shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, Agents shall
be entitled to refrain from such act or taking such action unless and until
Agents shall have received instructions from Requisite Lenders. Without
prejudice to the generality of the foregoing, (i) each Agent shall be entitled
to rely, and shall be fully protected in relying, upon any communication,
instrument or document believed by it to be genuine and correct and to have
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been signed or sent by the proper person or persons, and shall be entitled to
rely and shall be protected in relying on opinions and judgments of attorneys
(who may be attorneys for Company and its Subsidiaries), accountants, experts
and other professional advisors selected by it; and (ii) no Lender shall have
any right of action whatsoever against any Agent as a result of such Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders. Each Agent shall be entitled to refrain from exercising any power,
discretion or authority vested in it under this Agreement or any of the other
Loan Documents unless and until it has obtained the instructions of Requisite
Lenders.
D. Agents Entitled to Act as Lenders. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participations in the Loans, each Agent shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not performing the duties and functions delegated to it
hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include each Agent in its individual
capacity. Each Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust, financial advisory or other
business with Company or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Company for services in connection with this Agreement and otherwise without
having to account for the same to Lenders.
8.3 Representations and Warranties; No Responsibility For Appraisal of Credit-
worthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans hereunder and that it
has made and shall continue to make its own appraisal of the creditworthiness of
Company and its Subsidiaries. No Agent shall have any duty or responsibility,
either initially or on a continuing basis, to make any such investigation or any
such appraisal on behalf of Lenders or to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter, and no Agent
shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to Lenders.
8.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent (and its respective affiliates and partners), to
the extent that Administrative Agent shall not have been reimbursed by Company,
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent in
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exercising its powers, rights and remedies or performing its duties hereunder or
under the other Loan Documents or otherwise in its capacity as Administrative
Agent, in any way relating to or arising out of this Agreement or the other Loan
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Administrative Agent's gross
negligence or willful misconduct.
8.5 Collateral Documents.
Without limiting the generality of subsection 8.1, each Lender hereby
further authorizes Administrative Agent to enter into the Collateral Documents
as secured party on behalf of and for the benefit of such Lender and agrees to
be bound by the terms of each of the Collateral Documents; provided that, except
as otherwise provided below, Administrative Agent shall not enter into or
consent to any amendment, modification, termination or waiver of any provision
contained in any Collateral Document without prior written consent of Requisite
Lenders. Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the collateral under any Collateral
Document, it being understood and agreed that all powers, rights and remedies
under the Collateral Documents may be exercised solely by Administrative Agent
for the benefit of Lenders in accordance with the terms thereof. Each Lender
hereby authorizes Administrative Agent (i) to release or subordinate Collateral
as permitted or required under this Agreement or the Collateral Documents, and
agrees that a certificate executed by Administrative Agent evidencing such
release of Collateral shall be conclusive evidence of such release as to any
third party and (ii) to enter into any amendments of the Collateral Documents to
cure any ambiguity, defect or inconsistency or to amend provisions relating to
ministerial or administrative matters which do not materially adversely affect
the rights of the Lenders thereunder.
8.6 Successor Administrative Agent.
Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Company. Upon any such notice of
resignation, Requisite Lenders shall have the right, upon consultation with
Company, to appoint a successor Administrative Agent. Upon the acceptance of any
appointment hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring or removed Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
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SECTION 9.
MISCELLANEOUS
9.1 Assignments and Participations in Loans.
A. General. Each Lender shall have the right at any time to (i) sell,
assign or transfer to any Eligible Assignee, or (ii) sell participations to any
Person in, all or any part of its Commitments or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall, without the consent
of Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided, further that no
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until (a) an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 9.1B(ii) or (b) the sale,
assignment or transfer is made in accordance with subsection 9.21. Except as
otherwise provided in this subsection 9.1, no Lender shall, as between Company
and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or transfer of, or any granting of participations in, all
or any part of its Commitments or the Loans, or the other Obligations owed to
such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan or other
Obligation may (a) be assigned in any amount to another Lender, or to an
Affiliate of the assigning Lender or another Lender, with the giving of
notice to Company and Administrative Agent or (b) be assigned in an
aggregate amount of not less than $5,000,000 (or such lesser amount as
shall constitute the aggregate amount of the Commitments, Loans, and other
Obligations of the assigning Lender) to any other Eligible Assignee with
the giving of notice to Company and with the consent of Administrative
Agent and Company (which consent shall not be unreasonably withheld). Any
assignment of Loans hereunder shall effect a pro rata assignment of the
Notes with respect to each Financed Aircraft. To the extent of any such
assignment in accordance with either clause (a) or (b) above, the assigning
Lender shall be relieved of its obligations with respect to its
Commitments, Loans, or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the Register, an
Assignment Agreement, together with a processing and recordation fee of
$3,000 and such forms, certificates or other evidence, if any, with respect
to United States federal income tax withholding matters as the assignee
under such Assignment Agreement may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a); provided, however
that such processing fee shall not be required where the assignee is an
existing Lender. Upon such execution, delivery and acceptance, from and
after the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that rights
and
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obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(z) the assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment Agreement covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto). The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee substantially in the form of Exhibit IIIA annexed
hereto or Exhibit IIIB, as the case may be, with appropriate insertions, to
reflect the new Commitments and/or outstanding Term Loans, as the case may
be, of the assignee and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register. Upon
its receipt of an Assignment Agreement executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee, together with the
processing and recordation fee referred to in subsection 9.1B(i) and any
forms, certificates or other evidence with respect to United States federal
income tax withholding matters that such assignee may be required to
deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a),
Administrative Agent shall, if such Assignment Agreement has been completed
and is in substantially the form of Exhibit VII hereto and if
Administrative Agent has consented to the assignment evidenced thereby to
the extent such consent is required pursuant to subsection 9.1B(i)), (a)
accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register and (c) give prompt notice thereof to
Company. Administrative Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this subsection
9.1B(ii).
C. Participations. The holder of any participation, other than an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
affecting (i) the extension of the scheduled final maturity date of any Loan
allocated to such participation, (ii) a reduction of the principal amount of or
the rate of interest payable on any Loan allocated to such participation or
(iii) a release of Collateral, and all amounts payable by Company hereunder
(including without limitation amounts payable to such Lender pursuant to
subsections 2.6D and 2.7) shall be determined as if such Lender had not sold
such participation. Company and each Lender hereby acknowledge and agree that,
solely for purposes of subsection 9.5, (a) any participation will give rise to a
direct obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
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D. Assignments to Federal Reserve Banks. In addition to the assignments and
participations permitted under the foregoing provisions of this subsection 9.1,
any Lender may assign and pledge all or any portion of its Loans, the other
Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. Information. Each Lender may furnish any information concerning Company
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 9.19.
9.2 Expenses.
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents; (ii) all the costs of furnishing
all opinions by counsel for Company (including without limitation any opinions
requested by Lenders as to any legal matters arising hereunder) and of Company's
performance of and compliance with all agreements and conditions on its part to
be performed or complied with under this Agreement and the other Loan Documents
including, without limitation, with respect to confirming compliance with
environmental and insurance requirements; (iii) the reasonable fees, expenses
and disbursements of counsel to Administrative Agent in connection with the
negotiation, preparation, execution and administration of the Loan Documents and
the Loans and any consents, amendments, waivers or other modifications hereto or
thereto and any other documents or matters requested by Company; (iv) all the
costs and expenses of creating and perfecting the Liens in favor of
Administrative Agent for the benefit of Lenders pursuant to the Loan Documents,
including filing and recording fees and expenses, title insurance, fees and
expenses of counsel for providing such opinions as Lenders may reasonably
request and fees and expenses of legal counsel to Administrative Agent
(including local counsel); (v) all other actual and reasonable costs and
expenses incurred by Administrative Agent in connection with the syndication of
the Commitments and the negotiation, preparation and execution of the Loan
Documents and the transactions contemplated hereby and thereby; provided that
such costs and expenses of syndication shall not exceed $10,000; and (vi) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Administrative Agent and Lenders in enforcing
any Obligations of or in collecting any payments due from Company hereunder or
under the other Loan Documents by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings.
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9.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 9.2, whether
or not the transactions contemplated hereby shall be consummated, Company agrees
to defend, indemnify, pay and hold harmless Agents and Lenders, and the
officers, directors, partners, employees, agents and affiliates of Agents and
Lenders (collectively called the "Indemnitees") from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened by any Person,
whether or not any such Indemnitee shall be designated as a party or a potential
party thereto), whether direct, indirect or consequential and whether based on
any federal, state or foreign laws, statutes, rules or regulations (including
without limitation securities and commercial laws, statutes, rules or
regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of this Agreement
or the other Loan Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds of any of the Loans) or the statements
contained in the commitment letter delivered by any Lender to Company with
respect thereto (collectively called the "Indemnified Liabilities"); provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of that
Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
9.4 Set-Off.
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence of any Event of
Default each Lender is hereby authorized by Company at any time or from time to
time, without notice to Company or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other Indebtedness at any time held or owing
by that Lender to or for the credit or the account of Company against and on
account of the obligations and liabilities of Company to that Lender under this
Agreement, the Notes, and the other Loan Documents, including, but not limited
to, all claims of any nature or description arising out of or connected with
this Agreement, the Notes, or any other Loan Document, irrespective of whether
or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due hereunder
shall have become due and payable pursuant to
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Section 7 and although said obligations and liabilities, or any of them, may be
contingent or unmatured.
9.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment, by realization upon security, through the exercise of any
right of set-off or banker's lien, by counterclaim or cross action or by the
enforcement of any right under the Loan Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to that Lender
hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the
Aggregate Amounts Due to the other Lenders so that all such recoveries of
Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided that if all or part of such
proportionately greater payment received by such purchasing Lender is
thereafter recovered from such Lender upon the bankruptcy or reorganization of
Company or otherwise, those purchases shall be rescinded and the purchase
prices paid for such participations shall be returned to such purchasing Lender
ratably to the extent of such recovery, but without interest. Company expressly
consents to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of banker's lien,
set-off or counterclaim with respect to any and all monies owing by Company to
that holder with respect thereto as fully as if that holder were owed the
amount of the participation held by that holder.
9.6 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes any Lender's Pro Rata
Share; changes in any manner the definition of "Requisite Lenders"; changes in
any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the scheduled
final maturity date (but not the date of any scheduled installment of principal)
of any of the Loans; postpones the date or reduces the amount of any scheduled
payment (but not prepayment) (other than the prepayment required by subsection
2.4B(iii)(g))) of principal of any of the Loans; postpones the date on which any
interest or any fees are payable; decreases the interest rate borne by any of
the Loans (other than any waiver of any increase in the interest rate applicable
to any of the Loans pursuant to
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<PAGE> 107
subsection 2.2E) or the amount of any fees payable hereunder; increases the
maximum duration of Interest Periods permitted hereunder; releases all or
substantially all of the Collateral; or changes in any manner the provisions
contained in subsection 7.1 or this subsection 9.6 shall be effective only if
evidenced by a writing signed by or on behalf of all Lenders to whom are owed
Obligations being directly affected by such amendment, modification,
termination, waiver or consent. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 3 shall be
effective only if evidenced by a writing signed by or on behalf of Credit
Partners, Administrative Agent and Requisite Lenders, (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the Lender which is the holder of
that Note, (iii) no increase in the Commitments of any Lender over the amount
thereof then in effect shall be effective without the written concurrence of
that Lender, it being understood and agreed that in no event shall waivers or
modifications of conditions precedent, covenants, Events of Default, Potential
Events of Default or of a mandatory prepayment or a reduction of any or all of
the Commitments be deemed to constitute an increase of the Commitment of any
Lender and that an increase in the available portion of any Commitment of any
Lender shall not be deemed to constitute an increase in the Commitment of such
Lender, and (iv) no amendment, modification, termination or waiver of any
provision of Section 7 or of any other provision of this Agreement which, by
its terms, expressly requires the approval or concurrence of any Agent shall be
effective without the written concurrence of such Agent. Administrative Agent
may, but shall have no obligation to, with the concurrence of any Lender,
execute amendments, modifications, waivers or consents on behalf of that
Lender. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given. No notice to or demand on
Company in any case shall entitle Company to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 9.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Company, on Company. Notwithstanding anything in this
subsection 9.6A to the contrary, the Notes and Aircraft Chattel Mortgages may
be amended in the manner and for the purposes set forth in subsection 9.21
without the consents required by this subsection 9.6A.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 9.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other amounts
owed to such Lender through such date of termination, (ii) another financial
institution satisfactory to Company and Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of Administrative
Agent (or if Administrative Agent is also the Lender to be
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<PAGE> 108
terminated, the successor Administrative Agent) to evidence the substitution of
such Lender shall have been received and approved by Administrative Agent as of
such date.
9.7 Independence of Covenants.
All covenants under this Agreement shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
9.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Credit Partners, Syndication
Agent and Administrative Agent shall not be effective until received. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or (i) as to Company and
Administrative Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such party in a
written notice delivered to Administrative Agent.
9.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 9.2, 9.3
and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and 9.5
shall survive the payment of the Loans, and the termination of this Agreement.
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any Lender in
the exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
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<PAGE> 109
9.11 Marshalling; Payments Set Aside.
Neither Administrative Agent nor any Lender shall be under any obligation
to marshal any assets in favor of Company or any other party or against or in
payment of any or all of the Obligations. To the extent that Company makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce
any security interests or exercise their rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or set-off had
not occurred.
9.12 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
9.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
9.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.15 Applicable Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
102
<PAGE> 110
9.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 9.1). Neither Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
9.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION (SUBJECT TO ANY RIGHT TO APPEAL TO A COURT IN THE STATE OF NEW YORK).
Company hereby agrees that service of all process in any such proceeding in any
such court may be made by registered or certified mail, return receipt
requested, to Company at its address provided in subsection 9.8, such service
being hereby acknowledged by Company to be sufficient for personal jurisdiction
in any action against Company in any such court and to be otherwise effective
and binding service in every respect. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
any Lender to bring proceedings against Company in the courts of any other
jurisdiction.
9.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and
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<PAGE> 111
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
9.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may make disclosures to any Person who
evaluates, approves, structures or administers the Loans on behalf of a Lender
and who is subject to this confidentiality provision, or, reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participation therein or as required or requested by any governmental or
regulatory agency (including, without limitation, the National Association of
Insurance Commissioners) or representative thereof or pursuant to legal process
or in accordance with any applicable law or regulation; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify Company of any request by any governmental or regulatory agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental or
regulatory agency) for disclosure of any such non-public information prior to
disclosure of such information; and provided, further that in no event shall any
Lender be obligated or required to return any materials furnished by Company or
any of its Subsidiaries.
9.20 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company,
Syndication Agent and Administrative Agent of written or telephonic notification
of such execution and authorization of delivery thereof.
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<PAGE> 112
9.21 Cooperation in Refinancing, Syndication and Assignment.
Company, Administrative Agent and Lenders agree that, in connection with
the refinancing, syndication or assignment of the Notes, to the extent deemed
reasonably necessary by Company or Administrative Agent, some or all of the
Financed Aircraft may be transferred to a Special Purpose Subsidiary which will
lease such aircraft to Company under arrangements reasonably acceptable to
Company and Administrative Agent all in a manner designed to retain the economic
obligations and benefits of the Company, Administrative Agent and Lenders
hereunder and under the other Loan Documents. Company, Administrative Agent and
Lenders further agree that, in connection with an assignment of Notes to a
Person who will not become a Lender hereunder, Administrative Agent and Lenders
shall agree to any amendments to the Notes to be assigned and the related
Aircraft Chattel Mortgages and/or releases of the related First Aircraft Chattel
Mortgage and Second Aircraft Chattel Mortgage, in each case, as requested by
Company; provided that the terms of such amended Notes and Aircraft Chattel
Mortgages do not violate any term of this Agreement and provided, further, that
such amendments shall be effective only upon and simultaneous with (i) the
assignment of such Notes and Aircraft Chattel Mortgages to such Person, (ii)
indefeasible payment in full to Lenders of an amount equal to all amounts owing
under such Notes and (iii) releases from any liability relating to such Notes
and Aircraft Chattel Mortgages of Administrative Agent and Lenders in form and
substance satisfactory to Administrative Agent.
[Remainder of page intentionally left blank]
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<PAGE> 113
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
ATLAS AIR, INC.
By:
------------------------------
Name:
Title:
Notice Address:
538 Commons Drive
Golden, Colorado 80401
Attention: Nesa Hassanein
Senior Vice President,
General Counsel and Secretary
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY,
as Administrative Agent and Lender
By:
---------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
S-1
<PAGE> 114
SYNDICATION AGENT:
GOLDMAN SACHS CREDIT PARTNERS L.P., as
Syndication Agent and Lender
---------------------------------------
Notice Address:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Stephen King
LENDERS:
BANK ONE, COLORADO, N.A.
By:
---------------------------------------
Name:
Title:
CITY NATIONAL BANK
By:
---------------------------------------
Name:
Title:
COLORADO NATIONAL BANK
By:
---------------------------------------
Name:
Title:
S-2
<PAGE> 115
FIRST SECURITY BANK
By:
---------------------------------------
Name:
Title:
FUJI BANK
By:
---------------------------------------
Name:
Title:
IMPERIAL BANK, A CALIFORNIA BANKING
CORPORATION
By:
---------------------------------------
Name:
Title:
S-3
<PAGE> 116
KEYBANK, NATIONAL ASSOCIATION
By:
---------------------------------------
Name:
Title:
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor LGT Senior Secured Management,
Inc., as Portfolio Advisor
By:
---------------------------------------
Name:
Title:
THE MAINSTAY FUNDS, on behalf of its
HIGH YIELD CORPORATE BOND FUND SERIES
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By:
---------------------------------------
Name:
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE
CO.
By:
---------------------------------------
Name:
Title:
S-4
<PAGE> 117
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:
---------------------------------------
Name:
Title:
NORWEST-COLORADO N.A.
By:
---------------------------------------
Name:
Title:
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(A UNIT OF THE CHASE MANHATTAN BANK)
By:
---------------------------------------
Name:
Title:
THE SAKURA BANK, LIMITED
By:
---------------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management & Research,
as Investment Advisor
By:
---------------------------------------
Name:
Title:
S-5
<PAGE> 118
SOUTHERN PACIFIC THRIFT AND LOAN
ASSOCIATION
By:
---------------------------------------
Name:
Title:
TRANSAMERICA BUSINESS CREDIT CORP.
By:
---------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By:
---------------------------------------
Name:
Title:
S-6
<PAGE> 119
EXHIBIT 10.58
EXHIBIT I
(FORM OF NOTICE OF BORROWING)
NOTICE OF BORROWING
Pursuant to that certain Third Amended and Restated Credit Agreement dated
as of September 5, 1997, as amended, supplemented or otherwise modified to the
date hereof (said Credit Agreement, as so amended, supplemented or otherwise
modified, being the "CREDIT AGREEMENT", the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Atlas Air, Inc., a Delaware corporation ("COMPANY"), the financial institutions
listed therein as Lenders ("LENDERS"), Goldman Sachs Credit Partners L.P.
(formerly known as Pearl Street L.P.), as syndication agent ("SYNDICATION
AGENT"), and Bankers Trust Company, as administrative agent ("ADMINISTRATIVE
AGENT"), this represents Company's request to borrow from Lenders, in accordance
with their applicable Pro Rata Shares, as follows:
1. Date of borrowing: ___________________, _________
(the "FUNDING DATE")
2. Amount of borrowing: $___________________
3. Interest rate option: |_| a. Base Rate Loans
|_| b. Eurodollar Rate Loans with an
initial Interest Period of
____________ month(s)
4. Purpose of borrowing: |_| a. Purchase of Aircraft
|_| b. Modification of Aircraft
5. Aircraft to be financed with such borrowing:
__________________________ (the "AIRCRAFT").
The proceeds of such Loans are to be deposited in Company's account at
Administrative Agent.
The undersigned officer, to the best of his or her knowledge, and Company
(if the borrowing is for modification of the Aircraft: to the best of its
knowledge) certify that:
(i) the representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and complete in
all material respects on and as of the Funding Date to the same extent as
though made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier
<PAGE> 120
date, in which case such representations and warranties were true,
correct and complete in all material respects on and as of such earlier
date;
(ii) no event has occurred and is continuing or would result from the
consummation of the borrowing contemplated hereby that would constitute an
Event of Default or a Potential Event of Default;
(iii) Company has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof;
(iv) the Company is an air carrier certified under Sections 401 and
604(b) of the Federal Aviation Act;
(v) if the Aircraft is registered to be registered in the United
States, certificates of airworthiness have been duly issued pursuant to the
Federal Aviation Act and are in full force and effect; and
(vi) each Engine of the Aircraft is in compliance with all
airworthiness standards of the FAA or shall be maintained in accordance
with an FAA approved program.
If the borrowing is for the modification of an Aircraft, the invoices
required to determine the amount of such borrowing are attached hereto.
DATED: ATLAS AIR, INC.
--------------------
By:
----------------------------
Name:
Title:
<PAGE> 121
EXHIBIT II
(FORM OF NOTICE OF CONVERSION/CONTINUATION)
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Third Amended and Restated Credit Agreement dated
as of September 5, 1997, as amended, supplemented or otherwise modified to the
date hereof (said Credit Agreement, as so amended, supplemented or otherwise
modified, being the "CREDIT AGREEMENT", the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Atlas Air, Inc., a Delaware corporation ("COMPANY"), the financial institutions
listed therein as Lenders ("LENDERS"), Goldman Sachs Credit Partners L.P.
(formerly known as Pearl Street L.P.), as syndication agent ("SYNDICATION
AGENT"), and Bankers Trust Company, as administrative agent ("ADMINISTRATIVE
AGENT"), this represents Company's request to borrow from Lenders, in accordance
with their applicable Pro Rata Shares, as follows:
1. Date of conversion/continuation: __________________, _______
2. Amount of Loans being converted/continued: $___________________
3. Nature of conversion/continuation:
|_| a. Conversion of Base Rate Loans to Eurodollar Rate Loans
|_| b. Conversion of Eurodollar Rate Loans to Base Rate Loans
|_| c. Continuation of Eurodollar Rate Loans as such
4. If Loans are being continued as or converted to Eurodollar
Rate Loans, the duration of the new Interest Period that
commences on the conversion/ continuation date:
_______________ month(s)
5. The Loans being continued or converted hereby relate to the
Note or Notes listed below:
Amount of Note Date of Note Related Aircraft
-------------- ------------ ----------------
II-1
<PAGE> 122
In the case of a conversion to or continuation of Eurodollar Rate Loans,
the undersigned officer, to the best of his or her knowledge, and Company
certify that no Event of Default or Potential Event of Default has occurred and
is continuing under the Credit Agreement.
DATED: _____________________ ATLAS AIR, INC.
By:
----------------------------
Name:
Title:
II-2
<PAGE> 123
EXHIBIT IIIA
(FORM OF REVOLVING NOTE)
ATLAS AIR, INC.
PROMISSORY NOTE DUE SEPTEMBER 30, 1999
$(1) New York, New York
____________, 199_
FOR VALUE RECEIVED, ATLAS AIR, INC., a Delaware corporation ("COMPANY"),
promises to pay to the order of (2) ("PAYEE") or its registered assigns, on or
before September 30, 1999, the lesser of (x) (3) ($(1)) and (y) the unpaid
principal amount of all purchase money advances made in respect of the Aircraft
referred to below by Payee to Company as Revolving Loans under the Credit
Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Third Amended and Restated Credit Agreement dated as of September 5, 1997 by and
among Company, the financial institutions listed therein as Lenders, Goldman
Sachs Credit Partners L.P., as Syndication Agent and Bankers Trust Company, as
Administrative Agent (said Credit Agreement, as it may be amended, supplemented
or otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms
defined therein and not otherwise defined herein being used herein as therein
defined).
This Note is one of Company's "Revolving Notes" in the aggregate principal
amount of $250,000,000 and is issued pursuant to and entitled to the benefits of
the Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Loans evidenced
hereby were made and are to be repaid.
This Note is being issued with reference to the purchase and/or
modification of the following Eligible Aircraft: _______________________ (the
"AIRCRAFT").
- ----------
(1) Insert amount of Lender's Pro Rata share of Maximum Note Amount.
(2) Insert Lender's name in capital letters.
(3) Insert amount of Lender's Pro Rata share of Maximum Note Amount.
IIIA-1
<PAGE> 124
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent as provided in
subsection 9.1B(ii) of the Credit Agreement, Company and Administrative Agent
shall be entitled to deem and treat Payee as the owner and holder of this Note
and the Loans evidenced hereby. Payee hereby agrees, by its acceptance hereof,
that before disposing of this Note or any part hereof it will make a notation
hereon of all principal payments previously made hereunder and of the date to
which interest hereon has been paid; provided, however, that the failure to make
a notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Company hereunder with respect to payments of principal of or
interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is secured by the Collateral described in the Chattel Mortgage
and Security Agreement (Aircraft No. __) dated as of ____________________,
between Company and Administrative Agent, each Second Aircraft Chattel Mortgage,
whether now or hereafter in effect, and the other Collateral Documents.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 9.1 and 9.16 of the Credit Agreement.
IIIA-2
<PAGE> 125
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 9.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
ATLAS AIR, INC.
By:
-------------------------
Name:
Title:
IIIA-3
<PAGE> 126
TRANSACTIONS
ON
REVOLVING NOTE
<TABLE>
<CAPTION>
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
---- ----------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
IIIA-4
<PAGE> 127
EXHIBIT IIIB
(FORM OF TERM NOTE)
ATLAS AIR, INC.
PROMISSORY NOTE DUE SEPTEMBER 30, 2002
$(1) New York, New York
September 30, 1999
FOR VALUE RECEIVED, ATLAS AIR, INC., a Delaware corporation ("COMPANY"),
promises to pay to the order of (2) ("PAYEE") or its registered assigns the
principal amount of (3) ($(1)) in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Third Amended and Restated Credit Agreement dated as of September 5, 1997 by and
among Company, the financial institutions listed therein as Lenders, Goldman
Sachs Credit Partners L.P., as Syndication Agent and Administrative Agent (said
Credit Agreement, as it may be amended, supplemented or otherwise modified from
time to time, being the "CREDIT AGREEMENT", the terms defined therein and not
otherwise defined herein being used herein as therein defined).
Company shall make principal payments on this Note in consecutive quarterly
installments, commencing on December 31, 1999 and ending on September 30, 2002.
Each such installment shall be due on the date specified in the Credit Agreement
and in an amount determined in accordance with the provisions thereof; provided
that the last such installment shall be in an amount sufficient to repay the
entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon.
This Note is one of Company's "Term Notes" in the aggregate principal
amount of $4 and is issued pursuant to and entitled to the benefits of the
Credit Agreement, to
- --------
(1) Insert amount of Lender's Term Loan in numbers.
(2) Insert Lender's name in capital letters.
(3) Insert amount of Lender's Term Loan in words.
(4) Insert aggregate amount of all Term Loans in numbers.
IIIB-1
<PAGE> 128
which reference is hereby made for a more complete statement of the terms and
conditions under which the Term Loan evidenced hereby was made and is to be
repaid.
This Note is being issued upon conversion of a Revolving Note dated
_____________ which was issued with reference to the purchase and/or
modification of the following Eligible Aircraft: _____________________________.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent as provided in
subsection 9.1B(ii) of the Credit Agreement, Company and Administrative Agent
shall be entitled to deem and treat Payee as the owner and holder of this Note
and the Loan evidenced hereby. Payee hereby agrees, by its acceptance hereof,
that before disposing of this Note or any part hereof it will make a notation
hereon of all principal payments previously made hereunder and of the date to
which interest hereon has been paid; provided, however, that the failure to make
a notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Company hereunder with respect to payments of principal of or
interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is secured by the Collateral described in the Chattel Mortgage
and Security Agreement (Aircraft No. ___) dated as of ___________________,
between Company and Administrative Agent, each Second Aircraft Chattel
Mortgage, whether now or hereafter in effect, and the other Collateral
Documents.
IIIB-2
<PAGE> 129
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 9.1 and 9.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 9.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
ATLAS AIR, INC.
By:
--------------------------
Name:
Title:
IIIB-3
<PAGE> 130
PAYMENTS
ON
TERM NOTE
<TABLE>
<CAPTION>
Outstanding
Amount of Principal
Principal Paid Balance Notation
Date This Date This Date Made By
---- --------- --------- -------
<S> <C> <C> <C>
</TABLE>
IIIB-4
<PAGE> 131
EXHIBIT IV
(FORM OF COMPLIANCE CERTIFICATE)
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) We are the duly elected (Title) and (Title) of Atlas Air, Inc., a
Delaware corporation ("COMPANY");
(2) We have reviewed the terms of that certain Third Amended and
Restated Credit Agreement dated as of September 5, 1997, as amended,
supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, supplemented or otherwise modified, being the
"CREDIT AGREEMENT", the terms defined therein and not otherwise defined
herein being used herein as therein defined), by and among Atlas Air, Inc.,
a Delaware corporation ("COMPANY"), the financial institutions listed
therein as Lenders ("LENDERS"), Goldman Sachs Credit Partners L.P.
(formerly known as Pearl Street L.P.), as syndication agent ("SYNDICATION
AGENT"), and Bankers Trust Company, as administrative agent
("ADMINISTRATIVE AGENT"), and the terms of the other Loan Documents, and we
have made, or have caused to be made under our supervision, a review in
reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by the attached financial
statements; and
(3) The examination described in paragraph (2) above did not disclose,
and we have no knowledge of, the existence of any condition or event which
constitutes an Event of Default or Potential Event of Default during or at
the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate(, except as set forth
below).
(Set forth (below) (in a separate attachment to this Certificate) are all
exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Company has taken, is taking, or proposes to take with respect to each such
condition or event:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------)
IV-1
<PAGE> 132
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this __________ day of _____________, 199_ pursuant to subsection
5.1(iv) of the Credit Agreement.
ATLAS AIR, INC.
By:
--------------------------
Name:
Title:
IV-2
<PAGE> 133
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ____________, 199_ and pertains to the period from
____________, 199_ to ____________, 199_. Subsection references herein relate to
subsections of the Credit Agreement.
A. INDEBTEDNESS
1. Indebtedness permitted under subsection 6.1(xii): $___________
2. Aggregate liability, contingent or otherwise, outstanding
under subsection 6.4(vi): $___________
3. Maximum permitted under subsection
6.1(xii)(($30,000,000)-(A.2)): $___________
B. LIENS
1. Indebtedness secured by Liens permitted under subsec-
tion 6.2A(v): $___________
2. Maximum permitted under subsection 6.2A(v): $10,000,000
C. INVESTMENTS
1. Consolidated book value of the assets of Company and
its Subsidiaries: $___________
2. 15% of C.1: $___________
3. Investments permitted under subsection 6.3(iii): $___________
4. Maximum permitted under subsection 6.3(iii) (C.2): $___________
5. Investments permitted under subsection 6.3(viii): $___________
6. Maximum permitted under subsection 6.3(viii): $5,000,000
IV-3
<PAGE> 134
D. INVESTMENTS IN JOINT VENTURES(1)
1. Lesser of 25% of Consolidated Net Income for Fiscal
Year and $10,000,000: $___________
2. Dividends declared or paid during Fiscal Year: $___________
3. Contributions to capital of Special Purpose Subsidiaries
during Fiscal Year: $___________
4. Investments made under subsection 6.3(iv): $___________
5. Maximum permitted under subsection 6.3(iv) (1 - 2 - 3): $___________
E. CONTINGENT OBLIGATIONS
1. Contingent Obligations permitted under subsec-
tion 6.4(vi): $___________
2. Indebtedness outstanding under subsection 6.1 (xii): $___________
3. Maximum permitted under subsection 6.4(vi)
(($30,000,000)-(E-2)): $___________
F. RESTRICTED JUNIOR PAYMENTS(2)
1. Lesser of 25% of Consolidated Net Income for Fiscal
Year and $10,000,000: $___________
2. Dividends declared and paid under subsection 6.5(ii): $___________
3. Maximum permitted under subsection 6.5(ii) (F.1): $___________
- ----------
(1) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 5.1(iii)
in respect of such Fiscal Year.
(2) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 5.1(iii)
in respect of such Fiscal Year.
IV-4
<PAGE> 135
G. MINIMUM INTEREST COVERAGE RATIO (for the four-Fiscal Quarter
period ending _____________, 199_)
1. Consolidated Net Income: $___________
2. Consolidated Interest Expense: $___________
3. Provisions for taxes based on income: $___________
4. Total depreciation expense: $___________
5. Total amortization expense: $___________
6. Other non-cash items reducing Consolidated Net Income: $___________
7. All cash expenditures relating to reserves on the June 30,
1997 balance sheet $___________
8. Other non-cash items increasing Consolidated Net Income: $___________
9. Consolidated Adjusted EBITDA (adjusted for periods
ending prior to December 31, 1996) (1 + 2 + 3 + 4 +
5 + 6 - 7)-(8): $___________
10.Interest Coverage Ratio (9):(2): _____:1:00
11. Minimum ratio required under subsection 6.6A: _____:1:00
H. MAXIMUM LEVERAGE RATIO (as of _____________, 199_)
1. Consolidated Total Debt: $___________
2. Cash and Cash Equivalents in excess of $25,000,000: $___________
3. Consolidated Rental Payments $___________
4. Consolidated Adjusted EBITDA (G.9 above) $___________
5. Leverage Ratio (H.1 - H.2) + (7 x H.3): (H.4 + H.3): _____:1:00
6. Maximum ratio permitted under subsection 6.6B: _____:1:00
IV-5
<PAGE> 136
I. MINIMUM CONSOLIDATED NET WORTH (as of _____________, 199_)
1. Consolidated Net Worth: $___________
2. Minimum required under subsection 6.6E: $___________
J. FUNDAMENTAL CHANGES
1. Aggregate value of assets sold in Asset Sales during current
Fiscal Year permitted under subsection 6.7(iii): $___________
2. Maximum permitted under subsection 6.7(iii): $100,000,000
3. Aggregate value of assets sold in Asset Sales after Closing
Date in one or more transactions permitted under subsection
6.7(iii): $___________
4. Maximum permitted under subsection 6.7(iii): $500,000,000
K. CONSOLIDATED CAPITAL EXPENDITURES
1. Consolidated Capital Expenditures for Fiscal Year-to-
date: $___________
2. Maximum Consolidated Capital Expenditures Amount permitted
under subsection 6.7 (viii) for Fiscal Year: $___________
L. LEASES
1. Obligations under leases $___________
2. Maximum permitted under subsection 6.9 $___________
IV-6
<PAGE> 137
EXHIBIT VII
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and between
the parties designated as Assignor ("Assignor") and Assignee ("Assignee") above
the signatures of such parties on the Schedule of Terms attached hereto and
hereby made an integral part hereof (the "Schedule of Terms") and relates to
that certain Credit Agreement described in the Schedule of Terms (said Credit
Agreement, as amended, supplemented or otherwise modified to the date hereof and
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective upon the Settlement Date specified in Item 4 of the Schedule
of Terms (the "Settlement Date"), Assignor hereby sells and assigns to Assignee,
without recourse, representation or warranty (except as expressly set forth
herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitment and outstanding Loans, if any, which represents, as of the
Settlement Date, the percentage interest specified in Item 3 of the Schedule of
Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "Assigned Share").
(b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loans included within the Assigned Share, such payment to be made by
wire transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 5 of the Schedule of Terms.
(c) Assignor hereby represents and warrants that Item 3 of the Schedule of
Terms correctly sets forth the amount of the Commitment and the Pro Rata Share
corresponding to the Assigned Share.
(d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have
VII-1
<PAGE> 138
all of the rights and obligations of a Lender under the Loan Documents, and
shall be deemed to have made all of the covenants and agreements contained in
the Loan Documents, arising out of or otherwise related to the Assigned Share,
and (ii) Assignor shall be absolutely released from any of such obligations,
covenants and agreements assumed or made by Assignee in respect of the Assigned
Share. Assignee hereby acknowledges and agrees that the agreement set forth in
this Section 1(d) is expressly made for the benefit of Company, Administrative
Agent, Assignor and the other Lenders and their respective successors and
permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitment and the Pro Rata Share
corresponding to the Assigned Share as set forth in Item 3 of the Schedule of
Terms or on the interest of Assignee in any outstanding Loans corresponding
thereto, and (iii) from and after the Settlement Date, Administrative Agent
shall make all payments under the Credit Agreement in respect of the Assigned
Share (including without limitation all payments of principal and accrued but
unpaid interest and commitment fees with respect thereto) (A) in the case of any
such interest and fees that shall have accrued prior to the Settlement Date, to
Assignor, and (B) in all other cases, to Assignee; provided that Assignor and
Assignee shall make payments directly to each other to the extent necessary to
effect any appropriate adjustments in any amounts distributed to Assignor and/or
Assignee by Administrative Agent under the Loan Documents in respect of the
Assigned Share in the event that, for any reason whatsoever, the payment of
consideration contemplated by Section 1(b) occurs on a date other than the
Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and beneficial
owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Assignor to Assignee or by or on behalf
of Company or any of its Subsidiaries to Assignor or Assignee in connection with
the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor shall Assignor be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or as to the existence or possible
existence of any Event of Default or Potential Event of Default.
VII-2
<PAGE> 139
(c) Assignee represents and warrants that it is an Eligible Assignee; that
it has experience and expertise in the making of loans such as the Loans; that
it has acquired the Assigned Share for its own account in the ordinary course of
its business and without a view to distribution of the Loans within the meaning
of the Securities Act or the Exchange Act or other federal securities laws (it
being understood that, subject to the provisions of subsection 9.1 of the Credit
Agreement, the disposition of the Assigned Share or any interests therein shall
at all times remain within its exclusive control); and that it has received,
reviewed and approved a copy of the Credit Agreement (including all Exhibits and
Schedules thereto).
(d) Assignee represents and warrants that it has received from Assignor
such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the other party
hereto that it has full power and authority to enter into this Agreement and to
perform its obligations hereunder in accordance with the provisions hereof, that
this Agreement has been duly authorized, executed and delivered by such party
and that this Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought.
(c) Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed
VII-3
<PAGE> 140
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the notice address of each of Assignor and Assignee shall be as
set forth on the Schedule of Terms or, as to either such party, such other
address as shall be designated by such party in a written notice delivered to
the other such party. In addition, the notice address of Assignee set forth on
the Schedule of Terms shall serve as the initial notice address of Assignee for
purposes of subsection 9.8 of the Credit Agreement.
(d) In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the "Effective
Date") upon which all of the following conditions are satisfied: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
execution of a counterpart hereof by Company as evidence of its consent hereto
to the extent required under subsection 9.1B(i) of the Credit Agreement, (iii)
the receipt by Administrative Agent of the processing and recordation fee
referred to in subsection 9.1B(i) of the Credit Agreement, (iv) in the event
Assignee is a Non-US Lender (as defined in subsection 2.7B(iii)(a) of the Credit
Agreement), the delivery by Assignee to Administrative Agent of such forms,
certificates or other evidence with respect to United States federal income tax
withholding matters as Assignee may be required to deliver to Administrative
Agent pursuant to said subsection 2.7B(iii)(a), (v) the execution of a
counterpart hereof by Administrative Agent as evidence of its acceptance hereof
in accordance with subsection 9.1B(ii) of the Credit Agreement, and (vi) the
receipt by Administrative Agent of originals or telefacsimiles of the
counterparts described above and authorization of delivery thereof.
VII-4
<PAGE> 141
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
[Remainder of page intentionally left blank]
VII-5
<PAGE> 142
SCHEDULE OF TERMS
1. Borrower: Atlas Air, Inc.
2. Name and Date of Credit Agreement: Third Amended and Restated Credit
Agreement dated as of September 5, 1997, by and among Atlas Air, Inc.,
the financial institutions listed therein as Lenders, Goldman Sachs
Credit Partners L.P., as syndication agent, and Bankers Trust Company,
as administrative agent.
3. Amounts:
(a) Aggregate Commitments of all Lenders: $250,000,000
(b) Assigned Share/Pro Rata Share: ___________%
(c) Amount of Assigned Share of Commitments: $___________
4. Settlement Date: ____________, 199_
5. Payment Instructions:
ASSIGNOR: ASSIGNOR:
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
Attention: _________________ Attention: _________________
Reference: _________________ Reference: _________________
6. Notice Addresses:
ASSIGNOR: ASSIGNOR:
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
Attention: _________________ Attention: _________________
Reference: _________________ Reference: _________________
7. Signatures:
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
VII-6
<PAGE> 143
Accepted in accordance with sub-
section 9.1B(ii) [, and consented to in
accordance with subsection 9.1B(i),]
of the Credit Agreement
BANKERS TRUST COMPANY,
as Administrative Agent
By:
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
By:
-------------------------------
Name:
Title:
VII-7
<PAGE> 144
EXHIBIT VIII
[FORM OF CERTIFICATE RE NON-BANK STATUS]
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Third Amended and Restated Credit
Agreement dated as of September 5, 1997 (said Credit Agreement, as amended,
supplemented or otherwise modified to the date hereof, being the "Credit
Agreement") by and among Atlas Air, Inc., a Delaware corporation ("Company"),
the financial institutions listed therein as Lenders ("Lenders"), Goldman Sachs
Credit Partners L.P. (formerly known as Pearl Street L.P.), as syndication agent
("Syndication Agent"), and Bankers Trust Company, as administrative agent
("Administrative Agent"). Pursuant to subsection 2.7B(iii) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" or other
Person described in Section 881(c)(3) of the Internal Revenue Code of 1986, as
amended.
[NAME OF LENDER]
By:
-----------------------------
Name:
Title:
VIII-1
<PAGE> 145
EXHIBIT IX
[FORM OF FINANCIAL CONDITION CERTIFICATE]
FINANCIAL CONDITION CERTIFICATE
This FINANCIAL CONDITION CERTIFICATE (this "Certificate") is delivered in
connection with that certain Third Amended and Restated Credit Agreement dated
as of September 5, 1997, as amended, supplemented or otherwise modified to the
date hereof (said Credit Agreement, as so amended, supplemented or otherwise
modified, being the "Credit Agreement", the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Atlas Air, Inc., a Delaware corporation ("Company"), the financial institutions
listed therein as Lenders ("Lenders"), Goldman Sachs Credit Partners L.P.
(formerly known as Pearl Street L.P.), as syndication agent ("Syndication
Agent"), and Bankers Trust Company, as administrative agent ("Administrative
Agent"). Capitalized terms used herein without definition have the same meanings
as in the Credit Agreement.
A. I am the duly qualified and acting chief financial officer of Company.
In such capacity I have participated actively in the management of its financial
affairs and am familiar with its financial statements and those of its
Subsidiaries. I have, together with other officers of Company, acted on behalf
of Company in connection with the negotiation of the Credit Agreement and I am
familiar with the terms and conditions thereof.
B. I have carefully reviewed the contents of this Certificate, and I have
conferred with counsel for Company for the purpose of discussing the meaning of
its contents.
C. In connection with preparing for the consummation of the transactions
and financings contemplated by the Credit Agreement (the "Proposed
Transactions"), I have participated in the preparation of, and I have reviewed,
pro forma projections of net income and cash flows for Company and its
Subsidiaries for the fiscal years of Company ending December 31, 1997 through
September, 2002, inclusive (the "Projected Financial Statements"). The Projected
Financial Statements were prepared on the basis of information available at
[June 30, 1997]. I know of no facts that have occurred since such date that
would lead me to believe that the Projected Financial Statements are inaccurate
in any material respect. The Projected Financial Statements do not reflect (i)
any potential changes in interest rates from those assumed in the Projected
Financial Statements, (ii) any potential material, adverse changes in general
business conditions, or (iii) any potential changes in income tax laws.
D. In connection with the preparation of the Projected Financial
Statements, I have made such investigations and inquiries as I have deemed
necessary and prudent therefor and, specifically, have relied on historical
information with respect to revenues, expenses and other relevant items supplied
by the supervisory personnel of Company and its Subsidiaries directly
responsible for the various operations involved. Although any assumptions and
any projections
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by necessity involve uncertainties and approximations, I believe, based on my
discussions with other members of management, that the assumptions on which the
Projected Financial Statements are based are reasonable. Based thereon, I
believe that the projections for Company and its Subsidiaries, taken as a whole,
reflected in the Projected Financial Statements provide reasonable estimations
of future performance, subject, as stated above, to the uncertainties and
approximations inherent in any projections.
Based on the foregoing, I have reached the following conclusions:
1. Company is not now, nor will the incurrence of the Obligations
under the Credit Agreement and the incurrence of the other obligations
contemplated by the Proposed Transactions render Company "insolvent" as
defined in this paragraph 1. The recipients of this Certificate and I have
agreed that, in this context, "insolvent" means that the present fair value
of assets is less than the amount that will be required to pay the probable
liability on existing debts as they become absolute and matured. We have
also agreed that the term "debts" includes any legal liability, whether
matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent. Valuation of Company on the basis thereof would reflect the net
value of Company as $__________ representing the difference between asset
values of $__________ (based upon, with respect to aircraft, the book value
of the aircraft as of June 30, 1997 which I believe to be not less than the
present fair value thereof) and liabilities of $__________.
2. By the incurrence of the Obligations under the Credit Agreement and
the incurrence of the other obligations contemplated by the Proposed
Transactions, Company will not incur debts beyond its ability to pay as
such debts mature. I have based my conclusion in part on the Projected
Financial Statements, which demonstrate that Company will have positive
cash flow after paying all of its scheduled anticipated indebtedness
(including scheduled payments under the Credit Agreement, the other
obligations contemplated by the Proposed Transactions and other permitted
indebtedness). I have concluded that the realization of current assets in
the ordinary course of business and anticipated refinancings will be
sufficient to pay recurring current debt and short-term and long-term debt
service as such debts mature, and that the cash flow (including earnings
plus non-cash charges to earnings) will be sufficient to provide cash
necessary to repay the Loans and other Obligations under the Credit
Agreement, the other obligations contemplated by the Proposed Transactions
and other long-term indebtedness as such debt matures.
3. The incurrence of the Obligations under the Credit Agreement and
the incurrence of the other obligations contemplated by the Proposed
Transactions will not leave Company with property remaining in its hands
constituting "unreasonably small capital." In reaching this conclusion, I
understand that "unreasonably small capital" depends upon the nature of the
particular business or businesses conducted or to be conducted, and I have
reached my conclusion based on the needs and anticipated needs for capital
of the businesses conducted or anticipated to be conducted by Company and
its Subsidiaries in light of the Projected Financial Statements and
available credit capacity.
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4. To the best of my knowledge, Company has not executed the Credit
Agreement or any documents mentioned therein, or made any transfer or
incurred any obligations thereunder, with actual intent to hinder, delay or
defraud either present or future creditors.
I understand that Agent and Lenders are relying on the truth and accuracy
of the foregoing in connection with the extension of credit to Company pursuant
to the Credit Agreement.
[Remainder of page intentionally left blank]
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I represent the foregoing information to be, to the best of my knowledge
and belief, true and correct and execute this Certificate this ____ day of
________, 1997.
ATLAS AIR, INC.
By:
---------------------------------
Name:
Title:
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EXHIBIT X
(FORM OF)
FIRST SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. _____)
THIS FIRST SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated ________, 199_,
(this "Mortgage"), and entered into by and between Atlas Air, Inc., a Delaware
corporation ("Company"), and Bankers Trust Company, as agent for and
representative of ("Administrative Agent") the financial institutions
("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into that certain Third Amended and Restated Credit
Agreement dated as of September 5, 1997 (said credit agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time, being
the "Credit Agreement") with the financial institutions listed therein as
Lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent, and
Administrative Agent, pursuant to which Lenders have agreed, on the terms and
conditions set forth in the Credit Agreement, to make purchase money loans to
Company in the principal amount of up to $___________ (the "Loans") to enable
Company to purchase and modify the Aircraft Collateral (as defined below). The
indebtedness with respect to the Aircraft Collateral resulting from such Loans
made by Lenders is to be evidenced by certain promissory notes of Company to the
order of Lenders of even date herewith issued under and pursuant to the Credit
Agreement (such promissory notes, as they may be amended, modified,
supplemented, renewed, converted or extended from time to time, being the
"Notes"). It is a condition precedent to the making by Lenders of the Loans
under the Credit Agreement that this Mortgage be executed, delivered and filed
for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Administrative Agent as
follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents to the
extent such amounts relate to Loans made to finance the purchase of the
Aircraft (as defined below) and the cost of making the Aircraft usable by
Company as a cargo aircraft (including payment of amounts that would
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become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code), and to secure performance of all
obligations and covenants of Company under the Credit Agreement, this Mortgage
and the other Loan Documents to the extent such obligations relate to Loans
made to finance the purchase of the Aircraft Collateral and the cost of making
the Aircraft usable by Company as a cargo aircraft (all such payment and
performance obligations of Company, the "Secured Obligations"), Company hereby
mortgages to Administrative Agent, for the benefit of Lenders, and their
respective successors and assigns, and hereby grants and assigns to
Administrative Agent, for the benefit of Lenders, and their respective
successors and assigns, a first priority purchase money security interest in
the Aircraft and the Spare Engine (the "Aircraft Collateral") and a first
priority security interest in all estate, right, title and interest of Company
in, to and under, the other below described property wherever the same may be
located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in and
to:
(i) the airframe (the Aircraft except for the Engines or engines from
time to time installed thereon), which is described on Schedule I hereto
together with any and all Parts (as hereinafter defined) incorporated or
installed in or attached to such airframe and all Parts removed from such
airframe until such Parts are replaced in accordance with Section 4(e)
hereof (such airframe, together with any and all such Parts, hereinafter
referred to as the "Airframe");
(ii) each of the engines, which are listed in Schedule II hereto or
which are described in a Supplemental Chattel Mortgage (a "Supplemental
Chattel Mortgage") substantially in the form of Exhibit A attached hereto,
supplementing this Mortgage, and listed by manufacturer's serial numbers in
such Schedule or in such Supplemental Chattel Mortgage, whether or not from
time to time thereafter installed on the Airframe or on any other airframe
or aircraft, including any engine designated as a spare engine (the "Spare
Engine"), and any replacement engine which may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof, together,
in each case, with any and all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom, until such Parts
are replaced in accordance with Section 4(e) hereof (each such engine,
spare engine and replacement engine, together with any and all such Parts,
hereinafter referred to as an "Engine" (and the engines identified on such
schedule as spares and each replacement thereof hereinafter referred to as
"Spare Engines") and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment purchased by Company for incorporation or installation in
or attachment to the Airframe or any Engine pursuant to the terms
of the Modification Agreement and any Buyer-Furnished
Equipment whether or not identified in a Supplemental Chattel Mortgage
(collectively referred to herein as "Parts"); and
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(iv) all records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and materials
maintained in the ordinary course of business with respect to the
properties described in paragraphs (i), (ii) and (iii) above (together with
such Airframe and Engines (other than the Spare Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and interest
in and to:
(i) all the tolls, rents, issues, profits, revenues and other income
of the property subject or required to be subject to the lien of this
Mortgage other than any such amounts payable pursuant to an ACMI Contract;
(ii) all monies and securities deposited or required to be deposited
with the Administrative Agent pursuant to any term of this Mortgage and
held or required to be held by Administrative Agent hereunder;
(iii) the Purchase Agreement to the extent it relates to the Aircraft
(include any agreement assigned therewith);
(iv) the Modification Agreement and each BFE Agreement to the extent
each relates to the Aircraft together with all rights, powers, privileges,
options, licenses and other benefits of Company (including such
indemnities, rights of assignment, rights and remedies for breach of any
warranty and/or claims for damages, rights to receive title to parts and
materials, and the rights to any and each and every other guarantee,
condition and warranty contained or implied in the Modification Agreement),
as buyer under such agreement including upon an Event of Default to receive
and collect all payments of any kind now or hereafter payable or receivable
by or for the benefit or account of Company as buyer under the Modification
Agreement or such BFE Agreement to the extent it relates to the Aircraft
and after the occurrence and during the continuation of an Event of Default
the right to (A) give or receive any instrument, notice or other
communication, (B) exercise any election or option or accept any redelivery
of the Aircraft or any part thereof or delivery of any Buyer-Furnished
Equipment or grant any waiver, consent or other approval and (C) enter into
any amendment, supplement or other modification or agreement relating to
the Modification Agreement or such BFE Agreement or any provision thereof
to the extent it relates to the Aircraft;
(v) all amounts payable to Company by any manufacturer, supplier or
vendor of any of the Aircraft Collateral or any component thereof pursuant
to any warranty or indemnity covering any such Collateral;
(vi) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation, requisition or
other taking of any Aircraft Collateral to the extent payable to
Administrative Agent hereunder; and
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(vii) all proceeds of any and all of the properties described above,
including, without limitation, all payments under insurance proceeds or
payment under any indemnity, payable by reason of any loss or damage to the
Aircraft or any Engine.
Company does hereby warrant and represent that it has not assigned or
pledged, and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or interest
hereby assigned to anyone other than Administrative Agent, and that it will not,
except as provided herein or in the Credit Agreement, enter into any agreement
amending or supplementing the Purchase Agreement, the Modification Agreement or
any BFE Agreement to the extent it relates to the Aircraft, execute any waiver
or modification of, or consent under any such agreement, settle or compromise
any claim arising under any such agreement, or submit or consent to the
submission of any dispute, difference or other matter arising under or in
respect of any such agreement, to arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Administrative Agent" has the meaning specified in the first
paragraph of this instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"BFE Agreement" means any agreement entered into by Company from time
to time, in form and substance satisfactory to Administrative Agent, with
respect to Buyer-Furnished Equipment, in each case as the same may be
amended, modified or supplemented from time to time.
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"Buyer-Furnished Equipment" means all materials and parts to be
provided under a Modification Agreement by Company with respect to the
Aircraft, including all parts to be acquired by Company under the BFE
Agreements.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Foreign Air Carrier" means any "foreign air carrier" as defined in
the Act, as to which there is in force a permit issued pursuant to Section
402 of said Act or operators of aircraft operating under or governed by the
provisions of Parts 121, 123 or 129 of the Federal Aviation Regulations, in
each case that are certificated in a country that is a signatory to the
Convention on International Civil Aviation and are operating in conformity
with the Annexes thereunder and that fly routes into the United States on a
regularly scheduled basis.
"Loans" has the meaning specified in the Preliminary Statements.
"Modification Agreement" means (identify specific modification
agreement).
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Purchase Agreement" means (identify specific purchase agreement).
"Second Mortgage" means the Second Security Agreement and Chattel
Mortgage to be entered into with respect to the Aircraft Collateral and the
Aircraft Related Collateral as contemplated by the Credit Agreement, as
the same may be amended, modified or supplemented from time to time.
"Secured Obligations" has the meaning specified in Section 1 hereof.
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"Second Mortgage" means the Second Security Agreement and Chattel
Mortgage dated as of the date hereof between Company and Administrative
Agent as the same may be amended, modified or supplemented from time to
time.
"Spare Engine" has the meaning specified in Section 1.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and has full power and authority to mortgage and
grant the lien and security interest in the Aircraft Collateral and
Aircraft Related Collateral intended by the terms hereof and in the manner
aforesaid and has not assigned or pledged any of its right, title or
interest hereby assigned to anyone other than Administrative Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code and is an air carrier
certificated under Sections 401 and 604(b) of the Act and holds all
necessary air carrier operating certificates.
(c) The Airframe is duly registered in the name of Company in
accordance with the Act; and the Airframe is not registered under the laws
of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and, has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Administrative
Agent), and the airworthiness certificate for the Aircraft is in full force
and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required by
Section 4(g) hereof is in full force and effect.
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(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms and, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, creates a valid, perfected and first priority
mortgage on and purchase money security interest in the Aircraft
Collateral, securing the payment and performance of the Secured
Obligations.
(h) Company has delivered to Administrative Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (and such other states as may be required) with
respect to that portion of the Aircraft Collateral not covered by the
filing system established under the Act and with respect to the Aircraft
Related Collateral; and except for the filings described in this paragraph
and in paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral or Aircraft Related Collateral
under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
(j) Administrative Agent shall have a "purchase-money equipment
security interest" in the Airframe or such Engine within the meaning of
Section 1110 of the United States Bankruptcy Code, and shall be entitled to
all the benefits of said Section with respect to the Airframe or such
Engine.
(k) (i) The Modification Agreement is in full force and effect, and no
provision thereof has been waived, amended, supplemented or canceled in any
respect except to the extent permitted in the Credit Agreement; (ii)
Company is not in default of the Modification Agreement; (iii) no consents,
other than the consent of (the party modifying the Aircraft under the
Modification Agreement), are necessary for the assignment of the
Modification Agreement pursuant to this Mortgage; and (iv) Company has not
previously assigned, pledged or otherwise hypothecated its rights under the
Modification Agreement to the extent it relates to the Aircraft.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances. Company will promptly, at its own expense, take such
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action as may be necessary to duly discharge any such Lien not excepted
above if the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Administrative
Agent from and against, any and all fees and taxes, levies, imposts,
duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section
4(b) being called a "Tax"), which may from time to time be imposed on or
asserted against Administrative Agent or any Lender or the Airframe or any
Engine or any part thereof or interest therein by any Federal, state or
local government or other taxing authority in the United States or by any
foreign government or subdivision thereof or by any foreign taxing
authority in connection with, relating to or resulting from: (i) the
Airframe or any Engine or any part thereof of interest therein; (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use,
storage, maintenance, sale or other disposition of the Airframe or any
Engine; (iii) any rentals or other earnings therefor or arising therefrom
or the income or other proceeds received with respect thereto; or (iv) this
Mortgage; provided, however, that, unless the payment of any such Tax shall
be a condition to the enforceability of this Mortgage or the perfection of
the lien hereof or unless proceedings shall have been commenced to
foreclose any lien which may have attached as security for such Tax,
nothing in this Section shall require the payment of any Tax so long as and
to extent that validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted
and Company shall have set aside on its books adequate reserves with
respect thereto in accordance with generally accepted accounting
principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, will (i) be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code and will be an air
carrier certificated under Sections 401 and 604(b) of the Act and hold all
necessary air carrier operating certificates; (ii) cause the Airframe to be
duly registered and remain duly registered in the name of Company in
accordance with the Act; and (iii) service, repair, inspect, test, maintain
and overhaul the Airframe and each Engine and install replacement equipment
and parts on the Airframe and each Engine (A) so as to keep the Airframe
and each Engine in such operating condition as may be required to permit
the Airframe and each Engine to be utilized in commercial operations
throughout the world, (B) so as to enable the airworthiness certification
of the Airframe to be maintained in good standing at all times under the
Act, except when aircraft of the same type, model or series as the Airframe
(powered by engines of the same type as those with which the Airframe shall
be equipped at the time of grounding) registered in the United States have
been grounded by the FAA; provided, however, that if following its
issuance, the United States FAA airworthiness certificate of the Aircraft
shall be withdrawn, then subject to the provisions of Section 4(f) hereof,
so long as Company is diligently taking or causing to be taken all
necessary action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with Company's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care
used by Company with respect to the same or similar aircraft and
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engines owned or operated by Company so as to keep the same in as
good operating condition as when originally mortgaged hereunder or as when
redelivered under the Modification Agreement, ordinary wear and tear
excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar
equipment, and (D) in such manner as may be necessary to maintain in full
force all warranties of the manufacturers thereof. Nothing herein shall be
deemed to prevent Company from subjecting the Aircraft to the modification
contemplated by the Modification Agreement. Company shall maintain all
records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Company will comply with all airworthiness directives, mandatory notes
or modifications or similar requirements affecting the same (including
those issued by the manufacturer or supplier) in such condition so as to
comply with the provisions of this Mortgage and the rules and regulations
of the FAA from time to time in force and applicable to the Aircraft and
Engines. Neither the Airframe nor any Engine will be maintained, used or
operated in violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to the Airframe or such Engine issued by any such
authority, and in the event that such laws, rules, regulations or orders
require alteration of the Airframe or any Engine, Company, at its own cost
and expense, will conform thereto or obtain conformance therewith and will
maintain the same in proper operating condition under such laws, rules,
regulations and orders, provided, however, that Company may, in good faith
(after having delivered to Administrative Agent an Officer's Certificate
stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable
manner which does not, in Administrative Agent's opinion, adversely affect
the interests under this Mortgage of Administrative Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant
to Section 4(g) shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with
respect to the Airframe or such Engine, except in the case of a requisition
for use by the United States of America, and then only if Company obtains
indemnity in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless
fully covered to Administrative Agent's satisfaction by war risk and
political risk and allied perils insurance or unless the Airframe or such
Engine is operated or used under contract with the Government of the United
States of America under which contract that Government assumes liabilities
for any damages, loss, destruction or failure to return possession of the
Airframe or such Engine at the end of the term of such contract and for
injury to persons or damage to property of others.
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Company shall not use the Aircraft nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Administrative Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer the
right, title or interest of Company in, the Airframe or any Engine except
that, unless a Potential Event of Default shall have occurred and be
continuing, Company may without the prior written consent of Administrative
Agent:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject the Airframe to normal interchange agreements with
Domestic Carriers or any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company in the ordinary course of
business which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of the
Airframe or title to or use for the remainder of its useful life of
such Engine and if Company's title to or use for the remainder of its
useful life, of the Airframe or any Engines shall be divested under
any such agreement or arrangement, such divesture shall be deemed to
be an Event of Loss with respect to the Airframe or such Engine and
Company shall comply with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Company
free and clear of all Liens except (A) those permitted under clauses
(i) or (ii) of the definition of Permitted Encumbrances in the Credit
Agreement, (B) those that apply only to the engines (other than the
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), and (C) the rights
of any Domestic Carrier, under normal interchange agreements which are
customary in the airline industry and do not contemplate or require
the transfer of title to such airframe or the engines installed
thereon;
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(v) install an Engine on an airframe leased to Company or owned
by Company subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clause (iv) above; and (B) Administrative Agent shall
have received from the lessor, conditional vendor or secured party and
each of the purchasers, mortgagees and encumbrancers of such lessor,
conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors
and assigns will acquire or claim any right, title or interest in any
Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to this Mortgage;
(vi) install an Engine on an airframe owned by Company, leased by
Company or owned by Company subject to a conditional sale or other
security agreement under circumstances where neither clause (iv) nor
clause (v) above is applicable; provided that any divesture of title
to such Engine resulting from such installation shall be deemed to be
an Event of Loss with respect to such Engine and Company shall comply
with Section 4(f) in respect thereof;
(vii) lease any Engine and/or the Airframe to a Domestic Air
Carrier other than an ACMI Contract or wet lease permitted under
clause (ix) below, in the ordinary course of its business, for a term
(including without limitation, any option of the lessee to renew or
extend) not to exceed six (6) months (in the case of a lease of an
Engine without the Airframe, not to exceed twelve (12) months),
provided that (A) no such lease contemplates or requires the transfer
of title to or registration of the Airframe or title to any Engine,
(B) if Company's title to any Engine or the Airframe shall be divested
under any such agreement or arrangement, such divestiture shall be
deemed to be an Event of Loss for all purposes, (C) any such lease
shall provide that the lessee may not deliver, transfer or relinquish
possession or sublease the Airframe or any Engine without the prior
written consent of Administrative Agent, other than as permitted by
Section 4(d)(i), (ii) or (iii) hereof, (D) the lease agreement shall
provide that any amounts payable by the lessee to Company thereunder
are assigned hereunder to Administrative Agent for the benefit of
Lenders and that if an Event of Default has occurred and is
continuing, upon notice to the lessee by Administrative Agent, the
lessee shall pay all such amounts to Administrative Agent for the
benefit of Lenders unless and until such lessee shall have received
notice from Administrative Agent for the benefit of Lenders, that the
Event of Default has been cured, (E) the lease agreement shall provide
that the lessee shall agree to maintain and operate any Engine and/or
the Airframe in accordance with Section 4(c) hereof,
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and (F) any such lease will be permissible only if Administrative
Agent receives a perfected first priority security interest in any
such lease;
(viii) lease any Engine and/or the Airframe to a Foreign Air
Carrier other than an ACMI Contract or wet lease permitted under
clause (ix) below, in the ordinary course of its business, under
arrangements that provide for a term (including, without limitation,
any option of the lessee to renew or extend) not to exceed six (6)
months (in the case of a lease of an Engine without the Airframe, not
to exceed twelve (12) months), provided that (A) no such lease
contemplates or requires the transfer of title to or registration of
the Airframe or title to any Engine, (B) if Company's title to any
Engine or the Airframe shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss
for all purposes, (C) any such lease shall provide that the lessee may
not deliver, transfer or relinquish possession or sublease the
Airframe or any Engine without the prior written consent of
Administrative Agent other than as permitted by Section 4(d)(i), (ii)
or (iii) hereof, (D) the lease agreement shall provide that any
amounts payable by the lessee to Company thereunder are assigned
hereunder to Administrative Agent for the benefit of Lenders and that
if an Event of Default has occurred and is continuing, upon notice to
the lessee by Administrative Agent, the lessee shall pay all such
amounts to Administrative Agent for the benefit of Lenders, (E) the
lease agreement shall provide that the lessee shall agree to maintain
and operate any Engine and/or the Airframe in accordance with Section
4(c) hereof, and (F) any such lease will be permissible only if
Administrative Agent receives a perfected first priority security
interest in any such lease;
(ix) enter into an ACMI Contract or wet lease for the Airframe
and the Engines or engines installed thereon with any third party
pursuant to which Company has operational control of the Airframe and
any Engines installed thereon such operation to be performed solely by
employees of Company possessing all current certificates and licenses
that would be required under the applicable laws of the United States
for the performance by such employees of similar functions within the
United States; provided that Company's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI
Contract or wet lease; and
(x) sell the Aircraft or the Spare Engine upon satisfaction of
the conditions and compliance with the terms of subsection 6.7 of the
Credit Agreement.
provided, however, that the rights of any transferee (other than pursuant to a
sale permitted by the terms hereof) who receives possession of the Airframe or
any Engine permitted by the terms hereof shall be made subject and subordinate
to, and any lease permitted by this Section 4(d) (other than a lease permitted
by Section 4(d)(ix)) shall be made expressly subject and subordinate to, the
lien and security interest of this Mortgage
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and all of Administrative Agent's rights hereunder and Company shall
remain primarily liable hereunder for the performance of all the terms of
this Mortgage to the same extent as if such transfer had not occurred, and
any such instrument of transfer (other than a lease permitted by Section
4(d)(ix)) shall include appropriate provisions for the maintenance and
insurance of the Airframe or such Engine, and any such instrument of
transfer shall expressly prohibit any further transfer of the Airframe or
such Engine or any assignment of the rights thereunder; and provided,
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any
way discharge or diminish any of Company's obligations to Administrative
Agent hereunder or under the Credit Agreement. In the event Administrative
Agent shall have received from the lessor, conditional vendor or secured
party of any airframe leased to Company or purchased by Company subject to
a conditional sale or other security agreement, a written agreement
complying with clause (B) of Section 4(d)(v), and the lease or conditional
sale or other security agreement covering such airframe also covers an
engine or engines owned by the lessor under such lease, conditionally owned
by the conditional vendor under such conditional sale agreement, or subject
to such security agreement, Administrative Agent hereby agrees for the
benefit of such lessor, conditional vendor or secured party that
Administrative Agent will not acquire or claim, as against such lessor,
conditional vendor or secured party, any right, title or interest in any
such engine as the result of such engine being installed on the Airframe at
any time while such engine is subject to such lease or conditional sale or
other security agreement and owned by such lessor, conditionally owned by
such conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Company will deliver the Aircraft to (the party modifying the
Aircraft under the Modification Agreement) for modification under the
Modification Agreement no later than __________, __, 199_ (six months
after the date of this Mortgage).
(ii) Except as otherwise provided in Section 4(e)(iv), Company,
at its own cost and expense, will promptly replace all Parts, which
may from time to time be incorporated or installed in or attached to
the Airframe or any Engine and which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such Parts
as promptly as practicable. All replacement Parts shall be free and
clear of all Liens (except Permitted Encumbrances and for pooling
arrangements to the extent permitted by Section 4(e)(iii)), and shall
be in as good
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operating condition as, and shall have a value and utility at
least equal to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain subject to the lien and security interest of this
Mortgage, no matter where located until such time as such Parts shall
be replaced by parts which have been incorporated or installed in or
attached to the Airframe or any Engine and which meet the requirements
for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to
the Airframe or any Engine as above provided, without further act, (A)
such replacement Part shall become subject to the lien and security
interest of this Mortgage and shall be deemed part of the Airframe or
such Engine for all purposes hereof to the same extent as the property
originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall thereupon become free and
clear of all rights of Administrative Agent hereunder and shall no
longer be deemed a Part hereunder.
(iii) Any Part removed from the Airframe or any Engine as
provided in Section 4(e)(ii) may be subjected by Company to a normal
pooling arrangement of the type customary in the airline industry
entered into by Company in the ordinary course of its business and
entered into with Domestic Carriers or Foreign Air Carriers that are
not the subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe
or such Engine in accordance with Section 4(e)(ii) as promptly as
possible after the removal of such removed part. In addition, any
replacement Part when incorporated or installed in or attached to the
Airframe or any Engine in accordance with Section 4(e)(ii) may be
owned subject to such a pooling arrangement, provided Company, at
its expense, as promptly thereafter as possible, either (A) causes
such replacement Part to become subject to the lien and security
interest of this Mortgage in accordance with Section 4(e)(ii) by
Company's acquiring title thereto for the benefit of Administrative
Agent free and clear of all Liens (except Permitted Encumbrances) or
(B) replaces such replacement Part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement Part
owned by Company free and clear of all Liens (except Permitted
Encumbrances).
(iv) Company, at its own cost and expense, shall make or cause to
be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided, that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders.
Company also agrees, at its own cost and expense, to make or cause to
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be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards or requirements of any directive issued by a
manufacturer relating to the Airframe or any Engine. In addition so
long as no Potential Event of Default or Event of Default shall have
occurred and be continuing, Company, at its own cost and expense, may
from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Company may deem desirable
in the proper conduct of its business, provided no such alteration,
modification or addition diminishes the value or utility or impairs
the condition or airworthiness of the Airframe or such Engine below
the value, utility, condition or airworthiness thereof immediately
prior to such alteration, modification or addition assuming the
Airframe or such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
All Parts owned by Company incorporated or installed in or
attached to or added to the Airframe or any Engine as the result of
such alteration, modification or addition shall, without further act,
become subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage or the date the Airframe or Engine is redelivered under
the Modification Agreement or any Part in replacement of or
substitution for any such Part, (B) is not required to be incorporated
or installed in or attached or added to the Airframe or such Engine
pursuant to the terms of Section 4(c) hereof or any other provision of
this Mortgage and (C) can be removed from the Airframe or such Engine
without diminishing or impairing the value, utility or airworthiness
which the Airframe or such Engine would have had (if following the
modification contemplated by Section 4(e)(i), after giving effect to
such Modification) at such time had such alteration, modification or
addition not occurred, assuming the Collateral Aircraft was otherwise
in the condition required by this Mortgage. Upon the removal by
Company of any such Part, as above provided, title thereto shall,
without further act, be free and clear of all rights of the
Administrative Agent hereunder and such Part shall no longer be deemed
a Part hereunder.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
(or the Airframe and any Engine then installed thereon), Company will
promptly notify Administrative Agent thereof in writing (in any event
within five (5) days of such occurrence) and will prepay, at the times
and in the amounts required, the Notes and remaining Secured
Obligations in accordance with the terms of the Credit Agreement.
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(ii) If an Event of Loss shall occur with respect to an Engine
when not installed on the Airframe or under other circumstances in
which there has not occurred an Event of Loss with respect to the
Aircraft, Company will promptly notify Administrative Agent thereof in
writing (in any event within five (5) days of such occurrence) and
will, not later than sixty (60) days after the occurrence of such
Event of Loss, mortgage hereunder, by complying with all of the terms
of subsection (iv) below, another engine of the same or another
manufacturer of the same or an improved model and suitable for
installation and use on the Airframe and which shall be owned by
Company free of all Liens (other than Permitted Encumbrances) and
shall have a value and utility at least equal to (and be in as good
operating condition as) such Engine immediately prior to such Event of
Loss, assuming compliance by Company with all of the terms of this
Mortgage with respect to such Engine. Upon compliance with the terms
of the preceding sentence within such 60-day period, Administrative
Agent will execute and deliver to Company a partial release, in
recordable form, releasing the lien of this Mortgage to the extent
that it covers such Engine with respect to which such Event of Loss
occurred. Such additional engine shall thereupon constitute an
"Engine" for all purposes hereof and shall be deemed to constitute
part of the Aircraft.
(iii) Whenever Company shall subject any Engine to the lien and
security interest of this Mortgage (as contemplated by paragraph (ii)
above), Company will on or prior thereto:
(A) deliver to Administrative Agent and duly file for
recording under the Act, a Supplemental Chattel Mortgage
substantially in the form of Exhibit A hereto duly executed by
Company appropriately describing such engine to be subjected to
the lien and security interest of this Mortgage;
(B) deliver to Administrative Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the
States of Colorado and New York (or such other States as may be
required at such time) covering the security interest created by
this Mortgage to protect the security interest of Administrative
Agent in the Engine to be subjected to the lien and security
interest of this Mortgage;
(C) deliver to Administrative Agent an Officers' Certificate
dated the date of execution of said Supplemental Chattel
Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Engine and Company;
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(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Administrative Agent with evidence of compliance
with the insurance provisions of Section 4(g) hereof with respect
to such Engine as Administrative Agent may reasonably request;
(E) furnish Administrative Agent with such evidence of title
as Administrative Agent may reasonably request concerning such
Engine;
(F) cause to be delivered to Administrative Agent an
appraisal by the Approved Appraisers relating to the Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and in
as good operating condition as the Engine subject to such Event
of Loss immediately prior to such Event of Loss, assuming
compliance by Company with all the terms of this Mortgage with
respect to such Engine; and
(G) cause to be delivered to Administrative Agent an opinion
or opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the engine specifically described in said
Supplemental Chattel Mortgage, is free and clear of all
recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the engine described in said Supplemental
Chattel Mortgage, enforceable against all third parties and
securing the payment of all obligations purported to be
secured thereby and that all action required to perfect
fully such security interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
and
(IV) and as to such other matters as Administrative
Agent may reasonably request.
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Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Administrative
Agent an opinion of counsel for Company as to the due recording of
such Supplemental Chattel Mortgage in accordance with the Act.
(iv) With respect to the Airframe or any Engine, as between the
Administrative Agent and Company, any payments on account of an Event
of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 4(g) below and under
the terms of the Credit Agreement) received from any government
authority or other person shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Engine that has been or is being replaced by
Company pursuant to the terms hereof, such payment shall be paid
over to or retained by Company upon satisfaction of the
conditions for replacement contained in paragraph (iii) above;
and
(B) if such payments are received with respect to an Event
of Loss as to the Aircraft, such payments shall be applied to the
prepayment of the Notes required pursuant to the terms of the
Credit Agreement and shall be held pursuant to the terms of this
Mortgage or the Second Mortgage, or if the Second Mortgage shall
have been satisfied and discharged, the balance, if any, shall be
paid over to or retained by Company.
(v) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Company shall promptly
notify Administrative Agent of such requisition and all of Company's
obligations under this Mortgage shall continue to the same extent as
if such requisition had not occurred. Any payments received by
Administrative Agent or Company from the United States Government for
the use of the Airframe or such Engine, shall be paid over to, or
retained by, Company.
(vi) Any amount referred to in paragraph (iv) or (v) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such payment
or retention any Event of Default or a Potential Event of Default
shall have occurred and be continuing, but shall be held by or paid
over to Administrative Agent as security for the obligations of
Company under this Mortgage, the Second Mortgage and the other Loan
Documents, and, if Administrative Agent shall declare the Credit
Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such time as
there shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to
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Company to the extent not previously applied in accordance with the
preceding sentence.
(g) Insurance.
(i) Company will at all times carry and maintain on or with
respect to the Aircraft, at its own cost and expense, public liability
(including without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage
insurance with insurers of recognized responsibility and reputation in
amounts, of the type and covering the risks customarily carried with
respect to similar aircraft by corporations engaged in the same or
similar business and similarly situated with Company but in no event
in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when the Aircraft is on the
ground and not in operation, Company may carry or cause to be carried,
in lieu of insurance required by this Section, insurance otherwise
conforming with the provisions of this Section except that the amounts
of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily
carried with respect to similar aircraft on the ground by corporations
engaged in the same or similar business and similarly situated with
Company. Any policies of insurance carried in accordance with this
Section 4(g) and any policies taken out in substitution or replacement
of any such policies (A) shall be amended to name Administrative Agent
and Lenders as additional named insureds, (B) shall be primary without
right of contribution from any other insurance which is carried by
Company, (C) shall expressly provide that all provisions thereof,
except the limits of the liability, shall operate in the same manner
as if there were a separate policy covering each insured, and (D)
shall provide that the insurer shall waive any right of subrogation
against Administrative Agent or Lenders.
(ii) Company will at all times carry and maintain with insurers
of recognized responsibility and reputation on or with respect to the
Aircraft, at its own cost and expense, aircraft ground and flight
all-risk hull insurance as well as fire and extended coverage
insurance on Engines and other equipment while removed from the
Airframe (which shall include war risk, governmental confiscation and
expropriation (other than by the United States Government) and allied
perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C)
hijacking (air piracy) or any unlawful seizure or wrongful exercise of
control of the Aircraft or crew in flight (including any attempt at
such seizure or control) made by any person or persons aboard the
Aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by Company with respect to similar
aircraft owned or operated by Company on the same routes or if the
Aircraft is operated on routes
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where the custom is for Domestic Carriers similarly situated with
Company flying comparable routes with similar aircraft to carry such
insurance), of the type usually carried by corporations engaged in the
same or similar business and similarly situated with Company; provided
that such insurance (including any self-insurance to the extent
permitted below) shall at all times prior to delivery under the
Modification Agreement be for an amount not less than the greater of
(W) $30,000,000 and (X) an amount equal to the purchase price under
the Purchase Agreement, and at all times from and after delivery under
the Modification Agreement, the greater of (Y) $50,000,000 and (Z) the
amount under clause (X) plus the total cost of all modifications under
the Modification Agreement. During any period when the Aircraft is on
the ground and not in operation Company may carry or cause to be
carried, in lieu of the insurance required by this Section, insurance
otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Company for aircraft on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name
Administrative Agent and Lenders as additional insureds and loss
payees to the extent their interest may appear and shall provide that
any loss to the Airframe or an Engine in excess of $2,000,000, (and,
if a Potential Event of Default or Event of Default has occurred and
is continuing, any such loss) shall be payable to Administrative Agent
for the benefit of Lenders; and shall be primary without right of
contribution from any other insurance which is carried by
Administrative Agent with respect to its interest therein.
Company may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft in Company's fleet
which are of a value comparable to the Aircraft and as are not
substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with
Company; provided, however, that Company may not self-insure in an
amount in excess of $1,000,000 without the prior written consent of
Administrative Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Administrative Agent and Lenders as additional named insureds, but
without Administrative Agent or Lenders being thereby liable for
premiums; (B) provide that in respect of the interest of
Administrative Agent or Lenders in such policies the insurance shall
not be invalidated by any action or inaction of Company and shall
insure the interests of Administrative Agent and Lenders regardless of
any breach or violation by Company or any Person (other than
Administrative Agent) of any warranty, declaration, condition or
exclusion from coverage contained in such policies; (C) provide that
if such insurance is cancelled, or if any material change is made in
the coverage which affects the interest of Administrative Agent or any
Lender, or
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if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to
Administrative Agent for thirty (30) days (seven (7) days, or such
shorter or longer period as may from time to time be customarily
available in the industry, in the case of any war risk and allied
perils coverage) after receipt by Administrative Agent of written
notice from such insurers of such cancellation, change or lapse; (D)
be in full force and effect throughout any geographical areas at any
time traversed by the Aircraft and shall be payable in U.S. dollars;
(E) waive any right of the insurers to any set-off or counterclaim or
any other deduction, whether by attachment or otherwise in respect of
any liability of Administrative Agent; and (F) waive all rights of
subrogation against Administrative Agent.
(iv) In the case of a lease or contract with the United States or
any agency or instrumentality thereof in respect of the Airframe or
any Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify Company against the same risks against
which Company is required hereunder to insure shall be considered
adequate insurance with respect to the Airframe or such Engine to the
extent of the risks and in the amounts that are the subject of any
such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 21, Company will furnish to Administrative Agent (A)
a report signed by a firm of independent aircraft insurance brokers,
appointed by Company and not objected to by Administrative Agent,
describing in reasonable detail acceptable to Administrative Agent the
insurance then carried and maintained on or with respect to the
Aircraft and the Engines and stating that in the opinion of such firm
such insurance complies with the terms of this Section 4(g) and is
adequate to protect the interests of Company and Administrative Agent,
and (B) certificates of the insurer or insurers evidencing the
insurance covered by the report. Company will cause such brokers to
advise Administrative Agent in writing (x) promptly of any default in
the payment of any premium and of any other act or omission on the
part of Company of which such firm has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance
on the Aircraft or any Engine and (y) at least thirty (30) days prior
to the expiration or termination date, or date of effectiveness of any
material change, of any insurance carried and maintained on the
Aircraft hereunder.
(vi) All insurance payments and other payments received by
Administrative Agent or Company from insurance referred to in
paragraph (ii) above shall be, if received by Company, immediately
paid to Administrative Agent and shall be held and applied:
(A) If such payment is received as a result of an Event of
Loss referred to in paragraph (i) of Section 4(f) hereof, such
payment shall be applied to prepay the Notes and pay any other
Secured Obligations and all
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other obligations required to be paid in accordance with the
terms of the Credit Agreement or if already paid in full by
Company, paid to Company provided no Potential Event of Default
or Event of Default shall have occurred and be continuing; and
(B) If such payment is received as a result of an Event of
Loss referred to in paragraph (ii) Section 4(f) hereof, such
payment shall be paid to Company upon compliance by Company with
the terms of said Section, provided that no Potential Event of
Default or Event of Default shall have occurred and be
continuing.
All insurance payments and other payments received by Administrative
Agent or Company from insurance referred to in paragraph (ii) above
and paid other than as a result of an Event of Loss shall be paid by
Administrative Agent to or be retained by Company, and promptly
applied by Company to the extent necessary to repair the damage to the
Airframe or the Engine for which such insurance was paid, provided
that Administrative Agent shall not be required to make any such
payment to Company if a Potential Event of Default or Event of Default
has occurred and is continuing, but shall be held or paid over to
Administrative Agent as security for the obligations of Company under
this Mortgage, the Second Mortgage and the other Loan Documents, and,
if Administrative Agent shall declare the Credit Agreement to be in
default, shall be applied against Company's obligations hereunder and
thereunder as and when due. Retention by Administrative Agent of any
amounts pursuant to the preceding sentence shall not relieve Company
of its obligations to make promptly all repairs and replacements
required by Sections 4(c) and (e) hereof and to pay for the same with
Company's funds.
(vii) Nothing in this Section 4(g) shall prohibit Administrative
Agent, or any Lender from obtaining insurance with respect to the
Aircraft for its own account. Company 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 4(g). No
insurance maintained by Administrative Agent or any Lender shall
prevent Company from carrying the insurance required or permitted by
this Section or adversely affect such insurance or the cost thereof.
Proceeds of any such insurance carried by Company, Administrative
Agent or Lender shall be paid as provided in the insurance policy
relating thereto and Administrative Agent shall have no duty to obtain
any such insurance.
(h) Inspection. Company will permit any officers, employees or
authorized representatives of Administrative Agent to inspect, at Company's
cost and expense, the Aircraft Collateral and Aircraft Related Collateral,
or any part thereof, and to examine, copy or make extracts from, any and
all books, records and documents in the possession of Company relating to
such Collateral or any part thereof and performance of this Mortgage, all
at such reasonable times and as often as may be requested. Administrative
Agent shall have no duty to make any such inspection or examination and
shall not incur
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any liability or obligation by reason of making or not making any such
inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, cause the
Airframe and each Engine included in the Aircraft Collateral to be legibly
marked (in a reasonably prominent location, which in the case of the
Airframe shall be adjacent to the airworthiness certificate) with such a
plate, disk, or other marking of customary size, and bearing the legend
"Mortgaged to Bankers Trust Company, as Administrative Agent" or such other
legend, as shall in the opinion of Administrative Agent be appropriate or
desirable to evidence the fact that it is subject to the lien and security
interest created by this Mortgage. Company shall not remove or deface, or
permit to be removed or defaced, any such plate, disk, or other marking or
the identifying manufacturer's serial number, and, in the event of such
removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided above,
Company shall not allow the name of any person, association or corporation
to be placed on the Airframe or any Engine as a designation that might be
interpreted as a claim of ownership or of any security interest therein,
except that Company or any permitted lessee may place its customary colors
and insignia or the insignia of the manufacturer on the Airframe or any
Engine.
(j) Modification Agreement and BFE Agreements.
(i) Company shall not upon the occurrence and during the
continuation of an Event of Default under the Credit Agreement enter
into any agreement to amend, rescind, cancel or terminate the
Modification Agreement or any BFE Agreement to the extent it relates
to the Aircraft, without the prior written consent of Administrative
Agent.
(ii) If Administrative Agent and Company shall at any time be in
dispute as to the entitlement of Administrative Agent to exercise any
right hereunder upon an Event of Default in respect of the
Modification Agreement or any BFE Agreement, Company agrees that (the
party modifying the Aircraft under the Modification Agreement) or the
vendor of the Buyer- Furnished Equipment, as the case may be, shall
perform the corresponding obligations exclusively at the direction of
Administrative Agent.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then
Administrative Agent may, without notice of any kind to Company, exercise
in respect of the Aircraft Collateral and Aircraft Related Collateral, (i)
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect at the time in any applicable jurisdiction
(whether or not the Uniform Commercial Code applies to the affected
Aircraft Collateral), (ii) all the rights and remedies provided for in this
Mortgage, the Credit
X-23
<PAGE> 172
Agreement and any other Loan Document, and in any other agreement between
Company and Administrative Agent, and (iii) such other rights and remedies
as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
Administrative Agent may, without notice, take possession of the Aircraft
Collateral or any part thereof and may exclude Company, and all persons
claiming under Company, wholly or partly therefrom. At the request of
Administrative Agent, Company shall promptly deliver or cause to be
delivered to Administrative Agent or to whomsoever Administrative Agent
shall designate, at such time or times and place or places as
Administrative Agent may specify, and fly or cause to be flown to such
airport or airports in the United States as Administrative Agent may
specify, without risk or expense to Administrative Agent, the Aircraft
Collateral or any part thereof. In addition, Company will provide, without
cost or expense to Administrative Agent, storage facilities for the
Aircraft Collateral. If Company shall for any reason fail to deliver the
Aircraft Collateral or any part thereof after demand by Administrative
Agent, Administrative Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Administrative Agent the right
to immediate possession or requiring Company to deliver immediate
possession of the Aircraft Collateral or any part thereof to Administrative
Agent, to the entry of which judgment Company hereby specifically consents,
or (ii) with or without such judgment, pursue the Aircraft Collateral or
any part thereof wherever it may be found and may enter any of the premises
of Company where the Aircraft Collateral may be and search for the Aircraft
Collateral and take possession of and remove the same. Company agrees to
pay to Administrative Agent, upon demand, all expenses incurred in taking
any such action; and all such expenses shall, until paid, be secured by the
lien of this Mortgage. Upon every such taking of possession, Administrative
Agent may, from time to time, make all such reasonable expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Aircraft Collateral, as it may deem proper. In
each such case, Administrative Agent shall have the right to maintain, use,
operate, store, lease, control or manage the Aircraft Collateral or any
part thereof and to carry on the business and exercise all rights and
powers of Company relating to the Aircraft Collateral, as Administrative
Agent shall deem best, including the right to enter into any and all such
agreements with respect to the maintenance, use, operation, storage,
leasing, control, management or disposition of the Aircraft Collateral or
any part thereof as Administrative Agent may determine. Further, after the
occurrence and during the continuation of an Event of Default,
Administrative Agent shall be entitled to collect and receive directly all
tolls, rents, revenues, issues, income, products and profits of the
Aircraft Collateral or any part thereof (other than any received under any
ACMI Contract). Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments which
Administrative Agent may be required or may elect to make, if any, for
taxes, assessments, or other proper charges upon the Aircraft Collateral
and all other payments which Administrative Agent may be required or
authorized to make under any provision of this
X-24
<PAGE> 173
Mortgage, as well as just and reasonable compensation for the services of
Administrative Agent and of all persons properly engaged and employed for
such purposes by Administrative Agent.
(c) Administrative Agent, with or without taking possession of the
Aircraft Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as
an entirety or in separate lots or parcels, the Aircraft Collateral or
any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the retention of title by Administrative
Agent to the property so sold), as Administrative Agent may determine,
whether or not the Aircraft Collateral shall be at the place of sale;
and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it will not (and
hereby irrevocably waives its right to) at any time plead, or claim the
benefit or advantage of, any appraisement, valuation, stay, extension,
moratorium, or redemption law now or hereafter in force, in order to
prevent or hinder the enforcement of this Mortgage or the absolute sale of
the Aircraft Collateral. Company, for itself and all who may claim under
it, waives, to the extent that it lawfully may, all right to have all or
any portion of the Aircraft Collateral marshalled upon any foreclosure
hereof.
(e) Each and every remedy of Administrative Agent shall be cumulative
and shall not be exclusive of any other remedies provided now or hereafter
at law, in equity or otherwise. Company shall reimburse Administrative
Agent, upon demand, for all fees and other expenses paid or incurred by
Administrative Agent in exercising any rights, powers or remedies granted
hereby. All such fees and expenses shall, until paid, be secured by the
lien of this Mortgage.
SECTION 6. Application of Proceeds.
The proceeds of any sale, lease or other disposition of all or any of the
Aircraft Collateral or Aircraft Related Collateral under this Mortgage and all
other sums realized by Administrative Agent pursuant to this Mortgage or any
proceedings hereunder shall be applied in the following order of priority:
X-25
<PAGE> 174
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Administrative Agent's agents and counsel, and all expenses, liabilities
and advances made or incurred by Administrative Agent in connection
therewith, including, without limitation, taxes upon or with respect to the
sale, lease, disposition or realization and the payment of taxes and Liens,
if any, prior to the lien and security interest of this Mortgage (except
any taxes or Liens to which the respective sale, lease, disposition or
realization shall have been subject) and to the payment of expenses and the
reimbursement of payments incurred or made by Administrative Agent pursuant
to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement;
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document with respect
to the Loans made to finance the purchase of the Aircraft Collateral and
the cost of making the Aircraft usable by Company as a cargo aircraft; and
Fifth: To the extent the security interest under the Second Mortgage
remains in effect, as required to be applied thereunder, otherwise to
Company or to such other Person(s) as may lawfully be entitled, or as any
court of competent jurisdiction may direct, the remainder.
SECTION 7. Administrative Agent as Attorney.
Company hereby irrevocably appoints Administrative Agent the true and
lawful attorney of Company (with full power of substitution) in the name, place
and stead of, and at the expense of, Company at any time after the occurrence
and during the continuation of an Event of Default (i) to ask, demand, collect,
sue for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Aircraft Collateral and
Aircraft Related Collateral, (ii) to make all necessary transfers of all or any
part of the Aircraft Collateral and Aircraft Related Collateral in connection
with any sale, lease or other disposition made pursuant hereto, (iii) to execute
and deliver for value all necessary or appropriate bills of sale, assignments
and other instruments in connection with any such sale, lease or other
disposition, and (iv) generally to do, at Administrative Agent's option and
Company's cost and expense, at any time, or from time to time, all acts and
things that Administrative Agent deems necessary to protect, preserve or realize
upon the Aircraft Collateral and Aircraft Related Collateral and Administrative
Agent's security interest therein, in order to effect the intent of this
Mortgage, all as fully and effectively as Company might do, Company hereby
ratifying and
X-26
<PAGE> 175
confirming all that its said attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Administrative Agent to be held and applied under
this Section, and all monies if any, required to be paid to Administrative Agent
hereunder, which disposition is not elsewhere herein otherwise specifically
provided for shall be held by Administrative Agent and applied from time to time
as provided herein, in the Second Mortgage and in the Credit Agreement and the
other Loan Documents and shall be held in an account in the name of
Administrative Agent and invested in Cash Equivalents for the benefit and at the
risk of Company.
SECTION 9. Administrative Agent's Right to Perform.
If Company 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,
Administrative Agent may itself make such payment or perform or comply with such
agreement (including, without limitation, the agreement of Company to maintain
insurance pursuant to Section 4(g) hereof), and the amount of such payment and
the amount of the reasonable expenses of Administrative Agent 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 rate
specified in the Credit Agreement from time to time, shall be payable by Company
to Administrative Agent on demand and shall constitute additional indebtedness
secured by the lien and security interest of this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Administrative Agent may from time to time request, in order to correct
any defect, error or omission which may at any time hereafter be discovered in
the contents of this Mortgage or in the execution or delivery hereof, and/or in
order to more effectively carry out the intent and purpose of this Mortgage and
to establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of Administrative Agent hereunder,
including, without limitation, the execution, delivery and filing of any
instruments with the FAA and of any Uniform Commercial Code financing and
continuation statements with respect to the security interests created hereby,
in form and substance satisfactory to Administrative Agent, in such
jurisdictions as Administrative Agent may reasonably request. Company hereby
authorizes Administrative Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
X-27
<PAGE> 176
SECTION 11. Right to Possession Under Bankruptcy Code.
This Mortgage constitutes a purchase money equipment security interest in
the Aircraft Collateral within the meaning of Section 1110 of the United States
Bankruptcy Code, and Administrative Agent shall be entitled to the benefits
thereof. Notwithstanding, if at any time the Bankruptcy Code shall be amended in
such manner as to repeal or otherwise restrict the availability or applicability
of the provisions of Section 1110 of the United States Bankruptcy Code, the
right of Administrative Agent to take possession of the Aircraft Collateral in
compliance with the provisions of this instrument shall not be affected thereby.
SECTION 12. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Administrative Agent hereunder, to the benefit
of Administrative Agent and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), Administrative Agent or any
Lender may, subject to any restrictions contained in the Credit Agreement,
assign or otherwise transfer the Credit Agreement or any Note to any other
person or entity, and such other benefits in respect thereof granted to
Administrative Agent herein or otherwise. Upon the indefeasible payment in full
of the Secured Obligations, the security interest granted hereby shall terminate
and all rights to the Aircraft Collateral and Aircraft Related Collateral shall
revert to Company. Upon any such termination, Administrative Agent will execute
and deliver to Company, at Company's expense, such instruments of release and
termination as Company may reasonably request to evidence such termination.
SECTION 13. Miscellaneous.
Any provision of this Mortgage 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 unenforce- able such provision in
any other jurisdiction. To the extent permitted by applicable law, Company
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Administrative Agent. The captions and headings in
this Mortgage are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
X-28
<PAGE> 177
SECTION 14. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees
to be bound by any judgment rendered thereby in connection with this Mortgage.
Company hereby agrees that service of process in any such proceeding in any such
court may be made by registered or certified mail return receipt requested to
Company at its address provided on the signature pages of the Mortgage, such
service being hereby acknowledged by Company to be effective and binding service
in every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 16 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Administrative Agent to bring proceedings against Company in
the courts of any other jurisdiction.
SECTION 15. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Article 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
SECTION 16. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Administrative Agent, as the case may be, addressed to
it at the address of such party specified on the signature page hereof, or as to
either party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section 16. All such notices and other communications shall, when mailed,
be effective when deposited in the mails, addressed as aforesaid.
X-29
<PAGE> 178
SECTION 17. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
(Remainder of page intentionally left blank.)
X-30
<PAGE> 179
IN WITNESS WHEREOF, Company and Administrative Agent have caused this
Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS AIR, INC.
By:
----------------------------
Name:
Title:
Notice Address:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Nesa Hassanein
Senior Vice President and
General Counsel
BANKERS TRUST COMPANY,
as Administrative Agent
By:
----------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
X-31
<PAGE> 180
SCHEDULE I
to First Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
X-32
<PAGE> 181
SCHEDULE II
to First Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
X-33
<PAGE> 182
EXHIBIT A
to First Security Agreement
and Chattel Mortgage
FIRST SUPPLEMENTAL CHATTEL MORTGAGE NO. ___
THIS FIRST SUPPLEMENTAL CHATTEL MORTGAGE is dated __________, 19__ between
Atlas Air, Inc., a Delaware corporation (the "Company"), and Bankers Trust
Company, as agent for and representative of (in such capacity, "Administrative
Agent") the financial institutions ("Lenders") party to the Third Amended and
Restated Credit Agreement dated as of September 5, 1997 among Company, Lenders,
Goldman Sachs Credit Partners L.P., as syndication agent, and Bankers Trust
Company, as administrative agent.
Company and Mortgagee have heretofore entered into a First Security
Agreement and Chattel Mortgage dated __________, 199__ (the "Mortgage") and the
terms defined therein and not otherwise defined herein are used herein as
therein defined. The Mortgage provides for the execution and delivery of
supplements thereto substantially in the form hereof, for the purpose of
particularly describing each Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine to
Administrative Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 19__, and has been assigned Conveyance No. __________.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to
Administrative Agent, its successors and assigns, and grants and assigns to
Administrative Agent, its successors and assigns for the benefit of Lenders, a
first priority purchase money security interest in all estate, right, title and
interest of Company in and to the property described in Schedule I annexed
hereto (whether or not such Engine shall be installed on or attached to the
Airframe), and the proceeds thereof.
This First Supplemental Chattel Mortgage shall be construed as supplemental
to the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS FIRST SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
This First Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same First Supplemental Chattel Mortgage.
X-34
<PAGE> 183
(Balance of page intentionally left blank.)
X-35
<PAGE> 184
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS AIR, INC.
By:
----------------------------
Name:
Title:
Notice Address:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Nesa Hassanein
Senior Vice President and
General Counsel
BANKERS TRUST COMPANY,
as Administrative Agent
By:
----------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
X-36
<PAGE> 185
SCHEDULE I
to First Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
X-37
<PAGE> 186
EXHIBIT XI
(FORM OF)
SECOND SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. ________)
THIS SECOND SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated __________,
199__, (this "Mortgage"), and entered into by and between Atlas Air, Inc., a
Delaware corporation ("Company"), and Bankers Trust Company, as agent for and
representative of ("Administrative Agent") the financial institutions
("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into that certain Third Amended and Restated Credit
Agreement dated as of September 5, 1997 (said credit agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time, being
the "Credit Agreement") with the financial institutions listed therein as
Lenders, Goldman Credit Partners L.P., as Syndication Agent, and Administrative
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make purchase money loans to Company in the
principal amount of up to $___________ (the "Aircraft Loans") to enable Company
to purchase and modify the Aircraft Collateral (as defined below). Lenders have
also agreed pursuant to the Credit Agreement to make additional loans (the
"Additional Loans") for the acquisition and modification of Eligible Aircraft
(as defined in the Credit Agreement) and have made one or more purchase money
loans to Company for Financed Aircraft (as defined in the Credit Agreement)
other than the Aircraft (all such Eligible Aircraft and other Financed Aircraft
hereinafter referred to as "Other Aircraft"). The indebtedness with respect to
such other Financed Aircraft and the Eligible Aircraft resulting from such
Additional Loans that Lenders have made and have agreed to make, have been and
will (to the extent made) be evidenced by certain promissory notes of Company to
the order of Lenders of even date with such Additional Loans issued under and
pursuant to the Credit Agreement (such promissory notes, as they may be amended,
modified, supplemented, renewed, converted or extended from time to time, being
the "Additional Notes"). It is the intent of Company and Lenders that in
addition to securing the Aircraft Loans, the Aircraft Collateral and Aircraft
Related Collateral secure Company's other obligations under the Credit Agreement
including those obligations under the Additional Notes, and that such security
interest be second in interest only to the first priority security interest in
the Aircraft Collateral and Aircraft Related Collateral granted pursuant to the
First Mortgage (as defined below). It is a condition precedent to the making by
Lenders of the Aircraft Loans under the Credit Agreement that this Mortgage be
executed, delivered and filed for recordation.
XI-1
<PAGE> 187
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Aircraft Loans, Company hereby agrees with Administrative
Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Additional Notes, together
with accrued interest thereon, and all other amounts from time to time payable
by Company under the Credit Agreement, the First Mortgage, this Mortgage and the
other Loan Documents to the extent such amounts relate to the Additional Notes
or the Other Aircraft or are not otherwise secured by the First Mortgage
(including payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code), and
to secure performance of all obligations and covenants of Company under the
Credit Agreement, the First Mortgage, this Mortgage and the other Loan Documents
to the extent such obligations relate to the Additional Notes or the Other
Aircraft or are not otherwise secured by the First Mortgage (all such payment
and performance obligations of Company, the "Secured Obligations"), Company
hereby mortgages to Administrative Agent, for the benefit of Lenders, and their
respective successors and assigns, and hereby grants and assigns to
Administrative Agent, for the benefit of Lenders, and their respective
successors and assigns, a second priority security interest in the Aircraft and
the Spare Engine (the "Aircraft Collateral") and the other below-described
property wherever the same may be located (the "Aircraft Related Collateral")
such security interest second in priority only to the security interests granted
pursuant to the First Mortgage with respect to the Aircraft Collateral and
Aircraft Related Collateral:
(a) Aircraft Collateral. All of Company's right, title and interest in and
to:
(i) the airframe (the Aircraft except for the Engines or engines from
time to time installed thereon), which is described on Schedule I hereto
together with any and all Parts (as hereinafter defined) incorporated or
installed in or attached to such airframe and all Parts removed from such
airframe until such Parts are replaced in accordance with Section 4(e)
hereof (such airframe, together with any and all such Parts, hereinafter
referred to as the "Airframe");
(ii) each of the engines, which are listed in Schedule II hereto or
which are described in a Supplemental Chattel Mortgage and listed by
manufacturer's serial numbers in such Schedule or in such Supplemental
Chattel Mortgage (a "Supplemental Chattel Mortgage") substantially in the
form of Exhibit A attached hereto, supplementing this Mortgage, whether or
not from time to time thereafter installed on the Airframe or on any other
airframe or aircraft, including any engine designated a spare engine (the
"Spare Engine"), and any replacement engine which may be substituted for
such engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or installed in
or attached thereto and any and all Parts removed therefrom, until such
Parts are replaced in accordance with Section 4(e) hereof (each such
engine, spare engine and replacement engine, together with any and all such
Parts, hereinafter referred to as an "Engine" (and the engines identified
on such schedule as
XI-2
<PAGE> 188
spares and each replacement thereof hereinafter referred to as "Spare
Engines") and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment purchased by Company for incorporation or installation in
or attachment to the Airframe or any Engine pursuant to the terms of the
Modification Agreement and any Buyer-Furnished Equipment whether or not
identified in a Supplemental Chattel Mortgage (collectively referred to
herein as "Parts"); and
(iv) all records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and materials
maintained in the ordinary course of business with respect to the
properties described in paragraphs (i), (ii) and (iii) above (together with
such Airframe and Engines (other than the Spare Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and interest
in and to:
(i) all the tolls, rents, issues, profits, revenues and other income
of the property subject or required to be subject to the lien of this
Mortgage other than any such amounts payable pursuant to an ACMI Contract;
(ii) all monies and securities deposited or required to be deposited
with the Administrative Agent pursuant to any term of this Mortgage and
held or required to be held by Administrative Agent hereunder;
(iii) the Purchase Agreement to the extent it relates to the Aircraft
(include any agreement assigned therewith);
(iv) the Modification Agreement and each BFE Agreement to the extent
each relates to the Aircraft together with all rights, powers, privileges,
options, licenses and other benefits of Company (including such
indemnities, rights of assignment, rights and remedies for breach of any
warranty and/or claims for damages, rights to receive title to parts and
materials, and the rights to any and each and every other guarantee,
condition and warranty contained or implied in the Modification Agreement),
as buyer under such agreement including upon an Event of Default to receive
and collect all payments of any kind now or hereafter payable or receivable
by or for the benefit or account of Company as buyer under the Modification
Agreement or such BFE Agreement to the extent it relates to the Aircraft
and after the occurrence and during the continuation of an Event of Default
the right to (A) give or receive any instrument, notice or other
communication, (B) exercise any election or option or accept any redelivery
of the Aircraft or any part thereof or delivery of any Buyer-Furnished
Equipment or grant any waiver, consent or other approval and (C) enter into
any amendment, supplement or other modification or
XI-3
<PAGE> 189
agreement relating to the Modification Agreement or such BFE Agreement or
any provision thereof to the extent it relates to the Aircraft;
(v) all amounts payable to Company by any manufacturer, supplier or
vendor of any of the Aircraft Collateral or any component thereof pursuant
to any warranty or indemnity covering any such Collateral;
(vi) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation, requisition or
other taking of any Aircraft Collateral to the extent payable to
Administrative Agent hereunder; and
(vii) all proceeds of any and all of the properties described above,
including, without limitation, all payments under insurance proceeds or
payment under any indemnity, payable by reason of any loss or damage to the
Aircraft or any Engine.
Company does hereby warrant and represent that it has not assigned or
pledged, and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or interest
hereby assigned to anyone other than Administrative Agent, and that it will not,
except as provided in the First Mortgage, herein or in the Credit Agreement,
enter into any agreement amending or supplementing the Purchase Agreement, the
Modification Agreement or any BFE Agreement to the extent it relates to the
Aircraft, execute any waiver or modification of, or consent under any such
agreement, settle or compromise any claim arising under any such agreement, or
submit or consent to the submission of any dispute, difference or other matter
arising under or in respect of any such agreement, to arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation
of the United States enacted to supersede, amend or supplement such
Act and the rules and regulations promulgated thereunder.
"Additional Loans" has the meaning specified in the Preliminary
Statements.
"Additional Notes" has the meaning specified in the Preliminary
Statements.
"Administrative Agent" has the meaning specified in the first
paragraph of this instrument.
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<PAGE> 190
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1
hereof.
"Aircraft Loans" has the meaning specified in the Preliminary
Statements.
"Aircraft Related Collateral" has the meaning specified in
Section 1 hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"BFE Agreement" means any agreement entered into by Company from
time to time, in form and substance satisfactory to Administrative
Agent, with respect to Buyer-Furnished Equipment, in each case as the
same may be amended, modified or supplemented from time to time.
"Buyer-Furnished Equipment" means all materials and parts to be
provided under the Modification Agreement by Company with respect to
the Aircraft, including all parts to be acquired by Company under the
BFE Agreements.
"Company" has the meaning specified in the first paragraph of
this instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations,
that is operating in accordance with the operating certificate and
appropriate operations specifications issued under Part 121 or any
successor regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the
Credit Agreement.
"First Mortgage" means the First Security Agreement and Chattel
Mortgage dated as of the date hereof between Company and
Administrative Agent as the same may be amended, modified or
supplemented from time to time.
"Foreign Air Carrier" means any "foreign air carrier" as defined
in the Act, as to which there is in force a permit issued pursuant to
Section 402 of said Act or operators of aircraft operating under or
governed by the provisions of Parts 121, 123 or 129 of the Federal
Aviation Regulations, in each case that are certificated in a country
that is a signatory to the Convention on International Civil Aviation
and are operating in conformity with the Annexes thereunder and that
fly routes into the United States on a regularly scheduled basis.
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<PAGE> 191
"Loans" has the meaning specified in the Preliminary Statements.
"Modification Agreement" means (identify specific modification
agreement).
"Mortgage" has the meaning specified in the first paragraph of
this instrument.
"Other Aircraft" has the meaning specified in the Preliminary
Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Purchase Agreement" means (identify specific purchase
agreement).
"Secured Obligations" has the meaning specified in Section 1
hereof.
"Spare Engine" has the meaning specified in Section 1.
"Supplemental Chattel Mortgage" has the meaning specified in
Section 1 hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of the First Mortgage, the
lien of this Mortgage and Permitted Encumbrances and has full power and
authority to mortgage and grant the lien and security interest in the
Aircraft Collateral and Aircraft Related Collateral intended by the terms
hereof and in the manner aforesaid and has not assigned or pledged any of
its right, title or interest hereby assigned to anyone other than
Administrative Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code and is an air carrier
certificated under Sections 401 and 604(b) of the Act and holds all
necessary air carrier operating certificates.
(c) The Airframe is duly registered in the name of Company in
accordance with the Act; and the Airframe is not registered under the laws
of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act, and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s), as the case may be.
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<PAGE> 192
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Administrative
Agent), and the airworthiness certificate for the Aircraft is in full force
and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required by
Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms and, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, creates a valid, perfected and second priority
mortgage on and security interest in the Aircraft Collateral, securing the
payment and performance of the Secured Obligations.
(h) Company has delivered to Administrative Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (and such other states as may be required) with
respect to that portion of the Aircraft Collateral not covered by the
filing system established under the Act and with respect to the Aircraft
Related Collateral; and except for the filings described in this paragraph
and in paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a second priority
security interest in the Aircraft Collateral or Aircraft Related Collateral
under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
(j) (i) The Modification Agreement is in full force and effect, and no
provision thereof has been waived, amended, supplemented or canceled in any
respect except to the extent permitted in the Credit Agreement; (ii)
Company is not in default of the Modification Agreement; (iii) no consents,
other than the consent of (the party modifying the Aircraft under the
Modification Agreement), are necessary for the assignment of the
Modification Agreement pursuant to this Mortgage; and (iv) Company has not
previously assigned, pledged or otherwise hypothecated its rights under the
Modification Agreement to the extent it relates to the Aircraft.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft
XI-7
<PAGE> 193
Related Collateral, title thereto or any interest therein, except the lien
of the First Mortgage, the lien of this Mortgage and Permitted
Encumbrances. Company will promptly, at its own expense, take such action
as may be necessary to duly discharge any such Lien not excepted above if
the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Administrative
Agent from and against, any and all fees and taxes, levies, imposts,
duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section
4(b) being called a "Tax"), which may from time to time be imposed on or
asserted against Administrative Agent or any Lender or the Airframe or any
Engine or any part thereof or interest therein by any Federal, state or
local government or other taxing authority in the United States or by any
foreign government or subdivision thereof or by any foreign taxing
authority in connection with, relating to or resulting from: (i) the
Airframe or any Engine or any part thereof of interest therein; (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use,
storage, maintenance, sale or other disposition of the Airframe or any
Engine; (iii) any rentals or other earnings therefor or arising therefrom
or the income or other proceeds received with respect thereto; or (iv) this
Mortgage; provided, however, that, unless the payment of any such Tax shall
be a condition to the enforceability of this Mortgage or the perfection of
the lien hereof or unless proceedings shall have been commenced to
foreclose any lien which may have attached as security for such Tax,
nothing in this Section shall require the payment of any Tax so long as and
to extent that validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted
and Company shall have set aside on its books adequate reserves with
respect thereto in accordance with generally accepted accounting
principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, will (i) be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code and will be an air
carrier certificated under Sections 401 and 604(b) of the Act and hold all
necessary air carrier operating certificates; (ii) cause the Airframe to be
duly registered and remain duly registered in the name of Company in
accordance with the Act; and (iii) service, repair, inspect, test, maintain
and overhaul the Airframe and each Engine and install replacement equipment
and parts on the Airframe and each Engine (A) so as to keep the Airframe
and each Engine in such operating condition as may be required to permit
the Airframe and each Engine to be utilized in commercial operations
throughout the world, (B) so as to enable the airworthiness certification
of the Airframe to be maintained in good standing at all times under the
Act, except when aircraft of the same type, model or series as the Airframe
(powered by engines of the same type as those with which the Airframe shall
be equipped at the time of grounding) registered in the United States have
been grounded by the FAA; provided, however, that if following its
issuance, the United States FAA airworthiness certificate of the Aircraft
shall be withdrawn, then subject to the provisions of Section 4(f) hereof,
so long as Company is diligently taking or causing to be taken all
necessary action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with Company's FAA-approved mainte-
XI-8
<PAGE> 194
nance, inspection and maintenance control programs, and in the same manner
and with the same care used by Company with respect to the same or similar
aircraft and engines owned or operated by Company so as to keep the same in
as good operating condition as when originally mortgaged hereunder or as
when redelivered under the Modification Agreement, ordinary wear and tear
excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar
equipment, and (D) in such manner as may be necessary to maintain in full
force all warranties of the manufacturers thereof. Nothing herein shall be
deemed to prevent Company from subjecting the Aircraft to the modification
contemplated by the Modification Agreement. Company shall maintain all
records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Company will comply with all airworthiness directives, mandatory notes
or modifications or similar requirements affecting the same (including
those issued by the manufacturer or supplier) in such condition so as to
comply with the provisions of this Mortgage and the rules and regulations
of the FAA from time to time in force and applicable to the Aircraft and
Engines. Neither the Airframe nor any Engine will be maintained, used or
operated in violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to the Airframe or such Engine issued by any such
authority, and in the event that such laws, rules, regulations or orders
require alteration of the Airframe or any Engine, Company, at its own cost
and expense, will conform thereto or obtain conformance therewith and will
maintain the same in proper operating condition under such laws, rules,
regulations and orders, provided, however, that Company may, in good faith
(after having delivered to Administrative Agent an Officer's Certificate
stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable
manner which does not, in Administrative Agent's opinion, adversely affect
the interests under this Mortgage of Administrative Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant
to Section 4(g) shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with
respect to the Airframe or such Engine, except in the case of a requisition
for use by the United States of America, and then only if Company obtains
indemnity in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless
fully covered to Administrative Agent's satisfaction by war risk and
political risk and allied perils insurance or unless the Airframe or such
Engine is operated or used under contract with the Government of the United
States of America under which contract that Government assumes liabilities
for any damages, loss, destruction or failure to return possession of the
Airframe or such Engine at the end of the term of such contract and for
injury to persons or damage to property of others.
XI-9
<PAGE> 195
Company shall not use the Aircraft nor suffer it to be used in any manner
or for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or admit to do
anything the admission of which, may invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Administrative Agent, sell, assign, lease or otherwise in any manner deliver,
transfer or relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine except that, unless a
Potential Event of Default shall have occurred and be continuing, Company may
without the prior written consent of Administrative Agent:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 4(e) hereof, for alterations or modifications;
(iii) subject the Airframe to normal interchange agreements with
Domestic Carriers or any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Company in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine and if Company's title to or
use for the remainder of its useful life, of the Airframe or any Engines
shall be divested under any such agreement or arrangement, such divesture
shall be deemed to be an Event of Loss with respect to the Airframe or such
Engine and Company shall comply with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Company free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the 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), and (C) the rights of any Domestic Carrier, under
normal interchange agreements which are customary in the airline industry
and do not contemplate or require the transfer of title to such airframe or
the engines installed thereon;
XI-10
<PAGE> 196
(v) install an Engine on an airframe leased to Company or owned by
Company subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and except Liens of the type permitted by
clause (iv) above; and (B) Administrative Agent shall have received from
the lessor, conditional vendor or secured party and each of the purchasers,
mortgagees and encumbrancers of such lessor, conditional vendor or secured
party of such airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such airframe), whereby
such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional vendor
or secured party expressly and effectively agrees that neither it nor its
successors and assigns will acquire or claim any right, title or interest
in any Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to this Mortgage;
(vi) install an Engine on an airframe owned by Company, leased by
Company or owned by Company subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Company shall comply with Section 4(f) in
respect thereof;
(vii) lease any Engine and/or the Airframe to a Domestic Air Carrier
other than an ACMI Contract or wet lease permitted under clause (ix) below,
in the ordinary course of its business, for a term (including without
limitation, any option of the lessee to renew or extend) not to exceed six
(6) months (in the case of a lease of an Engine without the Airframe, not
to exceed twelve (12) months), provided that (A) no such lease contemplates
or requires the transfer of title to or registration of the Airframe or
title to any Engine, (B) if Company's title to any Engine or the Airframe
shall be divested under any such agreement or arrangement, such divestiture
shall be deemed to be an Event of Loss for all purposes, (C) any such lease
shall provide that the lessee may not deliver, transfer or relinquish
possession or sublease the Airframe or any Engine without the prior written
consent of Administrative Agent, other than as permitted by Section
4(d)(i), (ii) or (iii) hereof, (D) the lease agreement shall provide that
any amounts payable by the lessee to Company thereunder are assigned
hereunder to Administrative Agent for the benefit of Lenders and that if an
Event of Default has occurred and is continuing, upon notice to the lessee
by Administrative Agent, the lessee shall pay all such amounts to
Administrative Agent for the benefit of Lenders unless and until such
lessee shall have received notice from Administrative Agent for the benefit
of Lenders, that the Event of Default has been cured, (E) the lease
agreement shall provide that the lessee shall agree to maintain and operate
any Engine and/or the Airframe in accordance with Section 4(c) hereof,
XI-11
<PAGE> 197
and (F) any such lease will be permissible only if Administrative Agent
receives a perfected first priority security interest in any such lease;
(viii) lease any Engine and/or the Airframe to a Foreign Air Carrier
other than an ACMI Contract or wet lease permitted under clause (ix) below,
in the ordinary course of its business, under arrangements that provide for
a term (including, without limitation, any option of the lessee to renew or
extend) not to exceed six (6) months (in the case of a lease of an Engine
without the Airframe, not to exceed twelve (12) months), provided that (A)
no such lease contemplates or requires the transfer of title to or
registration of the Airframe or title to any Engine, (B) if Company's title
to any Engine or the Airframe shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss for
all purposes, (C) any such lease shall provide that the lessee may not
deliver, transfer or relinquish possession or sublease the Airframe or any
Engine without the prior written consent of Administrative Agent other than
as permitted by Section 4(d)(i), (ii) or (iii) hereof, (D) the lease
agreement shall provide that any amounts payable by the lessee to Company
thereunder are assigned hereunder to Administrative Agent for the benefit
of Lenders and that if an Event of Default has occurred and is continuing,
upon notice to the lessee by Administrative Agent, the lessee shall pay all
such amounts to Administrative Agent for the benefit of Lenders, (E) the
lease agreement shall provide that the lessee shall agree to maintain and
operate any Engine and/or the Airframe in accordance with Section 4(c)
hereof, and (F) any such lease will be permissible only if Administrative
Agent receives a perfected first priority security interest in any such
lease;
(ix) enter into an ACMI Contract or wet lease for the Airframe and the
Engines or engines installed thereon with any third party pursuant to which
Company has operational control of the Airframe and any Engines installed
thereon such operation to be performed solely by employees of Company
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by such
employees of similar functions within the United States; provided that
Company's obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease; and
(x) sell the Aircraft or the Spare Engine upon satisfaction of the
conditions and compliance with the terms of subsection 6.7 of the Credit
Agreement.
provided, however, that the rights of any transferee (other than pursuant to a
sale permitted by the terms hereof) who receives possession of the Airframe or
any Engine permitted by the terms hereof shall be made subject and subordinate
to, and any lease permitted by this Section 4(d) (other than a lease permitted
by Section 4(d)(ix)) shall be made expressly subject and subordinate to, the
lien and security interest of this Mortgage
XI-12
<PAGE> 198
and all of Administrative Agent's rights hereunder and Company shall remain
primarily liable hereunder for the performance of all the terms of this Mortgage
to the same extent as if such transfer had not occurred, and any such instrument
of transfer (other than a lease permitted by Section 4(d)(ix)) shall include
appropriate provisions for the maintenance and insurance of the Airframe or such
Engine, and any such instrument of transfer shall expressly prohibit any further
transfer of the Airframe or such Engine or any assignment of the rights
thereunder; and provided, further, that no such lease, pooling arrangement or
other transfer or relinquishment of the possession of the Airframe or any Engine
shall in any way discharge or diminish any of Company's obligations to
Administrative Agent hereunder or under the Credit Agreement. In the event
Administrative Agent shall have received from the lessor, conditional vendor or
secured party of any airframe leased to Company or purchased by Company subject
to a conditional sale or other security agreement, a written agreement complying
with clause (B) of Section 4(d)(v), and the lease or conditional sale or other
security agreement covering such airframe also covers an engine or engines owned
by the lessor under such lease, conditionally owned by the conditional vendor
under such conditional sale agreement, or subject to such security agreement,
Administrative Agent hereby agrees for the benefit of such lessor, conditional
vendor or secured party that Administrative Agent will not acquire or claim, as
against such lessor, conditional vendor or secured party, any right, title or
interest in any such engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease or conditional
sale or other security agreement and owned by such lessor, conditionally owned
by such conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Company will deliver the Aircraft to (the party modifying the
Aircraft under the Modification Agreement) for modification under the
Modification Agreement no later than ___________, 199__ (six months after
the date of this Mortgage).
(ii) Except as otherwise provided in Section 4(e)(iv), Company, at its
own cost and expense, will promptly replace all Parts, which may from time
to time be incorporated or installed in or attached to the Airframe or any
Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. In addition, in the
ordinary course of maintenance, service, repair or testing, Company at its
own cost and expense may remove any Parts, whether or not worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that, except as otherwise
provided in Section 4(e)(iv), Company at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall
be free and clear of all Liens (except the lien of the First Mortgage and
Permitted Encumbrances and for pooling arrangements to the extent permitted
by Sec-
XI-13
<PAGE> 199
tion 4(e)(iii)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced assuming
such property were in the condition and repair required to be maintained by
the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall
remain subject to the lien and security interest of this Mortgage, no
matter where located until such time as such Parts shall be replaced by
parts which have been incorporated or installed in or attached to the
Airframe or any Engine and which meet the requirements for replacement
parts specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any Engine as
above provided, without further act, (A) such replacement Part shall become
subject to the lien and security interest of this Mortgage and shall be
deemed part of the Airframe or such Engine for all purposes hereof to the
same extent as the property originally comprising, or installed on, such
Airframe or such Engine, and (B) title to the replaced part shall thereupon
become free and clear of all rights of Administrative Agent hereunder and
shall no longer be deemed a Part hereunder.
(iii) Any Part removed from the Airframe or any Engine as provided in
Section 4(e)(ii) may be subjected by Company to a normal pooling
arrangement of the type customary in the airline industry entered into by
Company in the ordinary course of its business and entered into with
Domestic Carriers or Foreign Air Carriers that are not the subject of any
bankruptcy, insolvency, or similar proceeding, voluntary or involuntary,
provided the Part replacing such removed Part shall be incorporated or
installed in or attached to the Airframe or such Engine in accordance with
Section 4(e)(ii) as promptly as possible after the removal of such removed
part. In addition, any replacement Part when incorporated or installed in
or attached to the Airframe or any Engine in accordance with Section
4(e)(ii) may be owned subject to such a pooling arrangement, provided
Company, at its expense, as promptly thereafter as possible, either (A)
causes such replacement Part to become subject to the lien and security
interest of this Mortgage in accordance with Section 4(e)(ii) by Company's
acquiring title thereto for the benefit of Administrative Agent free and
clear of all Liens (except the lien of the First Mortgage and Permitted
Encumbrances) or (B) replaces such replacement Part by incorporating or
installing in or attaching to the Airframe or such Engine a further
replacement Part owned by Company free and clear of all Liens (except the
lien of the First Mortgage and Permitted Encumbrances).
(iv) Company, at its own cost and expense, shall make or cause to be
made such alterations and modifications in and additions to the Airframe
and the Engines as may be required from time to time to meet the standards
of the FAA or other governmental authority having jurisdiction; provided,
that Company may, in good faith, contest the validity or application of any
such standard in any reasonable matter that shall not adversely affect the
Lien of this Mortgage or Lenders. Company also agrees, at its own cost and
expense, to make or cause to
XI-14
<PAGE> 200
be made such alterations and modifications in and additions to the Airframe
and the Engines as may be required from time to time to meet the standards
or requirements of any directive issued by a manufacturer relating to the
Airframe or any Engine. In addition so long as no Potential Event of
Default or Event of Default shall have occurred and be continuing, Company,
at its own cost and expense, may from time to time make such alterations
and modifications in and additions to the Airframe and any Engine as
Company may deem desirable in the proper conduct of its business, provided
no such alteration, modification or addition diminishes the value or
utility or impairs the condition or airworthiness of the Airframe or such
Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition assuming the
Airframe or such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
All Parts owned by Company incorporated or installed in or attached to
or added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become subject to the
lien and security interest of this Mortgage; provided, that, so long as no
Potential Event of Default or Event of Default shall have occurred and be
continuing, Company may remove and not replace any such Part if it (A) is
in addition to, and not in replacement of or in substitution for, any Part
incorporated or installed in or attached to the Airframe or such Engine on
the date hereof, on the date the Engine first becomes subject to the lien
of this Mortgage or the date the Airframe or Engine is redelivered under
the Modification Agreement or any Part in replacement of or substitution
for any such Part, (B) is not required to be incorporated or installed in
or attached or added to the Airframe or such Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage and (C) can
be removed from the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness which the Airframe or such
Engine would have had (if following the modification contemplated by
Section 4(e)(i), after giving effect to such Modification) at such time had
such alteration, modification or addition not occurred, assuming the
Collateral Aircraft was otherwise in the condition required by this
Mortgage. Upon the removal by Company of any such Part, as above provided,
title thereto shall, without further act, be free and clear of all rights
of the Administrative Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe (or
the Airframe and any Engine then installed thereon), Company will promptly
notify Administrative Agent thereof in writing (in any event within five
(5) days of such occurrence) and will prepay, at the times and in the
amounts required, the Additional Notes and remaining Secured Obligations in
accordance with the terms of the Credit Agreement.
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(ii) If an Event of Loss shall occur with respect to an Engine when
not installed on the Airframe or under other circumstances in which there
has not occurred an Event of Loss with respect to the Aircraft, Company
will promptly notify Administrative Agent thereof in writing (in any event
within five (5) days of such occurrence) and will, not later than sixty
(60) days after the occurrence of such Event of Loss, mortgage hereunder,
by complying with all of the terms of subsection (iv) below, another engine
of the same or another manufacturer of the same or an improved model and
suitable for installation and use on the Airframe and which shall be owned
by Company free of all Liens (other than the lien of the First Mortgage and
Permitted Encumbrances) and shall have a value and utility at least equal
to (and be in as good operating condition as) such Engine immediately prior
to such Event of Loss, assuming compliance by Company with all of the terms
of this Mortgage with respect to such Engine. Upon compliance with the
terms of the preceding sentence within such 60-day period, Administrative
Agent will execute and deliver to Company a partial release, in recordable
form, releasing the lien of this Mortgage to the extent that it covers such
Engine with respect to which such Event of Loss occurred. Such additional
engine shall thereupon constitute an "Engine" for all purposes hereof and
shall be deemed to constitute part of the Aircraft.
(iii) Whenever Company shall subject any Engine to the lien and
security interest of this Mortgage (as contemplated by paragraph (ii)
above), Company will on or prior thereto:
(A) deliver to Administrative Agent and duly file (immediately
following the Supplemental Chattel Mortgage with respect to such
Engine under the First Mortgage) for recording under the Act, a
Supplemental Chattel Mortgage substantially in the form of Exhibit A
hereto duly executed by Company appropriately describing such engine
to be subjected to the lien and security interest of this Mortgage;
(B) deliver to Administrative Agent for filing (immediately after
the financing statements with respect to such Engine to be filed in
accordance with the First Mortgage) financing statements under Article
9 of the Uniform Commercial Code of the States of Colorado and New
York (or such other States as may be required at such time) covering
the security interest created by this Mortgage to protect the security
interest of Administrative Agent in the Engine to be subjected to the
lien and security interest of this Mortgage;
(C) deliver to Administrative Agent an Officers' Certificate
dated the date of execution of said Supplemental Chattel Mortgage,
stating:
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<PAGE> 202
(I) that the representations and warranties contained in
Section 3 hereof are true and correct on and as of such date of
execution with respect to such Engine and Company;
(II) that, upon consummation of the terms of this Section
4(f), no Potential Event of Default or Event of Default will
exist; and
(III) that all conditions precedent contemplated in this
Section 4(f)(iii) have been complied with.
(D) furnish Administrative Agent with evidence of compliance with
the insurance provisions of Section 4(g) hereof with respect to such
Engine as Administrative Agent may reasonably request;
(E) furnish Administrative Agent with such evidence of title as
Administrative Agent may reasonably request concerning such Engine;
(F) cause to be delivered to Administrative Agent an appraisal by
the Approved Appraisers relating to the Engine to be subjected to the
lien and the security interest of this Mortgage stating that it has a
value and utility at least equal to, and in as good operating
condition as the Engine subject to such Event of Loss immediately
prior to such Event of Loss, assuming compliance by Company with all
the terms of this Mortgage with respect to such Engine; and
(G) cause to be delivered to Administrative Agent an opinion or
opinions of counsel dated the date of execution of such Supplemental
Chattel Mortgage, stating:
(I) that the engine specifically described in said
Supplemental Chattel Mortgage, is free and clear of all recorded
Liens other than the lien of the First Mortgage,
(II) that said Supplemental Chattel Mortgage (1) has been
duly authorized, executed and delivered by Company, and (2)
creates a valid, perfected second priority security interest in
and to the engine described in said Supplemental Chattel
Mortgage, enforceable against all third parties and securing the
payment of all obligations purported to be secured thereby and
that all action required to perfect fully such security interest
has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been duly
filed for recordation (immediately following the Supplemental
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<PAGE> 203
Chattel Mortgage with respect to such Engine under the First
Mortgage) in accordance with the provisions of the Act to
continue the perfection and priority of the security interest
intended to be created by the Mortgage, and
(IV) and as to such other matters as Administrative Agent
may reasonably request.
Promptly upon the recording of each Supplemental Chattel Mortgage under the
Act, Company will cause to be delivered to Administrative Agent an opinion
of counsel for Company as to the due recording of such Supplemental Chattel
Mortgage in accordance with the Act.
(iv) With respect to the Airframe or any Engine, as between the
Administrative Agent and Company, any payments on account of an Event of
Loss (other than insurance proceeds or other payments the application of
which is provided for in Section 4(g) below and under the terms of the
Credit Agreement) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event of
Loss to an Engine that has been or is being replaced by Company
pursuant to the terms hereof, such payment shall be paid over to or
retained by Company upon satisfaction of the conditions for
replacement contained in paragraph (iii) above; and
(B) if such payments are received with respect to an Event of
Loss as to the Aircraft, such payments shall be applied to the
prepayment of any outstanding Additional Notes required pursuant to
the terms of the Credit Agreement and shall be held pursuant to the
terms of this Mortgage, or if this Mortgage shall have been satisfied
and discharged, the balance, if any, shall be paid over to or retained
by Company.
(v) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Company shall promptly notify
Administrative Agent of such requisition and all of Company's obligations
under this Mortgage shall continue to the same extent as if such
requisition had not occurred. Any payments received by Administrative Agent
or Company from the United States Government for the use of the Airframe or
such Engine, shall be paid over to, or retained by, Company.
(vi) Any amount referred to in paragraph (iv) or (v) of this Section
4(f) which is payable to or retained by Company shall not be paid to
Company or retained by Company, if at the time of such payment or retention
any Event of Default or a Potential Event of Default shall have occurred
and be continuing, but
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shall be held by or paid over to Administrative Agent as security for the
obligations of Company under the First Mortgage, this Mortgage and the
other Loan Documents, and, if Administrative Agent shall declare the Credit
Agreement to be in default, shall be applied against Company's obligations
hereunder and thereunder as and when due. At such time as there shall not
be continuing any such Event of Default or Potential Event of Default, such
amount shall be paid to Company to the extent not previously applied in
accordance with the preceding sentence.
(g) Insurance.
(i) Company will at all times carry and maintain on or with respect to
the Aircraft, at its own cost and expense, public liability (including
without limitation, contractual liability, cargo liability, passenger legal
liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the
type and covering the risks customarily carried with respect to similar
aircraft by corporations engaged in the same or similar business and
similarly situated with Company but in no event in an amount less than
$500,000,000 per occurrence (which shall include war risk, governmental
confiscation and expropriation and allied perils coverage). During any
period when the Aircraft is on the ground and not in operation, Company may
carry or cause to be carried, in lieu of insurance required by this
Section, insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed the
amounts of comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily carried
with respect to similar aircraft on the ground by corporations engaged in
the same or similar business and similarly situated with Company. Any
policies of insurance carried in accordance with this Section 4(g) and any
policies taken out in substitution or replacement of any such policies (A)
shall be amended to name Administrative Agent and Lenders as additional
named insureds, (B) shall be primary without right of contribution from any
other insurance which is carried by Company, (C) shall expressly provide
that all provisions thereof, except the limits of the liability, shall
operate in the same manner as if there were a separate policy covering each
insured, and (D) shall provide that the insurer shall waive any right of
subrogation against Administrative Agent or Lenders.
(ii) Company will at all times carry and maintain with insurers of
recognized responsibility and reputation on or with respect to the
Aircraft, at its own cost and expense, aircraft ground and flight all-risk
hull insurance as well as fire and extended coverage insurance on Engines
and other equipment while removed from the Airframe (which shall include
war risk, governmental confiscation and expropriation (other than by the
United States Government) and allied perils including (A) strikes, riots,
civil commotions or labor disturbances,
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<PAGE> 205
(B) any malicious act or act of sabotage and (C) hijacking (air piracy) or
any unlawful seizure or wrongful exercise of control of the Aircraft or
crew in flight (including any attempt at such seizure or control) made by
any person or persons aboard the Aircraft acting without the consent of the
insured, if and to the extent the same shall be maintained by Company with
respect to similar aircraft owned or operated by Company on the same routes
or if the Aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with Company flying comparable routes with
similar aircraft to carry such insurance), of the type usually carried by
corporations engaged in the same or similar business and similarly situated
with Company; provided that such insurance (including any self-insurance to
the extent permitted below) shall at all times prior to delivery under the
Modification Agreement be for an amount not less than the greater of (W)
$30,000,000 and (x) an amount equal to the purchase price under the
Purchase Agreement, and at all times from and after delivery under the
Modification Agreement, the greater of (Y) $50,000,000 and (Z) the amount
under clause (X) plus the total cost of all modifications under the
Modification Agreement. During any period when the Aircraft is on the
ground and not in operation Company may carry or cause to be carried, in
lieu of the insurance required by this Section, insurance otherwise
conforming hereto except that the scope of risk covered and type of
insurance shall be the same as are from time to time customarily carried
with respect to similar aircraft by corporations engaged in the same or
similar business and similarly situated with Company for aircraft on the
ground in an amount at least equal to the applicable amount provided above.
All such insurance shall name Administrative Agent and Lenders as
additional insureds and loss payees to the extent their interest may appear
and shall provide that any loss to the Airframe or an Engine in excess of
$2,000,000, (and, if a Potential Event of Default or Event of Default has
occurred and is continuing, any such loss) shall be payable to
Administrative Agent for the benefit of Lenders; and shall be primary
without right of contribution from any other insurance which is carried by
Administrative Agent with respect to its interest therein.
Company may self-insure, by way of deductible or equivalent provisions
in insurance policies, the risks required to be insured against pursuant to
this Section 4(g)(ii) in such reasonable amounts as are then applicable to
other similar aircraft in Company's fleet which are of a value comparable
to the Aircraft and as are not substantially greater than amounts
self-insured by corporations engaged in the same or similar business and
similarly situated with Company; provided, however, that Company may not
self-insure in an amount in excess of $1,000,000 without the prior written
consent of Administrative Agent.
(iii) Any policies of insurance required pursuant to either paragraph
(i) or paragraph (ii) above shall: (A) be amended to name Administrative
Agent and Lenders as additional named insureds, but without Administrative
Agent or Lenders being thereby liable for premiums; (B) provide that in
respect of the interest of Administrative Agent or Lenders in such policies
the insurance shall not
XI-20
<PAGE> 206
be invalidated by any action or inaction of Company and shall insure the
interests of Administrative Agent and Lenders regardless of any breach or
violation by Company or any Person (other than Administrative Agent) of any
warranty, declaration, condition or exclusion from coverage contained in
such policies; (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the interest of
Administrative Agent or any Lender, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to Administrative Agent for thirty (30) days (seven (7)
days, or such shorter or longer period as may from time to time be
customarily available in the industry, in the case of any war risk and
allied perils coverage) after receipt by Administrative Agent of written
notice from such insurers of such cancellation, change or lapse; (D) be in
full force and effect throughout any geographical areas at any time
traversed by the Aircraft and shall be payable in U.S. dollars; (E) waive
any right of the insurers to any set-off or counterclaim or any other
deduction, whether by attachment or otherwise in respect of any liability
of Administrative Agent; and (F) waive all rights of subrogation against
Administrative Agent.
(iv) In the case of a lease or contract with the United States or any
agency or instrumentality thereof in respect of the Airframe or any Engine,
a valid agreement by the United States or such agency or instrumentality to
indemnify Company against the same risks against which Company is required
hereunder to insure shall be considered adequate insurance with respect to
the Airframe or such Engine to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 21, Company will furnish to Administrative Agent (A) a
report signed by a firm of independent aircraft insurance brokers,
appointed by Company and not objected to by Administrative Agent,
describing in reasonable detail acceptable to Administrative Agent the
insurance then carried and maintained on or with respect to the Aircraft
and the Engines and stating that in the opinion of such firm such insurance
complies with the terms of this Section 4(g) and is adequate to protect the
interests of Company and Administrative Agent, and (B) certificates of the
insurer or insurers evidencing the insurance covered by the report. Company
will cause such brokers to advise Administrative Agent in writing (x)
promptly of any default in the payment of any premium and of any other act
or omission on the part of Company of which such firm has knowledge and
which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft or any Engine and (y) at least thirty (30) days
prior to the expiration or termination date, or date of effectiveness of
any material change, of any insurance carried and maintained on the
Aircraft hereunder.
(vi) All insurance payments and other payments received by
Administrative Agent or Company from insurance referred to in paragraph
(ii) above shall
XI-21
<PAGE> 207
be, if received by Company, immediately paid to Administrative Agent and
shall be held and applied:
(A) If such payment is received as a result of an Event of Loss
referred to in paragraph (i) of Section 4(f) hereof, such payment
shall be applied to prepay the Additional Notes and pay any other
Secured Obligations in accordance with the terms of the Credit
Agreement or if already paid in full by Company, paid to Company
provided no Potential Event of Default or Event of Default shall have
occurred and be continuing; and
(B) If such payment is received as a result of an Event of Loss
referred to in paragraph (ii) Section 4(f) hereof, such payment shall
be paid to Company upon compliance by Company with the terms of said
Section, provided that no Potential Event of Default or Event of
Default shall have occurred and be continuing.
All insurance payments and other payments received by Administrative
Agent or Company from insurance referred to in paragraph (ii) above
and paid other than as a result of an Event of Loss shall be paid by
Administrative Agent to or be retained by Company, and promptly
applied by Company to the extent necessary to repair the damage to the
Airframe or the Engine for which such insurance was paid, provided
that Administrative Agent shall not be required to make any such
payment to Company if a Potential Event of Default or Event of Default
has occurred and is continuing, but shall be held or paid over to
Administrative Agent as security for the obligations of Company under
this Mortgage and the other Loan Documents, and, if Administrative
Agent shall declare the Credit Agreement to be in default, shall be
applied against Company's obligations hereunder and thereunder as and
when due. Retention by Administrative Agent of any amounts pursuant to
the preceding sentence shall not relieve Company of its obligations to
make promptly all repairs and replacements required by Sections 4(c)
and (e) hereof and to pay for the same with Company's funds.
(vii) Nothing in this Section 4(g) shall prohibit Administrative
Agent, or any Lender from obtaining insurance with respect to the
Aircraft for its own account. Company 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 4(g). No
insurance maintained by Administrative Agent or any Lender shall
prevent Company from carrying the insurance required or permitted by
this Section or adversely affect such insurance or the cost thereof.
Proceeds of any such insurance carried by Company, Administrative
Agent or Lender shall be paid as provided in the insurance policy
relating thereto and Administrative Agent shall have no duty to obtain
any such insurance.
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<PAGE> 208
(h) Inspection. Company will permit any officers, employees or authorized
representatives of Administrative Agent to inspect, at Company's cost and
expense, the Aircraft Collateral and Aircraft Related Collateral, or any part
thereof, and to examine, copy or make extracts from, any and all books, records
and documents in the possession of Company relating to such Collateral or any
part thereof and performance of this Mortgage, all at such reasonable times and
as often as may be requested. Administrative Agent shall have no duty to make
any such inspection or examination and shall not incur any liability or
obligation by reason of making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, cause the
Airframe and each Engine included in the Aircraft Collateral to be legibly
marked (in a reasonably prominent location, which in the case of the Airframe
shall be adjacent to the airworthiness certificate) with such a plate, disk, or
other marking of customary size, and bearing the legend "Mortgaged to Bankers
Trust Company, as Administrative Agent" or such other legend, as shall in the
opinion of Administrative Agent be appropriate or desirable to evidence the fact
that it is subject to the lien and security interest created by this Mortgage.
Company shall not remove or deface, or permit to be removed or defaced, any such
plate, disk, or other marking or the identifying manufacturer's serial number,
and, in the event of such removal or defacement, shall promptly cause such
plate, disk, or other marking or serial number to be promptly replaced. Except
as provided above, Company shall not allow the name of any person, association
or corporation to be placed on the Airframe or any Engine as a designation that
might be interpreted as a claim of ownership or of any security interest
therein, except that Company or any permitted lessee may place its customary
colors and insignia or the insignia of the manufacturer on the Airframe or any
Engine.
(j) Modification Agreement and BFE Agreements.
(i) Company shall not upon the occurrence and during the continuation
of an Event of Default under the Credit Agreement enter into any agreement
to amend, rescind, cancel or terminate the Modification Agreement or any
BFE Agreement to the extent it relates to the Aircraft, without the prior
written consent of Administrative Agent.
(ii) If Administrative Agent and Company shall at any time be in
dispute as to the entitlement of Administrative Agent to exercise any right
hereunder upon an Event of Default in respect of the Modification Agreement
or any BFE Agreement, Company agrees that (the party modifying the Aircraft
under the Modification Agreement) or the vendor of the Buyer-Furnished
Equipment, as the case may be, shall perform the corresponding obligations
exclusively at the direction of Administrative Agent.
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SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then
Administrative Agent may, without notice of any kind to Company, subject to
the rights of "Administrative Agent" under the First Mortgage, exercise in
respect of the Aircraft Collateral and Aircraft Related Collateral, (i) all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect at the time in any applicable jurisdiction
(whether or not the Uniform Commercial Code applies to the affected
Aircraft Collateral), (ii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in any
other agreement between Company and Administrative Agent, and (iii) such
other rights and remedies as may be provided by law or otherwise. The
rights of Administrative Agent in the remainder of this Section 5 are
subject to the rights of "Administrative Agent" under the First Mortgage.
(b) After an Event of Default has occurred and is continuing,
Administrative Agent may, without notice, take possession of the Aircraft
Collateral or any part thereof and may exclude Company, and all persons
claiming under Company, wholly or partly therefrom. At the request of
Administrative Agent, Company shall promptly deliver or cause to be
delivered to Administrative Agent or to whomsoever Administrative Agent
shall designate, at such time or times and place or places as
Administrative Agent may specify, and fly or cause to be flown to such
airport or airports in the United States as Administrative Agent may
specify, without risk or expense to Administrative Agent, the Aircraft
Collateral or any part thereof. In addition, Company will provide, without
cost or expense to Administrative Agent, storage facilities for the
Aircraft Collateral. If Company shall for any reason fail to deliver the
Aircraft Collateral or any part thereof after demand by Administrative
Agent, Administrative Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Administrative Agent the right
to immediate possession or requiring Company to deliver immediate
possession of the Aircraft Collateral or any part thereof to Administrative
Agent, to the entry of which judgment Company hereby specifically consents,
or (ii) with or without such judgment, pursue the Aircraft Collateral or
any part thereof wherever it may be found and may enter any of the premises
of Company where the Aircraft Collateral may be and search for the Aircraft
Collateral and take possession of and remove the same. Company agrees to
pay to Administrative Agent, upon demand, all expenses incurred in taking
any such action; and all such expenses shall, until paid, be secured by the
lien of this Mortgage. Upon every such taking of possession, Administrative
Agent may, from time to time, make all such reasonable expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Aircraft Collateral, as it may deem proper. In
each such case, Administrative Agent shall have the right to maintain,
use, operate, store, lease, control or manage the Aircraft or any part
thereof and to carry on the business and exercise all rights and powers of
Company relating to the Aircraft Collateral, as Administrative Agent shall
deem best, including the right to enter into any and all such agreements
with respect to the maintenance, use, operation, storage, leasing, control,
management or disposition of the Aircraft Collateral or any part thereof as
Administrative Agent may determine. Further, after the occurrence and
during the
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continuation of an Event of Default, Administrative Agent shall be entitled
to collect and receive directly all tolls, rents, revenues, issues, income,
products and profits of the Aircraft Collateral or any part thereof (other
than any received under any ACMI Contract). Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the expenses
of the use, operation, storage, leasing, control, management or disposition
of the Aircraft Collateral, and of all maintenance, insurance, repairs,
replacements, alterations, additions and improvements, and to make all
payments which Administrative Agent may be required or may elect to make,
if any, for taxes, assessments, or other proper charges upon the Aircraft
Collateral and all other payments which Administrative Agent may be
required or authorized to make under any provision of this Mortgage, as
well as just and reasonable compensation for the services of Administrative
Agent and of all persons properly engaged and employed for such purposes by
Administrative Agent.
(c) Administrative Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as an
entirety or in separate lots or parcels, the Aircraft Collateral or any
part thereof, at public or private sale, at such place or places and at
such time or times and upon such terms, including terms of credit (which
may include the retention of title by Administrative Agent to the property
so sold), as Administrative Agent may determine, whether or not the
Aircraft shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this Mortgage by
suit, whether for specific performance of any covenant herein contained or
in aid of the exercise of any power herein granted or for the foreclosure
of this Mortgage and the sale of the Aircraft Collateral under the judgment
or decree of a court of competent jurisdiction or for the enforcement of
any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it will not (and hereby
irrevocably waives its right to) at any time plead, or claim the benefit or
advantage of, any appraisement, valuation, stay, extension, moratorium, or
redemption law now or hereafter in force, in order to prevent or hinder the
enforcement of this Mortgage or the absolute sale of the Aircraft Collateral.
Company, for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have all or any portion of the Aircraft Collateral
marshalled upon any foreclosure hereof.
(e) Each and every remedy of Administrative Agent shall be cumulative and
shall not be exclusive of any other remedies provided now or hereafter at law,
in equity or otherwise. Company shall reimburse Administrative Agent, upon
demand, for all fees and other expenses paid or incurred by Administrative Agent
in exercising any rights, powers or remedies granted hereby. All such fees and
expenses shall, until paid, be secured by the lien of this Mortgage.
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SECTION 6. Application of Proceeds.
The proceeds of any sale, lease or other disposition of all or any of the
Aircraft Collateral or Aircraft Related Collateral under this Mortgage and all
other sums realized by Administrative Agent pursuant to this Mortgage or any
proceedings hereunder shall be applied in the following order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Administrative Agent's agents and counsel, and all expenses, liabilities
and advances made or incurred by Administrative Agent in connection
therewith, including, without limitation, taxes upon or with respect to the
sale, lease, disposition or realization and the payment of taxes and Liens
(except for the lien of the First Mortgage), if any, prior to the lien and
security interest of this Mortgage (except any taxes or Liens to which the
respective sale, lease, disposition or realization shall have been subject)
and to the payment of expenses and the reimbursement of payments incurred
or made by Administrative Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Additional Notes to and including the date of such application;
Third: To the ratable payment of principal of the Additional Notes,
which payment shall be applied to the principal installments of the
Additional Notes in the manner specified by the Credit Agreement;
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document; and
Fifth: To Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Administrative Agent as Attorney.
Company hereby irrevocably appoints Administrative Agent the true and
lawful attorney of Company (with full power of substitution) in the name, place
and stead of, and at the expense of, Company at any time after the occurrence
and during the continuation of an Event of Default (i) to ask, demand, collect,
sue for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Aircraft Collateral and
Aircraft Related Collateral, (ii) to make all necessary transfers of all or any
part of the Aircraft Collateral and Aircraft Related Collateral in connection
with any sale, lease or other disposition made pursuant hereto, (iii) to execute
and deliver for value all necessary or appropriate bills of sale, assignments
and other instruments in connection with any such sale, lease or other
disposition, and (iv) generally to do, at Administrative Agent's option and
Company's cost and expense, at any time, or from time to time, all acts and
things that Administrative Agent deems
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necessary to protect, preserve or realize upon the Aircraft Collateral and
Aircraft Related Collateral and Administrative Agent's security interest
therein, in order to effect the intent of this Mortgage, all as fully and
effectively as Company might do, Company hereby ratifying and confirming all
that its said attorney (or any substitute) shall lawfully do hereunder and
pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Administrative Agent to be held and applied under
this Section, and all monies if any, required to be paid to Administrative Agent
hereunder, which disposition is not elsewhere herein otherwise specifically
provided for shall be held by Administrative Agent and applied from time to time
as provided herein and in the Credit Agreement and the other Loan Documents and
shall be held in an account in the name of Administrative Agent and invested in
Cash Equivalents for the benefit and at the risk of Company.
SECTION 9. Administrative Agent's Right to Perform.
If Company 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,
Administrative Agent may itself make such payment or perform or comply with such
agreement (including, without limitation, the agreement of Company to maintain
insurance pursuant to Section 4(g) hereof), and the amount of such payment and
the amount of the reasonable expenses of Administrative Agent 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 rate
specified in the Credit Agreement from time to time, shall be payable by Company
to Administrative Agent on demand and shall constitute additional indebtedness
secured by the lien and security interest of this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Administrative Agent may from time to time request, in order to correct
any defect, error or omission which may at any time hereafter be discovered in
the contents of this Mortgage or in the execution or delivery hereof, and/or in
order to more effectively carry out the intent and purpose of this Mortgage and
to establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of Administrative Agent hereunder,
including, without limitation, the execution, delivery and filing of any
instruments with the FAA and of any Uniform Commercial Code financing and
continuation statements with respect to the security interests created hereby,
in form and substance satisfactory to Administrative Agent, in such
jurisdictions as Administrative Agent may reasonably request. Company hereby
authorizes Administrative Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
XI-27
<PAGE> 213
SECTION 11. RESERVED
SECTION 12. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) except as provided
below, remain in full force and effect until the indefeasible payment in full of
the Secured Obligations, (b) be binding upon Company, its successors and assigns
and (c) inure, together with the rights and remedies of Administrative Agent
hereunder, to the benefit of Administrative Agent and its successors,
transferees and assigns; provided, however, that if Lenders transfer or assign
their rights with respect to the Aircraft Loans without transferring all their
rights under the Credit Agreement with respect to Additional Loans, and the
security interest created under the First Mortgage is assigned therewith, upon
payment in full of the consideration for such transfer or assignment, the
security interest granted hereby shall terminate. Without limiting the
generality of the foregoing clause (c), Administrative Agent or any Lender may,
subject to any restrictions contained in the Credit Agreement, assign or
otherwise transfer the Credit Agreement and any Additional Note to any other
person or entity, and such other benefits in respect thereof granted to
Administrative Agent herein or otherwise. Upon the indefeasible payment in full
of the Secured Obligations, or unless an Event of Default shall have occurred
and be continuing, upon the termination of the security interest granted by the
First Mortgage and the satisfaction of any payment obligations of Company under
the Credit Agreement, Section 4 of this Mortgage or any other Loan Document as a
result of the events leading to such termination of the security interest
granted by the First Mortgage, the security interest granted hereby shall
terminate and all rights to the Aircraft Collateral and Aircraft Related
Collateral shall revert to Company. Upon any such termination, Administrative
Agent will execute and deliver to Company, at Company's expense, such
instruments of release and termination as Company may reasonably request to
evidence such termination.
SECTION 13. Miscellaneous.
Any provision of this Mortgage 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 unenforce- able such provision in
any other jurisdiction. To the extent permitted by applicable law, Company
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Administrative Agent. The captions and headings in
this Mortgage are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
XI-28
<PAGE> 214
SECTION 14. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 16 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Administrative Agent to bring proceedings against Company in
the courts of any other jurisdiction.
SECTION 15. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Article 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
SECTION 16. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Administrative Agent, as the case may be, addressed to
it at the address of such party specified on the signature page hereof, or as to
either party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section 16. All such notices and other communications shall, when mailed,
be effective when deposited in the mails, addressed as aforesaid.
XI-29
<PAGE> 215
SECTION 17. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
(Remainder of page intentionally left blank.)
XI-30
<PAGE> 216
IN WITNESS WHEREOF, Company and Administrative Agent have caused this
Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS AIR, INC.
By:
-----------------------------
Name:
Title:
Notice Address:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Nesa Hassanein
Senior Vice President and
General Counsel
BANKERS TRUST COMPANY,
as Administrative Agent
By:
-----------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
XI-31
<PAGE> 217
SCHEDULE I
to Second Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
XI-32
<PAGE> 218
SCHEDULE II
to Second Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
XI-33
<PAGE> 219
EXHIBIT A
to Second Security Agreement
and Chattel Mortgage
SECOND SUPPLEMENTAL CHATTEL MORTGAGE NO. ___
THIS SECOND SUPPLEMENTAL CHATTEL MORTGAGE is dated __________, 19__ between
Atlas Air, Inc., a Delaware corporation (the "Company"), and Bankers Trust
Company, as agent for and representative of ("Administrative Agent") the
financial institutions ("Lenders") party to the Third Amended and Restated
Credit Agreement dated as of September 5, 1997 among Company, Lenders, Goldman
Sachs Credit Partners L.P., as syndication agent, and Bankers Trust Company, as
administrative agent.
Company and Mortgagee have heretofore entered into a Second Security
Agreement and Chattel Mortgage dated __________, 199__ (the "Mortgage") and the
terms defined therein and not otherwise defined herein are used herein as
therein defined. The Mortgage provides for the execution and delivery of
supplements thereto substantially in the form hereof, for the purpose of
particularly describing each Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine to
Administrative Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 19__, and has been assigned Conveyance No. __________.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to
Administrative Agent, its successors and assigns, and grants and assigns to
Administrative Agent, its successors and assigns for the benefit of Lenders, a
second priority security interest, second only to the security interests granted
by the First Mortgage, in all estate, right, title and interest of Company in
and to the property described in Schedule I annexed hereto (whether or not such
Engine shall be installed on or attached to the Airframe), and the proceeds
thereof.
This Second Supplemental Chattel Mortgage shall be construed as
supplemental to the Mortgage and shall form a part thereof, and the Mortgage is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
THIS SECOND SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
XI-34
<PAGE> 220
This Second Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Second Supplemental Chattel Mortgage.
[Balance of page intentionally left blank.]
XI-35
<PAGE> 221
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS AIR, INC.
By:
-----------------------------
Name:
Title:
Notice Address:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Nesa Hassanein
Senior Vice President and
General Counsel
BANKERS TRUST COMPANY,
as Administrative Agent
By:
-----------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
XI-36
<PAGE> 222
SCHEDULE I
to Second Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
XI-37
<PAGE> 1
EXHIBIT 10.59
CREDIT AGREEMENT
DATED AS OF MAY 29, 1997
AMONG
ATLAS FREIGHTER LEASING, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders,
and
BANKERS TRUST COMPANY,
as Agent
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
SECTION 1. DEFINITIONS.................................................................................1
1.1 Certain Defined Terms.......................................................................1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement..................................................................................17
1.3 Other Definitional Provisions..............................................................17
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.................................................18
2.1 Commitments; Making of Loans; Notes; Register..............................................18
A. Commitments................................................................................18
B. Borrowing Mechanics........................................................................18
C. Disbursement of Funds......................................................................19
D. Notes......................................................................................19
E. The Register...............................................................................19
2.2 Interest on the Loans......................................................................20
A. Rate of Interest...........................................................................20
B. Interest Periods...........................................................................21
C. Interest Payments..........................................................................22
D. Default Rate...............................................................................22
E. Computation of Interest....................................................................22
2.3 Fees.......................................................................................23
2.4 Repayments and Prepayments; General Provisions Regarding Payments.........................23
A. Mandatory Reduction of Commitments.........................................................23
B. Scheduled Repayments of Loans..............................................................23
C. Prepayments................................................................................23
D. General Provisions Regarding Payments......................................................27
2.5 Use of Proceeds............................................................................28
A. Application of Proceeds....................................................................28
B. Margin Regulations.........................................................................28
2.6 Special Provisions Governing Loans.........................................................29
A. Determination of Applicable Interest Rate..................................................29
B. Inability to Determine Applicable Interest Rate............................................29
C. Illegality or Impracticability of Loans....................................................29
D. Compensation For Breakage or Non-Commencement of Interest Periods..........................30
E. Booking of Loans...........................................................................30
F. Assumptions Concerning Funding of Loans....................................................30
G. Substitute Basis...........................................................................31
2.7 Increased Costs, Taxes; Capital Adequacy...................................................32
A. Compensation for Increased Costs and Taxes.................................................32
B. Withholding of Taxes.......................................................................33
C. Capital Adequacy Adjustment................................................................35
D. Substitute Lenders.........................................................................36
2.8 Obligation of Lenders to Mitigate..........................................................36
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3. CONDITIONS TO LOANS........................................................................37
3.1 Conditions to Loans........................................................................37
A. Borrower and Atlas Documents...............................................................37
B. Aircraft Documents.........................................................................38
C. Notice of Borrowing........................................................................38
D. Necessary Consents.........................................................................38
E. Aircraft Chattel Mortgage..................................................................38
F. Solvency Opinion...........................................................................39
G. Financial Condition Certificate............................................................39
H. Opinions of Borrower's Counsel.............................................................39
I. Opinions of Clark Onstad...................................................................39
J. Atlas Credit Agreement.....................................................................40
K. Opinions of FAA Counsel....................................................................40
L. Fees.......................................................................................40
M. Financial Statements.......................................................................40
N. Evidence of Insurance......................................................................40
O. No Material Adverse Effect.................................................................40
P. Representations and Warranties; Performance of Agreements..................................40
Q. Compliance Certificate.....................................................................41
R. Transaction; Refinancing...................................................................41
S. Completion of Proceedings..................................................................41
T. Appraisals.................................................................................42
U. FAA Certification and Title................................................................42
V. Bankruptcy-Remote Subsidiary...............................................................42
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES..................................................42
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries..............42
A. Organization and Powers....................................................................42
B. Qualification and Good Standing............................................................43
C. Subsidiaries. Borrower has no Subsidiaries................................................43
D. Collateral Documents.......................................................................43
4.2 Authorization of Borrowing, etc............................................................43
A. Authorization of Borrowing.................................................................43
B. No Conflict................................................................................43
C. Governmental Consents......................................................................44
D. Binding Obligation.........................................................................44
4.3 Financial Condition........................................................................44
4.4 No Material Adverse Change; No Restricted Junior Payments..................................45
4.5 Title to Properties, Liens.................................................................45
4.6 Litigation, Adverse Facts..................................................................45
4.7 Payment of Taxes...........................................................................46
4.8 Performance of Agreements..................................................................46
4.9 Governmental Regulation....................................................................46
4.10 Securities Activities......................................................................47
4.11 Compliance with ERISA......................................................................47
4.12 Certain Fees...............................................................................47
4.13 Environmental Protection...................................................................47
4.14 Employee Matters...........................................................................48
4.15 Solvency...................................................................................48
4.16 Disclosure.................................................................................48
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
4.17 Section 1110...............................................................................48
4.18 Special Purpose Corporation................................................................49
4.19 Transaction................................................................................49
4.20 Representations and Warranties in Documents................................................49
4.21 Leases.....................................................................................49
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS...........................................................50
5.1 Financial Statements and Other Reports.....................................................50
5.2 Corporate Existence........................................................................53
5.3 Payment of Taxes and Claims; Tax Consolidation.............................................54
5.4 Maintenance of Properties; Insurance.......................................................54
5.5 Inspection; Lender Meeting.................................................................54
5.6 Compliance with Laws, etc..................................................................55
5.7 Environmental Indemnity....................................................................55
5.8 Borrower's Remedial Action Regarding Hazardous Materials...................................55
5.9 Maintenance Contracts......................................................................56
5.10 Employee Benefit Plans.....................................................................56
5.11 Further Assurances.........................................................................56
5.12 Performance of Obligations.................................................................56
5.13 Corporate Separateness.....................................................................56
SECTION 6. BORROWER'S NEGATIVE COVENANTS..............................................................57
6.1 Indebtedness...............................................................................57
6.2 Liens and Related Matters..................................................................58
A. Prohibition on Liens.......................................................................58
B. No Negative Pledges........................................................................58
6.3 Investments; Joint Ventures................................................................58
6.4 Contingent Obligations.....................................................................58
6.5 Restricted Junior Payments.................................................................58
6.6 Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries...............................................................................59
6.7 Amendments of Material Agreements..........................................................59
6.8 Restriction on Leases......................................................................59
6.9 Transaction with Shareholders and Affiliates...............................................59
6.10 Conduct of Business........................................................................60
SECTION 7. EVENTS OF DEFAULT..........................................................................60
7.1 Failure to Make Payments When Due..........................................................60
7.2 Default Under Lease........................................................................60
7.3 Breach of Certain Covenants................................................................60
7.4 Breach of Warranty.........................................................................61
7.5 Other Defaults Under Loan Documents........................................................61
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.......................................61
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.........................................61
7.8 Judgments and Attachments..................................................................62
7.9 Dissolution................................................................................62
7.10 Change in Control..........................................................................62
7.11 Failure of Security........................................................................62
7.12 Loss of United States Citizen Status.......................................................63
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 8. AGENT......................................................................................64
8.1 Appointment................................................................................64
8.2 Powers and Duties; General Immunity........................................................64
A. Powers; Duties Specified...................................................................64
B. No Responsibility for Certain Matters......................................................64
C. Exculpatory Provisions.....................................................................65
D. Agent Entitled to Act as Lender............................................................65
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness...........................................................................66
8.4 Right to Indemnity.........................................................................66
8.5 Collateral Documents.......................................................................66
8.6 Successor Agent............................................................................67
SECTION 9. MISCELLANEOUS..............................................................................67
9.1 Assignments and Participations in Loans....................................................67
A. General....................................................................................67
B. Assignments................................................................................68
C. Participations.............................................................................69
D. Assignments to Federal Reserve Banks and Others............................................69
E. Information................................................................................70
9.2 Expenses...................................................................................70
9.3 Indemnity..................................................................................70
9.4 Set-Off....................................................................................71
9.5 Ratable Sharing............................................................................72
9.6 Amendments and Waivers.....................................................................72
9.7 Independence of Covenants..................................................................74
9.8 Notices....................................................................................74
9.9 Survival of Representations, Warranties and Agreements.....................................74
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative......................................74
9.11 Marshalling: Payments Set Aside............................................................75
9.12 Severability...............................................................................75
9.13 Obligations Several; Independent Nature of Lenders' Rights.................................75
9.14 Headings...................................................................................76
9.15 Applicable Law.............................................................................76
9.16 Successors and Assigns.....................................................................76
9.17 Consent to Jurisdiction and Service of Process.............................................76
9.18 Waiver of Jury Trial.......................................................................77
9.19 Confidentiality............................................................................77
9.20 Counterparts; Effectiveness................................................................78
</TABLE>
-iv-
<PAGE> 6
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTE
III FORM OF COMPLIANCE CERTIFICATE
IVA FORM OF OPINION OF CAHILL GORDON & REINDEL
IVB FORM OF SECTION 1110 OPINION
IVC FORM OF OPINION COVERING CERTAIN TAX ISSUES
IVD FORM OF OPINION OF CLARK ONSTAD
IVE FORM OF OPINION OF FAA COUNSEL
V FORM OF ASSIGNMENT AGREEMENT
VI FORM OF CERTIFICATE RE NON-BANK STATUS
VII FORM OF FINANCIAL CONDITION CERTIFICATE - BORROWER
VIIA FORM OF FINANCIAL CONDITION CERTIFICATE - ATLAS
VIII FORM OF LEASE
IX FORM OF AIRCRAFT CHATTEL MORTGAGE
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
-v-
<PAGE> 7
CREDIT AGREEMENT, dated as of May 29, 1997, among ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Atlas Leasing" or the "Borrower"), the lenders
party hereto from time to time (each a "Lender" and, collectively, the
"Lenders"), and BANKERS TRUST COMPANY, as Agent for the Lenders (in such
capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has been established for the sole purpose of owning
and leasing to Atlas the Aircraft;
WHEREAS, the Aircraft are currently owned by Atlas One, a wholly owned
subsidiary of Atlas;
WHEREAS, the Aircraft are currently encumbered by certain indebtedness
which Atlas desires to refinance;
WHEREAS, in connection with the refinancing of such indebtedness, Atlas One
will dividend the Aircraft subject to the related indebtedness to Atlas which
will in turn contribute the Aircraft subject to certain indebtedness to Atlas
Leasing;
WHEREAS, subject to and upon the terms and conditions herein set forth, the
Lenders are willing to make available to Borrower the credit facility provided
for herein to refinance the indebtedness relating to the Aircraft;
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date,
the rate per annum obtained by dividing (rounded upward to the nearest 1/100 of
one percent) of the offered quotation, if any, to first class banks in the
interbank Eurodollar market by Agent for U.S. dollar deposits of amounts in same
day funds comparable to the principal amount of the Loans of Agent for which the
Adjusted Eurodollar Rate is then being determined with maturities comparable to
such Interest Period as of approximately 10:00 A.M. (New York time) on such
Interest Rate Determination Date by (y) a percentage equal to 100% minus the
stated maximum rate of all reserve requirements (including, without limi-
<PAGE> 8
-2-
tation, any marginal, emergency, supplemental, special or other reserves)
applicable on such Interest Rate Determination Date to any member bank of the
Federal Reserve System in respect of "Eurocurrency liabilities" as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"Affected Lender" has the meaning assigned to that term in subsection 2.6C.
"Affected Loans" has the meaning assigned to that term in subsection 2.6C.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" has the meaning assigned to that term in the introduction to this
Agreement and also means and includes any successor Agent appointed pursuant to
subsection 8.6.
"Aggregate Amounts Due" has the meaning assigned to that term in subsection
9.5.
"Agreement" means this Credit Agreement dated as of May 29, 1997, as it may
be amended, supplemented or otherwise modified from time to time.
"Aircraft" means six Boeing 747-200 aircraft in full freighter
configuration with FAA Registration Nos. N505MC, N507MC, N508MC, N509MC, N516MC
and N808MC, including the Engines installed thereon and spare engines of the
same type and model, which aircraft (i) are in cargo configuration capable of
immediate operation in the business of Borrower, and (ii) have a maximum gross
take-off weight ("MTOW") of at least 800,000 pounds.
"Aircraft Chattel Mortgage" means, with respect to each Aircraft a Security
Agreement and Chattel Mortgage in substantially in the form of Exhibit IX
annexed hereto granting to Agent for the benefit of Lenders a first priority
security interest in such Aircraft, as such Aircraft Chattel Mortgage may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms hereof and thereof.
"Airframe" means, as the context requires, an Airframe as defined in a
particular Aircraft Chattel Mortgage or all Airframes as defined in all Aircraft
Chattel Mortgages.
"Applicable Margin" has the meaning assigned to that term in subsection
2.2A.
<PAGE> 9
-3-
"Appraised Value" means, with respect to any Aircraft, the average of the
appraised value of such Aircraft by two Approved Appraisers as determined
pursuant to subsection 3.1T.
"Approved Appraiser" means either of BK Associates, Inc. or Simat,
Helliesen & Eichner, Inc. or any other nationally recognized firm of aircraft
appraisers reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) or
other disposition by Borrower to any other Person of any assets of Borrower
(whether tangible or intangible) excluding transactions related to aircraft
engines, components, parts or spare parts or other equipment, appliances,
instruments, appurtenances, accessories or furnishings of whatever nature which
may from time to time be removed from any Airframe or Engine in connection with
transactions permitted pursuant to and in accordance with Section 4(d) or
Section 4(e) of the Aircraft Chattel Mortgages.
"Assignment Agreement" means an Assignment Agreement in substantially the
form of Exhibit V annexed hereto.
"Atlas" means Atlas Air, Inc., a Delaware corporation.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
"Atlas One Leases" means those leases existing prior to the Effective Date
with Atlas One as lessor and Atlas as lessee.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the
rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Borrower" has the meaning assigned to that term in the introduction to
this Agreement.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
<PAGE> 10
-4-
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"Certificate re Non-Bank Status" means a certificate substantially in the
form of Exhibit VI annexed hereto delivered by a Lender to Agent pursuant to
subsection 2.7B(iii).
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Collateral" means all of the properties and assets in which Liens are
purported to be granted by the Collateral Documents.
<PAGE> 11
-5-
"Collateral Documents" means each Aircraft Chattel Mortgage and any
security agreement executed pursuant to subsection 5.11.
"Commitment" means the commitment of each Lender as set forth on Schedule
2.1, as the same may be reduced or terminated pursuant to Section 2.4 and/or
Section 7.
"Compliance Certificate" means a certificate delivered to Agent and Lenders
by Borrower pursuant to subsection 3.1Q or 5.1(iii).
"Condemnation Proceeds" has the meaning assigned to that term in subsection
2.4C(ii)(b).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
<PAGE> 12
-6-
"Contribution" has the meaning assigned to that term in subsection 3.1R.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designated to protect Borrower against fluctuations in
currency values.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Dividend" has the meaning assigned to that term in subsection 3.1R.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Effective Date" has the meaning assigned to that term in Section 9.20.
"Eligible Assignee" means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, and (B) any Lender and any Affiliate of any
Lender; provided that no Affiliate of Borrower shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Borrower or any of its ERISA Affiliates.
"Engine" means, as the context requires, an Engine as defined in a
particular Aircraft Chattel Mortgage or Engines as defined in all Aircraft
Chattel Mortgages.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
<PAGE> 13
-7-
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means each of the events set forth in Section 7.
"Event of Loss" shall mean any of the following events with respect to any
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such or the use thereof due to theft or disappearance of such Aircraft which
shall result in the loss of possession thereof for a period of 120 days (or for
a shorter period ending on the date on which there is an insurance settlement
for a total loss on the basis of the theft or disappearance of such Aircraft);
(B) the destruction, damage beyond repair or rendition of such Aircraft
permanently unfit for normal use for any reason whatsoever; (C) the
condemnation, confiscation or seizure of, or requisition of title to, or use or
possession (other than use by the United States Government if Borrower obtains
adequate compensation from the United States Government) of such Aircraft; (D)
as a result of any rule, regulation, order or other action by the FAA or other
governmental body having jurisdiction, the use of such Aircraft in the normal
course of interstate air transportation of persons or cargo shall have been
prohibited for a period of more than nine consecutive months unless Borrower,
prior to the expiration of such nine month 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 Borrower or, in any event, if such
use shall have been prohibited for a period of twelve consecutive months; (E)
the operation or location of such Aircraft, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area excluded
from coverage by any insurance policy in effect with respect to such Aircraft,
if Borrower shall be unable to obtain indemnity or "war risk" insurance in lieu
thereof from the United
<PAGE> 14
-8-
States; (F) any damage which results in an insurance settlement with respect to
such Aircraft on the basis of an actual or constructive total loss or (G) a
divestiture of such Airframe as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage. An Event of Loss with respect to any
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe of such Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means the ING Obligations and the Lufthansa
Obligations.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day on which is a Business Day, the average of the quotations for such day on
such transactions received by Agent from three Federal funds brokers of
recognized standing selected by Agent.
"Final Maturity Date" means the seventh anniversary of the Initial
Borrowing Date.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession. Financial statements and other information required to
<PAGE> 15
-9-
be delivered by Borrower to Lenders pursuant to clauses (i) and (ii) of
subsection 5.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation. Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with GAAP as in effect on the date of this
Agreement.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property of Borrower; and (ii) caused by, or
undertaken by or on behalf of, Borrower.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and are not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 9.3.
"Indemnitee" has the meaning assigned to that term in subsection 9.3.
"Independent Director" means a director of Borrower that satisfies the
criteria for "Independent Director" set forth in the Certificate of
Incorporation of Borrower.
"ING Financing Agreement" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Atlas and Internationale Nederlanden Aviation
Lease B.V.,
<PAGE> 16
-10-
as amended by Amendment No. 1 thereto and as further amended, restated,
supplemented and otherwise modified from time to time on or prior to the date of
this Agreement.
"ING Obligations" means all amounts owing by Atlas or any of its
Subsidiaries made pursuant to the ING Financing Agreement and related documents.
"Initial Borrowing Date" shall mean the date occurring on or after the
Effective Date on which the borrowing of the Loans occurs.
"Insurance Proceeds" has the meaning assigned to that term in subsection
2.4C(ii)(b).
"Interest Payment Date" means with respect to any Loan, the last day of
each Interest Period applicable to such Loan.
"Interest Period" has the meaning assigned to that term in subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Borrower against fluctuations in interest rates.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Borrower of, or of a beneficial interest in, any Securities of any other
Person or (ii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Borrower to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
<PAGE> 17
-11-
"Lease" or "Leases" shall mean each of the lease agreements, dated as of
May 29, 1997 between Atlas Freighter Leasing, Inc., as Lessor and Atlas Air,
Inc., as Lessee, as the same may be amended, modified or supplemented from time
to time in accordance with the terms hereof. The term "Lease" shall include any
Lease Supplement entered into in accordance with the terms of any Lease.
"Lender" and "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of this Agreement, together with their successors and
permitted assigns pursuant to subsection 9.1.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under this Agreement on the
same day by all the Lenders to the Borrower and relating to one Aircraft but
secured by all Collateral.
"Loan Documents" means this Agreement, the Notes, the Lease and the
Collateral Documents.
"Loan Exposure" means, with respect to any Lender as of any date of
determination the outstanding principal amount of the Loans of that Lender.
"Lufthansa Financing Agreement" means the two Conditional Sales Agreements
and two Sales Agreements between Atlas and Deutsche Lufthansa Aktiengellschaft,
each dated September 22, 1994.
"Lufthansa Obligations" means all amounts owing by Atlas or any of its
Subsidiaries to Lufthansa pursuant to the Lufthansa Financing Agreement and
related documents.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Borrower or (ii) the impairment of the ability of Borrower to
perform the Obligations, or the impairment, as a result of actions or inaction
by Borrower, of the ability of Agent or Lenders to enforce the Obligations.
<PAGE> 18
-12-
"Maximum Loan Amount" means, with respect to the Loan relating to (i) the
Aircraft with U.S. Registration No. N516MC, $36,264,150.94, (ii) the Aircraft
with U.S. Registration No. N509MC, $29,452,830.19, (iii) the Aircraft with U.S.
Registration No. N508MC, $34,452,830.19, (iv) the Aircraft with U.S.
Registration No. N507MC, $32,622,641.51, (v) the Aircraft with U.S. Registration
No. N505MC, $30,094,339.62 and (vi) the Aircraft with U.S. Registration No.
N808MC, $22,113,207.55.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including income taxes
reasonably estimated to be actually payable as a result of such Asset Sale
within two years of the date of such Asset Sale.
"Non-US Lender" has the meaning assigned to that term in subsection
2.7B(iii)(a).
"Notes" has the meaning assigned to that term in subsection 2.1D.
"Notice of Borrowing" means a notice delivered by Borrower to Agent
pursuant to subsection 2.1B.
"Obligations" means all obligations of every nature of Borrower from time
to time owed to Agent, Lenders or any of them under the Loan Documents, whether
for principal, interest, fees, expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
with respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
<PAGE> 19
-13-
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements which related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by subsection
5.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent
or being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any Collateral,
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(iii) the rights of others under agreements or arrangements to
the extent expressly permitted by the terms of Sections 4(d) and 4(e)
of the Aircraft Chattel Mortgages; and
(iv) Liens granted pursuant to the Collateral Documents.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default.
"Pricing Certificate" has the meaning assigned to that term in subsection
5.1(xi).
"Pricing Reduction" means, if at any time on or after the third anniversary
of the Initial Borrowing Date, Atlas's obligations in respect of the Pass
Through Trust Documents
<PAGE> 20
-14-
are rated by Moody's or S&P at the levels specified below, a pricing reduction
equal to the percentage corresponding to the applicable rating set forth in the
chart below:
<TABLE>
<CAPTION>
Rating Pricing Reduction
------ -----------------
<S> <C>
Ba 2 by Moody's and BB by S&P 0.25%
Ba 1 or higher by Moody's and
BB+ or higher by S&P 0.50%
</TABLE>
In the event of a split rating, the more creditworthy of the two
ratings shall be used to determine the Pricing Reduction; provided that, if the
less creditworthy of the two ratings is two or more rating categories below the
more creditworthy rating, the more creditworthy rating shall be deemed to be the
rating category which is one rating category above the less creditworthy rating.
The Pricing Reduction shall be determined with reference to the most recent
Pricing Certificate delivered by Borrower to Agent pursuant to subsection
5.1(xi). Any changes to the Pricing Reduction shall become effective on the day
following the delivery of the relevant Pricing Certificate to Agent and shall
remain in effect through the next date a Pricing Certificate is required to be
delivered. It is understood and agreed that the Pricing Reduction percentages
provided are not cumulative. Notwithstanding anything to the contrary herein, at
any time an Event of Default shall have occurred and be continuing, the Pricing
Reduction shall be zero.
"Prime Rate" means the rate that Agent announces from time to time as its
prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Agent or any other Lender may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
"Proceedings" has the meaning assigned to that term in subsection
5.1(viii).
"Projections" means the financial projections of Atlas and its Subsidiaries
delivered on or prior to the Initial Borrowing Date covering the five-year
period ending on December 31, 2001.
"Pro Rata Share" means, with respect to each Lender, the percentage
obtained by dividing the Loan Exposure of that Lender by the aggregate Loan
Exposure of all Lenders, in each case as such percentage may be adjusted by
assignments permitted pursuant to subsection 9.1. The initial Pro Rata Share of
each Lender is set forth opposite the name of that Lender in Schedule 2.1
annexed hereto.
"Refinancing" has the meaning assigned to that term in subsection 3.1R.
<PAGE> 21
-15-
"Register" has the meaning assigned to that term in subsection 2.1.E.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Related Fund" means, with respect to any Lender that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Requisite Lenders" means Lenders having or holding 50.1% or more of the
aggregate Loan Exposure of all Lenders.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Borrower now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Borrower now or hereafter outstanding.
"S&P" means Standard & Poor's Ratings Group.
"Second Amended and Restated Credit Agreement" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Atlas Air, Inc.,
as Borrower, the Lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Administrative Agent as amended
by the First Amendment thereto, dated as of April 25, 1997, and the Second
Amendment thereto, dated as of May 29, 1997, but without giving effect to any
further amendments, modifications, supplements or waivers thereof.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or
<PAGE> 22
-16-
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Service Agreement" means the Service Agreement, dated as of May 29, 1997,
between Atlas and Borrower.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"Substitute Basis" has the meaning assigned to that term in subsection
2.6G.
"Syndication Date" means the date on which Agent has completed, in Agent's
determination, the primary syndication of Loans.
<PAGE> 23
-17-
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its lending office)
is located on all or part of the net income, profits or gains of that Person
(whether worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or otherwise).
"Total Commitment" means the sum of the Commitments of the Lenders.
"Transaction" has the meaning assigned that term in subsection 3.1R.
"Transaction Documents" means the Second Amendment to the Second Amended
and Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2) delivered in
connection with the Transaction, the Leases, the releases of the Atlas One
Leases, all documents relating to the Refinancing, and all other agreements and
documentation executed and delivered in connection with the Transaction,
including, without limitation, in connection with the Dividend and the
Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
1.2 Accounting Terms; Utilization of GAAP
for Purposes of Calculations Under Agreement.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP.
1.3 Other Definitional Provisions.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
<PAGE> 24
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SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes; Register.
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Borrower herein set
forth, each Lender hereby severally agrees to make on the Initial Borrowing
Date, six Loans to Borrower in an aggregate amount not to exceed the Commitment
of such Lender. Each Loan of a Lender shall relate to one of the Aircraft and
shall be in an amount equal to such Lender's Pro Rata Share on the Initial
Borrowing Date of the Maximum Loan Amount with respect to such Aircraft. The
Loans of all of the Lenders relating to one Aircraft shall not exceed the
Maximum Loan Amount for such Aircraft and shall be made on the same day by the
Lenders ratably according to their respective Commitments. Once repaid, Loans
borrowed hereunder may not be reborrowed.
B. Borrowing Mechanics. (i) Each borrowing of Loans relating to a
particular Aircraft shall be made by the delivery of a Notice of Borrowing by
Borrower to Agent not later than 12:00 Noon (New York City time) on the third
Business Day prior to the date of the proposed borrowing. Agent shall give to
each Lender prompt notice thereof. Each such Notice of Borrowing shall be
irrevocable and binding on Borrower. Each such Notice of Borrowing shall be in
the form of Exhibit I. The Notice of Borrowing shall specify (i) the proposed
borrowing date (which shall be a Business Day), (ii) the amount of Loans
requested and (iii) the Aircraft to which the Loans relate. In lieu of
delivering the above described Notice of Borrowing, Borrower may give Agent
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1B; provided that such notice shall be promptly confirmed in
writing.
(ii) Neither Agent nor any Lender shall incur any liability to Borrower in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to borrow on behalf of Borrower or for otherwise acting in good faith under this
subsection 2.1B, and upon funding of the Loans by Lenders in accordance with
this Agreement pursuant to any such telephonic notice Borrower shall have
effected the Loans hereunder. Borrower shall notify Agent prior to the funding
of the Loans in the event that any of the matters to which Borrower is required
to certify in the Notice of Borrowing is no longer true and correct as of the
Initial Borrowing Date and the acceptance by Borrower of the proceeds of any
Loans shall constitute a recertification by Borrower as of the Initial Borrowing
Date, as to the matters to which Borrower is required to certify in the
applicable Notice of Borrowing.
<PAGE> 25
-19-
C. Disbursement of Funds. All Loans under this Agreement shall be made by
Lenders simultaneously and proportionately to their respective Pro Rata Shares,
it being understood that no Lender shall be responsible for any default by any
other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make a Loan requested be
increased or decreased as a result of a default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder. Promptly after
receipt by Agent of a Notice of Borrowing pursuant to subsection 2.1B (or
telephonic notice in lieu thereof), Agent shall notify each Lender of the
proposed borrowing. Each Lender shall make the amount of its Loans available to
Agent not later than 12:00 Noon (New York time) on the Initial Borrowing Date,
in each case in same day funds in Dollars, at the Funding and Payment Office.
Unless Agent shall have been notified by any Lender prior to the Initial
Borrowing Date that such Lender does not intend to make available to Agent the
amount of such Lender's Loans so requested on the Initial Borrowing Date, Agent
may assume that such Lender has made such amount available to Agent on the
Initial Borrowing Date and Agent may, in its sole discretion, but shall not be
obligated to, make available to Borrower a corresponding amount on the Initial
Borrowing Date. If such corresponding amount is not in fact made available to
Agent by such Lender, Agent shall be entitled to recover such corresponding
amount on demand from such Lender together with interest thereon, for each day
from the Initial Borrowing Date until the date such amount is paid to Agent, at
the customary rate set by Agent for the correction of errors among banks for
three Business Days. If such Lender does not pay such corresponding amount
forthwith upon Agent's demand therefor, Agent shall promptly notify Borrower and
Borrower shall immediately pay such corresponding amount to Agent together with
interest thereon, for each day from the Initial Borrowing Date until the date
such amount is paid to Agent, at the rate payable under this Agreement. Nothing
in this subsection 2.1C shall be deemed to relieve any Lender from its
obligation to fulfill its Commitment hereunder or to prejudice any rights that
Borrower may have against any Lender as a result of any default by such Lender
hereunder.
D. Notes. Borrower shall duly execute and deliver on the Initial Borrowing
Date to each Lender (or to Agent for that Lender) the Notes, each substantially
in the form of Exhibit II annexed hereto, to evidence that Lender's Loans in
respect of each Aircraft, in the principal amount of such Lender's Pro Rata
Share of such Aircraft's Maximum Loan Amount and with other appropriate
insertions (each a "Note" and collectively, the "Notes").
E. The Register.
(i) Agent shall maintain, at its address referred to in subsection 9.8, a
register (the "Register") for the recordation of the names and addresses of
Lenders and the Com-
<PAGE> 26
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mitments and Loans of each Lender from time to time and Agent shall record in
the Register the Commitment and the Loans from time to time of each Lender and
each repayment or prepayment in respect of the principal amount of the Loans of
each Lender. Such recordation shall be conclusive and binding on Borrower and
each Lender, absent manifest error; provided that failure to make any such
recordation, or any error in such recordation, shall not affect Borrower's
Obligations in respect of the applicable Loans. The Register shall be available
for inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(ii) Each Lender shall record on its internal records (including, without
limitation, the Notes held by such Lender) the amount of each Loan made by it
and each payment in respect thereof. Any such recordation shall be conclusive
and binding on Borrower, absent manifest error; provided that failure to make
any such recordation, or any error in such recordation, shall not affect
Borrower's Obligations in respect of the applicable Loans; and provided further
that in the event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern.
(iii) Borrower, Agent and Lenders shall deem and treat the Persons listed
as Lenders in the Register as the holders and owners of the corresponding
Commitments and Loans listed therein for all purposes hereof, and no assignment
or transfer of any such Commitment or Loan shall be effective in each case
unless and until an Assignment Agreement effecting the assignment or transfer
thereof shall have been accepted by Agent and recorded in the Register as
provided in subsection 9.1B(ii). Prior to such recordation, all amounts owed
with respect to the applicable Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and binding
on any subsequent holder, assignee or transferee of the corresponding
Commitments or Loans.
(iv) Borrower hereby designates Agent to serve as Borrower's agent solely
for purposes of maintaining the Register as provided in this subsection 2.1E,
and Borrower hereby agrees that, to the extent Agent serves in such capacity,
Agent and its officers, directors, employees, agents and affiliates shall
constitute Indemnitees for all purposes under subsection 9.3.
2.2 Interest on the Loans.
A. Rate of Interest. (i) Subject to the provisions of Sections 2.6 and 2.7,
each Loan shall bear interest on the unpaid principal amount thereof from the
Initial Borrowing Date through maturity (whether by acceleration or otherwise)
at a rate determined by reference to the Adjusted Eurodollar Rate. The
applicable Interest Period for determining the
<PAGE> 27
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rate of interest with respect to the Loans shall be determined in accordance
with subsection 2.2B.
(ii) Subject to the provisions of subsections 2.2D and 2.7, the Loans shall
bear interest through maturity at a per annum rate equal to the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin.
The "Applicable Margin" for each Loan shall be the percentage set forth
below for the periods set forth below.
<TABLE>
<CAPTION>
Time Period Applicable Margin
----------- -----------------
<S> <C>
From the Initial Borrowing Date through the
third anniversary of the Initial Borrowing
Date 2.50%
Thereafter 3.00%
</TABLE>
Notwithstanding the foregoing, from and after the third anniversary of the
Initial Borrowing Date the Applicable Margin shall be reduced by an amount equal
to the applicable Pricing Reduction effective from the date following the
delivery by Borrower to Agent of a Pricing Certificate through the date a
subsequent Pricing Certificate is required to be delivered. If Borrower fails to
deliver a Pricing Certificate or delivers an incorrect Pricing Certificate, no
Pricing Reduction shall be effective until Borrower delivers a correct Pricing
Certificate.
B. Interest Periods. In connection with each Loan, the interest period
("Interest Period") to be applicable to such Loan shall be, (x) from the Initial
Borrowing Date until the earlier to occur of (1) the 60th day after the Initial
Borrowing Date and (2) the Syndication Date, one month, and (y) immediately
after the completion of any one-month Interest Period following the earlier of
the dates described above, three months, provided that:
(i) the initial Interest Period for each Loan shall commence on the
Initial Borrowing Date;
(ii) each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day
<PAGE> 28
-22-
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period shall extend beyond the Final Maturity Date;
(vi) no Interest Period shall extend beyond a date on which Borrower
is required to make a scheduled payment of principal of the Loans;
(vii) there shall be no more than one Interest Period at any time.
C. Interest Payments. Subject to the provisions of subsection 2.2D,
interest on each Loan shall be payable in arrears on the last day of each
Interest Period applicable to that Loan, upon any prepayment of Loans (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. Default Rate. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 1% per annum in
excess of the sum of the Base Rate as in effect from time to time and the
Applicable Margin); provided that, upon the expiration of the Interest Period in
effect at the time any such increase in interest rate is effective, such Loans
shall thereupon bear interest payable upon demand at a rate which is 1% per
annum in excess of the sum of the Base Rate as in effect from time to time and
the Applicable Margin. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2D is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Agent or any Lender.
E. Computation of Interest. Interest on each Loan shall be computed on the
basis of a 360-day year, in each case for the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of such Loan or the first day of an Interest Period applicable to
such Loan shall be included, and
<PAGE> 29
-23-
the date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan shall be excluded; provided that if a Loan is repaid on
the same day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
Borrower agrees to pay to Lenders and Agent such fees and in such amounts
and at such times as have been separately agreed in writing upon among Borrower
and Agent.
2.4 Repayments and Prepayments; General
Provisions Regarding Payments.
A. Mandatory Reduction of Commitments. The Total Commitment (and the
Commitment of each Lender) shall terminate on the earlier of (x) the Initial
Borrowing Date, after giving effect to the incurrence of the Loans on such date
and (y) June 1, 1997.
B. Scheduled Repayments of Loans. Borrower shall make the following
scheduled payments on the Loans on each three month anniversary of the Initial
Borrowing Date commencing with the nine month anniversary thereof: (i) the first
two scheduled principal payments shall be in the amount of $2,525,000; (ii) the
next succeeding 23 scheduled principal payments shall be in the amount of
$5,650,000 and (iii) the final payment shall be in an amount equal to
$50,000,000; provided that such scheduled installments of principal of the Loans
shall be reduced in connection with any voluntary or mandatory prepayments of
the Loans in accordance with subsection 2.4C; and provided further, that the
Loans and all other amounts owed hereunder with respect to the Loans shall be
paid in full no later than the Final Maturity Date, and the final installment
payable by Borrower in respect of the Loans on such date shall be in an amount
sufficient to repay all amounts owing by Borrower under this Agreement with
respect to the Loans. Any payment pursuant to this subsection 2.4B will be
applied ratably among the Loans relating to all Aircraft based on the
outstanding principal amount of each such Loan as compared to the total
outstanding principal amount of all Loans. If the date on which any scheduled
payment is due falls on a day that is not a Business Day, then such scheduled
repayment shall be made on the next succeeding Business Day; provided that, if
any such scheduled repayment would otherwise become due on a day that is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such scheduled repayment shall be made on the next
preceding Business Day.
C. Prepayments.
(i) Voluntary Prepayments. Borrower may, upon not less than three Business
Days' prior written or telephonic notice given to Agent by 12:00 Noon (New York
time) on
<PAGE> 30
-24-
the date required and, if given by telephone, promptly confirmed in writing to
Agent (which original written or telephonic notice Agent will promptly transmit
by telefacsimile or telephone to each Lender), at any time and from time to time
prepay, without premium or penalty, the Loans on any Business Day in whole or in
part in an aggregate minimum amount of $5,000,000 and integral multiples of
$500,000 in excess of that amount; provided, however, that Loans may only be
prepaid on the expiration of the Interest Period applicable thereto. Notice of
prepayment having been given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as specified
in subsection 2.4C(iii).
(ii) Mandatory Prepayments.
(a) Prepayments and Reductions from Asset Sales. No later than the
second Business Day following the date of receipt by Borrower of Cash
Proceeds of any Asset Sale, Borrower shall prepay, without premium or
penalty (other than pursuant to subsection 2.6D), Loans in an amount equal
to the Net Cash Proceeds of such Asset Sale. Concurrently with any
prepayment of the Loans pursuant to this subsection 2.4C(ii)(a), Borrower
shall deliver to Agent an Officers' Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale from the
gross sales price thereof. In the event that Borrower shall, at any time
after receipt of Cash Proceeds of any Asset Sale requiring a prepayment
pursuant to this subsection 2.4C(ii)(a), determine that the prepayments
previously made in respect of such Asset Sale were in an aggregate amount
less than that required by the terms of this subsection 2.4C(ii)(a),
Borrower shall promptly make an additional prepayment of the Loans, as the
case may be, in the manner described above in an amount equal to the amount
of any such deficit, and Borrower shall concurrently therewith deliver to
Agent an Officers' Certificate demonstrating the derivation of the
additional Net Cash Proceeds resulting in such deficit. Any mandatory
prepayments pursuant to this subsection 2.4C(ii)(a) shall be applied as
specified in subsection 2.4C(iii).
(b) Prepayments and Reductions Due to Insurance and Condemnation
Proceeds. Within 180 days of receipt by Borrower of any cash payments under
any of the casualty insurance policies covering damage to or loss of
property maintained pursuant to subsection 5.4 or otherwise resulting from
damage to or loss of all or any portion of the Collateral or any other
tangible asset (net of actual and documented reasonable costs incurred by
Borrower in connection with adjustment and settlement thereof and in
connection with the reinvestment of proceeds permitted hereby, "Insurance
Proceeds") or any proceeds resulting from the taking of assets by the power
of eminent domain, condemnation or otherwise (net of actual and documented
reasonable costs incurred by Borrower in connection with adjustment
<PAGE> 31
-25-
and settlement thereof and in connection with the reinvestment of proceeds
permitted hereby, "Condemnation Proceeds" and, collectively with Insurance
Proceeds, "Proceeds") (other than proceeds applied pursuant to subsection
2.4C(ii)(c)) and so long as at the time of receipt of such proceeds there
shall exist no Potential Event of Default or Event of Default, Borrower may
reinvest such Proceeds in property substantially similar to the property so
damaged or lost so long as the Collateral Agent receives a first priority
perfected security interest in such property pursuant to documentation
acceptable to the Collateral Agent, the property is duly leased to Atlas
pursuant to the applicable Lease and the Collateral Agent receives all
documents and opinions in connection therewith which it may reasonably
request, including without limitation, an opinion from counsel that
Borrower as lessor and the Collateral Agent as the assignee under the Lease
are entitled to the benefits of Section 1110 of the Bankruptcy Code with
respect to such property. If 180 days after receipt of any such Proceeds,
Borrower has not reinvested such Proceeds as described above or if at the
time of receipt of such proceeds or at the time of reinvestment there shall
exist a Potential Event of Default or an Event of Default then Borrower
shall immediately prepay, without premium or penalty (other than pursuant
to subsection 2.6D), those Loans relating to the Aircraft in respect of
which such Proceeds were received based on the outstanding principal amount
of each Loan as compared to the total outstanding principal amount of all
Loans relating to such Aircraft. Any amount of the Proceeds remaining (a)
after prepayment of the Loans described in the immediately preceding
sentence and/or (b) after being reinvested in the manner described in the
second preceding sentence shall be applied ratably to the prepayment of
Loans relating to all of the remaining Aircraft based on the outstanding
principal amount of each such Loan as compared to the total outstanding
principal amount of all Loans relating to all of the remaining Aircraft.
Any such mandatory prepayments shall be applied as specified in subsection
2.4C(iii). Until such time as such proceeds are reinvested or applied to
repay Loans, all such proceeds shall be held by the Agent in a cash
collateral account with the Agent as security for the Obligations pursuant
to a cash collateral agreement in form and substance satisfactory to the
Agent and providing that such proceeds may be invested in Cash or Cash
Equivalents at the direction of Borrower with any earnings thereon being
for the account of Borrower.
(c) Prepayments and Reductions Due to an Event of Loss. Following an
Event of Loss with respect to an Aircraft, Borrower shall prepay, without
premium or penalty (other than pursuant to subsection 2.6(D)) the
outstanding principal amount of Loans relating to the Aircraft which is the
subject of the Event of Loss; provided that Borrower shall not be required
to make a prepayment pursuant to this subsection 2.4C(ii)(c) in the event
that Borrower receives Insurance Proceeds or
<PAGE> 32
-26-
Condemnation Proceeds in connection with such Event of Loss so long as at
the time of reinvestment there exists no Potential Event of Default or
Event of Default, in which case, such Proceeds may, within 180 days of
receipt of any such Proceeds, be reinvested in aircraft substantially
similar to the Aircraft which was the subject of the Event of Loss so long
as such replacement aircraft is duly leased to Atlas pursuant to the
applicable Lease or Leases and the Collateral Agent receives all documents
and opinions in connection therewith which it may reasonably request,
including without limitation, an opinion from counsel of the Borrower to
the extent that the Borrower as lessor and Collateral Agent as the assignee
under the Lease are entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to such property. To the extent Insurance
Proceeds or Condemnation Proceeds received upon the occurrence of an Event
of Loss with respect to an Aircraft are not reinvested in accordance with
the preceding sentence, then Borrower shall prepay, without premium or
penalty (other than pursuant to subsection 2.6D), those Loans relating to
the Aircraft in respect of which such Insurance Proceeds or Condemnation
Proceeds were received based on the outstanding principal amount of each
Loan as compared to the total outstanding principal amount of all Loans
relating to such Aircraft. Any amount of the Proceeds remaining (a) after
prepayment of the Loan described in the immediately preceding sentence
and/or (b) after being reinvested in the manner described in the second
preceding sentence, shall be applied ratably to the prepayment of Loans
relating to all of the remaining Aircraft based on the outstanding
principal amount of each such Loan as compared to the total outstanding
principal amount of all Loans relating to all of the remaining Aircraft.
Any such mandatory prepayments shall be applied as specified in subsection
2.4C(iii). Until such time as such Proceeds are reinvested in replacement
aircraft or applied to repay Loans, such proceeds shall be held by the
Agent in a cash collateral account with the Agent as security for the
Obligations pursuant to a cash collateral agreement in form and substance
satisfactory to the Agent and providing that such proceeds may be invested
in Cash or Cash Equivalents at the direction of Borrower with any earnings
thereon being for the account of Borrower.
(d) Prepayments under Leases. On any date on which Borrower receives
any prepayments of rent or other amounts pursuant to the terms of any
Lease, Borrower shall prepay, without premium or penalty (other than
pursuant to subsection 2.6), the outstanding principal amount of Loans
relating to the Aircraft which is the subject of the Lease pursuant to
which such prepayments were made and to the extent that such payments are
in excess of the principal amount of Loans relating to such Aircraft such
excess proceeds shall be applied to make an additional prepayment of Loans.
All such additional prepayments of Loans shall be applied ratably
<PAGE> 33
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among the Loans relating to all of the remaining Aircraft based on the
amount of each such Loan as compared to the total outstanding amount of all
Loans.
(iii) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of Loans and Order of
Maturity. Any voluntary prepayments pursuant to subsection 2.4C(i) shall be
applied ratably among the Loans relating to all of the Aircraft based on
the outstanding principal amount of each such Loan as compared to the total
outstanding principal amount of all Loans. All voluntary prepayments of the
Loans pursuant to subsection 2.4C(i) shall be applied pro rata to all
scheduled amortization payments.
(b) Application of Mandatory Prepayments of Loans. Any mandatory
prepayments of the Loans pursuant to subsection 2.4C(ii) shall be applied
ratably among the Loans relating to all of the Aircraft based on the
outstanding principal amount of each such Loan as compared to the total
outstanding principal amount of all Loans; provided that in the event of a
prepayment pursuant to subsection 2.4C(ii)(a) such prepayment shall be
applied first to the Loans relating to such Aircraft which is the subject
of the Asset Sale on a pro rata basis based on the outstanding principal
amount of each Loan as compared to the total outstanding principal amount
of all Loans relating to such Aircraft and second, ratably among the Loans
relating to all other Aircraft on a pro rata basis based on the outstanding
principal amount of the Loan being prepaid as compared to the total
outstanding principal amount of all Loans relating to all other Aircraft.
Any mandatory prepayments of the Loans pursuant to subsection 2.4C(ii)(b)
or (c) shall be applied to the Loans relating to the particular Aircraft,
retained by Borrower and/or applied ratably among the Loans relating to all
other Aircraft in accordance with such sections. All mandatory prepayments
of the Loans pursuant to subsection 2.4C(ii) shall be applied to scheduled
amortization payments in inverse order of maturity.
D. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Borrower of principal,
interest, fees and other Obligations hereunder and under the Notes shall be made
in Dollars in same day funds, without defense, set-off or counterclaim, free of
any restriction or condition, and delivered to Agent not later than 12:00 Noon
(New York time) on the date due at the Funding and Payment Office for the
account of Lenders; funds received by Agent after that time on such due date
shall be deemed to have been paid by Borrower on the next succeeding Business
Day. Borrower hereby authorizes Agent to charge its accounts with Agent in order
to cause timely payment to be made to Agent of all principal, interest, fees
<PAGE> 34
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and expenses due hereunder (subject to sufficient funds being available in its
accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All payments in
respect of the principal amount of any Loan shall include payment of accrued
interest on the principal amount being repaid or prepaid, and all such payments
shall be applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest payments
in respect of Loans shall be apportioned among all outstanding Loans to which
such payments relate, in each case proportionately to Lenders' respective Pro
Rata Share. Agent shall promptly distribute to each Lender, at its address set
forth below its name on the signature page hereof or at such other address as
such Lender may request, its Pro Rata Share of all such payments received by
Agent.
(iv) Payments on Business Days. Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in the computation of the payment of interest hereunder.
(v) Notation of Payment. Each Lender agrees that before disposing of any
Note held by it, or any part thereof (other than by granting participations
therein), that Lender will make a notation thereon of all Loans evidenced by
that Note and all principal payments previously made thereon and of the date to
which interest thereon has been paid; provided that the failure to make (or any
error in the making of) a notation of any Loan made under such Note shall not
limit or otherwise affect the obligations of Borrower hereunder or under such
Note with respect to any Loan or any payments of principal or interest on such
Note.
2.5 Use of Proceeds.
A. Application of Proceeds. The proceeds of the Loans shall be applied
solely to (x) consummate the Refinancing and (y) to pay fees and expenses
related to the Refinancing and the other transactions contemplated hereby.
B. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Borrower in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
<PAGE> 35
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2.6 Special Provisions Governing Loans.
Notwithstanding any other provisions of this Agreement to the contrary, the
following provisions shall govern with respect to Loans as to the matters
covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
10:00 A.M. (New York time) on each Interest Rate Determination Date, Agent shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the Loans for which an interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to Borrower and each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that Agent
shall have determined (which determination shall be final and conclusive and
binding upon all parties hereto), on any Interest Rate Determination Date with
respect to any Loans, that by reason of circumstances affecting the interbank
Eurodollar market adequate and fair means do not exist for ascertaining the
interest rate applicable to such Loans on the basis provided for in the
definition of Adjusted Eurodollar Rate, Agent shall on such date give notice (by
telefacsimile or by telephone confirmed in writing) to Borrower and each Lender
of such determination, whereupon (i) no Loans may be incurred until such time as
Agent notifies Borrower and Lenders that the circumstances giving rise to such
notice no longer exist or until Borrower, Agent and the Lenders agree upon a
Substitute Basis in accordance with Section 2.6G and (ii) the rate of interest
applicable to any Affected Loans then outstanding shall be determined in
accordance with Section 2.6G.
C. Illegality or Impracticability of Loans. In the event that on any date
any Lender shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto but shall be made only after
consultation with Borrower and Agent) that the making, maintaining or
continuation of its Loans (i) has become unlawful as a result of compliance by
such Lender in good faith with any law, treaty, governmental rule, regulation,
guideline or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful) or (ii) has become
impracticable, or would cause such Lender material hardship, as a result of
contingencies occurring after the date of this Agreement which materially and
adversely affect the interbank Eurodollar market or the position of such Lender
in that market, then, and in any such event, such Lender shall be an "Affected
Lender" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Borrower and Agent of such determination (which notice
Agent shall promptly transmit to each other Lender). Thereafter (a) the
obligation of the Affected Lender to make Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) the Affected Lender's
obligation to maintain its outstanding Loans (the
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"Affected Loans") shall be suspended until such notice shall be withdrawn by the
Affected Lender, and (c) the parties shall follow the procedures set forth in
Section 2.6G with respect to the Affected Loans so long as, if following such
procedures the maintaining of such Loans is not unlawful. Notwithstanding the
foregoing, to the extent a determination by an Affected Lender as described
above relates to a borrowing then being requested by Borrower subject to the
provisions of subsection 2.6D, Borrower shall have the option, subject to the
provisions of subsection 2.6D, to rescind such borrowing as to all Lenders by
giving notice (by telefacsimile or by telephone confirmed in writing) to Agent
of such rescission on the date on which the Affected Lender gives notice of its
determination as described above (which notice of rescission Agent shall
promptly transmit to each other Lender). Except as provided in the immediately
preceding sentence, nothing in this subsection 2.6C shall affect the obligation
of any Lender other than an Affected Lender to make or maintain Loans in
accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Loans and any loss, expense or liability sustained by that Lender in
connection with the liquidation or reemployment of such funds) which that Lender
may sustain: (i) if for any reason (other than a default by that Lender) a
borrowing of any Loan does not occur on a date specified therefor in a Notice of
Borrowing or a telephonic request for borrowing, (ii) if any prepayment or other
principal payment occurs on a date prior to the last day of an Interest Period
applicable to that Loan, (iii) if any prepayment of any of its Loans is not made
on any date specified in a notice of prepayment given by Borrower, or (iv) as a
consequence of any other default by Borrower in the repayment of its Loans when
required by the terms of this Agreement.
E. Booking of Loans. Any Lender may make, carry or transfer Loans at, to,
or for the account of any of its branch offices or the office of an Affiliate of
that Lender.
F. Assumptions Concerning Funding of Loans. Calculation of all amounts
payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be
made as though that Lender had actually funded each of its relevant Loans
through the purchase of a Eurodollar deposit bearing interest at the rate
obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in
an amount equal to the amount of such Loan and having a maturity comparable to
the relevant Interest Period and through the transfer of such Eurodollar deposit
from an offshore office of that Lender to a domestic office of that Lender in
the United States of America; provided, however, that each Lender may fund each
of its Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the
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purposes of calculating amounts payable under this subsection 2.6 and under
subsection 2.7A.
G. Substitute Basis. During the 30 days following the date of any notice
given to Borrower pursuant to subsections 2.6B and 2.6C, Agent, the Lenders and
Borrower shall negotiate in good faith in order to arrive at a mutually
acceptable alternative basis for determining the interest rate from time to
time applicable to the affected Loans (the "Substitute Basis"). If within the
30 days following the date of any such notice to Borrower, Agent, the Lenders
and Borrower shall agree upon a Substitute Basis, such Substitute Basis shall
be retroactive to and effective from the first day of the then current Interest
Period until and including the last day of such Interest Period. If after 30
days from the date of such notice, the Lenders and Borrower shall have failed
to agree upon a Substitute Basis, then each Lender shall certify in writing to
Borrower through Agent (such certification to be conclusive and binding on all
of the parties hereto absent manifest error) the interest rate at which such
Lender is prepared to make or maintain its affected Loan for such Interest
Period, it being understood that such Lender's interest rate shall be at a rate
per annum equal to the sum of the Applicable Margin plus a rate which
adequately and fairly reflects the cost to such Lender of obtaining the funds
necessary to maintain its affected Loan for such Interest Period, such interest
rate to be retroactive to and effective from the first day of such Interest
Period. If no Substitute Basis is established, upon receipt of notice of the
interest rates at which the Lenders are prepared to make or maintain their
respective affected Loans, Borrower shall have the right (i) exercis able upon
ten Business Days' prior notice to any Lender through Agent (A) to continue to
borrow Loans at the interest rates so advised by the respective Lenders (as
such rates may be modified, from time to time, at the outset of each subsequent
Interest Period) or (B) to prepay in full the Affected Loans of any Lender,
together with accrued interest thereon at the interest rate certified in
writing by such Lender as provided above, whereupon such Affected Loans shall
become due and payable on the date specified by Borrower in such notice. In
determining the actual interest rate per annum to be charged on any Loan, the
Substitute Basis or the interest rate advised by the respective Lenders to
apply to a Loan in accordance with the provisions of this subsection 2.6G shall
be increased to the rate per annum obtained by dividing the Substitute Basis or
such advised interest rate by a percentage equal to 100% minus the then stated
maximum rate of all required reserve requirements under applicable law
(including any marginal, emergency, supplemental, special or other reserves)
and applicable on the date of determination of such interest rate to any member
bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time (or any successor category of
liabilities under regulation D).
<PAGE> 38
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2.7 Increased Costs, Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions of
subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any change in the rate of Tax on the overall net
income of such Lender) with respect to this Agreement or any of its
obligations hereunder or any payments to such Lender (or its applicable
lending office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other
than any such reserve or other requirements with respect to Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Borrower shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Borrower (with a copy to Agent) a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Lender under this sub-
<PAGE> 39
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section 2.7A, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Borrower under this
Agreement and the other Loan Documents shall be paid free and clear of and
(except to the extent required by law) without any deduction or withholding on
account of any Tax (other than a Tax on the overall net income of any Lender)
imposed, levied, collected, withheld or assessed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein with respect to
such payments.
(ii) Grossing-up of Payments. If Borrower or any other Person is required
by law to make any deduction or withholding on account of any such Tax from any
sum paid or payable by Borrower to Agent or any Lender under any of the Loan
Documents:
(a) Borrower shall notify Agent of any such requirement or any change
in any such requirement as soon as Borrower becomes aware of it;
(b) Borrower shall pay any such Tax before the date on which penalties
attach thereto, such payment to be made (if the liability to pay is imposed
on Borrower) for its own account or (if that liability is imposed on Agent
or such Lender, as the case may be) on behalf of and in the name of Agent
or such Lender;
(c) the sum payable by Borrower in respect of which the relevant
deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction,
withholding or payment, Agent or such Lender, as the case may be, receives
on the due date a net sum equal to what it would have received had no such
deduction, withholding or payment been required or made;
(d) within 30 days after paying any sum from which it is required by
law to make any deduction or withholding, and within 30 days after the due
date of payment of any Tax which it is required by clause (b) above to pay,
Borrower shall deliver to Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the remittance
thereof to the relevant taxing or other authority; and
(e) if any amounts are payable in respect of Taxes pursuant to
subsection 2.7B(ii)(c), Borrower agrees to reimburse each Lender, upon the
written request of such Lender, for taxes imposed on or measured by the
overall net income of such
<PAGE> 40
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Lender and for any withholding of taxes as such Lender shall determine are
payable by, or withheld from, such Lender, in respect of such amounts so
paid to or on behalf of such Lender pursuant to subsection 2.7B(ii)(c),
and in respect of any amounts paid to or on behalf of such Lender pursuant
to this subsection 2.7B(ii)(e).
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction
other than the United States or any state or other political subdivision
thereof (for purposes of this subsection 2.7B(iii), a "Non-US Lender")
shall deliver to Agent for transmission to Borrower, on or prior to the
Effective Date (in the case of each Lender listed on the signature pages
hereof) or on the date of the Assignment Agreement pursuant to which it
becomes a Lender (in the case of each other Lender), and at such other
times as may be necessary in the determination of Borrower or Agent (each
in the reasonable exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor forms),
properly completed and duly executed by such Lender, together with any
other certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that such
Lender is not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of principal,
interest, fees or other amounts payable under any of the Loan Documents or
(2) if such Lender is not a "bank" or other Person described in Section
881(c)(3) of the Internal Revenue Code and cannot deliver either Internal
Revenue Service Form 1001 or 4224 pursuant to clause (1) above, a
Certificate re Non-Bank Status together with two original copies of
Internal Revenue Service Form W-8 (or any successor form), properly
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal Revenue
Code or the regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of interest payable under
any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or other
evidence with respect to United States federal income tax withholding
matters pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to
time after the initial delivery by such Lender of such forms, certificates
or other evidence, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence obsolete or inaccurate
in any material respect, such Lender shall (1) deliver to Agent for
transmission to Borrower two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case may be,
properly completed and
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duly executed by such Lender, together with any other certificate or
statement of exemption required in order to confirm or establish that such
Lender is not subject to deduction or withholding of United States federal
income tax with respect to payments to such Lender under the Loan
Documents or (2) immediately notify Agent and Borrower of its inability to
deliver any such forms, certificates or other evidence in which case such
Lender shall not be required to deliver any such forms, certificates or
other evidence pursuant to this subsection 2.7B(iii)(b).
(c) Borrower shall not be required to pay any additional amount to any
Non-US Lender under clause (c) or (e) of subsection 2.7B(ii) if such Lender
shall have failed to satisfy the requirements of subsection 2.7B(iii)(a);
provided that if such Lender shall have satisfied such requirements on the
Initial Borrowing Date (in the case of each Lender listed on the signature
pages hereof) or on the date of the Assignment Agreement pursuant to which
it became a Lender (in the case of each other Lender), nothing in this
subsection 2.7B(iii)(c) shall relieve Borrower of its obligation to pay any
additional amounts pursuant to clause (c) or (e) of subsection 2.7B(ii) in
the event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is no
longer properly entitled to deliver forms, certificates or other evidence
at a subsequent date establishing the fact that such Lender is not subject
to withholding as described in subsection 2.7B(iii)(a).
(iv) If Borrower pays any additional amount under this subsection 2.7B to a
Lender and such Lender determines in its sole discretion that it has actually
received or realized in connection therewith any refund or any reduction of,
or credit against, its Tax liabilities in or with respect to the taxable year
in which the additional amount is paid, such Lender shall pay to Borrower an
amount that Lender shall, in its sole discretion, determine is equal to the net
benefit, after tax, which was obtained by the Lender in such year as a
consequence of such refund, reduction or credit.
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or other obligations hereunder to a level
below that which such Lender or such controlling
<PAGE> 42
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corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within ten Business Days after receipt by Borrower from
such Lender of the statement referred to in the next sentence, Borrower shall
pay to such Lender such additional amount or amounts as will compensate such
Lender or such controlling corporation on an after-tax basis for such
reduction. Such Lender shall deliver to Borrower (with a copy to Agent) a
written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
D. Substitute Lenders. In the event Borrower is required under the
provisions of subsection 2.6C or this subsection 2.7 to make payments in a
material amount to any Lender or in the event any Lender fails to lend to
Borrower in accordance with this Agreement, Borrower may, so long as no Event of
Default or Potential Event of Default shall have occurred and be continuing,
elect to terminate such Lender as a party to this Agreement; provided that,
concurrently with such termination, (i) Borrower shall pay that Lender all
principal, interest and fees and other amounts (including, without limitation,
amounts, if any, owed under subsection 2.6C or this subsection 2.7) owed to such
Lender through such date of termination, (ii) another financial institution
satisfactory to Borrower and Agent (or if Agent is also the Lender to be
terminated, the successor Agent) shall agree, as of such date, to become a
Lender for all purposes under this Agreement (whether by assignment or
amendment) and to assume all obligations of the Lender to be terminated as of
such date, and (iii) all documents and supporting materials necessary, in the
judgment of Agent (or if Agent is also the Lender to be terminated, the
successor Agent) to evidence the substitution of such Lender shall have been
received and approved by Agent as of such date.
2.8 Obligation of Lenders to Mitigate.
Each Lender agrees that, as promptly as practicable after the officer of
such Lender responsible for administering the Loans of such Lender becomes aware
of the occurrence of an event or the existence of a condition that would cause
such Lender to become an Affected Lender or that would entitle such Lender to
receive payments under subsection 2.7, it will, to the extent not inconsistent
with the internal policies of such Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitment of such Lender or the affected Loan of such Lender through another
lending office of such Lender, or (ii) take such other measures as such Lender
may deem reasonable, if as a result thereof the circumstances which would cause
such Lender to be an Affected Lender would cease to exist or the additional
amounts which would otherwise be required to be paid to such Lender pursuant to
subsection 2.7 would be materially reduced and if, as determined by such Lender
in its sole discretion, the making, issuing,
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funding or maintaining of such Commitments or Loans through such other lending
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or the
interests of such Lender; provided that such Lender will not be obligated to
utilize such other lending office pursuant to this subsection 2.8 unless
Borrower agrees to pay all incremental expenses incurred by such Lender as a
result of utilizing such other lending office as described in clause (i) above.
A certificate as to the amount of any such expenses payable by Borrower
pursuant to this subsection 2.8 (setting forth in reasonable detail the basis
for requesting such amount) submitted by such Lender to Borrower (with a copy
to Agent) shall be conclusive absent manifest error.
SECTION 3.
CONDITIONS TO LOANS
3.1 Conditions to Loans.
The obligations of Lenders to make the Loans on the Initial Borrowing Date
are subject to prior or concurrent satisfaction of the following conditions:
A. Borrower and Atlas Documents. On or before the Initial Borrowing Date,
Borrower shall deliver or cause to be delivered to Lenders (or to Agent for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following, each, unless otherwise noted, dated the
Effective Date:
(i) certified copies of certificate or articles of incorporation of
Borrower and Atlas, together with a good standing certificate from the
Secretary of State of the State of Delaware and each other state in which
such corporation is qualified as a foreign corporation to do business and,
to the extent generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar taxes from
the appropriate taxing authority of each of such states, each dated a
recent date prior to the Effective Date;
(ii) copies of Bylaws of Borrower and Atlas, certified as of the
Effective Date by its corporate secretary or an assistant secretary;
(iii) resolutions of Board of Directors of Borrower, Atlas and Atlas
One approving and authorizing the execution, delivery and performance of
this Agreement, the other Loan Documents and the Transaction Documents (to
the extent such Person is a party thereto), certified as of the Effective
Date by such Person's corpo-
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rate secretary or an assistant secretary as being in full force and
effect without modification or amendment;
(iv) signature and incumbency certificates of officers of Borrower and
Atlas executing this Agreement and the other Loan Documents;
(v) executed originals of this Agreement, the Notes (duly executed in
accordance with this Agreement) and the other Loan Documents, including
Aircraft Chattel Mortgages with respect to all of the Aircraft; and
(vi) such other documents as Agent may reasonably request.
B. Aircraft Documents. With respect to each Aircraft, the following
documents shall have been duly authorized, executed and delivered by the
respective parties thereto, shall each be reasonably satisfactory in form and
substance to the Lenders and Agent and shall be in full force and effect, and
copies shall have been delivered to Agent all documents, including without
limitation, any bills of sale, certificates of transfer and bills of sale on AC
Form 8050-2 evidencing the conveyance of title of the Aircraft from Atlas One to
Atlas to Borrower and such other evidence as Agent shall request confirming that
Atlas Leasing has good and valid title to each Aircraft and that all
registrations and recordings necessary to evidence such title have been made,
including, without limitation, all recordings with the FAA to register the
Aircraft in the name of Atlas Leasing.
C. Notice of Borrowing. Prior to the making of the Loans, Agent shall have
received such Notices of Borrowing as are required by subsection 2.1B.
D. Necessary Consents. Borrower shall have obtained all consents necessary
or advisable in connection with the transactions contemplated by the Loan
Documents and the continued operation of the business of Borrower, and each of
the foregoing shall be in full force and effect and in form and substance
satisfactory to Agent.
E. Aircraft Chattel Mortgage. Agent shall have received a copy of a first
priority Aircraft Chattel Mortgage relating to each Aircraft, duly executed by
Borrower, in substantially the form of Exhibit IX hereto which Aircraft Chattel
Mortgage provides a first priority security interest in the Collateral for the
benefit of the Lenders, securing all the Obligations, together with:
(i) executed copies of proper financing statements to be filed under
the U.C.C. in all jurisdictions where Agent may deem necessary or desirable
in order to perfect the security interests created by the Aircraft Chattel
Mortgages;
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(ii) evidence of the completion of all recordings and filings with
respect to the Collateral that Agent may deem necessary or desirable in
order to perfect the security interest created by the Aircraft Chattel
Mortgages including, without limitation, all filings with the FAA; and
(iii) evidence that all other actions necessary or, in the reasonable
opinion of Agent, desirable to establish, preserve and perfect the first
priority security interests created by the Aircraft Chattel Mortgages in
all Aircraft have been taken (including all FAA filings).
F. Solvency Opinion. On or prior to the Initial Borrowing Date, Borrower
shall have delivered or shall have caused to be delivered to Agent a solvency
opinion in form and substance satisfactory to Agent and from a firm satisfactory
to Agent setting forth its conclusions, that after giving effect to the
Transaction each of Atlas One, the Borrower and Atlas and its Subsidiaries is
Solvent.
G. Financial Condition Certificate. Each of Borrower and Atlas shall have
delivered to Agent a Financial Condition Certificate dated the Initial Borrowing
Date, substantially in the form annexed hereto as Exhibit VII and Exhibit VIIA
respectively, with appropriate attachments demonstrating that, after giving
effect to the consummation of the financing transactions contemplated hereby,
each of Borrower and Atlas and its Subsidiaries is Solvent.
H. Opinions of Borrower's Counsel. Lenders and their respective counsel
shall have received (i) originally executed copies of one or more favorable
written opinions of Cahill Gordon & Reindel, counsel for Borrower, in form and
substance reasonably satisfactory to Agent and its counsel, dated as of the
Initial Borrowing Date and setting forth substantially the matters in the
opinions designated in Exhibit IVA annexed hereto and as to such other matters
as Agent acting on behalf of Lenders may reasonably request, (ii) an opinion of
Cahill Gordon & Reindel regarding Section 1110 of the Bankruptcy Code, dated the
Initial Borrowing Date and setting forth substantially the matters in the
opinions designated in Exhibit IVB annexed hereto and (iii) an opinion of Cahill
Gordon & Reindel regarding certain bankruptcy matters other than those covered
in the opinion referred to in clause (ii) above, dated the Initial Borrowing
Date and setting forth substantially the matters in the opinions designated in
Exhibit IVC annexed hereto.
I. Opinions of Clark Onstad. Lenders and their respective counsel shall
have received executed copies of one or more favorable written opinions of Clark
Onstad, General Counsel of Atlas, Atlas One and Borrower, in form and substance
reasonably satisfactory to Agent and its counsel, dated the Initial Borrowing
Date, and setting forth substantially the matters in the opinions designated in
Exhibit IVD annexed hereto.
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J. Atlas Credit Agreement. The Second Amended and Restated Credit Agreement
shall have been amended in a manner satisfactory to Agent and Lenders so as to
allow, according to its terms, the Transaction and the Refinancing to be
consummated.
K. Opinions of FAA Counsel. Lenders and their respective counsel shall have
received originally executed copies of one or more favorable written opinions of
FAA counsel in form and substance satisfactory to Agent and its counsel, dated
the Initial Borrowing Date, and setting forth substantially the matters in the
opinions designated in Exhibit IVE annexed hereto.
L. Fees. Borrower shall have paid to Agent, for distribution (as
appropriate) to Agent and Lenders, the fees payable on the Initial Borrowing
Date referred to in subsection 2.3.
M. Financial Statements. On or before the Initial Borrowing Date, Agent
shall have received from Borrower (i) an audited consolidated and consolidating
balance sheet of Atlas and its Subsidiaries as at December 31, 1996, and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows of Atlas and its Subsidiaries for such fiscal year,
accompanied by an opinion of a nationally recognized firm of independent public
accountants and (ii) the unaudited consolidated and consolidating balance sheet
of Atlas and its Subsidiaries as at March 31, 1997 and the related unaudited
consolidated and consolidating statements of income, stockholders' equity and
cash flows of Atlas and its Subsidiaries for the three-month period then ended
and (iii) the Projections, which financial statements and Projections shall be
in form and substance reasonably satisfactory to Agent.
N. Evidence of Insurance. Borrower shall have delivered to Agent
certificates of insurance naming Agent on behalf of Agent and Lenders as loss
payee under the casualty insurance policies and Agent and Lenders as additional
insured under the liability policies of Borrower and a broker's report from
Borrower's insurance broker evidencing compliance with the requirements of each
Aircraft Chattel Mortgage, all as required pursuant to subsection 5.4 hereof or
pursuant to the Collateral Documents. All such certificates of insurance shall
contain such endorsements as are reasonably required by Agent.
O. No Material Adverse Effect. Since March 31, 1997, no Material Adverse
Effect (in the reasonable opinion of Agent) shall have occurred.
P. Representations and Warranties; Performance of Agreements. On the
Initial Borrowing Date, (i) there shall exist no Potential Event of Default or
Event of Default and (ii) all representations and warranties in Section 4 hereof
are true, correct and complete in all material respects on and as of the Initial
Borrowing Date to the same extent
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as though made on and as of that date and that Borrower shall have performed in
all material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before the
Initial Borrowing Date except as otherwise disclosed to and agreed to in
writing by Agent and Requisite Lenders and Borrower shall have delivered to
Agent an Officer's Certificate, in form and substance, satisfactory to Agent,
to that effect.
Q. Compliance Certificate. Borrower shall have delivered to Agent a
Compliance Certificate dated the Initial Borrowing Date, substantially in the
form annexed hereto as Exhibit III.
R. Transaction; Refinancing. On or prior to the Initial Borrowing Date, the
following shall have occurred: (i) Atlas One shall terminate the Atlas One
Leases; (ii) Atlas One shall dividend each of the Aircraft to Atlas subject to
the Existing Indebtedness (the "Dividend"); (iii) Atlas shall contribute to
Borrower each of the Aircraft subject to the Existing Indebtedness and
approximately $10,400,000 in cash (the "Contribution"); (iv) Borrower shall
lease each of the Aircraft to Atlas via the six Leases; (v) all Existing
Indebtedness shall have been indefeasibly repaid in full and (vi) all security
interests and Liens encumbering the Aircraft or any part thereof or any other
assets of Borrower shall be terminated and released (the actions taken in
clauses (v) and (vi) collectively, the "Refinancing", and the actions taken in
clauses (i) through (vi) together with the incurrence of Loans hereunder
collectively, the "Transaction"). The Lenders shall have received true and
correct copies of all of the Transaction Documents, including, without
limitation, all documentation entered into in connection with the Dividend and
the Contribution and the Leases, which Leases shall be substantially in the form
of Exhibit VIII annexed hereto and all terms and conditions thereof shall be
satisfactory to Agent (including, with respect to the Leases, their terms,
rental schedules, covenants, events of default and remedies). All of the
Transaction Documents shall have been duly executed and delivered by all parties
thereto, and shall be in full force and effect. Each of the conditions precedent
to the consummation of the Transaction set forth in the Transaction Documents
shall have been satisfied or waived, all to the satisfaction of Agent, and on or
prior to the Initial Borrowing Date, the Transaction shall have been consummated
in accordance with the Transaction Documents and all applicable laws, rules and
regulations.
S. Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Agent, acting on
behalf of Lenders, and its counsel shall be satisfactory in form and substance
to Agent and such counsel, and Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as Agent may
reasonably request.
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T. Appraisals. Borrower shall have delivered to Agent appraisals from two
Approved Appraisers, in form and substance satisfactory to the Lenders, which
appraisals shall demonstrate to the Lenders' satisfaction that the ratio of the
Total Commitment to the Appraised Value of the Aircraft does not exceed 75% and
that the terms of the Lease, including, without limitation, rental rates,
economic life and residual value, are at fair market value.
U. FAA Certification and Title. Agent shall have received evidence
satisfactory to it to the effect that Atlas is an air carrier certificated under
Sections 401 and 604(b) of the Federal Aviation Act and with respect to each
Aircraft, Agent shall received evidence that (i) each of the Aircraft has been
registered with and duly certified by the FAA as to type and airworthiness in
the name of Borrower and Agent shall have received a copy of such certification
and evidence satisfactory to the Lenders that each Engine is being maintained in
accordance with an FAA-approved or substantially similar program and (ii)
Borrower shall have good and marketable title to and a valid ownership interest
in the Collateral, including the Aircraft, free and clear of all Liens other
than Liens permitted by subsection 6.2.
V. Bankruptcy-Remote Subsidiary. Agent and Lenders shall be satisfied that
Borrower is a bankruptcy-remote Subsidiary of Atlas and that the certificate of
incorporation contains provisions under which the Borrower may not commence a
voluntary bankruptcy proceeding without the affirmative vote of all directors.
SECTION 4.
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, Borrower represents and warrants to each Lender, after giving effect to
the Transaction consummated on the Initial Borrowing Date, that the following
statements are true, correct and complete:
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Borrower has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Docu-
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ments and to carry out the transactions contemplated thereby and by the
Transaction Documents.
B. Qualification and Good Standing. Borrower is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. Subsidiaries. Borrower has no Subsidiaries.
D. Collateral Documents. The security interests created in favor of Agent
under the Collateral Documents will at all times from and after the Initial
Borrowing Date constitute, as security for the obligations purported to be
secured thereby, a legal, valid and enforceable first priority perfected
security interest in and Lien on all of the Collateral referred to therein in
favor of Agent for the benefit of the Lenders, perfected and prior to the rights
of all third persons in accordance with the requirements of all applicable
Collateral Documents. Borrower has good and marketable title to its Collateral,
and all such Collateral is free and clear of all Liens except for Liens
permitted by subsection 6.2. No consents, filings or recordings are required in
order to perfect (or maintain the perfection or priority of) the security
interests purported to be created by any of the Collateral Documents, other than
such as have been obtained and which remain in full force and effect and Uniform
Commercial Code financing statements to be filed, or delivered to Agent for
filing, on the Initial Borrowing Date and periodic Uniform Commercial Code
continuation filings or as is specifically otherwise permitted by the terms of
any applicable Collateral Document.
4.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents and the Transaction Documents have been duly authorized by
all necessary corporate action on the part of Borrower.
B. No Conflict. The execution, delivery and performance by Borrower of the
Loan Documents and the Transaction Documents and the consummation of the
Transaction and the transactions contemplated by the Loan Documents do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Borrower, the Certificate or Articles of Incorporation
or Bylaws of Borrower or any order, judgment or decree of any court or other
agency of government binding on Borrower, (ii) conflict with in any material
respect, result in a material breach of or constitute (with due notice or lapse
of time or both) a material default under any material Contractual Obligation of
Borrower, including the Pass Through Trust Documents and the Second Amended and
Restated
<PAGE> 50
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Credit Agreement, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Borrower (other than any
Liens created under any of the Loan Documents in favor of Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Borrower, except for
such approvals or consents which will be obtained on or before the Initial
Borrowing Date, disclosed in writing to Lenders and the terms and conditions of
which are acceptable to the Agent and the Lenders.
C. Governmental Consents. The execution, delivery and performance by
Borrower of the Loan Documents and the Transaction Documents and the
consummation of the Transaction and the transactions contemplated by the
Transaction Documents do not and will not require any registration with, consent
or approval of, or notice to, or other action to, with or by, any federal, state
or other governmental authority or regulatory body which has not been obtained
or made on or prior to the date required to be obtained or made.
D. Binding Obligation. Each of the Loan Documents and the Transaction
Documents has been duly executed and delivered by Borrower and is the legally
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
4.3 Financial Condition.
A. Borrower has heretofore delivered to Lenders the following financial
statements and information: (i) the audited consolidated and consolidating
balance sheets of Atlas and its Subsidiaries as at December 31, 1996, and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows of Atlas and its Subsidiaries for such fiscal year and
(ii) the unaudited consolidated and consolidating balance sheets of Atlas and
its Subsidiaries as at March 31, 1997 and the related unaudited consolidated and
consolidating statements of income, stockholders' equity and cash flows of Atlas
and its Subsidiaries for the three-month period then ended and (iii) the
Projections. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated, and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Atlas does not have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is ma-
<PAGE> 51
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terial in relation to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Atlas or any of its Subsidiaries.
B. Except as fully disclosed in the financial statements delivered pursuant
to Section 4.3A, there were as of the Effective Date no liabilities or
obligations with respect to Atlas and its Subsidiaries or to Borrower of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Atlas and its Subsidiaries taken as a whole but
excluding Borrower, or to Borrower on a stand-alone basis. As of the Effective
Date, neither Atlas nor Borrower knows of any basis for the assertion against it
or, in the case of Atlas, against it or its Subsidiaries, of any liability or
obligation of any nature whatsoever that is not fully disclosed in the financial
statements delivered pursuant to Section 4.3A which, either individually or in
the aggregate, could reasonably be expected to be material to Atlas and its
Subsidiaries taken as a whole but excluding Borrower, or to Borrower on a
stand-alone basis.
4.4 No Material Adverse Change; No Restricted Junior Payments.
(i) Since March 31, 1997, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material Adverse Effect.
(ii) Since March 31, 1997, Borrower has not directly or indirectly
declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Junior Payment or agreed to do so, except as permitted by subsection
6.5.
4.5 Title to Properties, Liens.
A. Borrower has good, sufficient and legal title to all of its properties
and assets, including without limitation, all Aircraft. Except as permitted by
this Agreement, all such properties and assets are free and clear of Liens.
B. Each Aircraft has a current and valid airworthiness certificate issued
by the FAA pursuant to the Federal Aviation Act in effect and is in such
condition as may be necessary to enable the airworthiness certificate to be
maintained in good standing. Each Engine has a rated takeoff horsepower greater
than 750 horsepower or the equivalent of such horsepower. Each Aircraft is
registered with the FAA in the name of Borrower and Atlas has authority to
operate such Aircraft.
4.6 Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Borrower) at law or in
equity or before or by any
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federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or any property
of Borrower or with respect to the Transaction that could reasonably be expected
to result in a Material Adverse Effect to Borrower's knowledge. Borrower is not
(i) in violation of any applicable laws that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect or (ii)
subject to or in default with respect to any final judgments, writs,
injunctions, decrees, rules or regulations of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.
4.7 Payment of Taxes.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of Borrower required to be filed by it have been timely filed, and all
taxes, assessments, fees and other governmental charges upon Borrower and upon
its respective properties, assets, income, businesses and franchises which are
due and payable have been paid when due and payable. Borrower does not know of
any proposed tax assessment against it which is not being actively contested by
it in good faith and by appropriate proceedings; provided that such reserves or
other appropriate provisions, if any, for liabilities for taxes as shall be
required in conformity with GAAP shall have been made or provided in the
financial statements of Borrower. There are no agreements with respect to taxes
between Borrower and any tax agency or authority.
4.8 Performance of Agreements.
Borrower is not in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any of its
Contractual Obligations, and no condition exists that, with the giving of notice
or the lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, would not
have a Material Adverse Effect.
4.9 Governmental Regulation.
Borrower is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Indebtedness or which may
otherwise render all or any portion of the Obligations unenforceable.
<PAGE> 53
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4.10 Securities Activities.
A. Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any Margin Stock.
B. No part of the proceeds of any Loan will be used (or has been used) to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any margin Stock. Neither the making of any Loan nor the
use of the proceeds thereof will violate or be inconsistent with the provisions
of Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System.
4.11 Compliance with ERISA.
Borrower has no qualified retirement plans under Section 401(k) of the
Internal Revenue Code nor medical benefit plans. Borrower has never sponsored,
maintained, contributed to (or had an obligation to contribute to) any Employee
Benefit Plans.
4.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the transactions contemplated hereby, and Borrower
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.13 Environmental Protection.
A. All facilities and operations of Borrower are, and have been to the best
of Borrower's knowledge, in compliance in all material respects with all
applicable Environmental Laws.
B. There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Borrower
or (b) arising in connection with the operations of Borrower (including the
transportation of Hazardous Materials), which conditions, occurrences or
Hazardous Materials Activity could reasonably be expected to form the basis of
an Environmental Claim against Borrower and which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
<PAGE> 54
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C. To the best of Borrower's knowledge, there are no pending or threatened
Environmental Claims against Borrower, and Borrower has received no written
notices, inquiries, or requests for information with respect to any
Environmental Claims.
4.14 Employee Matters.
There is no strike or work stoppage in existence or to Borrower's knowledge
threatened involving Borrower that could reasonably be expected to have a
Material Adverse Effect.
4.15 Solvency.
Borrower is and, upon the incurrence of any Obligations by Borrower on any
date on which this representation is made, will be, Solvent.
4.16 Disclosure.
No representation or warranty of Borrower contained in any Loan Document,
any Transaction Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Borrower for use in connection
with the transactions contemplated by this Agreement contains any untrue
statement of a material fact or omits to state a material fact (known to
Borrower, in the case of any document not furnished by them) necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by Lenders that the Projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by the Projections may differ from the projected results. There
are no facts known (or which should upon the reasonable exercise of diligence be
known) to Borrower (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
4.17 Section 1110.
(i) Borrower, as Lessor under the Leases, is entitled to the protection of
Section 1110 of the Bankruptcy Code with respect to each Aircraft in the event
of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
<PAGE> 55
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(ii) Agent will be entitled to the protection of Section 1110 of the
Bankruptcy Code with respect to each Aircraft in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor upon the exercise
of Agent's remedies under each Aircraft Chattel Mortgage.
(iii) All assumptions made by the appraisers with respect to the Aircraft
in the appraisals delivered to Agent which would affect Approved Appraiser's
determinations as set forth in such appraisal shall be true and correct as of
the Initial Borrowing Date with respect to each Aircraft.
4.18 Special Purpose Corporation.
Borrower was formed solely for the purpose of effecting the Transaction,
and except in connection therewith (and as contemplated by this Agreement) has
no assets or liabilities.
4.19 Transaction.
The Transaction has been consummated in accordance with applicable law and
the Transaction Documents.
4.20 Representations and Warranties in Documents.
All representations and warranties of Borrower set forth in the Loan
Documents and the Transaction Documents were true and correct in all material
respects as of the time such representations and warranties were made and shall
be true and correct in all material respects as of the Initial Borrowing Date as
if such representations and warranties were made on and as of such date, unless
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date.
4.21 Leases.
The Leases are in full force and effect and are leases for U.S. Federal
income tax purposes of Lessor and Lessee thereunder.
<PAGE> 56
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SECTION 5.
BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations unless Requisite Lenders shall otherwise give prior
written consent, Borrower shall perform all covenants in this Section 5.
5.1 Financial Statements and Other Reports.
Borrower will maintain a system of accounting established and administered
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP. Borrower will deliver to Agent and Lenders:
(i) Quarterly Financials: as soon as available, and in any event
within 45 days after the end of each fiscal quarter of each Fiscal Year,
the balance sheet of Borrower as at the end of such fiscal quarter and the
related statements of income, stockholders' equity and cash flows of
Borrower for such fiscal quarter and for the period from the beginning of
the then current Fiscal Year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year, if applicable, in
reasonable detail and certified by the chief financial officer of Borrower
that they fairly present the financial condition of Borrower as at the
dates indicated and the results of its operations and its cash flows for
the periods indicated, subject to changes resulting from audit and normal
year-end adjustments.
(ii) Year-End Financials: as soon as available, and in any event
within 90 days after the end of each Fiscal Year, (a) the balance sheet of
Borrower as at the end of such Fiscal Year and the related statements of
income, stockholders' equity and cash flows of Borrower for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year, if applicable, in reasonable detail
and certified by the chief financial officer of Borrower that they fairly
present the financial condition of Borrower as at the dates indicated and
<PAGE> 57
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the results of their operations and their cash flows for the periods
indicated, and (b) in the case of such financial statements, a report
thereon of independent certified public accountants of recognized national
standing selected by Borrower and satisfactory to Agent, which report
shall be unqualified, shall express no doubts about the ability of
Borrower to continue as a going concern, and shall state that such
financial statements fairly present the financial position of Borrower as
at the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Officers' and Compliance Certificates: together with each
delivery of financial statements of Borrower pursuant to subdivisions (i)
and (ii) above after the Effective Date, (a) an Officers' Certificate of
Borrower stating that the signers have reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Borrower during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that the signers do not have knowledge of the existence as at
the date of such Officers' Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period
of existence thereof and what action Borrower has taken, is taking and
proposes to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable quarterly and annual accounting periods with the restrictions
contained in Section 6;
(iv) Notices under Leases: within 3 Business Days, all notices and
other information or documents delivered or received under any of the
Leases by Lessor pursuant to Section 19 of the Leases, including, without
limitation, all additional financial statements and reports delivered
pursuant to Section 6(a) of the Leases;
(v) Accountants' Certification: together with each delivery of
financial statements of Borrower pursuant to subdivision (ii) above, a
written statement by the independent certified public accountants giving
the report thereon (a) stating that their audit examination has included a
review of the terms of this Agreement, the other Loan Documents as they
relate to accounting matters, (b) stating whether, in connection with their
audit examination, any condition or event that constitutes an Event of
Default or Potential Event of Default has come to their attention and, if
such a condition or event has come to their attention, specifying the
nature and period of existence thereof; provided that such accountants
shall not be liable by reason of any failure to obtain knowledge of any
such Event of Default or Potential Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in
the certificates delivered therewith pursuant to subdivision (iii) above
is not correct
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or that the matters set forth in the Compliance Certificates delivered
therewith pursuant to clause (b) of subdivision (iii) above for the
applicable Fiscal Year are not stated in accordance with the terms of this
Agreement;
(vi) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Borrower by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Borrower made by such accountants, including, without
limitation, any comment letter submitted by such accountants to management
in connection with their annual audit;
(vii) Events of Default, etc.: promptly upon any officer of Borrower
obtaining knowledge (a) of any condition or event that constitutes an Event
of Default or Potential Event of Default, or becoming aware that any Lender
has given any notice (other than to Agent) or taken any other action with
respect to a claimed Event of Default or Potential Event of Default, (b)
that any Person has given any notice to Borrower or taken any other action
with respect to a claimed default or event or condition of the type
referred to in subsection 7.2, or (c) of the occurrence of any event or
change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Borrower has taken, is taking
and proposes to take with respect thereto;
(viii) Litigation or Other Proceedings: (a) promptly upon any officer
of Borrower obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Borrower or any property of Borrower (collectively,
"Proceedings") not previously disclosed in writing by Borrower to Lenders
or (Y) any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
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written notice thereof together with such other information as may be
reasonably available Borrower to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each
fiscal quarter of Borrower, a schedule of all Proceedings involving an
alleged liability of, or claims against or affecting, Borrower equal to or
greater than $1,000,000 and promptly after request by Agent such other
information as may be reasonably requested by Agent to enable Agent and
its counsel to evaluate any of such Proceedings;F
(ix) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Agent outlining all material insurance coverage maintained as of the date
of such report by Borrower and all material insurance coverage planned to
be maintained by Borrower in the immediately succeeding Fiscal Year;
(x) Environmental Audits and Reports: as soon as practicable following
receipt thereof, copies of all environmental audits and reports, whether
prepared by personnel of Borrower or by independent consultants, with
respect to significant environmental matters or which relate to an
Environmental Claim which could result in a Material Adverse Effect;
(xi) Pricing Certificates: on or after the third anniversary of the
Initial Borrowing Date, a certificate setting forth the credit rating on
Atlas's obligations under the Pass Through Trust Documents (each a "Pricing
Certificate"), (a) upon each delivery of financial statements of Borrower
pursuant to subdivisions (i) and (ii) above, (b) within one Business Day
after any public release by S&P or Moody's lowering its credit rating on
Atlas's obligations under the Pass Through Trust Documents and (c) at such
additional times as Borrower may elect ;
(xii) Other Information: with reasonable promptness, such other
information and data with respect to Borrower or Atlas, as the case may be,
as from time to time may be reasonably requested by any Lender.
5.2 Corporate Existence.
Borrower will, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will at all times maintain its corporate existence as a United States
Citizen.
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5.3 Payment of Taxes and Claims; Tax Consolidation.
A. Borrower will pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
income, businesses or franchises before any penalty, fine or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums that have become due and payable and
that by law have or may become a Lien upon any of its properties or assets,
prior to the time when any penalty fine or interest shall be incurred with
respect thereto; provided that no such charge or claim need be paid if being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate provision, if any,
with respect to any liability for taxes, as shall be required in conformity with
GAAP shall have been made therefor in the financial statements of Borrower.
B. Borrower will not file or consent to the filing of any consolidated
federal income tax return with any Person other than the affiliate group of
which Atlas is the parent corporation.
5.4 Maintenance of Properties; Insurance.
Borrower will maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Borrower and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business
against loss or damage (including, without limitation, flood insurance, if
necessary or advisable) of the kinds customarily carried or maintained under
similar circumstances by corporations of established reputation engaged in
similar businesses and Borrower will, with respect to each Aircraft, maintain
the insurance specified in the Aircraft Chattel Mortgage with respect to such
Aircraft.
5.5 Inspection; Lender Meeting.
Borrower will permit any authorized representatives designated by any
Lender to visit and inspect any of the properties of Borrower, including its and
their financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Borrower
may, if it so chooses, be present at or participate in any such discussion), all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may be reasonably requested; provided that so long as no Event
of Default shall have occurred and be continuing, such inspection shall not be
dis-
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ruptive to Borrower's business, as reasonably determined by Borrower. Without in
any way limiting the foregoing, Borrower will, upon the request of Agent or
Requisite Lenders, participate in a meeting of Agent and Lenders once during
each Fiscal Year to be held at Borrower's corporate offices (or such other
location as may be agreed to by Borrower and Agent) at such time as may be
agreed to by Borrower and Agent.
5.6 Compliance with Laws, etc.
Borrower will comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority (including, without
limitation, Environmental Laws), noncompliance with which could reasonably be
expected to cause a Material Adverse Effect. Borrower shall not conduct, and
shall not permit the conduct of, any Hazardous Materials Activity at any other
location which could reasonably be expected to form the basis of an
Environmental Claim against Borrower and which could reasonably be expected to
have a Material Adverse Effect.
5.7 Environmental Indemnity.
Borrower agrees to indemnify, defend, and hold harmless Agent and Lenders,
and the officers, directors, employees, agents and affiliates of Agent and
Lenders from and against any and all losses, claims, liability or expenses
arising in connection with Environmental Claims against Borrower or with any
Hazardous Materials Activity.
5.8 Borrower's Remedial Action Regarding Hazardous Materials.
Borrower will promptly take any and all necessary remedial action in
connection with the presence, storage, use, disposal, transportation or Release
of any Hazardous Materials on, under or about any facility in order to comply
with all applicable Environmental Laws and Governmental Authorizations. In the
event Borrower undertakes any remedial action with respect to any Hazardous
Materials on, under or about any such facility, Borrower will conduct and
complete such remedial action in compliance with all applicable Environmental
Laws, and in accordance with the policies, orders and directives of all federal,
state and local governmental authorities except when, and only to the extent
that, Borrower's liability for such presence, storage, use, disposal,
transportation or Release of any such Hazardous Materials is being contested in
good faith by Borrower. Notwithstanding anything to the contrary contained in
the Transaction Documents, Borrower or Lessee may engage in the transportation
of Hazardous Materials in the ordinary course of business so long as such is
conducted in compliance with all applicable Environmental Laws and all other
applicable laws, policies, orders, regulations and directives.
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5.9 Maintenance Contracts.
Borrower shall maintain or shall cause to be maintained a maintenance
program with respect to the Aircraft approved by the FAA.
5.10 Employee Benefit Plans.
Borrower will not establish, contribute to (or have an obligation to
contribute to) or permit to be established any Employee Benefit Plans for
Borrower or any of its employees.
5.11 Further Assurances.
At any time or from time to time upon the request of Agent, Borrower will,
at its expense, promptly execute, acknowledge and deliver such further documents
and do such other acts and things as Agent may reasonably request in order to
effect fully the purposes of the Loan Documents and to provide for payment of
the Obligations in accordance with the terms of this Agreement, the Notes and
the other Loan Documents.
5.12 Performance of Obligations.
Borrower will perform all of its obligations under the terms of each Lease,
Collateral Document and Loan Document, contract or instrument by which it is
bound.
5.13 Corporate Separateness.
Borrower will take all such action as is necessary to keep its operations
separate and apart from those of Atlas or any of its Affiliates, including,
without limitation, ensuring that all customary corporate formalities, including
the maintenance of separate corporate records and documents and holding regular
meetings are followed. Any financial statements distributed to any creditors of
Borrower shall clearly establish the corporate separateness of Borrower from
Atlas and each of Atlas's other Subsidiaries. Borrower shall not take any action
or conduct its affairs in a manner which is likely to result in the corporate
existence of Borrower on the one hand and of Atlas or any Subsidiary of Atlas on
the other hand being disregarded, or in the assets and liabilities of Atlas or
any Subsidiary of Atlas being substantively consolidated with those of Borrower
in a bankruptcy, reorganization or other insolvency proceeding. Borrower shall
have at all times at least one Independent Director who shall be satisfactory to
the Agent. Borrower shall maintain its principal executive office separate from
Atlas, which may be subleased from Atlas on an arm's-length basis or maintained
as provided in the Service Agreement.
Borrower shall pay out of its own funds fees for its directors and salaries
of its officers and employees, and shall promptly reimburse any Affiliate for
any services provided to
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Borrower by such Affiliate; provided, however, that Atlas may advance funds on
behalf of Borrower to pay for the expenses of its organization and funding. All
such advances shall be duly and properly recorded and promptly repaid as
intercompany advances. Borrower shall not commingle any of its funds or other
assets with the funds or assets of any other entity or person. Borrower will
maintain separate bank accounts in its own name.
The assets of Borrower shall be separately identified and segregated. All
of Borrowers's assets shall at all times be held by or on behalf of Borrower,
and, if held on behalf of Borrower by another entity, shall at all times be kept
identifiable (in accordance with customary usages) as assets owned by Borrower.
In no event shall any of Borrower's assets be held by Atlas or by any other
Affiliate. Borrower shall pay from its assets all obligations and indebtedness
of any kind incurred by Borrower, and shall not pay from its assets any
obligations or indebtedness of any other entity or person. The liabilities of
Borrower will be separately managed from those of any Affiliate, and all
liabilities, including all administrative expenses, shall be paid from its own
separate assets; provided, however, Borrower will be included, to the extent
permitted by law, in the affiliated group of corporations of which Atlas is the
"common parent" for federal income tax returns filed for such affiliated group
by Atlas.
SECTION 6.
BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Borrower shall perform all covenants in this Section 6.
6.1 Indebtedness.
Borrower shall not directly or indirectly, create, incur, assume or
guaranty, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(i) Borrower may become and remain liable with respect to the
Obligations; and
(ii) Borrower may become and remain liable with respect to Contingent
Obligations permitted by subsection 6.4 and, upon any matured obligations
actually
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arising pursuant thereto, the Indebtedness corresponding to the Contingent
Obligations so extinguished.
6.2 Liens and Related Matters.
A. Prohibition on Liens. Borrower shall not directly or indirectly, create,
incur, assume or permit to exist any Lien on or with respect to any property or
asset of any kind (including any document or instrument in respect of goods or
accounts receivable) of Borrower, whether now owned or hereafter acquired, or
any income or profits therefrom, or file or permit the filing of, or permit to
remain in effect, any financing statement or other similar notice of any Lien
with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any state or under any similar recording or notice statute,
except for Permitted Encumbrances.
B. No Negative Pledges. Borrower shall not enter into any agreement
prohibiting the creation or assumption of any Lien upon any of its properties or
assets, whether now owned or hereafter acquired.
6.3 Investments; Joint Ventures.
Borrower shall not, directly or indirectly, make or own any Investment in
any Person, including any Joint Venture, except that Borrower may make and own
Investments in Cash Equivalents.
6.4 Contingent Obligations.
Borrower shall not, directly or indirectly, create or become or remain
liable with respect to any Contingent Obligation.
6.5 Restricted Junior Payments.
Borrower shall not directly or indirectly, declare, order, pay, make or set
apart any sum for any Restricted Junior Payment; provided that Borrower may make
payments pursuant to the Service Agreement in an aggregate annual amount not to
exceed $200,000 per annum; and provided, further, that so long as no Event of
Default or Potential Event of Default has occurred and is continuing, or would
result therefrom, within five Business Days of any payment made under any of the
Leases by Atlas to Borrower, to the extent such payment is in excess of amounts
owing the Lenders under the Loan Documents, Borrower may dividend such excess
amounts to Atlas to the extent Borrower, after giving effect to such dividend,
has no other liabilities and maintains a reserve of Cash or Cash Equivalents
adequate to fund all expenses of Borrower (exclusive of payments under the Loan
Documents) to be incurred during the next four quarters following such dividend.
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6.6 Restriction on Fundamental Changes; Asset Sales and Acquisitions;
New Subsidiaries.
Borrower shall not enter into any transaction of merger or consolidation,
or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, sub-lease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any part of its
business, property or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or any portion of the business, property or
assets of, or stock or other evidence of beneficial ownership of, any Person or
any division or line of business of any Person or establish any Subsidiary,
except Borrower may effect the Transaction on or prior to the Initial Borrowing
Date and Borrower may sell, lease or dispose of assets so long as such
transaction is effected in accordance with Section 4(d) or 4(e) of the Aircraft
Chattel Mortgages.
6.7 Amendments of Material Agreements.
Borrower shall not permit (i) its articles of incorporation or bylaws to be
amended or otherwise modified in any manner or (ii) any Lease to be amended or
otherwise modified in any manner.
6.8 Restriction on Leases.
Borrower shall not become liable in any way, whether directly or by
assignment or as a guarantor or other surety, for the obligations of the lessee
under any lease, whether such lease be an Operating Lease or a Capital Lease.
6.9 Transaction with Shareholders and Affiliates.
Borrower shall not directly or indirectly, enter into or permit to exist
any transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with Atlas or with any
other Affiliate of Borrower; provided that the foregoing restriction shall not
apply to (i) reasonable and customary fees paid to and indemnification of
members of the Board of Directors of Borrower, (ii) reasonable and customary
salaries, bonuses and other compensation paid to and indemnification of
employees of Borrower, (iii) the Transaction and (iv) the Service Agreement
providing for the rendering of accounting, administration and office services by
Atlas to Borrower on terms consistent with the terms of similar agreements
between unrelated parties in an aggregate amount not to exceed $200,000 per
annum.
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6.10 Conduct of Business.
(a) From and after the Initial Borrowing Date, Borrower shall not engage in
any business other than in connection with owning the Aircraft or any
replacement aircraft and leasing of the Aircraft or any replacement aircraft to
Atlas and will have no material assets (other than Cash, Cash Equivalents, the
Aircraft or any replacement aircraft and the Leases) or liabilities (other than
the Loans and other liabilities which are expressly permitted hereunder);
provided, however that replacement aircraft are substituted for Aircraft in
accordance with the applicable Aircraft Chattel Mortgage.
(b) The Borrower shall not take any action or enter into any transaction
which requires the approval of the Independent Director without the consent of
the Independent Director.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
7.1 Failure to Make Payments When Due.
Failure by Borrower to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; or failure by Borrower to pay
any interest on any Loan or any fee or any other amount due under this Agreement
within five days after the date due; or
7.2 Default Under Lease.
Any Lease shall at any time be terminated other than by its terms or cease
to be in full force and effect other than by its terms, or there shall exist a
Default or a Lease Event of Default under, and as defined in, any of the Leases;
or
7.3 Breach of Certain Covenants.
Failure of Borrower to perform or comply in any material respect with any
term or condition contained in subsections 2.5, 5.1(vii), 5.2, 5.13, Subsections
6.1, 6.2, 6.5, 6.6, 6.7 or 6.10 of this Agreement or in clauses (i) and (ii) of
Section 4(c), Section 4(d) or Section 4(g) of any Aircraft Chattel Mortgage; or
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7.4 Breach of Warranty.
Any representation, warranty, certification or other statement made by
Atlas, Atlas One or Borrower in any Loan Document or in any Transaction Document
or in any statement or certificate at any time given by Atlas, Atlas One or
Borrower in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
7.5 Other Defaults Under Loan Documents.
Borrower shall default in the performance of or compliance with any term
contained in this Agreement or any of the other Loan Documents, other than any
such term referred to in any other subsection of this Section 7, and such
default shall not have been remedied or waived within 15 days after the earlier
of (a) an officer of Borrower becoming aware of such default or (b) receipt by
Borrower of notice from Agent or any Lender of such default; or
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Borrower in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against Borrower under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Borrower, or over all or a substantial part of its property, shall have been
entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of Borrower for all or a substantial part
of its property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Borrower, and
any such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; or
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Borrower shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking posses-
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sion by a receiver, trustee or other custodian for all or a substantial part of
its property; or Borrower shall make any assignment for the benefit of
creditors; or (ii) Borrower shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become due; or
the Board of Directors of Borrower (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
7.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process (not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Borrower or
any of its assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
7.9 Dissolution.
Any order, judgment or decree shall be entered against Borrower decreeing
the dissolution or split up of Borrower and such order shall remain undischarged
or unstayed for a period in excess of 30 days; or
7.10 Change in Control.
Atlas shall cease to beneficially own and control all of the issued and
outstanding shares of capital stock of Borrower; or
7.11 Failure of Security.
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations or
any other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested in writing by Borrower, or Agent shall
not have or shall cease to have a valid security interest in any Collateral
purported to be covered thereby, perfected and with the priority required by the
relevant Collateral Document, for any reason, subject only to Liens permitted
under the applicable Collateral Documents or Borrower, as lessor under a Lease
or the Agent, as assignee of Borrower's rights under such Lease, shall cease to
be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect
to the rights and remedies under such Lease; or
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7.12 Loss of United States Citizen Status
Borrower for any reason ceases to be a United States Citizen;
THEN (I) (i) upon the occurrence of any Event of Default described in
subsection 7.6 or 7.7, each of (a) the unpaid principal amount of and accrued
interest on the Loans and (b) all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Borrower,
and the obligation of each Lender to make any Loan shall thereupon terminate and
(ii) upon the occurrence and during the continuation of any other Event of
Default, Agent shall, upon the written request or with the written consent of
Requisite Lenders, by written notice to Borrower, declare all or any portion of
the amounts described in clauses (a) and (b) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender
to make any Loan shall thereupon terminate and (II) upon the occurrence of any
Event of Default, the Agent upon the written request of the Requisite Lenders,
shall by written notice to Borrower enforce all of the Liens and security
interests created pursuant to the Collateral Documents and (III) exercise all
other remedies at law or in equity available under the Loan Documents.
If at any time within 60 days after an acceleration of the Loans pursuant
to the preceding paragraph Borrower shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than
non-payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 9.6, then Requisite Lenders, by written notice to
Borrower, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended to
benefit Borrower and do not grant Borrower the right to require Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth
herein are met.
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SECTION 8.
AGENT
8.1 Appointment.
Each Lender hereby appoints Bankers Trust Company as Agent hereunder and
under the other Loan Documents and each Lender hereby authorizes Agent to act as
its agent in accordance with the terms of this Agreement and the other Loan
Documents. Agent agrees to act upon the express conditions contained in this
Agreement and the other Loan Documents, as applicable. The provisions of this
Section 8 are solely for the benefit of Agent and Lenders, and Borrower shall
have no rights as a third-party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, Agent shall act solely
as an agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation towards or relationship of agency or trust with or for
Borrower.
8.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes Agent to
take such action on such Lender's behalf and to exercise such powers, rights and
remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to Agent by the terms hereof and thereof, together with
such powers, rights and remedies as are reasonably incidental thereto. Agent
shall have only those duties and responsibilities that are expressly specified
in this Agreement and the other Loan Documents. Agent may exercise such powers,
rights and remedies and perform such duties by or through its agents or
employees. Agent shall not have, by reason of this Agreement or any of the other
Loan Documents, a fiduciary relationship in respect of any Lender; and nothing
in this Agreement or any of the other Loan Documents, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement or any of the other Loan Documents except as expressly
set forth herein or therein.
B. No Responsibility for Certain Matters. Agent shall not be responsible to
any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by Agent to Lenders or by or on behalf of Borrower
to Agent or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Borrower or any other Person liable for the payment of any
Obligations, nor shall Agent be required to as-
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certain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the Loan
Documents or as to the use of the proceeds of the Loans or as to the existence
or possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding, Agent
shall not have any liability arising from confirmations of the amount of
outstanding Loans or the component amounts thereof.
C. Exculpatory Provisions. Neither Agent nor any of its respective
officers, directors, partners, employees or agents shall be liable to Lenders
for any action taken or omitted by Agent under or in connection with any of the
Loan Documents except to the extent caused by their respective gross negligence
or willful misconduct. If Agent shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, Agent shall
be entitled to refrain from such act or taking such action unless and until
Agent shall have received instructions from Requisite Lenders. Without prejudice
to the generality of the foregoing, (i) Agent shall be entitled to rely, and
shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and shall be entitled to rely and shall be
protected in relying on opinions and judgments of attorneys (who may be
attorneys for Borrower), accountants, experts and other professional advisors
selected by it; and (ii) no Lender shall have any right of action whatsoever
against Agent as a result of Agent acting or (where so instructed) refraining
from acting under this Agreement or any of the other Loan Documents in
accordance with the instructions of Requisite Lenders. Agent shall be entitled
to refrain from exercising any power, discretion or authority vested in it under
this Agreement or any of the other Loan Documents unless and until it has
obtained the instructions of Requisite Lenders.
D. Agent Entitled to Act as Lender. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Agent in its individual capacity as a Lender hereunder. With
respect to its participations in the Loans, Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not performing the duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its individual capacity. Agent and its
Affiliates may accept deposits from, lend money to and generally, engage in any
kind of banking, trust, financial advisory or other business with Borrower or
any of its Affiliates as if it were not performing the duties specified herein,
and may accept fees and other consideration from Borrower for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
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8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Atlas and its
Subsidiaries, Borrower and the Aircraft in connection with the making of the
Loans hereunder and that it has made and shall continue to make its own
appraisal of the creditworthiness of Atlas and its Subsidiaries and Borrower.
Agent shall not have any duty or responsibility, either initially or on a
continuing basis, to make any such investigation or any such appraisal on behalf
of Lenders or to provide any Lender with any credit or other information with
respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter, and Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
8.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Agent (and its respective affiliates and partners), to the extent that
Agent shall not have been reimbursed by Borrower, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent in exercising its powers, rights and
remedies or performing its duties hereunder or under the other Loan Documents or
otherwise in its capacity as Agent, in any way relating to or arising out of
this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent's gross negligence or willful misconduct.
8.5 Collateral Documents.
Without limiting the generality of subsection 8.1, each Lender hereby
further authorizes Agent to enter into the Collateral Documents as secured party
on behalf of and for the benefit of such Lender and agrees to be bound by the
terms of each of the Collateral Documents; provided that, except as otherwise
provided below, Agent shall not enter into or consent to any amendment,
modification, termination or waiver of any provision contained in any Collateral
Document without prior written consent of Requisite Lenders. Anything contained
in any of the Loan Documents to the contrary notwithstanding, each Lender agrees
that no Lender shall have any right individually to realize upon any of the
collateral under any Collateral Document, it being understood and agreed that
all powers, rights and remedies under the Collateral Documents may be exercised
solely by Agent for the benefit of Lenders in accordance with the terms thereof.
Each Lender hereby authorizes
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Agent (i) to release or subordinate Collateral as permitted or required under
this Agreement or the Collateral Documents, and agrees that a certificate
executed by Agent evidencing such release of Collateral shall be conclusive
evidence of such release as to any third party and (ii) to enter into any
amendments of the Collateral Documents to cure any ambiguity, defect or
inconsistency or to amend provisions relating to ministerial or administrative
matters which do not materially adversely affect the rights of the Lenders
thereunder.
8.6 Successor Agent.
Agent may resign at any time by giving 30 days' prior written notice
thereof to Lenders and Borrower. Upon any such notice of resignation, Requisite
Lenders shall have the right, upon consultation with Borrower, to appoint a
successor Agent. Upon the acceptance of any appointment hereunder by a successor
Agent, that successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent and the
retiring or removed Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Section 8 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 9.
MISCELLANEOUS
9.1 Assignments and Participations in Loans.
A. General. Each Lender shall have the right at any time to (i) sell,
assign or transfer to any Eligible Assignee, or (ii) sell participations to any
Person in, all or any part of its Commitment or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall, without the consent
of Borrower, require Borrower to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided
further, that no such sale, assignment or transfer described in clause (i) above
shall be effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Agent and recorded in the
Register as provided in subsection 9.1B(ii). Except as otherwise provided in
this subsection 9.1, no Lender shall, as between Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment or transfer of, or any granting of participations in, all or any
part of its Commitment or the Loans, or the other Obligations owed to such
Lender.
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B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan or other
Obligation may (a) be assigned in any amount to another Lender, or to an
Affiliate or Related Fund of the assigning Lender or another Lender, with
the giving of notice to Borrower and Agent or (b) be assigned in an
aggregate amount of not less than $5,000,000 (or such lesser amount as
shall constitute the aggregate amount of the Commitments, Loans, and other
Obligations of the assigning Lender) to any other Eligible Assignee with
the giving of notice to Borrower and with the consent of Agent and Borrower
(which consent shall not be unreasonably withheld) unless an Event of
Default shall have occurred and be occurring, in which case the consent of
Borrower to such assignment shall not be required. Any assignment of Loans
hereunder shall effect a pro rata assignment of the Notes with respect to
each Aircraft. To the extent of any such assignment in accordance with
either clause (a) or (b) above, the assigning Lender shall be relieved of
its obligations with respect to its Commitment, Loans, or other Obligations
or the portion thereof so assigned. The parties to each such assignment
shall execute and deliver to Agent, for its acceptance and recording in the
Register, an Assignment Agreement, together with a processing and
recordation fee of $3,000 and such forms, certificates or other evidence,
if any, with respect to United States federal income tax withholding
matters as the assignee under such Assignment Agreement may be required to
deliver to Agent pursuant to subsection 2.7B(iii)(a); provided, however
that such processing fee shall not be required where the assignee is an
existing Lender. Upon such execution, delivery, acceptance and recording
from and after the effective date specified in such Assignment Agreement,
(y) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be
a party hereto) provided, however, that the assigning Lender shall retain
any right to payment accrued under Subsections 2.6C, 2.6D, 2.7, 9.2 or 9.3
unless such rights are explicitly assigned to the assignee in the
Assignment Agreement. The Commitments hereunder shall be modified to
reflect the Commitment of such assignee and any remaining Commitment of
such assigning Lender and, if any such assignment occurs after the
issuance of the Notes hereunder, the assigning Lender shall, upon the
effectiveness of such assignment or as promptly thereafter as practicable,
surrender its applicable Notes to Agent for cancellation, and thereupon
new
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Notes shall be issued to the assignee substantially in the form of Exhibit
I annexed hereto, with appropriate insertions, to reflect the new
Commitment or outstanding Loans, as the case may be, of the assignee
and/or the assigning Lender.
(ii) Acceptance by Agent; Recordation in Register. Upon its receipt of
an Assignment Agreement executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, together with the processing
and recordation fee referred to in subsection 9.1B(i) and any forms,
certificates or other evidence with respect to United States federal income
tax withholding matters that such assignee may be required to deliver to
Agent pursuant to subsection 2.7B(iii) (a), Agent shall, if such Assignment
Agreement has been completed and is in substantially the form of Exhibit V
hereto and if Agent and Borrower have consented to the assignment evidenced
thereby to the extent such consent is required pursuant to subsection
9.1B(i)), (a) accept such Assignment Agreement by executing a counterpart
thereof as provided therein (which acceptance shall evidence any required
consent of Agent and Borrower to such assignment), (b) record the
information contained therein in the Register and (c) give prompt notice
thereof to Borrower. Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this subsection
9.1B(ii).
C. Participations. The holder of any participation, other than an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
affecting (i) the extension of the Final Maturity Date of any Loan allocated to
such participation, (ii) a reduction of the principal amount of or the rate of
interest payable on any Loan allocated to such participation or (iii) a release
of Collateral, and all amounts payable by Borrower hereunder (including without
limitation amounts payable to such Lender pursuant to subsections 2.6D and 2.7)
shall be determined as if such Lender had not sold such participation. Borrower
and each Lender hereby acknowledge and agree that, solely for purposes of
subsection 9.5, (a) any participation will give rise to a direct obligation of
Borrower to the participant and (b) the participant shall be considered to be a
"Lender".
D. Assignments to Federal Reserve Banks and Others. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 9.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to (i) any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank or (ii) if such Lender is a "fund", to its
lenders as collateral security to secure its indebtedness to said lenders;
provided that (i) no Lender shall, as between Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event
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shall such Federal Reserve Bank or lender be considered to be a "Lender" or be
entitled to require the assigning Lender to take or omit to take any action
hereunder.
E. Information. Each Lender may furnish any information concerning Borrower
in the possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants), subject to subsection 9.19.
9.2 Expenses.
Whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents; (ii) all the costs of furnishing
all opinions by counsel for Borrower (including without limitation any opinions
requested by Lenders as to any legal matters arising hereunder) and of
Borrower's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Agent in connection with the
negotiation, preparation, execution and administration of the Loan Documents and
the Loans and any consents, amendments, waivers or other modifications hereto or
thereto and any other documents or matters requested by Borrower; (iv) all the
costs and expenses of creating and perfecting the Liens in favor of Agent for
the benefit of Lenders pursuant to the Loan Documents, including filing and
recording fees and expenses, title insurance, fees and expenses of counsel for
providing such opinions as Lenders may reasonably request and fees and expenses
of legal counsel to Agent (including local counsel); (v) all other actual and
reasonable costs and expenses incurred by Agent in connection with the
syndication of the Commitments and the Loans and the negotiation, preparation
and execution of the Loan Documents and the transactions contemplated hereby and
thereby; provided that such costs and expenses of syndication shall not exceed
$10,000; and (vi) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees (including allocated costs of
internal counsel) and costs of settlement, incurred by Agent and Lenders in
enforcing any Obligations of or in collecting any payments due from Borrower
hereunder or under the other Loan Documents by reason of such Event of Default
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
9.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 9.2, whether
or not the transactions contemplated hereby shall be consummated, Borrower
agrees to defend, indemnify, pay and hold harmless Agent and Lenders, and the
officers, directors, employ-
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ees, agents and affiliates of Agent and Lenders (collectively called the
"Indemnitees") from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including without
limitation the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including without
limitation securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds of any of the Loans) or the statements
contained in the commitment letter delivered by any Lender to Borrower with
respect thereto (collectively called the "Indemnified Liabilities"); provided
that Borrower shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of
that Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Borrower shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
9.4 Set-Off.
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence of any Event of
Default each Lender is hereby authorized by Borrower at any time or from time to
time, without notice to Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other Indebtedness at any time held or owing
by that Lender to or for the credit or the account of Borrower against and on
account of the obligations and liabilities of Borrower to that Lender under
this Agreement, its Notes, and the other Loan Documents, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement, the Notes, or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due
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hereunder shall have become due and payable pursuant to Section 7 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured.
9.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment, by realization upon security, through the exercise of any
right of set-off or banker's lien, by counterclaim or cross action or by the
enforcement of any right under the Loan Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to that Lender
hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
them; provided that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered from such Lender upon
the bankruptcy or reorganization of Borrower or otherwise, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Borrower expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Borrower to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
9.6 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to and departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes any Lender's Pro Rata
Share; changes in any manner the definition of "Requisite Lenders"; changes in
any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the Final
Maturity Date (but not the date of any scheduled installment of principal) of
any of the Loans; postpones
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the date on which any interest or any fees are payable; decreases the interest
rate borne by any of the Loans (other than any waiver of any increase in the
interest rate applicable to any of the Loans pursuant to subsection 2.2D) or the
amount of any fees payable hereunder; releases all or substantially all of the
Collateral; or changes in any manner the provisions contained in this subsection
9.6 shall be effective only if evidenced by a writing signed by or on behalf of
all Lenders to whom are owed Obligations being directly affected by such
amendment, modification, termination, waiver or consent. In addition, (i) no
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the Lender which is the
holder of that Note, (ii) no increase in the Commitment of any Lender over the
amount thereof then in effect shall be effective without the written concurrence
of that Lender, it being understood and agreed that in no event shall waivers or
modifications of conditions precedent, covenants, Events of Default, Potential
Events of Default or of a mandatory prepayment or a reduction of any or all of
the Commitments be deemed to constitute an increase of the Commitment of any
Lender and that an increase in the available portion of any Commitment of any
Lender shall not be deemed to constitute an increase in the Commitment of such
Lender, (iii) no amendment, modification, termination or waiver of any provision
of Section 7 or of any other provision of this Agreement which, by its terms,
expressly requires the approval or concurrence of Agent shall be effective
without the written concurrence of Agent and (iv) no amendment, modification,
termination or waiver of any provision of Section 8 shall be effective without
the written consent of the Agent. Agent may, but shall have no obligation to,
with the concurrence of any Lender, execute amendments, modifications, waivers
or consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 9.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Borrower on Borrower.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 9.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Borrower may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a
party to this Agreement; provided that, concurrently with such termination, (i)
Borrower shall pay that Lender all principal, interest and fees and other
amounts owed to such Lender through such date of termination, (ii) another
financial institution satisfactory to Borrower and Agent (or if Agent is also
the Lender to be terminated, the successor Agent) shall agree, as of such date,
to become a Lender for all purposes under this Agreement (whether
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by assignment or amendment) and to assume all obligations of the Lender to be
terminated as of such date, and (iii) all documents and supporting materials
necessary, in the judgment of Agent (or if Agent is also the Lender to be
terminated, the successor Agent) to evidence the substitution of such Lender
shall have been received and approved by Agent as of such date.
9.7 Independence of Covenants.
All covenants under this Agreement shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
9.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Agent shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or (i) as
to Borrower and Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such partner in a
written notice delivered to Agent.
9.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in subsections 2.6D, 2.7, 9.2,
9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and
9.5 shall survive the payment of the Loans, and the termination of this
Agreement.
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Agent or any Lender in the exercise of
any power, right or privilege hereunder or under any other Loan Document shall
impair such power,
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right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other power, right or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
9.11 Marshalling: Payments Set Aside.
Neither Agent nor any Lender shall be under any obligation to marshal any
assets in favor of Borrower or any other party or against or in payment of any
or all of the Obligations. To the extent that Borrower makes a payment or
payments to Agent or Lenders (or to Agent for the benefit of Lenders), or Agent
or Lenders enforce any security interests or exercise their rights of set-off,
and such payment or payments or the proceeds of such enforcement or set-off or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or set-off had not occurred.
9.12 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
9.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such
purpose.
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9.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.15 Applicable Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
9.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of lenders (it being understood that
Lenders' rights of assignment are subject to subsection 9.1). Neither Borrower's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Borrower without the prior written consent of all Lenders.
9.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION (SUBJECT TO ANY RIGHT TO APPEAL TO A COURT IN THE STATE OF NEW
YORK). Borrower hereby agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail,
return receipt requested, to Borrower at its address provided in subsection
9.8, such service being hereby acknowledged by Borrower to be sufficient for
personal jurisdiction in any action against Borrower in any such court and to
be otherwise effective and binding service in every respect. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall
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limit the right of any Lender to bring proceedings against Borrower in the
courts of any other jurisdiction.
9.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
9.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of the Transaction Documents which has been identified as
confidential by Borrower in accordance with such Lender's customary procedures
for handling confidential information of this nature, it being understood and
agreed by Borrower that in any event a Lender may make disclosures, subject to
this Section 9.19, reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any participation therein (at which time, any such
assignee, transferee or participant shall be bound by this Section 9.19) or as
required or requested by any governmental agency or representative thereof or
pursuant to legal process or in accordance with any applicable law or
regulation; provided that, unless specifically prohibited by applicable law or
court order, each Lender shall notify Borrower of any request by any
governmental agency or representative thereof (other than any such request in
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connection with any examination of the financial condition of such Lender by
such governmental agency) for disclosure of any such non-public information
prior to disclosure of such information; and provided further, that in no event
shall any Lender be obligated or required to return any materials furnished by
Borrower.
9.20 Counterparts; Effectiveness.
(i) This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(ii) This Agreement shall become effective upon the execution of a
counterpart hereof by (the "Effective Date") each of the parties hereto and
receipt by Company and Agent of written or telephonic notification of such
execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
ATLAS FREIGHTER LEASING, INC.
By:
---------------------------------
Name:
Title:
Notice Address:
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
BANKERS TRUST COMPANY, as Agent and Lender
By:
---------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 86
-80-
LENDERS:
SENIOR HIGH INCOME PORTFOLIO, INC.,
as Lender
By:
---------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC., as Lender
By:
---------------------------------
Name:
Title:
FLOATING RATE PORTFOLIO, as Lender
BY: CHANCELLOR LGT SENIOR
SECURED MANAGEMENT INC.,
as Attorney-in-Fact
By:
---------------------------------
Name:
Title:
MORGAN STANLEY SENIOR FUNDING, INC.,
as Lender
By:
---------------------------------
Name:
Title:
<PAGE> 87
-81-
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase Manhattan
Bank), as Lender
By:
---------------------------------
Name:
Title:
<PAGE> 88
-82-
PILGRIM AMERICA PRIME RATE TRUST, as Lender
By:
---------------------------------
Name:
Title:
<PAGE> 89
-83-
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST, as Lender
By:
---------------------------------
Name:
Title:
<PAGE> 90
-84-
DEEPROCK & COMPANY, as Lender
BY: EATON VANCE MANAGEMENT,
as Investment Advisor
By:
---------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.60
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(N516MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-200 Aircraft
U.S. Registration No. N516MC
Manufacturer's Serial No. 22507
---------------------------
- -------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
SECTION 1. Definitions.............................................................................1
SECTION 2. Acceptance and Lease...................................................................21
SECTION 3. Term and Rent..........................................................................22
(a) Term and Basic Rent.............................................................22
(b) Adjustments to Basic Rent.......................................................22
(c) Supplemental Rent...............................................................22
(d) Payments in General.............................................................22
(e) Minimum Rent....................................................................23
(f) Prepayment of Rent Payments.....................................................23
SECTION 4. Certain Representations and Warranties.................................................24
SECTION 5. Lessee's Representations and Warranties................................................25
SECTION 6. Lessee's Affirmative Covenants.........................................................31
SECTION 7. Lessee's Negative Covenants............................................................38
SECTION 8. Return of the Aircraft.................................................................47
(a) Condition Upon Return...........................................................47
(b) Overhaul and Repair.............................................................47
(c) Repairs.........................................................................47
(d) Modifications...................................................................47
(e) Airworthiness Directives........................................................48
(f) Return of the Engines...........................................................48
(g) Deferred Maintenance............................................................48
(h) Corrosion Treatment.............................................................48
(i) Manuals.........................................................................48
(j) Storage Upon Return.............................................................48
(k) Severable Parts.................................................................49
(l) Survival........................................................................49
SECTION 9. Liens..................................................................................49
SECTION 10. Registration, Maintenance and Operation; Possession and Subleases; Insignia............49
(a) Maintenance and Operation.......................................................49
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(b) Possession......................................................................51
(c) Insignia........................................................................53
(d) Holding Out.....................................................................53
(e) No Pledging of Credit...........................................................54
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and
Additions..............................................................................54
SECTION 12. Indemnities............................................................................56
SECTION 13. Event of Loss..........................................................................57
SECTION 14. Insurance..............................................................................59
SECTION 15. Assignment.............................................................................62
SECTION 16. Events of Default......................................................................62
SECTION 17. Remedies...............................................................................65
SECTION 18. Lessee's Cooperation Concerning Certain Matters........................................67
SECTION 19. Notices................................................................................68
SECTION 20. Net Lease, True Lease, etc.............................................................68
SECTION 21. Purchase Option........................................................................70
(a) Purchase Option.................................................................70
(b) Notice of Purchase..............................................................70
SECTION 22. Lessor's Right to Perform for Lessee...................................................70
SECTION 23. Miscellaneous..........................................................................70
SECTION 24. Security for Lessor's Obligations......................................................71
</TABLE>
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
-ii-
<PAGE> 4
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
-iii-
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suitable for installation and use
on the Airframe; provided that such 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 747-200 aircraft
operated by
<PAGE> 6
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immediately
preceding the date of calculation, and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of
-2-
<PAGE> 7
this definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agent" shall mean the Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts; provided
that the assets received by the Lessee or any Subsidiary have a fair market
value at least equal to the assets transferred (provided that with respect to
any asset swap or series of related asset swaps involving assets of Lessee or
any Subsidiary with a fair market value exceeding $3,000,000, such determination
shall be made by the Board of Directors of Lessee)) and (D) asset sales
involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
-3-
<PAGE> 8
"Atlas One Leases" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
-4-
<PAGE> 9
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"Consolidated Fixed Charges" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting
-5-
<PAGE> 10
period determined in conformity with GAAP; provided that there shall be excluded
(i) the income (or loss) of any Person (other than a Subsidiary of Lessee) in
which any other Person (other than Lessee or any of its Subsidiaries) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to Lessee or any of its Subsidiaries by such Person
during such period, (ii) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary of Lessee or is merged into or consolidated with
Lessee or any of its Subsidiaries or that Person's assets are acquired by Lessee
or any of its Subsidiaries, (iii) the income of any Subsidiary of Lessee to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to Asset Sales or returned surplus assets
of any pension plan, and (v) (to the extent not included in clauses (i) through
(iv) above) any net extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of
-6-
<PAGE> 11
the obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other party or parties
to an agreement, and (c) any liability of such Person for the obligation of
another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"Credit Agreement" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bankers Trust Company, as Agent as such agreement may be amended,
modified, waived, or supplemented from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
-7-
<PAGE> 12
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension Indebtedness
and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Dividend" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the four Pratt & Whitney JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of the
General Electric CF6-50E2 aircraft engines for the aircraft bearing U.S.
registration numbers N505MC, N507MC, N508MC, N509MC and N516MC listed by
manufacturer's serial numbers in the initial Lease Supplement and installed on
the Airframe at the time of the delivery to Lessee of such Airframe, whether or
not from time to time thereafter installed on such Airframe or any other
airframe; (ii) any Acceptable Alternate Engine which may from time to time be
substituted for any of such four engines pursuant to the terms of the Lease; and
(iii) in any case, any and all Parts which are from time to time incorporated or
installed in or attached to any such engine and any and all parts removed
therefrom so long as title thereto remains vested in Lessor in accordance
herewith. The term "Engines" means, as of any date of determination, all Engines
then leased under this Lease.
-8-
<PAGE> 13
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or disappearance
of such Aircraft); (B) the destruction, damage beyond repair or rendition of
such Aircraft permanently unfit for normal use for any reason whatsoever; (C)
the condemnation, confiscation or seizure of, or requisition of title to, or use
or possession (other than use by the United States Government if Lessee obtains
adequate compensation from the United States Government) of such Aircraft; (D)
as a result of any rule, regulation, order or other action by the FAA or other
governmental body having jurisdiction, the use of such Aircraft in the normal
course of interstate air transportation of persons or cargo shall have been
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prohibited for a period of more than nine consecutive months unless Lessee,
prior to the expiration of such nine month period, shall have undertaken and
shall be diligently carrying forward all steps which are necessary or desirable
to permit the normal use of such property by Lessee or, in any event, if such
use shall have been prohibited for a period of twelve consecutive months; (E)
the operation or location of such Aircraft, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area excluded
from coverage by any insurance policy in effect with respect to such Aircraft,
if Lessee shall be unable to obtain indemnity or "war-risk" insurance in lieu
thereof from the United States; (F) any damage which results in an insurance
settlement with respect to such Aircraft on the basis of an actual or
constructive total loss or (G) a divestiture of such Airframe as described in
Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft Chattel Mortgage under the
Credit Agreement. 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 of the
Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means the ING Obligations and the Lufthansa
Obligations.
"Fair Market Sales Value" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-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 by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
Lessee, or, if such appraiser cannot be agreed to within 20 days, then either
party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining 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 8 of this Lease, that all modifications and improvements shall be taken
into account, that Lessee has removed all Parts which it is entitled to remove
pursuant to Section 11 of this Lease and that the Aircraft is not encumbered by
this Lease. Except as otherwise expressly provided in the Lease, all appraisal
costs will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States
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<PAGE> 15
enacted to supersede, amend or supplement such Act and the rules and regulations
promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Financed Aircraft" means all Financed Aircraft under and as defined in the
Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
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<PAGE> 16
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING Financing Agreement" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale Nederlanden
Aviation Lease B.V., as amended by Amendment No. 1 thereto and as further
amended, restated, supplemented and otherwise modified from time to time.
"ING Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other
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<PAGE> 17
Person, (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Lessee from any Person other than
Lessee or any of its Subsidiaries, of any equity Securities of such Subsidiary,
or (iii) any direct or indirect loan, advance (other than advances to employees
for moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Lessee or any of its Subsidiaries to any other Person (other than a wholly-owned
Subsidiary of Lessee), including all indebtedness and accounts receivable from
that other Person that are not current assets or did not arise from sales to
that other Person in the ordinary course of business. The amount of any
Investment shall be the original cost of such Investment plus the cost of all
additions thereto, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Leases" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented from
time to time (including this Lease). The term "Lease" shall include any Lease
Supplement entered into pursuant to the respective Lease.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
and any subsequent Lease Supplement entered into in accordance with the terms of
the Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
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<PAGE> 18
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or the transactions contemplated by this Lease or the
operation of the Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organization, any place of
business or any activity of Lessee or any other Person having use,
possession or custody of the Aircraft, the Airframe, any Engine or any
Part in the jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Lufthansa Agreement" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"Lufthansa Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
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<PAGE> 19
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"Nationsbank Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as title thereto shall vest in Lessor
in accordance with this Lease.
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<PAGE> 20
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
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<PAGE> 21
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated Credit
Agreement; and
(xii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of such Indebtedness, plus
the amount of expenses of Lessee incurred in connection with such extension,
(iii) in the case of any extension of subordinated Indebtedness, such Permitted
Extension Indebtedness is made subordinate to the obligations of Lessee
hereunder at least to the same extent as the Indebtedness immediately prior to
such extension, (iv) such Permitted Extension Indebtedness has a final stated
maturity later than the end of the stated maturity of the Indebtedness being
extended immediately prior to such extension and (v) the amortization and the
other terms, provisions, conditions, covenants and events of default thereof
taken as a whole shall be no more onerous or restrictive from the perspective of
Lessee and its Subsidiaries or any less favorable, from the perspective of
Lessor and Lenders than those contained in the Indebtedness immediately prior to
such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
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"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement .
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action which
requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Lessor and Agent using the consolidated financial
statements of Lessee and its Subsidiaries which shall be reformulated as if any
such incurrence of Indebtedness and the application of proceeds, acquisition,
disposition or other related action had been consummated at the beginning of the
period specified in the covenant with respect to which Pro Forma Basis
compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
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<PAGE> 23
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"S&P" means Standard & Poor's Corporation.
"Second Amended and Restated Credit Agreement" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably
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<PAGE> 24
believe) that it will incur, debts beyond its ability to pay such debts as they
become due; and (B) such Person is "solvent" within the meaning given that term
and similar terms under applicable laws relating to fraudulent transfers and
conveyances. For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f) plus all accrued and unpaid interest on the
Loans relating to the Aircraft on the date of determination.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the
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financial covenants set forth in subsection 7(f) and the definitions related
thereto, Lessor shall not be considered a Subsidiary of Lessee.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and ending
on the seventh anniversary of the Initial Borrowing Date, or such earlier date
as the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing by
Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"Transaction Documents" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of the
ING Obligations and the Lufthansa Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Dividend and
the Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees to appoint in
writing one or more of its employees as its authorized representative to accept
delivery of the Aircraft pursuant to the terms hereof. Lessee hereby agrees that
acceptance of delivery by such employee or employees shall, without
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further act, irrevocably constitute acceptance by Lessee of the Aircraft for all
purposes of this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the seventh anniversary of the Initial
Borrowing Date or such earlier date as this Lease may be terminated in
accordance with the provisions hereof. Basic Rent shall accrue during the Term
in accordance with Exhibit B hereto. Lessee shall pay to Lessor on each Basic
Rent Payment Date an amount of Basic Rent specified opposite each Basic Rent
Payment Date on Exhibit B hereto as such amounts may be adjusted pursuant to
Section 3 plus accrued interest on Basic Rent previously accrued but unpaid as
specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and notified to
Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on such
Basic Rent Payment Date and determined in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when due until the same shall be paid
and on any other amounts payable hereunder which are not paid when due and (ii)
all amounts payable by Lessor pursuant to subsections 2.6D, 2.7, 9.2 and 9.3 of
the Credit Agreement; provided, however, to the extent any Supplemental Rent
required to be paid pursuant to this clause (ii) of subsection 2(c) has been
paid by Lessee pursuant to the terms of another Lease, then Lessee's obligations
hereunder shall be deemed to be satisfied by the payments made pursuant to such
other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided
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that so long as any Obligations remain outstanding, all Rent shall be paid
directly to the Agent at the Funding and Payment Office; provided, further, that
to the extent the amount of Rent paid directly to the Agent is in excess of the
amount of principal and interest on the Loans relating to the Aircraft and other
unpaid Obligations (other than principal and interest on other Loans relating to
other aircraft leased pursuant to the other Leases and after taking into account
all other payments of rent pursuant to the other Leases on such date), then such
excess amounts shall be paid by the Agent to Lessor at its above-referenced
office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
all other unpaid Obligations of Lessor (other than principal and interest
on Loans relating to other Aircraft and after taking into account all other
payments of Stipulated Loss Value pursuant to the other Leases on such
date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately pre-
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pay an amount of Basic Rent equal to the amount of such required prepayment
less any required payments of the Loans relating to the Aircraft actually
made by the Lessor from Insurance Proceeds or Condemnation Proceeds (as
each such term is defined in the Credit Agreement) received directly by the
Lessor.
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section
3(f)(ii), the schedules of Basic Rent and Stipulated Loss Value, shall be
adjusted so as to preserve the after tax yield and after tax cash flows of
the Lessor and, to the extent consistent therewith, to minimize the net
present value of Basic Rent payments. All such computations shall be made
on the basis of the same assumptions and the method of computations
employed in the original calculations of Basic Rent and Stipulated Loss
Values (except to the extent such assumptions have been changed as a result
of such prepayment or any prior such adjustment). At the Lessee's written
request, independent public accountants mutually selected by the Lessor and
the Lessee shall confirm the required adjustments. The final determination
of any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE ARE OF
A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE
AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND
EACH ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY
LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED
TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
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<PAGE> 29
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor
covenants that it will not, through its own actions or inactions, in such
capacity, interfere in Lessee's quiet enjoyment of the Aircraft unless this
Lease shall have been declared or deemed to have been declared in default
pursuant to Section 17 hereof. None of the provisions of this Section 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 any manufacturer, any affiliate thereof, any subcontractor or supplier of any
manufacturer or any affiliate thereof, with respect to the Airframe, Engines, or
any Parts, or to release the manufacturer, any affiliate thereof, or any such
subcontractor or supplier from any such representation, warranty or obligation.
Unless a Default or Lease Event of Default shall have occurred and be
continuing, Lessor agrees to make available to Lessee such rights as Lessor may
have under any warranty with respect to the Aircraft made by the manufacturer or
any affiliate thereof or any of its subcontractors or suppliers and any other
claims against the manufacturer or any affiliate thereof, or any such
subcontractor or supplier with respect to the Aircraft, all pursuant to and in
accordance with the terms of any applicable purchase agreements or warranty
agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the
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Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed hereto (as so
supplemented) is duly authorized, validly issued, fully paid and nonassessable
and none of such capital stock constitutes Margin Stock. Each of the
Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed hereto is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation set forth therein, has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted, and is
qualified to do business and in good standing in every jurisdiction where its
assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or a lack of such corporate power and authority has not had and will
not have a Material Adverse Effect. Schedule 5(a)(iii) annexed hereto correctly
sets forth the ownership interest of Lessee and each of its Subsidiaries in each
of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Lessee or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Initial Borrowing Date and
disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by the
Lessee and its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated by
this Lease and the other Transaction Documents do not and will not require any
registration with, consent or
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<PAGE> 31
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body which has not been obtained or
made on or prior to the date required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at March 31, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the three
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Neither Lessee nor any of its Subsidiaries has (and
will not following the Initial Borrowing Date) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully dis-
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closed in the financial statements delivered pursuant to Section 5(c)(A) which,
either individually or in the aggregate, could reasonably be expected to be
material to Lessee and its Subsidiaries taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
(i) Lessee and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor any of its Subsidiaries is (i) in violation of any applicable
laws that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect or (ii) subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
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<PAGE> 33
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
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<PAGE> 34
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee or
(b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or threatened
Environmental Claims against Lessee or any of its Subsidiaries, and neither
Lessee nor any of its Subsidiaries has received no written notices, inquiries,
or requests for information with respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
nec-
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<PAGE> 35
essary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such monthly
financial statements shall only be required to be delivered to Agent to the
extent such monthly financial statements are required to be delivered under
the Second Amended and Restated Credit Agreement as such agreement may be
amended, modified, supplemented, renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the
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corresponding figures for the corresponding periods of the previous fiscal
year and the corresponding figures from the consolidated plan and financial
forecast for the current fiscal year delivered pursuant to subsection
6(a)(12)), all in reasonable detail and certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Lessee and its Subsidiaries
in the form prepared for presentation to senior management for such fiscal
quarter and for the period from the beginning of the then current fiscal
year to the end of such fiscal quarter; provided that delivery of Lessee's
Form 10-Q for such fiscal quarter shall be deemed to satisfy the
requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6(a)(12) for the fiscal year covered by
such financial statements, all in reasonable detail and certified by the
chief financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Lessee and satisfactory to Lessor and Agent, which report shall be
unqualified, shall express no doubts about the ability of Lessee and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a) and
(b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each delivery
of financial statements of Lessee and its Subsidiaries pursuant to
subdivisions (2) and
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(3) above after the Initial Borrowing Date, (a) an Officers' Certificate of
Lessee stating that the signers have reviewed the terms of this Lease and
have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Lessee and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of such Officers' Certificate, of
any condition or event that constitutes a Default or Lease Event of
Default, or, if any such condition or event existed or exists, specifying
the nature and period of existence thereof and what action Lessee has
taken, is taking and proposes to take with respect thereto; and (b) a
Compliance Certificate demonstrating in reasonable detail compliance during
and at the end of the applicable quarterly and annual accounting periods
with the restrictions contained in Section 7;
(5) Pricing Certificates: On or after the third anniversary of the
Initial Borrowing Date, a certificate setting forth the credit rating on
Lessee's obligations under the Pass Through Trust Documents, (a) together
with each delivery of financial statements of Lessee pursuant to
subdivisions (2) and (3) above, (b) within one Business Day after any
public release by S&P or Moody's lowering its credit rating on Lessee's
obligations under the Pass Through Trust Documents and (c) at such
additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Lease Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Lease Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (4) above is not
correct or that the matters set forth in the Compliance Certificates
delivered there with pursuant to clause (b) of subdivision (4) above for
the applicable fiscal year are not stated in accordance with the terms of
this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Les-
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<PAGE> 38
see by independent certified public accountants in connection with each
annual, interim or special audit of the financial statements of Lessee and
its Subsidiaries made by such accountants, including, without limitation,
any comment letter submitted by such accountants to management in
connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
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<PAGE> 39
(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to evaluate
any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or Agent
shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corpo-
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<PAGE> 40
rate existence and all rights and franchises material to its business; provided,
however, that the corporate existence of any such Subsidiary may be terminated
if such termination is in the interests of Lessee and its Subsidiaries and is
not materially disadvantageous to Lessor or to any assignee of the Lease. Lessee
will at all times maintain its corporate existence as a United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage (including, without limitation, flood
insurance, if necessary or advisable) of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine, and its and their financial and
accounting records, and to make copies and take extracts
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<PAGE> 41
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Lessee may,
if it so chooses, be present at or participate in any such discussion), all upon
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested; provided that so long as no Lease Event
of Default shall have occurred and be continuing, such inspection shall not be
disruptive to Lessee's business, as reasonably determined by Lessee. Without in
any way limiting the foregoing, Lessee will, upon the request of Lessor or
Agent, participate in a meeting of Agent and Lenders once during each fiscal
year to be held at Lessee's corporate offices (or such other location as may be
agreed to by Lessee, Lessor and Agent) at such time as may be agreed to by
Lessee, Lessor and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which could reasonably be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event Lessee or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any facility, Lessee or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Lessee or such Subsidiary. Notwithstanding
anything to the contrary contained in this Lease, Lessee and its Subsidiaries
may engage in the transportation of Hazardous Materials in the ordinary course
of business so long as such is conducted in compliance with all applicable
Environmental Laws, and all other applicable laws, policies, orders, directives
and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA Affiliate
to establish any
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<PAGE> 42
Employee Benefit Plan which, in either case, could reasonably be expected to
result in a liability for Lessee, under Title IV of ERISA or the minimum funding
standards of Part 3 of Subtitle B of Title I of ERISA, in excess of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees that,
so long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") to Consolidated Adjusted
EBITDA for the four-fiscal quarter period ending on such Determination
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<PAGE> 43
Date did not exceed 4.5:1.0, (ii) the ratio of Consolidated Adjusted EBITDA
for such four-fiscal quarter period to Consolidated Interest Expense for
such four-fiscal quarter period was not less than 3.0:1.0; and (iii) Lessee
will be in compliance with all covenants set forth in subsection 7(f)
hereof, Lessee and its Subsidiaries may incur Other Permitted Indebtedness;
and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any state or under any similar recording or
notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the
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<PAGE> 44
Aircraft Chattel Mortgages except for Permitted Encumbrances of the type
described in clauses (i), (ii) or (viii) of the definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal year;
provided that Lessee shall not incur liabilities related to any such Joint
Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed at any time 10.5 million.
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<PAGE> 45
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(8) shall at no time exceed $30
million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
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<PAGE> 46
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four-fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee occurring during any of the periods set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION>
===================================================
Minimum
Interest
Period Coverage Ratio
- ---------------------------------------------------
<S> <C>
fiscal year 1997 2.50:1.00
- ---------------------------------------------------
fiscal year 1998 2.75:1.00
- ---------------------------------------------------
fiscal year 1999 3.00:1.00
- ---------------------------------------------------
Thereafter 3.25:1.00
===================================================
</TABLE>
(ii) Minimum Fixed Charge Coverage Ratio. Lessee shall not permit the ratio
of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated Rental
Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Lessee occurring during any
of the periods set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
===========================================================
Minimum Fixed
Charge Coverage
Period Ratio
- -----------------------------------------------------------
<S> <C>
fiscal year 1997 1.25:1.00
- -----------------------------------------------------------
Thereafter 1.10:1.00
===========================================================
</TABLE>
(iii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Lessee in excess of $25 million as of such date) to (ii)
Consolidated Adjusted EBITBA for the four-fiscal quarter period ending on such
date to exceed the correlative ratio indicated:
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<PAGE> 47
<TABLE>
<CAPTION>
===================================================
Maximum
Period Leverage Ratio
- ---------------------------------------------------
<S> <C>
fiscal year 1997 4.50:1.00
- ---------------------------------------------------
fiscal year 1998 4.25:1.00
- ---------------------------------------------------
fiscal year 1999 4.00:1.00
- ---------------------------------------------------
Thereafter 3.75:1.00
===================================================
</TABLE>
(iv) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
============================================================
Minimum
Consolidated
Period Net Worth
- ------------------------------------------------------------
<S> <C>
fiscal year 1997 $120 million
- ------------------------------------------------------------
fiscal year 1998 $145 million
- ------------------------------------------------------------
fiscal year 1999 $170 million
- ------------------------------------------------------------
Thereafter $195 million
============================================================
</TABLE>
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
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<PAGE> 48
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of another
Person provided that, (a) the acquisition primarily involves the
acquisition of assets to be used in the business of Lessee, (b) with
respect to such acquisition any newly acquired or created subsidiary of
Lessee shall be a wholly-owned subsidiary, (c) immediately before and after
giving effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Lessee shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 7(f) and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance, (e)
Lessor and Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other liabilities not on
the balance sheet of Lessee assumed in connection with such acquisition and
a business plan prepared by Lessee with respect to such acquisition and (f)
the aggregate amount of cash payments made in connection with all such
acquisitions other than with the proceeds from sales or issuances of equity
by Lessee does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with re-
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<PAGE> 49
spect to the acquisition, in the normal course of business, of spare parts
and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business; and
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter).
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation or
bylaws to be amended or otherwise modified in any manner which could reasonably
be expected to have a Material Adverse Effect or (ii) any Material Agreement to
be amended or otherwise modified in any manner with respect to any provision
providing material representations and warranties to Lessee, indemnification
rights to Lessee, or limiting Lessee's remedies or rights upon the other party
to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
fiscal year do not exceed $60 million plus an amount not to exceed $12 million
during any fiscal year, equal to Consolidated Rental Payments incurred in
connection with sale leaseback transactions described in subsection 7(j) plus
Consolidated Rental Payments assumed pursuant to acquisitions permitted under
subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital Lease,
of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other
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than Lessee or any of its Subsidiaries) or (ii) which Lessee or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Lessee or any of its
Subsidiaries to any Person (other than Lessee or any of its Subsidiaries) in
connection with such lease; provided that Lessee and its Subsidiaries may become
and remain liable as lessee, guarantor or other surety with respect to any such
lease if and to the extent that Lessee or any of its Subsidiaries would be
permitted to enter into, and remain liable under, such lease under subsection
7(i).
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 10% or more of any class of equity
Securities of Lessee or with any Affiliate of Lessee or of any such holder, on
terms that are less favorable to Lessee or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
(i) reasonable and customary fees paid to and indemnification of members of the
Boards of Directors of Lessee and its Subsidiaries, (ii) reasonable and
customary salaries, bonuses and other compensation paid to and indemnification
of employees of Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of Lessee or (iii)
performance by Lessee of its obligations under and in accordance with the
Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
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(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
SECTION 8. Return of the Aircraft. (a) Condition Upon Return. Unless the
Aircraft has been sold pursuant to Section 21, if at any time the Lessee shall
return the Aircraft to the Lessor hereunder, Lessee, at its own expense, will
return the Aircraft to Lessor at a location specified by the Lessor to the
Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft to be in compliance with the maintenance covenants contained in this
Lease and (ii) the Airframe will be fully equipped with the Engines installed
thereon.
At the time of such return, such Airframe and Engines (A) shall have an air
worthiness certificate from the Federal Aviation Administration and shall be in
full compliance with the provisions of Federal Aviation Regulations, Part 121
(or successor regulation), and shall be in material compliance with all
applicable FAA noise, corrosion, environmental and aging aircraft requirements,
(B) shall be free and clear of all Liens and (C) shall be in a full freighter
configuration and in as good condition as when originally delivered to Lessee,
ordinary wear and tear excepted, and otherwise in the condition required to be
maintained under Lessee's FAA-approved maintenance plan; and in all such cases
the Aircraft shall not have been discriminated against as compared to other
aircraft owned or leased by Lessee whether by reason of its leased status or
otherwise in maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines and all Parts shall
have been, and shall be properly documented to have been, repaired or overhauled
by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since
the Initial Borrowing Date on the Aircraft are eligible to receive approval by
the FAA (or its designee), if so required. All such repairs shall be accompanied
by all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial
Borrowing Date which deviate from the certified configuration and which are
still in existence on the Aircraft shall have approval or certification by the
FAA (or its designee) or certification if required. All such modifications shall
be accompanied by complete data and documentation necessary to substantiate
their certification and approval and methods of compliance.
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(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe, 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
Acceptable Alternate Engine, in form and substance reasonably satisfactory to
Lessor (together with an opinion of 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 Acceptable Alternate Engines are free
and clear of all Liens) against receipt from Lessor of a bill of sale evidencing
the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft including
those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall have
been maintained by cleaning and treating all mild and moderate corrosion and
correcting of all severe or exfoliate corrosion in accordance with Lessee's
approved maintenance program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of this
Lease, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and maintenance, inspection, modification and overhaul records and
similar records required to be maintained with respect to the Aircraft and Parts
under FAA rules, the Aircraft maintenance program. If any such logs, manuals,
records or other data are missing, incomplete or otherwise not in accordance
with FAA standards applicable to Lessee, Lessee shall re-accomplish the
maintenance tasks necessary to produce such records in accordance with its
approved maintenance program prior to delivery of the Aircraft or otherwise
perform all necessary acts (without regard to any applicable waivers or
deferrals) to obtain such records in a manner satisfactory to the FAA and
Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, Lessee receives from
Lessor a written request for storage of the Aircraft upon its return hereunder,
Lessee will provide
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Lessor, or cause Lessor to be provided, with storage facilities for the Aircraft
at Lessee's risk and at Lessee's expense for a period not exceeding 30 days, and
thereafter at Lessor's risk and at Lessor's cost for insurance, maintenance and
Lessee's out-of-pocket expenses for such storage for a period not exceeding 90
days (provided that if such termination occurs as a result of a Lease Event of
Default hereunder, such storage shall be at the cost of the Lessee), commencing
on the date the Aircraft is returned substantially in the condition required
under this Section 8, at a location in the continental United States selected by
Lessee and used by Lessee as a location for the long-term parking or storage of
aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned to
Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable nonproprietary Parts (other than Parts otherwise
required by Sections 10 or 11 to be maintained on the Aircraft) 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 11 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 at their
fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft, title
thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. Lessee will promptly, at its own expense,
take such action as may be necessary to duly discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, will
(i) be a "citizen of the United States" as defined in Section 40102(15) of Title
49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Aircraft to be duly registered
and remain duly registered in the name of Lessor in accordance with the Act and
otherwise registered under all applicable laws of the United States so as to be
eligible to operate in commercial air service under the Act; and (iii) will
service, repair, inspect, test, maintain and overhaul the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine (A) so as to keep the Airframe and each Engine in such operating
condition as may be required to permit the Airframe and each Engine to be
utilized in commercial operations (B) so as to enable the airworthiness
certification of the Airframe to be maintained in good standing at all times
under the Act, except when air-
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craft of the same type, model or series as the Airframe (powered by engines of
the same type as those with which the Airframe shall be equipped at the time of
grounding) registered in the United States have been grounded by the FAA;
provided, however, that if following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then subject to
the provisions of Section 13 hereof, so long as Lessee is diligently taking or
causing to be taken all necessary action to promptly correct the condition which
caused such withdrawal, no Lease Event of Default shall arise from such
withdrawal, (C) in accordance with Lessee's FAA-approved maintenance, inspection
and maintenance control programs, and in the same manner and with the same care
used by Lessee with respect to the same or similar aircraft and engines owned or
operated by Lessee so as to keep the same in as good operating condition as when
originally leased hereunder, ordinary wear and tear excepted, which practices
shall at all times be at or above the standard of the industry in the United
States for prudent maintenance of similar equipment, and (D) in such manner as
may be necessary to maintain in full force all warranties of the manufacturers
thereof. Lessee shall maintain all records, logs and other materials which may
be required to permit the Airframe and each Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
the Airframe or such Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine, Lessee, at its own cost and expense, will conform thereto or obtain
conformance therewith and will maintain the same in proper operating condition
under such laws, rules, regulations and orders, provided, however, that Lessee
may, in good faith (after having delivered to Lessor and Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's and Agent's opinion (in their sole discretion),
adversely affect the interests of Lessor, Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section 14
shall not be at the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the Airframe or such
Engine, except in the case of a requisition for use by the United States of
America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened area
of
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hostilities unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of the
term of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner or
for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or omit to do
anything the omission of which, may invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent
of Agent and Lessor, sell, assign, lease or otherwise in any manner deliver,
transfer or relinquish possession or control of, or transfer the right, title or
interest of Lessee in, the Airframe or any Engine except that, unless a Default
or Lease Event of Default shall have occurred and be continuing, Lessee may
without the prior written consent of the Agent and Lessor, take the following
actions so long as the actions to be taken shall not deprive the Agent of the
first priority Lien under the Aircraft Chattel Mortgage in the assets subject
thereto and so long as the actions to be taken shall not deprive Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
and shall not deprive the Agent of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft as assignee of Lessee's rights
under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Lessee in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine; provided, however, that if
Lessee's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to
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the Airframe or such Engine and Lessee shall comply with Section 13 in
respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the 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), and (C) the rights of any Domestic Air Carrier,
under normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to such
airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided:
(A) such airframe is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe and except Liens of the type permitted by clause
(iv) above; and (B) Agent and Lessor shall have received from the lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party of
such airframe a written agreement (which may be the lease, conditional sale
agreement or mortgage covering such airframe), whereby such lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any Engine by
reason of such Engine being installed on such airframe at any time when
such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current certificates
and licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided that Lessee's obligations hereunder
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shall continue in full force and effect notwithstanding any such ACMI
Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness certificate)
with such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust
Company, as Agent" or such other legend, as shall in the opinion of Lessor and
Agent be appropriate or desirable to evidence the fact that it is subject to the
ownership of Lessor and the lien and security interest created by the Aircraft
Chattel Mortgage. Lessee shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or defacement,
shall promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, Lessee shall not allow the name of
any person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership or of
any security interest therein, except that Lessee or any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer on
the Airframe or any Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or any Part or any other operations or carriage undertaken by Lessee.
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(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, or any Part, or for any
other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and which
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair or testing, Lessee at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that, except as
otherwise provided in Section 11(d), Lessee at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall be
owned by Lessor free and clear of all Liens (except Permitted Encumbrances and
for pooling arrangements to the extent permitted by Section 11(b)), and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such parts were in the condition and
repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to
such replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor
and shall thereupon become free and clear of all rights of Lessor hereunder and
all rights derivative of Lessor's and shall no longer be deemed a Part
hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in Section
11(a) may be subjected by Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the ordinary course
of its business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insol-
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vency, or similar proceeding, voluntary or involuntary, provided the Part
replacing such removed Part shall be incorporated or installed in or attached to
the Airframe or such Engine in accordance with Section 11(a) as promptly as
possible after the removal of such removed part. In addition, any replacement
Part when incorporated or installed in or attached to the Airframe or any Engine
in accordance with Section 11(a) may be owned by any third party subject to such
a pooling arrangement, provided Lessee, at its expense, as promptly thereafter
as possible, either (A) causes such replacement Part to become property of
Lessor and subject to the lien and security interest of the Aircraft Chattel
Mortgage in accordance with Section 11(a) free and clear of all Liens (except
Permitted Encumbrances and the Aircraft Chattel Mortgage relating to the
Aircraft) or (B) replaces such replacement Part by incorporating or installing
in or attaching to the Airframe or such Engine a further replacement Part owned
by Lessee which shall become the property of Lessor subject to the lien and
security interest of the mortgage free and clear of all Liens (except Permitted
Encumbrances and the Aircraft Chattel Mortgage relating to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the standards of the FAA or
other governmental authority having jurisdiction; provided, that Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or Agent's
respective interests. Lessee also agrees, at its own cost and expense, to make
or cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer relating to
the Airframe or any Engine. In addition so long as no Default or Lease Event of
Default shall have occurred and be continuing, Lessee, at its own cost and
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility, condition
or airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine were then in the condition and
airworthiness required to be maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement
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of or substitution for any such Part, (B) is not required to be incorporated or
installed in or attached or added to the Airframe or such Engine pursuant to the
terms of Section 10(a) hereof or any other provision of this Lease or the
Aircraft Chattel Mortgage and (C) can be removed from the Airframe or such
Engine without diminishing or impairing the value, utility or airworthiness
which the Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming the Airframe or such
Engine was otherwise in the condition required by this Lease and the Aircraft
Chattel Mortgage. Upon the removal by Lessee of any such Part, as above
provided, title thereto shall, without further act, be free and clear of the
interests of Lessor and all rights derivative of Lessor's and such Part shall no
longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification of
the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or any part
thereof or interest therein by any Federal, state or local government or other
taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any part
thereof of interest therein; (ii) the manufacture, purchase, ownership,
mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage; provided,
however, that, there shall be excluded from any indemnification under this
Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien which may have attached as security for such Tax, nothing
in this Section shall require the payment of any Tax so long as and to extent
that validity thereof shall be contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and Lessee shall have
set aside on its books adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, employees, agents and affiliates
of Les-
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sor, Agent and each Lender, (collectively called the "Indemnitees") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "Indemnified Liabilities"); provided that
Lessee shall not have any obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Lessee shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine, Lessee will promptly notify Lessor and Agent
thereof in writing (in any event within five (5) days of such occurrence) and
will, not later than 180 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Airframe or Acceptable Alternate
Engine, as the case may be. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will, as conditions to such transfer, (i) furnish
Lessor with a warranty (as to title) bill of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such Acceptable Alternate
Airframe or Acceptable Alternate Engine, (ii) cause a Lease Supplement to be
filed for recording pursuant to Title 49 of the United States Code, as amended,
(iii) furnish Lessor with such evidence of Lessee's title to such Acceptable
Alternate Airframe or Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 14 hereof with respect to such Acceptable
Alternate Airframe or Acceptable Alternate Engine as Lessor may reasonably
request, (iv) furnish Lessor with an opinion of Lessee's counsel to the effect
that title to such Acceptable Alternate Airframe or Acceptable Alternate Engine
has been duly conveyed to Lessor free and clear of all Liens except Permitted
Encumbrances and Lessor and Agent continue to have 1110 protection with respect
to such Aircraft and (v) transfer to or at the direction of
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Lessee without recourse or warranty all of Lessor's right, title and interest,
if any, in and to (A) the Airframe or Engine with respect to which such Event of
Loss occurred and furnish to or at the direction of Lessee, at Lessee's expense,
a bill of sale in form and substance reasonably satisfactory to Lessee,
evidencing such transfer and (B) all claims, if any, against third parties, for
damage to or loss of the Airframe or Engine subject to such Event of Loss, and
such Airframe or Engine shall thereupon cease to be an Airframe or Engine leased
hereunder. Lessee shall cooperate with Lessor and take all such actions as shall
be requested by Lessor so that Lessor complies with Section 4(f) of the Aircraft
Chattel Mortgage. For all purposes hereof, each such Acceptable Alternate
Airframe or Acceptable Alternate Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an "Airframe" or
"Engine", as the case may be. No Event of Loss under the circumstance
contemplated by the terms of this paragraph (a) shall result in any reduction in
Basic Rent.
(b) With respect to the Airframe or any Engine, as between the Lessor and
Lessee, any payments on account of an Event of Loss (other than insurance
proceeds or other payments the application of which is provided for in Section
14 below) received from any government authority or other person shall be
applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee pursuant
to the terms hereof, so long as there shall exist no Default or Lease Event
of Default, such payment shall be paid over to or retained by Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by Lessor as security for the
obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Lessee shall promptly notify Lessor
and Agent of such requisition and all of Lessee's obligations under the Lease
shall continue to the same extent as if such requisition had not occurred. Any
payments received by Lessor or Lessee from the United States Government for the
use of the Airframe or such Engine, to the extent allocable to the Term, shall
be paid over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment
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or retention any Default or 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 the Lease and shall be applied against Lessee's
obligations hereunder as and when due. At such time as there shall not be
continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft, at its own cost and expense, public liability
(including, without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee but
in no event in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of insurance
required by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in the same or
similar business and similarly situated with Lessee. Any policies of insurance
carried in accordance with this Section 14 and any policies taken out in
substitution or replacement of any such policies (A) shall be amended to name
Agent, Lenders and Lessor as additional named insureds, (B) shall be primary
without right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except the
limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft, at its own
cost and expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment while
removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C) hijacking (air
piracy) or any unlawful seizure or wrongful exercise of control of the Aircraft
or crew in flight (including any attempt at such seizure or control) made by any
person or persons aboard the Aircraft acting without the consent of the insured,
if and to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes
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or if the Aircraft is operated on routes where the custom is for Domestic Air
Carriers similarly situated with Lessee flying comparable routes with similar
aircraft to carry such insurance, of the type usually carried by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided that such insurance (including any self-insurance to the extent
permitted below) shall at all times be for an amount not less than the greater
of the Stipulated Loss Value as of the closest Stipulated Loss Determinate Date
and $50,000,000. During any period when 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 this Section, insurance otherwise conforming hereto except that the
scope of risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee for
aircraft on the ground in an amount at least equal to the applicable amount
provided above. All such insurance shall name Agent, Lenders and Lessor as
additional insureds and loss payees to the extent their interest may appear and
shall provide that any loss to the Airframe or an Engine in excess of $2,000,000
(and, if a Default or Lease Event of Default has occurred and is continuing, any
such loss) shall be payable to the Lessor and to the Agent for the benefit of
Lenders; and shall be primary without right of contribution from any other
insurance which is carried by Lessor or Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the Aircraft and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided, however, that Lessee may not self-insure in an amount in excess of
$1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Lessor, Agent or any Lender,
or if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Agent or any
Lender for thirty (30) days (seven (7) days, or such shorter or longer period as
may from time to time be customarily available in the industry, in the case of
any
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war risk and allied perils coverage) after receipt by Agent and Lessor of
written notice from such insurers of such cancellation, change or lapse; (D) be
in full force and effect throughout any geographical areas at any time traversed
by the Aircraft and shall be payable in U.S. dollars; (E) waive any right of the
insurers to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise in respect of any liability of Lessor and Agent; and (F)
waive all rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine, a valid
agreement by the United States or such agency or instrumentality to indemnify
Lessee against the same risks against which Lessee is required hereunder to
insure shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the subject
of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 14 and is adequate to protect
the interests of Lessee, Lessor and Agent, and (B) certificates of the insurer
or insurers evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee of
which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine
and (y) at least thirty (30) days prior to the expiration or termination date,
or date of effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee 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 14. No insurance maintained by Agent, Lessor or any Lender shall
prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or
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Lender shall be paid as provided in the insurance policy relating thereto and no
such Person shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft. Lessor agrees that it will not assign or
convey its right, title and interest in and to this Lease or the Aircraft except
in accordance with the Credit Agreement. Subject to the foregoing, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective successors and permitted assigns and
shall inure, to the direct benefit of, and shall also be enforceable by the
Agent and the Lenders, and their respective successors, as assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any
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other similar relief shall be granted under any applicable federal or state
law, or (ii) an involuntary case shall be commenced against Lessee or any
of its Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
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(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities
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of Lessee entitled to vote in the election of directors, other than
Securities having such power only by reason of the happening of a
contingency, or (b) any Person or any two or more Persons acting in concert
(in any such case, excluding Mr. Chowdry) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of Securities
of Lessee (or other Securities convertible into such Securities)
representing 20% or more of the combined voting power of all Securities of
Lessee entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency or (c)
the Board of Directors of Lessee shall not consist of a majority of
Continuing Directors or (ii) a "Change of Control" shall occur under the
Pass Through Trust Documents or any other Material Agreement (as in effect
on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e) (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines as Lessor in its sole
discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
Lessee to execute and deliver such instruments to the Lessor;
(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 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 17; and
without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above with
respect to the
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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, any Basic Rent due on or before the payment date
so specified plus 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
after the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft computed as of the immediately
preceding Stipulated Loss Determination Date, together with interest, if
any, at the Past Due Rate on the amount of such Basic Rent and Stipulated
Loss Value from the Stipulated Loss Determination Date as of which
Stipulated Loss Value is computed until the date of actual payment; and
upon such payment of liquidated damages and all Supplemental Rent then due
and payable by the Lessee hereunder, the Lessor shall transfer (without any
representation, recourse or warranty whatsoever) the Aircraft to the Lessee
and the Lessor shall execute and deliver such documents evidencing such
transfer and take such further action as the Lessee shall reasonably
request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph
(c) above with respect to such Aircraft, may, if it shall so elect, demand
that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of such
sale, any accrued rent with respect to the Aircraft due on or prior to such
date plus, as liquidated damages for loss of a bargain and not as a
penalty, 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 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;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
in accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof, shall include, without limitation all logs,
manuals and data and
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inspection, maintenance, modification and overhaul and similar records with
respect thereto) in the condition and airworthiness required by such Section.
The Lessee hereby acknowledges that it shall be directly liable for such costs
and expenses to any Person designated by the Lessor, the Agent or any Lender (as
the case may be) to provide services in connection with or to effect the return
of the Airframe or any Engine in accordance with the terms of Section 8 hereof
or in placing such Airframe or Engine (which for purposes hereof shall include,
without limitation, such logs, manuals and records) in the condition and
airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except as
otherwise expressly provided above, no remedy referred to in this Section 17 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to 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 17 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or other Obligations (other than principal
and interest on Loans relating to other aircraft) are outstanding under the
Credit Agreement, all rights of Lessor under this Section 17 shall be exercised
only by the Agent as assignee of Lessor's rights under this Lease pursuant to
the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, Lessee at its expense
will promptly and duly execute and deliver to Lessor and the Agent such further
documents and take such further action as Lessor and the Agent may from time to
time rea-
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<PAGE> 72
sonably request in order more effectively to carry out the intent and purpose of
this Lease and the other Transaction Documents and to establish and protect the
rights and remedies created or intended to be created in favor of Lessor and
Agent hereunder and under the other Transaction Documents, including, without
limitation, if requested by Lessor and the Agent, the execution and delivery of
supplements or amendments hereto, at the expense of Lessee, each in recordable
form, and all financing statements and continuation statements, and all similar
notices required by applicable law at all times to be kept recorded and filed in
such manner and such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of Lessor hereunder and the Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Clark H. Onstad, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Gina Thompson.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration
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<PAGE> 73
under Title 49 of the United States Code, as amended or other applicable law,
condition, design, compliance with specifications, operation or fitness for use
of, or any damage to or loss or destruction of, the Aircraft, or any theft,
interference, interruption or cessation in or prohibition of the use or
possession thereof by the Lessee or any sublessee for any reason whatsoever,
including, without limitation, any such interference, interruption, cessation or
prohibition resulting from the act of any governmental authority, (iii) any
Liens, encumbrances or rights of any other Person with respect to the Aircraft,
(iv) the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any other Transaction Document or document or
instrument executed pursuant hereto or thereto, or any lack of right, power or
authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to the Aircraft,
Airframe, any Engine or any Part, (vi) any insolvency, bankruptcy,
reorganization or similar proceedings by or against the Lessee or any other
Person, or (vii) any failure, breach or delay by the Lessor or any other Person
in performing or complying with any term of this Lease or any other cause
whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason whatsoever, including any present or future claims of
Lessee against Lessor or any other Person under this Lease or otherwise. Lessee
hereby waives, and hereby agrees to waive at any future time at the request of
Lessor, to the full extent now or then permitted by applicable law any and all
rights which it may now have or which at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Lease except in accordance with the express terms hereof. Each payment of Rent
made by Lessee to Lessor shall be final as to Lessor and Lessee. Lessee will not
seek to recover all or any part of any such payment of Rent from Lessor for any
reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Lease is possible, a construction which would
preserve such benefits shall control over any construction which would not
preserve such benefits or would render them doubtful. To the extent consistent
with the provisions of 11 U.S.C. ss. 1110 or any analogous section of the
Federal bankruptcy laws, as amended from time to time, it is hereby expressly
agreed, that notwithstanding any other provisions of the Federal bankruptcy law,
as amended from time to time, any right of the Lessor and the Agent, as assignee
of the Lessor under the Aircraft Chattel Mortgage, to take possession of the
Aircraft in compliance with the provisions of this Lease shall not be affected
by
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<PAGE> 74
the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or any
analogue provisions of any superseding statute or any power of the bankruptcy
court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft at the end
of the Term for a purchase price equal to the higher of the Fair Market Sales
Value (assuming that the Aircraft is in the condition required by the Lease) as
of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of the full of such
amounts, 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.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and not exercise any purchase option under this Section 21. If Lessee
fails to give notice as required herein, Lessee will be deemed to have elected
to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, together
with interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 23. Miscellaneous. (a) 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 pro-
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<PAGE> 75
visions hereof, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. No term or provision of this Lease may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
Lessor, Lessee and Agent. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. Neither Lessee nor
any Affiliate of Lessee will file any tax returns in a manner inconsistent with
the foregoing fact or with Lessor's ownership of the Aircraft or with the
parties' agreement that this Lease be treated as a tax lease for purposes of the
Internal Revenue Code. 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 reference
herein to numbered sections, unless otherwise indicated, are to sections of this
Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE OR ANY OTHER TRANSACTION
DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER
ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE
PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER
THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the
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<PAGE> 76
Lessee agree that so long as the lien of the Aircraft Chattel Mortgage has not
been discharged in accordance with its terms, (i) all payments hereunder shall
be made to the Agent for the benefit of Lenders to the extent of the Lenders'
interest in such payments; (ii) all notices from or to the Lessor shall be
copied to the Agent and (iii) the Lessee shall not take any actions that the
Lessor would be prohibited from taking under the terms of the Aircraft Chattel
Mortgage. Lessee hereby acknowledges due notice of, and consents to, such
assignment and to the creation of such mortgage and security interest. To the
extent, if any, that this Lease and any Lease Supplement constitutes chattel
paper (as such term is in effect in any applicable jurisdiction), no security
interest in this Lease or any Lease Supplement may be created through the
transfer or possession of any counterpart other than the original executed
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof or thereof.
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<PAGE> 77
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
-------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
__th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
-------------------------------
Name:
Title:
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<PAGE> 78
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of May 29, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
(*/)The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document.
(**/)The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, together with Lease Supplement No. 1 dated May 29,
1997, to the Lease Agreement, has been recorded by the Federal Aviation
Administration on __________ __, 1997, as one document and assigned Conveyance
No. ------------.
- ----------
(*/) This language for Lease Supplement No. 1.
(**/) This language for other Lease Supplements.
<PAGE> 79
EXHIBIT A
Page 2
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______; and
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______]3/ (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The closing date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof. Except as otherwise provided in the
Lease, the Term for the Aircraft shall commence on the closing date and end on
the seventh anniversary thereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
for all purposes hereof and of the Lease as being airworthy, in good working
order and repair and without defect or inherent vice in title, condition,
design, operation or fitness for use; provided, however, that nothing contained
herein or in the Lease shall in any way diminish or otherwise affect any right
Lessee or Lessor may have with respect to the Aircraft against the manufacturer,
any affiliate thereof, or any subcontractor or supplier of the manufacturer or
any affiliate thereof, under any purchase agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 80
EXHIBIT A
Page 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
-------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on May __, 1997.
BANKERS TRUST COMPANY, as
Agent
By
-------------------------------
Name:
Title:
<PAGE> 81
EXHIBIT B
to
Lease Agreement
BASIC RENT
<TABLE>
<CAPTION>
Date Principal Repayment
- ---- -------------------
<S> <C>
[Confidential information intentionally deleted
from FAA-filed counterpart]
</TABLE>
<PAGE> 82
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 83
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE
<PAGE> 1
EXHIBIT 10.61
- -------------------------------------------------------------------------------
LEASE AGREEMENT
(N508MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
-------------------------------
One Boeing B747-200 Aircraft
U.S. Registration No. N508MC
Manufacturer's Serial No. 21644
-------------------------------
- -------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions........................................................................... 1
SECTION 2. Acceptance and Lease.................................................................. 21
SECTION 3. Term and Rent......................................................................... 21
(a) Term and Basic Rent.............................................................. 21
(b) Adjustments to Basic Rent........................................................ 22
(c) Supplemental Rent................................................................ 22
(d) Payments in General.............................................................. 22
(e) Minimum Rent..................................................................... 23
(f) Prepayment of Rent Payments...................................................... 23
SECTION 4. Certain Representations and Warranties................................................ 24
SECTION 5. Lessee's Representations and Warranties............................................... 25
SECTION 6. Lessee's Affirmative Covenants........................................................ 31
SECTION 7. Lessee's Negative Covenants........................................................... 37
SECTION 8. Return of the Aircraft................................................................ 46
(a) Condition Upon Return............................................................ 46
(b) Overhaul and Repair.............................................................. 47
(c) Repairs.......................................................................... 47
(d) Modifications.................................................................... 47
(e) Airworthiness Directives......................................................... 47
(f) Return of the Engines............................................................ 47
(g) Deferred Maintenance............................................................. 48
(h) Corrosion Treatment.............................................................. 48
(i) Manuals.......................................................................... 48
(j) Storage Upon Return.............................................................. 48
(k) Severable Parts.................................................................. 48
(l) Survival......................................................................... 49
SECTION 9. Liens................................................................................. 49
SECTION 10. Registration, Maintenance and Operation; Possession and Subleases;
Insignia......................................................................... 49
(a) Maintenance and Operation........................................................ 49
(b) Possession....................................................................... 51
(c) Insignia......................................................................... 53
(d) Holding Out...................................................................... 53
(e) No Pledging of Credit............................................................ 53
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and
Additions...................................................................... 53
SECTION 12. Indemnities.......................................................................... 56
SECTION 13. Event of Loss........................................................................ 57
SECTION 14. Insurance............................................................................ 58
SECTION 15. Assignment........................................................................... 61
SECTION 16. Events of Default.................................................................... 61
SECTION 17. Remedies............................................................................. 64
SECTION 18. Lessee's Cooperation Concerning Certain Matters...................................... 67
SECTION 19. Notices.............................................................................. 67
SECTION 20. Net Lease, True Lease, etc........................................................... 68
SECTION 21. Purchase Option...................................................................... 69
(a) Purchase Option................................................................. 69
(b) Notice of Purchase.............................................................. 70
SECTION 22. Lessor's Right to Perform for Lessee................................................. 70
SECTION 23. Miscellaneous........................................................................ 70
SECTION 24. Security for Lessor's Obligations.................................................... 71
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
</TABLE>
ii
<PAGE> 4
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
iii
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions.. All capitalized terms used herein shall have the
respective meanings set forth in this section
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suitable for installation and use
on the Airframe; provided that such 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 747-200 aircraft
operated by
<PAGE> 6
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immediately
preceding the date of calculation, and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling",
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"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agent" shall mean the Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts; provided
that the assets received by the Lessee or any Subsidiary have a fair market
value at least equal to the assets transferred (provided that with respect to
any asset swap or series of related asset swaps involving assets of Lessee or
any Subsidiary with a fair market value exceeding $3,000,000, such determination
shall be made by the Board of Directors of Lessee)) and (D) asset sales
involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
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"Atlas One Leases" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
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<PAGE> 9
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"Consolidated Fixed Charges" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting
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period determined in conformity with GAAP; provided that there shall be excluded
(i) the income (or loss) of any Person (other than a Subsidiary of Lessee) in
which any other Person (other than Lessee or any of its Subsidiaries) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to Lessee or any of its Subsidiaries by such Person
during such period, (ii) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary of Lessee or is merged into or consolidated with
Lessee or any of its Subsidiaries or that Person's assets are acquired by Lessee
or any of its Subsidiaries, (iii) the income of any Subsidiary of Lessee to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to Asset Sales or returned surplus assets
of any pension plan, and (v) (to the extent not included in clauses (i) through
(iv) above) any net extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required
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<PAGE> 11
regardless of non-performance by any other party or parties to an agreement, and
(c) any liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise) or (Y) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another if, in the case of any agreement described under subclauses (X) or (Y)
of this sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported or, if less,
the amount to which such Contingent Obligation is specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"Credit Agreement" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bankers Trust Company, as Agent as such agreement may be amended,
modified, waived, or supplemented from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
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"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension Indebtedness
and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Dividend" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the four Pratt & Whitney JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of the
General Electric CF6-50E2 aircraft engines for the aircraft bearing U.S.
registration numbers N505MC, N507MC, N508MC, N509MC and N516MC listed by
manufacturer's serial numbers in the initial Lease Supplement and installed on
the Airframe at the time of the delivery to Lessee of such Airframe, whether or
not from time to time thereafter installed on such Airframe or any other
airframe; (ii) any Acceptable Alternate Engine which may from time to time be
substituted for any of such four engines pursuant to the terms of the Lease; and
(iii) in any case, any and all Parts which are from time to time incorporated or
installed in or attached to any such engine and any and all parts removed
therefrom so long as title thereto remains vested in Lessor in accordance
herewith. The term "Engines" means, as of any date of determination, all Engines
then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual
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<PAGE> 13
violation of Environmental Laws or with any Hazardous Material, or any actual or
alleged damage, or harm to health, safety or the environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or disappearance
of such Aircraft); (B) the destruction, damage beyond repair or rendition of
such Aircraft permanently unfit for normal use for any reason whatsoever; (C)
the condemnation, confiscation or seizure of, or requisition of title to, or use
or possession (other than use by the United States Government if Lessee obtains
adequate compensation from the United States Government) of such Aircraft; (D)
as a result of any rule, regulation, order or other action by the FAA or other
governmental body having jurisdiction, the use of such Aircraft in the normal
course of interstate air transportation of persons or cargo shall have been
prohibited for a period of more than nine consecutive months unless Lessee,
prior to the expiration of such nine month period, shall have undertaken and
shall be diligently carrying
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<PAGE> 14
forward all steps which are necessary or desirable to permit the normal use of
such property by Lessee or, in any event, if such use shall have been prohibited
for a period of twelve consecutive months; (E) the operation or location of such
Aircraft, while under requisition for use by the United States or any
instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Aircraft, if Lessee shall be
unable to obtain indemnity or "war-risk" insurance in lieu thereof from the
United States; (F) any damage which results in an insurance settlement with
respect to such Aircraft on the basis of an actual or constructive total loss or
(G) a divestiture of such Airframe as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage under the Credit Agreement. 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 of the Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means the ING Obligations and the Lufthansa
Obligations.
"Fair Market Sales Value" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-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 by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
Lessee, or, if such appraiser cannot be agreed to within 20 days, then either
party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining 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 8 of this Lease, that all modifications and improvements shall be taken
into account, that Lessee has removed all Parts which it is entitled to remove
pursuant to Section 11 of this Lease and that the Aircraft is not encumbered by
this Lease. Except as otherwise expressly provided in the Lease, all appraisal
costs will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
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"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Financed Aircraft" means all Financed Aircraft under and as defined in the
Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous
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Material (i) from, under, in, into or on the facilities or surrounding property;
and (ii) caused by, or undertaken by or on behalf of, Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING Financing Agreement" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale Nederlanden
Aviation Lease B.V., as amended by Amendment No. 1 thereto and as further
amended, restated, supplemented and otherwise modified from time to time.
"ING Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan,
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advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Lessee or any of its Subsidiaries to any
other Person (other than a wholly-owned Subsidiary of Lessee), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Leases" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented from
time to time (including this Lease). The term "Lease" shall include any Lease
Supplement entered into pursuant to the respective Lease.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
and any subsequent Lease Supplement entered into in accordance with the terms of
the Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or the transactions contemplated by this Lease or the
operation of the Aircraft by Lessee; or
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(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organization, any place of
business or any activity of Lessee or any other Person having use,
possession or custody of the Aircraft, the Airframe, any Engine or any
Part in the jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Lufthansa Agreement" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"Lufthansa Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
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Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"Nationsbank Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as title thereto shall vest in Lessor
in accordance with this Lease.
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended,
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restated, supplemented or otherwise modified from time to time in accordance
with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith by appropriate proceedings that do not involve any
danger of the sale, forfeiture or loss of any assets, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary conduct
of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease to any
restriction or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods;
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(viii) the rights of others under agreements or arrangements to
the extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated
Credit Agreement; and
(xii) extensions, modifications, replacements and refinancings
of any of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of such Indebtedness, plus
the amount of expenses of Lessee incurred in connection with such extension,
(iii) in the case of any extension of subordinated Indebtedness, such Permitted
Extension Indebtedness is made subordinate to the obligations of Lessee
hereunder at least to the same extent as the Indebtedness immediately prior to
such extension, (iv) such Permitted Extension Indebtedness has a final stated
maturity later than the end of the stated maturity of the Indebtedness being
extended immediately prior to such extension and (v) the amortization and the
other terms, provisions, conditions, covenants and events of default thereof
taken as a whole shall be no more onerous or restrictive from the perspective of
Lessee and its Subsidiaries or any less favorable, from the perspective of
Lessor and Lenders than those contained in the Indebtedness immediately prior to
such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement
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and (ii) that certain Lease Agreement dated as of January 1, 1995 by and between
Bankers Trust Company and Philippine Airlines, Inc., as the Lease Agreement may
be further amended, restated, supplemented or otherwise modified from time to
time in accordance with this Agreement, as modified pursuant to an
acknowledgement dated May 12, 1997 by and between Philippine Airlines and
Lessee, and as assigned to Lessee pursuant to an Assignment and Acceptance of
Lease dated May 12, 1997 as the Lease Agreement may be further amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Agreement .
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action which
requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Lessor and Agent using the consolidated financial
statements of Lessee and its Subsidiaries which shall be reformulated as if any
such incurrence of Indebtedness and the application of proceeds, acquisition,
disposition or other related action had been consummated at the beginning of the
period specified in the covenant with respect to which Pro Forma Basis
compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee
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now or hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Lessee now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Designated
Indebtedness.
"S&P" means Standard & Poor's Corporation.
"Second Amended and Restated Credit Agreement" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
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<PAGE> 24
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f) plus all accrued and unpaid interest on the
Loans relating to the Aircraft on the date of determination.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and ending
on the seventh
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anniversary of the Initial Borrowing Date, or such earlier date as the Lease may
be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing by
Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"Transaction Documents" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of the
ING Obligations and the Lufthansa Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Dividend and
the Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees to appoint in
writing one or more of its employees as its authorized representative to accept
delivery of the Aircraft pursuant to the terms hereof. Lessee hereby agrees that
acceptance of delivery by such employee or employees shall, without further act,
irrevocably constitute acceptance by Lessee of the Aircraft for all purposes of
this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the seventh anniversary of the Initial
Borrowing Date or such earlier date as this Lease may be terminated in
accordance with the provisions hereof. Basic Rent shall accrue during the Term
in accordance with Exhibit B hereto. Lessee shall pay to Lessor on each Basic
Rent Payment Date an amount of Basic Rent specified opposite each Basic Rent
Payment Date on Exhibit B hereto as such amounts
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may be adjusted pursuant to Section 3 plus accrued interest on Basic Rent
previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards
on each Basic Rent Payment Date by an amount, determined by Agent and notified
to Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on such
Basic Rent Payment Date and determined in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor,
or to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when due until the same shall be paid
and on any other amounts payable hereunder which are not paid when due and (ii)
all amounts payable by Lessor pursuant to subsections 2.6D, 2.7, 9.2 and 9.3 of
the Credit Agreement; provided, however, to the extent any Supplemental Rent
required to be paid pursuant to this clause (ii) of subsection 2(c) has been
paid by Lessee pursuant to the terms of another Lease, then Lessee's obligations
hereunder shall be deemed to be satisfied by the payments made pursuant to such
other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and other unpaid Obligations (other than
principal and interest on other Loans relating to other aircraft leased pursuant
to the other Leases and after taking into account all other payments of rent
pursuant to the other Leases on such date), then such excess amounts shall be
paid by the Agent to Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be
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made on the next succeeding Business Day; provided, however, if any date on
which a payment of Rent becomes due is not a Business Day and is a day of the
month after which no further Business Day occurs in such month, the payment of
Rent shall be made on the next preceding Business Day. No interest shall accrue
on the amount of any payment made on the Business Day next succeeding the
regularly scheduled Basic Rent Payment Date, if such payment is made on such
next succeeding Business Day because the original date of payment was not a
Business Day (it being understood that the amount of Basic Rent includes Rent
for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
all other unpaid Obligations of Lessor (other than principal and interest
on Loans relating to other Aircraft and after taking into account all other
payments of Stipulated Loss Value pursuant to the other Leases on such
date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately prepay an amount of Basic Rent equal to the amount
of such required prepayment less any required payments of the Loans
relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f)(ii),
the schedules of Basic Rent and Stipulated Loss Value, shall be adjusted
so as to preserve
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the after tax yield and after tax cash flows of the Lessor and, to the
extent consistent therewith, to minimize the net present value of Basic
Rent payments. All such computations shall be made on the basis of the same
assumptions and the method of computations employed in the original
calculations of Basic Rent and Stipulated Loss Values (except to the extent
such assumptions have been changed as a result of such prepayment or any
prior such adjustment). At the Lessee's written request, independent public
accountants mutually selected by the Lessor and the Lessee shall confirm
the required adjustments. The final determination of any adjustment
hereunder shall be set forth in amendments to this Lease, executed and
delivered by the Lessor, the Lessee and consented to by the Agent. The
reasonable fees, cost and expenses of the verifying accounting firm shall
be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE ARE OF
A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE
AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND
EACH ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY
LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED
TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor covenants that
it will not, through its own actions or inactions, in such capacity, interfere
in Lessee's quiet enjoyment of the Aircraft unless this Lease shall have been
declared or deemed to have been declared in default pursuant to Section 17
hereof. None of the provisions of this Section 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 any manufacturer, any
affiliate thereof, any subcontractor or supplier of any manufacturer or any
affiliate thereof, with respect to the Airframe, Engines, or any Parts, or to
release the manufacturer, any affiliate thereof, or any such subcontractor or
supplier
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from any such representation, warranty or obligation. Unless a Default or Lease
Event of Default shall have occurred and be continuing, Lessor agrees to make
available to Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made by the manufacturer or any affiliate thereof or any
of its subcontractors or suppliers and any other claims against the manufacturer
or any affiliate thereof, or any such subcontractor or supplier with respect to
the Aircraft, all pursuant to and in accordance with the terms of any applicable
purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each of
its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
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(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Lessee or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Initial Borrowing Date and
disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by the
Lessee and its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated by
this Lease and the other Transaction Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body which has not been obtained or made on or prior to the date required to be
obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
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(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at March 31, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the three
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Neither Lessee nor any of its Subsidiaries has (and
will not following the Initial Borrowing Date) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 5(c)(A) which, either individually or in the aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
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(e) Title to Properties, Liens.
(i) Lessee and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor any of its Subsidiaries is (i) in violation of any applicable
laws that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect or (ii) subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or authority.
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(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee or
(b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity
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could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or threatened
Environmental Claims against Lessee or any of its Subsidiaries, and neither
Lessee nor any of its Subsidiaries has received no written notices, inquiries,
or requests for information with respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
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(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such monthly
financial statements shall only be required to be delivered to Agent to the
extent such monthly financial statements are required to be delivered under
the Second Amended and Restated Credit Agreement as such agreement may be
amended, modified, supplemented, renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
and (b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter; provided that
delivery of Lessee's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the
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corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6(a)(12) for the fiscal year covered by
such financial statements, all in reasonable detail and certified by the
chief financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Lessee and satisfactory to Lessor and Agent, which report shall be
unqualified, shall express no doubts about the ability of Lessee and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a) and
(b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each delivery
of financial statements of Lessee and its Subsidiaries pursuant to
subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee stating that the signers have reviewed the
terms of this Lease and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Lessee and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes a Default
or Lease Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section 7;
(5) Pricing Certificates: On or after the third anniversary of the
Initial Borrowing Date, a certificate setting forth the credit rating on
Lessee's obligations under the Pass Through Trust Documents, (a) together
with each delivery of financial statements of Lessee pursuant to
subdivisions (2) and (3) above, (b) within one Business Day after any
public release by S&P or Moody's lowering its credit rating
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on Lessee's obligations under the Pass Through Trust Documents and (c) at
such additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Lease Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Lease Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (4) above is not
correct or that the matters set forth in the Compliance Certificates
delivered therewith pursuant to clause (b) of subdivision (4) above for the
applicable fiscal year are not stated in accordance with the terms of this
Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such
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Form as in effect on the date hereof) if Lessee were required to file
such reports under the Exchange Act, or (d) of the occurrence of any event
or change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Lease Event of Default, Default, default, event or
condition, and what action Lessee has taken, is taking and proposes to take
with respect thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(i) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(ii) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to evaluate
any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or Agent
shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies
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of its financial plans and projections and at the reasonable request of
Lessor and Agent an opportunity for Lessor and Lenders to question and
discuss such materials with the Chief Financial Officer of Lessee;
provided that, at the request of Lessee, all copies of such financial
plans and projections shall be returned to Lessee after review thereof
and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such Subsidiary
may be terminated if such termination is in the interests of Lessee and its
Subsidiaries and is not materially disadvantageous to Lessor or to any assignee
of the Lease. Lessee will at all times maintain its corporate existence as a
United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
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(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage (including, without limitation, flood
insurance, if necessary or advisable) of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine, and its and their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants (provided that Lessee may, if it so chooses,
be present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and as often as may be
reasonably requested; provided that so long as no Lease Event of Default shall
have occurred and be continuing, such inspection shall not be disruptive to
Lessee's business, as reasonably determined by Lessee. Without in any way
limiting the foregoing, Lessee will, upon the request of Lessor or Agent,
participate in a meeting of Agent and Lenders once during each fiscal year to be
held at Lessee's corporate offices (or such other location as may be agreed to
by Lessee, Lessor and Agent) at such time as may be agreed to by Lessee, Lessor
and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which could reasonably be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal,
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transportation or Release of any Hazardous Materials on, under or about any
facility in order to comply with all applicable Environmental Laws and
Governmental Authorizations. In the event Lessee or any of its Subsidiaries
undertakes any remedial action with respect to any Hazardous Materials on, under
or about any facility, Lessee or such Subsidiary will conduct and complete such
remedial action in compliance with all applicable Environmental Laws, and in
accordance with the policies, orders and directives of all federal, state and
local governmental authorities except when, and only to the extent that,
Lessee's or such Subsidiary's liability for such presence, storage, use,
disposal, transportation or discharge of any Hazardous Materials is being
contested in good faith by Lessee or such Subsidiary. Notwithstanding anything
to the contrary contained in this Lease, Lessee and its Subsidiaries may engage
in the transportation of Hazardous Materials in the ordinary course of business
so long as such is conducted in compliance with all applicable Environmental
Laws, and all other applicable laws, policies, orders, directives and
regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA Affiliate
to establish any Employee Benefit Plan which, in either case, could reasonably
be expected to result in a liability for Lessee, under Title IV of ERISA or the
minimum funding standards of Part 3 of Subtitle B of Title I of ERISA, in excess
of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees that,
so long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
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(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") to Consolidated Adjusted
EBITDA for the four-fiscal quarter period ending on such Determination Date
did not exceed 4.5:1.0, (ii) the ratio of Consolidated Adjusted EBITDA for
such four-fiscal quarter period to Consolidated Interest Expense for such
four-fiscal quarter period was not less than 3.0:1.0; and (iii) Lessee will
be in compliance with all covenants set forth in subsection 7(f) hereof,
Lessee and its Subsidiaries may incur Other Permitted Indebtedness; and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien
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with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any state or under any similar recording or notice statute,
except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) Other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
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(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal year;
provided that Lessee shall not incur liabilities related to any such Joint
Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed at any time 10.5 million.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(8) shall at no time exceed $30
million.
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(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four-fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee occurring during any of the periods set forth below to be less than the
correlative ratio indicated:
Minimum Interest
Period Coverage Ratio
---------------- ----------------
fiscal year 1997 2.50:1.00
fiscal year 1998 2.75:1.00
fiscal year 1999 3.00:1.00
Thereafter 3.25:1.00
(ii) Minimum Fixed Charge Coverage Ratio. Lessee shall not permit the ratio
of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated Rental
Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Lessee occurring during any
of the periods set forth below to be less than the correlative ratio indicated:
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Minimum Fixed
Period Charge Coverage Ratio
---------------- ---------------------
fiscal year 1997 1.25:1.00
Thereafter 1.10:1.00
(iii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Lessee in excess of $25 million as of such date) to (ii)
Consolidated Adjusted EBITBA for the four-fiscal quarter period ending on such
date to exceed the correlative ratio indicated:
Maximum
Period Leverage Ratio
---------------- --------------
fiscal year 1997 4.50:1.00
fiscal year 1998 4.25:1.00
fiscal year 1999 4.00:1.00
Thereafter 3.75:1.00
(iv) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
Minimum Consolidated
Period Net Worth
---------------- --------------------
fiscal year 1997 $120 million
fiscal year 1998 $145 million
fiscal year 1999 $170 million
Thereafter $195 million
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or
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fixed assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of another
Person provided that, (a) the acquisition primarily involves the
acquisition of assets to be used in the business of Lessee, (b) with
respect to such acquisition any newly acquired or created subsidiary of
Lessee shall be a wholly-owned subsidiary, (c) immediately before and after
giving effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Lessee shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 7(f) and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance, (e)
Lessor and Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other liabilities not on
the balance sheet of Lessee assumed in connection with such acquisition and
a business plan prepared by Lessee with respect to such acquisition and (f)
the aggregate
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amount of cash payments made in connection with all such acquisitions other
than with the proceeds from sales or issuances of equity by Lessee does not
exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business; and
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter).
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation or
bylaws to be amended or otherwise modified in any manner which could reasonably
be expected to have a Material Adverse Effect or (ii) any Material Agreement to
be amended or otherwise modified in any manner with respect to any provision
providing material representations and warranties to Lessee, indemnification
rights to Lessee, or limiting Lessee's remedies or rights upon the other party
to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
fiscal year do not exceed $60 million plus an amount not to exceed $12 million
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during any fiscal year, equal to Consolidated Rental Payments incurred in
connection with sale leaseback transactions described in subsection 7(j) plus
Consolidated Rental Payments assumed pursuant to acquisitions permitted under
subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital Lease,
of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries intends
to use for substantially the same purpose as any other property which has been
or is to be sold or transferred by Lessee or any of its Subsidiaries to any
Person (other than Lessee or any of its Subsidiaries) in connection with such
lease; provided that Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to the
extent that Lessee or any of its Subsidiaries would be permitted to enter into,
and remain liable under, such lease under subsection 7(i).
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 10% or more of any class of equity
Securities of Lessee or with any Affiliate of Lessee or of any such holder, on
terms that are less favorable to Lessee or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
(i) reasonable and customary fees paid to and indemnification of members of the
Boards of Directors of Lessee and its Subsidiaries, (ii) reasonable and
customary salaries, bonuses and other compensation paid to and indemnification
of employees of Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of Lessee or (iii)
performance by Lessee of its obligations under and in accordance with the
Services Agreement.
(i) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law or to a wholly-owned Subsidiary of Lessee; or
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(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
SECTION 8. Return of the Aircraft. (a) Condition Upon Return. Unless the
Aircraft has been sold pursuant to Section 21, if at any time the Lessee shall
return the Aircraft to the Lessor hereunder, Lessee, at its own expense, will
return the Aircraft to Lessor at a location specified by the Lessor to the
Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft to be in compliance with the maintenance covenants contained in this
Lease and (ii) the Airframe will be fully equipped with the Engines installed
thereon.
At the time of such return, such Airframe and Engines (A) shall have an air
worthiness certificate from the Federal Aviation Administration and shall be in
full compliance with the provisions of Federal Aviation Regulations, Part 121
(or successor regulation), and shall be in material compliance with all
applicable FAA noise, corrosion, environmental and aging aircraft requirements,
(B) shall be free and clear of all Liens and (C) shall be in a full freighter
configuration and in as good condition as when originally delivered to Lessee,
ordinary wear and tear excepted, and otherwise in the condition required to be
maintained under Lessee's FAA-approved maintenance plan; and in all such cases
the Aircraft shall not have been discriminated against as compared to other
aircraft owned or leased by Lessee whether by reason of its leased status or
otherwise in maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines and all Parts shall have
been, and shall be properly documented to have been, repaired or overhauled by
certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft shall have approval or certification by the FAA (or
its designee) or certification if required.
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All such modifications shall be accompanied by complete data and documentation
necessary to substantiate their certification and approval and methods of
compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe, 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
Acceptable Alternate Engine, in form and substance reasonably satisfactory to
Lessor (together with an opinion of 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 Acceptable Alternate Engines are free
and clear of all Liens) against receipt from Lessor of a bill of sale evidencing
the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft including
those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall have
been maintained by cleaning and treating all mild and moderate corrosion and
correcting of all severe or exfoliate corrosion in accordance with Lessee's
approved maintenance program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of this
Lease, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and maintenance, inspection, modification and overhaul records and
similar records required to be maintained with respect to the Aircraft and Parts
under FAA rules, the Aircraft maintenance program. If any such logs, manuals,
records or other data are missing, incomplete or otherwise not in accordance
with FAA standards applicable to Lessee, Lessee shall re-accomplish the
maintenance tasks necessary to produce such records in accordance with its
approved maintenance program prior to delivery of the Aircraft or otherwise
perform all necessary acts (without regard to any applicable waivers or
deferrals) to obtain such records in a manner satisfactory to the FAA and
Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, Lessee receives from
Lessor a written request
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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 Lessee's risk and at Lessee's expense for a period not exceeding 30 days, and
thereafter at Lessor's risk and at Lessor's cost for insurance, maintenance and
Lessee's out-of-pocket expenses for such storage for a period not exceeding 90
days (provided that if such termination occurs as a result of a Lease Event of
Default hereunder, such storage shall be at the cost of the Lessee), commencing
on the date the Aircraft is returned substantially in the condition required
under this Section 8, at a location in the continental United States selected by
Lessee and used by Lessee as a location for the long-term parking or storage of
aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned to
Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable nonproprietary Parts (other than Parts otherwise
required by Sections 10 or 11 to be maintained on the Aircraft) 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 11 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 at their
fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft, title
thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. Lessee will promptly, at its own expense,
take such action as may be necessary to duly discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, will
(i) be a "citizen of the United States" as defined in Section 40102(15) of Title
49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Aircraft to be duly registered
and remain duly registered in the name of Lessor in accordance with the Act and
otherwise registered under all applicable laws of the United States so as to be
eligible to operate in commercial air service under the Act; and (iii) will
service, repair, inspect, test, maintain and overhaul the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine (A) so as to keep the Airframe and each Engine in such operating
condition as may be required to permit the Airframe and each Engine to be
utilized in commercial operations (B) so as to enable the airworthiness
certification of
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the Airframe to be maintained in good standing at all times under the Act,
except when aircraft of the same type, model or series as the Airframe (powered
by engines of the same type as those with which the Airframe shall be equipped
at the time of grounding) registered in the United States have been grounded by
the FAA; provided, however, that if following its issuance, the United States
FAA airworthiness certificate of the Aircraft shall be withdrawn, then subject
to the provisions of Section 13 hereof, so long as Lessee is diligently taking
or causing to be taken all necessary action to promptly correct the condition
which caused such withdrawal, no Lease Event of Default shall arise from such
withdrawal, (C) in accordance with Lessee's FAA-approved maintenance, inspection
and maintenance control programs, and in the same manner and with the same care
used by Lessee with respect to the same or similar aircraft and engines owned or
operated by Lessee so as to keep the same in as good operating condition as when
originally leased hereunder, ordinary wear and tear excepted, which practices
shall at all times be at or above the standard of the industry in the United
States for prudent maintenance of similar equipment, and (D) in such manner as
may be necessary to maintain in full force all warranties of the manufacturers
thereof. Lessee shall maintain all records, logs and other materials which may
be required to permit the Airframe and each Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
the Airframe or such Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine, Lessee, at its own cost and expense, will conform thereto or obtain
conformance therewith and will maintain the same in proper operating condition
under such laws, rules, regulations and orders, provided, however, that Lessee
may, in good faith (after having delivered to Lessor and Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's and Agent's opinion (in their sole discretion),
adversely affect the interests of Lessor, Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section 14
shall not be at the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the Airframe or such
Engine, except in the case of a requisition for use by the United States of
America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened area
of
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hostilities unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of the
term of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner or
for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or omit to do
anything the omission of which, may invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine except that, unless a Default or Lease
Event of Default shall have occurred and be continuing, Lessee may without the
prior written consent of the Agent and Lessor, take the following actions so
long as the actions to be taken shall not deprive the Agent of the first
priority Lien under the Aircraft Chattel Mortgage in the assets subject thereto
and so long as the actions to be taken shall not deprive Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
and shall not deprive the Agent of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft as assignee of Lessee's rights
under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Lessee in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine; provided, however, that if
Lessee's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to
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the Airframe or such Engine and Lessee shall comply with Section 13 in
respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the 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), and (C) the rights of any Domestic Air Carrier,
under normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to such
airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided:
(A) such airframe is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe and except Liens of the type permitted by clause
(iv) above; and (B) Agent and Lessor shall have received from the lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party of
such airframe a written agreement (which may be the lease, conditional sale
agreement or mortgage covering such airframe), whereby such lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any Engine by
reason of such Engine being installed on such airframe at any time when
such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current certificates
and licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided that Lessee's obligations hereunder
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shall continue in full force and effect notwithstanding any such ACMI
Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness certificate)
with such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust
Company, as Agent" or such other legend, as shall in the opinion of Lessor and
Agent be appropriate or desirable to evidence the fact that it is subject to the
ownership of Lessor and the lien and security interest created by the Aircraft
Chattel Mortgage. Lessee shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or defacement,
shall promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, Lessee shall not allow the name of
any person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership or of
any security interest therein, except that Lessee or any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer on
the Airframe or any Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or any Part or any other operations or carriage undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance,
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service, repairs, or overhauls of, modifications to, or changes or alterations
in, the Airframe, any Engine, or any Part, or for any other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and which
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair or testing, Lessee at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that, except as
otherwise provided in Section 11(d), Lessee at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall be
owned by Lessor free and clear of all Liens (except Permitted Encumbrances and
for pooling arrangements to the extent permitted by Section 11(b)), and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such parts were in the condition and
repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall
remain the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to
such replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor
and shall thereupon become free and clear of all rights of Lessor hereunder and
all rights derivative of Lessor's and shall no longer be deemed a Part
hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in Section
11(a) may be subjected by Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the ordinary course
of its business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be incorporated
or installed in or attached to the Airframe or such Engine in accordance with
Section 11(a) as promptly as possible after the removal of such removed part.
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In addition, any replacement Part when incorporated or installed in or attached
to the Airframe or any Engine in accordance with Section 11(a) may be owned by
any third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or such Engine a further
replacement Part owned by Lessee which shall become the property of Lessor
subject to the lien and security interest of the mortgage free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the standards of the FAA or
other governmental authority having jurisdiction; provided, that Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or Agent's
respective interests. Lessee also agrees, at its own cost and expense, to make
or cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer relating to
the Airframe or any Engine. In addition so long as no Default or Lease Event of
Default shall have occurred and be continuing, Lessee, at its own cost and
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility, condition
or airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine were then in the condition and
airworthiness required to be maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement of or substitution for any such Part, (B) is not
required to be incorporated or installed in or attached or added to the Airframe
or such Engine pursuant to the terms of Section 10(a) hereof or any other
provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from the Airframe or such Engine without diminishing or impairing the value,
utility or airworthiness
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which the Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming the Airframe or such
Engine was otherwise in the condition required by this Lease and the Aircraft
Chattel Mortgage. Upon the removal by Lessee of any such Part, as above
provided, title thereto shall, without further act, be free and clear of the
interests of Lessor and all rights derivative of Lessor's and such Part shall no
longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification of
the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or any part
thereof or interest therein by any Federal, state or local government or other
taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any part
thereof of interest therein; (ii) the manufacture, purchase, ownership,
mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage; provided,
however, that, there shall be excluded from any indemnification under this
Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien which may have attached as security for such Tax, nothing
in this Section shall require the payment of any Tax so long as and to extent
that validity thereof shall be contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and Lessee shall have
set aside on its books adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, employees, agents and affiliates
of Lessor, Agent and each Lender, (collectively called the "Indemnitees") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any
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Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "Indemnified Liabilities"); provided that
Lessee shall not have any obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Lessee shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine, Lessee will promptly notify Lessor and Agent
thereof in writing (in any event within five (5) days of such occurrence) and
will, not later than 180 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Airframe or Acceptable Alternate
Engine, as the case may be. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will, as conditions to such transfer, (i) furnish
Lessor with a warranty (as to title) bill of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such Acceptable Alternate
Airframe or Acceptable Alternate Engine, (ii) cause a Lease Supplement to be
filed for recording pursuant to Title 49 of the United States Code, as amended,
(iii) furnish Lessor with such evidence of Lessee's title to such Acceptable
Alternate Airframe or Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 14 hereof with respect to such Acceptable
Alternate Airframe or Acceptable Alternate Engine as Lessor may reasonably
request, (iv) furnish Lessor with an opinion of Lessee's counsel to the effect
that title to such Acceptable Alternate Airframe or Acceptable Alternate Engine
has been duly conveyed to Lessor free and clear of all Liens except Permitted
Encumbrances and Lessor and Agent continue to have 1110 protection with respect
to such Aircraft and (v) transfer to or at the direction of Lessee without
recourse or warranty all of Lessor's right, title and interest, if any, in and
to (A) the Airframe or Engine with respect to which such Event of Loss occurred
and furnish to or at the direction of Lessee, at Lessee's expense, a bill of
sale in form and substance reasonably satisfactory to Lessee, evidencing such
transfer and (B) all claims, if any, against third parties, for damage to or
loss of the Airframe or Engine subject to such Event of Loss, and such Airframe
or Engine shall thereupon cease to be an Airframe or Engine leased hereunder.
Lessee shall cooperate with Lessor and take all such actions as shall be
requested by
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Lessor so that Lessor complies with Section 4(f) of the Aircraft Chattel
Mortgage. For all purposes hereof, each such Acceptable Alternate Airframe or
Acceptable Alternate Engine shall, after such conveyance, be deemed[C part of
the property leased hereunder, and shall be deemed an "Airframe" or "Engine", as
the case may be. No Event of Loss under the circumstance contemplated by the
terms of this paragraph (a) shall result in any reduction in Basic Rent.
(b) With respect to the Airframe or any Engine, as between the Lessor and
Lessee, any payments on account of an Event of Loss (other than insurance
proceeds or other payments the application of which is provided for in Section
14 below) received from any government authority or other person shall be
applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee pursuant
to the terms hereof, so long as there shall exist no Default or Lease Event
of Default, such payment shall be paid over to or retained by Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by Lessor as security for the
obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine, Lessee shall promptly notify Lessor and Agent of
such requisition and all of Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe or such Engine, to the extent allocable to the Term, shall be paid
over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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.
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SECTION 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft, at its own cost and expense, public liability
(including, without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee but
in no event in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of insurance
required by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in the same or
similar business and similarly situated with Lessee. Any policies of insurance
carried in accordance with this Section 14 and any policies taken out in
substitution or replacement of any such policies (A) shall be amended to name
Agent, Lenders and Lessor as additional named insureds, (B) shall be primary
without right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except the
limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft, at its own
cost and expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment while
removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C) hijacking (air
piracy) or any unlawful seizure or wrongful exercise of control of the Aircraft
or crew in flight (including any attempt at such seizure or control) made by any
person or persons aboard the Aircraft acting without the consent of the insured,
if and to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes or if the
Aircraft is operated on routes where the custom is for Domestic Air Carriers
similarly situated with Lessee flying comparable routes with similar aircraft to
carry such insurance, of the type usually carried by corporations engaged in the
same or similar business and similarly situated with Lessee; provided that such
insurance (including any self-insurance to the extent permitted below) shall at
all times be for an amount not less than the greater of the Stipulated Loss
Value as of the closest Stipulated Loss Determinate Date and $50,000,000. During
any period when 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 this Section,
insurance
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otherwise conforming hereto except that the scope of risk covered and type of
insurance shall be the same as are from time to time customarily carried with
respect to similar aircraft by corporations engaged in the same or similar
business and similarly situated with Lessee for aircraft on the ground in an
amount at least equal to the applicable amount provided above. All such
insurance shall name Agent, Lenders and Lessor as additional insureds and loss
payees to the extent their interest may appear and shall provide that any loss
to the Airframe or an Engine in excess of $2,000,000 (and, if a Default or Lease
Event of Default has occurred and is continuing, any such loss) shall be payable
to the Lessor and to the Agent for the benefit of Lenders; and shall be primary
without right of contribution from any other insurance which is carried by
Lessor or Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the Aircraft and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided, however, that Lessee may not self-insure in an amount in excess of
$1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Lessor, Agent or any Lender,
or if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Agent or any
Lender for thirty (30) days (seven (7) days, or such shorter or longer period as
may from time to time be customarily available in the industry, in the case of
any war risk and allied perils coverage) after receipt by Agent and Lessor of
written notice from such insurers of such cancellation, change or lapse; (D) be
in full force and effect throughout any geographical areas at any time traversed
by the Aircraft and shall be payable in U.S. dollars; (E) waive any right of the
insurers to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise in respect of any liability of Lessor and Agent; and (F)
waive all rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine, a valid
agreement by the
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United States or such agency or instrumentality to indemnify Lessee against the
same risks against which Lessee is required hereunder to insure shall be
considered adequate insurance with respect to the Airframe or such Engine to
the extent of the risks and in the amounts that are the subject of any such
agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 14 and is adequate to protect
the interests of Lessee, Lessor and Agent, and (B) certificates of the insurer
or insurers evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee of
which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine
and (y) at least thirty (30) days prior to the expiration or termination date,
or date of effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee 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 14. No insurance maintained by Agent, Lessor or any Lender shall
prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or Lender shall
be paid as provided in the insurance policy relating thereto and no such Person
shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft. Lessor agrees that it will not assign or
convey its right, title and interest in and to this Lease or the Aircraft except
in accordance with the Credit Agreement. Subject to the foregoing, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective successors and permitted assigns and
shall inure, to the direct benefit of, and shall also be enforceable by the
Agent and the Lenders, and their respective successors, as assignees of Lessor.
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SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
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(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5
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million or more or any Contingent Obligations with an aggregate principal
amount of $10 million or more or (b) any loan agreement, mortgage,
indenture or other agreement relating to such Indebtedness or Contingent
Obligation(s), if the effect of such breach or default is to cause, or to
permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause,
that Indebtedness or Contingent Obligation(s) to become or be declared due
and payable prior to its stated maturity or the stated maturity of any
underlying obligations, as the case may be (upon the giving or receiving of
notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities of Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons
acting in concert (in any such case, excluding Mr. Chowdry) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Lessee (or other Securities convertible into
such Securities) representing 20% or more of the combined voting power of
all Securities of Lessee entitled to vote in the election of directors,
other than Securities having such power only by reason of the happening of
a contingency or (c) the Board of Directors of Lessee shall not consist of
a majority of Continuing Directors or (ii) a "Change of Control" shall
occur under the Pass Through Trust Documents or any other Material
Agreement (as in effect on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e) (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines as Lessor in its sole
discretion shall elect:
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(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
Lessee to execute and deliver such instruments to the Lessor;
(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 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 17; and
without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) 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, any Basic Rent due on or before
the payment date so specified plus 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 after the date specified in such notice if any), an amount
equal to the Stipulated Loss Value for the Aircraft computed as of the
immediately preceding Stipulated Loss Determination Date, together with
interest, if any, at the Past Due Rate on the amount of such Basic Rent and
Stipulated Loss Value from the Stipulated Loss Determination Date as of
which Stipulated Loss Value is computed until the date of actual payment;
and upon such payment of liquidated damages and all Supplemental Rent then
due and payable by the Lessee hereunder, the Lessor shall transfer (without
any representation, recourse or warranty whatsoever) the Aircraft to the
Lessee and the Lessor shall execute and deliver such documents evidencing
such transfer and take such further action as the Lessee shall reasonably
request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph
(c) above with respect
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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, any accrued rent
with respect to the Aircraft due on or prior to such date plus, as
liquidated damages for loss of a bargain and not as a penalty, 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 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;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
in accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof, shall include, without limitation all logs,
manuals and data and inspection, maintenance, modification and overhaul and
similar records with respect thereto) in the condition and airworthiness
required by such Section. The Lessee hereby acknowledges that it shall be
directly liable for such costs and expenses to any Person designated by the
Lessor, the Agent or any Lender (as the case may be) to provide services in
connection with or to effect the return of the Airframe or any Engine in
accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof shall include, without limitation, such logs,
manuals and records) in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except as
otherwise expressly provided above, no remedy referred to in this Section 17 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to 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
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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 17 or which may
otherwise limit or modify any of Lessor's rights and remedies in this Section
17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or other Obligations (other than principal
and interest on Loans relating to other aircraft) are outstanding under the
Credit Agreement, all rights of Lessor under this Section 17 shall be exercised
only by the Agent as assignee of Lessor's rights under this Lease pursuant to
the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, Lessee at its expense
will promptly and duly execute and deliver to Lessor and the Agent such further
documents and take such further action as Lessor and the Agent may from time to
time reasonably request in order more effectively to carry out the intent and
purpose of this Lease and the other Transaction Documents and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor and Agent hereunder and under the other Transaction Documents, including,
without limitation, if requested by Lessor and the Agent, the execution and
delivery of supplements or amendments hereto, at the expense of Lessee, each in
recordable form, and all financing statements and continuation statements, and
all similar notices required by applicable law at all times to be kept recorded
and filed in such manner and such places as Lessor and the Agent may reasonably
request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of Lessor hereunder and the Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if
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given by facsimile device, when transmitted and the appropriate confirmation
received, (b) if given by certified mail, three Business Days after being
deposited in the United States mail, with appropriate postage prepaid, (c) if
given by telex, upon receipt by the party transmitting the telex of such party's
answerback code at the end of such telex (receipt of confirmation in writing not
being necessary to the effectiveness of any telex) and (d) if given by overnight
service or other means, when received or personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Clark H. Onstad, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Gina Thompson.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration under Title
49 of the United States Code, as amended or other applicable law, condition,
design, compliance with specifications, operation or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any theft, interference,
interruption or cessation in or prohibition of the use or possession thereof by
the Lessee or any sublessee for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority, (iii) any Liens,
encumbrances or rights of any other Person with respect to the Aircraft, (iv)
the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any other Transaction Document or document or
instrument executed pursuant hereto or thereto, or any lack of right, power or
authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to the Aircraft,
Airframe, any Engine or any Part, (vi) any insolvency, bankruptcy,
reorganization or similar proceedings by or against the Lessee or any other
Person, or (vii) any failure, breach or delay by the Lessor or any other Person
in performing or complying with any term of this Lease or any other cause
whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason whatsoever, including any present
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or future claims of Lessee against Lessor or any other Person under this Lease
or otherwise. Lessee hereby waives, and hereby agrees to waive at any future
time at the request of Lessor, to the full extent now or then permitted by
applicable law any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express
terms hereof. Each payment of Rent made by Lessee to Lessor shall be final as
to Lessor and Lessee. Lessee will not seek to recover all or any part of any
such payment of Rent from Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Lease is possible, a construction which would
preserve such benefits shall control over any construction which would not
preserve such benefits or would render them doubtful. To the extent consistent
with the provisions of 11 U.S.C. ss. 1110 or any analogous section of the
Federal bankruptcy laws, as amended from time to time, it is hereby expressly
agreed, that notwithstanding any other provisions of the Federal bankruptcy law,
as amended from time to time, any right of the Lessor and the Agent, as assignee
of the Lessor under the Aircraft Chattel Mortgage, to take possession of the
Aircraft in compliance with the provisions of this Lease shall not be affected
by the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or
any analogue provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft at the end
of the Term for a purchase price equal to the higher of the Fair Market Sales
Value (assuming that the Aircraft is in the condition required by the Lease) as
of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of
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the full of such amounts, 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.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and not exercise any purchase option under this Section 21. If Lessee
fails to give notice as required herein, Lessee will be deemed to have elected
to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, together
with interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as a lessee only. Neither Lessee nor any Affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft or with the parties' agreement that this
Lease be treated as a tax lease for purposes of the Internal Revenue Code. 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 reference herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE
AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT
IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT
-69-
<PAGE> 74
OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER ARISING OR
ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT,
OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER THIS
LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so long
as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments; (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. Lessee
hereby acknowledges due notice of, and consents to, such assignment and to the
creation of such mortgage and security interest. To the extent, if any, that
this Lease and any Lease Supplement constitutes chattel paper (as such term is
in effect in any applicable jurisdiction), no security interest in this Lease or
any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
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<PAGE> 75
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
-----------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
-----------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged
this __th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
-----------------------------------
Name:
Title:
-71-
<PAGE> 1
EXHIBIT 10.62
- -------------------------------------------------------------------------------
LEASE AGREEMENT
(N507MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
----------------------------------
One Boeing B747-200 Aircraft
U.S. Registration No. N507MC
Manufacturer's Serial No. 21380
---------------------------------
- -------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions...............................................................................1
SECTION 2. Acceptance and Lease.....................................................................22
SECTION 3. Term and Rent............................................................................22
(a) Term and Basic Rent.............................................................22
(b) Adjustments to Basic Rent.......................................................23
(c) Supplemental Rent...............................................................23
(d) Payments in General.............................................................23
(e) Minimum Rent....................................................................24
(f) Prepayment of Rent Payments.....................................................24
SECTION 4. Certain Representations and Warranties...................................................25
SECTION 5. Lessee's Representations and Warranties..................................................26
SECTION 6. Lessee's Affirmative Covenants...........................................................32
SECTION 7. Lessee's Negative Covenants..............................................................39
SECTION 8. Return of the Aircraft...................................................................48
(a) Condition Upon Return...........................................................48
(b) Overhaul and Repair.............................................................49
(c) Repairs.........................................................................49
(d) Modifications...................................................................49
(e) Airworthiness Directives........................................................49
(f) Return of the Engines...........................................................49
(g) Deferred Maintenance............................................................49
(h) Corrosion Treatment.............................................................49
(i) Manuals.........................................................................50
(j) Storage Upon Return.............................................................50
(k) Severable Parts.................................................................50
(l) Survival........................................................................50
SECTION 9. Liens....................................................................................50
SECTION 10. Registration, Maintenance and Operation; Possession and Subleases; Insignia..............51
(a) Maintenance and Operation.......................................................51
(b) Possession......................................................................52
(c) Insignia........................................................................54
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(d) Holding Out.....................................................................55
(e) No Pledging of Credit...........................................................55
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and Additions...............55
SECTION 12. Indemnities..............................................................................58
SECTION 13. Event of Loss............................................................................59
SECTION 14. Insurance................................................................................60
SECTION 15. Assignment...............................................................................63
SECTION 16. Events of Default........................................................................64
SECTION 17. Remedies.................................................................................67
SECTION 18. Lessee's Cooperation Concerning Certain Matters..........................................69
SECTION 19. Notices..................................................................................70
SECTION 20. Net Lease, True Lease, etc...............................................................70
SECTION 21. Purchase Option..........................................................................72
(a) Purchase Option.................................................................72
(b) Notice of Purchase..............................................................72
SECTION 22. Lessor's Right to Perform for Lessee.....................................................72
SECTION 23. Miscellaneous............................................................................73
SECTION 24. Security for Lessor's Obligations........................................................74
</TABLE>
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
ii
<PAGE> 4
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
iii
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suit-
<PAGE> 6
able for installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immediately
preceding the date of calculation, and provided, further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consoli-
-2-
<PAGE> 7
dated Rental Payments, to the extent included in computing consolidated
operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" shall mean the Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts; provided
that the assets received by the Lessee or any Subsidiary have a fair market
value at least equal to the assets transferred (provided that with respect to
any
-3-
<PAGE> 8
asset swap or series of related asset swaps involving assets of Lessee or any
Subsidiary with a fair market value exceeding $3,000,000, such determination
shall be made by the Board of Directors of Lessee)) and (D) asset sales
involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
"Atlas One Leases" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
-4-
<PAGE> 9
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"Consolidated Fixed Charges" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
-5-
<PAGE> 10
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Lessee or is merged
into or consolidated with Lessee or any of its Subsidiaries or that Person's
assets are acquired by Lessee or any of its Subsidiaries, (iii) the income of
any Subsidiary of Lessee to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
-6-
<PAGE> 11
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"Credit Agreement" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bank-
-7-
<PAGE> 12
ers Trust Company, as Agent as such agreement may be amended, modified, waived,
or supplemented from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension Indebtedness
and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Dividend" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
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<PAGE> 13
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the four Pratt & Whitney JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of the
General Electric CF6-50E2 aircraft engines for the aircraft bearing U.S.
registration numbers N505MC, N507MC, N508MC, N509MC and N516MC listed by
manufacturer's serial numbers in the initial Lease Supplement and installed on
the Airframe at the time of the delivery to Lessee of such Airframe, whether or
not from time to time thereafter installed on such Airframe or any other
airframe; (ii) any Acceptable Alternate Engine which may from time to time be
substituted for any of such four engines pursuant to the terms of the Lease; and
(iii) in any case, any and all Parts which are from time to time incorporated or
installed in or attached to any such engine and any and all parts removed
therefrom so long as title thereto remains vested in Lessor in accordance
herewith. The term "Engines" means, as of any date of determination, all Engines
then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of
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<PAGE> 14
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or disappearance
of such Aircraft); (B) the destruction, damage beyond repair or rendition of
such Aircraft permanently unfit for normal use for any reason whatsoever; (C)
the condemnation, confiscation or seizure of, or requisition of title to, or use
or possession (other than use by the United States Government if Lessee obtains
adequate compensation from the United States Government) of such Aircraft; (D)
as a result of any rule, regulation, order or other action by the FAA or other
governmental body having jurisdiction, the use of such Aircraft in the normal
course of interstate air transportation of persons or cargo shall have been
prohibited for a period of more than nine consecutive months unless Lessee,
prior to the expiration of such nine month period, shall have undertaken and
shall be diligently carrying forward all steps which are necessary or desirable
to permit the normal use of such property by Lessee or, in any event, if such
use shall have been prohibited for a period of twelve consecutive months; (E)
the operation or location of such Aircraft, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area excluded
from coverage by any insurance policy in effect with respect to such Aircraft,
if Lessee shall be unable to obtain indemnity or "war-risk" insurance in lieu
thereof from the United States; (F) any damage which results in an insurance
settlement with respect to such Aircraft on the basis of an actual or
constructive total loss or (G) a divestiture of such Airframe as described in
Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft Chattel Mortgage under the
Credit Agreement. 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 of the
Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means the ING Obligations and the Lufthansa
Obligations.
"Fair Market Sales Value" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-length transaction between an informed
and willing lessee-user or buyer-user (other than a lessee currently in
possession or a used equipment
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<PAGE> 15
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 by a recognized independent aircraft
appraiser, mutually agreed to by the Agent and Lessee, or, if such appraiser
cannot be agreed to within 20 days, then either party may apply to the American
Arbitration Association (or any successor organization thereto) in New York City
for the appointment of an appraiser, whose determinations shall be final and
binding upon the parties hereto. In determining 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 8 of this Lease, that all modifications
and improvements shall be taken into account, that Lessee has removed all Parts
which it is entitled to remove pursuant to Section 11 of this Lease and that the
Aircraft is not encumbered by this Lease. Except as otherwise expressly provided
in the Lease, all appraisal costs will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Financed Aircraft" means all Financed Aircraft under and as defined in the
Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
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<PAGE> 16
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
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<PAGE> 17
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING Financing Agreement" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale Nederlanden
Aviation Lease B.V., as amended by Amendment No. 1 thereto and as further
amended, restated, supplemented and otherwise modified from time to time.
"ING Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by Lessee or any of its Subsidiaries to any other Person
(other than a wholly-owned Subsidiary of Lessee), including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
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<PAGE> 18
"Leases" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented from
time to time (including this Lease). The term "Lease" shall include any Lease
Supplement entered into pursuant to the respective Lease.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
and any subsequent Lease Supplement entered into in accordance with the terms of
the Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or the transactions contemplated by this Lease or the
operation of the Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organization, any place of
business or any activity of Lessee or any other Person having use,
possession or custody of the Aircraft, the Airframe, any Engine or any
Part in the jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
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<PAGE> 19
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Lufthansa Agreement" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"Lufthansa Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"Nationsbank Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
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<PAGE> 20
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as title thereto shall vest in Lessor
in accordance with this Lease.
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
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<PAGE> 21
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated Credit
Agreement; and
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<PAGE> 22
(xii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of such Indebtedness, plus
the amount of expenses of Lessee incurred in connection with such extension,
(iii) in the case of any extension of subordinated Indebtedness, such Permitted
Extension Indebtedness is made subordinate to the obligations of Lessee
hereunder at least to the same extent as the Indebtedness immediately prior to
such extension, (iv) such Permitted Extension Indebtedness has a final stated
maturity later than the end of the stated maturity of the Indebtedness being
extended immediately prior to such extension and (v) the amortization and the
other terms, provisions, conditions, covenants and events of default thereof
taken as a whole shall be no more onerous or restrictive from the perspective of
Lessee and its Subsidiaries or any less favorable, from the perspective of
Lessor and Lenders than those contained in the Indebtedness immediately prior to
such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement.
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<PAGE> 23
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action which
requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Lessor and Agent using the consolidated financial
statements of Lessee and its Subsidiaries which shall be reformulated as if any
such incurrence of Indebtedness and the application of proceeds, acquisition,
disposition or other related action had been consummated at the beginning of the
period specified in the covenant with respect to which Pro Forma Basis
compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
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<PAGE> 24
"S&P" means Standard & Poor's Corporation.
"Second Amended and Restated Credit Agreement" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Sub-
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<PAGE> 25
sidiary, which together with all other contributions to capital made to other
such Subsidiaries, are not in excess of 15% of the consolidated book value of
the assets of the Lessee and its Subsidiaries, and the only liability of which
is the Permitted Extension Indebtedness or Other Permitted Indebtedness incurred
to refinance such Indebtedness; provided that Lessee beneficially owns and
controls at least 95% of the issued and outstanding capital stock of such
Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f) plus all accrued and unpaid interest on the
Loans relating to the Aircraft on the date of determination.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and ending
on the seventh anniversary of the Initial Borrowing Date, or such earlier date
as the Lease may be terminated in accordance with the terms thereof.
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"Transaction" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing by
Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"Transaction Documents" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of the
ING Obligations and the Lufthansa Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Dividend and
the Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees to appoint in
writing one or more of its employees as its authorized representative to accept
delivery of the Aircraft pursuant to the terms hereof. Lessee hereby agrees that
acceptance of delivery by such employee or employees shall, without further act,
irrevocably constitute acceptance by Lessee of the Aircraft for all purposes of
this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the seventh anniversary of the Initial
Borrowing Date or such earlier date as this Lease may be terminated in
accordance with the provisions hereof. Basic Rent shall accrue during the Term
in accordance with Exhibit B hereto. Lessee shall pay to Lessor on each Basic
Rent Payment Date an amount of Basic Rent specified opposite each Basic Rent
Payment Date on Exhibit B hereto as such amounts
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may be adjusted pursuant to Section 3 plus accrued interest on Basic Rent
previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and notified to
Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on such
Basic Rent Payment Date and determined in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when due until the same shall be paid
and on any other amounts payable hereunder which are not paid when due and (ii)
all amounts payable by Lessor pursuant to subsections 2.6D, 2.7, 9.2 and 9.3 of
the Credit Agreement; provided, however, to the extent any Supplemental Rent
required to be paid pursuant to this clause (ii) of subsection 2(c) has been
paid by Lessee pursuant to the terms of another Lease, then Lessee's obligations
hereunder shall be deemed to be satisfied by the payments made pursuant to such
other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and other unpaid Obligations (other than
principal and interest on other Loans relating to other aircraft leased pursuant
to the other Leases and after taking into account all other payments of rent
pursuant to the other Leases on such date), then such excess amounts shall be
paid by the Agent to Lessor at its above-referenced office.
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Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
all other unpaid Obligations of Lessor (other than principal and interest
on Loans relating to other Aircraft and after taking into account all other
payments of Stipulated Loss Value pursuant to the other Leases on such
date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately prepay an amount of Basic Rent equal to the amount
of such required prepayment less any required payments of the Loans
relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
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<PAGE> 29
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section
3(f)(ii), the schedules of Basic Rent and Stipulated Loss Value, shall be
adjusted so as to preserve the after tax yield and after tax cash flows of
the Lessor and, to the extent consistent therewith, to minimize the net
present value of Basic Rent payments. All such computations shall be made
on the basis of the same assumptions and the method of computations
employed in the original calculations of Basic Rent and Stipulated Loss
Values (except to the extent such assumptions have been changed as a result
of such prepayment or any prior such adjustment). At the Lessee's written
request, independent public accountants mutually selected by the Lessor and
the Lessee shall confirm the required adjustments. The final determination
of any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE ARE OF
A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE
AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND
EACH ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY
LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED
TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor covenants that
it will not, through its own actions or
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<PAGE> 30
inactions, in such capacity, interfere in Lessee's quiet enjoyment of the
Aircraft unless this Lease shall have been declared or deemed to have been
declared in default pursuant to Section 17 hereof. None of the provisions of
this Section 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 any manufacturer, any affiliate thereof, any
subcontractor or supplier of any manufacturer or any affiliate thereof, with
respect to the Airframe, Engines, or any Parts, or to release the manufacturer,
any affiliate thereof, or any such subcontractor or supplier from any such
representation, warranty or obligation. Unless a Default or Lease Event of
Default shall have occurred and be continuing, Lessor agrees to make available
to Lessee such rights as Lessor may have under any warranty with respect to the
Aircraft made by the manufacturer or any affiliate thereof or any of its
subcontractors or suppliers and any other claims against the manufacturer or any
affiliate thereof, or any such subcontractor or supplier with respect to the
Aircraft, all pursuant to and in accordance with the terms of any applicable
purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good stand-
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ing under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each of
its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Lessee or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Initial Borrowing Date and
disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by the
Lessee and its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated by
this Lease and the other Transaction Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body which has not been obtained or made on or prior to the date required to be
obtained or made.
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(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at March 31, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the three
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Neither Lessee nor any of its Subsidiaries has (and
will not following the Initial Borrowing Date) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 5(c)(A) which, either individually or in the aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole.
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<PAGE> 33
(d) No Material Adverse Change; No Restricted Junior Payments.
Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
Lessee and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor any of its Subsidiaries is (i) in violation of any applicable
laws that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect or (ii) subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries
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and upon their respective properties, assets, income, businesses and franchises
which are due and payable have been paid when due and payable. Lessee does not
know of any proposed tax assessment against Lessee or any of its Subsidiaries
which is not being actively contested by Lessee or such Subsidiary in good faith
and by appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, for liabilities for taxes as shall be required in conformity
with GAAP shall have been made or provided in the financial statements of
Lessee. There are no agreements with respect to taxes between Lessee and any tax
agency or authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
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<PAGE> 35
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee or
(b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or threatened
Environmental Claims against Lessee or any of its Subsidiaries, and neither
Lessee nor any of its Subsidiaries has received no written notices, inquiries,
or requests for information with respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor,
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<PAGE> 36
Agent and Lenders that such projections as to future events are not to be viewed
as facts and that actual results during the period or periods covered by any
such projections may differ from the projected results. There are no facts known
(or which should upon the reasonable exercise of diligence be known) to Lessee
(other than matters of a general economic nature) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and that have not been disclosed herein or in such other documents, certificates
and statements furnished to Lessor, Agent and Lenders for use in connection with
the transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such monthly
financial statements shall only be required to be delivered to Agent to the
extent such monthly financial statements are required to be delivered under
the Second Amended and Restated Credit Agreement as such agreement may be
amended, modified, supplemented, renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail
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<PAGE> 37
and certified by the chief financial officer of Lessee that they fairly
present the financial condition of Lessee and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated, subject to changes resulting from audit and
normal year-end adjustments, and (b) a narrative report describing the
operations of Lessee and its Subsidiaries in the form prepared for
presentation to senior management for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of
such fiscal quarter; provided that delivery of Lessee's Form 10-Q for such
fiscal quarter shall be deemed to satisfy the requirements of this
subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6(a)(12) for the fiscal year covered by
such financial statements, all in reasonable detail and certified by the
chief financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Lessee and satisfactory to Lessor and Agent, which report shall be
unqualified, shall express no doubts about the ability of Lessee and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a) and
(b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each delivery
of financial statements of Lessee and its Subsidiaries pursuant to
subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee
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<PAGE> 38
stating that the signers have reviewed the terms of this Lease and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Lessee and its Subsidiaries
during the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any condition or
event that constitutes a Default or Lease Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action Lessee has taken, is taking and proposes
to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable quarterly and annual accounting periods with the restrictions
contained in Section 7;
(5) Pricing Certificates: On or after the third anniversary of the
Initial Borrowing Date, a certificate setting forth the credit rating on
Lessee's obligations under the Pass Through Trust Documents, (a) together
with each delivery of financial statements of Lessee pursuant to
subdivisions (2) and (3) above, (b) within one Business Day after any
public release by S&P or Moody's lowering its credit rating on Lessee's
obligations under the Pass Through Trust Documents and (c) at such
additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Lease Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Lease Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (4) above is not
correct or that the matters set forth in the Compliance Certificates
delivered therewith pursuant to clause (b) of subdivision (4) above for the
applicable fiscal year are not stated in accordance with the terms of this
Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Les-
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<PAGE> 39
see by independent certified public accountants in connection with each
annual, interim or special audit of the financial statements of Lessee and
its Subsidiaries made by such accountants, including, without limitation,
any comment letter submitted by such accountants to management in
connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
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<PAGE> 40
(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to evaluate
any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or Agent
shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
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<PAGE> 41
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such Subsidiary
may be terminated if such termination is in the interests of Lessee and its
Subsidiaries and is not materially disadvantageous to Lessor or to any assignee
of the Lease. Lessee will at all times maintain its corporate existence as a
United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage (including, without limitation, flood
insurance, if necessary or advisable) of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses.
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<PAGE> 42
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine, and its and their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants (provided that Lessee may, if it so chooses,
be present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and as often as may be
reasonably requested; provided that so long as no Lease Event of Default shall
have occurred and be continuing, such inspection shall not be disruptive to
Lessee's business, as reasonably determined by Lessee. Without in any way
limiting the foregoing, Lessee will, upon the request of Lessor or Agent,
participate in a meeting of Agent and Lenders once during each fiscal year to be
held at Lessee's corporate offices (or such other location as may be agreed to
by Lessee, Lessor and Agent) at such time as may be agreed to by Lessee, Lessor
and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which could reasonably be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event Lessee or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any facility, Lessee or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Lessee or such Subsidiary. Notwithstanding
anything to the contrary contained in this Lease, Lessee and
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<PAGE> 43
its Subsidiaries may engage in the transportation of Hazardous Materials in the
ordinary course of business so long as such is conducted in compliance with all
applicable Environmental Laws, and all other applicable laws, policies, orders,
directives and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA Affiliate
to establish any Employee Benefit Plan which, in either case, could reasonably
be expected to result in a liability for Lessee, under Title IV of ERISA or the
minimum funding standards of Part 3 of Subtitle B of Title I of ERISA, in excess
of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees that,
so long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
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<PAGE> 44
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") to Consolidated Adjusted
EBITDA for the four-fiscal quarter period ending on such Determination Date
did not exceed 4.5:1.0, (ii) the ratio of Consolidated Adjusted EBITDA for
such four-fiscal quarter period to Consolidated Interest Expense for such
four-fiscal quarter period was not less than 3.0:1.0; and (iii) Lessee will
be in compliance with all covenants set forth in subsection 7(f) hereof,
Lessee and its Subsidiaries may incur Other Permitted Indebtedness; and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any state or under any similar recording or
notice statute, except:
(i) Permitted Encumbrances;
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<PAGE> 45
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net
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<PAGE> 46
Income for such fiscal year and $10 million less (B) the sum of (x) the
aggregate amount of dividends on the Common Stock of Lessee declared or
paid in such fiscal year and (y) the aggregate amount contributed to
capital of Special Purpose Subsidiaries in such fiscal year; provided that
Lessee shall not incur liabilities related to any such Joint Venture in
excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed at any time 10.5 million.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(8) shall at no time exceed $30
million.
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<PAGE> 47
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four-fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee occurring during any of the periods set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION
======================================================
Minimum
Interest
Period Coverage Ratio
------------------------------------------------------
<S> <C>
fiscal year 1997 2.50:1.00
------------------------------------------------------
fiscal year 1998 2.75:1.00
------------------------------------------------------
fiscal year 1999 3.00:1.00
------------------------------------------------------
Thereafter 3.25:1.00
======================================================
</TABLE>
(ii) Minimum Fixed Charge Coverage Ratio. Lessee shall not permit the ratio
of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated Rental
Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Lessee occurring during any
of the periods set forth below to be less than the correlative ratio indicated:
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<PAGE> 48
<TABLE>
<CAPTION>
======================================================
Minimum Fixed
Charge Coverage
Period Ratio
------------------------------------------------------
<S> <C>
fiscal year 1997 1.25:1.00
Thereafter 1.10:1.00
======================================================
</TABLE>
(iii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Lessee in excess of $25 million as of such date) to (ii)
Consolidated Adjusted EBITBA for the four-fiscal quarter period ending on such
date to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
======================================================
Maximum
Period Leverage Ratio
------------------------------------------------------
<S> <C>
fiscal year 1997 4.50:1.00
fiscal year 1998 4.25:1.00
fiscal year 1999 4.00:1.00
Thereafter 3.75:1.00
======================================================
</TABLE>
(iv) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
=====================================================
Minimum
Consolidated
Period Net Worth
-----------------------------------------------------
<S> <C>
fiscal year 1997 $120 million
fiscal year 1998 $145 million
fiscal year 1999 $170 million
Thereafter $195 million
=====================================================
</TABLE>
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of
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<PAGE> 49
beneficial ownership of, any Person or any division or line of business of any
Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of another
Person provided that, (a) the acquisition primarily involves the
acquisition of assets to be used in the business of Lessee, (b) with
respect to such acquisition any newly acquired or created subsidiary of
Lessee shall be a wholly-owned subsidiary, (c) immediately before and after
giving effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Lessee shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 7(f) and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance, (e)
Lessor and Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other liabilities not on
the balance sheet of Lessee assumed in connection with such acquisition and
a business plan prepared by Lessee with respect to such acquisition and (f)
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<PAGE> 50
the aggregate amount of cash payments made in connection with all such
acquisitions other than with the proceeds from sales or issuances of equity
by Lessee does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business; and
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter).
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation or
bylaws to be amended or otherwise modified in any manner which could reasonably
be expected to have a Material Adverse Effect or (ii) any Material Agreement to
be amended or otherwise modified in any manner with respect to any provision
providing material representations and warranties to Lessee, indemnification
rights to Lessee, or limiting Lessee's remedies or rights upon the other party
to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect
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to such lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year do not exceed $60 million plus an amount not to exceed
$12 million during any fiscal year, equal to Consolidated Rental Payments
incurred in connection with sale leaseback transactions described in subsection
7(j) plus Consolidated Rental Payments assumed pursuant to acquisitions
permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital Lease,
of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries intends
to use for substantially the same purpose as any other property which has been
or is to be sold or transferred by Lessee or any of its Subsidiaries to any
Person (other than Lessee or any of its Subsidiaries) in connection with such
lease; provided that Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to the
extent that Lessee or any of its Subsidiaries would be permitted to enter into,
and remain liable under, such lease under subsection 7(i).
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 10% or more of any class of equity
Securities of Lessee or with any Affiliate of Lessee or of any such holder, on
terms that are less favorable to Lessee or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
(i) reasonable and customary fees paid to and indemnification of members of the
Boards of Directors of Lessee and its Subsidiaries, (ii) reasonable and
customary salaries, bonuses and other compensation paid to and indemnification
of employees of Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of Lessee or (iii)
performance by Lessee of its obligations under and in accordance with the
Services Agreement.
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(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
SECTION 8. Return of the Aircraft. (a) Condition Upon Return. Unless the
Aircraft has been sold pursuant to Section 21, if at any time the Lessee shall
return the Aircraft to the Lessor hereunder, Lessee, at its own expense, will
return the Aircraft to Lessor at a location specified by the Lessor to the
Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft to be in compliance with the maintenance covenants contained in this
Lease and (ii) the Airframe will be fully equipped with the Engines installed
thereon.
At the time of such return, such Airframe and Engines (A) shall have an air
worthiness certificate from the Federal Aviation Administration and shall be in
full compliance with the provisions of Federal Aviation Regulations, Part 121
(or successor regulation), and shall be in material compliance with all
applicable FAA noise, corrosion, environmental and aging aircraft requirements,
(B) shall be free and clear of all Liens and (C) shall be in a full freighter
configuration and in as good condition as when originally delivered to Lessee,
ordinary wear and tear excepted, and otherwise in the condition required to be
maintained under Lessee's FAA-approved maintenance plan; and in all such cases
the Aircraft shall not have been discriminated against as compared to other
aircraft owned or leased by Lessee whether by reason of its leased status or
otherwise in maintenance, use, operation or in any other manner whatsoever.
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(b) Overhaul and Repair. The Airframe, Engines and all Parts shall have
been, and shall be properly documented to have been, repaired or overhauled by
certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft shall have approval or certification by the FAA (or
its designee) or certification if required. All such modifications shall be
accompanied by complete data and documentation necessary to substantiate their
certification and approval and methods of compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe, 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
Acceptable Alternate Engine, in form and substance reasonably satisfactory to
Lessor (together with an opinion of 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 Acceptable Alternate Engines are free
and clear of all Liens) against receipt from Lessor of a bill of sale evidencing
the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft including
those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall have
been maintained by cleaning and treating all mild and moderate corrosion and
correcting of all
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severe or exfoliate corrosion in accordance with Lessee's approved maintenance
program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of this
Lease, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and maintenance, inspection, modification and overhaul records and
similar records required to be maintained with respect to the Aircraft and Parts
under FAA rules, the Aircraft maintenance program. If any such logs, manuals,
records or other data are missing, incomplete or otherwise not in accordance
with FAA standards applicable to Lessee, Lessee shall re-accomplish the
maintenance tasks necessary to produce such records in accordance with its
approved maintenance program prior to delivery of the Aircraft or otherwise
perform all necessary acts (without regard to any applicable waivers or
deferrals) to obtain such records in a manner satisfactory to the FAA and
Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, 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 Lessee's risk and at Lessee's expense for a
period not exceeding 30 days, and thereafter at Lessor's risk and at Lessor's
cost for insurance, maintenance and Lessee's out-of-pocket expenses for such
storage for a period not exceeding 90 days (provided that if such termination
occurs as a result of a Lease Event of Default hereunder, such storage shall be
at the cost of the Lessee), commencing on the date the Aircraft is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by Lessee and used by Lessee as a
location for the long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned to
Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable nonproprietary Parts (other than Parts otherwise
required by Sections 10 or 11 to be maintained on the Aircraft) 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 11 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 at their
fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft, title
thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances.
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Lessee will promptly, at its own expense, take such action as may be necessary
to duly discharge any such Lien not excepted above if the same shall arise at
any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, will
(i) be a "citizen of the United States" as defined in Section 40102(15) of Title
49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Aircraft to be duly registered
and remain duly registered in the name of Lessor in accordance with the Act and
otherwise registered under all applicable laws of the United States so as to be
eligible to operate in commercial air service under the Act; and (iii) will
service, repair, inspect, test, maintain and overhaul the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine (A) so as to keep the Airframe and each Engine in such operating
condition as may be required to permit the Airframe and each Engine to be
utilized in commercial operations (B) so as to enable the airworthiness
certification of the Airframe to be maintained in good standing at all times
under the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of grounding) registered in the United States have
been grounded by the FAA; provided, however, that if following its issuance, the
United States FAA airworthiness certificate of the Aircraft shall be withdrawn,
then subject to the provisions of Section 13 hereof, so long as Lessee is
diligently taking or causing to be taken all necessary action to promptly
correct the condition which caused such withdrawal, no Lease Event of Default
shall arise from such withdrawal, (C) in accordance with Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same manner
and with the same care used by Lessee with respect to the same or similar
aircraft and engines owned or operated by Lessee so as to keep the same in as
good operating condition as when originally leased hereunder, ordinary wear and
tear excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar equipment,
and (D) in such manner as may be necessary to maintain in full force all
warranties of the manufacturers thereof. Lessee shall maintain all records, logs
and other materials which may be required to permit the Airframe and each Engine
to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or op-
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erated in violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or foreign),
or in violation of any airworthiness certificate, license or registration
relating to the Airframe or such Engine issued by any such authority, and in the
event that such laws, rules, regulations or orders require alteration of the
Airframe or any Engine, Lessee, at its own cost and expense, will conform
thereto or obtain conformance therewith and will maintain the same in proper
operating condition under such laws, rules, regulations and orders, provided,
however, that Lessee may, in good faith (after having delivered to Lessor and
Agent an Officers' Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not, in Lessor's and Agent's opinion (in their sole
discretion), adversely affect the interests of Lessor, Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section 14
shall not be at the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the Airframe or such
Engine, except in the case of a requisition for use by the United States of
America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened area
of hostilities unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of the
term of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner or
for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or omit to do
anything the omission of which, may invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine except that, unless a Default or Lease
Event of Default shall have occurred and be continuing, Lessee may without the
prior written consent of the Agent and Lessor, take the following actions so
long as the actions to be taken shall not deprive the Agent of the first
priority Lien under the Aircraft Chattel Mortgage in the assets subject thereto
and so long as the actions to be taken shall not deprive Lessor of the protec-
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tions of Section 1110 of the Bankruptcy Code with respect to the Aircraft and
shall not deprive the Agent of the protections of Section 1110 of the Bankruptcy
Code with respect to the Aircraft as assignee of Lessee's rights under this
Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Lessee in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine; provided, however, that if
Lessee's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to the Airframe or such Engine and Lessee shall comply with Section
13 in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the 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), and (C) the rights of any Domestic Air Carrier,
under normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to such
airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided:
(A) such airframe is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe and except Liens of the type permitted by clause
(iv) above; and (B) Agent and Lessor shall have received from the lessor,
conditional vendor or secured
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party and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or mortgage
covering such airframe), whereby such lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or claim
any right, title or interest in any Engine by reason of such Engine being
installed on such airframe at any time when such Engine is subject to the
Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current certificates
and licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided that Lessee's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI Contract or
wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine to be legibly marked (in a reasonably prominent location, which
in the case of
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the Airframe shall be adjacent to the airworthiness certificate) with such a
plate, disk, or other marking of customary size, and bearing the legend "Owned
by Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust Company, as
Agent" or such other legend, as shall in the opinion of Lessor and Agent be
appropriate or desirable to evidence the fact that it is subject to the
ownership of Lessor and the lien and security interest created by the Aircraft
Chattel Mortgage. Lessee shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or defacement,
shall promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, Lessee shall not allow the name of
any person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership or of
any security interest therein, except that Lessee or any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer on
the Airframe or any Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or any Part or any other operations or carriage undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, or any Part, or for any
other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and which
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair or testing, Lessee at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that, except as
otherwise provided in Section 11(d), Lessee at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall be
owned by Lessor free and clear of all Liens (except Permitted Encumbrances and
for pooling arrangements to the ex-
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tent permitted by Section 11(b)), and shall be in as good operating condition
as, and shall have a value and utility at least equal to, the Parts replaced
assuming such parts were in the condition and repair required to be maintained
by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor and
shall thereupon become free and clear of all rights of Lessor hereunder and all
rights derivative of Lessor's and shall no longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in Section
11(a) may be subjected by Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the ordinary course
of its business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be incorporated
or installed in or attached to the Airframe or such Engine in accordance with
Section 11(a) as promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or attached to
the Airframe or any Engine in accordance with Section 11(a) may be owned by any
third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or such Engine a further
replacement Part owned by Lessee which shall become the property of Lessor
subject to the lien and security interest of the mortgage free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the standards of the FAA or
other governmental authority
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having jurisdiction; provided, that Lessee may, in good faith, contest the
validity or application of any such standard in any reasonable manner that shall
not adversely affect the Lessor's or Agent's respective interests. Lessee also
agrees, at its own cost and expense, to make or cause to be made such
alterations and modifications in and additions to the Airframe and the Engines
as may be required from time to time to meet the standards or requirements of
any directive issued by a manufacturer relating to the Airframe or any Engine.
In addition so long as no Default or Lease Event of Default shall have occurred
and be continuing, Lessee, at its own cost and expense, may from time to time
make such alterations and modifications in and additions to the Airframe and any
Engine as Lessee may deem desirable in the proper conduct of its business,
provided no such alteration, modification or addition diminishes the value or
utility or impairs the condition or airworthiness of the Airframe or such Engine
below the value, utility, condition or airworthiness thereof immediately prior
to such alteration, modification or addition assuming the Airframe or such
Engine were then in the condition and airworthiness required to be maintained by
the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement of or substitution for any such Part, (B) is not
required to be incorporated or installed in or attached or added to the Airframe
or such Engine pursuant to the terms of Section 10(a) hereof or any other
provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from the Airframe or such Engine without diminishing or impairing the value,
utility or airworthiness which the Airframe or such Engine would have had at
such time had such alteration, modification or addition not occurred, assuming
the Airframe or such Engine was otherwise in the condition required by this
Lease and the Aircraft Chattel Mortgage. Upon the removal by Lessee of any such
Part, as above provided, title thereto shall, without further act, be free and
clear of the interests of Lessor and all rights derivative of Lessor's and such
Part shall no longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification of
the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
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SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or any part
thereof or interest therein by any Federal, state or local government or other
taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any part
thereof of interest therein; (ii) the manufacture, purchase, ownership,
mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage; provided,
however, that, there shall be excluded from any indemnification under this
Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien which may have attached as security for such Tax, nothing
in this Section shall require the payment of any Tax so long as and to extent
that validity thereof shall be contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and Lessee shall have
set aside on its books adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, employees, agents and affiliates
of Lessor, Agent and each Lender, (collectively called the "Indemnitees") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "Indemnified Liabilities"); provided that
Lessee shall not have any obligation to any In-
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demnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend, indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, Lessee shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine, Lessee will promptly notify Lessor and Agent
thereof in writing (in any event within five (5) days of such occurrence) and
will, not later than 180 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Airframe or Acceptable Alternate
Engine, as the case may be. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will, as conditions to such transfer, (i) furnish
Lessor with a warranty (as to title) bill of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such Acceptable Alternate
Airframe or Acceptable Alternate Engine, (ii) cause a Lease Supplement to be
filed for recording pursuant to Title 49 of the United States Code, as amended,
(iii) furnish Lessor with such evidence of Lessee's title to such Acceptable
Alternate Airframe or Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 14 hereof with respect to such Acceptable
Alternate Airframe or Acceptable Alternate Engine as Lessor may reasonably
request, (iv) furnish Lessor with an opinion of Lessee's counsel to the effect
that title to such Acceptable Alternate Airframe or Acceptable Alternate Engine
has been duly conveyed to Lessor free and clear of all Liens except Permitted
Encumbrances and Lessor and Agent continue to have 1110 protection with respect
to such Aircraft and (v) transfer to or at the direction of Lessee without
recourse or warranty all of Lessor's right, title and interest, if any, in and
to (A) the Airframe or Engine with respect to which such Event of Loss occurred
and furnish to or at the direction of Lessee, at Lessee's expense, a bill of
sale in form and substance reasonably satisfactory to Lessee, evidencing such
transfer and (B) all claims, if any, against third parties, for damage to or
loss of the Airframe or Engine subject to such Event of Loss, and such Airframe
or Engine shall thereupon cease to be an Airframe or Engine leased hereunder.
Lessee shall cooperate with Lessor and take all such actions as shall be
requested by Lessor so that Lessor complies with Section 4(f) of the Aircraft
Chattel Mortgage. For all purposes hereof, each such Acceptable Alternate
Airframe or Acceptable Alternate Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an "Airframe" or
"Engine", as the case may be. No Event of Loss under the circumstance
contemplated by the terms of this paragraph (a) shall result in any reduction in
Basic Rent.
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(b) With respect to the Airframe or any Engine, as between the Lessor and
Lessee, any payments on account of an Event of Loss (other than insurance
proceeds or other payments the application of which is provided for in Section
14 below) received from any government authority or other person shall be
applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee pursuant
to the terms hereof, so long as there shall exist no Default or Lease Event
of Default, such payment shall be paid over to or retained by Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by Lessor as security for the
obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine, Lessee shall promptly notify Lessor and Agent of
such requisition and all of Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe or such Engine, to the extent allocable to the Term, shall be paid
over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft, at its own cost and expense, public liability
(including, without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage in-
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surance with insurers of recognized responsibility and reputation in amounts, of
the type and covering the risks customarily carried with respect to similar
aircraft by corporations engaged in the same or similar business and similarly
situated with Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation and
expropriation and allied perils coverage). During any period when the Aircraft
is on the ground and not in operation, Lessee may carry or cause to be carried,
in lieu of insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of coverage shall
not be required to exceed the amounts of comprehensive airline liability
insurance, and the scope of risk covered and type of insurance shall be the
same, as are customarily carried with respect to similar aircraft on the ground
by corporations engaged in the same or similar business and similarly situated
with Lessee. Any policies of insurance carried in accordance with this Section
14 and any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name Agent, Lenders and Lessor as additional
named insureds, (B) shall be primary without right of contribution from any
other insurance which is carried by Lessee, (C) shall expressly provide that all
provisions thereof, except the limits of the liability, shall operate in the
same manner as if there were a separate policy covering each insured, and (D)
shall provide that the insurer shall waive any right of subrogation against
Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft, at its own
cost and expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment while
removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C) hijacking (air
piracy) or any unlawful seizure or wrongful exercise of control of the Aircraft
or crew in flight (including any attempt at such seizure or control) made by any
person or persons aboard the Aircraft acting without the consent of the insured,
if and to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes or if the
Aircraft is operated on routes where the custom is for Domestic Air Carriers
similarly situated with Lessee flying comparable routes with similar aircraft to
carry such insurance, of the type usually carried by corporations engaged in the
same or similar business and similarly situated with Lessee; provided that such
insurance (including any self-insurance to the extent permitted below) shall at
all times be for an amount not less than the greater of the Stipulated Loss
Value as of the closest Stipulated Loss Determinate Date and $50,000,000. During
any period when 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 this Section,
insurance otherwise conforming hereto except that the scope of risk covered and
type of
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insurance shall be the same as are from time to time customarily carried with
respect to similar aircraft by corporations engaged in the same or similar
business and similarly situated with Lessee for aircraft on the ground in an
amount at least equal to the applicable amount provided above. All such
insurance shall name Agent, Lenders and Lessor as additional insureds and loss
payees to the extent their interest may appear and shall provide that any loss
to the Airframe or an Engine in excess of $2,000,000 (and, if a Default or Lease
Event of Default has occurred and is continuing, any such loss) shall be payable
to the Lessor and to the Agent for the benefit of Lenders; and shall be primary
without right of contribution from any other insurance which is carried by
Lessor or Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the Aircraft and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided, however, that Lessee may not self-insure in an amount in excess of
$1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Lessor, Agent or any Lender,
or if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Agent or any
Lender for thirty (30) days (seven (7) days, or such shorter or longer period as
may from time to time be customarily available in the industry, in the case of
any war risk and allied perils coverage) after receipt by Agent and Lessor of
written notice from such insurers of such cancellation, change or lapse; (D) be
in full force and effect throughout any geographical areas at any time traversed
by the Aircraft and shall be payable in U.S. dollars; (E) waive any right of the
insurers to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise in respect of any liability of Lessor and Agent; and (F)
waive all rights of subrogation against Lessor and Agent.
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(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine, a valid
agreement by the United States or such agency or instrumentality to indemnify
Lessee against the same risks against which Lessee is required hereunder to
insure shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the subject
of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 14 and is adequate to protect
the interests of Lessee, Lessor and Agent, and (B) certificates of the insurer
or insurers evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee of
which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine
and (y) at least thirty (30) days prior to the expiration or termination date,
or date of effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee 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 14. No insurance maintained by Agent, Lessor or any Lender shall
prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or Lender shall
be paid as provided in the insurance policy relating thereto and no such Person
shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft. Lessor agrees that it will not assign or
convey its right, title and interest in and to this Lease or the Aircraft except
in accordance with the Credit Agreement.
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Subject to the foregoing, the terms and provisions of this Lease shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns and shall inure, to the direct benefit of, and
shall also be enforceable by the Agent and the Lenders, and their respective
successors, as assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having juris-
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diction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers
over Lessee or any of its Subsidiaries, or over all or a substantial part
of its property, shall have been entered; or there shall have occurred the
appointment of an interim receiver, trustee or other custodian of Lessee or
any of its Subsidiaries; or a warrant of attachment, execution or similar
process shall have been issued against any substantial part of the property
of Lessee or any of its subsidiaries, and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
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(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities of Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons
acting in concert (in any such case, excluding Mr. Chowdry) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Lessee (or other Securities convertible into
such Securities) representing 20% or more of the combined voting power of
all Securities of Lessee entitled to vote in the
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election of directors, other than Securities having such power only by
reason of the happening of a contingency or (c) the Board of Directors of
Lessee shall not consist of a majority of Continuing Directors or (ii) a
"Change of Control" shall occur under the Pass Through Trust Documents or
any other Material Agreement (as in effect on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e) (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines as Lessor in its sole
discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
Lessee to execute and deliver such instruments to the Lessor;
(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 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 17; and
without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) 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, any Basic Rent due on or before
the payment date
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so specified plus 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
after the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft computed as of the immediately
preceding Stipulated Loss Determination Date, together with interest, if
any, at the Past Due Rate on the amount of such Basic Rent and Stipulated
Loss Value from the Stipulated Loss Determination Date as of which
Stipulated Loss Value is computed until the date of actual payment; and
upon such payment of liquidated damages and all Supplemental Rent then due
and payable by the Lessee hereunder, the Lessor shall transfer (without any
representation, recourse or warranty whatsoever) the Aircraft to the Lessee
and the Lessor shall execute and deliver such documents evidencing such
transfer and take such further action as the Lessee shall reasonably
request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph
(c) above with respect to such Aircraft, may, if it shall so elect, demand
that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of such
sale, any accrued rent with respect to the Aircraft due on or prior to such
date plus, as liquidated damages for loss of a bargain and not as a
penalty, 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 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;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
in accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof, shall include, without limitation all logs,
manuals and data and inspection, maintenance, modification and overhaul and
similar records with respect
68
<PAGE> 73
thereto) in the condition and airworthiness required by such Section. The Lessee
hereby acknowledges that it shall be directly liable for such costs and expenses
to any Person designated by the Lessor, the Agent or any Lender (as the case may
be) to provide services in connection with or to effect the return of the
Airframe or any Engine in accordance with the terms of Section 8 hereof or in
placing such Airframe or Engine (which for purposes hereof shall include,
without limitation, such logs, manuals and records) in the condition and
airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except as
otherwise expressly provided above, no remedy referred to in this Section 17 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to 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 17 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or other Obligations (other than principal
and interest on Loans relating to other aircraft) are outstanding under the
Credit Agreement, all rights of Lessor under this Section 17 shall be exercised
only by the Agent as assignee of Lessor's rights under this Lease pursuant to
the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, Lessee at its expense
will promptly and duly execute and deliver to Lessor and the Agent such further
documents and take such further action as Lessor and the Agent may from time to
time reasonably request
69
<PAGE> 74
in order more effectively to carry out the intent and purpose of this Lease and
the other Transaction Documents and to establish and protect the rights and
remedies created or intended to be created in favor of Lessor and Agent
hereunder and under the other Transaction Documents, including, without
limitation, if requested by Lessor and the Agent, the execution and delivery of
supplements or amendments hereto, at the expense of Lessee, each in recordable
form, and all financing statements and continuation statements, and all similar
notices required by applicable law at all times to be kept recorded and filed in
such manner and such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of Lessor hereunder and the Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Clark H. Onstad, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Gina Thompson.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against
70
<PAGE> 75
the Lessor, the Agent, the Lenders, any manufacturer, any supplier or any other
Person for any reason whatsoever, (ii) any defect in the title, airworthiness,
eligibility for registration under Title 49 of the United States Code, as
amended or other applicable law, condition, design, compliance with
specifications, operation or fitness for use of, or any damage to or loss or
destruction of, the Aircraft, or any theft, interference, interruption or
cessation in or prohibition of the use or possession thereof by the Lessee or
any sublessee for any reason whatsoever, including, without limitation, any such
interference, interruption, cessation or prohibition resulting from the act of
any governmental authority, (iii) any Liens, encumbrances or rights of any other
Person with respect to the Aircraft, (iv) the invalidity or unenforceability or
lack of due authorization or other infirmity of this Lease or any other
Transaction Document or document or instrument executed pursuant hereto or
thereto, or any lack of right, power or authority of the Lessor or the Lessee or
any other party to any other Transaction Document to enter into this Lease or
any other Transaction Document or any such document or instrument, (v) any loss
of or damage to the Aircraft, Airframe, any Engine or any Part, (vi) any
insolvency, bankruptcy, reorganization or similar proceedings by or against the
Lessee or any other Person, or (vii) any failure, breach or delay by the Lessor
or any other Person in performing or complying with any term of this Lease or
any other cause whether similar or dissimilar to the foregoing, any present or
future law notwithstanding, it being the intention of the parties that all Rent
payable by the Lessee hereunder shall continue to be payable in all events in
the manner and at the times provided herein. Such Rent shall not be subject to
any abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason whatsoever, including any present or future claims of
Lessee against Lessor or any other Person under this Lease or otherwise. Lessee
hereby waives, and hereby agrees to waive at any future time at the request of
Lessor, to the full extent now or then permitted by applicable law any and all
rights which it may now have or which at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Lease except in accordance with the express terms hereof. Each payment of Rent
made by Lessee to Lessor shall be final as to Lessor and Lessee. Lessee will not
seek to recover all or any part of any such payment of Rent from Lessor for any
reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Lease is possible, a construction which would
preserve such benefits shall control over any construction which would not
preserve such benefits or would render them doubtful. To the extent consistent
with the provisions of 11 U.S.C. ss. 1110 or any analogous section of the
Federal bankruptcy laws, as amended from time to time, it is hereby expressly
agreed, that notwithstanding any other provisions of the Federal bankruptcy
laws, as amended from
71
<PAGE> 76
time to time, any right of the Lessor and the Agent, as assignee of the Lessor
under the Aircraft Chattel Mortgage, to take possession of the Aircraft in
compliance with the provisions of this Lease shall not be affected by the
provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or any
analogue provisions of any superseding statute or any power of the bankruptcy
court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft at the end
of the Term for a purchase price equal to the higher of the Fair Market Sales
Value (assuming that the Aircraft is in the condition required by the Lease) as
of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of the full of such
amounts, 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.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and not exercise any purchase option under this Section 21. If Lessee
fails to give notice as required herein, Lessee will be deemed to have elected
to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement,
72
<PAGE> 77
as the case may be, together with interest thereon at the Past Due Rate, shall
be deemed Supplemental Rent, payable by Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as a lessee only. Neither Lessee nor any Affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft or with the parties' agreement that this
Lease be treated as a tax lease for purposes of the Internal Revenue Code. 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 reference herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE
AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT
IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR
AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE
OF LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER
TRANSACTION DOCUMENT. This Lease may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
73
<PAGE> 78
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so long
as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments; (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. Lessee
hereby acknowledges due notice of, and consents to, such assignment and to the
creation of such mortgage and security interest. To the extent, if any, that
this Lease and any Lease Supplement constitutes chattel paper (as such term is
in effect in any applicable jurisdiction), no security interest in this Lease or
any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
74
<PAGE> 79
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By:
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By:
-------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
__th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By:
-------------------------------
Name:
Title:
75
<PAGE> 80
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of May 29, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
* The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document.
** The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, together with Lease Supplement No. 1 dated May 29,
1997, to the Lease
- ----------
* This language for Lease Supplement No. 1.
** This language for other Lease Supplements.
<PAGE> 81
EXHIBIT A
PAGE 2
Agreement, has been recorded by the Federal Aviation Administration on
__________, 1997, as one document and assigned Conveyance No. ___________.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______; and
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______]3/ (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The closing date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof. Except as otherwise provided in the
Lease, the Term for the Aircraft shall commence on the closing date and end on
the seventh anniversary thereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
for all purposes hereof and of the Lease as being airworthy, in good working
order and repair and without defect or inherent vice in title, condition,
design, operation or fitness for use; provided, however, that nothing contained
herein or in the Lease shall in any way diminish or otherwise affect any right
Lessee or Lessor may have with respect to the Aircraft against the manufacturer,
any affiliate thereof, or any subcontractor or supplier of the manufacturer or
any affiliate thereof, under any purchase agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 82
EXHIBIT A
PAGE 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By:
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By:
-------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on May __, 1997.
BANKERS TRUST COMPANY,
as Agent
By:
-------------------------------
Name:
Title:
<PAGE> 83
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 84
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 85
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE
<PAGE> 1
EXHIBIT 10.63
---------------------------------------------------------------------------
LEASE AGREEMENT
(N509MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-200 Aircraft
U.S. Registration No. N509MC
Manufacturer's Serial No. 21221
---------------------------
---------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page
SECTION 1. Definitions............................................................................ 1
SECTION 2. Acceptance and Lease................................................................... 22
SECTION 3. Term and Rent.......................................................................... 22
(a) Term and Basic Rent.............................................................. 22
(b) Adjustments to Basic Rent........................................................ 22
(c) Supplemental Rent................................................................ 22
(d) Payments in General.............................................................. 23
(e) Minimum Rent..................................................................... 23
(f) Prepayment of Rent Payments...................................................... 24
SECTION 4. Certain Representations and Warranties................................................. 25
SECTION 5. Lessee's Representations and Warranties................................................ 26
SECTION 6. Lessee's Affirmative Covenants......................................................... 32
SECTION 7. Lessee's Negative Covenants............................................................ 39
SECTION 8. Return of the Aircraft................................................................. 48
(a) Condition Upon Return............................................................ 48
(b) Overhaul and Repair.............................................................. 49
(c) Repairs.......................................................................... 49
(d) Modifications.................................................................... 49
(e) Airworthiness Directives......................................................... 49
(f) Return of the Engines............................................................ 49
(g) Deferred Maintenance............................................................. 50
(h) Corrosion Treatment Corrosion Treatment.......................................... 50
(i) Manuals.......................................................................... 50
(j) torage Upon Return............................................................... 50
(k) Severable Parts.................................................................. 50
(l) Survival......................................................................... 51
SECTION 9 Liens.................................................................................. 51
SECTION 10 Registration, Maintenance and Operation; Possession and Subleases; Insignia............ 51
(a) Maintenance and Operation........................................................ 51
(b) Possession....................................................................... 53
(c) Insignia......................................................................... 55
(d) Holding Out...................................................................... 55
(e) No Pledging of Credit............................................................ 55
SECTION 11 Replacement and Pooling of Parts; Alterations, Modifications and
Additions.............................................................................. 56
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 12 Indemnities............................................................................ 58
SECTION 14 Insurance.............................................................................. 61
SECTION 15. Assignment............................................................................. 64
SECTION 16 Events of Default...................................................................... 64
SECTION 17. Remedies............................................................................... 67
SECTION 18. Lessee's Cooperation Concerning Certain Matters....................................... 70
SECTION 19. Notices................................................................................ 70
SECTION 20. Net Lease, True Lease, etc............................................................. 71
SECTION 21. Purchase Option........................................................................ 72
(a) Purchase Options................................................................. 72
(b) Notice to Purchase............................................................... 73
SECTION 22. Lessor's Right to Perform for Lessee................................................... 73
SECTION 23. Miscellaneous.......................................................................... 73
SECTION 24. Security for Lessors Obligations....................................................... 74
</TABLE>
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
ii
<PAGE> 4
LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suitable for installation
<PAGE> 5
and use on the Airframe; provided that such 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 747-200
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immediately
preceding the date of calculation, and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization
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and Consolidated Rental Payments, to the extent included in computing
consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" shall mean the Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts; provided
that the assets received by the Lessee or any Subsidiary have a fair market
value at least equal to the assets transferred (provided that with respect to
any asset swap or series of related asset swaps involving assets of Lessee or
any Subsidiary with a fair market value
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<PAGE> 7
exceeding $3,000,000, such determination shall be made by the Board of Directors
of Lessee)) and (D) asset sales involving obsolete, worn-out, excess or
redundant equipment as long as the proceeds therefrom are used to replace or to
upgrade the aircraft or the equipment installed thereon.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
"Atlas One Leases" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized"
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<PAGE> 8
(as defined in the regulations of its primary Federal banking regulator) and (b)
has Tier I capital (as defined in such regulations) of not less than
$100,000,000; and (v) shares of any money market mutual fund that (a) has at
least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"Consolidated Fixed Charges" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that
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<PAGE> 9
portion attributable to Capital Leases in accordance with GAAP and capitalized
interest) of Lessee and its Subsidiaries on a consolidated basis with respect
to all outstanding Indebtedness of Lessee and its Subsidiaries, including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs under Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Lessee or is merged
into or consolidated with Lessee or any of its Subsidiaries or that Person's
assets are acquired by Lessee or any of its Subsidiaries, (iii) the income of
any Subsidiary of Lessee to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person
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<PAGE> 10
incurring the Contingent Obligation is to provide assurance to the obligee of
such obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof, (ii) with respect to any letter of credit
issued for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings, or (iii) under Interest Rate Agreements
and Currency Agreements. Contingent Obligations shall include, without
limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (Y) to
maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"Credit Agreement" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bankers Trust Company, as Agent as such agreement may be amended,
modified, waived, or supplemented from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement
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designed to protect Lessee or any of its Subsidiaries against fluctuations in
currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension Indebtedness
and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Dividend" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the four Pratt & Whitney JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of the
General Electric
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<PAGE> 12
CF6-50E2 aircraft engines for the aircraft bearing U.S. registration numbers
N505MC, N507MC, N508MC, N509MC and N516MC listed by manufacturer's serial
numbers in the initial Lease Supplement and installed on the Airframe at the
time of the delivery to Lessee of such Airframe, whether or not from time to
time thereafter installed on such Airframe or any other airframe; (ii) any
Acceptable Alternate Engine which may from time to time be substituted for
any of such four engines pursuant to the terms of the Lease; and (iii) in any
case, any and all Parts which are from time to time incorporated or installed in
or attached to any such engine and any and all parts removed therefrom so long
as title thereto remains vested in Lessor in accordance herewith. The term
"Engines" means, as of any date of determination, all Engines then leased under
this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
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"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or disappearance
of such Aircraft); (B) the destruction, damage beyond repair or rendition of
such Aircraft permanently unfit for normal use for any reason whatsoever; (C)
the condemnation, confiscation or seizure of, or requisition of title to, or use
or possession (other than use by the United States Government if Lessee obtains
adequate compensation from the United States Government) of such Aircraft; (D)
as a result of any rule, regulation, order or other action by the FAA or other
governmental body having jurisdiction, the use of such Aircraft in the normal
course of interstate air transportation of persons or cargo shall have been
prohibited for a period of more than nine consecutive months unless Lessee,
prior to the expiration of such nine month period, shall have undertaken and
shall be diligently carrying forward all steps which are necessary or desirable
to permit the normal use of such property by Lessee or, in any event, if such
use shall have been prohibited for a period of twelve consecutive months; (E)
the operation or location of such Aircraft, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area excluded
from coverage by any insurance policy in effect with respect to such Aircraft,
if Lessee shall be unable to obtain indemnity or "war-risk" insurance in lieu
thereof from the United States; (F) any damage which results in an insurance
settlement with respect to such Aircraft on the basis of an actual or
constructive total loss or (G) a divestiture of such Airframe as described in
Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft Chattel Mortgage under the
Credit Agreement. 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 of the
Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means the ING Obligations and the Lufthansa
Obligations.
"Fair Market Sales Value" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-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 by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
Lessee, or, if such appraiser cannot be agreed to within 20 days, then either
party may apply to the American Arbitration Association (or any successor
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<PAGE> 14
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining 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 8 of this Lease, that all modifications and improvements shall be taken
into account, that Lessee has removed all Parts which it is entitled to remove
pursuant to Section 11 of this Lease and that the Aircraft is not encumbered by
this Lease. Except as otherwise expressly provided in the Lease, all appraisal
costs will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Financed Aircraft" means all Financed Aircraft under and as defined in the
Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
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of the accounting profession. Financial statements and other information
required to be delivered by Lessee to Lessor, Agent and Lenders pursuant to
clauses (1), (2), (3) and (12) of subsection 6(a) hereunder shall be prepared
in accordance with GAAP as in effect as of the date of such preparation.
Calculations in connection with the definitions, covenants and other provisions
of this Lease shall utilize accounting principles and policies in conformity
GAAP as in effect as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING Financing Agreement" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale Nederlanden
Aviation Lease B.V., as amended by Amendment No. 1 thereto and as further
amended, restated, supplemented and otherwise modified from time to time.
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"ING Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by Lessee or any of its Subsidiaries to any other Person
(other than a wholly-owned Subsidiary of Lessee), including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Leases" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented from
time to time (including this Lease). The term "Lease" shall include any Lease
Supplement entered into pursuant to the respective Lease.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the
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<PAGE> 17
Aircraft under and pursuant to the terms of the Lease, and any subsequent
Lease Supplement entered into in accordance with the terms of the Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings with
Lessee or the transactions contemplated by this Lease or the operation of
the Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the
United States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority of any
jurisdiction if and to the extent that such Tax results from (i) the use
(or to and/or from) operation, presence or registration of the Aircraft,
the Airframe, any Engine or any Part in the jurisdiction imposing the Tax,
or (ii) the situs of organization, any place of business or any activity of
Lessee or any other Person having use, possession or custody of the
Aircraft, the Airframe, any Engine or any Part in the jurisdiction imposing
the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by this
Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
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<PAGE> 18
"Lufthansa Agreement" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"Lufthansa Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"Nationsbank Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later
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<PAGE> 19
than the end of the Term and (iii) the amortization and the other terms,
provisions, conditions, covenants and events of default thereof taken as
a whole shall be no more onerous or restrictive from the perspective of Lessee
and its Subsidiaries or any less favorable, from the perspective of Lessor or
Lenders, than any other Designated Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as title thereto shall vest in Lessor
in accordance with this Lease.
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade
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<PAGE> 20
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects, encroachments
or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.(i), (b) restriction or encumbrances that
the interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated
Credit Agreement; and
(xii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of such Indebtedness, plus
the amount of expenses
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of Lessee incurred in connection with such extension, (iii) in the case of any
extension of subordinated Indebtedness, such Permitted Extension Indebtedness
is made subordinate to the obligations of Lessee hereunder at least to the same
extent as the Indebtedness immediately prior to such extension, (iv) such
Permitted Extension Indebtedness has a final stated maturity later than the end
of the stated maturity of the Indebtedness being extended immediately prior to
such extension and (v) the amortization and the other terms, provisions,
conditions, covenants and events of default thereof taken as a whole shall be
no more onerous or restrictive from the perspective of Lessee and its
Subsidiaries or any less favorable, from the perspective of Lessor and Lenders
than those contained in the Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement .
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action which
requires compliance
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<PAGE> 22
on a Pro Forma Basis. In making any determination of compliance on a Pro Forma
Basis, such determination shall be performed after good faith consultation with
Lessor and Agent using the consolidated financial statements of Lessee and its
Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition or other
related action had been consummated at the beginning of the period specified in
the covenant with respect to which Pro Forma Basis compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"S&P" means Standard & Poor's Corporation.
"Second Amended and Restated Credit Agreement" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options,
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<PAGE> 23
warrants, bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of
the foregoing.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately
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prior to such date, as such amount may be reduced in accordance with Section
3(f) plus all accrued and unpaid interest on the Loans relating to the
Aircraft on the date of determination.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and ending
on the seventh anniversary of the Initial Borrowing Date, or such earlier date
as the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing by
Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"Transaction Documents" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of the
ING Obligations and the Lufthansa Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Dividend and
the Contribution.
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<PAGE> 25
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft as evi Supplement leasing the Aircraft hereunder. Lessee
agrees to appoint in writing one or more of its employees as its authorized
representative to accept delivery of the Aircraft pursuant to the terms hereof.
Lessee hereby agrees that acceptance of delivery by such employee or employees
shall, without further act, irrevocably constitute acceptance by Lessee of the
Aircraft for all purposes of this Lease Agreement.
SECTION 3. Term and Rent
(a) Term and Basic Rent. The Term shall commence on the Initial Borrowing
Date and end on the seventh anniversary of the Initial Borrowing Date or such
earlier date as this Lease may be terminated in accordance with the provisions
hereof. Basic Rent shall accrue during the Term in accordance with Exhibit B
hereto. Lessee shall pay to Lessor on each Basic Rent Payment Date an amount of
Basic Rent specified opposite each Basic Rent Payment Date on Exhibit B hereto
as such amounts may be adjusted pursuant to Section 3 plus accrued interest on
Basic Rent previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and notified to
Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on such
Basic Rent Payment Date and determined in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic
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Rent. Lessee also will pay to Lessor, or to whomsoever shall be entitled
thereto, as assignee of Lessor, on demand, as Supplemental Rent, (i) interest
at the Past Due Rate with respect to any part of any installment of Basic Rent
not paid when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid when due for the period and, to the
extent permitted by law, on interest accrued on Basic Rent which itself was
accrued and not paid to the extent such accrued interest was not paid when due
until the same shall be paid and on any other amounts payable hereunder which
are not paid when due and (ii) all amounts payable by Lessor pursuant to
subsections 2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however,
to the extent any Supplemental Rent required to be paid pursuant to this clause
(ii) of subsection 2(c) has been paid by Lessee pursuant to the terms of
another Lease, then Lessee's obligations hereunder shall be deemed to be
satisfied by the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and other unpaid Obligations (other than
principal and interest on other Loans relating to other aircraft leased pursuant
to the other Leases and after taking into account all other payments of rent
pursuant to the other Leases on such date), then such excess amounts shall be
paid by the Agent to Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent
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due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
all other unpaid Obligations of Lessor (other than principal and interest
on Loans relating to other Aircraft and after taking into account all other
payments of Stipulated Loss Value pursuant to the other Leases on such
date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately prepay an amount of Basic Rent equal to the amount
of such required prepayment less any required payments of the Loans
relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section
3(f)(ii), the schedules of Basic Rent and Stipulated Loss Value, shall be
adjusted so as to preserve the after tax yield and after tax cash flows of
the Lessor and, to the extent consistent therewith, to minimize the net
present value of Basic Rent payments. All such computations shall be made
on the basis of the same assumptions and the method of computations
employed in the original calculations of Basic Rent and Stipulated Loss
Values (except to the extent such assumptions have been changed as a result
of such prepayment or any prior such adjustment). At the Lessee's written
request, independent public accountants mutually selected by the Lessor and
the Lessee shall confirm the required
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adjustments. The final determination of any adjustment hereunder shall be
set forth in amendments to this Lease, executed and delivered by the
Lessor, the Lessee and consented to by the Agent. The reasonable fees,
cost and expenses of the verifying accounting firm shall be paid by the
Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE ARE OF
A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE
AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND
EACH ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY
LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED
TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor covenants that
it will not, through its own actions or inactions, in such capacity, interfere
in Lessee's quiet enjoyment of the Aircraft unless this Lease shall have been
declared or deemed to have been declared in default pursuant to Section 17
hereof. None of the provisions of this Section 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 any manufacturer, any
affiliate thereof, any subcontractor or supplier of any manufacturer or any
affiliate thereof, with respect to the Airframe, Engines, or any Parts, or to
release the manufacturer, any affiliate thereof, or any such subcontractor or
supplier from any such representation, warranty or obligation. Unless a Default
or Lease Event of Default shall have occurred and be continuing, Lessor agrees
to make available to Lessee such rights as Lessor may have under any warranty
with respect to the Aircraft made by the manufacturer or any affiliate thereof
or any of its subcontractors or suppliers and any other claims against the
manufacturer or any affiliate thereof, or any such subcontractor or supplier
with respect to the
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Aircraft, all pursuant to and in accordance with the terms of any
applicable purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Lessee has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into this Lease and the other
Transaction Documents and to carry out the transactions contemplated hereby
and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do
business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations,
except in jurisdictions where the failure to be so qualified or in good
standing has not had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the
Initial Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto.
The capital stock of each of the Subsidiaries of Lessee identified in
Schedule 5(a)(iii) annexed hereto (as so supplemented) is duly authorized,
validly issued, fully paid and nonassessable and none of such capital stock
constitutes Margin Stock. Each of the Subsidiaries of Lessee identified in
Schedule 5(a)(iii) annexed hereto is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction
of incorporation set forth therein, has all requisite corporate power and
authority to own and operate its properties and to carry on its business as
now conducted and as proposed to be conducted, and is qualified to do
business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in
each case except where failure to be so qualified or in good standing or a
lack of such corporate power and authority has not had and will not have a
Material Adverse Effect. Schedule 5(a)(iii) annexed hereto correctly sets
forth the ownership interest of Lessee and each of its Subsidiaries in each
of the Subsidiaries of Lessee identified therein.
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(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery
and performance of this Lease and the other Transaction Documents have been
duly authorized by all necessary corporate action on the part of Lessee or
its Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee
or its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated
by the Transaction Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to Lessee or
any of its Subsidiaries, the Certificate or Articles of Incorporation or
Bylaws of Lessee or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on Lessee or any
of its Subsidiaries, (ii) conflict with in any material respect, result in
a material breach of or constitute (with due notice or lapse of time or
both) a material default under any material Contractual Obligation of
Lessee or any of its Subsidiaries, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of Lessee or
any of its Subsidiaries (other than any Liens created under this Lease or
any of the other Transaction Documents in favor of the Agent on behalf of
the Lenders), or (iv) require any approval of stockholders or any approval
or consent of any Person under any Contractual Obligation of Lessee or any
of its Subsidiaries, except for such approvals or consents which will be
obtained on or before the Initial Borrowing Date and disclosed in writing
to Lessor and Lenders.
(iii) Governmental Consents.. The execution, delivery and performance
by the Lessee and its Subsidiaries, as the case may be, of this Lease and
the other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and
will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body which has not been obtained or
made on or prior to the date required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its
Subsidiaries, as the case may be, to the extent it is a party thereto, and
is the legally valid and binding obligation of each such Person,
enforceable against each such Person in accordance with its respective
terms, except as may be limited
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by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at December 31, 1996, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Lessee and its Subsidiaries for the fiscal year then ended, (ii) the
unaudited consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at March 31, 1997 and the related unaudited consolidated
and consolidating statements of income, stockholders' equity and cash flows
of Lessee and its Subsidiaries for the three months then ended. All such
statements were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated and, where applicable, consolidating
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case
of any such unaudited financial statements, to changes resulting from audit
and normal year-end adjustments. Neither Lessee nor any of its Subsidiaries
has (and will not following the Initial Borrowing Date) have any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the
foregoing financial statements or the notes thereto and which in any such
case is material in relation to the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Lessee or any of
its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of
any nature whatsoever (whether absolute, accrued, contingent or otherwise
and whether or not due) which, either individually or in aggregate, could
reasonably be expected to be material to Lessee and its Subsidiaries taken
as a whole. As of the Initial Borrowing Date, Lessee does not know of any
basis for the assertion against it of any liability or obligation of any
nature whatsoever that is not fully disclosed in the financial statements
delivered pursuant to Section 5(c)(A) which, either individually or in the
aggregate, could reasonably be expected to be material to Lessee and its
Subsidiaries taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
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Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
(i) Lessee and its Subsidiaries have (i) good, sufficient and legal
title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or
personal property), or (iii) good title to (in the case of all other
personal property), all of the properties and assets reflected in the
financial statements referred to in subsection 5(c) or in the most recent
financial statements delivered pursuant to subsection 6(a), in each case
except for assets disposed of since the date of such financial statements
in the ordinary course of business or as otherwise permitted under
subsection 7(g). Except as permitted by this Lease, all such properties and
assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor any of its Subsidiaries is (i) in violation of any applicable
laws that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect or (ii) subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and pay-
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able have bee paid when due and payable. Lessee does not know of any proposed
tax assessment against Lessee or any of its Subsidiaries which is not being
actively contested by Lessee or such Subsidiary in good faith and by appro-
priate proceedings; provided that such reserves or other appropriate provisions,
if any, for liabilities for taxes as shall be required in conformity with GAAP
shall have been made or provided in the financial statements of Lessee.
There are no agreements with respect to taxes between Lessee and any tax
agency or authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
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(i) All facilities and operations of the Lessee and its Subsidiaries
are, and have been to the best of Lessee's knowledge, in compliance in all
material respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity, (a) arising at any facilities owned or
operated by Lessee or (b) arising in connection with the operations of
Lessee or any of its Subsidiaries (including the transportation of
Hazardous Materials), which conditions, occurrences or Hazardous Materials
Activity could reasonably be expected to form the basis of an Environmental
Claim against Lessee and which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or
threatened Environmental Claims against Lessee or any of its Subsidiaries,
and neither Lessee nor any of its Subsidiaries has received no written
notices, inquiries, or requests for information with respect to any
Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
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that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such monthly
financial statements shall only be required to be delivered to Agent to the
extent such monthly financial statements are required to be delivered under
the Second Amended and Restated Credit Agreement as such agreement may be
amended, modified, supplemented, renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12), all in reasonable detail and certified by the chief
fi-
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nancial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
and (b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter; provided that
delivery of Lessee's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6(a)(12) for the fiscal year covered by
such financial statements, all in reasonable detail and certified by the
chief financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Lessee and satisfactory to Lessor and Agent, which report shall be
unqualified, shall express no doubts about the ability of Lessee and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a) and
(b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each delivery
of financial statements of Lessee supervision, supervision, and its
Subsidiaries pursuant to subdivisions (2) and (3)
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above after the Initial Borrowing Date, (a) an Officers' Certificate of
Lessee stating that the signers have reviewed the terms of this
Lease and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition
of Lessee and its Subsidiaries during the accounting period covered
by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes a Default
or Lease Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section 7;
(5) Pricing Certificates: On or after the third anniversary of the
Initial Borrowing Date, a certificate setting forth the credit rating on
Lessee's obligations under the Pass Through Trust Documents, (a) together
with each delivery of financial statements of Lessee pursuant to
subdivisions (2) and (3) above, (b) within one Business Day after any
public release by S&P or Moody's lowering its credit rating on Lessee's
obligations under the Pass Through Trust Documents and (c) at such
additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Lease Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Lease Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (4) above is not
correct or that the matters set forth in the Compliance Certificates
delivered therewith pursuant to clause (b) of subdivision (4) above for the
applicable fiscal year are not stated in accordance with the terms of this
Lease;
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(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
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(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the
end of each fiscal quarter of Lessee, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting,
Lessee or any of its Subsidiaries equal to or greater than $1,000,000
and promptly after request by Lessor and Agent such other information
as may be reasonably requested by Lessor and Agent to enable Agent and
their counsel to evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or Agent
shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
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Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such Subsidiary
may be terminated if such termination is in the interests of Lessee and its
Subsidiaries and is not materially disadvantageous to Lessor or to any assignee
of the Lease. Lessee will at all times maintain its corporate existence as a
United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all
claims (including, without limitation, claims for labor, services,
materials and supplies) for sums that have become due and payable and that
by law have or may become a Lien upon any of its properties or assets,
prior to the time when any penalty fine or interest shall be incurred with
respect thereto; provided that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such reserve or other
appropriate provision, if any, with respect to any liability for taxes, as
shall be required in conformity with GAAP shall have been made therefor in
the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with
any Person (other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage (including, without limitation, flood
insurance, if necessary or advisable) of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses.
(e) Inspection; Lender Meeting.
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Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine, and its and their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants (provided that Lessee may, if it so chooses,
be present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and as often as may be
reasonably requested; provided that so long as no Lease Event of Default shall
have occurred and be continuing, such inspection shall not be disruptive to
Lessee's business, as reasonably determined by Lessee. Without in any way
limiting the foregoing, Lessee will, upon the request of Lessor or Agent,
participate in a meeting of Agent and Lenders once during each fiscal year to be
held at Lessee's corporate offices (or such other location as may be agreed to
by Lessee, Lessor and Agent) at such time as may be agreed to by Lessee, Lessor
and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which could reasonably be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event Lessee or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any facility, Lessee or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Lessee or such Subsidiary. Notwithstanding
anything to the contrary contained in this Lease, Lessee and its Subsidiaries
may engage in the transportation of Hazardous Materials in the ordinary course
of business so long as such is
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conducted in compliance with all applicable Environmental Laws, and all
other applicable laws, policies, orders, directives and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA Affiliate
to establish any Employee Benefit Plan which, in either case, could reasonably
be expected to result in a liability for Lessee, under Title IV of ERISA or the
minimum funding standards of Part 3 of Subtitle B of Title I of ERISA, in excess
of $20 million.
SECTIN 7. Lessee's negative Covenants. Lessee covenants and agrees that, so
long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
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<PAGE> 43
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") to Consolidated Adjusted
EBITDA for the four-fiscal quarter period ending on such Determination Date
did not exceed 4.5:1.0, (ii) the ratio of Consolidated Adjusted EBITDA for
such four-fiscal quarter period to Consolidated Interest Expense for such
four-fiscal quarter period was not less than 3.0:1.0; and (iii) Lessee will
be in compliance with all covenants set forth in subsection 7(f) hereof,
Lessee and its Subsidiaries may incur Other Permitted Indebtedness; and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. PROHIBITION ON LIENS. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any state or under any similar recording or
notice statute, except:
(i) Permitted Encumbrances;
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(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
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<PAGE> 45
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal year;
provided that Lessee shall not incur liabilities related to any such Joint
Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time 10.5 million.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal
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<PAGE> 46
amount of Indebtedness outstanding in accordance with Section 7(a)(8)
shall at no time exceed $30 million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
Expense for any four-fiscal quarter period ending as of the last day of
any fiscal quarter of Lessee occurring during any of the periods set forth
below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
=====================================
Minimum
Period Interest
Coverage Ratio
-------------------------------------
<S> <C>
fiscal year 1997 2.50:1.00
-------------------------------------
fiscal year 1998 2.75:1.00
-------------------------------------
fiscal year 1999 3.00:1.00
-------------------------------------
Thereafter 3.25:1.00
=====================================
</TABLE>
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<PAGE> 47
(ii) Minimum Fixed Charge Coverage Ratio. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated
Rental Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving
Credit Facility as in effect on the date hereof) for any four-fiscal
quarter period ending as of the last day of any fiscal quarter of Lessee
occurring during any of the periods set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION>
===================================================
Minimum Fixed
Period Charge Coverage
Ratio
---------------------------------------------------
<S> <C>
fiscal year 1997 1.25:1.00
---------------------------------------------------
Thereafter 1.10:1.00
===================================================
</TABLE>
(iii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Lessee in excess of $25 million as of such date) to
(ii) Consolidated Adjusted EBITBA for the four-fiscal quarter period ending
on such date to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
==============================================
Period Maximum
Leverage Ratio
<S> <C>
----------------------------------------------
fiscal year 1997 4.50:1.00
----------------------------------------------
fiscal year 1998 4.25:1.00
----------------------------------------------
fiscal year 1999 4.00:1.00
----------------------------------------------
Thereafter 3.75:1.00
==============================================
</TABLE>
(iv) Minimum Consolidated Net Worth. Lessee shall not permit
Consolidated Net Worth at any time during any of the periods set forth
below to be less than the correlative amount indicated:
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<PAGE> 48
<TABLE>
<CAPTION>
==================================================
Minimum
Period Consolidated
Net Worth
<S> <C>
--------------------------------------------------
fiscal year 1997 $120 million
--------------------------------------------------
fiscal year 1998 $145 million
--------------------------------------------------
fiscal year 1999 $170 million
--------------------------------------------------
Thereafter $195 million
==================================================
</TABLE>
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value
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<PAGE> 49
thereof; (y) the consideration received shall be at least 75% cash; and
(z) the proceeds of such Asset Sales shall be applied to repay permanently
senior bank debt or prepay Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of another
Person provided that, (a) the acquisition primarily involves the
acquisition of assets to be used in the business of Lessee, (b) with
respect to such acquisition any newly acquired or created subsidiary of
Lessee shall be a wholly-owned subsidiary, (c) immediately before and after
giving effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Lessee shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 7(f) and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance, (e)
Lessor and Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other liabilities not on
the balance sheet of Lessee assumed in connection with such acquisition and
a business plan prepared by Lessee with respect to such acquisition and (f)
the aggregate amount of cash payments made in connection with all such
acquisitions other than with the proceeds from sales or issuances of equity
by Lessee does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business; and
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in
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<PAGE> 50
any fiscal year may be carried forward to and made during the immediately
succeeding fiscal year (but no amount once carried forward to the
next fiscal year may be carried forward to any fiscal year thereafter).
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation or
bylaws to be amended or otherwise modified in any manner which could reasonably
be expected to have a Material Adverse Effect or (ii) any Material Agreement to
be amended or otherwise modified in any manner with respect to any provision
providing material representations and warranties to Lessee, indemnification
rights to Lessee, or limiting Lessee's remedies or rights upon the other party
to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
fiscal year do not exceed $60 million plus an amount not to exceed $12 million
during any fiscal year, equal to Consolidated Rental Payments incurred in
connection with sale leaseback transactions described in subsection 7(j) plus
Consolidated Rental Payments assumed pursuant to acquisitions permitted under
subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital Lease,
of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries intends
to use for substantially the same purpose as any other property which has been
or is to be sold or transferred by Lessee or any of its Subsidiaries to any
Person (other than Lessee or any of its Subsidiaries) in connection with such
lease; provided that Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to the
extent that Lessee or any of its Subsidiaries would be permitted to enter into,
and remain liable under, such lease under subsection 7(i).
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<PAGE> 51
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 10% or more of any class of equity
Securities of Lessee or with any Affiliate of Lessee or of any such holder, on
terms that are less favorable to Lessee or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
(i) reasonable and customary fees paid to and indemnification of members of the
Boards of Directors of Lessee and its Subsidiaries, (ii) reasonable and
customary salaries, bonuses and other compensation paid to and indemnification
of employees of Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of Lessee or (iii)
performance by Lessee of its obligations under and in accordance with the
Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
SECTION 8. Return of the Aircraft
(a) Condition Upon Return. Unless the Aircraft has been sold pursuant to
Section 21, if at any time the Lessee shall return the Aircraft to the Lessor
hereunder, Lessee, at its own expense, will return the Aircraft to Lessor at a
location specified by the Lessor to the Lessee in writing. At the time of such
return, (i) Lessee will cause the Aircraft to be in
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<PAGE> 52
compliance with the maintenance covenants contained in this Lease and
(ii) the Airframe will be fully equipped with the Engines installed thereon.
At the time of such return, such Airframe and Engines (A) shall have an air
worthiness certificate from the Federal Aviation Administration and shall be in
full compliance with the provisions of Federal Aviation Regulations, Part 121
(or successor regulation), and shall be in material compliance with all
applicable FAA noise, corrosion, environmental and aging aircraft requirements,
(B) shall be free and clear of all Liens and (C) shall be in a full freighter
configuration and in as good condition as when originally delivered to Lessee,
ordinary wear and tear excepted, and otherwise in the condition required to be
maintained under Lessee's FAA-approved maintenance plan; and in all such cases
the Aircraft shall not have been discriminated against as compared to other
aircraft owned or leased by Lessee whether by reason of its leased status or
otherwise in maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines and all Parts shall have
been, and shall be properly documented to have been, repaired or overhauled by
certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft shall have approval or certification by the FAA (or
its designee) or certification if required. All such modifications shall be
accompanied by complete data and documentation necessary to substantiate their
certification and approval and methods of compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe, 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
Acceptable Alternate Engine, in form and substance reasonably satisfactory
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<PAGE> 53
to Lessor (together with an opinion of 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 Acceptable Alternate Engines are
free and clear of all Liens) against receipt from Lessor of a bill of sale
evidencing the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft including
those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall have
been maintained by cleaning and treating all mild and moderate corrosion and
correcting of all severe or exfoliate corrosion in accordance with Lessee's
approved maintenance program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of this
Lease, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and maintenance, inspection, modification and overhaul records and
similar records required to be maintained with respect to the Aircraft and Parts
under FAA rules, the Aircraft maintenance program. If any such logs, manuals,
records or other data are missing, incomplete or otherwise not in accordance
with FAA standards applicable to Lessee, Lessee shall re-accomplish the
maintenance tasks necessary to produce such records in accordance with its
approved maintenance program prior to delivery of the Aircraft or otherwise
perform all necessary acts (without regard to any applicable waivers or
deferrals) to obtain such records in a manner satisfactory to the FAA and
Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, 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 Lessee's risk and at Lessee's expense for a
period not exceeding 30 days, and thereafter at Lessor's risk and at Lessor's
cost for insurance, maintenance and Lessee's out-of-pocket expenses for such
storage for a period not exceeding 90 days (provided that if such termination
occurs as a result of a Lease Event of Default hereunder, such storage shall be
at the cost of the Lessee), commencing on the date the Aircraft is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by Lessee and used by Lessee as a
location for the long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned to
Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable
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<PAGE> 54
nonproprietary Parts (other than Parts otherwise required by Sections 10 or 11
to be maintained on the Aircraft) 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 11 hereof. Lessor may, at its option, upon
30 days notice to Lessee, purchase any or all of such nonproprietary Parts from
Lessee upon expiration of the Term at their fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft, title
thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. Lessee will promptly, at its own expense,
take such action as may be necessary to duly discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia
(a) Maintenance and Operation. Lessee, at its own cost and expense, will
(i) be a "citizen of the United States" as defined in Section 40102(15) of Title
49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Aircraft to be duly registered
and remain duly registered in the name of Lessor in accordance with the Act and
otherwise registered under all applicable laws of the United States so as to be
eligible to operate in commercial air service under the Act; and (iii) will
service, repair, inspect, test, maintain and overhaul the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine and install replacement equipment and parts on the Airframe and each
Engine (A) so as to keep the Airframe and each Engine in such operating
condition as may be required to permit the Airframe and each Engine to be
utilized in commercial operations (B) so as to enable the airworthiness
certification of the Airframe to be maintained in good standing at all times
under the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of grounding) registered in the United States have
been grounded by the FAA; provided, however, that if following its issuance, the
United States FAA airworthiness certificate of the Aircraft shall be withdrawn,
then subject to the provisions of Section 13 hereof, so long as Lessee is
diligently taking or causing to be taken all necessary action to promptly
correct the condition which caused such withdrawal, no Lease Event of Default
shall arise from such withdrawal, (C) in accordance with Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same manner
and with the same care used by Lessee with re-
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spect to the same or similar aircraft and engines owned or operated by Lessee
so as to keep the same in as good operating condition as when originally leased
hereunder, ordinary wear and tear excepted, which practices shall at all times
be at or above the standard of the industry in the United States for prudent
maintenance of similar equipment, and (D) in such manner as may be necessary to
maintain in full force all warranties of the manufacturers thereof. Lessee
shall maintain all records, logs and other materials which may be required to
permit the Airframe and each Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
the Airframe or such Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine, Lessee, at its own cost and expense, will conform thereto or obtain
conformance therewith and will maintain the same in proper operating condition
under such laws, rules, regulations and orders, provided, however, that Lessee
may, in good faith (after having delivered to Lessor and Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's and Agent's opinion (in their sole discretion),
adversely affect the interests of Lessor, Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section 14
shall not be at the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the Airframe or such
Engine, except in the case of a requisition for use by the United States of
America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened area
of hostilities unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of the
term of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner or
for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be
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done, anything which, or omit to do anything the omission of which, may
invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine except that, unless a Default or Lease
Event of Default shall have occurred and be continuing, Lessee may without the
prior written consent of the Agent and Lessor, take the following actions so
long as the actions to be taken shall not deprive the Agent of the first
priority Lien under the Aircraft Chattel Mortgage in the assets subject thereto
and so long as the actions to be taken shall not deprive Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
and shall not deprive the Agent of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft as assignee of Lessee's rights
under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Lessee in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine; provided, however, that if
Lessee's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to the Airframe or such Engine and Lessee shall comply with Section
13 in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the Engines), appliances,
parts, instruments, appurtenances, accessories, furnishings and other
equipment (other than
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Parts) installed on such airframe (but not to the airframe as an
entirety), and (C) the rights of any Domestic Air Carrier, under normal
interchange agreements which are customary in the airline industry and
do not contemplate or require the transfer of title to such airframe or the
engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided:
(A) such airframe is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe and except Liens of the type permitted by clause
(iv) above; and (B) Agent and Lessor shall have received from the lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party of
such airframe a written agreement (which may be the lease, conditional sale
agreement or mortgage covering such airframe), whereby such lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any Engine by
reason of such Engine being installed on such airframe at any time when
such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current certificates
and licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided that Lessee's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI Contract or
wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate
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to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for
the maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and
provided further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness certificate)
with such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust
Company, as Agent" or such other legend, as shall in the opinion of Lessor and
Agent be appropriate or desirable to evidence the fact that it is subject to the
ownership of Lessor and the lien and security interest created by the Aircraft
Chattel Mortgage. Lessee shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or defacement,
shall promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, Lessee shall not allow the name of
any person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership or of
any security interest therein, except that Lessee or any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer on
the Airframe or any Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or any Part or any other operations or carriage undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, or any Part, or for any
other purpose whatsoever.
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SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and which
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair or testing, Lessee at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that, except as
otherwise provided in Section 11(d), Lessee at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall be
owned by Lessor free and clear of all Liens (except Permitted Encumbrances and
for pooling arrangements to the extent permitted by Section 11(b)), and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such parts were in the condition and
repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor and
shall thereupon become free and clear of all rights of Lessor hereunder and all
rights derivative of Lessor's and shall no longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in Section
11(a) may be subjected by Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the ordinary course
of its business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be incorporated
or installed in or attached to the Airframe or such Engine in accordance with
Section 11(a) as promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or attached to
the Air-
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frame or any Engine in accordance with Section 11(a) may be owned by any
third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or such Engine a further
replacement Part owned by Lessee which shall become the property of Lessor
subject to the lien and security interest of the mortgage free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the standards of the FAA or
other governmental authority having jurisdiction; provided, that Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or Agent's
respective interests. Lessee also agrees, at its own cost and expense, to make
or cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer relating to
the Airframe or any Engine. In addition so long as no Default or Lease Event of
Default shall have occurred and be continuing, Lessee, at its own cost and
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility, condition
or airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine were then in the condition and
airworthiness required to be maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement of or substitution for any such Part, (B) is not
required to be incorporated or installed in or attached or added to the Airframe
or such Engine pursuant to the terms of Section 10(a) hereof or any other
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provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from the Airframe or such Engine without diminishing or impairing the value,
utility or airworthiness which the Airframe or such Engine would have had at
such time had such alteration, modification or addition not occurred, assuming
the Airframe or such Engine was otherwise in the condition required by this
Lease and the Aircraft Chattel Mortgage. Upon the removal by Lessee of any such
Part, as above provided, title thereto shall, without further act, be free and
clear of the interests of Lessor and all rights derivative of Lessor's and such
Part shall no longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification of
the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or any part
thereof or interest therein by any Federal, state or local government or other
taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any part
thereof of interest therein; (ii) the manufacture, purchase, ownership,
mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage; provided,
however, that, there shall be excluded from any indemnification under this
Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien which may have attached as security for such Tax, nothing
in this Section shall require the payment of any Tax so long as and to extent
that validity thereof shall be contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and Lessee shall have
set aside on its books adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, employees, agents and affiliates
of Lessor, Agent and each Lender, (collectively called the "Indemnitees") from
and against any and all li-
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abilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, commenced or threatened by any Person,
whether or not any such Indemnitee shall be designated as a party or a
potential party thereto), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including without limitation securities and commercial laws, statutes, rules
or regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of this Lease or
the other Transaction Documents or the transactions contemplated hereby or
thereby (including without limitation Lenders' agreement to make the Loans to
Lessor or the use or intended use of the proceeds of any of the Loans)
(collectively called the "Indemnified Liabilities"); provided that Lessee shall
not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Lessee shall contribute the maximum portion that it
is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine, Lessee will promptly notify Lessor and Agent
thereof in writing (in any event within five (5) days of such occurrence) and
will, not later than 180 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Airframe or Acceptable Alternate
Engine, as the case may be. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will, as conditions to such transfer, (i) furnish
Lessor with a warranty (as to title) bill of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such Acceptable Alternate
Airframe or Acceptable Alternate Engine, (ii) cause a Lease Supplement to be
filed for recording pursuant to Title 49 of the United States Code, as amended,
(iii) furnish Lessor with such evidence of Lessee's title to such Acceptable
Alternate Airframe or Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 14 hereof with respect to such Acceptable
Alternate Airframe or Acceptable Alternate Engine as Lessor may reasonably
request, (iv) furnish Lessor with an opinion of Lessee's counsel to the effect
that title to such Acceptable Alternate Airframe or Acceptable Alternate Engine
has been duly conveyed to Lessor free and clear of all Liens except Permitted
Encumbrances and Lessor and Agent continue to have 1110 protection with respect
to such Aircraft and (v) transfer to or at the direction of Lessee without
recourse or warranty all of Lessor's right, title and
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interest, if any, in and to (A) the Airframe or Engine with respect to which
such Event of Loss occurred and furnish to or at the direction of Lessee,
at Lessee's expense, a bill ofsale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if any,
against third parties, for damage to or loss of the Airframe or Engine subject
to such Event of Loss, and such Airframe or Engine shall thereupon cease to be
an Airframe or Engine leased hereunder. Lessee shall cooperate with Lessor and
take all such actions as shall be requested by Lessor so that Lessor complies
with Section 4(f) of the Aircraft Chattel Mortgage. For all purposes hereof,
each such Acceptable Alternate Airframe or Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Airframe" or "Engine", as the case may be. No Event of Loss
under the circumstance contemplated by the terms of this paragraph (a) shall
result in any reduction in Basic Rent.
(b) With respect to the Airframe or any Engine, as between the Lessor and
Lessee, any payments on account of an Event of Loss (other than insurance
proceeds or other payments the application of which is provided for in Section
14 below) received from any government authority or other person shall be
applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee pursuant
to the terms hereof, so long as there shall exist no Default or Lease Event
of Default, such payment shall be paid over to or retained by Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by Lessor as security for the
obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine, Lessee shall promptly notify Lessor and Agent of
such requisition and all of Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe or such Engine, to the extent allocable to the Term, shall be paid
over to, or retained by, Lessee.
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(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft, at its own cost and expense, public liability
(including, without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee but
in no event in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of insurance
required by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in the same or
similar business and similarly situated with Lessee. Any policies of insurance
carried in accordance with this Section 14 and any policies taken out in
substitution or replacement of any such policies (A) shall be amended to name
Agent, Lenders and Lessor as additional named insureds, (B) shall be primary
without right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except the
limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft, at its own
cost and expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment while
removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) an
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C) hijacking (air
piracy) or any unlawful seizure or wrongful exercise of control of the Aircraft
or crew in flight (including any attempt
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at such seizure or control) made by any person or persons aboard the Aircraft
acting without the consent of the insured, if and to the extent the same
shall be maintained by Lessee with respect to similar aircraft owned or
operated by Lessee on the same routes or if the Aircraft is operated on routes
where the custom is for Domestic Air Carriers similarly situated with Lessee
flying comparable routes with similar aircraft to carry such insurance, of the
type usually carried by corporations engaged in the same or similar business
and similarly situated with Lessee; provided that such insurance (including a
self-insurance to the extent permitted below) shall at all times be for an
amount not less than the greater of the Stipulated Loss Value as of the closes
Stipulated Loss Determinate Date and $50,000,000. During any period when 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 this Section, insurance otherwise
conforming hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with respect to
similar aircraft by corporations engaged in the same or similar business and
similarly situated with Lessee for aircraft on the ground in an amount at least
equal to the applicable amount provided above. All such insurance shall name
Agent, Lenders and Lessor as additional insureds and loss payees to the extent
their interest may appear and shall provide that any loss to the Airframe or an
Engine in excess of $2,000,000 (and, if a Default or Lease Event of Default has
occurred and is continuing, any such loss) shall be payable to the Lessor and
to the Agent for the benefit of Lenders; and shall be primary without right of
contribution from any other insurance which is carried by Lessor or Agent with
respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the Aircraft and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided, however, that Lessee may not self-insure in an amount in excess of
$1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is
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cancelled, or if any material change is made in the coverage which affects the
interest of Lessor, Agent or any Lender, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall not be
effective as to Lessor, Agent or any Lender for thirty (30) days (seven (7)
days, or such shorter or longer period as may from time to time be customarily
available in the industry, in the case of any war risk and allied perils
coverage) after receipt by Agent and Lessor of written notice from such insurers
of such cancellation, change or lapse; (D) be in full force and effect
throughout any geographical areas at any time traversed by the Aircraft and
shall be payable in U.S. dollars; (E) waive any right of the insurers to any
setoff or counterclaim or any other deduction, whether by attachment or
otherwise in respect of any liability of Lessor and Agent; and (F) waive all
rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine, a valid
agreement by the United States or such agency or instrumentality to indemnify
Lessee against the same risks against which Lessee is required hereunder to
insure shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the subject
of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 14 and is adequate to protect
the interests of Lessee, Lessor and Agent, and (B) certificates of the insurer
or insurers evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee of
which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine
and (y) at least thirty (30) days prior to the expiration or termination date,
or date of effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
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(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee 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 14. No insurance maintained by Agent, Lessor or any Lender shall
prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or Lender shall
be paid as provided in the insurance policy relating thereto and no such Person
shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft. Lessor agrees that it will not assign or
convey its right, title and interest in and to this Lease or the Aircraft except
in accordance with the Credit Agreement. Subject to the foregoing, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective successors and permitted assigns and
shall inure, to the direct benefit of, and shall also be enforceable by the
Agent and the Lenders, and their respective successors, as assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
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(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
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(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, un-
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vacated, unbonded or unstayed for a period of 60 days (or in any event
later than five days prior to the date of any proposed sale thereunder); or
(n) (i) (a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities of Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons
acting in concert (in any such case, excluding Mr. Chowdry) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Lessee (or other Securities convertible into
such Securities) representing 20% or more of the combined voting power of
all Securities of Lessee entitled to vote in the election of directors,
other than Securities having such power only by reason of the happening of
a contingency or (c) the Board of Directors of Lessee shall not consist of
a majority of Continuing Directors or (ii) a "Change of Control" shall
occur under the Pass Through Trust Documents or any other Material
Agreement (as in effect on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e) (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines as Lessor in its sole
discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific
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performance, conferring the right to immediate possession upon the Lessor
and requiring Lessee to execute and deliver such instruments to the Lessor;
(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 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 17; and
without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) 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, any Basic Rent due on or before
the payment date so specified plus 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 after the date specified in such notice if any), an amount
equal to the Stipulated Loss Value for the Aircraft computed as of the
immediately preceding Stipulated Loss Determination Date, together with
interest, if any, at the Past Due Rate on the amount of such Basic Rent and
Stipulated Loss Value from the Stipulated Loss Determination Date as of
which Stipulated Loss Value is computed until the date of actual payment;
and upon such payment of liquidated damages and all Supplemental Rent then
due and payable by the Lessee hereunder, the Lessor shall transfer (without
any representation, recourse or warranty whatsoever) the Aircraft to the
Lessee and the Lessor shall execute and deliver such documents evidencing
such transfer and take such further action as the Lessee shall reasonably
request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph
(c) above with respect to such Aircraft, may, if it shall so elect, demand
that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of such
sale, any accrued rent with respect to the Aircraft due on or prior to such
date plus, as liquidated damages for loss of a bargain and not as a
penalty, 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 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;
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(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
in accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof, shall include, without limitation all logs,
manuals and data and inspection, maintenance, modification and overhaul and
similar records with respect thereto) in the condition and airworthiness
required by such Section. The Lessee hereby acknowledges that it shall be
directly liable for such costs and expenses to any Person designated by the
Lessor, the Agent or any Lender (as the case may be) to provide services in
connection with or to effect the return of the Airframe or any Engine in
accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof shall include, without limitation, such logs,
manuals and records) in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except as
otherwise expressly provided above, no remedy referred to in this Section 17 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to 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 17 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 17.
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Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or other Obligations (other than principal
and interest on Loans relating to other aircraft) are outstanding under the
Credit Agreement, all rights of Lessor under this Section 17 shall be exercised
only by the Agent as assignee of Lessor's rights under this Lease pursuant to
the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, Lessee at its expense
will promptly and duly execute and deliver to Lessor and the Agent such further
documents and take such further action as Lessor and the Agent may from time to
time reasonably request in order more effectively to carry out the intent and
purpose of this Lease and the other Transaction Documents and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor and Agent hereunder and under the other Transaction Documents, including,
without limitation, if requested by Lessor and the Agent, the execution and
delivery of supplements or amendments hereto, at the expense of Lessee, each in
recordable form, and all financing statements and continuation statements, and
all similar notices required by applicable law at all times to be kept recorded
and filed in such manner and such places as Lessor and the Agent may reasonably
request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of Lessor hereunder and the Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in
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writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(a) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Clark H. Onstad, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(b) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Gina Thompson.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration under Title
49 of the United States Code, as amended or other applicable law, condition,
design, compliance with specifications, operation or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any theft, interference,
interruption or cessation in or prohibition of the use or possession thereof by
the Lessee or any sublessee for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority, (iii) any Liens,
encumbrances or rights of any other Person with respect to the Aircraft, (iv)
the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any other Transaction Document or document or
instrument executed pursuant hereto or thereto, or any lack of right, power or
authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to the Aircraft,
Airframe, any Engine or any Part, (vi) any insolvency, bankruptcy,
reorganization or similar proceedings by or against the Lessee or any other
Person, or (vii) any failure, breach or delay by the Lessor or any other Person
in performing or complying with any term of this Lease or any other cause
whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason whatsoever, including any present or future claims of
Lessee against Lessor or any other Person under this Lease or otherwise. Lessee
hereby waives, and hereby agrees to waive at any future time at the request of
Lessor, to the full extent now or then 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
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otherwise, to terminate, cancel, quit or surrender this Lease except in
accordance with the express terms hereof. Each payment of Rent made by Lessee
to Lessor shall be final as to Lessor and Lessee. Lessee will not seek to
recover all or any part of any such payment of Rent from Lessor for any reason
whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Lease is possible, a construction which would
preserve such benefits shall control over any construction which would not
preserve such benefits or would render them doubtful. To the extent consistent
with the provisions of 11 U.S.C. ss. 1110 or any analogous section of the
Federal bankruptcy laws, as amended from time to time, it is hereby expressly
agreed, that notwithstanding any other provisions of the Federal bankruptcy law,
as amended from time to time, any right of the Lessor and the Agent, as assignee
of the Lessor under the Aircraft Chattel Mortgage, to take possession of the
Aircraft in compliance with the provisions of this Lease shall not be affected
by the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or
any analogue provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft at the end
of the Term for a purchase price equal to the higher of the Fair Market Sales
Value (assuming that the Aircraft is in the condition required by the Lease) as
of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of the full of such
amounts, 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.
-72-
<PAGE> 76
(b) Notice to Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and not exercise any purchase option under this Section 21. If Lessee
fails to give notice as required herein, Lessee will be deemed to have elected
to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, together
with interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as a lessee only. Neither Lessee nor any Affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft or with the parties' agreement that this
Lease be treated as a tax lease for purposes of the Internal Revenue Code. 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 reference herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE
AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT
IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP
ESTABLISHED HEREUN-
-73-
<PAGE> 77
DER OR THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE
DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE OF
LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION
DOCUMENT. This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessors Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so long
as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments; (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. Lessee
hereby acknowledges due notice of, and consents to, such assignment and to the
creation of such mortgage and security interest. To the extent, if any, that
this Lease and any Lease Supplement constitutes chattel paper (as such term is
in effect in any applicable jurisdiction), no security interest in this Lease or
any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
-74-
<PAGE> 78
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
-------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged
this __th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
-------------------------------
Name:
Title:
<PAGE> 79
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of May 29, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
*/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document.
**/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, together with Lease Supplement No. 1 dated May 29,
- ----------
*/ This language for Lease Supplement No. 1.
**/ This language for other Lease Supplements.
<PAGE> 80
EXHIBIT A
PAGE 2
1997, to the Lease Agreement, has been recorded by the Federal Aviation
Administration on _________ ___, 1997, as one document and assigned Conveyance
No. ____________.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______; and
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______]3/ (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The closing date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof. Except as otherwise provided in the
Lease, the Term for the Aircraft shall commence on the closing date and end on
the seventh anniversary thereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
for all purposes hereof and of the Lease as being airworthy, in good working
order and repair and without defect or inherent vice in title, condition,
design, operation or fitness for use; provided, however, that nothing contained
herein or in the Lease shall in any way diminish or otherwise affect any right
Lessee or Lessor may have with respect to the Aircraft against the manufacturer,
any affiliate thereof, or any subcontractor or supplier of the manufacturer or
any affiliate thereof, under any purchase agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
A-2
<PAGE> 81
EXHIBIT A
PAGE 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
-------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
-------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on May __, 1997.
BANKERS TRUST COMPANY, as
Agent
By
-------------------------------
Name:
Title:
<PAGE> 82
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
- ---- -------------------
[Confidential information intentionally deleted from FAA-filed
counterpart]
<PAGE> 83
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
----------------------
[Confidential information intentionally deleted from FAA-filed
counterpart]
[Also to include method of calculating reductions to Stipulated Loss
Values in the event of prepayments]
<PAGE> 84
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE
<PAGE> 1
EXHIBIT 10.64
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(N808MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-200 Aircraft
U.S. Registration No. N808MC
Manufacturer's Serial No. 21048
---------------------------
- -------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
----
SECTION 1. Definitions.............................................................................1
SECTION 2. Acceptance and Lease...................................................................22
SECTION 3. Term and Rent..........................................................................22
(a) Term and Basic Rent.............................................................22
(b) Adjustments to Basic Rent.......................................................22
(c) Supplemental Rent...............................................................22
(d) Payments in General.............................................................23
(e) Minimum Rent....................................................................23
(f) Prepayment of Rent Payments.....................................................24
SECTION 4. Certain Representations and Warranties.................................................24
SECTION 5. Lessee's Representations and Warranties................................................25
SECTION 6. Lessee's Affirmative Covenants.........................................................31
SECTION 7. Lessee's Negative Covenants............................................................38
SECTION 8. Return of the Aircraft.................................................................47
(a) Condition Upon Return...........................................................47
(b) Overhaul and Repair.............................................................47
(c) Repairs.........................................................................47
(d) Modifications...................................................................48
(e) Airworthiness Directives........................................................48
(f) Return of the Engines...........................................................48
(g) Deferred Maintenance............................................................48
(h) Corrosion Treatment.............................................................48
(i) Manuals.........................................................................48
(j) Storage Upon Return.............................................................49
(k) Severable Parts.................................................................49
(l) Survival........................................................................49
SECTION 9. Liens..................................................................................49
SECTION 10. Registration, Maintenance and Operation; Possession and Subleases;
Insignia...............................................................................49
(a) Maintenance and Operation.......................................................49
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(b) Possession......................................................................51
(c) Insignia........................................................................53
(d) Holding Out.....................................................................54
(e) No Pledging of Credit...........................................................54
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and
Additions..............................................................................54
SECTION 12. Indemnities............................................................................56
SECTION 13. Event of Loss..........................................................................57
SECTION 14. Insurance..............................................................................59
SECTION 15. Assignment.............................................................................62
SECTION 16. Events of Default......................................................................62
SECTION 17. Remedies...............................................................................65
SECTION 18. Lessee's Cooperation Concerning Certain Matters........................................67
SECTION 19. Notices................................................................................68
SECTION 20. Net Lease, True Lease, etc.............................................................69
SECTION 21. Purchase Option........................................................................70
(a) Purchase Option.................................................................70
(b) Notice of Purchase..............................................................70
SECTION 22. Lessor's Right to Perform for Lessee...................................................70
SECTION 23. Miscellaneous..........................................................................71
SECTION 24. Security for Lessor's Obligations......................................................72
</TABLE>
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
ii
<PAGE> 4
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
--------
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
iii
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"ACCEPTABLE ALTERNATE AIRFRAME" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"ACCEPTABLE ALTERNATE ENGINE" means a Pratt & Whitney JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suitable for installation and use
on the Airframe; provided that such engine shall be of the same make, model and
manufacturer as the other engines installed on the Airframe,
<PAGE> 6
shall be an engine of a type then being utilized by Lessee on other Boeing
747-200 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.
"ACMI CONTRACT" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI CONTRACTED AIRCRAFT" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immediately
preceding the date of calculation, and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
-2-
<PAGE> 7
"AFFILIATE" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGENT" shall mean the Agent under the Credit Agreement.
"AIRCRAFT" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"AIRCRAFT CHATTEL MORTGAGE" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"AIRFRAME" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"APPROVED APPRAISER" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"ASSET SALE" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts; provided
that the assets received by the Lessee or any Subsidiary have a fair market
value at least equal to the assets transferred (provided that with respect to
any asset swap or series of related asset swaps involving assets of Lessee or
any Subsidiary with a fair market value exceeding $3,000,000, such determination
shall be made by the Board of Directors of Lessee)) and (D) asset sales
involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
-3-
<PAGE> 8
"ATLAS ONE" means Atlas One, Inc., a Delaware corporation.
"ATLAS ONE LEASES" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASIC RENT" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"BASIC RENT PAYMENT DATE" means each date set forth on Exhibit B.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
-4-
<PAGE> 9
"CERTIFICATED AIR CARRIER" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
-5-
<PAGE> 10
"CONSOLIDATED NET INCOME" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Lessee or is merged
into or consolidated with Lessee or any of its Subsidiaries or that Person's
assets are acquired by Lessee or any of its Subsidiaries, (iii) the income of
any Subsidiary of Lessee to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indi-
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<PAGE> 11
rect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"CONTINUING DIRECTORS" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"CONTRIBUTION" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bankers Trust Company, as Agent as such agreement may be amended,
modified, waived, or supplemented from time to time.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"DEFAULT" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
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<PAGE> 12
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"DESIGNATED INDEBTEDNESS" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension Indebtedness
and any Other Permitted Indebtedness.
"DETERMINATION DATE" has the meaning assigned to that term in subsection
7(a)(6).
"DIVIDEND" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
"DOMESTIC AIR CARRIER" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"ELIGIBLE AIRCRAFT" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"ENGINE" means: (i) each of the four Pratt & Whitney JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of the
General Electric CF6-50E2 aircraft engines for the aircraft bearing U.S.
registration numbers N505MC, N507MC, N508MC, N509MC and N516MC listed by
manufacturer's serial numbers in the initial Lease Supplement and installed on
the Airframe at the time of the delivery to Lessee of such Airframe, whether or
not from time to time thereafter installed on such Airframe or any other
airframe; (ii) any Acceptable Alternate Engine which may from time to time be
substituted for any of such four engines pursuant to the terms of the Lease; and
(iii) in any case, any and all Parts which are from time to time incorporated or
installed
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<PAGE> 13
in or attached to any such engine and any and all parts removed
therefrom so long as title thereto remains vested in Lessor in accordance
herewith. the term "Engines" means, as of any date of determination, all Engines
then leased under this Lease.
"ENVIRONMENTAL CLAIM" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"EQUITY PROCEEDS" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"EVENT OF DEFAULT" means an Event of Default under and as defined in the
Credit Agreement.
"EVENT OF LOSS" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or disappearance
of such Aircraft); (B) the destruction, damage beyond repair or rendition of
such Aircraft permanently unfit for normal use for any reason whatsoever; (C)
the condemnation, confiscation or seizure of, or requisition of title to, or use
or possession (other than
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<PAGE> 14
use by the United States Government if Lessee obtains adequate compensation from
the United States Government) of such Aircraft; (D) as a result of any rule,
regulation, order or other action by the FAA or other governmental body having
jurisdiction, the use of such Aircraft in the normal course of interstate air
transportation of persons or cargo shall have been prohibited for a period of
more than nine consecutive months unless Lessee, prior to the expiration of such
nine month period, shall have undertaken and shall be diligently carrying
forward all steps which are necessary or desirable to permit the normal use of
such property by Lessee or, in any event, if such use shall have been prohibited
for a period of twelve consecutive months; (E) the operation or location of such
Aircraft, while under requisition for use by the United States or any
instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Aircraft, if Lessee shall be
unable to obtain indemnity or "war-risk" insurance in lieu thereof from the
United States; (F) any damage which results in an insurance settlement with
respect to such Aircraft on the basis of an actual or constructive total loss or
(G) a divestiture of such Airframe as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage under the Credit Agreement. 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 of the Aircraft.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"EXISTING INDEBTEDNESS" means the ING Obligations and the Lufthansa
Obligations.
"FAIR MARKET SALES VALUE" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-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 by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
Lessee, or, if such appraiser cannot be agreed to within 20 days, then either
party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining 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 8 of this Lease, that all modifications and improvements shall be taken
into account, that Lessee has removed all Parts which it is entitled to remove
pursuant to Section 11 of this Lease and
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<PAGE> 15
that the Aircraft is not encumbered by this Lease. Except as otherwise expressly
provided in the Lease, all appraisal costs will be shared equally by Lessor and
Lessee.
"FEDERAL AVIATION ACT" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"FINANCED AIRCRAFT" means all Financed Aircraft under and as defined in the
Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"FOREIGN AIR CARRIER" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"FUNDING AND PAYMENT OFFICE" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
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<PAGE> 16
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Lessee.
"INDEBTEDNESS" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in
subsection 12(b) hereunder.
"INDEMNITEE" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING FINANCING AGREEMENT" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale Nederlanden
Aviation Lease B.V., as amended by Amendment No. 1 thereto and as further
amended, restated, supplemented and otherwise modified from time to time.
"ING OBLIGATIONS" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"INITIAL BORROWING DATE" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
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<PAGE> 17
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by Lessee or any of its Subsidiaries to any other Person
(other than a wholly-owned Subsidiary of Lessee), including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LEASES" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented from
time to time (including this Lease). The term "Lease" shall include any Lease
Supplement entered into pursuant to the respective Lease.
"LEASE EVENT OF DEFAULT" has the meaning specified in Section 16 of this
Lease.
"LEASE SUPPLEMENT" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
and any subsequent Lease Supplement entered into in accordance with the terms of
the Lease.
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<PAGE> 18
"LENDER" or "LENDERS" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"LESSEE" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"LESSOR" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"LESSOR TAX" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or the transactions contemplated by this Lease or the
operation of the Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organization, any place of
business or any activity of Lessee or any other Person having use,
possession or custody of the Aircraft, the Airframe, any Engine or any
Part in the jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"LOAN" or "LOANS" means the term loans made under the Credit Agreement.
"LOAN DOCUMENTS" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
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<PAGE> 19
"LUFTHANSA AGREEMENT" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"LUFTHANSA OBLIGATIONS" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"MATERIAL AGREEMENT" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"MOODY'S" means Moody's Investors Service, Inc.
"NATIONSBANK AGREEMENT" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"OBLIGATIONS" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"OPERATING LEASE" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"OTHER PERMITTED INDEBTEDNESS" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears inter-
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<PAGE> 20
est at a rate which does not exceed 15% per annum, (ii) such Indebtedness has a
final stated maturity later than the end of the Term and (iii) the amortization
and the other terms, provisions, conditions, covenants and events of default
thereof taken as a whole shall be no more onerous or restrictive from the
perspective of Lessee and its Subsidiaries or any less favorable, from the
perspective of Lessor or Lenders, than any other Designated Indebtedness.
"PART" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as title thereto shall vest in Lessor
in accordance with this Lease.
"PASS THROUGH TRUST DOCUMENTS" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"PAST DUE RATE" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
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<PAGE> 21
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.(i), (b) restriction or encumbrances that
the interest or title of such lessor or sublessor may be subject to, or
(c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated Credit
Agreement; and
(xii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"PERMITTED EXTENSION INDEBTEDNESS" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of such Indebtedness, plus
the amount of expenses of Lessee incurred in connection with such extension,
(iii) in the case of any extension of subordinated Indebtedness, such Permitted
Extension Indebtedness is made subordinate to the obligations of Lessee
hereunder at least to the same extent as the Indebtedness immediately prior to
such extension, (iv) such Permitted Exten-
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<PAGE> 22
sion Indebtedness has a final stated maturity later than the end of the stated
maturity of the Indebtedness being extended immediately prior to such extension
and (v) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor and Lenders than those contained in
the Indebtedness immediately prior to such extension.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"PHILIPPINE LEASES" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement .
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"PRO FORMA BASIS" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action which
requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Lessor and Agent using the consolidated financial
statements of Lessee and its Subsidiaries which shall be reformulated as if any
such incurrence of Indebtedness
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and the application of proceeds, acquisition, disposition or other related
action had been consummated at the beginning of the period specified in the
covenant with respect to which Pro Forma Basis compliance is required.
"PROCEEDINGS" has the meaning assigned to that term in subsection 6(a)(10).
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"RENT" means Basic Rent and Supplemental Rent, collectively.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"S&P" means Standard & Poor's Corporation.
"SECOND AMENDED AND RESTATED CREDIT AGREEMENT" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in
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<PAGE> 24
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SERVICES AGREEMENT" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SPECIAL PURPOSE SUBSIDIARY" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"STIPULATED LOSS DETERMINATION DATE" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"STIPULATED LOSS VALUE" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f) plus all accrued and unpaid interest on the
Loans relating to the Aircraft on the date of determination.
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<PAGE> 25
"SUPPLEMENTAL RENT" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"TAX" or "TAXES" shall have the meaning assigned to the term in Section
12(a) hereunder.
"TERM" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and ending
on the seventh anniversary of the Initial Borrowing Date, or such earlier date
as the Lease may be terminated in accordance with the terms thereof.
"TRANSACTION" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing by
Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"TRANSACTION DOCUMENTS" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of the
ING Obligations and the Lufthansa Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Dividend and
the Contribution.
"UNITED STATES CITIZEN" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"UNSECURED REVOLVING CREDIT FACILITY" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for
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<PAGE> 26
a $25,000,000 revolving working capital line of credit and a $1,000,000 term
real estate loan, as amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees to appoint in
writing one or more of its employees as its authorized representative to accept
delivery of the Aircraft pursuant to the terms hereof. Lessee hereby agrees that
acceptance of delivery by such employee or employees shall, without further act,
irrevocably constitute acceptance by Lessee of the Aircraft for all purposes of
this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the seventh anniversary of the Initial
Borrowing Date or such earlier date as this Lease may be terminated in
accordance with the provisions hereof. Basic Rent shall accrue during the Term
in accordance with Exhibit B hereto. Lessee shall pay to Lessor on each Basic
Rent Payment Date an amount of Basic Rent specified opposite each Basic Rent
Payment Date on Exhibit B hereto as such amounts may be adjusted pursuant to
Section 3 plus accrued interest on Basic Rent previously accrued but unpaid as
specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and notified to
Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on such
Basic Rent Payment Date and determined in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when
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<PAGE> 27
due until the same shall be paid and on any other amounts payable hereunder
which are not paid when due and (ii) all amounts payable by Lessor pursuant to
subsections 2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however,
to the extent any Supplemental Rent required to be paid pursuant to this clause
(ii) of subsection 2(c) has been paid by Lessee pursuant to the terms of another
Lease, then Lessee's obligations hereunder shall be deemed to be satisfied by
the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and other unpaid Obligations (other than
principal and interest on other Loans relating to other aircraft leased pursuant
to the other Leases and after taking into account all other payments of rent
pursuant to the other Leases on such date), then such excess amounts shall be
paid by the Agent to Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic
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<PAGE> 28
Rent due and payable in connection therewith) is at least equal to, as of
the date of payment, the sum of the aggregate unpaid principal of and
accrued interest on the Loans relating to the Aircraft and all other unpaid
Obligations of Lessor (other than principal and interest on Loans relating
to other Aircraft and after taking into account all other payments of
Stipulated Loss Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately prepay an amount of Basic Rent equal to the amount
of such required prepayment less any required payments of the Loans
relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section
3(f)(ii), the schedules of Basic Rent and Stipulated Loss Value, shall be
adjusted so as to preserve the after tax yield and after tax cash flows of
the Lessor and, to the extent consistent therewith, to minimize the net
present value of Basic Rent payments. All such computations shall be made
on the basis of the same assumptions and the method of computations
employed in the original calculations of Basic Rent and Stipulated Loss
Values (except to the extent such assumptions have been changed as a result
of such prepayment or any prior such adjustment). At the Lessee's written
request, independent public accountants mutually selected by the Lessor and
the Lessee shall confirm the required adjustments. The final determination
of any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES
AND AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE
ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO
LESSEE AND LESSEE
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<PAGE> 29
TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH
ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY
LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED
TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor covenants that
it will not, through its own actions or inactions, in such capacity, interfere
in Lessee's quiet enjoyment of the Aircraft unless this Lease shall have been
declared or deemed to have been declared in default pursuant to Section 17
hereof. None of the provisions of this Section 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 any manufacturer, any
affiliate thereof, any subcontractor or supplier of any manufacturer or any
affiliate thereof, with respect to the Airframe, Engines, or any Parts, or to
release the manufacturer, any affiliate thereof, or any such subcontractor or
supplier from any such representation, warranty or obligation. Unless a Default
or Lease Event of Default shall have occurred and be continuing, Lessor agrees
to make available to Lessee such rights as Lessor may have under any warranty
with respect to the Aircraft made by the manufacturer or any affiliate thereof
or any of its subcontractors or suppliers and any other claims against the
manufacturer or any affiliate thereof, or any such subcontractor or supplier
with respect to the Aircraft, all pursuant to and in accordance with the terms
of any applicable purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
(i) ORGANIZATION AND POWERS. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
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<PAGE> 30
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) QUALIFICATION AND GOOD STANDING. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
(iii) SUBSIDIARIES. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each of
its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) AUTHORIZATION OF TRANSACTION DOCUMENTS, ETC.
(i) AUTHORIZATION OF TRANSACTION DOCUMENTS. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) NO CONFLICT. The execution, delivery and performance by Lessee or
its Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any
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<PAGE> 31
Liens created under this Lease or any of the other Transaction Documents in
favor of the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Lessee or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Initial Borrowing Date and
disclosed in writing to Lessor and Lenders.
(iii) GOVERNMENTAL CONSENTS. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.
(iv) BINDING OBLIGATION. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) FINANCIAL CONDITION.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at March 31, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the three
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Neither Lessee nor any of its Subsidiaries has (and
will not following the Initial Borrowing Date) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is mate-
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<PAGE> 32
rial in relation to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 5(c)(A) which, either individually or in the aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole.
(d) NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) TITLE TO PROPERTIES, LIENS.
(i) Lessee and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) LITIGATION, ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor
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<PAGE> 33
any of its Subsidiaries is (i) in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or (ii) subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(g) PAYMENT OF TAXES.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or authority.
(h) PERFORMANCE OF AGREEMENTS.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) GOVERNMENTAL REGULATION.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
(j) EMPLOYEE BENEFIT PLANS.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded li-
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abilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) CERTAIN FEES.
No broker's or finder's fee or commission will be payable with
respect to this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) ENVIRONMENTAL PROTECTION.
(i) All facilities and operations of the Lessee and its
Subsidiaries are, and have been to the best of Lessee's knowledge, in
compliance in all material respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences,
or Hazardous Materials Activity, (a) arising at any facilities owned or
operated by Lessee or (b) arising in connection with the operations of Lessee
or any of its Subsidiaries (including the transportation of Hazardous
Materials), which conditions, occurrences or Hazardous Materials Activity could
reasonably be expected to form the basis of an Environmental Claim against
Lessee and which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or
threatened Environmental Claims against Lessee or any of its Subsidiaries, and
neither Lessee nor any of its Subsidiaries has received no written notices,
inquiries, or requests for information with respect to any Environmental
Claims.
(m) EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened
involving Lessee or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
(n) SOLVENCY.
Lessee and each of its Subsidiaries is and, upon the incurrence
of any obligations by Lessee under the Leases, will be, after giving effect to
the transactions contemplated hereby, Solvent.
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(o) DISCLOSURE.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and
agrees that, so long as any amounts under this Lease remain unpaid, Lessee
shall perform, and will cause each of its Subsidiaries to perform, all
covenants in this Section 6.
(a) FINANCIAL STATEMENTS AND OTHER REPORTS.
Lessee will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared
by Lessee in the ordinary course of business certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries for such month, subject to
changes resulting from audit and normal year-end adjustments;
provided, however, such monthly financial statements shall only be
required to be delivered to Agent to the extent such monthly financial
statements are required to be delivered under the Second Amended and
Restated Credit Agreement as such agreement may be amended, modified,
supplemented, renewed or refinanced from time to time;
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(2) Quarterly Financials: as soon as available and in any
event within 45 days after the end of each fiscal quarter of each
fiscal year, (a) the consolidated and consolidating balance sheets of
Lessee and its Subsidiaries as at the end of such fiscal quarter and
the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the
current fiscal year delivered pursuant to subsection 6(a)(12)), all in
reasonable detail and certified by the chief financial officer of
Lessee that they fairly present the financial condition of Lessee and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management
for such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter; provided
that delivery of Lessee's Form 10-Q for such fiscal quarter shall be
deemed to satisfy the requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any
event within 90 days after the end of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Lessee and its Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding
figures for the previous fiscal year and the corresponding figures from
the consolidated plan and financial forecast delivered pursuant to
subsection 6(a)(12) for the fiscal year covered by such financial
statements, all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, (b) a narrative report describing the operations of Lessee
and its Subsidiaries in the form prepared for presentation to senior
management for such fiscal year, and (c) in the case of such
consolidated financial statements, a report thereon of Arthur Andersen
LLP or other independent certified public accountants of recognized
national standing selected by Lessee and satisfactory to Lessor and
Agent, which report shall be unqualified, shall express no doubts about
the ability of Lessee and its Subsidiaries to continue as a going
concern, and shall state that such consolidated financial statements
fairly present the consolidated financial position of Lessee and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such
consolidated financial state-
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ments has been made in accordance with generally accepted auditing
standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a)
and (b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each
delivery of financial statements of Lessee and its Subsidiaries
pursuant to subdivisions (2) and (3) above after the Initial Borrowing
Date, (a) an Officers' Certificate of Lessee stating that the signers
have reviewed the terms of this Lease and have made, or caused to be
made under their supervision, a review in reasonable detail of the
transactions and condition of Lessee and its Subsidiaries during the
accounting period covered by such financial statements and that such
review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any
condition or event that constitutes a Default or Lease Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Lessee has taken, is taking and proposes to take with respect thereto;
and (b) a Compliance Certificate demonstrating in reasonable detail
compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section
7;
(5) Pricing Certificates: On or after the third anniversary
of the Initial Borrowing Date, a certificate setting forth the credit
rating on Lessee's obligations under the Pass Through Trust Documents,
(a) together with each delivery of financial statements of Lessee
pursuant to subdivisions (2) and (3) above, (b) within one Business
Day after any public release by S&P or Moody's lowering its credit
rating on Lessee's obligations under the Pass Through Trust Documents
and (c) at such additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries
pursuant to subdivision (3) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the
terms of this Lease and the other Transaction Documents as they relate
to accounting matters, (b) stating whether, in connection with their
audit examination, any condition or event that constitutes a Default
or Lease Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such
Default or Lease Event of Default that would not be disclosed in the
course of their audit examination, and (c) stating that based on their
audit examination nothing has come to
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their attention that causes them to believe either or both that the
information contained in the certificates delivered therewith pursuant to
subdivision (4) above is not correct or that the matters set forth in the
Compliance Certificates delivered therewith pursuant to clause (b) of
subdivision (4) above for the applicable fiscal year are not stated in
accordance with the terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "PROCEEDINGS")
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not previously disclosed in writing by Lessee to Lessor and Lenders or (Y)
any material development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the
end of each fiscal quarter of Lessee, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting,
Lessee or any of its Subsidiaries equal to or greater than $1,000,000
and promptly after request by Lessor and Agent such other information
as may be reasonably requested by Lessor and Agent to enable Agent and
their counsel to evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or Agent
shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
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(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) CORPORATE EXISTENCE.
Except as permitted under subsection 7(g) hereunder, Lessee will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the interests of Lessee
and its Subsidiaries and is not materially disadvantageous to Lessor or to any
assignee of the Lease. Lessee will at all times maintain its corporate
existence as a United States Citizen.
(c) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than any Subsidiary of Lessor or Lessee).
(d) MAINTENANCE OF PROPERTIES; INSURANCE.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage (including, without limitation, flood
insurance, if necessary or advisable) of the kinds customarily carried or
maintained
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under similar circumstances by corporations of established reputation engaged
in similar businesses.
(e) INSPECTION; LENDER MEETING.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine, and its and their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants (provided that Lessee may, if it so chooses,
be present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and as often as may be
reasonably requested; provided that so long as no Lease Event of Default shall
have occurred and be continuing, such inspection shall not be disruptive to
Lessee's business, as reasonably determined by Lessee. Without in any way
limiting the foregoing, Lessee will, upon the request of Lessor or Agent,
participate in a meeting of Agent and Lenders once during each fiscal year to be
held at Lessee's corporate offices (or such other location as may be agreed to
by Lessee, Lessor and Agent) at such time as may be agreed to by Lessee, Lessor
and Agent.
(f) COMPLIANCE WITH LAWS, ETC.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which could reasonably be expected to have a Material Adverse Effect.
(g) LESSEE'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the event
Lessee or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any facility, Lessee or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Lessee's or such Subsidiary's liability for
such presence, storage, use, disposal, trans-
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portation or discharge of any Hazardous Materials is being contested in good
faith by Lessee or such Subsidiary. Notwithstanding anything to the contrary
contained in this Lease, Lessee and its Subsidiaries may engage in the
transportation of Hazardous Materials in the ordinary course of business so long
as such is conducted in compliance with all applicable Environmental Laws, and
all other applicable laws, policies, orders, directives and regulations.
(h) EMPLOYEE BENEFIT PLANS.
Lessee will not establish or permit to be established any Employee
Benefit Plans for Lessee or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
reasonably be expected to result in a liability for Lessee, under Title IV of
ERISA or the minimum funding standards of Part 3 of Subtitle B of Title I of
ERISA, in excess of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees
that, so long as any amounts remain owing under this Lease, Lessee shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
(a) INDEBTEDNESS.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the
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cash proceeds from such Permitted Extension Indebtedness are sufficient to
repay in full the Indebtedness associated with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") to Consolidated Adjusted
EBITDA for the four-fiscal quarter period ending on such Determination Date
did not exceed 4.5:1.0, (ii) the ratio of Consolidated Adjusted EBITDA for
such four-fiscal quarter period to Consolidated Interest Expense for such
four-fiscal quarter period was not less than 3.0:1.0; and (iii) Lessee will
be in compliance with all covenants set forth in subsection 7(f) hereof,
Lessee and its Subsidiaries may incur Other Permitted Indebtedness; and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any state or under any similar recording or
notice statute, except:
(i) Permitted Encumbrances;
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(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO LESSEE OR OTHER
SUBSIDIARIES. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) INVESTMENTS; JOINT VENTURES.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate
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amount of dividends on the Common Stock of Lessee declared or paid in such
fiscal year and (y) the aggregate amount contributed to capital of Special
Purpose Subsidiaries in such fiscal year; provided that Lessee shall not
incur liabilities related to any such Joint Venture in excess of Lessee's
Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed at any time 10.5 million.
(d) CONTINGENT OBLIGATIONS.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(8) shall at no time exceed $30
million.
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<PAGE> 46
(e) RESTRICTED JUNIOR PAYMENTS.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
(f) FINANCIAL COVENANTS.
(i) MINIMUM INTEREST COVERAGE RATIO. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense
for any four-fiscal quarter period ending as of the last day of any fiscal
quarter of Lessee occurring during any of the periods set forth below to be
less than the correlative ratio indicated:
<TABLE>
<CAPTION>
===================================================
MINIMUM INTEREST
PERIOD COVERAGE RATIO
<S> <C>
fiscal year 1997 2.50:1.00
fiscal year 1998 2.75:1.00
fiscal year 1999 3.00:1.00
Thereafter 3.25:1.00
===================================================
</TABLE>
(ii) MINIMUM FIXED CHARGE COVERAGE RATIO. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated Rental
Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Lessee occurring during any
of the periods set forth below to be less than the correlative ratio indicated:
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<PAGE> 47
<TABLE>
<CAPTION>
==================================================
MINIMUM FIXED
PERIOD CHARGE COVERAGE RATIO
<S> <C>
fiscal year 1997 1.25:1.00
Thereafter 1.10:1.00
==================================================
</TABLE>
(iii) MAXIMUM LEVERAGE RATIO. Lessee shall not permit the ratio
of (i) Consolidated Total Debt as of each date set forth below (less Cash and
Cash Equivalents held by Lessee in excess of $25 million as of such date) to
(ii) Consolidated Adjusted EBITBA for the four-fiscal quarter period ending on
such date to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
==============================================
MAXIMUM
PERIOD LEVERAGE RATIO
<S> <C>
fiscal year 1997 4.50:1.00
fiscal year 1998 4.25:1.00
fiscal year 1999 4.00:1.00
Thereafter 3.75:1.00
==============================================
</TABLE>
(iv) Minimum Consolidated Net Worth. Lessee shall not permit
Consolidated Net Worth at any time during any of the periods set forth below to
be less than the correlative amount indicated:
<TABLE>
<CAPTION>
=======================================================
MINIMUM CONSOLIDATED
PERIOD NET WORTH
<S> <C>
fiscal year 1997 $120 million
fiscal year 1998 $145 million
fiscal year 1999 $170 million
Thereafter $195 million
=======================================================
</TABLE>
(g) RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS; NEW
SUBSIDIARIES.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suf-
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<PAGE> 48
fer any liquidation or dissolution), or convey, sell, lease, sub-lease, transfer
or otherwise dispose of, in one transaction or a series of transactions, all or
any part of its business, property or fixed assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or any portion of
the business, property or fixed assets of, or stock or other evidence of
beneficial ownership of, any Person or any division or line of business of any
Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of another
Person provided that, (a) the acquisition primarily involves the
acquisition of assets to be used in the business of Lessee, (b) with
respect to such acquisition any newly acquired or created subsidiary of
Lessee shall be a wholly-owned subsidiary, (c) immediately before and after
giving effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Lessee shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 7(f) and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance, (e)
Lessor and Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other li-
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<PAGE> 49
abilities not on the balance sheet of Lessee assumed in connection with
such acquisition and a business plan prepared by Lessee with respect to
such acquisition and (f) the aggregate amount of cash payments made in
connection with all such acquisitions other than with the proceeds from
sales or issuances of equity by Lessee does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business; and
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter).
AMENDMENTS OF MATERIAL AGREEMENTS.
(h) Lessee shall not permit (i) its certificate or articles of
incorporation or by laws to be amended or otherwise modified in any manner
which could reasonably be expected to have a Material Adverse Effect or
(ii) any Material Agreement to be amended or otherwise modified in any manner
with respect to any provision providing material representations and warranties
to Lessee, indemnification rights to Lessee, or limiting Lessee's remedies or
rights upon the other party to such agreements failing to perform.
RESTRICTION ON LEASES.
(i) Lessee shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a guarantor
or other surety, for the obligations of the lessee under any lease, whether an
Operating Lease or a Capital Lease (other than intercompany leases between Lesse
and its wholly-owned Subsidiaries, including Lessor); provided, however, that
Lessee may become so obligated to the extent that, and only to the extent that,
immediately after giving effect to the incurrence of liability with
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<PAGE> 50
respect to such lease, the Consolidated Rental Payments at the time in effect
during the then current fiscal year do not exceed $60 million plus an amount not
to exceed $12 million during any fiscal year, equal to Consolidated Rental
Payments incurred in connection with sale leaseback transactions described in
subsection 7(j) plus Consolidated Rental Payments assumed pursuant to
acquisitions permitted under subsection 7(g)(5).
(j) SALES AND LEASE-BACKS.
Lessee shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, become or remain liable as lessee or as a guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real, personal or mixed), whether now
owned or hereafter acquired, (i) which Lessee or any of its Subsidiaries has
sold or transferred or is to sell or transfer to any other Person (other than
Lessee or any of its Subsidiaries) or (ii) which Lessee or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Lessee or any of its
Subsidiaries to any Person (other than Lessee or any of its Subsidiaries) in
connection with such lease; provided that Lessee and its Subsidiaries may
become and remain liable as lessee, guarantor or other surety with respect to
any such lease if and to the extent that Lessee or any of its Subsidiaries
would be permitted to enter into, and remain liable under, such lease under
subsection 7(i).
(k) TRANSACTION WITH SHAREHOLDERS AND AFFILIATES.
Lessee shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Lessee or with any Affiliate of Lessee or of any
such holder, on terms that are less favorable to Lessee or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Lessee and its
Subsidiaries, (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Lessee or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Lessee or (iii) performance by Lessee of its obligations under and
in accordance with the Services Agreement.
(l) DISPOSAL OF SUBSIDIARY STOCK.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidi-
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<PAGE> 51
aries, except to qualify directors if required by applicable law or to a
wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
(m) CONDUCT OF BUSINESS.
From and after the Initial Borrowing Date, Lessee shall not, and
shall not permit any of its Subsidiaries to, engage in any business other than
the businesses engaged in by Lessee and its Subsidiaries on the Initial
Borrowing Date and similar or related businesses.
SECTION 8. Return of the Aircraft. (a) Condition Upon Return. Unless
the Aircraft has been sold pursuant to Section 21, if at any time the Lessee
shall return the Aircraft to the Lessor hereunder, Lessee, at its own expense,
will return the Aircraft to Lessor at a location specified by the Lessor to the
Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft to be in compliance with the maintenance covenants contained in this
Lease and (ii) the Airframe will be fully equipped with the Engines installed
thereon.
At the time of such return, such Airframe and Engines (A) shall have
an air worthiness certificate from the Federal Aviation Administration and
shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 121 (or successor regulation), and shall be in material
compliance with all applicable FAA noise, corrosion, environmental and aging
aircraft requirements, (B) shall be free and clear of all Liens and (C) shall
be in a full freighter configuration and in as good condition as when
originally delivered to Lessee, ordinary wear and tear excepted, and otherwise
in the condition required to be maintained under Lessee's FAA-approved
maintenance plan; and in all such cases the Aircraft shall not have been
discriminated against as compared to other aircraft owned or leased by Lessee
whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines and all Parts shall
have been, and shall be properly documented to have been, repaired or
overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation
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<PAGE> 52
necessary to substantiate their certification, approval and methods of
compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft shall have approval or certification by the FAA (or
its designee) or certification if required. All such modifications shall be
accompanied by complete data and documentation necessary to substantiate their
certification and approval and methods of compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe, 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
Acceptable Alternate Engine, in form and substance reasonably satisfactory to
Lessor (together with an opinion of 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 Acceptable Alternate Engines are free
and clear of all Liens) against receipt from Lessor of a bill of sale evidencing
the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft including
those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall have
been maintained by cleaning and treating all mild and moderate corrosion and
correcting of all severe or exfoliate corrosion in accordance with Lessee's
approved maintenance program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of this
Lease, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and maintenance, inspection, modification and overhaul records and
similar records required to be maintained with respect to the Aircraft and Parts
under FAA rules, the Aircraft maintenance program. If any such logs, manuals,
records or other data are missing, in-
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<PAGE> 53
complete or otherwise not in accordance with FAA standards applicable to Lessee,
Lessee shall re-accomplish the maintenance tasks necessary to produce such
records in accordance with its approved maintenance program prior to delivery of
the Aircraft or otherwise perform all necessary acts (without regard to any
applicable waivers or deferrals) to obtain such records in a manner satisfactory
to the FAA and Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, 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 Lessee's risk and at Lessee's expense for a
period not exceeding 30 days, and thereafter at Lessor's risk and at Lessor's
cost for insurance, maintenance and Lessee's out-of-pocket expenses for such
storage for a period not exceeding 90 days (provided that if such termination
occurs as a result of a Lease Event of Default hereunder, such storage shall be
at the cost of the Lessee), commencing on the date the Aircraft is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by Lessee and used by Lessee as a
location for the long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned to
Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable nonproprietary Parts (other than Parts otherwise
required by Sections 10 or 11 to be maintained on the Aircraft) 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 11 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 at their
fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft, title
thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. Lessee will promptly, at its own expense,
take such action as may be necessary to duly discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, will
(i) be a "citizen of the United States" as defined in Section 40102(15) of Title
49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Air-
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<PAGE> 54
craft to be duly registered and remain duly registered in the name of Lessor in
accordance with the Act and otherwise registered under all applicable laws of
the United States so as to be eligible to operate in commercial air service
under the Act; and (iii) will service, repair, inspect, test, maintain and
overhaul the Airframe and each Engine and install replacement equipment and
parts on the Airframe and each Engine and install replacement equipment and
parts on the Airframe and each Engine (A) so as to keep the Airframe and each
Engine in such operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations (B) so as to enable the
airworthiness certification of the Airframe to be maintained in good standing at
all times under the Act, except when aircraft of the same type, model or series
as the Airframe (powered by engines of the same type as those with which the
Airframe shall be equipped at the time of grounding) registered in the United
States have been grounded by the FAA; provided, however, that if following its
issuance, the United States FAA airworthiness certificate of the Aircraft shall
be withdrawn, then subject to the provisions of Section 13 hereof, so long as
Lessee is diligently taking or causing to be taken all necessary action to
promptly correct the condition which caused such withdrawal, no Lease Event of
Default shall arise from such withdrawal, (C) in accordance with Lessee's
FAA-approved maintenance, inspection and maintenance control programs, and in
the same manner and with the same care used by Lessee with respect to the same
or similar aircraft and engines owned or operated by Lessee so as to keep the
same in as good operating condition as when originally leased hereunder,
ordinary wear and tear excepted, which practices shall at all times be at or
above the standard of the industry in the United States for prudent maintenance
of similar equipment, and (D) in such manner as may be necessary to maintain in
full force all warranties of the manufacturers thereof. Lessee shall maintain
all records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
the Airframe or such Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine, Lessee, at its own cost and expense, will conform thereto or obtain
conformance therewith and will maintain the same in proper operating condition
under such laws, rules, regulations and orders, provided, however, that Lessee
may, in good faith (after having delivered to Lessor and Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's and Agent's
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<PAGE> 55
opinion (in their sole discretion), adversely affect the interests of Lessor,
Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section 14
shall not be at the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the Airframe or such
Engine, except in the case of a requisition for use by the United States of
America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened area
of hostilities unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of the
term of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner or
for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or omit to do
anything the omission of which, may invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine except that, unless a Default or Lease
Event of Default shall have occurred and be continuing, Lessee may without the
prior written consent of the Agent and Lessor, take the following actions so
long as the actions to be taken shall not deprive the Agent of the first
priority Lien under the Aircraft Chattel Mortgage in the assets subject thereto
and so long as the actions to be taken shall not deprive Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
and shall not deprive the Agent of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft as assignee of Lessee's rights
under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
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<PAGE> 56
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Lessee in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine; provided, however, that if
Lessee's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to the Airframe or such Engine and Lessee shall comply with Section
13 in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the 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), and (C) the rights of any Domestic Air Carrier,
under normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to such
airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided:
(A) such airframe is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe and except Liens of the type permitted by clause
(iv) above; and (B) Agent and Lessor shall have received from the lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party of
such airframe a written agreement (which may be the lease, conditional sale
agreement or mortgage covering such airframe), whereby such lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any Engine by
reason of such Engine being installed on such airframe at any time when
such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
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<PAGE> 57
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current certificates
and licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided that Lessee's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI Contract or
wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness certificate)
with such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust
Company, as Agent" or such other legend, as shall in the opinion of Lessor and
Agent be appropriate or desirable to evidence the fact that it is subject to the
ownership of Lessor and the lien and security interest created by the Aircraft
Chattel Mortgage. Lessee shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or defacement,
shall promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, Lessee shall not allow the name of
any person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership or of
any security interest therein, except that Lessee or any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer on
the Airframe or any Engine.
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(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or any Part or any other operations or carriage undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, or any Part, or for any
other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and which
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair or testing, Lessee at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that, except as
otherwise provided in Section 11(d), Lessee at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall be
owned by Lessor free and clear of all Liens (except Permitted Encumbrances and
for pooling arrangements to the extent permitted by Section 11(b)), and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such parts were in the condition and
repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor and
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shall thereupon become free and clear of all rights of Lessor hereunder and all
rights derivative of Lessor's and shall no longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in Section
11(a) may be subjected by Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the ordinary course
of its business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be incorporated
or installed in or attached to the Airframe or such Engine in accordance with
Section 11(a) as promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or attached to
the Airframe or any Engine in accordance with Section 11(a) may be owned by any
third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or such Engine a further
replacement Part owned by Lessee which shall become the property of Lessor
subject to the lien and security interest of the mortgage free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the standards of the FAA or
other governmental authority having jurisdiction; provided, that Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or Agent's
respective interests. Lessee also agrees, at its own cost and expense, to make
or cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer relating to
the Airframe or any Engine. In addition so long as no Default or Lease Event of
Default shall have occurred and be continuing, Lessee, at its own cost and
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility, condition
or airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine were then in the condition and
airworthiness required to be maintained by the terms of this Lease.
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(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement of or substitution for any such Part, (B) is not
required to be incorporated or installed in or attached or added to the Airframe
or such Engine pursuant to the terms of Section 10(a) hereof or any other
provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from the Airframe or such Engine without diminishing or impairing the value,
utility or airworthiness which the Airframe or such Engine would have had at
such time had such alteration, modification or addition not occurred, assuming
the Airframe or such Engine was otherwise in the condition required by this
Lease and the Aircraft Chattel Mortgage. Upon the removal by Lessee of any such
Part, as above provided, title thereto shall, without further act, be free and
clear of the interests of Lessor and all rights derivative of Lessor's and such
Part shall no longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification of
the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or any part
thereof or interest therein by any Federal, state or local government or other
taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any part
thereof of interest therein; (ii) the manufacture, purchase, ownership,
mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage; provided,
however, that, there shall be excluded from any indemnification under this
Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been com-
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menced to foreclose any lien which may have attached as security for such Tax,
nothing in this Section shall require the payment of any Tax so long as and to
extent that validity thereof shall be contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and Lessee shall
have set aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, employees, agents and affiliates
of Lessor, Agent and each Lender, (collectively called the "Indemnitees") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "INDEMNIFIED LIABILITIES"); provided that
Lessee shall not have any obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Lessee shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine, Lessee will promptly notify Lessor and Agent
thereof in writing (in any event within five (5) days of such occurrence) and
will, not later than 180 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Airframe or Acceptable Alternate
Engine, as the case may be. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will, as conditions to such transfer, (i) furnish
Lessor with a warranty (as to title) bill of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such Acceptable Alternate
Airframe or Acceptable Alternate Engine, (ii) cause a Lease Supplement to be
filed for recording pursuant to Title 49 of
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the United States Code, as amended, (iii) furnish Lessor with such evidence of
Lessee's title to such Acceptable Alternate Airframe or Acceptable Alternate
Engine and of compliance with the insurance provisions of Section 14 hereof with
respect to such Acceptable Alternate Airframe or Acceptable Alternate Engine as
Lessor may reasonably request, (iv) furnish Lessor with an opinion of Lessee's
counsel to the effect that title to such Acceptable Alternate Airframe or
Acceptable Alternate Engine has been duly conveyed to Lessor free and clear of
all Liens except Permitted Encumbrances and Lessor and Agent continue to have
1110 protection with respect to such Aircraft and (v) transfer to or at the
direction of Lessee without recourse or warranty all of Lessor's right, title
and interest, if any, in and to (A) the Airframe or Engine with respect to which
such Event of Loss occurred and furnish to or at the direction of Lessee, at
Lessee's expense, a bill of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer and (B) all claims, if any, against third
parties, for damage to or loss of the Airframe or Engine subject to such Event
of Loss, and such Airframe or Engine shall thereupon cease to be an Airframe or
Engine leased hereunder. Lessee shall cooperate with Lessor and take all such
actions as shall be requested by Lessor so that Lessor complies with Section
4(f) of the Aircraft Chattel Mortgage. For all purposes hereof, each such
Acceptable Alternate Airframe or Acceptable Alternate Engine shall, after such
conveyance, be deemed part of the property leased hereunder, and shall be deemed
an "Airframe" or "Engine", as the case may be. No Event of Loss under the
circumstance contemplated by the terms of this paragraph (a) shall result in any
reduction in Basic Rent.
(b) With respect to the Airframe or any Engine, as between the
Lessor and Lessee, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for
in Section 14 below) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee pursuant
to the terms hereof, so long as there shall exist no Default or Lease Event
of Default, such payment shall be paid over to or retained by Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by Lessor as security for the
obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
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(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine, Lessee shall promptly notify Lessor and Agent of
such requisition and all of Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe or such Engine, to the extent allocable to the Term, shall be paid
over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft, at its own cost and expense, public liability
(including, without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee but
in no event in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of insurance
required by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in the same or
similar business and similarly situated with Lessee. Any policies of insurance
carried in accordance with this Section 14 and any policies taken out in
substitution or replacement of any such policies (A) shall be amended to name
Agent, Lenders and Lessor as additional named insureds, (B) shall be primary
without right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except the
limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft, at its own
cost and expense,
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aircraft ground and flight all-risk hull insurance as well as fire and extended
coverage insurance on Engines and other equipment while removed from the
Airframe (which shall include war risk, governmental confiscation and
expropriation (other than by the United States Government) and allied perils
including (A) strikes, riots, civil commotions or labor disturbances, (B) any
malicious act or act of sabotage and (C) hijacking (air piracy) or any unlawful
seizure or wrongful exercise of control of the Aircraft or crew in flight
(including any attempt at such seizure or control) made by any person or persons
aboard the Aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by Lessee with respect to similar aircraft
owned or operated by Lessee on the same routes or if the Aircraft is operated on
routes where the custom is for Domestic Air Carriers similarly situated with
Lessee flying comparable routes with similar aircraft to carry such insurance,
of the type usually carried by corporations engaged in the same or similar
business and similarly situated with Lessee; provided that such insurance
(including any self-insurance to the extent permitted below) shall at all times
be for an amount not less than the greater of the Stipulated Loss Value as of
the closest Stipulated Loss Determinate Date and $50,000,000. During any period
when 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 this Section,
insurance otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time customarily carried
with respect to similar aircraft by corporations engaged in the same or similar
business and similarly situated with Lessee for aircraft on the ground in an
amount at least equal to the applicable amount provided above. All such
insurance shall name Agent, Lenders and Lessor as additional insureds and loss
payees to the extent their interest may appear and shall provide that any loss
to the Airframe or an Engine in excess of $2,000,000 (and, if a Default or Lease
Event of Default has occurred and is continuing, any such loss) shall be payable
to the Lessor and to the Agent for the benefit of Lenders; and shall be primary
without right of contribution from any other insurance which is carried by
Lessor or Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the Aircraft and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided, however, that Lessee may not self-insure in an amount in excess of
$1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the in
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surance shall not be invalidated by any action or inaction of (x) Lessee or (y)
Lessee or Lessor, respectively, and shall insure the interests of Agent and
Lenders regardless of any breach or violation by Lessee, Lessor or any Person
(other than Agent) of any warranty, declaration, condition or exclusion from
coverage contained in such policies; (C) provide that if such insurance is
cancelled, or if any material change is made in the coverage which affects the
interest of Lessor, Agent or any Lender, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall not be
effective as to Lessor, Agent or any Lender for thirty (30) days (seven (7)
days, or such shorter or longer period as may from time to time be customarily
available in the industry, in the case of any war risk and allied perils
coverage) after receipt by Agent and Lessor of written notice from such insurers
of such cancellation, change or lapse; (D) be in full force and effect
throughout any geographical areas at any time traversed by the Aircraft and
shall be payable in U.S. dollars; (E) waive any right of the insurers to any
setoff or counterclaim or any other deduction, whether by attachment or
otherwise in respect of any liability of Lessor and Agent; and (F) waive all
rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine, a valid
agreement by the United States or such agency or instrumentality to indemnify
Lessee against the same risks against which Lessee is required hereunder to
insure shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the subject
of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 14 and is adequate to protect
the interests of Lessee, Lessor and Agent, and (B) certificates of the insurer
or insurers evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee of
which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine
and (y) at least thirty (30) days prior to the expiration or termination date,
or date of effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Les-
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see upon compliance by Lessee with the terms of Section 13, provided that no
Default or Lease Event of Default shall have occurred and be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee 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 14. No insurance maintained by Agent, Lessor or any Lender shall
prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or Lender shall
be paid as provided in the insurance policy relating thereto and no such Person
shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft. Lessor agrees that it will not assign or
convey its right, title and interest in and to this Lease or the Aircraft except
in accordance with the Credit Agreement. Subject to the foregoing, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective successors and permitted assigns and
shall inure, to the direct benefit of, and shall also be enforceable by the
Agent and the Lenders, and their respective successors, as assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
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(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
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(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
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(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities of Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons
acting in concert (in any such case, excluding Mr. Chowdry) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Lessee (or other Securities convertible into
such Securities) representing 20% or more of the combined voting power of
all Securities of Lessee entitled to vote in the election of directors,
other than Securities having such power only by reason of the happening of
a contingency or (c) the Board of Directors of Lessee shall not consist of
a majority of Continuing Directors or (ii) a "Change of Control" shall
occur under the Pass Through Trust Documents or any other Material
Agreement (as in effect on the date of such occurrence).
SECTION 17. 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 to be
in default, except that upon the occurrence of a Lease Event of Default
referred to in clauses (e) (f) or (g) of Section 16, this Lease shall be deemed
declared in default without any further act or notice, and at any time
thereafter, Lessor may do one or more of the following with respect to all or
any part of the Aircraft, Airframe and any or all of the Engines as Lessor in
its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
Lessee to execute and deliver such instruments to the Lessor;
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(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 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 17; and
without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) 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, any Basic Rent due on or before
the payment date so specified plus 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 after the date specified in such notice if any), an amount
equal to the Stipulated Loss Value for the Aircraft computed as of the
immediately preceding Stipulated Loss Determination Date, together with
interest, if any, at the Past Due Rate on the amount of such Basic Rent and
Stipulated Loss Value from the Stipulated Loss Determination Date as of
which Stipulated Loss Value is computed until the date of actual payment;
and upon such payment of liquidated damages and all Supplemental Rent then
due and payable by the Lessee hereunder, the Lessor shall transfer (without
any representation, recourse or warranty whatsoever) the Aircraft to the
Lessee and the Lessor shall execute and deliver such documents evidencing
such transfer and take such further action as the Lessee shall reasonably
request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph
(c) above with respect to such Aircraft, may, if it shall so elect, demand
that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of such
sale, any accrued rent with respect to the Aircraft due on or prior to such
date plus, as liquidated damages for loss of a bargain and not as a
penalty, 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 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;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
in accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof, shall include, without limitation all logs,
manuals and data and inspection, maintenance, modification and overhaul and
similar records with respect thereto) in the condition and airworthiness
required by such Section. The Lessee hereby acknowledges that it shall be
directly liable for such costs and expenses to any Person designated by the
Lessor, the Agent or any Lender (as the case may be) to provide services in
connection with or to effect the return of the Airframe or any Engine in
accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof shall include, without limitation, such logs,
manuals and records) in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except as
otherwise expressly provided above, no remedy referred to in this Section 17 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to 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 17 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or other Obligations (other than principal
and interest on Loans relating to other aircraft) are outstanding under the
Credit Agreement, all rights of Lessor under this Section 17 shall be exercised
only by the Agent as assignee of Lessor's rights under this Lease pursuant to
the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
re-
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quired by the terms hereof and upon the execution and delivery of any amendment
to this Lease, Lessee (at its expense), unless such supplement or amendment
relates solely to the assignment of all or any portion of the Lessor's interest
hereunder, will cause such Lease Supplement (and, in the case of the initial
Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, Lessee at its expense
will promptly and duly execute and deliver to Lessor and the Agent such further
documents and take such further action as Lessor and the Agent may from time to
time reasonably request in order more effectively to carry out the intent and
purpose of this Lease and the other Transaction Documents and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor and Agent hereunder and under the other Transaction Documents, including,
without limitation, if requested by Lessor and the Agent, the execution and
delivery of supplements or amendments hereto, at the expense of Lessee, each in
recordable form, and all financing statements and continuation statements, and
all similar notices required by applicable law at all times to be kept recorded
and filed in such manner and such places as Lessor and the Agent may reasonably
request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of Lessor hereunder and the Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Clark H. Onstad, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time
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to time designate in writing to Lessee with a copy to the Agent at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations
to pay Rent and all other amounts payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) any setoff, counterclaim, recoupment,
defense or other right which the Lessee may have against the Lessor, the Agent,
the Lenders, any manufacturer, any supplier or any other Person for any reason
whatsoever, (ii) any defect in the title, airworthiness, eligibility for
registration under Title 49 of the United States Code, as amended or other
applicable law, condition, design, compliance with specifications, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft,
or any theft, interference, interruption or cessation in or prohibition of the
use or possession thereof by the Lessee or any sublessee for any reason
whatsoever, including, without limitation, any such interference, interruption,
cessation or prohibition resulting from the act of any governmental authority,
(iii) any Liens, encumbrances or rights of any other Person with respect to the
Aircraft, (iv) the invalidity or unenforceability or lack of due authorization
or other infirmity of this Lease or any other Transaction Document or document
or instrument executed pursuant hereto or thereto, or any lack of right, power
or authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to the Aircraft,
Airframe, any Engine or any Part, (vi) any insolvency, bankruptcy,
reorganization or similar proceedings by or against the Lessee or any other
Person, or (vii) any failure, breach or delay by the Lessor or any other Person
in performing or complying with any term of this Lease or any other cause
whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason whatsoever, including any present or future claims of
Lessee against Lessor or any other Person under this Lease or otherwise. Lessee
hereby waives, and hereby agrees to waive at any future time at the request of
Lessor, to the full extent now or then permitted by applicable law any and all
rights which it may now have or which at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Lease except in accordance with the express terms hereof. Each payment of Rent
made by Lessee to Lessor shall be final as to Lessor and Lessee. Lessee will
not seek to recover all or any part of any such payment of Rent from Lessor for
any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent
as assignee of the Lessor's right under this Lease pursuant to the Aircraft
Chattel Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Air-
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frame, Engines and Parts as provided herein, and in any circumstances where more
than one construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. ss. 1110 or
any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the Federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft in compliance with the provisions
of this Lease shall not be affected by the provisions of 11 U.S.C. ss. 362 or
363, as amended from time to time, or any analogue provisions of any superseding
statute or any power of the bankruptcy court to enjoin such taking of
possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft at the end
of the Term for a purchase price equal to the higher of the Fair Market Sales
Value (assuming that the Aircraft is in the condition required by the Lease) as
of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of the full of such
amounts, 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.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and not exercise any purchase option under this Section 21. If Lessee
fails to give notice as required herein, Lessee will be deemed to have elected
to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment
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or perform or comply with such agreement but shall not be obligated hereunder to
do so, and the amount of such payment and the amount of the reasonable expenses
of Lessor incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Past Due Rate, shall be deemed Supplemental Rent, payable by
Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as a lessee only. Neither Lessee nor any Affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft or with the parties' agreement that this
Lease be treated as a tax lease for purposes of the Internal Revenue Code. 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 reference herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE
AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT
IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR
AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE
OF LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER
TRANSACTION DOCUMENT. This Lease may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
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(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so long
as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments; (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. Lessee
hereby acknowledges due notice of, and consents to, such assignment and to the
creation of such mortgage and security interest. To the extent, if any, that
this Lease and any Lease Supplement constitutes chattel paper (as such term is
in effect in any applicable jurisdiction), no security interest in this Lease or
any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
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IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
__th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Title:
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<PAGE> 78
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of May 29, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
*/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document.
**/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, together with Lease Supplement No. 1 dated May 29,
1997, to the Lease Agreement, has been recorded by the Federal Aviation
Administration on __________ __, 1997, as one document and assigned Conveyance
No. _____________.
- ------------------
*/ This language for other Lease Supplement No. 1.
**/ This language for other Lease Supplements.
<PAGE> 79
EXHIBIT A
Page 2
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______; and
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______]3/ (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The closing date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof. Except as otherwise provided in the
Lease, the Term for the Aircraft shall commence on the closing date and end on
the seventh anniversary thereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
for all purposes hereof and of the Lease as being airworthy, in good working
order and repair and without defect or inherent vice in title, condition,
design, operation or fitness for use; provided, however, that nothing contained
herein or in the Lease shall in any way diminish or otherwise affect any right
Lessee or Lessor may have with respect to the Aircraft against the manufacturer,
any affiliate thereof, or any subcontractor or supplier of the manufacturer or
any affiliate thereof, under any purchase agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 80
EXHIBIT A
Page 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
__th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Name:
Title:
<PAGE> 81
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 82
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 83
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE
<PAGE> 1
EXHIIBIT 10.65
- -------------------------------------------------------------------------------
LEASE AGREEMENT
(N505MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-200 Aircraft
U.S. Registration No. N505MC
Manufacturer's Serial No. 21251
---------------------------
- -------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN
AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions.............................................................................1
SECTION 2. Acceptance and Lease...................................................................21
SECTION 3. Term and Rent..........................................................................21
(a) Term and Basic Rent.............................................................21
(b) Adjustments to Basic Rent.......................................................21
(c) Supplemental Rent...............................................................22
(d) Payments in General.............................................................22
(e) Minimum Rent....................................................................23
(f) Pepayment of Rent Payments......................................................23
SECTION 4. Certain Representations and Warranties.................................................24
SECTION 5. Lessee's Representations and Warranties................................................25
SECTION 6. Lessee's Affirmative Covenants.........................................................30
SECTION 7. Lessee's Negative Covenants............................................................37
SECTION 8. Return of the Aircraft.................................................................45
(a) Condition Upon Return...........................................................45
(b) Overhaul and Repair.............................................................46
(c) Repairs.........................................................................46
(d) Modifications...................................................................46
(e) Airworthiness Directives........................................................46
(f) Return of the Engines...........................................................46
(g) Deferred Maintenance............................................................47
(h) Corrosion Treatment.............................................................47
(i) Manuals.........................................................................47
(j) Storage Upon Return.............................................................47
(k) Severable Parts.................................................................47
(l) Survival........................................................................48
SECTION 9. Liens..................................................................................48
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia....................................................................48
(a) Maintenance and Operation.......................................................48
(b) Possession......................................................................50
(c) Insignia........................................................................52
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(d) Holding Out.....................................................................52
(e) No Pledging of Credit...........................................................52
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and
Additions..............................................................................52
SECTION 12. Indemnities............................................................................55
SECTION 13. Event of Loss..........................................................................56
SECTION 14. Insurance..............................................................................57
SECTION 15. Assignment.............................................................................60
SECTION 16. Events of Default......................................................................60
SECTION 17. Remedies...............................................................................63
SECTION 18. Lessee's Cooperation Concerning Certain Matters........................................66
SECTION 19. Notices................................................................................66
SECTION 20. Net Lease, True Lease, etc.............................................................67
SECTION 21. Purchase Option........................................................................68
(a) Purchase Option.................................................................68
(b) Notice of Purchase..............................................................68
SECTION 22. Lessor's Right to Perform for Lessee...................................................69
SECTION 23. Miscellaneous..........................................................................69
SECTION 24. Security for Lessor's Obligations......................................................70
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
</TABLE>
ii
<PAGE> 4
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
iii
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of
this Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have
the respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has
a maximum gross takeoff weight of at least 800,000 pounds and is of the
equivalent or greater residual value, condition, utility, airworthiness, and
remaining useful life and which shall have been maintained, serviced, repaired
and overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suitable for installation and use
on the Airframe; provided that such 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 747-200 aircraft
operated by Lessee, and shall have
<PAGE> 6
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract
entered into at the time of the acquisition of such aircraft (which ACMI
Contract shall not represent a renewal or replacement of a prior ACMI Contract
unless the aircraft used pursuant to such prior ACMI Contract was operated
under an operating lease and returned to the lessor) which is in effect on the
date of calculation and has a remaining term of one year or more on the date
such aircraft was intended to be used in connection with such ACMI Contract
(subject to cancellation terms, which may include the right to cancel on six
months notice). When making any calculation on a Pro Forma Basis effect shall
be given to the acquisition of an ACMI Contracted Aircraft by adding to the
appropriate components of Consolidated Adjusted EBITDA (i) the net projected
annualized revenues from the operation of the ACMI Contracted Aircraft under
such ACMI Contract for that portion of the period for which Consolidated
Adjusted EBITDA is being calculated prior to the acquisition of such aircraft,
assuming operation for the minimum guaranteed number of block hours (less any
block hours subject to cancellation) at the minimum guaranteed rate under such
ACMI Contract less (ii) the projected annualized cash operating expenses from
such operation for the same period for which the related projected revenues are
determined in clause (i) above; provided that such projected cash operating
expenses shall not be less on a per block hour basis than the average
historical per block hour operating expenses of Lessee for the four full fiscal
quarters immediately preceding the date of calculation, and provided further,
that if such aircraft is of a model other than a Boeing 747 freighter, such
projected cash operating expenses shall include maintenance costs which shall
not be less than the average for such aircraft type disclosed on the most
recently available DOT Forms 41 with respect to such aircraft type or any
summary of such data as reported in a nationally recognized industry
publication. For purposes of this definition, "ACMI Contract" shall include
contracts pursuant to which Lessee does not pay any crew costs, in which event
pro forma effect shall be given as described above but excluding from the
projected annualized cash operating expenses all crew costs. Cash operating
expenses means for purposes of this definition consolidated operating expenses,
less consolidated depreciation and amortization and Consolidated Rental
Payments, to the extent included in computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the pos-
-2-
<PAGE> 7
session, directly or indirectly, of the power to direct or cause the direction
of the management and policies of that Person, whether through the ownership of
voting securities or by contract or otherwise.
"Agent" shall mean the Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement
and (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but
where title to which remains vested in Lessor in accordance with this Lease.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock
of any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C)
asset swaps involving aircraft engines, components, parts or spare parts;
provided that the assets received by the Lessee or any Subsidiary have a fair
market value at least equal to the assets transferred (provided that with
respect to any asset swap or series of related asset swaps involving assets of
Lessee or any Subsidiary with a fair market value exceeding $3,000,000, such
determination shall be made by the Board of Directors of Lessee)) and (D) asset
sales involving obsolete, worn-out, excess or redundant equipment as long as
the proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Atlas One" means Atlas One, Inc., a Delaware corporation.
"Atlas One Leases" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
-3-
<PAGE> 8
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized
or required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of
the United States the obligations of which are backed by the full faith and
credit of the United States, in each case maturing within one year after such
date; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia that (a) is at least "adequately capitalized" (as
defined in the regulations of its primary Federal banking regulator) and (b)
has Tier I capital (as defined in such regulations) of not less than
$100,000,000; and (v) shares of any money market mutual fund that (a) has at
least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
-4-
<PAGE> 9
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries)
by Lessee and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"Consolidated Fixed Charges" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in
conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it be-
-5-
<PAGE> 10
comes a Subsidiary of Lessee or is merged into or consolidated with Lessee or
any of its Subsidiaries or that Person's assets are acquired by Lessee or any
of its Subsidiaries, (iii) the income of any Subsidiary of Lessee to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (iv)
any after-tax gains or losses attributable to Asset Sales or returned surplus
assets of any pension plan, and (v) (to the extent not included in clauses (i)
through (iv) above) any net extraordinary gains or net non-cash extraordinary
losses.
"Consolidated Net Worth" means, as at any date of determination, the sum
of the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agreements. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guaranty, endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by
any other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement (contingent or
otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the case of
any
-6-
<PAGE> 11
agreement described under subclauses (X) or (Y) of this sentence, the primary
purpose or intent thereof is as described in the preceding sentence. The amount
of any Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"Credit Agreement" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bankers Trust Company, as Agent as such agreement may be amended,
modified, waived, or supplemented from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension
Indebtedness and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Dividend" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
-7-
<PAGE> 12
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the four Pratt & Whitney JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of
the General Electric CF6-50E2 aircraft engines for the aircraft bearing U.S.
registration numbers N505MC, N507MC, N508MC, N509MC and N516MC listed by
manufacturer's serial numbers in the initial Lease Supplement and installed on
the Airframe at the time of the delivery to Lessee of such Airframe, whether or
not from time to time thereafter installed on such Airframe or any other
airframe; (ii) any Acceptable Alternate Engine which may from time to time be
substituted for any of such four engines pursuant to the terms of the Lease;
and (iii) in any case, any and all Parts which are from time to time
incorporated or installed in or attached to any such engine and any and all
parts removed therefrom so long as title thereto remains vested in Lessor in
accordance herewith. The term "Engines" means, as of any date of determination,
all Engines then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
-8-
<PAGE> 13
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member;
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or
disappearance of such Aircraft); (B) the destruction, damage beyond repair or
rendition of such Aircraft permanently unfit for normal use for any reason
whatsoever; (C) the condemnation, confiscation or seizure of, or requisition of
title to, or use or possession (other than use by the United States Government
if Lessee obtains adequate compensation from the United States Government) of
such Aircraft; (D) as a result of any rule, regulation, order or other action
by the FAA or other governmental body having jurisdiction, the use of such
Aircraft in the normal course of interstate air transportation of persons or
cargo shall have been prohibited for a period of more than nine consecutive
months unless Lessee, prior to the expiration of such nine month period, shall
have undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such property by Lessee or,
in any event, if such use shall have been prohibited for a period of twelve
consecutive months; (E) the operation or location of such Aircraft, while under
requisition for use by the United States or any instrumentality or agency
thereof, in any area excluded from coverage by any insurance policy in effect
with respect to such Aircraft, if Lessee shall be unable to obtain indemnity or
"war-risk" insurance in lieu thereof from the United States; (F) any damage
which results in an insurance settlement with respect to such Aircraft on the
basis of an actual or constructive total loss or (G) a divestiture of such
Airframe as described in Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft
Chattel Mortgage under the Credit Agreement. 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 of the Aircraft.
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<PAGE> 14
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means the ING Obligations and the Lufthansa
Obligations.
"Fair Market Sales Value" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-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 by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
Lessee, or, if such appraiser cannot be agreed to within 20 days, then either
party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining 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 8 of this Lease, that all modifications and improvements shall be taken
into account, that Lessee has removed all Parts which it is entitled to remove
pursuant to Section 11 of this Lease and that the Aircraft is not encumbered by
this Lease. Except as otherwise expressly provided in the Lease, all appraisal
costs will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation
of the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Financed Aircraft" means all Financed Aircraft under and as defined in
the Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal
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<PAGE> 15
Aviation Regulations, in each case that are certificated in a country that is a
signatory to the Convention on International Civil Aviation and are operating
in conformity with the Annexes thereunder and that fly routes into the United
States on a regularly scheduled basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Gina Thompson.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in
effect as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under
any law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (iv) any
obligation owed for all or any part of the deferred purchase price of property
or services (excluding any such obligations incurred under ERISA), which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
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<PAGE> 16
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING Financing Agreement" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale
Nederlanden Aviation Lease B.V., as amended by Amendment No. 1 thereto and as
further amended, restated, supplemented and otherwise modified from time to
time.
"ING Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement
or arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Lessee or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement, purchase or other acquisition for value, by any
Subsidiary of Lessee from any Person other than Lessee or any of its
Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Lessee or any of
its Subsidiaries to any other Person (other than a wholly-owned Subsidiary of
Lessee), including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Leases" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time
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<PAGE> 17
(including this Lease). The term "Lease" shall include any Lease Supplement
entered into pursuant to the respective Lease.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
and any subsequent Lease Supplement entered into in accordance with the terms
of the Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
imposed solely as the result of activities of Lessor in the jurisdiction
imposing the Tax that is unrelated to Lessor's dealings with Lessee or the
transactions contemplated by this Lease or the operation of the Aircraft by
Lessee; or imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but excluding
any Tax imposed by any such government or taxing authority of any jurisdiction
if and to the extent that such Tax results from (i) the use (or to and/or from)
operation, presence or registration of the Aircraft, the Airframe, any Engine
or any Part in the jurisdiction imposing the Tax, or (ii) the situs of
organization, any place of business or any activity of Lessee or any other
Person having use, possession or custody of the Aircraft, the Airframe, any
Engine or any Part in the jurisdiction imposing the Tax; or imposed solely as
the result of an event that occurs after the expiration or other termination of
this Lease and that is unrelated to Lessor's dealings with Lessee or to the
transactions contemplated by this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any security
interest) and any option, trust or other preferential arrangement having the
practical effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
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<PAGE> 18
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Lufthansa Agreement" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"Lufthansa Obligations" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"Margin Stock" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"Nationsbank Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing
Corporation, as Lender, and as further amended, supplemented and modified in
accordance with this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease
other than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate
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<PAGE> 19
which does not exceed 15% per annum, (ii) such Indebtedness has a final stated
maturity later than the end of the Term and (iii) the amortization and the
other terms, provisions, conditions, covenants and events of default thereof
taken as a whole shall be no more onerous or restrictive from the perspective
of Lessee and its Subsidiaries or any less favorable, from the perspective of
Lessor or Lenders, than any other Designated Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as title thereto shall vest in
Lessor in accordance with this Lease.
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust
Agreement and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
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<PAGE> 20
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.(i), (b) restriction or encumbrances that
the interest or title of such lessor or sublessor may be subject to, or
(c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated
Credit Agreement; and
(xii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of Lessee incurred in connection with
such extension, (iii) in the case of any extension of subordinated
Indebtedness, such Permitted Extension Indebtedness is made subordinate to the
obligations of Lessee hereunder at least to the same extent as the Indebtedness
immediately prior to such extension, (iv) such Permitted Extension Indebtedness
has a final stated maturity later than the end of the stated maturity of the
Indebtedness being extended immediately prior to such extension and (v) the
amortization and the other terms, provisions, conditions, covenants and events
of default thereof taken as a whole shall be no more onerous
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<PAGE> 21
or restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor and Lenders than those contained in
the Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated
March 31, 1995, as modified pursuant to an acknowledgement dated December 31,
1996 by and between Philippine Airlines and Lessee, and as assigned to Atlas
Air, Inc. pursuant to an Assignment and Acceptance of Lease dated December 31,
1996 as the Lease Agreement may be further amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement and (ii)
that certain Lease Agreement dated as of January 1, 1995 by and between Bankers
Trust Company and Philippine Airlines, Inc., as the Lease Agreement may be
further amended, restated, supplemented or otherwise modified from time to time
in accordance with this Agreement, as modified pursuant to an acknowledgement
dated May 12, 1997 by and between Philippine Airlines and Lessee, and as
assigned to Lessee pursuant to an Assignment and Acceptance of Lease dated May
12, 1997 as the Lease Agreement may be further amended, restated, supplemented
or otherwise modified from time to time in accordance with this Agreement .
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action
which requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Lessor and Agent using the consolidated financial
statements of Lessee and its Subsidiaries which shall be reformulated as if any
such incurrence of Indebtedness and the application of proceeds, acquisition,
disposition or other related action had been consummated at the beginning of
the period specified in the covenant with respect to which Pro Forma Basis
compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
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<PAGE> 22
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee
now or hereafter outstanding, except a dividend payable solely in shares of
that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Lessee now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Lessee now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Designated
Indebtedness.
"S&P" means Standard & Poor's Corporation.
"Second Amended and Restated Credit Agreement" means the Second Amended
and Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
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<PAGE> 23
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely
for the purpose of refinancing Indebtedness associated with a Financed Aircraft
or acquiring or refinancing other aircraft with Permitted Extension
Indebtedness or Other Permitted Indebtedness the only assets of which are such
financed aircraft, leases of such aircraft and contracts related to the
modification of such aircraft and contributions to capital of such Subsidiary,
which together with all other contributions to capital made to other such
Subsidiaries, are not in excess of 15% of the consolidated book value of the
assets of the Lessee and its Subsidiaries, and the only liability of which is
the Permitted Extension Indebtedness or Other Permitted Indebtedness incurred
to refinance such Indebtedness; provided that Lessee beneficially owns and
controls at least 95% of the issued and outstanding capital stock of such
Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on
the schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be
reduced in accordance with Section 3(f) plus all accrued and unpaid interest on
the Loans relating to the Aircraft on the date of determination.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others
under any of the Transaction Documents, including payments of Stipulated Loss
Value and other amounts referred to in Section 3(c) of this Lease.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof. For all
purposes of this Agreement other than the financial
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<PAGE> 24
covenants set forth in subsection 7(f) and the definitions related thereto,
Lessor shall not be considered a Subsidiary of Lessee.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and
ending on the seventh anniversary of the Initial Borrowing Date, or such
earlier date as the Lease may be terminated in accordance with the terms
thereof.
"Transaction" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing
by Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"Transaction Documents" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of
the ING Obligations and the Lufthansa Obligations, the Loan Documents and all
other agreements and documentation executed and delivered in connection with
the Transaction, including, without limitation, in connection with the Dividend
and the Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility
to be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this
Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence
of the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee
hereunder, and Lessee hereby agrees to accept on the Initial Borrowing Date
from Lessor hereunder, the Aircraft as evidenced by the execution by Lessor and
Lessee of a Lease Supplement leasing the Aircraft hereunder. Lessee agrees to
appoint in writing one or more of its employees as its authorized
representative to accept delivery of the Aircraft pursuant to the terms hereof.
Lessee hereby agrees that acceptance of delivery by such employee or employees
shall, without further act, irrevocably constitute acceptance by Lessee of the
Aircraft for all purposes of this Lease Agreement.
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<PAGE> 25
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the seventh anniversary of the Initial
Borrowing Date or such earlier date as this Lease may be terminated in
accordance with the provisions hereof. Basic Rent shall accrue during the Term
in accordance with Exhibit B hereto. Lessee shall pay to Lessor on each Basic
Rent Payment Date an amount of Basic Rent specified opposite each Basic Rent
Payment Date on Exhibit B hereto as such amounts may be adjusted pursuant to
Section 3 plus accrued interest on Basic Rent previously accrued but unpaid as
specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and notified to
Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on
such Basic Rent Payment Date and determined in accordance with the Credit
Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor,
or to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or
by law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee
also will pay to Lessor, or to whomsoever shall be entitled thereto, as
assignee of Lessor, on demand, as Supplemental Rent, (i) interest at the Past
Due Rate with respect to any part of any installment of Basic Rent not paid
when due for any period for which the same shall be overdue and on any payment
of Supplemental Rent not paid when due for the period and, to the extent
permitted by law, on interest accrued on Basic Rent which itself was accrued
and not paid to the extent such accrued interest was not paid when due until
the same shall be paid and on any other amounts payable hereunder which are not
paid when due and (ii) all amounts payable by Lessor pursuant to subsections
2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however, to the
extent any Supplemental Rent required to be paid pursuant to this clause (ii)
of subsection 2(c) has been paid by Lessee pursuant to the terms of another
Lease, then Lessee's obligations hereunder shall be deemed to be satisfied by
the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to
the date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and other unpaid Obligations (other than
principal and interest on other Loans relating to other aircraft leased
pursuant to the other Leases and after taking into account all other payments
of
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<PAGE> 26
rent pursuant to the other Leases on such date), then such excess amounts shall
be paid by the Agent to Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be made on the next succeeding Business Day; provided, however,
if any date on which a payment of Rent becomes due is not a Business Day and is
a day of the month after which no further Business Day occurs in such month,
the payment of Rent shall be made on the next preceding Business Day. No
interest shall accrue on the amount of any payment made on the Business Day
next succeeding the regularly scheduled Basic Rent Payment Date, if such
payment is made on such next succeeding Business Day because the original date
of payment was not a Business Day (it being understood that the amount of Basic
Rent includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft
and all other unpaid Obligations of Lessor (other than principal and
interest on Loans relating to other Aircraft and after taking into account
all other payments of Stipulated Loss Value pursuant to the other Leases
on such date).
(f) Pepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately prepay an amount of Basic Rent equal to the
amount of such required prepayment less any required payments of the Loans
relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon
not less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
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<PAGE> 27
(iii) In the event of any prepayment pursuant to this Section
3(f)(ii), the schedules of Basic Rent and Stipulated Loss Value, shall be
adjusted so as to preserve the after tax yield and after tax cash flows of
the Lessor and, to the extent consistent therewith, to minimize the net
present value of Basic Rent payments. All such computations shall be made
on the basis of the same assumptions and the method of computations
employed in the original calculations of Basic Rent and Stipulated Loss
Values (except to the extent such assumptions have been changed as a
result of such prepayment or any prior such adjustment). At the Lessee's
written request, independent public accountants mutually selected by the
Lessor and the Lessee shall confirm the required adjustments. The final
determination of any adjustment hereunder shall be set forth in amendments
to this Lease, executed and delivered by the Lessor, the Lessee and
consented to by the Agent. The reasonable fees, cost and expenses of the
verifying accounting firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES
AND AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE
ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO
LESSEE AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE
AIRFRAME AND EACH ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR
THE AGENT NOR ANY LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND
EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE
OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF
ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except
that Lessor covenants that it will not, through its own actions or inactions,
in such capacity, interfere in Lessee's quiet enjoyment of the Aircraft unless
this Lease shall have been declared or deemed to have been declared in default
pursuant to Section 17 hereof. None of the provisions of this Section 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 any manufacturer, any affiliate thereof, any subcontractor or
supplier of any manufacturer or any affiliate thereof, with respect to the
Airframe, Engines, or any Parts, or to release the manufacturer, any affiliate
thereof, or any such subcontractor or supplier from any such repre-
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<PAGE> 28
sentation, warranty or obligation. Unless a Default or Lease Event of Default
shall have occurred and be continuing, Lessor agrees to make available to
Lessee such rights as Lessor may have under any warranty with respect to the
Aircraft made by the manufacturer or any affiliate thereof or any of its
subcontractors or suppliers and any other claims against the manufacturer or
any affiliate thereof, or any such subcontractor or supplier with respect to
the Aircraft, all pursuant to and in accordance with the terms of any
applicable purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each
of its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
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<PAGE> 29
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Lessee or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Initial Borrowing Date and
disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Lessee and its Subsidiaries as at December
31, 1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its
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<PAGE> 30
Subsidiaries for the fiscal year then ended, (ii) the unaudited consolidated
and consolidating balance sheets of Lessee and its Subsidiaries as at March 31,
1997 and the related unaudited consolidated and consolidating statements of
income, stockholders' equity and cash flows of Lessee and its Subsidiaries for
the three months then ended. All such statements were prepared in conformity
with GAAP and fairly present the financial position (on a consolidated and,
where applicable, consolidating basis) of the entities described in such
financial statements as at the respective dates thereof and the results of
operations and cash flows (on a consolidated and, where applicable,
consolidating basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments. Neither Lessee
nor any of its Subsidiaries has (and will not following the Initial Borrowing
Date) have any Contingent Obligation, contingent liability or liability for
taxes, long-term lease or unusual forward or long-term commitment that is not
reflected in the foregoing financial statements or the notes thereto and which
in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Lessee
or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could
reasonably be expected to be material to Lessee and its Subsidiaries taken as a
whole. As of the Initial Borrowing Date, Lessee does not know of any basis for
the assertion against it of any liability or obligation of any nature
whatsoever that is not fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A) which, either individually or in the aggregate,
could reasonably be expected to be material to Lessee and its Subsidiaries
taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly
or indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
(i) Lessee and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant
to subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in
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<PAGE> 31
the ordinary course of business or as otherwise permitted under subsection
7(g). Except as permitted by this Lease, all such properties and assets are
free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor any of its Subsidiaries is (i) in violation of any
applicable laws that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or
authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect,
of such default or defaults, if any, would not have a Material Adverse Effect.
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<PAGE> 32
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of its
obligations under the Transaction Documents unenforceable.
(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee
or (b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or
threatened Environmental Claims against Lessee or any of its Subsidiaries, and
neither Lessee nor any of its Subsidiaries has received no written notices,
inquiries, or requests for information with respect to any Environmental
Claims.
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<PAGE> 33
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with
the transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordi-
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<PAGE> 34
nary course of business certified by the chief financial officer of Lessee that
they fairly present the financial condition of Lessee and its Subsidiaries for
such month, subject to changes resulting from audit and normal year-end
adjustments; provided, however, such monthly financial statements shall only be
required to be delivered to Agent to the extent such monthly financial
statements are required to be delivered under the Second Amended and Restated
Credit Agreement as such agreement may be amended, modified, supplemented,
renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each fiscal year,
(a) the consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the operations of
Lessee and its Subsidiaries in the form prepared for presentation to
senior management for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter; provided that delivery of Lessee's Form 10-Q for such fiscal
quarter shall be deemed to satisfy the requirements of this subsection
6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and
its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6(a)(12) for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Lessee that they fairly
present the financial condition of Lessee and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated, (b) a narrative report describing the
operations of Lessee and its Subsidiaries in the form prepared for
presentation to senior management for such fiscal year, and (c) in the
case of such consolidated financial statements, a report thereon of Arthur
Andersen LLP or other independent certified public accountants of
recognized national standing selected by Lessee and satisfactory to Lessor
and Agent, which report shall be unqualified, shall express no doubts
about the ability of Lessee and its Subsidiaries to continue as a go
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<PAGE> 35
ing concern, and shall state that suchconsolidated financial statements
fairly present the consolidated financial position of Lessee and its
Subsidiaries as at the dates indicated and the results of their operations
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the examination
by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards; provided that delivery of Lessee's Form 10-K for such fiscal
year shall be deemed to satisfy the requirements of clauses (a) and (b) of
this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each
delivery of financial statements of Lessee and its Subsidiaries pursuant
to subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee stating that the signers have reviewed the
terms of this Lease and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Lessee and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the date
of such Officers' Certificate, of any condition or event that constitutes
a Default or Lease Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action Lessee has taken, is taking and proposes to take with
respect thereto; and (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
quarterly and annual accounting periods with the restrictions contained in
Section 7;
(5) Pricing Certificates: On or after the third anniversary of the
Initial Borrowing Date, a certificate setting forth the credit rating on
Lessee's obligations under the Pass Through Trust Documents, (a) together
with each delivery of financial statements of Lessee pursuant to
subdivisions (2) and (3) above, (b) within one Business Day after any
public release by S&P or Moody's lowering its credit rating on Lessee's
obligations under the Pass Through Trust Documents and (c) at such
additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or
event that constitutes a Default or Lease Event of Default has come to
their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such Default or Lease Event of Default that
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<PAGE> 36
would not be disclosed in the course of their audit examination, and (c)
stating that based on their audit examination nothing has come to their
attention that causes them to believe either or both that the information
contained in the certificates delivered therewith pursuant to subdivision
(4) above is not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision (4)
above for the applicable fiscal year are not stated in accordance with the
terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of
(a) all financial statements, reports, notices and proxy statements sent
or made available generally by Lessee to its security holders, (b) all
regular and periodic reports and all registration statements (other than
on Form S-8 or a similar form) and prospectuses, if any, filed by Lessee
or any of its Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental or private
regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of
Lessee obtaining knowledge (a) of any condition or event that constitutes
a Default or Lease Event of Default, (b) that any Person has given any
notice to Lessee or any of its Subsidiaries or taken any other action with
respect to a claimed default or event or condition of the type referred to
in subsection 16(1), (c) of any condition or event that would be required
to be disclosed in a current report filed by Lessee with the Securities
and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form
as in effect on the date hereof) if Lessee were required to file such
reports under the Exchange Act, or (d) of the occurrence of any event or
change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Lease Event of Default, Default, default, event or
condition, and what action Lessee has taken, is taking and proposes to
take with respect thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer
of Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previ-
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<PAGE> 37
ously disclosed in writing by Lessee to Lessor and Lenders or (Y) any
material development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or
Agent shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
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<PAGE> 38
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to
its business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the interests of Lessee
and its Subsidiaries and is not materially disadvantageous to Lessor or to any
assignee of the Lease. Lessee will at all times maintain its corporate
existence as a United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the properties and
businesses of its Subsidiaries against loss or damage (including, without
limitation, flood insurance, if necessary or advisable) of the kinds
customarily carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee
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<PAGE> 39
or any of its Subsidiaries, including the Aircraft or any part thereof and any
Engine, and its and their financial and accounting records, and to make copies
and take extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Lessee may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may be reasonably requested;
provided that so long as no Lease Event of Default shall have occurred and be
continuing, such inspection shall not be disruptive to Lessee's business, as
reasonably determined by Lessee. Without in any way limiting the foregoing,
Lessee will, upon the request of Lessor or Agent, participate in a meeting of
Agent and Lenders once during each fiscal year to be held at Lessee's corporate
offices (or such other location as may be agreed to by Lessee, Lessor and
Agent) at such time as may be agreed to by Lessee, Lessor and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim
against Lessee and which could reasonably be expected to have a Material
Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the event
Lessee or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any facility, Lessee or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Lessee's or such Subsidiary's liability for
such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Lessee or such
Subsidiary. Notwithstanding anything to the contrary contained in this Lease,
Lessee and its Subsidiaries may engage in the transportation of Hazardous
Materials in the ordinary course of business so long as such is conducted in
compliance with all applicable Environmental Laws, and all other applicable
laws, policies, orders, directives and regulations.
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<PAGE> 40
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
reasonably be expected to result in a liability for Lessee, under Title IV of
ERISA or the minimum funding standards of Part 3 of Subtitle B of Title I of
ERISA, in excess of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees
that, so long as any amounts remain owing under this Lease, Lessee shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers
an Officers' Certificate to Lessor, Agent and Lenders, in form and
substance reasonably satisfactory to Lessor and Agent, confirming that, on
a Pro Forma Basis after giving effect to such incurrence of Indebtedness,
(i) the ratio of Consolidated Total Debt (less Cash and Cash Equivalents
held by Lessee in excess of $25 million) as of the last day of the most re-
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<PAGE> 41
cently ended fiscal quarter (the "Determination Date") to Consolidated
Adjusted EBITDA for the four-fiscal quarter period ending on such
Determination Date did not exceed 4.5:1.0, (ii) the ratio of Consolidated
Adjusted EBITDA for such four-fiscal quarter period to Consolidated
Interest Expense for such four-fiscal quarter period was not less than
3.0:1.0; and (iii) Lessee will be in compliance with all covenants set
forth in subsection 7(f) hereof, Lessee and its Subsidiaries may incur
Other Permitted Indebtedness; and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any
assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event
shall Lessee create, incur, assume or permit to exist Liens on or with respect
to any assets subject to the
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<PAGE> 42
Aircraft Chattel Mortgages except for Permitted Encumbrances of the type
described in clauses (i), (ii) or (viii) of the definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal
year; provided that Lessee shall not incur liabilities related to any such
Joint Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time 10.5 million.
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<PAGE> 43
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with
Asset Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7(d)(4)
annexed hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(8) shall at no time exceed $30
million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Lessee may make scheduled payments of
principal, mandatory prepayments of principal (including through the exercise
of remedies) and payment of interest from time to time on Designated
Indebtedness; and provided further, that so long as no Default or Lease Event
of Default has occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
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<PAGE> 44
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four-fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee occurring during any of the periods set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION>
Minimum
Interest
Period Coverage Ratio
------ --------------
<S> <C>
fiscal year 1997 2.50:1.00
fiscal year 1998 2.75:1.00
fiscal year 1999 3.00:1.00
Thereafter 3.25:1.00
</TABLE>
(ii) Minimum Fixed Charge Coverage Ratio. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated Rental
Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Lessee occurring during any
of the periods set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
Minimum Fixed
Charge Coverage
Period Ratio
------ ---------------
<S> <C>
fiscal year 1997 1.25:1.00
Thereafter 1.10:1.00
</TABLE>
(iii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Lessee in excess of $25 million as of such date) to (ii)
Consolidated Adjusted EBITBA for the four-fiscal quarter period ending on such
date to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
Maximum
Period Leverage Ratio
------ --------------
<S> <C>
fiscal year 1997 4.50:1.00
fiscal year 1998 4.25:1.00
fiscal year 1999 4.00:1.00
Thereafter 3.75:1.00
</TABLE>
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<PAGE> 45
(iv) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
Minimum
Consolidated
Period Net Worth
------ ------------
<S> <C>
fiscal year 1997 $120 million
fiscal year 1998 $145 million
fiscal year 1999 $170 million
Thereafter $195 million
</TABLE>
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee
or any wholly-owned Subsidiary of Lessee, or be liquidated, wound up
or dissolved, or all or any part of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of,
in one transaction or a series of transactions, to Lessee or any such
wholly-owned Subsidiary of Lessee; provided that, in the case of such
a merger, Lessee or such wholly-owned Subsidiary shall be the
continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided
that the consideration received for such assets shall be in an amount
at least equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess
of $100 million in any fiscal year or $500 million in the aggregate;
provided that (x) the consideration received for such assets shall be
in an amount at least equal to the fair market value thereof; (y) the
consideration received shall be at least 75% cash; and (z) the
proceeds of such Asset Sales shall be applied to repay permanently
senior bank debt or prepay Basic Rent;
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<PAGE> 46
(4) Lessee may lease or transfer any Financed Aircraft to the
extent expressly permitted by the mortgages encumbering such Financed
Aircraft as in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of
another Person provided that, (a) the acquisition primarily involves
the acquisition of assets to be used in the business of Lessee, (b)
with respect to such acquisition any newly acquired or created
subsidiary of Lessee shall be a wholly-owned subsidiary, (c)
immediately before and after giving effect thereto, no Default or
Lease Event of Default shall have occurred and be continuing, (d)
immediately after giving effect to the acquisition, Lessee shall be
in compliance on a Pro Forma Basis with financial covenants in
subsection 7(f) and such compliance shall be evidenced by an
Officer's Certificate demonstrating such compliance, (e) Lessor and
Agent shall have reviewed and be reasonably satisfied with the nature
and amount of all contingent liabilities or other liabilities not on
the balance sheet of Lessee assumed in connection with such
acquisition and a business plan prepared by Lessee with respect to
such acquisition and (f) the aggregate amount of cash payments made
in connection with all such acquisitions other than with the proceeds
from sales or issuances of equity by Lessee does not exceed
$100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of
Eligible Aircraft permitted to be purchased, but not purchased,
during the previous fiscal year (but in no event shall any such
number of Eligible Aircraft once carried forward to the next fiscal
year be carried forward to any fiscal year thereafter) together with
Consolidated Capital Expenditures with respect to the acquisition, in
the normal course of business, of spare parts and spare engines
associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal
course of business; and
(8) Lessee and its Subsidiaries may make other Consolidated
Capital Expenditures not in excess of $10 million during any fiscal
year; provided that any amount of such other Consolidated Capital
Expenditures permitted, but not made, in any fiscal year may be
carried forward to and made during the immediately succeeding fiscal
year (but no amount once carried forward to the next fiscal year may
be carried forward to any fiscal year thereafter).
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation
or bylaws to be amended or otherwise modified in any manner which could
reasonably be expected to have a
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<PAGE> 47
Material Adverse Effect or (ii) any Material Agreement to be amended or
otherwise modified in any manner with respect to any provision providing
material representations and warranties to Lessee, indemnification rights to
Lessee, or limiting Lessee's remedies or rights upon the other party to such
agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee
may become so obligated to the extent that, and only to the extent that,
immediately after giving effect to the incurrence of liability with respect to
such lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year do not exceed $60 million plus an amount not to exceed
$12 million during any fiscal year, equal to Consolidated Rental Payments
incurred in connection with sale leaseback transactions described in subsection
7(j) plus Consolidated Rental Payments assumed pursuant to acquisitions
permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Lessee or any of its Subsidiaries
to any Person (other than Lessee or any of its Subsidiaries) in connection with
such lease; provided that Lessee and its Subsidiaries may become and remain
liable as lessee, guarantor or other surety with respect to any such lease if
and to the extent that Lessee or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease under subsection 7(i).
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Lessee or with any Affiliate of Lessee or of any
such holder, on terms that are less favorable to Lessee or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Lessee and its Subsi-
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diaries, (ii) reasonable and customary salaries, bonuses and other compensation
paid to and indemnification of employees of Lessee or any of its Subsidiaries
in accordance with past practice or approved by the compensation committee of
Lessee or (iii) performance by Lessee of its obligations under and in
accordance with the Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of
any of its Subsidiaries, except to qualify directors if required by
applicable law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Lessee, another wholly-owned Subsidiary of
Lessee, or to qualify directors if required by applicable law.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
SECTION 8. Return of the Aircraft. (a) Condition Upon Return. Unless
the Aircraft has been sold pursuant to Section 21, if at any time the Lessee
shall return the Aircraft to the Lessor hereunder, Lessee, at its own expense,
will return the Aircraft to Lessor at a location specified by the Lessor to the
Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft to be in compliance with the maintenance covenants contained in this
Lease and (ii) the Airframe will be fully equipped with the Engines installed
thereon.
At the time of such return, such Airframe and Engines (A) shall have an
air worthiness certificate from the Federal Aviation Administration and shall
be in full compliance with the provisions of Federal Aviation Regulations, Part
121 (or successor regulation), and shall be in material compliance with all
applicable FAA noise, corrosion, environmental and aging aircraft requirements,
(B) shall be free and clear of all Liens and (C) shall be in a full freighter
configuration and in as good condition as when originally delivered to Lessee,
ordinary wear and tear excepted, and otherwise in the condition required to be
maintained under Lessee's FAA-approved maintenance plan; and in all such cases
the Aircraft shall not have been discriminated against as compared to other
aircraft owned or leased by Lessee whether by reason of its leased status or
otherwise in maintenance, use, operation or in any other manner whatsoever.
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<PAGE> 49
(b) Overhaul and Repair. The Airframe, Engines and all Parts shall
have been, and shall be properly documented to have been, repaired or
overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial
Borrowing Date which deviate from the certified configuration and which are
still in existence on the Aircraft shall have approval or certification by the
FAA (or its designee) or certification if required. All such modifications
shall be accompanied by complete data and documentation necessary to
substantiate their certification and approval and methods of compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate
Engine shall be delivered with the returned Airframe, 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
Acceptable Alternate Engine, in form and substance reasonably satisfactory to
Lessor (together with an opinion of 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 Acceptable Alternate Engines are
free and clear of all Liens) against receipt from Lessor of a bill of sale
evidencing the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or
deferred maintenance items, scheduled or unscheduled, against the Aircraft
including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall
have been maintained by cleaning and treating all mild and moderate corrosion
and correcting of all severe or exfoliate corrosion in accordance with Lessee's
approved maintenance program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of
this Lease, Lessee shall deliver or cause to be delivered to Lessor all logs,
manuals and data and
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maintenance, inspection, modification and overhaul records and similar records
required to be maintained with respect to the Aircraft and Parts under FAA
rules, the Aircraft maintenance program. If any such logs, manuals, records or
other data are missing, incomplete or otherwise not in accordance with FAA
standards applicable to Lessee, Lessee shall re-accomplish the maintenance
tasks necessary to produce such records in accordance with its approved
maintenance program prior to delivery of the Aircraft or otherwise perform all
necessary acts (without regard to any applicable waivers or deferrals) to
obtain such records in a manner satisfactory to the FAA and Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of
this Lease at the end of the Term or pursuant to Section 17, 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 Lessee's risk and at Lessee's expense
for a period not exceeding 30 days, and thereafter at Lessor's risk and at
Lessor's cost for insurance, maintenance and Lessee's out-of-pocket expenses
for such storage for a period not exceeding 90 days (provided that if such
termination occurs as a result of a Lease Event of Default hereunder, such
storage shall be at the cost of the Lessee), commencing on the date the
Aircraft is returned substantially in the condition required under this Section
8, at a location in the continental United States selected by Lessee and used
by Lessee as a location for the long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned
to Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable nonproprietary Parts (other than Parts otherwise
required by Sections 10 or 11 to be maintained on the Aircraft) 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 11 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 at
their fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of
this Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien, on or with respect to the Aircraft,
title thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. Lessee will promptly, at its own expense,
take such action as may be necessary to duly discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense,
will (i) be a "citizen of the United States" as defined in Section 40102(15) of
Title 49 of the United
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States Code and will be an air carrier certificated under Sections 401 and 609
of the Act and hold all necessary air carrier operating certificates; (ii) will
cause ownership of the Aircraft to be duly registered and remain duly
registered in the name of Lessor in accordance with the Act and otherwise
registered under all applicable laws of the United States so as to be eligible
to operate in commercial air service under the Act; and (iii) will service,
repair, inspect, test, maintain and overhaul the Airframe and each Engine and
install replacement equipment and parts on the Airframe and each Engine and
install replacement equipment and parts on the Airframe and each Engine (A) so
as to keep the Airframe and each Engine in such operating condition as may be
required to permit the Airframe and each Engine to be utilized in commercial
operations (B) so as to enable the airworthiness certification of the Airframe
to be maintained in good standing at all times under the Act, except when
aircraft of the same type, model or series as the Airframe (powered by engines
of the same type as those with which the Airframe shall be equipped at the time
of grounding) registered in the United States have been grounded by the FAA;
provided, however, that if following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then subject to
the provisions of Section 13 hereof, so long as Lessee is diligently taking or
causing to be taken all necessary action to promptly correct the condition
which caused such withdrawal, no Lease Event of Default shall arise from such
withdrawal, (C) in accordance with Lessee's FAA-approved maintenance,
inspection and maintenance control programs, and in the same manner and with
the same care used by Lessee with respect to the same or similar aircraft and
engines owned or operated by Lessee so as to keep the same in as good operating
condition as when originally leased hereunder, ordinary wear and tear excepted,
which practices shall at all times be at or above the standard of the industry
in the United States for prudent maintenance of similar equipment, and (D) in
such manner as may be necessary to maintain in full force all warranties of the
manufacturers thereof. Lessee shall maintain all records, logs and other
materials which may be required to permit the Airframe and each Engine to be so
utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
the Airframe or such Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine, Lessee, at its own cost and expense, will conform thereto or obtain
conformance therewith and will maintain the same in proper operating condition
under such laws, rules, regulations and orders, provided, however, that Lessee
may, in good faith (after having delivered to Lessor and Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's and Agent's opinion (in their sole discretion),
adversely affect the interests of Lessor, Agent or any Lender.
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Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section
14 shall not be at the time in full force and effect, or in any area excluded
from coverage by an insurance policy in effect with respect to the Airframe or
such Engine, except in the case of a requisition for use by the United States
of America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened
area of hostilities unless the Airframe or such Engine is operated or used
under contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of
the term of such contract and for injury to persons or damage to property of
others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner
or for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or omit to do
anything the omission of which, may invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of
Agent and Lessor, sell, assign, lease or otherwise in any manner deliver,
transfer or relinquish possession or control of, or transfer the right, title
or interest of Lessee in, the Airframe or any Engine except that, unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessee
may without the prior written consent of the Agent and Lessor, take the
following actions so long as the actions to be taken shall not deprive the
Agent of the first priority Lien under the Aircraft Chattel Mortgage in the
assets subject thereto and so long as the actions to be taken shall not deprive
Lessor of the protections of Section 1110 of the Bankruptcy Code with respect
to the Aircraft and shall not deprive the Agent of the protections of Section
1110 of the Bankruptcy Code with respect to the Aircraft as assignee of
Lessee's rights under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline
industry and entered into by Lessee in the ordinary course of business
which do not contemplate or require the transfer of title to, use for the
remainder of its useful life, or registration of the Air
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frame or title to or use for the remainder of its useful life of such
Engine; provided, however, that if Lessee's title to or use for the
remainder of its useful life, of the Airframe or any Engines shall be
divested under any such agreement or arrangement, such divesture shall be
deemed to be an Event of Loss with respect to the Airframe or such Engine
and Lessee shall comply with Section 13 in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or
(ii) of the definition of Permitted Encumbrances in the Credit Agreement,
(B) those that apply only to the engines (other than the 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), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements which are customary in the
airline industry and do not contemplate or require the transfer of title
to such airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and except Liens of the type permitted by
clause (iv) above; and (B) Agent and Lessor shall have received from the
lessor, conditional vendor or secured party and each of the purchasers,
mortgagees and encumbrancers of such lessor, conditional vendor or secured
party of such airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such airframe), whereby
such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party expressly and effectively agrees that neither it
nor its successors and assigns will acquire or claim any right, title or
interest in any Engine by reason of such Engine being installed on such
airframe at any time when such Engine is subject to the Aircraft Chattel
Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current
certificates and licenses that would be required under the applicable laws
of the United States for the performance by such employees of similar
functions
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within the United States; provided that Lessee's obligations hereunder
shall continue in full force and effect notwithstanding any such ACMI
Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for
the maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and
provided further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the
Airframe and each Engine to be legibly marked (in a reasonably prominent
location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing, Inc.
and Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Lessor and Agent be appropriate or desirable to
evidence the fact that it is subject to the ownership of Lessor and the lien
and security interest created by the Aircraft Chattel Mortgage. Lessee shall
not remove or deface, or permit to be removed or defaced, any such plate, disk,
or other marking or the identifying manufacturer's serial number, and, in the
event of such removal or defacement, shall promptly cause such plate, disk, or
other marking or serial number to be promptly replaced. Except as provided
above, Lessee shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine as a designation that
might be interpreted as a claim of ownership or of any security interest
therein, except that Lessee or any permitted lessee may place its customary
colors and insignia or the insignia of the manufacturer on the Airframe or any
Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent
or hold out the Lessor, the Agent or any Affiliate of any of them (and will use
its best efforts to ensure that none of the Lessor, the Agent, any Lender or
any Affiliate of any of them is not at any time represented or held out) as
being in any way connected or associated with any operation of the Airframe,
any Engine or any Part or any other operations or carriage undertaken by
Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees
that it will not purport to, pledge the credit of the Lessor, any Lender or the
Agent for any maintenance, service, repairs, or overhauls of, modifications to,
or changes or alterations in, the Airframe, any Engine, or any Part, or for any
other purpose whatsoever.
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SECTION 11. Replacement and Pooling of Parts; Alterations,
Modifications and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own
cost and expense, will promptly replace all Parts, which may from time to time
be incorporated or installed in or attached to the Airframe or any Engine and
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Lessee at its own cost and expense may remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided that,
except as otherwise provided in Section 11(d), Lessee at its own cost and
expense shall replace such Parts as promptly as practicable. All replacement
Parts shall be owned by Lessor free and clear of all Liens (except Permitted
Encumbrances and for pooling arrangements to the extent permitted by Section
11(b)), and shall be in as good operating condition as, and shall have a value
and utility at least equal to, the Parts replaced assuming such parts were in
the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to
such replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor
and shall thereupon become free and clear of all rights of Lessor hereunder and
all rights derivative of Lessor's and shall no longer be deemed a Part
hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in
Section 11(a) may be subjected by Lessee to a normal pooling arrangement of the
type customary in the airline industry entered into by Lessee in the ordinary
course of its business and entered into with Domestic Air Carriers that are not
the subject of any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such Engine in
accordance with Section 11(a) as promptly as possible after the removal of such
removed part. In addition, any replacement Part when incorporated or installed
in or attached to the Airframe or any Engine in accordance with Section 11(a)
may be owned by any third party subject to such a pooling arrangement, provided
Lessee, at its expense, as promptly thereafter as possible, either (A) causes
such replacement Part to become property of Lessor and subject to the lien and
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security interest of the Aircraft Chattel Mortgage in accordance with Section
11(a) free and clear of all Liens (except Permitted Encumbrances and the
Aircraft Chattel Mortgage relating to the Aircraft) or (B) replaces such
replacement Part by incorporating or installing in or attaching to the Airframe
or such Engine a further replacement Part owned by Lessee which shall become
the property of Lessor subject to the lien and security interest of the
mortgage free and clear of all Liens (except Permitted Encumbrances and the
Aircraft Chattel Mortgage relating to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be
made such alterations and modifications in and additions to the Airframe and
the Engines as may be required from time to time to meet the standards of the
FAA or other governmental authority having jurisdiction; provided, that Lessee
may, in good faith, contest the validity or application of any such standard in
any reasonable manner that shall not adversely affect the Lessor's or Agent's
respective interests. Lessee also agrees, at its own cost and expense, to make
or cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer relating to
the Airframe or any Engine. In addition so long as no Default or Lease Event of
Default shall have occurred and be continuing, Lessee, at its own cost and
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility,
condition or airworthiness thereof immediately prior to such alteration,
modification or addition assuming the Airframe or such Engine were then in the
condition and airworthiness required to be maintained by the terms of this
Lease.
(d) All Parts incorporated or installed in or attached to or added to
the Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement of or substitution for any such Part, (B) is not
required to be incorporated or installed in or attached or added to the
Airframe or such Engine pursuant to the terms of Section 10(a) hereof or any
other provision of this Lease or the Aircraft Chattel Mortgage and (C) can be
removed from the Airframe or such Engine without diminishing or impairing the
value, utility or airworthiness which the Airframe or such Engine would have
had at such time had such alteration, modification or addition not occurred,
assuming the Airframe or such Engine was otherwise in the condition required by
this Lease and the Aircraft Chattel Mortgage. Upon the removal by Lessee of any
such Part, as above provided, title thereto shall, without further act, be free
and clear of the interests of Lessor and all rights derivative of Lessor's and
such Part shall no longer be deemed a Part hereunder.
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(e) In no event shall the Lessor bear any liability or cost whatsoever
for (i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification
of the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax
basis, Lessor and its assignees, if any, from and against, any and all fees and
taxes, levies, imposts, duties, charges or withholdings, together with any
penalties, fines or interest thereon (any of the foregoing for the purposes of
this Section 12 being called a "Tax"), which may from time to time be imposed
on or asserted against Lessor and its assignees, if any, or the Airframe or any
Engine or any part thereof or interest therein by any Federal, state or local
government or other taxing authority in the United States or by any foreign
government or subdivision thereof or by any foreign taxing authority in
connection with, relating to or resulting from: (i) the Airframe or any Engine
or any part thereof of interest therein; (ii) the manufacture, purchase,
ownership, mortgaging, lease, sublease, use, storage, maintenance, sale or
other disposition of the Airframe or any Engine; (iii) any rentals or other
earnings therefor or arising therefrom or the income or other proceeds received
with respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage;
provided, however, that, there shall be excluded from any indemnification under
this Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien which may have attached as security for such Tax, nothing
in this Section shall require the payment of any Tax so long as and to extent
that validity thereof shall be contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and Lessee shall have
set aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless
Lessor, Agent and each Lender, and the officers, directors, employees, agents
and affiliates of Lessor, Agent and each Lender, (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct,
indirect or consequential and whether based on any federal, state or foreign
laws, statutes, rules or regulations (including without limitation securities
and commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Lease or the other Transaction Documents or
the transactions contemplated hereby or thereby (including without limitation
Lenders' agreement to make the Loans to Lessor or the use or intended use of
the proceeds of
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any of the Loans) (collectively called the "Indemnified Liabilities"); provided
that Lessee shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of
that Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Lessee shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with
respect to an Airframe or an Engine, Lessee will promptly notify Lessor and
Agent thereof in writing (in any event within five (5) days of such occurrence)
and will, not later than 180 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, free of all Liens (other than
Permitted Encumbrances) title to an Acceptable Alternate Airframe or Acceptable
Alternate Engine, as the case may be. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will, as conditions to such transfer,
(i) furnish Lessor with a warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to such Acceptable
Alternate Airframe or Acceptable Alternate Engine, (ii) cause a Lease
Supplement to be filed for recording pursuant to Title 49 of the United States
Code, as amended, (iii) furnish Lessor with such evidence of Lessee's title to
such Acceptable Alternate Airframe or Acceptable Alternate Engine and of
compliance with the insurance provisions of Section 14 hereof with respect to
such Acceptable Alternate Airframe or Acceptable Alternate Engine as Lessor may
reasonably request, (iv) furnish Lessor with an opinion of Lessee's counsel to
the effect that title to such Acceptable Alternate Airframe or Acceptable
Alternate Engine has been duly conveyed to Lessor free and clear of all Liens
except Permitted Encumbrances and Lessor and Agent continue to have 1110
protection with respect to such Aircraft and (v) transfer to or at the
direction of Lessee without recourse or warranty all of Lessor's right, title
and interest, if any, in and to (A) the Airframe or Engine with respect to
which such Event of Loss occurred and furnish to or at the direction of Lessee,
at Lessee's expense, a bill of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if any,
against third parties, for damage to or loss of the Airframe or Engine subject
to such Event of Loss, and such Airframe or Engine shall thereupon cease to be
an Airframe or Engine leased hereunder. Lessee shall cooperate with Lessor and
take all such actions as shall be requested by Lessor so that Lessor complies
with Section 4(f) of the Aircraft Chattel Mortgage. For all purposes hereof,
each such Acceptable Alternate Airframe or Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Airframe" or "Engine", as the case may be. No Event of Loss
under the circumstance contemplated by the terms of this paragraph (a) shall
result in any reduction in Basic Rent.
(b) With respect to the Airframe or any Engine, as between the Lessor
and Lessee, any payments on account of an Event of Loss (other than insurance
proceeds or other
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payments the application of which is provided for in Section 14 below) received
from any government authority or other person shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee
pursuant to the terms hereof, so long as there shall exist no Default or
Lease Event of Default, such payment shall be paid over to or retained by
Lessee upon satisfaction of the conditions for replacement contained in
paragraph (a) above and until such time shall be held by Lessor as
security for the obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Lessee shall promptly notify Lessor
and Agent of such requisition and all of Lessee's obligations under the Lease
shall continue to the same extent as if such requisition had not occurred. Any
payments received by Lessor or Lessee from the United States Government for the
use of the Airframe or such Engine, to the extent allocable to the Term, shall
be paid over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain
on or with respect to the Aircraft, at its own cost and expense, public
liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type
and covering the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated
with Lessee but in no event in an amount less than $500,000,000 per occurrence
(which shall include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when the Aircraft is on the ground
and not in operation, Lessee may carry or cause to be carried, in lieu of
insurance
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required by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required to
exceed the amounts of comprehensive airline liability insurance, and the scope
of risk covered and type of insurance shall be the same, as are customarily
carried with respect to similar aircraft on the ground by corporations engaged
in the same or similar business and similarly situated with Lessee. Any
policies of insurance carried in accordance with this Section 14 and any
policies taken out in substitution or replacement of any such policies (A)
shall be amended to name Agent, Lenders and Lessor as additional named
insureds, (B) shall be primary without right of contribution from any other
insurance which is carried by Lessee, (C) shall expressly provide that all
provisions thereof, except the limits of the liability, shall operate in the
same manner as if there were a separate policy covering each insured, and (D)
shall provide that the insurer shall waive any right of subrogation against
Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of
recognized responsibility and reputation on or with respect to the Aircraft, at
its own cost and expense, aircraft ground and flight all-risk hull insurance as
well as fire and extended coverage insurance on Engines and other equipment
while removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C) hijacking (air
piracy) or any unlawful seizure or wrongful exercise of control of the Aircraft
or crew in flight (including any attempt at such seizure or control) made by
any person or persons aboard the Aircraft acting without the consent of the
insured, if and to the extent the same shall be maintained by Lessee with
respect to similar aircraft owned or operated by Lessee on the same routes or
if the Aircraft is operated on routes where the custom is for Domestic Air
Carriers similarly situated with Lessee flying comparable routes with similar
aircraft to carry such insurance, of the type usually carried by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided that such insurance (including any self-insurance to the extent
permitted below) shall at all times be for an amount not less than the greater
of the Stipulated Loss Value as of the closest Stipulated Loss Determinate Date
and $50,000,000. During any period when 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 this Section, insurance otherwise conforming hereto except that the
scope of risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee for
aircraft on the ground in an amount at least equal to the applicable amount
provided above. All such insurance shall name Agent, Lenders and Lessor as
additional insureds and loss payees to the extent their interest may appear and
shall provide that any loss to the Airframe or an Engine in excess of
$2,000,000 (and, if a Default or Lease Event of Default has occurred and is
continuing, any such loss) shall be payable to the Lessor and to the Agent for
the benefit of Lenders; and shall be primary without right of contribution from
any other insurance which is carried by Lessor or Agent with respect to its
interest therein.
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Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other
similar aircraft in Lessee's fleet which are of a value comparable to the
Aircraft and as are not substantially greater than amounts self-insured by
corporations engaged in the same or similar business and similarly situated
with Lessee; provided, however, that Lessee may not self-insure in an amount in
excess of $1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph
(a) or paragraph (b) above shall: (A) be amended to name Lessor, Agent and
Lenders as additional named insureds, but without Lessor, Agent or Lenders
being thereby liable for premiums (and the insurance companies waiving their
right with respect thereto); (B) provide that in respect of the interest of (x)
Lessor or (y) Agent or Lenders in such policies the insurance shall not be
invalidated by any action or inaction of (x) Lessee or (y) Lessee or Lessor,
respectively, and shall insure the interests of Agent and Lenders regardless of
any breach or violation by Lessee, Lessor or any Person (other than Agent) of
any warranty, declaration, condition or exclusion from coverage contained in
such policies; (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the interest of Lessor,
Agent or any Lender, or if such insurance is allowed to lapse for nonpayment of
premium, such cancellation, change or lapse shall not be effective as to
Lessor, Agent or any Lender for thirty (30) days (seven (7) days, or such
shorter or longer period as may from time to time be customarily available in
the industry, in the case of any war risk and allied perils coverage) after
receipt by Agent and Lessor of written notice from such insurers of such
cancellation, change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft and shall be payable
in U.S. dollars; (E) waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise in
respect of any liability of Lessor and Agent; and (F) waive all rights of
subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any
agency or instrumentality thereof in respect of the Airframe or any Engine, a
valid agreement by the United States or such agency or instrumentality to
indemnify Lessee against the same risks against which Lessee is required
hereunder to insure shall be considered adequate insurance with respect to the
Airframe or such Engine to the extent of the risks and in the amounts that are
the subject of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or
prior to January 31, Lessee will furnish to Lessor and Agent (A) a report
signed by a firm of independent aircraft insurance brokers, appointed by Lessee
and not objected to by Lessor or Agent, describing in reasonable detail
acceptable to Lessor and Agent the insurance then carried and maintained on or
with respect to the Aircraft and the Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of Lessee, Lessor and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance covered by the
report. Lessee will cause such brokers to advise Agent in
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writing (x) promptly of any default in the payment of any premium and of any
other act or omission on the part of Lessee of which such firm has knowledge
and which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft or any Engine and (y) at least thirty (30) days prior
to the expiration or termination date, or date of effectiveness of any material
change, of any insurance carried and maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent,
Lessor or Lessee from insurance referred to in paragraph (b) above shall be, if
received by Lessor or Lessee, immediately paid to Agent, as agent for itself
and Lessor and shall be paid to Lessee upon compliance by Lessee with the terms
of Section 13, provided that no Default or Lease Event of Default shall have
occurred and be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee 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 14. No insurance maintained by Agent, Lessor or any Lender
shall prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or Lender
shall be paid as provided in the insurance policy relating thereto and no such
Person shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section
10, Lessee will not, without the prior written consent of Lessor, assign any of
its rights hereunder or in the Aircraft. Lessor agrees that it will not assign
or convey its right, title and interest in and to this Lease or the Aircraft
except in accordance with the Credit Agreement. Subject to the foregoing, the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective successors and permitted
assigns and shall inure, to the direct benefit of, and shall also be
enforceable by the Agent and the Lenders, and their respective successors, as
assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days
after the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
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(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10
Business Days after written notice from Lessor or Agent, unless action has
been taken within 15 Business Days to remedy such breach and such action
is being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its
Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the appointment of an
interim receiver, trustee or other custodian of Lessee or any of its
Subsidiaries; or a warrant of attachment, execution or similar process
shall have been issued against any substantial part of the property of
Lessee or any of its subsidiaries, and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) Lessee or any of its Subsidiaries shall be unable, or
shall fail generally, or shall admit in writing its inability, to pay its
debts as such debts become due; or the Board of Directors of Lessee or any
of its Subsidiaries (or any committee thereof) shall adopt any resolution
or otherwise authorize any action to approve any of the actions referred
to in clause (i) above or this clause (ii); or
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(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or
any items of Indebtedness with an aggregate principal amount of $10
million or more or (b) any Contingent Obligation in an individual
principal amount of $5 million or more or any Contingent Obligations with
an aggregate principal amount of $10 million or more, in each case beyond
the end of any grace period provided therefor; or (ii) there shall exist a
breach by Lessee or any of its Subsidiaries with respect to any other
material term of (a) any evidence of any Indebtedness in an individual
principal amount of $5 million or more or any items of Indebtedness with
an aggregate principal amount of $10 million or more or any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million
or more or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), if the effect
of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligations, as the case
may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Lessee or any of its Subsidiar-
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ies or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event
later than five days prior to the date of any proposed sale thereunder);
or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities of Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons
acting in concert (in any such case, excluding Mr. Chowdry) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Lessee (or other Securities convertible into
such Securities) representing 20% or more of the combined voting power of
all Securities of Lessee entitled to vote in the election of directors,
other than Securities having such power only by reason of the happening of
a contingency or (c) the Board of Directors of Lessee shall not consist of
a majority of Continuing Directors or (ii) a "Change of Control" shall
occur under the Pass Through Trust Documents or any other Material
Agreement (as in effect on the date of such occurrence).
SECTION 17. 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 to be in default, except that upon the occurrence of a Lease
Event of Default referred to in clauses (e) (f) or (g) of Section 16, this
Lease shall be deemed declared in default without any further act or
notice, and at any time thereafter, Lessor may do one or more of the
following with respect to all or any part of the Aircraft, Airframe and
any or all of the Engines as Lessor in its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
Lessee to execute and deliver such instruments to the Lessor;
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(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 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 17;
and without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a) or (b) 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, any Basic Rent
due on or before the payment date so specified plus 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 after the date specified in such notice if
any), an amount equal to the Stipulated Loss Value for the Aircraft
computed as of the immediately preceding Stipulated Loss Determination
Date, together with interest, if any, at the Past Due Rate on the amount
of such Basic Rent and Stipulated Loss Value from the Stipulated Loss
Determination Date as of which Stipulated Loss Value is computed until the
date of actual payment; and upon such payment of liquidated damages and
all Supplemental Rent then due and payable by the Lessee hereunder, the
Lessor shall transfer (without any representation, recourse or warranty
whatsoever) the Aircraft to the Lessee and the Lessor shall execute and
deliver such documents evidencing such transfer and take such further
action as the Lessee shall reasonably request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under
paragraph (c) above with respect to such Aircraft, may, if it shall so
elect, demand that Lessee pay Lessor, and Lessee shall pay to Lessor, on
the date of such sale, any accrued rent with respect to the Aircraft due
on or prior to such date plus, as liquidated damages for loss of a bargain
and not as a penalty, 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 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;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses
incurred by Lessor and Agent and any Lender (including reasonable
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allocated time charges of internal counsel for the Lender) in connection with
the Lease Event of Default, the exercise of remedies and the return of the
Airframe or any Engine in accordance with the terms of Section 8 hereof or in
placing such Airframe or Engine (which for purposes hereof, shall include,
without limitation all logs, manuals and data and inspection, maintenance,
modification and overhaul and similar records with respect thereto) in the
condition and airworthiness required by such Section. The Lessee hereby
acknowledges that it shall be directly liable for such costs and expenses to
any Person designated by the Lessor, the Agent or any Lender (as the case may
be) to provide services in connection with or to effect the return of the
Airframe or any Engine in accordance with the terms of Section 8 hereof or in
placing such Airframe or Engine (which for purposes hereof shall include,
without limitation, such logs, manuals and records) in the condition and
airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except
as otherwise expressly provided above, no remedy referred to in this Section 17
is intended to be exclusive, but each shall be cumulative and in addition to
any other remedy referred to above or otherwise available to 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 17 or which may otherwise limit
or modify any of Lessor's rights and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so
long as any Loan relating to the Aircraft or other Obligations (other than
principal and interest on Loans relating to other aircraft) are outstanding
under the Credit Agreement, all rights of Lessor under this Section 17 shall be
exercised only by the Agent as assignee of Lessor's rights under this Lease
pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the
Lessor's interest hereunder, will cause such Lease Supplement (and, in the case
of the initial Lease Supplement, this Lease as well) or amendment to be duly
filed and recorded, and maintained of record, in accordance with the applicable
laws of the government of registry of the Aircraft. In addition, Lessee at its
expense will promptly and duly execute and deliver to Lessor and the Agent such
further documents and take such further action as
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<PAGE> 68
Lessor and the Agent may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and the other
Transaction Documents and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor and Agent hereunder and
under the other Transaction Documents, including, without limitation, if
requested by Lessor and the Agent, the execution and delivery of supplements or
amendments hereto, at the expense of Lessee, each in recordable form, and all
financing statements and continuation statements, and all similar notices
required by applicable law at all times to be kept recorded and filed in such
manner and such places as Lessor and the Agent may reasonably request.
(a) Lessee agrees at its own expense to furnish to the Lessor and the
Agent promptly after execution and delivery of any supplement and amendment
hereto, an opinion of counsel satisfactory to Lessor and the Agent (which may
include Lessee's general counsel) stating that in the opinion of such counsel,
such supplement or amendment to the Lease (or a financing statement,
continuation statement or similar notice thereof if and to the extent permitted
or required by applicable law) has been properly recorded or filed for record
in all public offices in which such recording or filing is necessary to protect
the right, title and interest of Lessor hereunder and the Agent under the Loan
Documents.
SECTION 19. Notices. All notices required under the terms and
provisions hereof shall be in writing (including telex, facsimile or similar
writing) and shall be effective (a) if given by facsimile device, when
transmitted and the appropriate confirmation received, (b) if given by
certified mail, three Business Days after being deposited in the United States
mail, with appropriate postage prepaid, (c) if given by telex, upon receipt by
the party transmitting the telex of such party's answerback code at the end of
such telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by overnight service or other
means, when received or personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Clark H. Onstad, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Gina Thompson.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations
to pay Rent and all other amounts payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) any setoff, counterclaim, recoupment,
defense or other right which the Lessee may have against the Lessor, the Agent,
the Lenders, any manufacturer, any supplier or any other Person for any reason
whatsoever, (ii) any defect in the title, airworthiness, eligibility for
registration under Title 49 of the United States Code, as amended or other
applicable law, condition, design, compliance
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<PAGE> 69
with specifications, operation or fitness for use of, or any damage to or loss
or destruction of, the Aircraft, or any theft, interference, interruption or
cessation in or prohibition of the use or possession thereof by the Lessee or
any sublessee for any reason whatsoever, including, without limitation, any
such interference, interruption, cessation or prohibition resulting from the
act of any governmental authority, (iii) any Liens, encumbrances or rights of
any other Person with respect to the Aircraft, (iv) the invalidity or
unenforceability or lack of due authorization or other infirmity of this Lease
or any other Transaction Document or document or instrument executed pursuant
hereto or thereto, or any lack of right, power or authority of the Lessor or
the Lessee or any other party to any other Transaction Document to enter into
this Lease or any other Transaction Document or any such document or
instrument, (v) any loss of or damage to the Aircraft, Airframe, any Engine or
any Part, (vi) any insolvency, bankruptcy, reorganization or similar
proceedings by or against the Lessee or any other Person, or (vii) any failure,
breach or delay by the Lessor or any other Person in performing or complying
with any term of this Lease or any other cause whether similar or dissimilar to
the foregoing, any present or future law notwithstanding, it being the
intention of the parties that all Rent payable by the Lessee hereunder shall
continue to be payable in all events in the manner and at the times provided
herein. Such Rent shall not be subject to any abatement and the payments
thereof shall not be subject to any setoff or any reduction for any reason
whatsoever, including any present or future claims of Lessee against Lessor or
any other Person under this Lease or otherwise. Lessee hereby waives, and
hereby agrees to waive at any future time at the request of Lessor, to the full
extent now or then permitted by applicable law any and all rights which it may
now have or which at any time hereafter may be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender this Lease except in
accordance with the express terms hereof. Each payment of Rent made by Lessee
to Lessor shall be final as to Lessor and Lessee. Lessee will not seek to
recover all or any part of any such payment of Rent from Lessor for any reason
whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent
as assignee of the Lessor's right under this Lease pursuant to the Aircraft
Chattel Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Lease is possible, a construction which would
preserve such benefits shall control over any construction which would not
preserve such benefits or would render them doubtful. To the extent consistent
with the provisions of 11 U.S.C. ss. 1110 or any analogous section of the
Federal bankruptcy laws, as amended from time to time, it is hereby expressly
agreed, that notwithstanding any other provisions of the Federal bankruptcy
law, as amended from time to time, any right of the Lessor and the Agent, as
assignee of the Lessor under the Aircraft Chattel Mortgage, to take possession
of the Aircraft in compliance with the provisions of this Lease shall not be
affected by the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to
time, or any analogue provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
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<PAGE> 70
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred
and is continuing, Lessee shall have the option to purchase the Aircraft at the
end of the Term for a purchase price equal to the higher of the Fair Market
Sales Value (assuming that the Aircraft is in the condition required by the
Lease) as of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of the full of such
amounts, 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.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not
more than 360 days) irrevocable prior written notice to Lessor. The Lessee will
give Lessor prior written irrevocable notice not less than 90 days (but not
more than 360 days) before the expiration of the Term of its determination to
return the Aircraft and not exercise any purchase option under this Section 21.
If Lessee fails to give notice as required herein, Lessee will be deemed to
have elected to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, then Lessor may
itself make such payment or perform or comply with such agreement but shall not
be obligated hereunder to do so, and the amount of such payment and the amount
of the reasonable expenses of Lessor incurred in connection with such payment
or the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title
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<PAGE> 71
or interest in the Aircraft except as a lessee only. Neither Lessee nor any
Affiliate of Lessee will file any tax returns in a manner inconsistent with the
foregoing fact or with Lessor's ownership of the Aircraft or with the parties'
agreement that this Lease be treated as a tax lease for purposes of the
Internal Revenue Code. 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 reference
herein to numbered sections, unless otherwise indicated, are to sections of
this Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE OR ANY OTHER
TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER
AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR
AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE LESSOR'S
OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may
be executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect
to the subject matter hereof and thereof, except any agreements referred to
herein.
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations
under this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among
other things, to assign to the Agent this Lease and the Lease Supplements and
to mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so long
as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the
Agent for the benefit of Lenders to the extent of the Lenders' interest in such
payments; (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. Lessee
hereby acknowledges due notice of, and consents to, such assignment and to the
creation of such mortgage and security interest. To the extent, if any, that
this Lease and any Lease Sup-
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<PAGE> 72
plement constitutes chattel paper (as such term is in effect in any applicable
jurisdiction), no security interest in this Lease or any Lease Supplement may
be created through the transfer or possession of any counterpart other than the
original executed counterpart containing the receipt therefor executed by the
Agent on the signature page hereof or thereof.
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<PAGE> 73
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged
this __th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------
Name:
Title:
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<PAGE> 74
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of May 29, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
*/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document.
**/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, together with Lease Supplement No. 1 dated May 29,
1997, to the Lease Agreement, has been recorded by the Federal Aviation
Administration on __________ __, 1997, as one document and assigned Conveyance
No.
------------.
*/ This language for Lease Supplement No. 1.
**/ This language for other Lease Supplements.
<PAGE> 75
EXHIBIT A
PAGE 2
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______; and
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______]3/ (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The closing date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof. Except as otherwise provided in the
Lease, the Term for the Aircraft shall commence on the closing date and end on
the seventh anniversary thereof.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
for all purposes hereof and of the Lease as being airworthy, in good working
order and repair and without defect or inherent vice in title, condition,
design, operation or fitness for use; provided, however, that nothing contained
herein or in the Lease shall in any way diminish or otherwise affect any right
Lessee or Lessor may have with respect to the Aircraft against the
manufacturer, any affiliate thereof, or any subcontractor or supplier of the
manufacturer or any affiliate thereof, under any purchase agreement or
otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 76
EXHIBIT A
PAGE 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on May __, 1997.
BANKERS TRUST COMPANY, as
Agent
By
------------------------------
Name:
Title:
<PAGE> 77
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 78
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 79
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE
<PAGE> 1
EXHIBIT 10.66
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N808MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of May 29, 1997,
(this "MORTGAGE"), and entered into by and between ATLAS AIR, INC., a Delaware
corporation (the "LESSEE"), ATLAS FREIGHTER LEASING, INC., a Delaware
corporation ("COMPANY" OR "LESSOR"), and BANKERS TRUST COMPANY, as agent for and
representative of (in such capacity, the "AGENT") the financial institutions
("LENDERS") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of May 29, 1997 (said
credit agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement") with Lenders and
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make term loans to Company in the principal
amount of up to $185 million (the "Loans") to enable Company to refinance
certain indebtedness currently encumbering the Aircraft Collateral (as defined
below). The indebtedness with respect to Loans made by Lenders is to be
evidenced by certain promissory notes of Company to the order of Lenders of even
date herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security interest
<PAGE> 2
in the Aircraft and the Spare Engines (the "Aircraft Collateral") and a first
priority security interest in all estate, right, title and interest of Company
in, to and under, the other below described property wherever the same may be
located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in
and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule I
hereto and any replacement airframe which may be substituted for such
airframe in accordance with the provisions of Section 4(f) hereof
together with any and all Parts (as hereinafter defined) incorporated
or installed in or attached to such airframe and all Parts removed
from such airframe until such Parts are replaced in accordance with
Section 4(e) hereof (such airframe, together with any replacement
airframe and all such Parts, hereinafter referred to as the
"Airframe");
(ii) each of the engines, which are listed in Schedule II hereto
or which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial numbers in such Schedule or in such Supplemental
Chattel Mortgage, whether or not from time to time thereafter
installed on the airframe or on any other airframe or aircraft,
including, any engine designated as a spare engine (the "Spare
Engine"), and any replacement engine which may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or
installed in or attached thereto and any and all Parts removed
therefrom, until such Parts are replaced in accordance with Section
4(e) hereof (each such engine, spare engine and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased
by Company for incorporation or installation in or attachment to the
Airframe or any Engine pursuant to the terms of any agreement whether
or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
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<PAGE> 3
(iv) all records, logs and other materials required by applicable
law or regulation to be maintained and all other records, logs and
materials maintained in the ordinary course of business with respect
to the properties described in paragraphs (i), (ii) and (iii) above
(together with such Airframe and Engines (other than the Spare
Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part
thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held or
required to be held by Agent hereunder or paid to Agent in accordance
with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights
to receive title to parts and materials to the extent same relates to
the Aircraft including any agreement assigned therewith;
(iv) all amounts payable to Company by any manufacturer, supplier
or vendor of any of the Aircraft Collateral or any component thereof
pursuant to any warranty or indemnity covering any such Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or
-3-
<PAGE> 4
in respect of the Lease or to accept any surrender of any of the
Aircraft or any part thereof, as well as any rights, powers or
remedies on the part of the Lessor, whether arising under the Lease or
by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default (as defined in the Lease), including, without
limitation, all rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to the Aircraft or any Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft. All
property referred to in this granting clause, whenever acquired by the Lessor
under the Lease, shall secure all Secured Obligations. Company does hereby
warrant and represent that it has not assigned or pledged, and hereby covenants
that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned to anyone
other than Agent, and that it will not, except as provided herein or in the
Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Aircraft, or execute any waiver or modification of, or consent under, any
such agreement, or settle or compromise any claim arising under any such
agreement or submit or consent to the submission of any dispute, difference or
other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Atlas maintains, services, repairs and overhauls similar
airframes utilized by Atlas and without in any way discriminating against
such airframe.
-4-
<PAGE> 5
"Acceptable Alternate Engine" means a Pratt & Whitney JT9D-7A engine
for the aircraft bearing U.S. registration number N808MC and a General
Electric CF6-50E2 aircraft engine for the aircraft bearing U.S.
registration numbers N505MC, N508MC, N507MC, N509MC and N516MC or an engine
of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on the Airframe; provided that such
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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Atlas pursuant
to which Atlas furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Atlas's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
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<PAGE> 6
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of May 29, 1997,
by and between Atlas Freighter Leasing, Inc., as Lessor, and Atlas Air,
Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof and
in the manner aforesaid and has not assigned or pledged any of its right,
title or interest hereby assigned to anyone other than Agent.
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<PAGE> 7
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required by
Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Aircraft Collateral,
securing the payment and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
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<PAGE> 8
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. Company will promptly, at its own
expense, take such action as may be necessary to duly discharge any such
Lien not excepted above if the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against Agent
or any Lender or the Airframe or any Engine or any part thereof or interest
therein by any Federal, state or local government or other taxing authority
in the United States or by any foreign government or subdivision thereof or
by any foreign taxing authority in connection with, relating to or
resulting from: (i) the Airframe or any Engine or any part thereof of
interest therein; (ii) the manufacture, purchase, ownership, mortgaging,
lease, sublease, use, storage, maintenance, sale or other disposition of
the Airframe or any Engine; (iii) any rentals or other earnings therefor or
arising therefrom or the income or other proceeds received with respect
thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease)
and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered
in the name of Company in accordance with the Act; and (iii) will cause
Lessee to service, repair, inspect, test, maintain, overhaul the Airframe
and each Engine and install replacement equipment and parts on the Aircraft
and each Engine (A) so as to keep the Airframe and each Engine in such
operating
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<PAGE> 9
condition as may be required to permit the Airframe and each Engine to be
utilized in commercial operations, (B) so as to enable the airworthiness
certification of the Airframe to be maintained in good standing at all
times under the Act, except when aircraft of the same type, model or series
as the Airframe (powered by engines of the same type as those with which
the Airframe shall be equipped at the time of grounding) registered in the
United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate of
the Aircraft shall be withdrawn, then subject to the provisions of Section
4(f) hereof, so long as Company is diligently taking or causing to be taken
all necessary action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care
used by Lessee with respect to the same or similar aircraft and engines
owned or operated by Lessee so as to keep the same in as good operating
condition as when originally mortgaged hereunder, ordinary wear and tear
excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar
equipment, and (D) in such manner as may be necessary to maintain in full
force all warranties of the manufacturers thereof. Company shall maintain,
or shall cause Lessee to maintain, all records, logs and other materials
which may be required to permit the Airframe and each Engine to be so
utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or supplier)
in such condition so as to comply with the provisions of this Mortgage and
the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft and Engines. Neither the Airframe nor any Engine
will be maintained, used or operated in violation of any law or any rule,
regulation or order of any government or governmental authority having
jurisdiction (domestic or foreign), or in violation of any airworthiness
certificate, license or registration relating to the Airframe or such
Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of the Airframe or any
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders; provided,
however, that Company may, in good faith (after having delivered to Agent
an Officer's Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in
any reasonable manner which does not, in Agent's opinion, adversely affect
the interests under this Mortgage of Agent or any Lender.
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<PAGE> 10
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant
to Section 4(g) shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with
respect to the Airframe or such Engine, except in the case of a requisition
for use by the United States of America, and then only if Company obtains
indemnity or "war risk" insurance in lieu of such insurance from the United
States of America against the risks and in the amounts required by said
Section covering such area, or (II) in any recognized or threatened area of
hostilities unless fully covered to Agent's satisfaction by war risk and
political risk and allied perils insurance or unless the Airframe or such
Engine is operated or used under contract with the Government of the United
States of America under which contract that Government provides "war risk"
insurance or assumes liabilities for any damages, loss, destruction or
failure to return possession of the Airframe or such Engine at the end of
the term of such contract and for injury to persons or damage to property
of others.
Company shall not use the Aircraft nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Agent, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine except that Company may
enter into and perform all provisions and terms of the Lease and Lessee or
the Company, unless a Potential Event of Default or Event of Default shall
have occurred and be continuing, without the prior written consent of
Agent, may take the following actions so long as the actions to be taken
shall not deprive the Agent of the first priority Lien of this Mortgage on
the assets subject hereto and so long as the actions to be taken shall not
deprive Company as Lessor of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft nor shall such actions deprive
the Agent of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft as assignee of Company's rights under this
Mortgage:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
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<PAGE> 11
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company or Lessee in the ordinary
course of business which do not contemplate or require the transfer of
title to, use for the remainder of its useful life, or registration of
the Airframe or title to, or use for the remainder of its useful life
of such Engine; provided, however if Company's title to or use for the
remainder of its useful life, of the Airframe or any Engines shall be
divested under any such agreement or arrangement, such divesture shall
be deemed to be an Event of Loss with respect to the Airframe or such
Engine and Company shall comply with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee;
provided that such airframe is free and clear of all Liens on property
of Lessee except (A) Liens permitted under the Lease, (B) Liens that
apply only to the engines (other than the 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), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clause (iv) above; and (B) Agent shall have received from
the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which
may be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine by reason of such
Engine being installed on such airframe at any time when such Engine
is subject to this Mortgage;
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<PAGE> 12
(vi) install an Engine on an airframe owned or leased by Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and Company shall comply with Section
4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which Company has
operational control of the Airframe and any Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current certificates and
licenses that would be required under the applicable laws of the
United States for the performance by such employees of similar
functions within the United States; provided that Company's
obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine permitted by the terms hereof
shall be made subject and subordinate to, and the Leases shall be made
expressly subject and subordinate to, the lien and security interest of
this Mortgage and all of Agent's rights hereunder and Company shall remain
primarily liable hereunder for the performance of all the terms of this
Mortgage to the same extent as if such transfer had not occurred, and any
such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer (other than the Lease) shall expressly prohibit any
further transfer of the Airframe or such Engine or any assignment of the
rights thereunder; and provided, further, that no such lease, pooling
arrangement or other transfer or relinquishment of the possession of the
Airframe or any Engine shall in any way discharge or diminish any of
Company's obligations to Agent hereunder or under the Credit Agreement. In
the event Agent shall have received from the lessor, conditional vendor or
secured party of any airframe leased to Lessee or purchased by Lessee
subject to a conditional sale or other security agreement, a written
agreement complying with clause (B) of Section 4(d)(v), and the lease or
conditional sale or other security agreement covering such airframe also
covers an engine or engines owned by the lessor under such lease,
conditionally owned by the conditional vendor under such conditional sale
agreement, or subject to such security agreement, Agent hereby agrees for
the benefit of such lessor, conditional vendor or secured party that Agent
will not acquire or claim, as against such lessor, conditional vendor or
secured party, any right, title or interest in any such
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<PAGE> 13
engine as the result of such engine being installed on the Airframe at any
time while such engine is subject to such lease or conditional sale or
other security agreement and owned by such lessor, conditionally owned by
such conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts: Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company, at
its own cost and expense, will promptly replace all Parts, which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine and which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such Parts
as promptly as practicable. All replacement Parts shall be owned by
Company free and clear of all Liens (except Permitted Encumbrances and
the Lease, and for pooling arrangements to the extent permitted by
Section 4(e)(ii)), and shall be in as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced
assuming such property were in the condition and repair required to be
maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall
remain the property of Company and shall remain subject to the lien
and security interest of this Mortgage, no matter where located until
such time as such Parts shall be replaced by parts which have been
incorporated or installed in or attached to the Airframe or any Engine
and which meet the requirements for replacement parts specified above.
Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Airframe or any Engine as above
provided, without further act, (A) title to such replacement Part
shall vest in and such replacement part shall become the property of
Company and shall become subject to the lien and security interest of
this Mortgage and shall be deemed part of the Airframe or such Engine
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine, and (B)
title to the replaced part shall no longer be the property of Company
and shall thereupon become free
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<PAGE> 14
and clear of all rights of Agent hereunder and shall no longer be
deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as provided
in Section 4(e)(i) may be subjected by Company or Lessee to a normal
pooling arrangement of the type customary in the airline industry
entered into by Lessee in the ordinary course of its business and
entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 4(e)(i) as promptly as possible
after the removal of such removed part. In addition, any replacement
Part when incorporated or installed in or attached to the Airframe or
any Engine in accordance with Section 4(e)(i) may be owned subject to
such a pooling arrangement, provided Company, at its expense, as
promptly thereafter as possible, either (A) causes such replacement
Part to become subject to the lien and security interest of this
Mortgage in accordance with Section 4(e)(i) by Company's acquiring
title thereto for the benefit of Agent free and clear of all Liens
(except Permitted Encumbrances and the Lease) or (B) replaces such
replacement Part by incorporating or installing in or attaching to the
Airframe or such Engine a further replacement Part owned by Company
free and clear of all Liens (except Permitted Encumbrances and the
Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders'
interests therein. Company also agrees, at its own cost and expense,
to make or cause to be made such alterations and modifications in and
additions to the Airframe and the Engines as may be required from time
to time to meet the standards or requirements of any directive issued
by a manufacturer relating to the Airframe or any Engine. In addition
so long as no Potential Event of Default or Event of Default shall
have occurred and be continuing, Company, at its own cost and expense,
may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Company may deem desirable
in the proper conduct of its business or to accommodate the business
of Lessee, provided no such alteration, modification or addition
diminishes the value or utility or impairs the condition or
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<PAGE> 15
airworthiness of the Airframe or such Engine below the value, utility,
condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such
Engine were then in the condition and airworthiness required to be
maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in Company and shall
be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage and (C)
can be removed from the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness which the Airframe or
such Engine would have had at such time had such alteration,
modification or addition not occurred, assuming the Aircraft
Collateral was otherwise in the condition required by this Mortgage.
Upon the removal by Company of any such Part, as above provided, title
thereto shall, without further act, be free and clear of all rights of
the Agent hereunder and such Part shall no longer be deemed a Part
hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by the
Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine, Company will promptly notify Agent thereof in writing
(in any event
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<PAGE> 16
within five (5) days of such occurrence) and will, not later than 180
days after the receipt of Proceeds in connection with such Event of
Loss, mortgage hereunder, by complying with all of the terms of
subsection (ii) below and otherwise taking all necessary actions to
provide that Company (and the Agent upon foreclosure of Company's
interest in the Lease) will continue to be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to the replacement
airframe or engine referred to below, an Acceptable Alternate Airframe
or Acceptable Alternate Engine free of all Liens (other than Permitted
Encumbrances and the Lease). Upon compliance with the preceding
sentence within such 180-day period, Agent will execute and deliver to
Company a partial release, in recordable form, releasing the lien of
this Mortgage to the extent that it covers such Airframe or Engine
with respect to which such Event of Loss has occurred. Such Acceptable
Alternate Airframe or Acceptable Alternate Engine shall thereupon
constitute an "Airframe" or an "Engine", as the case may be, for all
purposes hereof and shall be deemed to constitute part of the
Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to the
lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form of
Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine to be subjected to the lien and security
interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the date
of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine
and Company;
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<PAGE> 17
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent with
respect to such Airframe or Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and in
as good operating condition as the Airframe or Engine subject to
such Event of Loss immediately prior to such Event of Loss,
assuming compliance by Company with all the terms of this
Mortgage with respect to such Airframe or Engine; and
(H) cause to be delivered to Agent an opinion or opinions of
counsel dated the date of execution of such Supplemental Chattel
Mortgage, stating:
(I) that the Airframe or Engine specifically described
in said Supplemental Chattel Mortgage, is free and clear of
all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Airframe or Engine described in said
Supplemental Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
purported to be secured
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<PAGE> 18
thereby and that all action required to perfect fully such
security interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
and
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine
described in said Supplemental Chattel Mortgage.
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel
Mortgage under the Act, Company will cause to be delivered to
Agent an opinion of counsel for Company as to the due
recording of such Supplemental Chattel Mortgage in accordance
with the Act.
(iii) With respect to the Airframe or any Engine, as
between the Agent and Company, any payments on account of an
Event of Loss (other than insurance proceeds or other payments
the application of which is provided for in Section 4(g) below
and under the terms of the Credit Agreement) received from any
government authority or other person shall be applied as
follows:
(A) if such payments are received with respect to
an Event of Loss to an Airframe or Engine that has been
or is being replaced by Company pursuant to the terms
hereof, so long as there shall exist no Event of Default
or Potential Event of Default, such payment shall be
paid over to or retained by Company or Lessee upon
satisfaction of the conditions for replacement contained
in paragraph (ii) above and until such time shall be
held by Agent in accordance with the provisions hereof
as security for the Secured Obligations; and
(B) if such payments are received with respect to
an Event of Loss with respect to which no replacement is
being effected, such payments shall be applied to the
prepayment of the Notes required pursuant to the terms
of the Credit Agreement and shall be held
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<PAGE> 19
pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United
States Government of the Airframe or any Engine, Company shall
promptly notify Agent of such requisition and all of Company's
obligations under this Mortgage shall continue to the same extent
as if such requisition had not occurred. Any payments received by
Agent or Company from the United States Government for the use of
the Airframe or such Engine, shall be paid over to, or retained
by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of
this Section 4(f) which is payable to or retained by Company
shall not be paid to Company or retained by Company, if at the
time of such payment or retention any Event of Default or a
Potential Event of Default shall have occurred and be continuing,
but shall be held by or paid over to Agent as security for the
obligations of Company under this Mortgage and the other Loan
Documents, and, if Agent shall declare the Credit Agreement to be
in default, shall be applied against Company's obligations
hereunder and thereunder as and when due. At such time as there
shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to Company to the
extent not previously applied in accordance with the preceding
sentence. In addition, and whether or not there shall exist an
Event of Default or Potential Event of Default, until such time
as Company shall request to be paid any amount referred to in
paragraph (iii) or (iv) in order to effect the mortgaging
hereunder of a replacement Airframe or Engine, any amounts
referred to in paragraphs (iii) or (iv) of this Section 4(f)
shall be held by the Agent as security for the obligations of
Company under this Mortgage and the other Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and
maintain on or with respect to the Aircraft, at Lessee's own
cost and expense, public liability (including without
limitation, contractual liability, cargo liability, passenger
legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage
insurance with insurers of recognized responsibility and
reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and
similarly situated with Lessee but in no event in an amount less
than $500,000,000 per occurrence (which shall include war risk,
governmental confiscation and expropriation and allied perils
coverage).
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<PAGE> 20
During any period when the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise
conforming with the provisions of this Section except that the
amounts of coverage shall not be required to exceed the amounts
of comprehensive airline liability insurance, and the scope of
risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the
ground by corporations engaged in the same or similar business
and similarly situated with Lessee. Any policies of insurance
carried in accordance with this Section 4(g) and any policies
taken out in substitution or replacement of any such policies
(A) shall be amended to name Agent and Lenders as additional
named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof,
except the limits of the liability, shall operate in the same
manner as if there were a separate policy covering each insured,
and (D) shall provide that the insurer shall waive any right of
subrogation against Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and
reputation on or with respect to the Aircraft, at Lessee's own
cost and expense, aircraft ground and flight all-risk hull
insurance as well as fire and extended coverage insurance on
Engines and other equipment while removed from the Airframe
(which shall include war risk, governmental confiscation and
expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or
labor disturbances, (B) any malicious act or act of sabotage and
(C) hijacking (air piracy) or any unlawful seizure or wrongful
exercise of control of the Aircraft or crew in flight (including
any attempt at such seizure or control) made by any person or
persons aboard the Aircraft acting without the consent of the
insured, if and to the extent the same shall be maintained by
Lessee with respect to similar aircraft owned or operated by
Lessee on the same routes or if the Aircraft is operated on
routes where the custom is for Domestic Carriers similarly
situated with Lessee flying comparable routes with similar
aircraft to carry such insurance, of the type usually carried by
corporations engaged in the same or similar business and
similarly situated with Lessee; provided that such insurance
(including any self-insurance to the extent permitted below)
shall at all times be for an amount not less than the greater of
the amount required by the applicable Lease and $50,000,000.
During any period when 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 this Section, insurance otherwise
conforming hereto except that the scope of risk covered and
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<PAGE> 21
type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and
similarly situated with Lessee for aircraft on the ground in an
amount at least equal to the applicable amount provided above.
All such insurance shall name Agent and Lenders as additional
insureds and loss payees to the extent their interest may appear
and shall provide that any loss to the Airframe or an Engine in
excess of $2,000,000 (and, if a Potential Event of Default or
Event of Default has occurred and is continuing, any such loss)
shall be payable to Agent for the benefit of Lenders; and shall
be primary without right of contribution from any other
insurance which is carried by Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft in Lessee's fleet
which are of a value comparable to the Aircraft and as are not
substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with
Lessee; provided, however, that Company shall not permit Lessee to
self-insure in an amount in excess of $1,000,000 without the prior
written consent of Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to
name Agent and Lenders as additional named insureds, but without
Agent or Lenders being thereby liable for premiums; (B) provide
that in respect of the interest of Agent or Lenders in such
policies the insurance shall not be invalidated by any action or
inaction of Lessee and shall insure the interests of Agent and
Lenders regardless of any breach or violation by Lessee or any
Person (other than Agent) of any warranty, declaration,
condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the
interest of Agent or any Lender, or if such insurance is allowed
to lapse for nonpayment of premium, such cancellation, change or
lapse shall not be effective as to Agent for thirty (30) days
(seven (7) days, or such shorter or longer period as may from
time to time be customarily available in the industry, in the
case of any war risk and allied perils coverage) after receipt
by Agent of written notice from such insurers of such
cancellation, change or lapse; (D) be in full force and effect
throughout any geographical areas at any time traversed by the
Aircraft and shall be payable in U.S. dollars; (E) waive any
right of the insurers to any set off or counterclaim or any
other deduction, whether by attachment or other-
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<PAGE> 22
wise in respect of any liability of Agent; and (F) waive all
rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United
States or any agency or instrumentality thereof in respect of the
Airframe or any Engine, a valid agreement by the United States or
such agency or instrumentality to indemnify Lessee against the
same risks against which Lessee is required hereunder to insure
shall be considered adequate insurance with respect to the
Airframe or such Engine to the extent of the risks and in the
amounts that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter
on or prior to January 21, Company will cause the Lessee to
furnish to Agent (A) a report signed by a firm of independent
aircraft insurance brokers, appointed by Lessee and not objected
to by Agent, describing in reasonable detail acceptable to Agent
the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section
4(g) and is adequate to protect the interests of Lessee, Company
and Agent, and (B) certificates of the insurer or insurers
evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any
default in the payment of any premium and of any other act or
omission on the part of Lessee of which such firm has knowledge
and which might invalidate or render unenforceable, in whole or
in part, any insurance on the Aircraft or any Engine and (y) at
least thirty (30) days prior to the expiration or termination
date, or date of effectiveness of any material change, of any
insurance carried and maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by
Agent or Company from insurance referred to in paragraph (ii)
above shall be, if received by Company, immediately paid to Agent
and shall be held by Agent as security for the Secured
Obligations and all other obligations required to be paid in
accordance with the terms of this Mortgage and the Credit
Agreement and such payments shall be paid to Company upon
compliance by Company with the terms of Subsection 4(f) with
respect to the replacement of an airframe or an engine, as the
case may be, provided that no Potential Event of Default or Event
of Default shall have occurred and be continuing.
All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above and
paid other than as a result of an Event of Loss shall be paid by
Agent to or be retained by
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<PAGE> 23
Company, and promptly applied by Company to the extent necessary
to repair the damage to the Airframe or the Engine for which
such insurance was paid, provided that Agent shall not be
required to make any such payment to Company if a Potential
Event of Default or Event of Default has occurred and is
continuing, but shall be held or paid over to Agent as security
for the obligations of Company under this Mortgage and the other
Loan Documents, and, if Agent shall declare the Credit Agreement
to be in default, shall be applied against Company's obligations
hereunder and thereunder as and when due. Retention by Agent of
any amounts pursuant to the preceding sentence shall not relieve
Company of its obligations to make promptly all repairs and
replacements required by Sections 4(c) and (e) hereof and to pay
for the same with Company's funds or cause payment of the same
under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or
any Lender from obtaining insurance with respect to the Aircraft
for its own account. Company 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 4(g).
No insurance maintained by Agent or any Lender shall prevent
Company from causing Lessee to carry the insurance required or
permitted by this Section or adversely affect such insurance or
the cost thereof. Proceeds of any such insurance carried by Agent
or Lender shall be paid as provided in the insurance policy
relating thereto and Agent shall have no duty to obtain any such
insurance.
(h) Inspection. Company will permit, and cause Lessee to permit,
any officers, employees or authorized representatives of Agent to
inspect, at Lessee's cost and expense under the Lease, the Aircraft
Collateral and Aircraft Related Collateral. or any part thereof, and
to examine, copy or make extracts from, any and all books, records and
documents in the possession of Company relating to such Collateral or
any part thereof and performance of this Mortgage, all at such
reasonable times and as often as may be requested. Agent shall have no
duty to make any such inspection or examination and shall not incur
any liability or obligation by reason of making or not making any such
inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or
pursuant to the Lease, cause the Airframe and each Engine included in
the Aircraft Collateral to be legibly marked (in a reasonably
prominent location, which in the case of the Airframe shall be
adjacent to the airworthiness certificate) with such a plate, disk,
or other marking of customary size, and bearing the legend "Owned by
Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust Company,
as Agent" or such other
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<PAGE> 24
legend, as shall in the opinion of Agent be appropriate or desirable
to evidence the fact that it is subject to the lien and security
interest created by this Mortgage. Company shall not remove or
deface, or permit to be removed or defaced, any such plate, disk, or
other marking or the identifying manufacturer's serial number, and,
in the event of such removal or defacement, shall promptly cause such
plate, disk, or other marking or serial number to be promptly
replaced. Except as provided above, Company shall not allow the name
of any person, association or corporation to be placed on the
Airframe or any Engine as a designation that might be interpreted as
a claim of ownership or of any security interest therein, except that
any permitted lessee may place its customary colors and insignia or
the insignia of the manufacturer on the Airframe or any Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then
Agent may, without notice of any kind to Company, exercise in respect
of the Aircraft Collateral and Aircraft Related Collateral, (i) all
the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect at the time in any applicable
jurisdiction (whether or not the Uniform Commercial Code applies to
the affected Aircraft Collateral), (ii) any and all remedies under
the Leases and all of the rights and remedies of the Lessor under the
Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other
rights and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
Agent may, without notice, take possession of the Aircraft Collateral
or any part thereof and may exclude Company and Lessee, and all
persons claiming under Company or Lessee, wholly or partly therefrom.
At the request of Agent, Company shall promptly deliver or cause
Lessee to deliver to Agent or to whomsoever Agent shall designate, at
such time or times and place or places as Agent may specify, and fly
or cause to be flown to such airport or airports in the United States
as Agent may specify, without risk or expense to Agent, the Aircraft
Collateral or any part thereof. In addition, Company will provide, or
cause Lessee to provide, without cost or expense to Agent, storage
facilities for the Aircraft Collateral. If Company or Lessee shall
for any reason fail to deliver the Aircraft Collateral or any part
thereof after demand by Agent, Agent may, without being responsible
for loss or damage, (i) obtain a judgment conferring on Agent the
right to immediate possession or requiring Company and Lessee to
deliver immediate possession of the Aircraft Collateral or any part
thereof to Agent, the entry of which judgment Company hereby
specifically consents and the Lessor's consent to
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<PAGE> 25
which will be obtained by Company under the Lease, or (ii) with or
without such judgment, pursue the Aircraft Collateral or any part
thereof wherever it may be found and may enter any of the premises of
Company and Lessee where the Aircraft Collateral may be and search
for the Aircraft Collateral and take possession of and remove the
same. Company agrees to pay to Agent, upon demand, all expenses
incurred in taking any such action; and all such expenses shall,
until paid, be secured by the lien of this Mortgage. Upon every such
taking of possession, Agent may, from time to time, make all such
reasonable expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the
Aircraft Collateral, as it may deem proper. In each such case, Agent
shall have the right to maintain, use, operate, store, lease, control
or manage the Aircraft Collateral or any part thereof and to carry on
the business and exercise all rights and powers of Company relating
to the Aircraft Collateral, as Agent shall deem best, including the
right to enter into any and all such agreements with respect to the
maintenance, use, operation, storage, leasing, control, management or
disposition of the Aircraft Collateral or any part thereof as Agent
may determine. Further, after the occurrence and during the
continuation of an Event of Default, Agent shall be entitled to
collect and receive directly all tolls, rents, revenues, issues,
income, products and profits of the Aircraft Collateral or any part
thereof, including without limitation, all payments under any of the
Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments
which Agent may be required or may elect to make, if any, for taxes,
assessments, or other proper charges upon the Aircraft Collateral and
all other payments which Agent may be required or authorized to make
under any provision of this Mortgage, as well as just and reasonable
compensation for the services of Agent and of all persons properly
engaged and employed for such purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more
sales, as an entirety or in separate lots or parcels, the
Aircraft Collateral or any part thereof, at public or private
sale, at such place or places and at such time or times and upon
such terms, including terms of credit (which may include the
retention of title by Agent to the property so sold), as Agent
may determine, whether or not the Aircraft Collateral shall be
at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any
covenant herein contained or in
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<PAGE> 26
aid of the exercise of any power herein granted or for the
foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing,
Company agrees to the fullest extent that it lawfully may, that it
and Lessee will not (and hereby irrevocably waives its right to) at
any time plead, or claim the benefit or advantage of, any
appraisement, valuation, stay, extension, moratorium, or redemption
law now or hereafter in force, in order to prevent or hinder the
enforcement of this Mortgage or the absolute sale of the Aircraft
Collateral. Company, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have all or
any portion of the Aircraft Collateral marshalled upon any
foreclosure hereof.
(e) Each and every remedy of Agent shall be cumulative and shall
not be exclusive of any other remedies provided now or hereafter at
law, in equity or otherwise. Company shall reimburse Agent, upon
demand, for all fees and other expenses paid or incurred by Agent in
exercising any rights, powers or remedies granted hereby. All such
fees and expenses shall, until paid, be secured by the lien of this
Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right,
to the exclusion of Company, to declare the Lease in default in
accordance with its terms and to exercise all remedies set forth in
the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including,
without limitation, amounts received in connection with the exercise by Lessee
of any purchase option or Event of Loss) and the proceeds of any sale, lease or
other disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale,
lease, disposition or other realization, including reasonable
compensation to Agent's agents and counsel, and all expenses,
liabilities and advances made or incurred by Agent in connection
therewith, including, without limitation, taxes upon or with respect
to the sale, lease, disposition or realization and the payment of
taxes and Liens, if any, prior to the lien and security interest of
this Mortgage (except any taxes or Liens to which the
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<PAGE> 27
respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of
payments incurred or made by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on
the Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which
payment shall be applied to the principal installments of the Notes in
the manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company
under the Credit Agreement, this Mortgage or any other Loan Document,
and otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful
attorney of Company (with full power of substitution) in the name, place and
stead of, and at the expense of, Company at any time after the occurrence and
during the continuation of an Event of Default (i) to ask, demand, collect, sue
for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Aircraft Collateral and
Aircraft Related Collateral, (ii) to make all necessary transfers of all or any
part of the Aircraft Collateral and Aircraft Related Collateral in connection
with any sale, lease or other disposition made pursuant hereto, (iii) to
execute and deliver for value all necessary or appropriate bills of sale,
assignments and other instruments in connection with any such sale, lease or
other disposition, and (iv) generally to do, at Agent's option and Company's
cost and expense, at any time, or from time to time, all acts and things that
Agent deems necessary to protect, preserve or realize upon the Aircraft
Collateral and Aircraft Related Collateral and Agent's security interest
therein, in order to effect the intent of this Mortgage, all as fully and
effectively as Company might do, Company hereby ratifying and confirming all
that its said attorney (or any substitute) shall lawfully do hereunder and
pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this
Section, and all monies if any, required to be paid to Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by Agent and applied from time to
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<PAGE> 28
time as provided herein and in the Credit Agreement and the other Loan
Documents and shall be held in an account in the name of Agent and invested in
Cash Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent may itself make such payment or perform or comply with such
agreement (including, without limitation, the agreement of Company to maintain
insurance pursuant to Section 4(g) hereof), and the amount of such payment and
the amount of the reasonable expenses of Agent 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 rate specified in the Credit
Agreement from time to time, shall be payable by Company to Agent on demand and
shall constitute additional indebtedness secured by the lien and security
interest of this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the
Aircraft Collateral and Aircraft Related Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, (b) be binding upon Company, its successors and assigns and (c)
inure, together with the rights and remedies of Agent hereunder, to the benefit
of Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), Agent or any Lender may, subject to any
restrictions contained in the
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<PAGE> 29
Credit Agreement, assign or otherwise transfer any of its interests in the
Credit Agreement or in any Note to any other person or entity, and such other
benefits in respect thereof granted to Agent or any Lender herein or otherwise.
Upon the indefeasible payment in full of the Secured Obligations, the security
interest granted hereby shall terminate and all rights to the Aircraft
Collateral and Aircraft Related Collateral shall revert to Company. Upon any
such termination. Agent will execute and deliver to Company, at Company's
expense, such instruments of release and termination as Company may reasonably
request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by applicable law, Company
hereby waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect. No term or provision of this
Mortgage may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Company and Agent. The captions and headings
in this Mortgage are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage.
Company hereby agrees that service of process in any such proceeding in any
such court may be made by registered or certified mail return receipt requested
to Company at its address provided on the signature pages of the Mortgage, such
service being hereby acknowledged by Company to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
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<PAGE> 30
shall limit the right of Agent to bring proceedings against Company in the
courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of New York are used herein as therein defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be
in writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute
one and the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 31
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
---------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 32
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
=================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Boeing 747-200F 21048 N808MC
=================================================================================
</TABLE>
<PAGE> 33
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
=================================================================================
Manufacturer's
Manufacturer Model Serial Number
- ---------------------------------------------------------------------------------
<S> <C> <C>
Pratt & Whitney JT9D-7A 662792
- ---------------------------------------------------------------------------------
Pratt & Whitney JT9D-7A 663003
- ---------------------------------------------------------------------------------
Pratt & Whitney JT9D-7A 686101
- ---------------------------------------------------------------------------------
Pratt & Whitney JT9D-7A 662853
=================================================================================
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 34
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.____
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated , 199[ ] between Atlas
Freighter Leasing, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as agent for and representative of (in such capacity, "Agent")
the financial institutions ("Lenders") party to the Credit Agreement dated as of
May 29, 1997 among Company, the Lenders and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated ______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to Section
4(f) thereof, and shall specifically mortgage such Engine to Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 1997, and has been assigned Conveyance No. __________.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine shall be installed on or attached to
the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
<PAGE> 35
EXHIBIT A
Page 2
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 36
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
<PAGE> 37
EXHIBIT A
Page 4
BANKERS TRUST COMPANY,
as Agent
By:
----------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 38
SCHEDULE I
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
=======================================================================================
Manufacturer's
Manufacturer Model Serial Number United States Registry No.
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
=======================================================================================
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.67
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N507MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of May 29, 1997,
(this "Mortgage"), and entered into by and between ATLAS AIR, INC., a Delaware
corporation (the "Lessee"), ATLAS FREIGHTER LEASING, INC., a Delaware
corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as agent for
and representative of (in such capacity, the "Agent") the financial
institutions ("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of May 29, 1997 (said
credit agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement") with Lenders and
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make term loans to Company in the principal
amount of up to $185 million (the "Loans") to enable Company to refinance
certain indebtedness currently encumbering the Aircraft Collateral (as defined
below). The indebtedness with respect to Loans made by Lenders is to be
evidenced by certain promissory notes of Company to the order of Lenders of
even date herewith issued under and pursuant to the Credit Agreement (such
promissory notes, as they may be amended, modified, supplemented, renewed,
converted or extended from time to time, being the "Notes"). It is a condition
precedent to the making by Lenders of the Loans under the Credit Agreement that
this Mortgage be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the
<PAGE> 2
benefit of Lenders, and their respective successors and assigns, a first
priority security interest in the Aircraft and the Spare Engines (the "Aircraft
Collateral") and a first priority security interest in all estate, right, title
and interest of Company in, to and under, the other below described property
wherever the same may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in
and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule
I hereto and any replacement airframe which may be substituted for
such airframe in accordance with the provisions of Section 4(f)
hereof together with any and all Parts (as hereinafter defined)
incorporated or installed in or attached to such airframe and all
Parts removed from such airframe until such Parts are replaced in
accordance with Section 4(e) hereof (such airframe, together with any
replacement airframe and all such Parts, hereinafter referred to as
the "Airframe");
(ii) each of the engines, which are listed in Schedule II hereto
or which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial numbers in such Schedule or in such
Supplemental Chattel Mortgage, whether or not from time to time
thereafter installed on the airframe or on any other airframe or
aircraft, including, any engine designated as a spare engine (the
"Spare Engine"), and any replacement engine which may be substituted
for such engine in accordance with the provisions of Section 4(f)
hereof, together, in each case, with any and all Parts incorporated
or installed in or attached thereto and any and all Parts removed
therefrom, until such Parts are replaced in accordance with Section
4(e) hereof (each such engine, spare engine and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased
by Company for incorporation or installation in or attachment to the
Airframe or any Engine pursuant to the terms of any agreement
-2-
<PAGE> 3
whether or not identified in a Supplemental Chattel Mortgage
(collectively referred to herein as "Parts"); and
(iv) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i), (ii) and (iii)
above (together with such Airframe and Engines (other than the Spare
Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part
thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held
or required to be held by Agent hereunder or paid to Agent in
accordance with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase
or modification agreement or manufacturer's warranty, together with
all rights, powers, privileges, options, licenses and other benefits
of Company (including such indemnities, rights of assignment, rights
and remedies for breach of any warranty and/or claims for damages,
rights to receive title to parts and materials to the extent same
relates to the Aircraft including any agreement assigned therewith;
(iv) all amounts payable to Company by any manufacturer,
supplier or vendor of any of the Aircraft Collateral or any component
thereof pursuant to any warranty or indemnity covering any such
Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
-3-
<PAGE> 4
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of any of the Aircraft or any part
thereof, as well as any rights, powers or remedies on the part of the
Lessor, whether arising under the Lease or by statute or at law or in
equity, or otherwise, arising out of any Lease Event of Default (as
defined in the Lease), including, without limitation, all rights
under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any
loss or damage to the Aircraft or any Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft. All
property referred to in this granting clause, whenever acquired by the Lessor
under the Lease, shall secure all Secured Obligations. Company does hereby
warrant and represent that it has not assigned or pledged, and hereby covenants
that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned to anyone
other than Agent, and that it will not, except as provided herein or in the
Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Aircraft, or execute any waiver or modification of, or consent under,
any such agreement, or settle or compromise any claim arising under any such
agreement or submit or consent to the submission of any dispute, difference or
other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life
-4-
<PAGE> 5
and which shall have been maintained, serviced, repaired and overhauled in
substantially the same manner as Atlas maintains, services, repairs and
overhauls similar airframes utilized by Atlas and without in any way
discriminating against such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT9D-7A engine
for the aircraft bearing U.S. registration number N808MC and a General
Electric CF6-50E2 aircraft engine for the aircraft bearing U.S.
registration numbers N505MC, N508MC, N507MC, N509MC and N516MC or an
engine of the same or another manufacturer of equivalent or greater
residual value, condition, utility, airworthiness, and remaining useful
life and suitable for installation and use on the Airframe; provided that
such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Atlas pursuant
to which Atlas furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Atlas's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
-5-
<PAGE> 6
"Domestic Air Carrier" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations, that
is operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of May 29, 1997,
by and between Atlas Freighter Leasing, Inc., as Lessor, and Atlas Air,
Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe
or each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related
-6-
<PAGE> 7
Collateral intended by the terms hereof and in the manner aforesaid and
has not assigned or pledged any of its right, title or interest hereby
assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft
or such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required
by Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or
limiting creditors' rights generally, and creates a valid, perfected and
first priority mortgage on and security interest in the Aircraft
Collateral, securing the payment and performance of the Secured
Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
-7-
<PAGE> 8
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. Company will promptly, at its own
expense, take such action as may be necessary to duly discharge any such
Lien not excepted above if the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against
Agent or any Lender or the Airframe or any Engine or any part thereof or
interest therein by any Federal, state or local government or other taxing
authority in the United States or by any foreign government or subdivision
thereof or by any foreign taxing authority in connection with, relating to
or resulting from: (i) the Airframe or any Engine or any part thereof of
interest therein; (ii) the manufacture, purchase, ownership, mortgaging,
lease, sublease, use, storage, maintenance, sale or other disposition of
the Airframe or any Engine; (iii) any rentals or other earnings therefor
or arising therefrom or the income or other proceeds received with respect
thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease)
and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered
in the name of Company in
-8-
<PAGE> 9
accordance with the Act; and (iii) will cause Lessee to service, repair,
inspect, test, maintain, overhaul the Airframe and each Engine and install
replacement equipment and parts on the Aircraft and each Engine (A) so as
to keep the Airframe and each Engine in such operating condition as may be
required to permit the Airframe and each Engine to be utilized in
commercial operations, (B) so as to enable the airworthiness certification
of the Airframe to be maintained in good standing at all times under the
Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the
Airframe shall be equipped at the time of grounding) registered in the
United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate of
the Aircraft shall be withdrawn, then subject to the provisions of Section
4(f) hereof, so long as Company is diligently taking or causing to be
taken all necessary action to promptly correct the condition which caused
such withdrawal, no Event of Default shall arise from such withdrawal, (C)
in accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same
care used by Lessee with respect to the same or similar aircraft and
engines owned or operated by Lessee so as to keep the same in as good
operating condition as when originally mortgaged hereunder, ordinary wear
and tear excepted, which practices shall at all times be at or above the
standard of the industry in the United States for prudent maintenance of
similar equipment, and (D) in such manner as may be necessary to maintain
in full force all warranties of the manufacturers thereof. Company shall
maintain, or shall cause Lessee to maintain, all records, logs and other
materials which may be required to permit the Airframe and each Engine to
be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with the provisions of this Mortgage and the rules
and regulations of the FAA from time to time in force and applicable to the
Aircraft and Engines. Neither the Airframe nor any Engine will be maintained,
used or operated in violation of any law or any rule, regulation or order of
any government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to the Airframe or such Engine issued by any such
authority, and in the event that such laws, rules, regulations or orders
require alteration of the Airframe or any Engine, Company, at its own cost and
expense, will conform thereto or obtain conformance therewith and will maintain
the same in proper operating condition under such laws, rules, regulations and
orders; provided, however, that Company may, in good faith (after having
delivered to Agent an Officer's Certificate stating the facts with respect
thereto), contest the validity or application of
-9-
<PAGE> 10
any such law, rule, regulation or order in any reasonable manner which does
not, in Agent's opinion, adversely affect the interests under this Mortgage of
Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section
4(g) shall not be at the time in full force and effect, or in any area excluded
from coverage by an insurance policy in effect with respect to the Airframe or
such Engine, except in the case of a requisition for use by the United States
of America, and then only if Company obtains indemnity or "war risk" insurance
in lieu of such insurance from the United States of America against the risks
and in the amounts required by said Section covering such area, or (II) in any
recognized or threatened area of hostilities unless fully covered to Agent's
satisfaction by war risk and political risk and allied perils insurance or
unless the Airframe or such Engine is operated or used under contract with the
Government of the United States of America under which contract that Government
provides "war risk" insurance or assumes liabilities for any damages, loss,
destruction or failure to return possession of the Airframe or such Engine at
the end of the term of such contract and for injury to persons or damage to
property of others.
Company shall not use the Aircraft nor suffer it to be used in any manner
or for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or admit to
do anything the admission of which, may invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent
of Agent, sell, assign, lease or otherwise in any manner deliver, transfer
or relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine except that Company may
enter into and perform all provisions and terms of the Lease and Lessee or
the Company, unless a Potential Event of Default or Event of Default shall
have occurred and be continuing, without the prior written consent of
Agent, may take the following actions so long as the actions to be taken
shall not deprive the Agent of the first priority Lien of this Mortgage on
the assets subject hereto and so long as the actions to be taken shall not
deprive Company as Lessor of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft nor shall such actions
deprive the Agent of the protections of Section 1110 of the Bankruptcy
Code with respect to the Aircraft as assignee of Company's rights under
this Mortgage:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Execu-
-10-
<PAGE> 11
tive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company or Lessee in the
ordinary course of business which do not contemplate or require the
transfer of title to, use for the remainder of its useful life, or
registration of the Airframe or title to, or use for the remainder of
its useful life of such Engine; provided, however if Company's title
to or use for the remainder of its useful life, of the Airframe or
any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss
with respect to the Airframe or such Engine and Company shall comply
with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee;
provided that such airframe is free and clear of all Liens on
property of Lessee except (A) Liens permitted under the Lease, (B)
Liens that apply only to the engines (other than the 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), and (C) the rights
of any Domestic Air Carrier, under normal interchange agreements
which are customary in the airline industry and do not contemplate or
require the transfer of title to such airframe or the engines
installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned
by Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except
the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the
type permitted by clause (iv) above; and (B) Agent shall have
received from the lessor, conditional vendor or secured party and
each of the purchasers, mortgagees and encumbrancers of such lessor,
conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such les-
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<PAGE> 12
sor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine by reason of such
Engine being installed on such airframe at any time when such Engine
is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and Company shall comply with
Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which Company has
operational control of the Airframe and any Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current certificates
and licenses that would be required under the applicable laws of the
United States for the performance by such employees of similar
functions within the United States; provided that Company's
obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and the Leases shall be made expressly subject and
subordinate to, the lien and security interest of this Mortgage and all of
Agent's rights hereunder and Company shall remain primarily liable hereunder
for the performance of all the terms of this Mortgage to the same extent as if
such transfer had not occurred, and any such instrument of transfer shall
include appropriate provisions for the maintenance and insurance of the
Airframe or such Engine, and any such instrument of transfer (other than the
Lease) shall expressly prohibit any further transfer of the Airframe or such
Engine or any assignment of the rights thereunder; and provided, further, that
no such lease, pooling arrangement or other transfer or relinquishment of the
possession of the Airframe or any Engine shall in any way discharge or diminish
any of Company's obligations to Agent hereunder or under the Credit Agreement.
In the event Agent shall have received from the lessor, conditional vendor or
secured party of any airframe leased to Lessee or purchased by Lessee subject
to a conditional sale or other security agreement, a written agreement
complying with clause (B) of Section 4(d)(v), and the lease or conditional sale
or other security agreement covering such airframe also covers an engine or
engines owned by the
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<PAGE> 13
lessor under such lease, conditionally owned by the conditional vendor
under such conditional sale agreement, or subject to such security
agreement, Agent hereby agrees for the benefit of such lessor, conditional
vendor or secured party that Agent will not acquire or claim, as against
such lessor, conditional vendor or secured party, any right, title or
interest in any such engine as the result of such engine being installed on
the Airframe at any time while such engine is subject to such lease or
conditional sale or other security agreement and owned by such lessor,
conditionally owned by such conditional vendor or subject to such security
agreement.
(e) Replacement and Pooling of Parts: Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company,
at its own cost and expense, will promptly replace all Parts, which
may from time to time be incorporated or installed in or attached to
the Airframe or any Engine and which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such
Parts as promptly as practicable. All replacement Parts shall be
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease, and for pooling arrangements to the
extent permitted by Section 4(e)(ii)), and shall be in as good
operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of Company and shall remain subject to the
lien and security interest of this Mortgage, no matter where located
until such time as such Parts shall be replaced by parts which have
been incorporated or installed in or attached to the Airframe or any
Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any
Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become
the property of Company and shall become subject to the lien and
security interest of this Mortgage and shall be deemed part of the
Airframe or such Engine
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<PAGE> 14
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine, and (B)
title to the replaced part shall no longer be the property of Company
and shall thereupon become free and clear of all rights of Agent
hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as
provided in Section 4(e)(i) may be subjected by Company or Lessee to
a normal pooling arrangement of the type customary in the airline
industry entered into by Lessee in the ordinary course of its
business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the
Airframe or such Engine in accordance with Section 4(e)(i) as
promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or
attached to the Airframe or any Engine in accordance with Section
4(e)(i) may be owned subject to such a pooling arrangement, provided
Company, at its expense, as promptly thereafter as possible, either
(A) causes such replacement Part to become subject to the lien and
security interest of this Mortgage in accordance with Section 4(e)(i)
by Company's acquiring title thereto for the benefit of Agent free
and clear of all Liens (except Permitted Encumbrances and the Lease)
or (B) replaces such replacement Part by incorporating or installing
in or attaching to the Airframe or such Engine a further replacement
Part owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders'
interests therein. Company also agrees, at its own cost and expense,
to make or cause to be made such alterations and modifications in and
additions to the Airframe and the Engines as may be required from
time to time to meet the standards or requirements of any directive
issued by a manufacturer relating to the Airframe or any Engine. In
addition so long as no Potential Event of Default or Event of Default
shall have occurred and be continuing, Company, at its own cost and
expense, may from time to time make such alterations and
modifications in and additions to
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<PAGE> 15
the Airframe and any Engine as Company may deem desirable in the
proper conduct of its business or to accommodate the business of
Lessee, provided no such alteration, modification or addition
diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value,
utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such
Engine were then in the condition and airworthiness required to be
maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in Company and shall
be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the
terms of Section 4(c) hereof or any other provision of this Mortgage
and (C) can be removed from the Airframe or such Engine without
diminishing or impairing the value, utility or airworthiness which
the Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming the
Aircraft Collateral was otherwise in the condition required by this
Mortgage. Upon the removal by Company of any such Part, as above
provided, title thereto shall, without further act, be free and clear
of all rights of the Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the
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<PAGE> 16
Aircraft, or (iv) loss of revenue suffered by the Company for any
reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine, Company will promptly notify Agent thereof in writing
(in any event within five (5) days of such occurrence) and will, not
later than 180 days after the receipt of Proceeds in connection with
such Event of Loss, mortgage hereunder, by complying with all of the
terms of subsection (ii) below and otherwise taking all necessary
actions to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the
replacement airframe or engine referred to below, an Acceptable
Alternate Airframe or Acceptable Alternate Engine free of all Liens
(other than Permitted Encumbrances and the Lease). Upon compliance
with the preceding sentence within such 180-day period, Agent will
execute and deliver to Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Airframe or Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable Alternate
Engine shall thereupon constitute an "Airframe" or an "Engine", as
the case may be, for all purposes hereof and shall be deemed to
constitute part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to
the lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form
of Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required
at such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine to be subjected to the lien and security
interest of this Mortgage;
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<PAGE> 17
(C) deliver to Agent an Officers' Certificate dated the
date of execution of said Supplemental Chattel Mortgage,
stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine
and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent
with respect to such Airframe or Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and
in as good operating condition as the Airframe or Engine subject
to such Event of Loss immediately prior to such Event of Loss,
assuming compliance by Company with all the terms of this
Mortgage with respect to such Airframe or Engine; and
(H) cause to be delivered to Agent an opinion or opinions
of counsel dated the date of execution of such Supplemental
Chattel Mortgage, stating:
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<PAGE> 18
(I) that the Airframe or Engine specifically described
in said Supplemental Chattel Mortgage, is free and clear of
all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company,
and (2) creates a valid, perfected and first priority
security interest in and to the Airframe or Engine
described in said Supplemental Chattel Mortgage,
enforceable against all third parties and securing the
payment of all obligations purported to be secured thereby
and that all action required to perfect fully such security
interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the
provisions of the Act to continue the perfection and
priority of the security interest intended to be created by
the Mortgage, and
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine
described in said Supplemental Chattel Mortgage.
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel
Mortgage under the Act, Company will cause to be delivered
to Agent an opinion of counsel for Company as to the due
recording of such Supplemental Chattel Mortgage in
accordance with the Act.
(iii) With respect to the Airframe or any Engine, as between the
Agent and Company, any payments on account of an Event of Loss (other
than insurance proceeds or other payments the application of which is
provided for in Section 4(g) below and under the terms of the Credit
Agreement) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Airframe or Engine that has been or is being
replaced
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<PAGE> 19
by Company pursuant to the terms hereof, so long as there shall
exist no Event of Default or Potential Event of Default, such
payment shall be paid over to or retained by Company or Lessee
upon satisfaction of the conditions for replacement contained in
paragraph (ii) above and until such time shall be held by Agent
in accordance with the provisions hereof as security for the
Secured Obligations; and
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Company shall promptly
notify Agent of such requisition and all of Company's obligations
under this Mortgage shall continue to the same extent as if such
requisition had not occurred. Any payments received by Agent or
Company from the United States Government for the use of the Airframe
or such Engine, shall be paid over to, or retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such
payment or retention any Event of Default or a Potential Event of
Default shall have occurred and be continuing, but shall be held by
or paid over to Agent as security for the obligations of Company
under this Mortgage and the other Loan Documents, and, if Agent shall
declare the Credit Agreement to be in default, shall be applied
against Company's obligations hereunder and thereunder as and when
due. At such time as there shall not be continuing any such Event of
Default or Potential Event of Default, such amount shall be paid to
Company to the extent not previously applied in accordance with the
preceding sentence. In addition, and whether or not there shall exist
an Event of Default or Potential Event of Default, until such time as
Company shall request to be paid any amount referred to in paragraph
(iii) or (iv) in order to effect the mortgaging hereunder of a
replacement Airframe or Engine, any amounts referred to in paragraphs
(iii) or (iv) of this Section 4(f) shall be held by the Agent as
security for the obligations of Company under this Mortgage and the
other Loan Documents.
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<PAGE> 20
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft, at Lessee's own cost and expense,
public liability (including without limitation, contractual
liability, cargo liability, passenger legal liability, bodily injury
and product liability, but excluding manufacturer's product
liability) and property damage insurance with insurers of recognized
responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly
situated with Lessee but in no event in an amount less than
$500,000,000 per occurrence (which shall include war risk,
governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and
not in operation, Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risk covered and type
of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in
the same or similar business and similarly situated with Lessee. Any
policies of insurance carried in accordance with this Section 4(g)
and any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name Agent and Lenders as additional
named insureds, (B) shall be primary without right of contribution
from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of
the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the
insurer shall waive any right of subrogation against Agent or
Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Aircraft, at Lessee's own cost and expense,
aircraft ground and flight all-risk hull insurance as well as fire
and extended coverage insurance on Engines and other equipment while
removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States
Government) and allied perils including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of
sabotage and (C) hijacking (air piracy) or any unlawful seizure or
wrongful exercise of control of the Aircraft or crew in flight
(including any attempt at
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<PAGE> 21
such seizure or control) made by any person or persons aboard the
Aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by Lessee with respect to similar
aircraft owned or operated by Lessee on the same routes or if the
Aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with Lessee flying comparable routes with
similar aircraft to carry such insurance, of the type usually carried
by corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when 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 this Section, insurance
otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee for aircraft on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name Agent
and Lenders as additional insureds and loss payees to the extent
their interest may appear and shall provide that any loss to the
Airframe or an Engine in excess of $2,000,000 (and, if a Potential
Event of Default or Event of Default has occurred and is continuing,
any such loss) shall be payable to Agent for the benefit of Lenders;
and shall be primary without right of contribution from any other
insurance which is carried by Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft in Lessee's fleet
which are of a value comparable to the Aircraft and as are not
substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with
Lessee; provided, however, that Company shall not permit Lessee to
self-insure in an amount in excess of $1,000,000 without the prior
written consent of Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in
respect of the interest of Agent or
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<PAGE> 22
Lenders in such policies the insurance shall not be invalidated by
any action or inaction of Lessee and shall insure the interests of
Agent and Lenders regardless of any breach or violation by Lessee or
any Person (other than Agent) of any warranty, declaration, condition
or exclusion from coverage contained in such policies; (C) provide
that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Agent or any
Lender, or if such insurance is allowed to lapse for nonpayment of
premium, such cancellation, change or lapse shall not be effective as
to Agent for thirty (30) days (seven (7) days, or such shorter or
longer period as may from time to time be customarily available in
the industry, in the case of any war risk and allied perils coverage)
after receipt by Agent of written notice from such insurers of such
cancellation, change or lapse; (D) be in full force and effect
throughout any geographical areas at any time traversed by the
Aircraft and shall be payable in U.S. dollars; (E) waive any right of
the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of
Agent; and (F) waive all rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe
or any Engine, a valid agreement by the United States or such agency
or instrumentality to indemnify Lessee against the same risks against
which Lessee is required hereunder to insure shall be considered
adequate insurance with respect to the Airframe or such Engine to the
extent of the risks and in the amounts that are the subject of any
such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 21, Company will cause the Lessee to furnish to
Agent (A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
stating that in the opinion of such firm such insurance complies with
the terms of this Section 4(g) and is adequate to protect the
interests of Lessee, Company and Agent, and (B) certificates of the
insurer or insurers evidencing the insurance covered by the report.
Lessee will cause such brokers to advise Agent in writing (x)
promptly of any default in the payment of any premium and of any
other act or omission on the part of Lessee of which such firm has
knowledge and which might invalidate or render unenforceable, in
whole or in part, any insurance on the Aircraft or any Engine and (y)
at least thirty (30) days prior to the ex-
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<PAGE> 23
piration or termination date, or date of effectiveness of any
material change, of any insurance carried and maintained on the
Aircraft hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if received by Company, immediately paid to Agent and shall be
held by Agent as security for the Secured Obligations and all other
obligations required to be paid in accordance with the terms of this
Mortgage and the Credit Agreement and such payments shall be paid to
Company upon compliance by Company with the terms of Subsection 4(f)
with respect to the replacement of an airframe or an engine, as the
case may be, provided that no Potential Event of Default or Event of
Default shall have occurred and be continuing.
All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above and paid
other than as a result of an Event of Loss shall be paid by Agent to
or be retained by Company, and promptly applied by Company to the
extent necessary to repair the damage to the Airframe or the Engine
for which such insurance was paid, provided that Agent shall not be
required to make any such payment to Company if a Potential Event of
Default or Event of Default has occurred and is continuing, but shall
be held or paid over to Agent as security for the obligations of
Company under this Mortgage and the other Loan Documents, and, if
Agent shall declare the Credit Agreement to be in default, shall be
applied against Company's obligations hereunder and thereunder as and
when due. Retention by Agent of any amounts pursuant to the preceding
sentence shall not relieve Company of its obligations to make
promptly all repairs and replacements required by Sections 4(c) and
(e) hereof and to pay for the same with Company's funds or cause
payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft for its
own account. Company 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 4(g). No insurance
maintained by Agent or any Lender shall prevent Company from causing
Lessee to carry the insurance required or permitted by this Section
or adversely affect such insurance or the cost thereof. Proceeds of
any such insurance carried by Agent or Lender shall be paid as
provided in the insurance policy relating thereto and Agent shall
have no duty to obtain any such insurance.
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<PAGE> 24
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as
may be requested. Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of
making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant
to the Lease, cause the Airframe and each Engine included in the Aircraft
Collateral to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size,
and bearing the legend "Owned by Atlas Freighter Leasing, Inc. and
Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Agent be appropriate or desirable to evidence the
fact that it is subject to the lien and security interest created by this
Mortgage. Company shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or
defacement, shall promptly cause such plate, disk, or other marking or
serial number to be promptly replaced. Except as provided above, Company
shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine as a designation that might be
interpreted as a claim of ownership or of any security interest therein,
except that any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any
Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights
and remedies of a secured party on default under the Uniform Commercial
Code as in effect at the time in any applicable jurisdiction (whether or
not the Uniform Commercial Code applies to the affected Aircraft
Collateral), (ii) any and all remedies under the Leases and all of the
rights and remedies of the Lessor under the Lease, (iii) all the rights
and remedies provided for in this Mortgage, the Credit Agreement and any
other Loan Document, and in any other agreement between Company and Agent,
and (iv) such other rights and remedies as may be provided by law or
otherwise.
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<PAGE> 25
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any
part thereof and may exclude Company and Lessee, and all persons claiming
under Company or Lessee, wholly or partly therefrom. At the request of
Agent, Company shall promptly deliver or cause Lessee to deliver to Agent
or to whomsoever Agent shall designate, at such time or times and place or
places as Agent may specify, and fly or cause to be flown to such airport
or airports in the United States as Agent may specify, without risk or
expense to Agent, the Aircraft Collateral or any part thereof. In
addition, Company will provide, or cause Lessee to provide, without cost
or expense to Agent, storage facilities for the Aircraft Collateral. If
Company or Lessee shall for any reason fail to deliver the Aircraft
Collateral or any part thereof after demand by Agent, Agent may, without
being responsible for loss or damage, (i) obtain a judgment conferring on
Agent the right to immediate possession or requiring Company and Lessee to
deliver immediate possession of the Aircraft Collateral or any part
thereof to Agent, the entry of which judgment Company hereby specifically
consents and the Lessor's consent to which will be obtained by Company
under the Lease, or (ii) with or without such judgment, pursue the
Aircraft Collateral or any part thereof wherever it may be found and may
enter any of the premises of Company and Lessee where the Aircraft
Collateral may be and search for the Aircraft Collateral and take
possession of and remove the same. Company agrees to pay to Agent, upon
demand, all expenses incurred in taking any such action; and all such
expenses shall, until paid, be secured by the lien of this Mortgage. Upon
every such taking of possession, Agent may, from time to time, make all
such reasonable expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the
Aircraft Collateral, as it may deem proper. In each such case, Agent shall
have the right to maintain, use, operate, store, lease, control or manage
the Aircraft Collateral or any part thereof and to carry on the business
and exercise all rights and powers of Company relating to the Aircraft
Collateral, as Agent shall deem best, including the right to enter into
any and all such agreements with respect to the maintenance, use,
operation, storage, leasing, control, management or disposition of the
Aircraft Collateral or any part thereof as Agent may determine. Further,
after the occurrence and during the continuation of an Event of Default,
Agent shall be entitled to collect and receive directly all tolls, rents,
revenues, issues, income, products and profits of the Aircraft Collateral
or any part thereof, including without limitation, all payments under any
of the Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments which
Agent may be required or may elect
-25-
<PAGE> 26
to make, if any, for taxes, assessments, or other proper charges upon the
Aircraft Collateral and all other payments which Agent may be required or
authorized to make under any provision of this Mortgage, as well as just
and reasonable compensation for the services of Agent and of all persons
properly engaged and employed for such purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales,
as an entirety or in separate lots or parcels, the Aircraft
Collateral or any part thereof, at public or private sale, at such
place or places and at such time or times and upon such terms,
including terms of credit (which may include the retention of title
by Agent to the property so sold), as Agent may determine, whether or
not the Aircraft Collateral shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein
granted or for the foreclosure of this Mortgage and the sale of the
Aircraft Collateral under the judgment or decree of a court of
competent jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the
absolute sale of the Aircraft Collateral. Company, for itself and all who
may claim under it, waives, to the extent that it lawfully may, all right
to have all or any portion of the Aircraft Collateral marshalled upon any
foreclosure hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any
rights, powers or remedies granted hereby. All such fees and expenses
shall, until paid, be secured by the lien of this Mortgage.
-26-
<PAGE> 27
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale,
lease, disposition or other realization, including reasonable
compensation to Agent's agents and counsel, and all expenses,
liabilities and advances made or incurred by Agent in connection
therewith, including, without limitation, taxes upon or with respect
to the sale, lease, disposition or realization and the payment of
taxes and Liens, if any, prior to the lien and security interest of
this Mortgage (except any taxes or Liens to which the respective
sale, lease, disposition or realization shall have been subject) and
to the payment of expenses and the reimbursement of payments incurred
or made by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on
the Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which
payment shall be applied to the principal installments of the Notes in
the manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company
under the Credit Agreement, this Mortgage or any other Loan Document,
and otherwise to Company or to such other Person(s) as may lawfully
be entitled, or as any court of competent jurisdiction may direct,
the remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of
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<PAGE> 28
Default (i) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Aircraft Collateral and Aircraft Related Collateral, (ii)
to make all necessary transfers of all or any part of the Aircraft Collateral
and Aircraft Related Collateral in connection with any sale, lease or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale, lease or other disposition, and (iv) generally
to do, at Agent's option and Company's cost and expense, at any time, or from
time to time, all acts and things that Agent deems necessary to protect,
preserve or realize upon the Aircraft Collateral and Aircraft Related
Collateral and Agent's security interest therein, in order to effect the intent
of this Mortgage, all as fully and effectively as Company might do, Company
hereby ratifying and confirming all that its said attorney (or any substitute)
shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section,
and all monies if any, required to be paid to Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by Agent and applied from time to time as provided herein and in the
Credit Agreement and the other Loan Documents and shall be held in an account
in the name of Agent and invested in Cash Equivalents for the benefit and at
the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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,
Agent may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect,
error or omission which may at any time hereafter be discovered in the contents
of this Mortgage or in the execution or de-
-28-
<PAGE> 29
livery hereof, and/or in order to more effectively carry out the intent and
purpose of this Mortgage and to establish, protect and perfect the rights,
remedies and security interests created or intended to be created in favor of
Agent hereunder, including, without limitation, the execution, delivery and
filing of any instruments with the FAA and of any Uniform Commercial Code
financing and continuation statements with respect to the security interests
created hereby, in form and substance satisfactory to Agent, in such
jurisdictions as Agent may reasonably request. Company hereby authorizes Agent
to file any such statements without the signature of Company to the extent
permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and
its successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender
herein or otherwise. Upon the indefeasible payment in full of the Secured
Obligations, the security interest granted hereby shall terminate and all
rights to the Aircraft Collateral and Aircraft Related Collateral shall revert
to Company. Upon any such termination. Agent will execute and deliver to
Company, at Company's expense, such instruments of release and termination as
Company may reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by applicable law, Company hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Agent. The captions and headings in this Mortgage
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
-29-
<PAGE> 30
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage.
Company hereby agrees that service of process in any such proceeding in any
such court may be made by registered or certified mail return receipt requested
to Company at its address provided on the signature pages of the Mortgage, such
service being hereby acknowledged by Company to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of Agent to bring proceedings against Company in the
courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of New York are used herein as therein defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
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<PAGE> 31
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
-31-
<PAGE> 32
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
-----------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 33
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
================================================================================
Manufacturer Manufacturer's Serial United States
Model Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Boeing 747-200F 21380 N507MC
================================================================================
</TABLE>
<PAGE> 34
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's
Manufacturer Model Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
General Electric CF6-50E2 517284
- --------------------------------------------------------------------------------
General Electric CF6-50E2 530320
- --------------------------------------------------------------------------------
General Electric CF6-50E2 517767
- --------------------------------------------------------------------------------
General Electric CF6-50E2 530288
================================================================================
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 35
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.____
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated _____________, 199[ ]
between Atlas Freighter Leasing, Inc., a Delaware corporation (the "Company"),
and Bankers Trust Company, as agent for and representative of (in such
capacity, "Agent") the financial institutions ("Lenders") party to the Credit
Agreement dated as of May 29, 1997 among Company, the Lenders and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement
and Chattel Mortgage dated _____________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to
Section 4(f) thereof, and shall specifically mortgage such Engine to Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
_____________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate,
right, title and interest of Company in and to the property described in
Schedule I annexed hereto (whether or not such Engine shall be installed on or
attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and
confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
<PAGE> 36
EXHIBIT A
Page 2
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
-2-
<PAGE> 37
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
--------------------------------
Name
Title
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
-3-
<PAGE> 38
EXHIBIT A
Page 4
BANKERS TRUST COMPANY,
as Agent
By:
--------------------------------
Name
Title
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
-4-
<PAGE> 39
SCHEDULE I
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.68
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N509MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of May 29, 1997
(this "Mortgage"), and entered into by and between ATLAS AIR, INC., a Delaware
corporation (the "Lessee"), ATLAS FREIGHTER LEASING, INC., a Delaware
corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as agent for and
representative of (in such capacity, the "Agent") the financial institutions
("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of May 29, 1997 (said
credit agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement") with Lenders and
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make term loans to Company in the principal
amount of up to $185 million (the "Loans") to enable Company to refinance
certain indebtedness currently encumbering the Aircraft Collateral (as defined
below). The indebtedness with respect to Loans made by Lenders is to be
evidenced by certain promissory notes of Company to the order of Lenders of even
date herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security in-
-1-
<PAGE> 2
terest in the Aircraft and the Spare Engines (the "Aircraft Collateral") and a
first priority security interest in all estate, right, title and interest of
Company in, to and under, the other below described property wherever the same
may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in
and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule I
hereto and any replacement airframe which may be substituted for such
airframe in accordance with the provisions of Section 4(f) hereof
together with any and all Parts (as hereinafter defined) incorporated
or installed in or attached to such airframe and all Parts removed
from such airframe until such Parts are replaced in accordance with
Section 4(e) hereof (such airframe, together with any replacement
airframe and all such Parts, hereinafter referred to as the
"Airframe");
(ii) each of the engines, which are listed in Schedule II hereto
or which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial numbers in such Schedule or in such Supplemental
Chattel Mortgage, whether or not from time to time thereafter
installed on the airframe or on any other airframe or aircraft,
including, any engine designated as a spare engine (the "Spare
Engine"), and any replacement engine which may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or
installed in or attached thereto and any and all Parts removed
therefrom, until such Parts are replaced in accordance with Section
4(e) hereof (each such engine, spare engine and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased
by Company for incorporation or installation in or attachment to the
Airframe or any Engine pursuant to the terms of any agreement whether
or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
-2-
<PAGE> 3
(iv) all records, logs and other materials required by applicable
law or regulation to be maintained and all other records, logs and
materials maintained in the ordinary course of business with respect
to the properties described in paragraphs (i), (ii) and (iii) above
(together with such Airframe and Engines (other than the Spare
Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part
thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held or
required to be held by Agent hereunder or paid to Agent in accordance
with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights
to receive title to parts and materials to the extent same relates to
the Aircraft including any agreement assigned therewith;
(iv) all amounts payable to Company by any manufacturer, supplier
or vendor of any of the Aircraft Collateral or any component thereof
pursuant to any warranty or indemnity covering any such Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of
-3-
<PAGE> 4
any of the Aircraft or any part thereof, as well as any rights,
powers or remedies on the part of the Lessor, whether arising
under the Lease or by statute or at law or in equity, or otherwise,
arising out of any Lease Event of Default (as defined in the Lease),
including, without limitation, all rights under Section 1110 of the
Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to the Aircraft or any Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft. All
property referred to in this granting clause, whenever acquired by the Lessor
under the Lease, shall secure all Secured Obligations. Company does hereby
warrant and represent that it has not assigned or pledged, and hereby covenants
that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned to anyone
other than Agent, and that it will not, except as provided herein or in the
Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Aircraft, or execute any waiver or modification of, or consent under, any
such agreement, or settle or compromise any claim arising under any such
agreement or submit or consent to the submission of any dispute, difference or
other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Atlas maintains, services, repairs and overhauls similar
airframes utilized by Atlas and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT9D-7A engine
for the aircraft bearing U.S. registration number N808MC and a General
Electric CF6-50E2 aircraft engine for the aircraft bearing U.S.
registration numbers
-4-
<PAGE> 5
N505MC, N508MC, N507MC, N509MC and N516MC or an engine of the same or
another manufacturer of equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and suitable for
installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Atlas pursuant
to which Atlas furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Atlas's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
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<PAGE> 6
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of May 29, 1997,
by and between Atlas Freighter Leasing, Inc., as Lessor, and Atlas Air,
Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof and
in the manner aforesaid and has not assigned or pledged any of its right,
title or interest hereby assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
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<PAGE> 7
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required by
Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Aircraft Collateral,
securing the payment and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Air-
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<PAGE> 8
craft Related Collateral, title thereto or any interest therein, except the
lien of this Mortgage and Permitted Encumbrances, including the Lease.
Company will promptly, at its own expense, take such action as may be
necessary to duly discharge any such Lien not excepted above if the same
shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against Agent
or any Lender or the Airframe or any Engine or any part thereof or interest
therein by any Federal, state or local government or other taxing authority
in the United States or by any foreign government or subdivision thereof or
by any foreign taxing authority in connection with, relating to or
resulting from: (i) the Airframe or any Engine or any part thereof of
interest therein; (ii) the manufacture, purchase, ownership, mortgaging,
lease, sublease, use, storage, maintenance, sale or other disposition of
the Airframe or any Engine; (iii) any rentals or other earnings therefor or
arising therefrom or the income or other proceeds received with respect
thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease)
and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered
in the name of Company in accordance with the Act; and (iii) will cause
Lessee to service, repair, inspect, test, maintain, overhaul the Airframe
and each Engine and install replacement equipment and parts on the Aircraft
and each Engine (A) so as to keep the Airframe and each Engine in such
operating condition as may be required to permit the Airframe and each
Engine to be utilized in commercial operations, (B) so as to enable the
airworthiness certification of the Airframe to be maintained in good
standing at all times under the Act, except when aircraft of the same type,
model or series as the Air-frame (powered by engines of the same type as
those with which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then
subject
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<PAGE> 9
to the provisions of Section 4(f) hereof, so long as Company is diligently
taking or causing to be taken all necessary action to promptly correct the
condition which caused such withdrawal, no Event of Default shall arise
from such withdrawal, (C) in accordance with Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same
manner and with the same care used by Lessee with respect to the same or
similar aircraft and engines owned or operated by Lessee so as to keep the
same in as good operating condition as when originally mortgaged hereunder,
ordinary wear and tear excepted, which practices shall at all times be at
or above the standard of the industry in the United States for prudent
maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or supplier)
in such condition so as to comply with the provisions of this Mortgage and
the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft and Engines. Neither the Airframe nor any Engine
will be maintained, used or operated in violation of any law or any rule,
regulation or order of any government or governmental authority having
jurisdiction (domestic or foreign), or in violation of any airworthiness
certificate, license or registration relating to the Airframe or such
Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of the Airframe or any
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders; provided,
however, that Company may, in good faith (after having delivered to Agent
an Officer's Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in
any reasonable manner which does not, in Agent's opinion, adversely affect
the interests under this Mortgage of Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant to
Section 4(g) shall not be at the time in full force and effect, or in any area
excluded from coverage by an insurance policy in effect with respect to the
Airframe or such Engine, except in the case of a requisition for use by the
United States of America, and then only if Company obtains indemnity or "war
risk" insurance in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless fully
covered to Agent's satisfaction by war risk and political risk and allied perils
insurance or unless the Airframe or such Engine is operated or used un-
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<PAGE> 10
der contract with the Government of the United States of America under
which contract that Government provides "war risk" insurance or assumes
liabilities for any damages, loss, destruction or failure to return
possession of the Airframe or such Engine at the end of the term of such
contract and for injury to persons or damage to property of others.
Company shall not use the Aircraft nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Agent, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine except that Company may
enter into and perform all provisions and terms of the Lease and Lessee or
the Company, unless a Potential Event of Default or Event of Default shall
have occurred and be continuing, without the prior written consent of
Agent, may take the following actions so long as the actions to be taken
shall not deprive the Agent of the first priority Lien of this Mortgage on
the assets subject hereto and so long as the actions to be taken shall not
deprive Company as Lessor of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft nor shall such actions deprive
the Agent of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft as assignee of Company's rights under this
Mortgage:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company or Lessee in the ordinary
course of business which do not contemplate or require the transfer of
title to, use for the remainder of its useful life, or registration
of the Airframe or title to, or use for the remainder of its useful
life of such Engine; provided, however if Company's title to or use
for the remainder of its useful life, of the Airframe
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<PAGE> 11
or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss
with respect to the Airframe or such Engine and Company shall comply
with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee;
provided that such airframe is free and clear of all Liens on property
of Lessee except (A) Liens permitted under the Lease, (B) Liens that
apply only to the engines (other than the 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), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clause (iv) above; and (B) Agent shall have received from
the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which
may be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine by reason of such
Engine being installed on such airframe at any time when such Engine
is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and Company shall comply with Section
4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which Company has
operational control of the Airframe and any Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company pos-
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<PAGE> 12
sessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by
such employees of similar functions within the United States; provided
that Company's obligations hereunder shall continue in full force and
effect notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine permitted by the terms hereof
shall be made subject and subordinate to, and the Leases shall be made
expressly subject and subordinate to, the lien and security interest of
this Mortgage and all of Agent's rights hereunder and Company shall remain
primarily liable hereunder for the performance of all the terms of this
Mortgage to the same extent as if such transfer had not occurred, and any
such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer (other than the Lease) shall expressly prohibit any
further transfer of the Airframe or such Engine or any assignment of the
rights thereunder; and provided, further, that no such lease, pooling
arrangement or other transfer or relinquishment of the possession of the
Airframe or any Engine shall in any way discharge or diminish any of
Company's obligations to Agent hereunder or under the Credit Agreement. In
the event Agent shall have received from the lessor, conditional vendor or
secured party of any airframe leased to Lessee or purchased by Lessee
subject to a conditional sale or other security agreement, a written
agreement complying with clause (B) of Section 4(d)(v), and the lease or
conditional sale or other security agreement covering such airframe also
covers an engine or engines owned by the lessor under such lease,
conditionally owned by the conditional vendor under such conditional sale
agreement, or subject to such security agreement, Agent hereby agrees for
the benefit of such lessor, conditional vendor or secured party that Agent
will not acquire or claim, as against such lessor, conditional vendor or
secured party, any right, title or interest in any such engine as the
result of such engine being installed on the Airframe at any time while
such engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor, conditionally owned by such conditional
vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company,
at its own cost and expense, will promptly replace all Parts, which
may from time to time be incorporated or installed in or attached to
the Airframe or any Engine and which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost
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<PAGE> 13
and expense may remove any Parts, whether or not worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that, except as otherwise
provided in Section 4(e)(iv), Company at its own cost and expense
shall replace such Parts as promptly as practicable. All replacement
Parts shall be owned by Company free and clear of all Liens (except
Permitted Encumbrances and the Lease, and for pooling arrangements to
the extent permitted by Section 4(e)(ii)), and shall be in as good
operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of Company and shall remain subject to the
lien and security interest of this Mortgage, no matter where located
until such time as such Parts shall be replaced by parts which have
been incorporated or installed in or attached to the Airframe or any
Engine and which meet the requirements for replacement parts specified
above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Airframe or any Engine as above
provided, without further act, (A) title to such replacement Part
shall vest in and such replacement part shall become the property of
Company and shall become subject to the lien and security interest of
this Mortgage and shall be deemed part of the Airframe or such Engine
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine, and (B)
title to the replaced part shall no longer be the property of Company
and shall thereupon become free and clear of all rights of Agent
hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as provided
in Section 4(e)(i) may be subjected by Company or Lessee to a normal
pooling arrangement of the type customary in the airline industry
entered into by Lessee in the ordinary course of its business and
entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 4(e)(i) as promptly as possible
after the removal of such removed part. In addition, any replacement
Part when incorporated or installed in or attached to the Airframe or
any Engine in accordance with Section 4(e)(i) may be owned subject to
such a pooling arrangement, provided Company, at its expense, as
promptly thereafter as possible, either (A) causes such replacement
Part to become subject to the lien and security interest of this
Mortgage in accordance with Section 4(e)(i) by Company's acquiring
title thereto for the benefit of Agent free and
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<PAGE> 14
clear of all Liens (except Permitted Encumbrances and the Lease) or
(B) replaces such replacement Part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement Part
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders'
interests therein. Company also agrees, at its own cost and expense,
to make or cause to be made such alterations and modifications in and
additions to the Airframe and the Engines as may be required from time
to time to meet the standards or requirements of any directive issued
by a manufacturer relating to the Airframe or any Engine. In addition
so long as no Potential Event of Default or Event of Default shall
have occurred and be continuing, Company, at its own cost and expense,
may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Company may deem desirable
in the proper conduct of its business or to accommodate the business
of Lessee, provided no such alteration, modification or addition
diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility,
condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such
Engine were then in the condition and airworthiness required to be
maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in Company and shall
be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the
terms of Section 4(c) hereof or any other provision of this Mortgage
and (C) can be removed from the Airframe or such Engine without
diminishing or impairing the value, utility or airworthiness which
the
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<PAGE> 15
Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming the
Aircraft Collateral was otherwise in the condition required by this
Mortgage. Upon the removal by Company of any such Part, as above
provided, title thereto shall, without further act, be free and clear
of all rights of the Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by the
Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine, Company will promptly notify Agent thereof in writing
(in any event within five (5) days of such occurrence) and will, not
later than 180 days after the receipt of Proceeds in connection with
such Event of Loss, mortgage hereunder, by complying with all of the
terms of subsection (ii) below and otherwise taking all necessary
actions to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the
replacement airframe or engine referred to below, an Acceptable
Alternate Airframe or Acceptable Alternate Engine free of all Liens
(other than Permitted Encumbrances and the Lease). Upon compliance
with the preceding sentence within such 180-day period, Agent will
execute and deliver to Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Airframe or Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable Alternate
Engine shall thereupon constitute an "Airframe" or an "Engine", as
the case may be, for all purposes hereof and shall be deemed to
constitute part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to the
lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
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<PAGE> 16
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form of
Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine to be subjected to the lien and security
interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the date
of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine
and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent with
respect to such Airframe or Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and in
as good operating condition
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<PAGE> 17
as the Airframe or Engine subject to such Event of Loss
immediately prior to such Event of Loss, assuming compliance by
Company with all the terms of this Mortgage with respect to
such Airframe or Engine; and
(H) cause to be delivered to Agent an opinion or opinions of
counsel dated the date of execution of such Supplemental Chattel
Mortgage, stating:
(I) that the Airframe or Engine specifically described
in said Supplemental Chattel Mortgage, is free and clear of
all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Airframe or Engine described in said
Supplemental Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
purported to be secured thereby and that all action required
to perfect fully such security interest has been taken and
completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine
described in said Supplemental Chattel Mortgage, and
(V) as to such other matters as Agent may reasonably
request. Promptly upon the recording of each Supplemental
Chattel Mortgage under the Act, Company will cause to be
delivered to Agent an opinion of counsel for Company as to
the due recording of such Supplemental Chattel Mortgage in
accordance with the Act.
(iii) With respect to the Airframe or any Engine, as between
the Agent and Company, any payments on account of an Event of
Loss (other than insurance proceeds or other payments the
application of which is pro-
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<PAGE> 18
vided for in Section 4(g) below and under the terms of the
Credit Agreement) received from any government authority or
other person shall be applied as follows:
(A) if such payments are received with respect to an
Event of Loss to an Airframe or Engine that has been or is
being replaced by Company pursuant to the terms hereof, so
long as there shall exist no Event of Default or Potential
Event of Default, such payment shall be paid over to or
retained by Company or Lessee upon satisfaction of the
conditions for replacement contained in paragraph (ii) above
and until such time shall be held by Agent in accordance
with the provisions hereof as security for the Secured
Obligations; and
(B) if such payments are received with respect to an
Event of Loss with respect to which no replacement is being
effected, such payments shall be applied to the prepayment
of the Notes required pursuant to the terms of the Credit
Agreement and shall be held pursuant to the terms of this
Mortgage, and the balance, if any, shall be paid over to or
retained by Company.
(iv) In the event of a requisition for use by the United
States Government of the Airframe or any Engine, Company shall
promptly notify Agent of such requisition and all of Company's
obligations under this Mortgage shall continue to the same extent
as if such requisition had not occurred. Any payments received by
Agent or Company from the United States Government for the use of
the Airframe or such Engine, shall be paid over to, or retained
by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of
this Section 4(f) which is payable to or retained by Company
shall not be paid to Company or retained by Company, if at the
time of such payment or retention any Event of Default or a
Potential Event of Default shall have occurred and be continuing,
but shall be held by or paid over to Agent as security for the
obligations of Company under this Mortgage and the other Loan
Documents, and, if Agent shall declare the Credit Agreement to be
in default, shall be applied against Company's obligations
hereunder and thereunder as and when due. At such time as there
shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to Company to the
extent not previously applied in accordance with the preceding
sentence. In addition, and whether or not there shall exist an
Event of Default or Potential Event of Default, until such time
as Company shall request to be paid any amount referred to in
paragraph (iii) or (iv) in order to effect the mortgaging
hereunder of a replacement Airframe or Engine, any amounts
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<PAGE> 19
referred to in paragraphs (iii) or (iv) of this Section
4(f) shall be held by the Agent as security for the obligations
of Company under this Mortgage and the other Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft, at Lessee's own cost and expense,
public liability (including without limitation, contractual liability,
cargo liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and
property damage insurance with insurers of recognized responsibility
and reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation
and expropriation and allied perils coverage). During any period when
the Aircraft is on the ground and not in operation, Lessee may carry
or cause to be carried, in lieu of insurance required by this Section,
insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the
scope of risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly
situated with Lessee. Any policies of insurance carried in accordance
with this Section 4(g) and any policies taken out in substitution or
replacement of any such policies (A) shall be amended to name Agent
and Lenders as additional named insureds, (B) shall be primary without
right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof,
except the limits of the liability, shall operate in the same manner
as if there were a separate policy covering each insured, and
(D) shall provide that the insurer shall waive any right of
subrogation against Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and
reputation on or with respect to the Aircraft, at Lessee's own
cost and expense, aircraft ground and flight all-risk hull
insurance as well as fire and extended coverage insurance on
Engines and other equipment while removed from the Airframe
(which shall include war risk, governmental confiscation and
expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or
labor disturbances, (B) any malicious act or act of sabotage and
(C) hijacking (air piracy) or any unlawful seizure or wrongful
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<PAGE> 20
exercise of control of the Aircraft or crew in flight (including
any attempt at such seizure or control) made by any person or
persons aboard the Aircraft acting without the consent of the
insured, if and to the extent the same shall be maintained by
Lessee with respect to similar aircraft owned or operated by
Lessee on the same routes or if the Aircraft is operated on
routes where the custom is for Domestic Carriers similarly
situated with Lessee flying comparable routes with similar
aircraft to carry such insurance, of the type usually carried by
corporations engaged in the same or similar business and
similarly situated with Lessee; provided that such insurance
(including any self-insurance to the extent permitted below)
shall at all times be for an amount not less than the greater of
the amount required by the applicable Lease and $50,000,000.
During any period when 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 this Section, insurance otherwise
conforming hereto except that the scope of risk covered and type
of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and
similarly situated with Lessee for aircraft on the ground in an
amount at least equal to the applicable amount provided above.
All such insurance shall name Agent and Lenders as additional
insureds and loss payees to the extent their interest may appear
and shall provide that any loss to the Airframe or an Engine in
excess of $2,000,000 (and, if a Potential Event of Default or
Event of Default has occurred and is continuing, any such loss)
shall be payable to Agent for the benefit of Lenders; and shall
be primary without right of contribution from any other insurance
which is carried by Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be
insured against pursuant to this Section 4(g)(ii) in such
reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the
Aircraft and as are not substantially greater than amounts
self-insured by corporations engaged in the same or similar
business and similarly situated with Lessee; provided, however,
that Company shall not permit Lessee to self-insure in an amount
in excess of $1,000,000 without the prior written consent of
Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to
name Agent and Lenders as additional named insureds, but without
Agent or Lenders being thereby liable for premiums; (B) provide
that in respect of the interest of Agent or Lenders in such
policies the insurance shall not be invalidated by any action or
inaction of Lessee and shall insure the interests of Agent and
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<PAGE> 21
Lenders regardless of any breach or violation by Lessee or any
Person (other than Agent) of any warranty, declaration, condition
or exclusion from coverage contained in such policies; (C)
provide that if such insurance is cancelled, or if any material
change is made in the coverage which affects the interest of
Agent or any Lender, or if such insurance is allowed to lapse for
nonpayment of premium, such cancellation, change or lapse shall
not be effective as to Agent for thirty (30) days (seven (7)
days, or such shorter or longer period as may from time to time
be customarily available in the industry, in the case of any war
risk and allied perils coverage) after receipt by Agent of
written notice from such insurers of such cancellation, change or
lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft and
shall be payable in U.S. dollars; (E) waive any right of the
insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of
Agent; and (F) waive all rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United
States or any agency or instrumentality thereof in respect of the
Airframe or any Engine, a valid agreement by the United States or
such agency or instrumentality to indemnify Lessee against the
same risks against which Lessee is required hereunder to insure
shall be considered adequate insurance with respect to the
Airframe or such Engine to the extent of the risks and in the
amounts that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter
on or prior to January 21, Company will cause the Lessee to
furnish to Agent (A) a report signed by a firm of independent
aircraft insurance brokers, appointed by Lessee and not objected
to by Agent, describing in reasonable detail acceptable to Agent
the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section
4(g) and is ade quate to protect the interests of Lessee, Company
and Agent, and (B) certificates of the insurer or insurers
evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any
default in the payment of any premium and of any other act or
omission on the part of Lessee of which such firm has knowledge
and which might invalidate or render unenforceable, in whole or
in part, any insurance on the Aircraft or any Engine and (y) at
least thirty (30) days prior to the expiration or termination
date, or date of effectiveness of any material change, of any
insurance carried and maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by
Agent or Company from insurance referred to in paragraph (ii)
above shall be, if
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<PAGE> 22
received by Company, immediately paid to Agent and shall be held
by Agent as security for the Secured Obligations and all other
obligations required to be paid in accordance with the terms of
this Mortgage and the Credit Agreement and such payments shall be
paid to Company upon compliance by Company with the terms of
Subsection 4(f) with respect to the replacement of an airframe or
an engine, as the case may be, provided that no Potential Event
of Default or Event of Default shall have occurred and be
continuing.
All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above and
paid other than as a result of an Event of Loss shall be paid by
Agent to or be retained by Company, and promptly applied by
Company to the extent necessary to repair the damage to the
Airframe or the Engine for which such insurance was paid,
provided that Agent shall not be required to make any such
payment to Company if a Potential Event of Default or Event of
Default has occurred and is continuing, but shall be held or paid
over to Agent as security for the obligations of Company under
this Mortgage and the other Loan Documents, and, if Agent shall
declare the Credit Agreement to be in default, shall be applied
against Company's obligations hereunder and thereunder as and
when due. Retention by Agent of any amounts pursuant to the
preceding sentence shall not relieve Company of its obligations
to make promptly all repairs and replacements required by
Sections 4(c) and (e) hereof and to pay for the same with
Company's funds or cause payment of the same under the Lease by
the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or
any Lender from obtaining insurance with respect to the Aircraft
for its own account. Company 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 4(g).
No insurance maintained by Agent or any Lender shall prevent
Company from causing Lessee to carry the insurance required or
permitted by this Section or adversely affect such insurance or
the cost thereof. Proceeds of any such insurance carried by Agent
or Lender shall be paid as provided in the insurance policy
relating thereto and Agent shall have no duty to obtain any such
insurance.
(h) Inspection. Company will permit, and cause Lessee to permit,
any officers, employees or authorized representatives of Agent to inspect,
at Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as
may be requested. Agent shall have no duty to make any such inspection
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<PAGE> 23
or examination and shall not incur any liability or obligation by reason of
making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or
pursuant to the Lease, cause the Airframe and each Engine included in
the Aircraft Collateral to be legibly marked (in a reasonably
prominent location, which in the case of the Airframe shall be
adjacent to the airworthiness certificate) with such a plate, disk, or
other marking of customary size, and bearing the legend "Owned by
Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust Company,
as Agent" or such other legend, as shall in the opinion of Agent be
appropriate or desirable to evidence the fact that it is subject to
the lien and security interest created by this Mortgage. Company shall
not remove or deface, or permit to be removed or defaced, any such
plate, disk, or other marking or the identifying manufacturer's serial
number, and, in the event of such removal or defacement, shall
promptly cause such plate, disk, or other marking or serial number to
be promptly replaced. Except as provided above, Company shall not
allow the name of any person, association or corporation to be placed
on the Airframe or any Engine as a designation that might be
interpreted as a claim of ownership or of any security interest
therein, except that any permitted lessee may place its customary
colors and insignia or the insignia of the manufacturer on the
Airframe or any Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as
in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii)
any and all remedies under the Leases and all of the rights and remedies of
the Lessor under the Lease, (iii) all the rights and remedies provided for
in this Mortgage, the Credit Agreement and any other Loan Document,
and in any other agreement between Company and Agent, and (iv) such other
rights and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any part
thereof and may exclude Company and Lessee, and all persons claiming under
Company or Lessee, wholly or partly therefrom. At the request of Agent,
Company shall promptly deliver or cause Lessee to deliver to Agent or to
whomsoever Agent shall designate, at such time or times and place or places
as Agent may specify, and fly or cause to be flown to such airport or
airports in the United States as Agent may specify, without risk or expense
to Agent, the Aircraft Collateral or any part thereof. In addition, Company
will provide, or cause Lessee to provide, without cost or expense to
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<PAGE> 24
Agent, storage facilities for the Aircraft Collateral. If Company or Lessee
shall for any reason fail to deliver the Aircraft Collateral or any part
thereof after demand by Agent, Agent may, without being responsible for
loss or damage, (i) obtain a judgment conferring on Agent the right to
immediate possession or requiring Company and Lessee to deliver immediate
possession of the Aircraft Collateral or any part thereof to Agent, the
entry of which judgment Company hereby specifically consents and the
Lessor's consent to which will be obtained by Company under the Lease, or
(ii) with or without such judgment, pursue the Aircraft Collateral or any
part thereof wherever it may be found and may enter any of the premises of
Company and Lessee where the Aircraft Collateral may be and search for the
Aircraft Collateral and take possession of and remove the same. Company
agrees to pay to Agent, upon demand, all expenses incurred in taking any
such action; and all such expenses shall, until paid, be secured by the
lien of this Mortgage. Upon every such taking of possession, Agent may,
from time to time, make all such reasonable expenditures for maintenance,
insurance, repairs, replacements, alterations, additions and improvements
to and of the Aircraft Collateral, as it may deem proper. In each such
case, Agent shall have the right to maintain, use, operate, store, lease,
control or manage the Aircraft Collateral or any part thereof and to carry
on the business and exercise all rights and powers of Company relating to
the Aircraft Collateral, as Agent shall deem best, including the right to
enter into any and all such agreements with respect to the maintenance,
use, operation, storage, leasing, control, management or disposition of the
Aircraft Collateral or any part thereof as Agent may determine. Further,
after the occurrence and during the continuation of an Event of Default,
Agent shall be entitled to collect and receive directly all tolls, rents,
revenues, issues, income, products and profits of the Aircraft Collateral
or any part thereof, including without limitation, all payments under any
of the Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments which
Agent may be required or may elect to make, if any, for taxes, assessments,
or other proper charges upon the Aircraft Collateral and all other payments
which Agent may be required or authorized to make under any provision of
this Mortgage, as well as just and reasonable compensation for the services
of Agent and of all persons properly engaged and employed for such purposes
by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as
an entirety or in separate lots or parcels, the Aircraft Collateral or
any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the
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<PAGE> 25
retention of title by Agent to the property so sold), as Agent may
determine, whether or not the Aircraft Collateral shall be at the
place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the absolute
sale of the Aircraft Collateral. Company, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have all
or any portion of the Aircraft Collateral marshalled upon any foreclosure
hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any rights,
powers or remedies granted hereby. All such fees and expenses shall, until
paid, be secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the
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<PAGE> 26
sale, lease, disposition or realization and the payment of taxes and Liens,
if any, prior to the lien and security interest of this Mortgage (except
any taxes or Liens to which the respective sale, lease, disposition or
realization shall have been subject) and to the payment of expenses and the
reimbursement of payments incurred or made by Agent pursuant to Section 9
hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Aircraft Collateral and Aircraft
Related Collateral, (ii) to make all necessary transfers of all or any part of
the Aircraft Collateral and Aircraft Related Collateral in connection with any
sale, lease or other disposition made pursuant hereto, (iii) to execute and
deliver for value all necessary or appropriate bills of sale, assignments and
other instruments in connection with any such sale, lease or other disposition,
and (iv) generally to do, at Agent's option and Company's cost and expense, at
any time, or from time to time, all acts and things that Agent deems necessary
to protect, preserve or realize upon the Aircraft Collateral and Aircraft
Related Collateral and Agent's security interest therein, in order to effect the
intent of this Mortgage, all as fully and effectively as Company might do,
Company hereby ratifying and confirming all that its said attorney (or any
substitute) shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section, and
all monies if any, required to be paid to Agent hereunder, which disposition is
not elsewhere herein otherwise specifically provided for, shall be held by Agent
and applied from time to time as provided herein and in the Credit Agreement and
the other Loan Documents and
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<PAGE> 27
shall be held in an account in the name of Agent and invested in Cash
Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent
may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender herein
or otherwise. Upon the indefeasible payment in full of the Secured Obligations,
the security interest granted hereby shall terminate and all rights to the
Aircraft Collateral and Aircraft Related Collateral shall revert to Company.
Upon any such termination. Agent will execute and deliver to Company, at
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<PAGE> 28
Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by applicable law, Company hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Agent. The captions and headings in this Mortgage
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Agent to bring proceedings against Company in the courts of
any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A
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<PAGE> 29
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Article 9 of the Uniform Commercial
Code in the State of New York are used herein as therein defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 30
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
-----------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 31
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer Manufacturer's Serial United States
Model Number Registry No.
- ------------ ----- ------ ------------
<S> <C> <C> <C>
Boeing 747-200F 21221 N509MC
</TABLE>
<PAGE> 32
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 530283
General Electric CF6-50E2 530304
General Electric CF6-50E2 517207
General Electric CF6-50E2 530318
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 33
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.____
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated ________, 199[ ] between Atlas
Freighter Leasing, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as agent for and representative of (in such capacity, "Agent")
the financial institutions ("Lenders") party to the Credit Agreement dated as of
May 29, 1997 among Company, the Lenders and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated ______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to Section
4(f) thereof, and shall specifically mortgage such Engine to Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 1997, and has been assigned Conveyance No. _____.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine shall be installed on or attached to
the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
<PAGE> 34
EXHIBIT A
Page 2
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 35
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
-----------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
<PAGE> 36
EXHIBIT A
Page 4
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 37
SCHEDULE I
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.69
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N505MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of May 29, 1997
(this "Mortgage"), and entered into by and between ATLAS AIR, INC., a Delaware
corporation (the "Lessee"), ATLAS FREIGHTER LEASING, INC., a Delaware
corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as agent for
and representative of (in such capacity, the "Agent") the financial
institutions ("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of May 29, 1997 (said
credit agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement") with Lenders and
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make term loans to Company in the principal
amount of up to $185 million (the "Loans") to enable Company to refinance
certain indebtedness currently encumbering the Aircraft Collateral (as defined
below). The indebtedness with respect to Loans made by Lenders is to be
evidenced by certain promissory notes of Company to the order of Lenders of
even date herewith issued under and pursuant to the Credit Agreement (such
promissory notes, as they may be amended, modified, supplemented, renewed,
converted or extended from time to time, being the "Notes"). It is a condition
precedent to the making by Lenders of the Loans under the Credit Agreement that
this Mortgage be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security in-
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<PAGE> 2
terest in the Aircraft and the Spare Engines (the "Aircraft Collateral") and a
first priority security interest in all estate, right, title and interest of
Company in, to and under, the other below described property wherever the same
may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in
and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule
I hereto and any replacement airframe which may be substituted for
such airframe in accordance with the provisions of Section 4(f)
hereof together with any and all Parts (as hereinafter defined)
incorporated or installed in or attached to such airframe and all
Parts removed from such airframe until such Parts are replaced in
accordance with Section 4(e) hereof (such airframe, together with any
replacement airframe and all such Parts, hereinafter referred to as
the "Airframe");
(ii) each of the engines, which are listed in Schedule II hereto
or which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial numbers in such Schedule or in such
Supplemental Chattel Mortgage, whether or not from time to time
thereafter installed on the airframe or on any other airframe or
aircraft, including, any engine designated as a spare engine (the
"Spare Engine"), and any replacement engine which may be substituted
for such engine in accordance with the provisions of Section 4(f)
hereof, together, in each case, with any and all Parts incorporated
or installed in or attached thereto and any and all Parts removed
therefrom, until such Parts are replaced in accordance with Section
4(e) hereof (each such engine, spare engine and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased
by Company for incorporation or installation in or attachment to the
Airframe or any Engine pursuant to the terms of any agreement whether
or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
-2-
<PAGE> 3
(iv) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i), (ii) and (iii)
above (together with such Airframe and Engines (other than the Spare
Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part
thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held
or required to be held by Agent hereunder or paid to Agent in
accordance with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase
or modification agreement or manufacturer's warranty, together with
all rights, powers, privileges, options, licenses and other benefits
of Company (including such indemnities, rights of assignment, rights
and remedies for breach of any warranty and/or claims for damages,
rights to receive title to parts and materials to the extent same
relates to the Aircraft including any agreement assigned therewith;
(iv) all amounts payable to Company by any manufacturer,
supplier or vendor of any of the Aircraft Collateral or any component
thereof pursuant to any warranty or indemnity covering any such
Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of any of the Aircraft or
-3-
<PAGE> 4
any part thereof, as well as any rights, powers or remedies on the
part of the Lessor, whether arising under the Lease or by statute or
at law or in equity, or otherwise, arising out of any Lease Event of
Default (as defined in the Lease), including, without limitation, all
rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any
loss or damage to the Aircraft or any Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft. All
property referred to in this granting clause, whenever acquired by the Lessor
under the Lease, shall secure all Secured Obligations. Company does hereby
warrant and represent that it has not assigned or pledged, and hereby covenants
that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned to anyone
other than Agent, and that it will not, except as provided herein or in the
Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Aircraft, or execute any waiver or modification of, or consent under,
any such agreement, or settle or compromise any claim arising under any such
agreement or submit or consent to the submission of any dispute, difference or
other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Atlas maintains, services, repairs and overhauls similar
airframes utilized by Atlas and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT9D-7A engine
for the aircraft bearing U.S. registration number N808MC and a General
Electric CF6-50E2 aircraft engine for the aircraft bearing U.S.
registration numbers
-4-
<PAGE> 5
N505MC, N508MC, N507MC, N509MC and N516MC or an engine of the same or
another manufacturer of equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and suitable for
installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Atlas pursuant
to which Atlas furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Atlas's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations, that
is operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
-5-
<PAGE> 6
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of May 29, 1997,
by and between Atlas Freighter Leasing, Inc., as Lessor, and Atlas Air,
Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe
or each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof
and in the manner aforesaid and has not assigned or pledged any of its
right, title or interest hereby assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
-6-
<PAGE> 7
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft
or such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required
by Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or
limiting creditors' rights generally, and creates a valid, perfected and
first priority mortgage on and security interest in the Aircraft
Collateral, securing the payment and performance of the Secured
Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Air-
-7-
<PAGE> 8
craft Related Collateral, title thereto or any interest therein, except
the lien of this Mortgage and Permitted Encumbrances, including the Lease.
Company will promptly, at its own expense, take such action as may be
necessary to duly discharge any such Lien not excepted above if the same
shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against
Agent or any Lender or the Airframe or any Engine or any part thereof or
interest therein by any Federal, state or local government or other taxing
authority in the United States or by any foreign government or subdivision
thereof or by any foreign taxing authority in connection with, relating to
or resulting from: (i) the Airframe or any Engine or any part thereof of
interest therein; (ii) the manufacture, purchase, ownership, mortgaging,
lease, sublease, use, storage, maintenance, sale or other disposition of
the Airframe or any Engine; (iii) any rentals or other earnings therefor
or arising therefrom or the income or other proceeds received with respect
thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease)
and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered
in the name of Company in accordance with the Act; and (iii) will cause
Lessee to service, repair, inspect, test, maintain, overhaul the Airframe
and each Engine and install replacement equipment and parts on the
Aircraft and each Engine (A) so as to keep the Airframe and each Engine in
such operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations, (B) so as to enable
the airworthiness certification of the Airframe to be maintained in good
standing at all times under the Act, except when aircraft of the same
type, model or series as the Airframe (powered by engines of the same type
as those with which the Airframe shall be equipped at the time of
grounding) registered in the United States have been grounded by the FAA;
provided, however, that if following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then subject
to the provisions of Section 4(f) hereof,
-8-
<PAGE> 9
so long as Company is diligently taking or causing to be taken all
necessary action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same
care used by Lessee with respect to the same or similar aircraft and
engines owned or operated by Lessee so as to keep the same in as good
operating condition as when originally mortgaged hereunder, ordinary wear
and tear excepted, which practices shall at all times be at or above the
standard of the industry in the United States for prudent maintenance of
similar equipment, and (D) in such manner as may be necessary to maintain
in full force all warranties of the manufacturers thereof. Company shall
maintain, or shall cause Lessee to maintain, all records, logs and other
materials which may be required to permit the Airframe and each Engine to
be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or
supplier) in such condition so as to comply with the provisions of this
Mortgage and the rules and regulations of the FAA from time to time in
force and applicable to the Aircraft and Engines. Neither the Airframe nor
any Engine will be maintained, used or operated in violation of any law or
any rule, regulation or order of any government or governmental authority
having jurisdiction (domestic or foreign), or in violation of any
airworthiness certificate, license or registration relating to the
Airframe or such Engine issued by any such authority, and in the event
that such laws, rules, regulations or orders require alteration of the
Airframe or any Engine, Company, at its own cost and expense, will conform
thereto or obtain conformance therewith and will maintain the same in
proper operating condition under such laws, rules, regulations and orders;
provided, however, that Company may, in good faith (after having delivered
to Agent an Officer's Certificate stating the facts with respect thereto),
contest the validity or application of any such law, rule, regulation or
order in any reasonable manner which does not, in Agent's opinion,
adversely affect the interests under this Mortgage of Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant
to Section 4(g) shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with
respect to the Airframe or such Engine, except in the case of a
requisition for use by the United States of America, and then only if
Company obtains indemnity or "war risk" insurance in lieu of such
insurance from the United States of America against the risks and in the
amounts required by said Section covering such area, or (II) in any
recognized or threatened area of hostilities unless fully covered to
Agent's satisfaction by war risk and political risk and allied perils
insurance or unless the Airframe or such Engine is operated or used un-
-9-
<PAGE> 10
der contract with the Government of the United States of America under
which contract that Government provides "war risk" insurance or assumes
liabilities for any damages, loss, destruction or failure to return
possession of the Airframe or such Engine at the end of the term of such
contract and for injury to persons or damage to property of others.
Company shall not use the Aircraft nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent
of Agent, sell, assign, lease or otherwise in any manner deliver, transfer
or relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine except that Company may
enter into and perform all provisions and terms of the Lease and Lessee or
the Company, unless a Potential Event of Default or Event of Default shall
have occurred and be continuing, without the prior written consent of
Agent, may take the following actions so long as the actions to be taken
shall not deprive the Agent of the first priority Lien of this Mortgage on
the assets subject hereto and so long as the actions to be taken shall not
deprive Company as Lessor of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft nor shall such actions
deprive the Agent of the protections of Section 1110 of the Bankruptcy
Code with respect to the Aircraft as assignee of Company's rights under
this Mortgage:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company or Lessee in the
ordinary course of business which do not contemplate or require the
transfer of title to, use for the remainder of its useful life, or
registration of the Airframe or title to, or use for the remainder of
its useful life of such Engine; provided, however if Company's title
to or use for the remainder of its useful life, of the Airframe or
any Engines shall
-10-
<PAGE> 11
be divested under any such agreement or arrangement, such divesture
shall be deemed to be an Event of Loss with respect to the Airframe
or such Engine and Company shall comply with Section 4(f) in respect
thereof;
(iv) install an Engine on an airframe which is owned by Lessee;
provided that such airframe is free and clear of all Liens on
property of Lessee except (A) Liens permitted under the Lease, (B)
Liens that apply only to the engines (other than the 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), and (C) the rights
of any Domestic Air Carrier, under normal interchange agreements
which are customary in the airline industry and do not contemplate or
require the transfer of title to such airframe or the engines
installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned
by Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except
the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the
type permitted by clause (iv) above; and (B) Agent shall have
received from the lessor, conditional vendor or secured party and
each of the purchasers, mortgagees and encumbrancers of such lessor,
conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors
and assigns will acquire or claim any right, title or interest in any
Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and Company shall comply with
Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which Company has
operational control of the Airframe and any Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current certificates
and licenses that would be required under the applicable laws of the
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<PAGE> 12
United States for the performance by such employees of similar
functions within the United States; provided that Company's
obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine permitted by the terms hereof
shall be made subject and subordinate to, and the Leases shall be made
expressly subject and subordinate to, the lien and security interest of
this Mortgage and all of Agent's rights hereunder and Company shall remain
primarily liable hereunder for the performance of all the terms of this
Mortgage to the same extent as if such transfer had not occurred, and any
such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer (other than the Lease) shall expressly prohibit any
further transfer of the Airframe or such Engine or any assignment of the
rights thereunder; and provided, further, that no such lease, pooling
arrangement or other transfer or relinquishment of the possession of the
Airframe or any Engine shall in any way discharge or diminish any of
Company's obligations to Agent hereunder or under the Credit Agreement. In
the event Agent shall have received from the lessor, conditional vendor or
secured party of any airframe leased to Lessee or purchased by Lessee
subject to a conditional sale or other security agreement, a written
agreement complying with clause (B) of Section 4(d)(v), and the lease or
conditional sale or other security agreement covering such airframe also
covers an engine or engines owned by the lessor under such lease,
conditionally owned by the conditional vendor under such conditional sale
agreement, or subject to such security agreement, Agent hereby agrees for
the benefit of such lessor, conditional vendor or secured party that Agent
will not acquire or claim, as against such lessor, conditional vendor or
secured party, any right, title or interest in any such engine as the
result of such engine being installed on the Airframe at any time while
such engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor, conditionally owned by such
conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company,
at its own cost and expense, will promptly replace all Parts, which
may from time to time be incorporated or installed in or attached to
the Airframe or any Engine and which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen,
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<PAGE> 13
destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use, provided that, except as otherwise provided
in Section 4(e)(iv), Company at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts
shall be owned by Company free and clear of all Liens (except
Permitted Encumbrances and the Lease, and for pooling arrangements to
the extent permitted by Section 4(e)(ii)), and shall be in as good
operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of Company and shall remain subject to the
lien and security interest of this Mortgage, no matter where located
until such time as such Parts shall be replaced by parts which have
been incorporated or installed in or attached to the Airframe or any
Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any
Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become
the property of Company and shall become subject to the lien and
security interest of this Mortgage and shall be deemed part of the
Airframe or such Engine for all purposes hereof to the same extent as
the property originally comprising, or installed on, such Airframe or
such Engine, and (B) title to the replaced part shall no longer be
the property of Company and shall thereupon become free and clear of
all rights of Agent hereunder and shall no longer be deemed a Part
hereunder.
(ii) Any Part removed from the Airframe or any Engine as
provided in Section 4(e)(i) may be subjected by Company or Lessee to
a normal pooling arrangement of the type customary in the airline
industry entered into by Lessee in the ordinary course of its
business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the
Airframe or such Engine in accordance with Section 4(e)(i) as
promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or
attached to the Airframe or any Engine in accordance with Section
4(e)(i) may be owned subject to such a pooling arrangement, provided
Company, at its expense, as promptly there after as possible, either
(A) causes such replacement Part to become subject to the lien and
security interest of this Mortgage in accordance with Section 4(e)(i)
by Company's acquiring title thereto for the benefit of Agent free
and clear of all Liens (except Permitted Encumbrances and the Lease)
or (B) re-
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<PAGE> 14
places such replacement Part by incorporating or installing in or
attaching to the Airframe or such Engine a further replacement Part
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders'
interests therein. Company also agrees, at its own cost and expense,
to make or cause to be made such alterations and modifications in and
additions to the Airframe and the Engines as may be required from
time to time to meet the standards or requirements of any directive
issued by a manufacturer relating to the Airframe or any Engine. In
addition so long as no Potential Event of Default or Event of Default
shall have occurred and be continuing, Company, at its own cost and
expense, may from time to time make such alterations and
modifications in and additions to the Airframe and any Engine as
Company may deem desirable in the proper conduct of its business or
to accommodate the business of Lessee, provided no such alteration,
modification or addition diminishes the value or utility or impairs
the condition or airworthiness of the Airframe or such Engine below
the value, utility, condition or airworthiness thereof immediately
prior to such alteration, modification or addition assuming the
Airframe or such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in Company and shall
be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the
terms of Section 4(c) hereof or any other provision of this Mortgage
and (C) can be removed from the Airframe or such Engine without
diminishing or impairing the value, utility or airworthiness which
the Airframe or such Engine would have had at such time had such
alteration,
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<PAGE> 15
modification or addition not occurred, assuming the Aircraft
Collateral was otherwise in the condition required by this Mortgage.
Upon the removal by Company of any such Part, as above provided,
title thereto shall, without further act, be free and clear of all
rights of the Agent hereunder and such Part shall no longer be deemed
a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by
the Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine, Company will promptly notify Agent thereof in writing
(in any event within five (5) days of such occurrence) and will, not
later than 180 days after the receipt of Proceeds in connection with
such Event of Loss, mortgage hereunder, by complying with all of the
terms of subsection (ii) below and otherwise taking all necessary
actions to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the
replacement airframe or engine referred to below, an Acceptable
Alternate Airframe or Acceptable Alternate Engine free of all Liens
(other than Permitted Encumbrances and the Lease). Upon compliance
with the preceding sentence within such 180-day period, Agent will
execute and deliver to Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Airframe or Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable Alternate
Engine shall thereupon constitute an "Airframe" or an "Engine", as
the case may be, for all purposes hereof and shall be deemed to
constitute part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to
the lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the
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<PAGE> 16
form of Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required
at such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine to be subjected to the lien and security
interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the
date of execution of said Supplemental Chattel Mortgage,
stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine
and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent
with respect to such Airframe or Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and
in as good operating condition as the Airframe or Engine subject
to such
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<PAGE> 17
Event of Loss immediately prior to such Event of Loss, assuming
compliance by Company with all the terms of this Mortgage with
respect to such Airframe or Engine; and
(H) cause to be delivered to Agent an opinion or opinions
of counsel dated the date of execution of such Supplemental
Chattel Mortgage, stating:
(I) that the Airframe or Engine specifically described
in said Supplemental Chattel Mortgage, is free and clear of
all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company,
and (2) creates a valid, perfected and first priority
security interest in and to the Airframe or Engine
described in said Supplemental Chattel Mortgage,
enforceable against all third parties and securing the
payment of all obligations purported to be secured thereby
and that all action required to perfect fully such security
interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the
provisions of the Act to continue the perfection and
priority of the security interest intended to be created by
the Mortgage,
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine
described in said Supplemental Chattel Mortgage, and
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Agent an opinion
of counsel for Company as to the due recording of such Supplemental
Chattel Mortgage in accordance with the Act.
(iii) With respect to the Airframe or any Engine, as between the
Agent and Company, any payments on account of an Event of Loss (other
than insurance proceeds or other payments the application of which is
provided for in Section 4(g) below and under the terms of the Credit
Agreement)
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<PAGE> 18
received from any government authority or other person shall be
applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Airframe or Engine that has been or is being
replaced by Company pursuant to the terms hereof, so long as
there shall exist no Event of Default or Potential Event of
Default, such payment shall be paid over to or retained by
Company or Lessee upon satisfaction of the conditions for
replacement contained in paragraph (ii) above and until such
time shall be held by Agent in accordance with the provisions
hereof as security for the Secured Obligations; and
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Company shall promptly
notify Agent of such requisition and all of Company's obligations
under this Mortgage shall continue to the same extent as if such
requisition had not occurred. Any payments received by Agent or
Company from the United States Government for the use of the Airframe
or such Engine, shall be paid over to, or retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such
payment or retention any Event of Default or a Potential Event of
Default shall have occurred and be continuing, but shall be held by
or paid over to Agent as security for the obligations of Company
under this Mortgage and the other Loan Documents, and, if Agent shall
declare the Credit Agreement to be in default, shall be applied
against Company's obligations hereunder and thereunder as and when
due. At such time as there shall not be continuing any such Event of
Default or Potential Event of Default, such amount shall be paid to
Company to the extent not previously applied in accordance with the
preceding sentence. In addition, and whether or not there shall exist
an Event of Default or Potential Event of Default, until such time as
Company shall request to be paid any amount referred to in paragraph
(iii) or (iv) in order to effect the mortgaging hereunder of a
replacement Airframe or Engine, any amounts
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<PAGE> 19
referred to in paragraphs (iii) or (iv) of this Section 4(f) shall be
held by the Agent as security for the obligations of Company under
this Mortgage and the other Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft, at Lessee's own cost and expense,
public liability (including without limitation, contractual
liability, cargo liability, passenger legal liability, bodily injury
and product liability, but excluding manufacturer's product
liability) and property damage insurance with insurers of recognized
responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly
situated with Lessee but in no event in an amount less than
$500,000,000 per occurrence (which shall include war risk,
governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and
not in operation, Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risk covered and type
of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in
the same or similar business and similarly situated with Lessee. Any
policies of insurance carried in accordance with this Section 4(g)
and any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name Agent and Lenders as additional
named insureds, (B) shall be primary without right of contribution
from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of
the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the
insurer shall waive any right of subrogation against Agent or
Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Aircraft, at Lessee's own cost and expense,
aircraft ground and flight all-risk hull insurance as well as fire
and extended coverage insurance on Engines and other equipment while
removed from the Airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States
Government) and allied perils including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of
sabotage and (C) hijacking (air piracy) or any unlawful seizure or
wrongful
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<PAGE> 20
exercise of control of the Aircraft or crew in flight (including any
attempt at such seizure or control) made by any person or persons
aboard the Aircraft acting without the consent of the insured, if and
to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes or if
the Aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with Lessee flying comparable routes with
similar aircraft to carry such insurance, of the type usually carried
by corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when 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 this Section, insurance
otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee for aircraft on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name Agent
and Lenders as additional insureds and loss payees to the extent
their interest may appear and shall provide that any loss to the
Airframe or an Engine in excess of $2,000,000 (and, if a Potential
Event of Default or Event of Default has occurred and is continuing,
any such loss) shall be payable to Agent for the benefit of Lenders;
and shall be primary without right of contribution from any other
insurance which is carried by Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft in Lessee's fleet
which are of a value comparable to the Aircraft and as are not
substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with
Lessee; provided, however, that Company shall not permit Lessee to
self-insure in an amount in excess of $1,000,000 without the prior
written consent of Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in
respect of the interest of Agent or Lenders in such policies the
insurance shall not be invalidated by any action or inaction of
Lessee and shall insure the interests of Agent and
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<PAGE> 21
Lenders regardless of any breach or violation by Lessee or any Person
(other than Agent) of any warranty, declaration, condition or
exclusion from coverage contained in such policies; (C) provide that
if such insurance is cancelled, or if any material change is made in
the coverage which affects the interest of Agent or any Lender, or if
such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Agent for
thirty (30) days (seven (7) days, or such shorter or longer period as
may from time to time be customarily available in the industry, in
the case of any war risk and allied perils coverage) after receipt by
Agent of written notice from such insurers of such cancellation,
change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft and shall be
payable in U.S. dollars; (E) waive any right of the insurers to any
setoff or counterclaim or any other deduction, whether by attachment
or otherwise in respect of any liability of Agent; and (F) waive all
rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe
or any Engine, a valid agreement by the United States or such agency
or instrumentality to indemnify Lessee against the same risks against
which Lessee is required hereunder to insure shall be considered
adequate insurance with respect to the Airframe or such Engine to the
extent of the risks and in the amounts that are the subject of any
such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 21, Company will cause the Lessee to furnish to
Agent (A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
stating that in the opinion of such firm such insurance complies with
the terms of this Section 4(g) and is adequate to protect the
interests of Lessee, Company and Agent, and (B) certificates of the
insurer or insurers evidencing the insurance covered by the report.
Lessee will cause such brokers to advise Agent in writing (x)
promptly of any default in the payment of any premium and of any
other act or omission on the part of Lessee of which such firm has
knowledge and which might invalidate or render unenforceable, in
whole or in part, any insurance on the Aircraft or any Engine and (y)
at least thirty (30) days prior to the expiration or termination
date, or date of effectiveness of any material change, of any
insurance carried and maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if re-
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<PAGE> 22
ceived by Company, immediately paid to Agent and shall be held by
Agent as security for the Secured Obligations and all other
obligations required to be paid in accordance with the terms of this
Mortgage and the Credit Agreement and such payments shall be paid to
Company upon compliance by Company with the terms of Subsection 4(f)
with respect to the replacement of an airframe or an engine, as the
case may be, provided that no Potential Event of Default or Event of
Default shall have occurred and be continuing.
All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above and paid
other than as a result of an Event of Loss shall be paid by Agent to
or be retained by Company, and promptly applied by Company to the
extent necessary to repair the damage to the Airframe or the Engine
for which such insurance was paid, provided that Agent shall not be
required to make any such payment to Company if a Potential Event of
Default or Event of Default has occurred and is continuing, but shall
be held or paid over to Agent as security for the obligations of
Company under this Mortgage and the other Loan Documents, and, if
Agent shall declare the Credit Agreement to be in default, shall be
applied against Company's obligations hereunder and thereunder as and
when due. Retention by Agent of any amounts pursuant to the preceding
sentence shall not relieve Company of its obligations to make
promptly all repairs and replacements required by Sections 4(c) and
(e) hereof and to pay for the same with Company's funds or cause
payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft for its
own account. Company 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 4(g). No insurance
maintained by Agent or any Lender shall prevent Company from causing
Lessee to carry the insurance required or permitted by this Section
or adversely affect such insurance or the cost thereof. Proceeds of
any such insurance carried by Agent or Lender shall be paid as
provided in the insurance policy relating thereto and Agent shall
have no duty to obtain any such insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as
may be requested. Agent shall have no duty to make any such inspection
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<PAGE> 23
or examination and shall not incur any liability or obligation by reason
of making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant
to the Lease, cause the Airframe and each Engine included in the Aircraft
Collateral to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size,
and bearing the legend "Owned by Atlas Freighter Leasing, Inc. and
Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Agent be appropriate or desirable to evidence the
fact that it is subject to the lien and security interest created by this
Mortgage. Company shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or
defacement, shall promptly cause such plate, disk, or other marking or
serial number to be promptly replaced. Except as provided above, Company
shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine as a designation that might be
interpreted as a claim of ownership or of any security interest therein,
except that any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any
Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights
and remedies of a secured party on default under the Uniform Commercial
Code as in effect at the time in any applicable jurisdiction (whether or
not the Uniform Commercial Code applies to the affected Aircraft
Collateral), (ii) any and all remedies under the Leases and all of the
rights and remedies of the Lessor under the Lease, (iii) all the rights
and remedies provided for in this Mortgage, the Credit Agreement and any
other Loan Document, and in any other agreement between Company and Agent,
and (iv) such other rights and remedies as may be provided by law or
otherwise.
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any
part thereof and may exclude Company and Lessee, and all persons claiming
under Company or Lessee, wholly or partly therefrom. At the request of
Agent, Company shall promptly deliver or cause Lessee to deliver to Agent
or to whomsoever Agent shall designate, at such time or times and place or
places as Agent may specify, and fly or cause to be flown to such airport
or airports in the United States as Agent may specify, without risk or
expense to Agent, the Aircraft Collateral or any part thereof. In
addition, Company will provide, or cause Lessee to provide, without cost
or expense to
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<PAGE> 24
Agent, storage facilities for the Aircraft Collateral. If Company or
Lessee shall for any reason fail to deliver the Aircraft Collateral or any
part thereof after demand by Agent, Agent may, without being responsible
for loss or damage, (i) obtain a judgment conferring on Agent the right to
immediate possession or requiring Company and Lessee to deliver immediate
possession of the Aircraft Collateral or any part thereof to Agent, the
entry of which judgment Company hereby specifically consents and the
Lessor's consent to which will be obtained by Company under the Lease, or
(ii) with or without such judgment, pursue the Aircraft Collateral or any
part thereof wherever it may be found and may enter any of the premises of
Company and Lessee where the Aircraft Collateral may be and search for the
Aircraft Collateral and take possession of and remove the same. Company
agrees to pay to Agent, upon demand, all expenses incurred in taking any
such action; and all such expenses shall, until paid, be secured by the
lien of this Mortgage. Upon every such taking of possession, Agent may,
from time to time, make all such reasonable expenditures for maintenance,
insurance, repairs, replacements, alterations, additions and improvements
to and of the Aircraft Collateral, as it may deem proper. In each such
case, Agent shall have the right to maintain, use, operate, store, lease,
control or manage the Aircraft Collateral or any part thereof and to carry
on the business and exercise all rights and powers of Company relating to
the Aircraft Collateral, as Agent shall deem best, including the right to
enter into any and all such agreements with respect to the maintenance,
use, operation, storage, leasing, control, management or disposition of
the Aircraft Collateral or any part thereof as Agent may determine.
Further, after the occurrence and during the continuation of an Event of
Default, Agent shall be entitled to collect and receive directly all
tolls, rents, revenues, issues, income, products and profits of the
Aircraft Collateral or any part thereof, including without limitation, all
payments under any of the Leases. Such tolls, rents, revenues, issues,
income, products and profits shall be applied to pay the expenses of the
use, operation, storage, leasing, control, management or disposition of
the Aircraft Collateral, and of all maintenance, insurance, repairs,
replacements, alterations, additions and improvements, and to make all
payments which Agent may be required or may elect to make, if any, for
taxes, assessments, or other proper charges upon the Aircraft Collateral
and all other payments which Agent may be required or authorized to make
under any provision of this Mortgage, as well as just and reasonable
compensation for the services of Agent and of all persons properly engaged
and employed for such purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales,
as an entirety or in separate lots or parcels, the Aircraft
Collateral or any part thereof, at public or private sale, at such
place or places and at such time or times and upon such terms,
including terms of credit (which may include the
-24-
<PAGE> 25
retention of title by Agent to the property so sold), as Agent may
determine, whether or not the Aircraft Collateral shall be at the
place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein
granted or for the foreclosure of this Mortgage and the sale of the
Aircraft Collateral under the judgment or decree of a court of
competent jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the
absolute sale of the Aircraft Collateral. Company, for itself and all who
may claim under it, waives, to the extent that it lawfully may, all right
to have all or any portion of the Aircraft Collateral marshalled upon any
foreclosure hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any
rights, powers or remedies granted hereby. All such fees and expenses
shall, until paid, be secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances
made or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to
-25-
<PAGE> 26
the sale, lease, disposition or realization and the payment of taxes and
Liens, if any, prior to the lien and security interest of this Mortgage
(except any taxes or Liens to which the respective sale, lease,
disposition or realization shall have been subject) and to the payment of
expenses and the reimbursement of payments incurred or made by Agent
pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Aircraft Collateral and
Aircraft Related Collateral, (ii) to make all necessary transfers of all or any
part of the Aircraft Collateral and Aircraft Related Collateral in connection
with any sale, lease or other disposition made pursuant hereto, (iii) to
execute and deliver for value all necessary or appropriate bills of sale,
assignments and other instruments in connection with any such sale, lease or
other disposition, and (iv) generally to do, at Agent's option and Company's
cost and expense, at any time, or from time to time, all acts and things that
Agent deems necessary to protect, preserve or realize upon the Aircraft
Collateral and Aircraft Related Collateral and Agent's security interest
therein, in order to effect the intent of this Mortgage, all as fully and
effectively as Company might do, Company hereby ratifying and confirming all
that its said attorney (or any substitute) shall lawfully do hereunder and
pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section,
and all monies if any, required to be paid to Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by Agent and applied from time to time as provided herein and in the
Credit Agreement and the other Loan Documents and
-26-
<PAGE> 27
shall be held in an account in the name of Agent and invested in Cash
Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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,
Agent may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect,
error or omission which may at any time hereafter be discovered in the contents
of this Mortgage or in the execution or delivery hereof, and/or in order to
more effectively carry out the intent and purpose of this Mortgage and to
establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of Agent hereunder, including,
without limitation, the execution, delivery and filing of any instruments with
the FAA and of any Uniform Commercial Code financing and continuation
statements with respect to the security interests created hereby, in form and
substance satisfactory to Agent, in such jurisdictions as Agent may reasonably
request. Company hereby authorizes Agent to file any such statements without
the signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and
its successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender
herein or otherwise. Upon the indefeasible payment in full of the Secured
Obligations, the security interest granted hereby shall terminate and all
rights to the Aircraft Collateral and Aircraft Related Collateral shall revert
to Company. Upon any such termination. Agent will execute and deliver to
Company, at
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<PAGE> 28
Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by applicable law, Company hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Agent. The captions and headings in this Mortgage
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage.
Company hereby agrees that service of process in any such proceeding in any
such court may be made by registered or certified mail return receipt requested
to Company at its address provided on the signature pages of the Mortgage, such
service being hereby acknowledged by Company to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of Agent to bring proceedings against Company in the
courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A
-28-
<PAGE> 29
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Article 9 of the Uniform Commercial
Code in the State of New York are used herein as therein defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
-29-
<PAGE> 30
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and Secretary
BANKERS TRUST COMPANY,
as Agent
By:
------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 31
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
================================================================================
Manufacturer's Serial United States
Manufacturer Model Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Boeing 747-200F 21251 N505MC
================================================================================
</TABLE>
<PAGE> 32
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's
Manufacturer Model Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
General Electric CF6-50E2 528318
General Electric CF6-50E2 517476
General Electric CF6-50E2 530197
General Electric CF6-50E2 517753
================================================================================
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 33
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.____
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated , 199[ ] between Atlas
Freighter Leasing, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as agent for and representative of (in such capacity, "Agent")
the financial institutions ("Lenders") party to the Credit Agreement dated as
of May 29, 1997 among Company, the Lenders and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement
and Chattel Mortgage dated ______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to
Section 4(f) thereof, and shall specifically mortgage such Engine to Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate,
right, title and interest of Company in and to the property described in
Schedule I annexed hereto (whether or not such Engine shall be installed on or
attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and
confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
<PAGE> 34
EXHIBIT A
Page 2
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 35
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and Secretary
<PAGE> 36
EXHIBIT A
Page 4
BANKERS TRUST COMPANY,
as Agent
By:
------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 37
SCHEDULE I
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.70
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N508MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of May 29, 1997
(this "Mortgage"), and entered into by and between ATLAS AIR, INC., a Delaware
corporation (the "Lessee"), ATLAS FREIGHTER LEASING, INC., a Delaware
corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as agent for and
representative of (in such capacity, the "Agent") the financial institutions
("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of May 29, 1997 (said
credit agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement") with Lenders and
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make term loans to Company in the principal
amount of up to $185 million (the "Loans") to enable Company to refinance
certain indebtedness currently encumbering the Aircraft Collateral (as defined
below). The indebtedness with respect to Loans made by Lenders is to be
evidenced by certain promissory notes of Company to the order of Lenders of even
date herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the
<PAGE> 2
benefit of Lenders, and their respective successors and assigns, a first
priority security interest in the Aircraft and the Spare Engines (the "Aircraft
Collateral") and a first priority security interest in all estate, right, title
and interest of Company in, to and under, the other below described property
wherever the same may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in
and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule I
hereto and any replacement airframe which may be substituted for such
airframe in accordance with the provisions of Section 4(f) hereof
together with any and all Parts (as hereinafter defined) incorporated
or installed in or attached to such airframe and all Parts removed
from such airframe until such Parts are replaced in accordance with
Section 4(e) hereof (such airframe, together with any replacement
airframe and all such Parts, hereinafter referred to as the
"Airframe");
(ii) each of the engines, which are listed in Schedule II hereto
or which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial numbers in such Schedule or in such Supplemental
Chattel Mortgage, whether or not from time to time thereafter
installed on the airframe or on any other airframe or aircraft,
including, any engine designated as a spare engine (the "Spare
Engine"), and any replacement engine which may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or
installed in or attached thereto and any and all Parts removed
therefrom, until such Parts are replaced in accordance with Section
4(e) hereof (each such engine, spare engine and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(iii) appliances, parts, 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, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased
by Company for incorporation or installation in or attach-
-2-
<PAGE> 3
ment to the Airframe or any Engine pursuant to the terms of any
agreement whether or not identified in a Supplemental Chattel Mortgage
(collectively referred to herein as "Parts"); and
(iv) records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and
materials maintained in the ordinary course of business with respect
to the properties described in paragraphs (i), (ii) and (iii) above
(together with such Airframe and Engines (other than the Spare
Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part
thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held or
required to be held by Agent hereunder or paid to Agent in accordance
with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights
to receive title to parts and materials to the extent same relates to
the Aircraft including any agreement assigned therewith;
(iv) all amounts payable to Company by any manufacturer, supplier
or vendor of any of the Aircraft Collateral or any component thereof
pursuant to any warranty or indemnity covering any such Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or
-3-
<PAGE> 4
other taking of any Aircraft Collateral to the extent payable to
Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of any of the Aircraft or any part thereof,
as well as any rights, powers or remedies on the part of the Lessor,
whether arising under the Lease or by statute or at law or in equity,
or otherwise, arising out of any Lease Event of Default (as defined in
the Lease), including, without limitation, all rights under Section
1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to the Aircraft or any Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft. All
property referred to in this granting clause, whenever acquired by the Lessor
under the Lease, shall secure all Secured Obligations. Company does hereby
warrant and represent that it has not assigned or pledged, and hereby covenants
that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned to anyone
other than Agent, and that it will not, except as provided herein or in the
Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Aircraft, or execute any waiver or modification of, or consent under, any
such agreement, or settle or compromise any claim arising under any such
agreement or submit or consent to the submission of any dispute, difference or
other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
-4-
<PAGE> 5
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Atlas maintains, services, repairs and overhauls similar
airframes utilized by Atlas and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT9D-7A engine
for the aircraft bearing U.S. registration number N808MC and a General
Electric CF6-50E2 aircraft engine for the aircraft bearing U.S.
registration numbers N505MC, N508MC, N507MC, N509MC and N516MC or an engine
of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on the Airframe; provided that such
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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Atlas pursuant
to which Atlas furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Atlas's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
-5-
<PAGE> 6
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of May 29, 1997,
by and between Atlas Freighter Leasing, Inc., as Lessor, and Atlas Air,
Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
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SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof and
in the manner aforesaid and has not assigned or pledged any of its right,
title or interest hereby assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required by
Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Aircraft Collateral,
securing the payment and performance of the Secured Obligations.
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<PAGE> 8
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. Company will promptly, at its own
expense, take such action as may be necessary to duly discharge any such
Lien not excepted above if the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against Agent
or any Lender or the Airframe or any Engine or any part thereof or interest
therein by any Federal, state or local government or other taxing authority
in the United States or by any foreign government or subdivision thereof or
by any foreign taxing authority in connection with, relating to or
resulting from: (i) the Airframe or any Engine or any part thereof of
interest therein; (ii) the manufacture, purchase, ownership, mortgaging,
lease, sublease, use, storage, maintenance, sale or other disposition of
the Airframe or any Engine; (iii) any rentals or other earnings therefor or
arising therefrom or the income or other proceeds received with respect
thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease)
and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings
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<PAGE> 9
shall have been commenced to foreclose any lien which may have attached as
security for such Tax, nothing in this Section shall require the payment of
any Tax so long as and to extent that validity thereof shall be contested
in good faith by appropriate legal proceedings promptly instituted and
diligently conducted and Company shall have set aside on its books adequate
reserves with respect thereto in accordance with generally accepted
accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered
in the name of Company in accordance with the Act; and (iii) will cause
Lessee to service, repair, inspect, test, maintain, overhaul the Airframe
and each Engine and install replacement equipment and parts on the Aircraft
and each Engine (A) so as to keep the Airframe and each Engine in such
operating condition as may be required to permit the Airframe and each
Engine to be utilized in commercial operations, (B) so as to enable the
airworthiness certification of the Airframe to be maintained in good
standing at all times under the Act, except when aircraft of the same type,
model or series as the Airframe (powered by engines of the same type as
those with which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then subject
to the provisions of Section 4(f) hereof, so long as Company is diligently
taking or causing to be taken all necessary action to promptly correct the
condition which caused such withdrawal, no Event of Default shall arise
from such withdrawal, (C) in accordance with Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same
manner and with the same care used by Lessee with respect to the same or
similar aircraft and engines owned or operated by Lessee so as to keep the
same in as good operating condition as when originally mortgaged hereunder,
ordinary wear and tear excepted, which practices shall at all times be at
or above the standard of the industry in the United States for prudent
maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or supplier)
in such condition so as to comply with the provisions of this Mortgage and
the rules and regulations of the
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<PAGE> 10
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration
relating to the Airframe or such Engine issued by any such authority, and
in the event that such laws, rules, regulations or orders require
alteration of the Airframe or any Engine, Company, at its own cost and
expense, will conform thereto or obtain conformance therewith and will
maintain the same in proper operating condition under such laws, rules,
regulations and orders; provided, however, that Company may, in good faith
(after having delivered to Agent an Officer's Certificate stating the facts
with respect thereto), contest the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not, in
Agent's opinion, adversely affect the interests under this Mortgage of
Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant
to Section 4(g) shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with
respect to the Airframe or such Engine, except in the case of a requisition
for use by the United States of America, and then only if Company obtains
indemnity or "war risk" insurance in lieu of such insurance from the United
States of America against the risks and in the amounts required by said
Section covering such area, or (II) in any recognized or threatened area of
hostilities unless fully covered to Agent's satisfaction by war risk and
political risk and allied perils insurance or unless the Airframe or such
Engine is operated or used under contract with the Government of the United
States of America under which contract that Government provides "war risk"
insurance or assumes liabilities for any damages, loss, destruction or
failure to return possession of the Airframe or such Engine at the end of
the term of such contract and for injury to persons or damage to property
of others.
Company shall not use the Aircraft nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Agent, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or
interest of Company in, the
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<PAGE> 11
Airframe or any Engine except that Company may enter into and perform all
provisions and terms of the Lease and Lessee or the Company, unless a
Potential Event of Default or Event of Default shall have occurred and be
continuing, without the prior written consent of Agent, may take the
following actions so long as the actions to be taken shall not deprive the
Agent of the first priority Lien of this Mortgage on the assets subject
hereto and so long as the actions to be taken shall not deprive Company as
Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft nor shall such actions deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the
Aircraft as assignee of Company's rights under this Mortgage:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company or Lessee in the ordinary
course of business which do not contemplate or require the transfer of
title to, use for the remainder of its useful life, or registration of
the Airframe or title to, or use for the remainder of its useful life
of such Engine; provided, however if Company's title to or use for the
remainder of its useful life, of the Airframe or any Engines shall be
divested under any such agreement or arrangement, such divesture shall
be deemed to be an Event of Loss with respect to the Airframe or such
Engine and Company shall comply with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee;
provided that such airframe is free and clear of all Liens on property
of Lessee except (A) Liens permitted under the Lease, (B) Liens that
apply only to the engines (other than the 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), and (C) the
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<PAGE> 12
rights of any Domestic Air Carrier, under normal interchange
agreements which are customary in the airline industry and do not
contemplate or require the transfer of title to such airframe or the
engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clause (iv) above; and (B) Agent shall have received from
the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which
may be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine by reason of such
Engine being installed on such airframe at any time when such Engine
is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and Company shall comply with Section
4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which Company has
operational control of the Airframe and any Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current certificates and
licenses that would be required under the applicable laws of the
United States for the performance by such employees of similar
functions within the United States; provided that Company's
obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine permitted by the terms hereof
shall be made subject and
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<PAGE> 13
subordinate to, and the Leases shall be made expressly subject and
subordinate to, the lien and security interest of this Mortgage and all of
Agent's rights hereunder and Company shall remain primarily liable
hereunder for the performance of all the terms of this Mortgage to the same
extent as if such transfer had not occurred, and any such instrument of
transfer shall include appropriate provisions for the maintenance and
insurance of the Airframe or such Engine, and any such instrument of
transfer (other than the Lease) shall expressly prohibit any further
transfer of the Airframe or such Engine or any assignment of the rights
thereunder; and provided, further, that no such lease, pooling arrangement
or other transfer or relinquishment of the possession of the Airframe or
any Engine shall in any way discharge or diminish any of Company's
obligations to Agent hereunder or under the Credit Agreement. In the event
Agent shall have received from the lessor, conditional vendor or secured
party of any airframe leased to Lessee or purchased by Lessee subject to a
conditional sale or other security agreement, a written agreement complying
with clause (B) of Section 4(d)(v), and the lease or conditional sale or
other security agreement covering such airframe also covers an engine or
engines owned by the lessor under such lease, conditionally owned by the
conditional vendor under such conditional sale agreement, or subject to
such security agreement, Agent hereby agrees for the benefit of such
lessor, conditional vendor or secured party that Agent will not acquire or
claim, as against such lessor, conditional vendor or secured party, any
right, title or interest in any such engine as the result of such engine
being installed on the Airframe at any time while such engine is subject to
such lease or conditional sale or other security agreement and owned by
such lessor, conditionally owned by such conditional vendor or subject to
such security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company, at
its own cost and expense, will promptly replace all Parts, which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine and which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such Parts
as promptly as practicable. All replacement Parts shall be owned by
Company
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<PAGE> 14
free and clear of all Liens (except Permitted Encumbrances and the
Lease, and for pooling arrangements to the extent permitted by Section
4(e)(ii)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced
assuming such property were in the condition and repair required to be
maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of Company and shall remain subject to the
lien and security interest of this Mortgage, no matter where located
until such time as such Parts shall be replaced by parts which have
been incorporated or installed in or attached to the Airframe or any
Engine and which meet the requirements for replacement parts specified
above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Airframe or any Engine as above
provided, without further act, (A) title to such replacement Part
shall vest in and such replacement part shall become the property of
Company and shall become subject to the lien and security interest of
this Mortgage and shall be deemed part of the Airframe or such Engine
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine, and (B)
title to the replaced part shall no longer be the property of Company
and shall thereupon become free and clear of all rights of Agent
hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as provided
in Section 4(e)(i) may be subjected by Company or Lessee to a normal
pooling arrangement of the type customary in the airline industry
entered into by Lessee in the ordinary course of its business and
entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 4(e)(i) as promptly as possible
after the removal of such removed part. In addition, any replacement
Part when incorporated or installed in or attached to the Airframe or
any Engine in accordance with Section 4(e)(i) may be owned subject to
such a pooling arrangement, provided Company, at its expense, as
promptly thereafter as possible, either (A) causes such replacement
Part to become subject to the lien and security interest of this
Mortgage in accordance with Section 4(e)(i) by Company's acquiring
title thereto for the benefit of Agent free and clear of all Liens
(except Permitted Encumbrances and the Lease) or (B) replaces such
replacement Part by incorporating or installing in or attaching to
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<PAGE> 15
the Airframe or such Engine a further replacement Part owned by
Company free and clear of all Liens (except Permitted Encumbrances and
the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders'
interests therein. Company also agrees, at its own cost and expense,
to make or cause to be made such alterations and modifications in and
additions to the Airframe and the Engines as may be required from time
to time to meet the standards or requirements of any directive issued
by a manufacturer relating to the Airframe or any Engine. In addition
so long as no Potential Event of Default or Event of Default shall
have occurred and be continuing, Company, at its own cost and expense,
may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Company may deem desirable
in the proper conduct of its business or to accommodate the business
of Lessee, provided no such alteration, modification or addition
diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility,
condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such
Engine were then in the condition and airworthiness required to be
maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in Company and shall
be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage and (C)
can be removed from the Airframe or such Engine
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<PAGE> 16
without diminishing or impairing the value, utility or airworthiness
which the Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming the
Aircraft Collateral was otherwise in the condition required by this
Mortgage. Upon the removal by Company of any such Part, as above
provided, title thereto shall, without further act, be free and clear
of all rights of the Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by the
Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine, Company will promptly notify Agent thereof in writing
(in any event within five (5) days of such occurrence) and will, not
later than 180 days after the receipt of Proceeds in connection with
such Event of Loss, mortgage hereunder, by complying with all of the
terms of subsection (ii) below and otherwise taking all necessary
actions to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the
replacement airframe or engine referred to below, an Acceptable
Alternate Airframe or Acceptable Alternate Engine free of all Liens
(other than Permitted Encumbrances and the Lease). Upon compliance
with the preceding sentence within such 180-day period, Agent will
execute and deliver to Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Airframe or Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable Alternate
Engine shall thereupon constitute an "Airframe" or an "Engine", as the
case may be, for all purposes hereof and shall be deemed to constitute
part of the Aircraft.
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<PAGE> 17
(ii) Whenever Company shall subject any Airframe or Engine to the
lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form of
Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine to be subjected to the lien and security
interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the date
of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine
and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent with
respect to such Airframe or Engine;
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<PAGE> 18
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and in
as good operating condition as the Airframe or Engine subject to
such Event of Loss immediately prior to such Event of Loss,
assuming compliance by Company with all the terms of this
Mortgage with respect to such Airframe or Engine; and
(H) cause to be delivered to Agent an opinion or opinions of
counsel dated the date of execution of such Supplemental Chattel
Mortgage, stating:
(I) that the Airframe or Engine specifically described
in said Supplemental Chattel Mortgage, is free and clear of
all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Airframe or Engine described in said
Supplemental Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
purported to be secured thereby and that all action required
to perfect fully such security interest has been taken and
completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine
described in said Supplemental Chattel Mortgage, and
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<PAGE> 19
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Agent an opinion
of counsel for Company as to the due recording of such Supplemental
Chattel Mortgage in accordance with the Act.
(iii) With respect to the Airframe or any Engine, as between the
Agent and Company, any payments on account of an Event of Loss (other
than insurance proceeds or other payments the application of which is
provided for in Section 4(g) below and under the terms of the Credit
Agreement) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Airframe or Engine that has been or is being
replaced by Company pursuant to the terms hereof, so long as
there shall exist no Event of Default or Potential Event of
Default, such payment shall be paid over to or retained by
Company or Lessee upon satisfaction of the conditions for
replacement contained in paragraph (ii) above and until such time
shall be held by Agent in accordance with the provisions hereof
as security for the Secured Obligations; and
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Company shall promptly
notify Agent of such requisition and all of Company's obligations
under this Mortgage shall continue to the same extent as if such
requisition had not occurred. Any payments received by Agent or
Company from the United States Government for the use of the Airframe
or such Engine, shall be paid over to, or retained by, Company.
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<PAGE> 20
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such payment
or retention any Event of Default or a Potential Event of Default
shall have occurred and be continuing, but shall be held by or paid
over to Agent as security for the obligations of Company under this
Mortgage and the other Loan Documents, and, if Agent shall declare the
Credit Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such time as
there shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to Company to the extent
not previously applied in accordance with the preceding sentence. In
addition, and whether or not there shall exist an Event of Default or
Potential Event of Default, until such time as Company shall request
to be paid any amount referred to in paragraph (iii) or (iv) in order
to effect the mortgaging hereunder of a replacement Airframe or
Engine, any amounts referred to in paragraphs (iii) or (iv) of this
Section 4(f) shall be held by the Agent as security for the
obligations of Company under this Mortgage and the other Loan
Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft, at Lessee's own cost and expense,
public liability (including without limitation, contractual liability,
cargo liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and
property damage insurance with insurers of recognized responsibility
and reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation
and expropriation and allied perils coverage). During any period when
the Aircraft is on the ground and not in operation, Lessee may carry
or cause to be carried, in lieu of insurance required by this Section,
insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the
scope of risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly
situated with Lessee. Any policies of insurance carried in accordance
with this Sec-
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<PAGE> 21
tion 4(g) and any policies taken out in substitution or replacement of
any such policies (A) shall be amended to name Agent and Lenders as
additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by Lessee, (C)
shall expressly provide that all provisions thereof, except the limits
of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the
insurer shall waive any right of subrogation against Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and maintain
with insurers of recognized responsibility and reputation on or with
respect to the Aircraft, at Lessee's own cost and expense, aircraft
ground and flight all-risk hull insurance as well as fire and extended
coverage insurance on Engines and other equipment while removed from
the Airframe (which shall include war risk, governmental confiscation
and expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C)
hijacking (air piracy) or any unlawful seizure or wrongful exercise of
control of the Aircraft or crew in flight (including any attempt at
such seizure or control) made by any person or persons aboard the
Aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by Lessee with respect to similar
aircraft owned or operated by Lessee on the same routes or if the
Aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with Lessee flying comparable routes with
similar aircraft to carry such insurance, of the type usually carried
by corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when 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 this Section, insurance
otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee for aircraft on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name Agent
and Lenders as additional insureds and loss payees to the extent their
interest may appear and shall provide that any loss to the Airframe or
an Engine in
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<PAGE> 22
excess of $2,000,000 (and, if a Potential Event of Default or Event of
Default has occurred and is continuing, any such loss) shall be
payable to Agent for the benefit of Lenders; and shall be primary
without right of contribution from any other insurance which is
carried by Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft in Lessee's fleet
which are of a value comparable to the Aircraft and as are not
substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with
Lessee; provided, however, that Company shall not permit Lessee to
self-insure in an amount in excess of $1,000,000 without the prior
written consent of Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in respect
of the interest of Agent or Lenders in such policies the insurance
shall not be invalidated by any action or inaction of Lessee and shall
insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such
policies; (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the interest of
Agent or any Lender, or if such insurance is allowed to lapse for
nonpayment of premium, such cancellation, change or lapse shall not be
effective as to Agent for thirty (30) days (seven (7) days, or such
shorter or longer period as may from time to time be customarily
available in the industry, in the case of any war risk and allied
perils coverage) after receipt by Agent of written notice from such
insurers of such cancellation, change or lapse; (D) be in full force
and effect throughout any geographical areas at any time traversed by
the Aircraft and shall be payable in U.S. dollars; (E) waive any right
of the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of
Agent; and (F) waive all rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States or
any agency or instrumentality thereof in respect of the Airframe or
any Engine, a
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<PAGE> 23
valid agreement by the United States or such agency or instrumentality
to indemnify Lessee against the same risks against which Lessee is
required hereunder to insure shall be considered adequate insurance
with respect to the Airframe or such Engine to the extent of the risks
and in the amounts that are the subject of any such agreement to
indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 21, Company will cause the Lessee to furnish to Agent
(A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
stating that in the opinion of such firm such insurance complies with
the terms of this Section 4(g) and is adequate to protect the
interests of Lessee, Company and Agent, and (B) certificates of the
insurer or insurers evidencing the insurance covered by the report.
Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or
omission on the part of Lessee of which such firm has knowledge and
which might invalidate or render unenforceable, in whole or in part,
any insurance on the Aircraft or any Engine and (y) at least thirty
(30) days prior to the expiration or termination date, or date of
effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if received by Company, immediately paid to Agent and shall be
held by Agent as security for the Secured Obligations and all other
obligations required to be paid in accordance with the terms of this
Mortgage and the Credit Agreement and such payments shall be paid to
Company upon compliance by Company with the terms of Subsection 4(f)
with respect to the replacement of an airframe or an engine, as the
case may be, provided that no Potential Event of Default or Event of
Default shall have occurred and be continuing.
All insurance payments and other payments received by Agent or Company
from insurance referred to in paragraph (ii) above and paid other than
as a result of an Event of Loss shall be paid by Agent to or be
retained by Company, and promptly applied by Company to the extent
necessary to repair the damage to the Airframe or the Engine for which
such insurance was paid, provided that Agent shall not be required to
make any such payment to Company if a Potential Event of Default or
Event of Default has occurred and is
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<PAGE> 24
continuing, but shall be held or paid over to Agent as security for
the obligations of Company under this Mortgage and the other Loan
Documents, and, if Agent shall declare the Credit Agreement to be in
default, shall be applied against Company's obligations hereunder and
thereunder as and when due. Retention by Agent of any amounts pursuant
to the preceding sentence shall not relieve Company of its obligations
to make promptly all repairs and replacements required by Sections
4(c) and (e) hereof and to pay for the same with Company's funds or
cause payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft for its
own account. Company 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 4(g). No insurance
maintained by Agent or any Lender shall prevent Company from causing
Lessee to carry the insurance required or permitted by this Section or
adversely affect such insurance or the cost thereof. Proceeds of any
such insurance carried by Agent or Lender shall be paid as provided in
the insurance policy relating thereto and Agent shall have no duty to
obtain any such insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as
may be requested. Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of
making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant
to the Lease, cause the Airframe and each Engine included in the Aircraft
Collateral to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size,
and bearing the legend "Owned by Atlas Freighter Leasing, Inc. and
Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Agent be appropriate or desirable to evidence the
fact that it is subject to the lien and security interest created by this
Mortgage. Company shall not remove or deface, or permit to be removed or
defaced, any such
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<PAGE> 25
plate, disk, or other marking or the identifying manufacturer's serial
number, and, in the event of such removal or defacement, shall promptly
cause such plate, disk, or other marking or serial number to be promptly
replaced. Except as provided above, Company shall not allow the name of any
person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership
or of any security interest therein, except that any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer
on the Airframe or any Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as
in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii)
any and all remedies under the Leases and all of the rights and remedies of
the Lessor under the Lease, (iii) all the rights and remedies provided for
in this Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other rights
and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any part
thereof and may exclude Company and Lessee, and all persons claiming under
Company or Lessee, wholly or partly therefrom. At the request of Agent,
Company shall promptly deliver or cause Lessee to deliver to Agent or to
whomsoever Agent shall designate, at such time or times and place or places
as Agent may specify, and fly or cause to be flown to such airport or
airports in the United States as Agent may specify, without risk or expense
to Agent, the Aircraft Collateral or any part thereof. In addition, Company
will provide, or cause Lessee to provide, without cost or expense to Agent,
storage facilities for the Aircraft Collateral. If Company or Lessee shall
for any reason fail to deliver the Aircraft Collateral or any part thereof
after demand by Agent, Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Agent the right to immediate
possession or requiring Company and Lessee to deliver immediate possession
of the Aircraft Collateral or any part thereof to Agent, the entry of which
judgment Company hereby specifically consents and the Lessor's consent to
which will be obtained by Company under the Lease, or (ii) with or without
such judgment, pursue the Aircraft Collateral or any part thereof wherever
it may be found and may enter any of the premises of Company and Les-
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<PAGE> 26
see where the Aircraft Collateral may be and search for the Aircraft
Collateral and take possession of and remove the same. Company agrees to
pay to Agent, upon demand, all expenses incurred in taking any such action;
and all such expenses shall, until paid, be secured by the lien of this
Mortgage. Upon every such taking of possession, Agent may, from time to
time, make all such reasonable expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of
the Aircraft Collateral, as it may deem proper. In each such case, Agent
shall have the right to maintain, use, operate, store, lease, control or
manage the Aircraft Collateral or any part thereof and to carry on the
business and exercise all rights and powers of Company relating to the
Aircraft Collateral, as Agent shall deem best, including the right to enter
into any and all such agreements with respect to the maintenance, use,
operation, storage, leasing, control, management or disposition of the
Aircraft Collateral or any part thereof as Agent may determine. Further,
after the occurrence and during the continuation of an Event of Default,
Agent shall be entitled to collect and receive directly all tolls, rents,
revenues, issues, income, products and profits of the Aircraft Collateral
or any part thereof, including without limitation, all payments under any
of the Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments which
Agent may be required or may elect to make, if any, for taxes, assessments,
or other proper charges upon the Aircraft Collateral and all other payments
which Agent may be required or authorized to make under any provision of
this Mortgage, as well as just and reasonable compensation for the services
of Agent and of all persons properly engaged and employed for such purposes
by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as
an entirety or in separate lots or parcels, the Aircraft Collateral or
any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the retention of title by Agent to the
property so sold), as Agent may determine, whether or not the Aircraft
Collateral shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this
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<PAGE> 27
Mortgage and the sale of the Aircraft Collateral under the judgment or
decree of a court of competent jurisdiction or for the enforcement of
any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the absolute
sale of the Aircraft Collateral. Company, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have all
or any portion of the Aircraft Collateral marshalled upon any foreclosure
hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any rights,
powers or remedies granted hereby. All such fees and expenses shall, until
paid, be secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest
-27-
<PAGE> 28
of this Mortgage (except any taxes or Liens to which the respective sale,
lease, disposition or realization shall have been subject) and to the
payment of expenses and the reimbursement of payments incurred or made by
Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Aircraft Collateral and Aircraft
Related Collateral, (ii) to make all necessary transfers of all or any part of
the Aircraft Collateral and Aircraft Related Collateral in connection with any
sale, lease or other disposition made pursuant hereto, (iii) to execute and
deliver for value all necessary or appropriate bills of sale, assignments and
other instruments in connection with any such sale, lease or other disposition,
and (iv) generally to do, at Agent's option and Company's cost and expense, at
any time, or from time to time, all acts and things that Agent deems necessary
to protect, preserve or realize upon the Aircraft Collateral and Aircraft
Related Collateral and Agent's security interest therein, in order to effect the
intent of this Mortgage, all as fully and effectively as Company might do,
Company hereby ratifying and confirming all that its said attorney (or any
substitute) shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section, and
all monies if any, required to be paid to Agent hereunder, which disposition is
not elsewhere
-28-
<PAGE> 29
herein otherwise specifically provided for, shall be held by Agent and applied
from time to time as provided herein and in the Credit Agreement and the other
Loan Documents and shall be held in an account in the name of Agent and invested
in Cash Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent
may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions con-
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<PAGE> 30
tained in the Credit Agreement, assign or otherwise transfer any
of its interests in the Credit Agreement or in any Note to any other person or
entity, and such other benefits in respect thereof granted to Agent or any
Lender herein or otherwise. Upon the indefeasible payment in full of the Secured
Obligations, the security interest granted hereby shall terminate and all rights
to the Aircraft Collateral and Aircraft Related Collateral shall revert to
Company. Upon any such termination. Agent will execute and deliver to Company,
at Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by applicable law, Company hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Agent. The captions and headings in this Mortgage
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in
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<PAGE> 31
any other manner permitted by law or shall limit the right of Agent to bring
proceedings against Company in the courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Article 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 32
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
----------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
-------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 33
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Number Serial Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
Boeing 747-200F 21644 N508MC
</TABLE>
<PAGE> 34
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Serial
------------ ----- Number
------
<S> <C> <C>
General Electric CF6-50E2 530284
General Electric CF6-50E2 517324
General Electric CF6-50E2 517287
General Electric CF6-50E2 517269
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 35
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.____
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated ___________________, 199[ ]
between Atlas Freighter Leasing, Inc., a Delaware corporation (the "Company"),
and Bankers Trust Company, as agent for and representative of (in such capacity,
"Agent") the financial institutions ("Lenders") party to the Credit Agreement
dated as of May 29, 1997 among Company, the Lenders and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated ______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to Section
4(f) thereof, and shall specifically mortgage such Engine to Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine shall be installed on or attached to
the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
<PAGE> 36
EXHIBIT A
Page 2
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 37
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
----------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
<PAGE> 38
EXHIBIT A
Page 4
BANKERS TRUST COMPANY,
as Agent
By:
-------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 39
SCHEDULE I
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
=====================================================================
Manufacturer Model Manufacturer's United States
Serial Number Registry No.
- ---------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
=====================================================================
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.71
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N516MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of May 29, 1997
(this "Mortgage"), and entered into by and between ATLAS AIR, INC., a Delaware
corporation (the "Lessee"), ATLAS FREIGHTER LEASING, INC., a Delaware
corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as agent for and
representative of (in such capacity, the "Agent") the financial institutions
("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of May 29, 1997 (said
credit agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement") with Lenders and
Agent, pursuant to which Lenders have agreed, on the terms and conditions set
forth in the Credit Agreement, to make term loans to Company in the principal
amount of up to $185 million (the "Loans") to enable Company to refinance
certain indebtedness currently encumbering the Aircraft Collateral (as defined
below). The indebtedness with respect to Loans made by Lenders is to be
evidenced by certain promissory notes of Company to the order of Lenders of even
date herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security in-
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<PAGE> 2
terest in the Aircraft and the Spare Engines (the "Aircraft Collateral") and a
first priority security interest in all estate, right, title and interest of
Company in, to and under, the other below described property wherever the same
may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in
and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule I
hereto and any replacement airframe which may be substituted for such
airframe in accordance with the provisions of Section 4(f) hereof
together with any and all Parts (as hereinafter defined) incorporated
or installed in or attached to such airframe and all Parts removed
from such airframe until such Parts are replaced in accordance with
Section 4(e) hereof (such airframe, together with any replacement
airframe and all such Parts, hereinafter referred to as the
"Airframe");
(ii) each of the engines, which are listed in Schedule II hereto
or which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial numbers in such Schedule or in such Supplemental
Chattel Mortgage, whether or not from time to time thereafter
installed on the airframe or on any other airframe or aircraft,
including, any engine designated as a spare engine (the "Spare
Engine"), and any replacement engine which may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or
installed in or attached thereto and any and all Parts removed
therefrom, until such Parts are replaced in accordance with Section
4(e) hereof (each such engine, spare engine and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(iii) all appliances, parts, 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, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased
by Company for incorporation or installation in or attachment to the
Airframe or any Engine pursuant to the terms of any agreement whether
or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
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<PAGE> 3
(iv) all records, logs and other materials required by applicable
law or regulation to be maintained and all other records, logs and
materials maintained in the ordinary course of business with respect
to the properties described in paragraphs (i), (ii) and (iii) above
(together with such Airframe and Engines (other than the Spare
Engine), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part
thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held or
required to be held by Agent hereunder or paid to Agent in accordance
with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights
to receive title to parts and materials to the extent same relates to
the Aircraft including any agreement assigned therewith;
(iv) all amounts payable to Company by any manufacturer, supplier
or vendor of any of the Aircraft Collateral or any component thereof
pursuant to any warranty or indemnity covering any such Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of
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<PAGE> 4
any of the Aircraft or any part thereof, as well as any rights, powers
or remedies on the part of the Lessor, whether arising under the Lease
or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default (as defined in the Lease), including, without
limitation, all rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to the Aircraft or any Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft. All
property referred to in this granting clause, whenever acquired by the Lessor
under the Lease, shall secure all Secured Obligations. Company does hereby
warrant and represent that it has not assigned or pledged, and hereby covenants
that it will not assign or pledge, so long as the assignment hereunder shall
remain in effect, any of its right, title or interest hereby assigned to anyone
other than Agent, and that it will not, except as provided herein or in the
Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Aircraft, or execute any waiver or modification of, or consent under, any
such agreement, or settle or compromise any claim arising under any such
agreement or submit or consent to the submission of any dispute, difference or
other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Atlas maintains, services, repairs and overhauls similar
airframes utilized by Atlas and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a Pratt & Whitney JT9D-7A engine
for the aircraft bearing U.S. registration number N808MC and a General
Electric CF6-50E2 aircraft engine for the aircraft bearing U.S.
registration numbers
-4-
<PAGE> 5
N505MC, N508MC, N507MC, N509MC and N516MC or an engine of the same or
another manufacturer of equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and suitable for
installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Atlas pursuant
to which Atlas furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Atlas's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
-5-
<PAGE> 6
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of May 29, 1997,
by and between Atlas Freighter Leasing, Inc., as Lessor, and Atlas Air,
Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine initially or subsequently mortgaged hereunder on the date the
Airframe or such Engine is mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof and
in the manner aforesaid and has not assigned or pledged any of its right,
title or interest hereby assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
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<PAGE> 7
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) as the case may be.
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to comply
with the requirements of Section 4(c) hereof; and the insurance required by
Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Aircraft Collateral,
securing the payment and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 2, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or
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<PAGE> 8
Aircraft Related Collateral, title thereto or any interest therein, except
the lien of this Mortgage and Permitted Encumbrances, including the Lease.
Company will promptly, at its own expense, take such action as may be
necessary to duly discharge any such Lien not excepted above if the same
shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against Agent
or any Lender or the Airframe or any Engine or any part thereof or interest
therein by any Federal, state or local government or other taxing authority
in the United States or by any foreign government or subdivision thereof or
by any foreign taxing authority in connection with, relating to or
resulting from: (i) the Airframe or any Engine or any part thereof of
interest therein; (ii) the manufacture, purchase, ownership, mortgaging,
lease, sublease, use, storage, maintenance, sale or other disposition of
the Airframe or any Engine; (iii) any rentals or other earnings therefor or
arising therefrom or the income or other proceeds received with respect
thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease)
and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered
in the name of Company in accordance with the Act; and (iii) will cause
Lessee to service, repair, inspect, test, maintain, overhaul the Airframe
and each Engine and install replacement equipment and parts on the Aircraft
and each Engine (A) so as to keep the Airframe and each Engine in such
operating condition as may be required to permit the Airframe and each
Engine to be utilized in commercial operations, (B) so as to enable the
airworthiness certification of the Airframe to be maintained in good
standing at all times under the Act, except when aircraft of the same type,
model or series as the Airframe (powered by engines of the same type as
those with which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then subject
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<PAGE> 9
to the provisions of Section 4(f) hereof, so long as Company is diligently
taking or causing to be taken all necessary action to promptly correct the
condition which caused such withdrawal, no Event of Default shall arise
from such withdrawal, (C) in accordance with Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same
manner and with the same care used by Lessee with respect to the same or
similar aircraft and engines owned or operated by Lessee so as to keep the
same in as good operating condition as when originally mortgaged hereunder,
ordinary wear and tear excepted, which practices shall at all times be at
or above the standard of the industry in the United States for prudent
maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or supplier)
in such condition so as to comply with the provisions of this Mortgage and
the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft and Engines. Neither the Airframe nor any Engine
will be maintained, used or operated in violation of any law or any rule,
regulation or order of any government or governmental authority having
jurisdiction (domestic or foreign), or in violation of any airworthiness
certificate, license or registration relating to the Airframe or such
Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of the Airframe or any
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders; provided,
however, that Company may, in good faith (after having delivered to Agent
an Officer's Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in
any reasonable manner which does not, in Agent's opinion, adversely affect
the interests under this Mortgage of Agent or any Lender.
Company will not operate, use or locate the Airframe or any Engine,
(I) in any area in which any insurance required to be maintained pursuant
to Section 4(g) shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with
respect to the Airframe or such Engine, except in the case of a requisition
for use by the United States of America, and then only if Company obtains
indemnity or "war risk" insurance in lieu of such insurance from the United
States of America against the risks and in the amounts required by said
Section covering such area, or (II) in any recognized or threatened area of
hostilities unless fully covered to Agent's satisfaction by war risk and
political risk and allied perils insurance or unless the Airframe or such
Engine is operated or used un-
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<PAGE> 10
der contract with the Government of the United States of America under
which contract that Government provides "war risk" insurance or assumes
liabilities for any damages, loss, destruction or failure to return
possession of the Airframe or such Engine at the end of the term of such
contract and for injury to persons or damage to property of others.
Company shall not use the Aircraft nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Agent, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine except that Company may
enter into and perform all provisions and terms of the Lease and Lessee or
the Company, unless a Potential Event of Default or Event of Default shall
have occurred and be continuing, without the prior written consent of
Agent, may take the following actions so long as the actions to be taken
shall not deprive the Agent of the first priority Lien of this Mortgage on
the assets subject hereto and so long as the actions to be taken shall not
deprive Company as Lessor of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft nor shall such actions deprive
the Agent of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft as assignee of Company's rights under this
Mortgage:
(i) transfer possession of the Airframe or any Engine other than
by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or,
to the extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by Company or Lessee in the ordinary
course of business which do not contemplate or require the transfer of
title to, use for the remainder of its useful life, or registration of
the Airframe or title to, or use for the remainder of its useful life
of such Engine; provided, however if Company's title to or use for the
remainder of its useful life, of the Airframe
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<PAGE> 11
or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss
with respect to the Airframe or such Engine and Company shall comply
with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee;
provided that such airframe is free and clear of all Liens on property
of Lessee except (A) Liens permitted under the Lease, (B) Liens that
apply only to the engines (other than the 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), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement,
provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clause (iv) above; and (B) Agent shall have received from
the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which
may be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine by reason of such
Engine being installed on such airframe at any time when such Engine
is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and Company shall comply with Section
4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which Company has
operational control of the Airframe and any Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company pos-
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<PAGE> 12
sessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by
such employees of similar functions within the United States; provided
that Company's obligations hereunder shall continue in full force and
effect notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine permitted by the terms hereof
shall be made subject and subordinate to, and the Leases shall be made
expressly subject and subordinate to, the lien and security interest of
this Mortgage and all of Agent's rights hereunder and Company shall remain
primarily liable hereunder for the performance of all the terms of this
Mortgage to the same extent as if such transfer had not occurred, and any
such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer (other than the Lease) shall expressly prohibit any
further transfer of the Airframe or such Engine or any assignment of the
rights thereunder; and provided, further, that no such lease, pooling
arrangement or other transfer or relinquishment of the possession of the
Airframe or any Engine shall in any way discharge or diminish any of
Company's obligations to Agent hereunder or under the Credit Agreement. In
the event Agent shall have received from the lessor, conditional vendor or
secured party of any airframe leased to Lessee or purchased by Lessee
subject to a conditional sale or other security agreement, a written
agreement complying with clause (B) of Section 4(d)(v), and the lease or
conditional sale or other security agreement covering such airframe also
covers an engine or engines owned by the lessor under such lease,
conditionally owned by the conditional vendor under such conditional sale
agreement, or subject to such security agreement, Agent hereby agrees for
the benefit of such lessor, conditional vendor or secured party that Agent
will not acquire or claim, as against such lessor, conditional vendor or
secured party, any right, title or interest in any such engine as the
result of such engine being installed on the Airframe at any time while
such engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor, conditionally owned by such
conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company, at
its own cost and expense, will promptly replace all Parts, which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine and which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost
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<PAGE> 13
and expense may remove any Parts, whether or not worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that, except as otherwise
provided in Section 4(e)(iv), Company at its own cost and expense
shall replace such Parts as promptly as practicable. All replacement
Parts shall be owned by Company free and clear of all Liens (except
Permitted Encumbrances and the Lease, and for pooling arrangements to
the extent permitted by Section 4(e)(ii)), and shall be in as good
operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of Company and shall remain subject to the
lien and security interest of this Mortgage, no matter where located
until such time as such Parts shall be replaced by parts which have
been incorporated or installed in or attached to the Airframe or any
Engine and which meet the requirements for replacement parts specified
above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Airframe or any Engine as above
provided, without further act, (A) title to such replacement Part
shall vest in and such replacement part shall become the property of
Company and shall become subject to the lien and security interest of
this Mortgage and shall be deemed part of the Airframe or such Engine
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine, and (B)
title to the replaced part shall no longer be the property of Company
and shall thereupon become free and clear of all rights of Agent
hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as provided
in Section 4(e)(i) may be subjected by Company or Lessee to a normal
pooling arrangement of the type customary in the airline industry
entered into by Lessee in the ordinary course of its business and
entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such
Engine in accordance with Section 4(e)(i) as promptly as possible
after the removal of such removed part. In addition, any replacement
Part when incorporated or installed in or attached to the Airframe or
any Engine in accordance with Section 4(e)(i) may be owned subject to
such a pooling arrangement, provided Company, at its expense, as
promptly thereafter as possible, either (A) causes such replacement
Part to become subject to the lien and security interest of this
Mortgage in accordance with Section 4(e)(i) by Company's acquiring
title thereto for the benefit of Agent free and
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<PAGE> 14
clear of all Liens (except Permitted Encumbrances and the Lease) or
(B) replaces such replacement Part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement Part
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet
the standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith, contest the
validity or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or Lenders'
interests therein. Company also agrees, at its own cost and expense,
to make or cause to be made such alterations and modifications in and
additions to the Airframe and the Engines as may be required from time
to time to meet the standards or requirements of any directive issued
by a manufacturer relating to the Airframe or any Engine. In addition
so long as no Potential Event of Default or Event of Default shall
have occurred and be continuing, Company, at its own cost and expense,
may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Company may deem desirable
in the proper conduct of its business or to accommodate the business
of Lessee, provided no such alteration, modification or addition
diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility,
condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such
Engine were then in the condition and airworthiness required to be
maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in Company and shall
be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company may remove and
not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage and (C)
can be removed from the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness which the
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<PAGE> 15
Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming the
Aircraft Collateral was otherwise in the condition required by this
Mortgage. Upon the removal by Company of any such Part, as above
provided, title thereto shall, without further act, be free and clear
of all rights of the Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by the
Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine, Company will promptly notify Agent thereof in writing
(in any event within five (5) days of such occurrence) and will, not
later than 180 days after the receipt of Proceeds in connection with
such Event of Loss, mortgage hereunder, by complying with all of the
terms of subsection (ii) below and otherwise taking all necessary
actions to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the
replacement airframe or engine referred to below, an Acceptable
Alternate Airframe or Acceptable Alternate Engine free of all Liens
(other than Permitted Encumbrances and the Lease). Upon compliance
with the preceding sentence within such 180-day period, Agent will
execute and deliver to Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Airframe or Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable Alternate
Engine shall thereupon constitute an "Airframe" or an "Engine", as the
case may be, for all purposes hereof and shall be deemed to constitute
part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to the
lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
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<PAGE> 16
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form of
Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine to be subjected to the lien and security
interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the date
of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine
and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
(III) that all conditions precedent contemplated in
this Section 4(f)(iii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent with
respect to such Airframe or Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine to be
subjected to the lien and the security interest of this Mortgage
stating that it has a value and utility at least equal to, and in
as good operating condition
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<PAGE> 17
as the Airframe or Engine subject to such Event of Loss
immediately prior to such Event of Loss, assuming compliance by
Company with all the terms of this Mortgage with respect to such
Airframe or Engine; and
(H) cause to be delivered to Agent an opinion or opinions of
counsel dated the date of execution of such Supplemental Chattel
Mortgage, stating:
(I) that the Airframe or Engine specifically described
in said Supplemental Chattel Mortgage, is free and clear of
all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Airframe or Engine described in said
Supplemental Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
purported to be secured thereby and that all action required
to perfect fully such security interest has been taken and
completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine
described in said Supplemental Chattel Mortgage, and
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Agent an opinion
of counsel for Company as to the due recording of such Supplemental
Chattel Mortgage in accordance with the Act.
(iii) With respect to the Airframe or any Engine, as between the
Agent and Company, any payments on account of an Event of Loss (other
than insurance proceeds or other payments the application of which is
pro-
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<PAGE> 18
vided for in Section 4(g) below and under the terms of the Credit
Agreement) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Airframe or Engine that has been or is being
replaced by Company pursuant to the terms hereof, so long as
there shall exist no Event of Default or Potential Event of
Default, such payment shall be paid over to or retained by
Company or Lessee upon satisfaction of the conditions for
replacement contained in paragraph (ii) above and until such time
shall be held by Agent in accordance with the provisions hereof
as security for the Secured Obligations; and
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, Company shall promptly
notify Agent of such requisition and all of Company's obligations
under this Mortgage shall continue to the same extent as if such
requisition had not occurred. Any payments received by Agent or
Company from the United States Government for the use of the Airframe
or such Engine, shall be paid over to, or retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such payment
or retention any Event of Default or a Potential Event of Default
shall have occurred and be continuing, but shall be held by or paid
over to Agent as security for the obligations of Company under this
Mortgage and the other Loan Documents, and, if Agent shall declare the
Credit Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such time as
there shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to Company to the extent
not previously applied in accordance with the preceding sentence. In
addition, and whether or not there shall exist an Event of Default or
Potential Event of Default, until such time as Company shall request
to be paid any amount referred to in paragraph (iii) or (iv) in order
to effect the mortgaging hereunder of a replacement Airframe or
Engine, any amounts
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<PAGE> 19
referred to in paragraphs (iii) or (iv) of this Section 4(f) shall be
held by the Agent as security for the obligations of Company under
this Mortgage and the other Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft, at Lessee's own cost and expense,
public liability (including without limitation, contractual liability,
cargo liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and
property damage insurance with insurers of recognized responsibility
and reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation
and expropriation and allied perils coverage). During any period when
the Aircraft is on the ground and not in operation, Lessee may carry
or cause to be carried, in lieu of insurance required by this Section,
insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the
scope of risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly
situated with Lessee. Any policies of insurance carried in accordance
with this Section 4(g) and any policies taken out in substitution or
replacement of any such policies (A) shall be amended to name Agent
and Lenders as additional named insureds, (B) shall be primary without
right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof,
except the limits of the liability, shall operate in the same manner
as if there were a separate policy covering each insured, and (D)
shall provide that the insurer shall waive any right of subrogation
against Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and maintain
with insurers of recognized responsibility and reputation on or with
respect to the Aircraft, at Lessee's own cost and expense, aircraft
ground and flight all-risk hull insurance as well as fire and extended
coverage insurance on Engines and other equipment while removed from
the Airframe (which shall include war risk, governmental confiscation
and expropriation (other than by the United States Government) and
allied perils including (A) strikes, riots, civil commotions or labor
disturbances, (B) any malicious act or act of sabotage and (C)
hijacking (air piracy) or any unlawful seizure or wrongful
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<PAGE> 20
exercise of control of the Aircraft or crew in flight (including any
attempt at such seizure or control) made by any person or persons
aboard the Aircraft acting without the consent of the insured, if and
to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes or if
the Aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with Lessee flying comparable routes with
similar aircraft to carry such insurance, of the type usually carried
by corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when 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 this Section, insurance
otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee for aircraft on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name Agent
and Lenders as additional insureds and loss payees to the extent their
interest may appear and shall provide that any loss to the Airframe or
an Engine in excess of $2,000,000 (and, if a Potential Event of
Default or Event of Default has occurred and is continuing, any such
loss) shall be payable to Agent for the benefit of Lenders; and shall
be primary without right of contribution from any other insurance
which is carried by Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft in Lessee's fleet
which are of a value comparable to the Aircraft and as are not
substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with
Lessee; provided, however, that Company shall not permit Lessee to
self-insure in an amount in excess of $1,000,000 without the prior
written consent of Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in respect
of the interest of Agent or Lenders in such policies the insurance
shall not be invalidated by any action or inaction of Lessee and shall
insure the interests of Agent and
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<PAGE> 21
Lenders regardless of any breach or violation by Lessee or any Person
(other than Agent) of any warranty, declaration, condition or
exclusion from coverage contained in such policies; (C) provide that
if such insurance is cancelled, or if any material change is made in
the coverage which affects the interest of Agent or any Lender, or if
such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Agent for
thirty (30) days (seven (7) days, or such shorter or longer period as
may from time to time be customarily available in the industry, in the
case of any war risk and allied perils coverage) after receipt by
Agent of written notice from such insurers of such cancellation,
change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft and shall be
payable in U.S. dollars; (E) waive any right of the insurers to any
setoff or counterclaim or any other deduction, whether by attachment
or otherwise in respect of any liability of Agent; and (F) waive all
rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States or
any agency or instrumentality thereof in respect of the Airframe or
any Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify Lessee against the same risks against
which Lessee is required hereunder to insure shall be considered
adequate insurance with respect to the Airframe or such Engine to the
extent of the risks and in the amounts that are the subject of any
such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 21, Company will cause the Lessee to furnish to Agent
(A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
stating that in the opinion of such firm such insurance complies with
the terms of this Section 4(g) and is adequate to protect the
interests of Lessee, Company and Agent, and (B) certificates of the
insurer or insurers evidencing the insurance covered by the report.
Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or
omission on the part of Lessee of which such firm has knowledge and
which might invalidate or render unenforceable, in whole or in part,
any insurance on the Aircraft or any Engine and (y) at least thirty
(30) days prior to the expiration or termination date, or date of
effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if
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<PAGE> 22
received by Company, immediately paid to Agent and shall be held by
Agent as security for the Secured Obligations and all other
obligations required to be paid in accordance with the terms of this
Mortgage and the Credit Agreement and such payments shall be paid to
Company upon compliance by Company with the terms of Subsection 4(f)
with respect to the replacement of an airframe or an engine, as the
case may be, provided that no Potential Event of Default or Event of
Default shall have occurred and be continuing.
All insurance payments and other payments received by Agent or Company
from insurance referred to in paragraph (ii) above and paid other than
as a result of an Event of Loss shall be paid by Agent to or be
retained by Company, and promptly applied by Company to the extent
necessary to repair the damage to the Airframe or the Engine for which
such insurance was paid, provided that Agent shall not be required to
make any such payment to Company if a Potential Event of Default or
Event of Default has occurred and is continuing, but shall be held or
paid over to Agent as security for the obligations of Company under
this Mortgage and the other Loan Documents, and, if Agent shall
declare the Credit Agreement to be in default, shall be applied
against Company's obligations hereunder and thereunder as and when
due. Retention by Agent of any amounts pursuant to the preceding
sentence shall not relieve Company of its obligations to make promptly
all repairs and replacements required by Sections 4(c) and (e) hereof
and to pay for the same with Company's funds or cause payment of the
same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft for its
own account. Company 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 4(g). No insurance
maintained by Agent or any Lender shall prevent Company from causing
Lessee to carry the insurance required or permitted by this Section or
adversely affect such insurance or the cost thereof. Proceeds of any
such insurance carried by Agent or Lender shall be paid as provided in
the insurance policy relating thereto and Agent shall have no duty to
obtain any such insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as
may be requested. Agent shall have no duty to make any such
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<PAGE> 23
inspection or examination and shall not incur any liability or obligation
by reason of making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant
to the Lease, cause the Airframe and each Engine included in the Aircraft
Collateral to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size,
and bearing the legend "Owned by Atlas Freighter Leasing, Inc. and
Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Agent be appropriate or desirable to evidence the
fact that it is subject to the lien and security interest created by this
Mortgage. Company shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or
defacement, shall promptly cause such plate, disk, or other marking or
serial number to be promptly replaced. Except as provided above, Company
shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine as a designation that might be
interpreted as a claim of ownership or of any security interest therein,
except that any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as
in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii)
any and all remedies under the Leases and all of the rights and remedies of
the Lessor under the Lease, (iii) all the rights and remedies provided for
in this Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other rights
and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any part
thereof and may exclude Company and Lessee, and all persons claiming under
Company or Lessee, wholly or partly therefrom. At the request of Agent,
Company shall promptly deliver or cause Lessee to deliver to Agent or to
whomsoever Agent shall designate, at such time or times and place or places
as Agent may specify, and fly or cause to be flown to such airport or
airports in the United States as Agent may specify, without risk or expense
to Agent, the Aircraft Collateral or any part thereof. In addition, Company
will provide, or cause Lessee to provide, without cost or expense to
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<PAGE> 24
Agent, storage facilities for the Aircraft Collateral. If Company or Lessee
shall for any reason fail to deliver the Aircraft Collateral or any part
thereof after demand by Agent, Agent may, without being responsible for
loss or damage, (i) obtain a judgment conferring on Agent the right to
immediate possession or requiring Company and Lessee to deliver immediate
possession of the Aircraft Collateral or any part thereof to Agent, the
entry of which judgment Company hereby specifically consents and the
Lessor's consent to which will be obtained by Company under the Lease, or
(ii) with or without such judgment, pursue the Aircraft Collateral or any
part thereof wherever it may be found and may enter any of the premises of
Company and Lessee where the Aircraft Collateral may be and search for the
Aircraft Collateral and take possession of and remove the same. Company
agrees to pay to Agent, upon demand, all expenses incurred in taking any
such action; and all such expenses shall, until paid, be secured by the
lien of this Mortgage. Upon every such taking of possession, Agent may,
from time to time, make all such reasonable expenditures for maintenance,
insurance, repairs, replacements, alterations, additions and improvements
to and of the Aircraft Collateral, as it may deem proper. In each such
case, Agent shall have the right to maintain, use, operate, store, lease,
control or manage the Aircraft Collateral or any part thereof and to carry
on the business and exercise all rights and powers of Company relating to
the Aircraft Collateral, as Agent shall deem best, including the right to
enter into any and all such agreements with respect to the maintenance,
use, operation, storage, leasing, control, management or disposition of the
Aircraft Collateral or any part thereof as Agent may determine. Further,
after the occurrence and during the continuation of an Event of Default,
Agent shall be entitled to collect and receive directly all tolls, rents,
revenues, issues, income, products and profits of the Aircraft Collateral
or any part thereof, including without limitation, all payments under any
of the Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments which
Agent may be required or may elect to make, if any, for taxes, assessments,
or other proper charges upon the Aircraft Collateral and all other payments
which Agent may be required or authorized to make under any provision of
this Mortgage, as well as just and reasonable compensation for the services
of Agent and of all persons properly engaged and employed for such purposes
by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as
an entirety or in separate lots or parcels, the Aircraft Collateral or
any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the
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<PAGE> 25
retention of title by Agent to the property so sold), as Agent may
determine, whether or not the Aircraft Collateral shall be at the
place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the absolute
sale of the Aircraft Collateral. Company, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have all
or any portion of the Aircraft Collateral marshalled upon any foreclosure
hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any rights,
powers or remedies granted hereby. All such fees and expenses shall, until
paid, be secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the
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<PAGE> 26
sale, lease, disposition or realization and the payment of taxes and Liens,
if any, prior to the lien and security interest of this Mortgage (except
any taxes or Liens to which the respective sale, lease, disposition or
realization shall have been subject) and to the payment of expenses and the
reimbursement of payments incurred or made by Agent pursuant to Section 9
hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Aircraft Collateral and Aircraft
Related Collateral, (ii) to make all necessary transfers of all or any part of
the Aircraft Collateral and Aircraft Related Collateral in connection with any
sale, lease or other disposition made pursuant hereto, (iii) to execute and
deliver for value all necessary or appropriate bills of sale, assignments and
other instruments in connection with any such sale, lease or other disposition,
and (iv) generally to do, at Agent's option and Company's cost and expense, at
any time, or from time to time, all acts and things that Agent deems necessary
to protect, preserve or realize upon the Aircraft Collateral and Aircraft
Related Collateral and Agent's security interest therein, in order to effect the
intent of this Mortgage, all as fully and effectively as Company might do,
Company hereby ratifying and confirming all that its said attorney (or any
substitute) shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section, and
all monies if any, required to be paid to Agent hereunder, which disposition is
not elsewhere herein otherwise specifically provided for, shall be held by Agent
and applied from time to time as provided herein and in the Credit Agreement and
the other Loan Documents and
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<PAGE> 27
shall be held in an account in the name of Agent and invested in Cash
Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent
may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender herein
or otherwise. Upon the indefeasible payment in full of the Secured Obligations,
the security interest granted hereby shall terminate and all rights to the
Aircraft Collateral and Aircraft Related Collateral shall revert to Company.
Upon any such termination. Agent will execute and deliver to Company, at
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<PAGE> 28
Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by applicable law, Company hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by Company and Agent. The captions and headings in this Mortgage
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Agent to bring proceedings against Company in the courts of
any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A
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<PAGE> 29
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Article 9 of the Uniform Commercial
Code in the State of New York are used herein as therein defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 30
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
-------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and Secretary
BANKERS TRUST COMPANY,
as Agent
By:
--------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 31
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Boeing 747-200F 22507 N516MC
================================================================================
</TABLE>
<PAGE> 32
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's
Manufacturer Model Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
General Electric CF6-50E2 517214
- --------------------------------------------------------------------------------
General Electric CF6-50E2 530202
- --------------------------------------------------------------------------------
General Electric CF6-50E2 530247
- --------------------------------------------------------------------------------
General Electric CF6-50E2 517551
================================================================================
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 33
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.____
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated ________, 199[ ] between Atlas
Freighter Leasing, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as agent for and representative of (in such capacity, "Agent")
the financial institutions ("Lenders") party to the Credit Agreement dated as of
May 29, 1997 among Company, the Lenders and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated ______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to Section
4(f) thereof, and shall specifically mortgage such Engine to Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on
__________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine shall be installed on or attached to
the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
<PAGE> 34
EXHIBIT A
Page 2
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 35
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING, INC.
By:
----------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and Secretary
<PAGE> 36
EXHIBIT A
Page 4
BANKERS TRUST COMPANY,
as Agent
By:
-------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
<PAGE> 37
SCHEDULE I
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.72
================================================================================
ATLAS AIR, INC.
as Issuer
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
INDENTURE
Dated as of August 13, 1997
$150,000,000
10 3/4% SENIOR NOTES DUE 2005, SERIES A
10 3/4% SENIOR NOTES DUE 2005, SERIES B
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1)................................. 7.10
(a)(2)................................. 7.10
(a)(3)................................. N.A.
(a)(4)................................. N.A.
(b).................................... 7.8; 7.10
(c).................................... N.A.
311(a).................................... 7.11
(b).................................... 7.11
(c).................................... N.A.
312(a).................................... 2.5
(b).................................... 10.3
(c).................................... 10.3
313(a).................................... 7.6
(b)(1)................................. N.A.
(b)(2)................................. 7.6
(c).................................... 7.6
(d).................................... 7.6
314(a).................................... 4.2; 4.10;
(b).................................... N.A.
(c)(1)................................. 10.4
(c)(2)................................. 10.4
(c)(3)................................. N.A.
(d).................................... N.A.
(e).................................... 10.5
(f).................................... 4.9
315(a).................................... 7.1
(b).................................... 7.5; 10.2
(c).................................... 7.1
(d).................................... 7.1
(e).................................... 6.11
316(a)(last sentence)..................... 10.6
(a)(1)(A).............................. 6.5
(a)(1)(B).............................. 6.4
(a)(2)................................. N.A.
(b).................................... 6.7
317(a)(1)................................. 6.8
(a)(2)................................. 6.9
(b).................................... 2.4
318(a).................................... 12.1
- -------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.....................................1
SECTION 1.2. Other Definitions..............................23
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act ...............................23
SECTION 1.4. Rules of Construction..........................24
ARTICLE II
The Securities
SECTION 2.1. Form and Dating................................25
SECTION 2.2. Execution and Authentication...................26
SECTION 2.3. Registrar and Paying Agent.....................27
SECTION 2.4. Paying Agent to Hold Money in Trust............28
SECTION 2.5. Securityholder Lists...........................28
SECTION 2.6. Transfer and Exchange..........................29
SECTION 2.7. Replacement Securities.........................30
SECTION 2.8. Outstanding Securities.........................30
SECTION 2.9. Treasury Securities............................31
SECTION 2.10. Temporary Securities..........................31
SECTION 2.11. Cancellation...................................31
SECTION 2.12. Defaulted Interest.............................32
SECTION 2.13. CUSIP Number...................................32
SECTION 2.14. Deposit of Moneys..............................32
SECTION 2.15. Restrictive Legends............................32
SECTION 2.16. Book-Entry Provisions for Global
Security ....................................35
SECTION 2.17. Special Transfer Provisions....................36
SECTION 2.18. Persons Deemed Owners..........................39
SECTION 2.19. Record Date....................................40
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee.............................40
SECTION 3.2. Selection of Securities To Be Redeemed.........40
SECTION 3.3. Notice of Redemption...........................41
</TABLE>
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<PAGE> 4
<TABLE>
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<S> <C>
SECTION 3.4. Effect of Notice of Redemption.................42
SECTION 3.5. Deposit of Redemption Price....................42
SECTION 3.6. Securities Redeemed in Part....................43
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities..........................43
SECTION 4.2. Reports........................................44
SECTION 4.3. Limitation on Incurrence of Additional
Indebtedness ................................44
SECTION 4.4. Limitation on Restricted Payments..............45
SECTION 4.5. Limitation on Issuances and Sales of
Capital Stock of Subsidiaries ...............49
SECTION 4.6. Limitation on Transactions with
Affiliates ..................................49
SECTION 4.7. Limitation on Liens............................50
SECTION 4.8. Limitation on Asset Sales and
Disposition of Proceeds of Asset
Sales .......................................50
SECTION 4.9. Change of Control..............................54
SECTION 4.10. Limitation on Guarantees of
Indebtedness by Subsidiaries ................56
SECTION 4.11. Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries ................................57
SECTION 4.12. Further Instruments and Acts...................57
SECTION 4.13. Use of Proceeds................................57
SECTION 4.14. Compliance Certificates........................58
SECTION 4.15. Maintenance of Office or Agency................59
SECTION 4.16. Taxes..........................................59
SECTION 4.17. Stay, Extension and Usury Laws.................59
SECTION 4.18. Corporate Existence............................60
ARTICLE V
Surviving Entity
SECTION 5.1. Limitations on Consolidations, Mergers
and Sales of Assets .........................60
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default..............................62
SECTION 6.2. Acceleration...................................64
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
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<S> <C>
SECTION 6.3. Other Remedies.................................65
SECTION 6.4. Waiver of Past Defaults........................65
SECTION 6.5. Control by Majority............................66
SECTION 6.6. Limitation on Suits............................66
SECTION 6.7. Rights of Holders to Receive Payment...........66
SECTION 6.8. Collection Suit by Trustee.....................67
SECTION 6.9. Trustee May File Proofs of Claim...............67
SECTION 6.10. Priorities.....................................67
SECTION 6.11. Undertaking for Costs..........................68
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee..............................68
SECTION 7.2. Rights of Trustee..............................70
SECTION 7.3. Individual Rights of Trustee...................71
SECTION 7.4. Trustee's Disclaimer...........................71
SECTION 7.5. Notice of Defaults.............................71
SECTION 7.6. Reports by Trustee to Holders..................72
SECTION 7.7. Compensation and Indemnity.....................72
SECTION 7.8. Replacement of Trustee.........................73
SECTION 7.9. Successor Trustee by Merger....................74
SECTION 7.10. Eligibility; Disqualification..................74
SECTION 7.11. Preferential Collection of Claims
Against Company .............................75
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities;
Defeasance ..................................75
SECTION 8.2. Conditions to Defeasance.......................77
SECTION 8.3. Application of Trust Money.....................79
SECTION 8.4. Repayment to Company...........................79
SECTION 8.5. Indemnity for U.S. Government
Obligations .................................79
SECTION 8.6. Reinstatement..................................79
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders.....................80
SECTION 9.2. With Consent of Holders........................81
SECTION 9.3. Compliance with Trust Indenture Act............83
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
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<S> <C>
SECTION 9.4. Revocation and Effect of Consents and
Waivers .....................................83
SECTION 9.5. Notation on or Exchange of Securities..........84
SECTION 9.6. Trustee To Sign Amendments.....................84
ARTICLE X
Miscellaneous
SECTION 10.1. Trust Indenture Act Controls..................85
SECTION 10.2. Notices.......................................85
SECTION 10.3. Communication by Holders with other
Holders .....................................86
SECTION 10.4. Certificate and Opinion as to
Conditions Precedent ........................86
SECTION 10.5. Statements Required in Certificate or
Opinion .....................................87
SECTION 10.6. When Securities Disregarded...................87
SECTION 10.7. Rules by Trustee, Paying Agent and
Registrar ...................................87
SECTION 10.8. Legal Holidays................................87
SECTION 10.9. Governing Law.................................88
SECTION 10.10. No Recourse Against Others....................88
SECTION 10.11. Successors....................................88
SECTION 10.12. Multiple Originals............................88
SECTION 10.13. Variable Provisions...........................88
SECTION 10.14. Qualification of Indenture....................88
SECTION 10.15. Table of Contents; Headings...................89
SECTION 10.16. Severability..................................89
SECTION 10.17. No Adverse Interpretation of Other
Agreements ..................................89
Exhibit A - Form of Series A Security ..................A-1
Exhibit B - Form of Series B Security ..................B-1
Exhibit C - Form of Certificate To Be Delivered
in Connection with Transfers to Non-
QIB Accredited Investors ...................C-1
Exhibit D - Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S ...................D-1
</TABLE>
__________________
Note: This Table of Contents shall not, for any purpose, be
deemed to be part of the Indenture.
-iv-
<PAGE> 7
INDENTURE dated as of August 13, 1997, between Atlas
Air, Inc., a Delaware corporation (as further defined below,
the "Company"), and State Street Bank and Trust Company, a Mas-
sachusetts bank and trust company (the "Trustee").
The Company has duly authorized the creation and is-
suance of up to $150,000,000 aggregate principal amount of 10
3/4% Senior Notes due 2005 (the "Initial Securities") and
$150,000,000 aggregate principal amount of 10 3/4% Senior Notes
due 2005 (the "Exchange Securities", and together with the Ini-
tial Securities, the "Securities") and, to provide therefor,
the Company has duly authorized the execution and delivery of
this Indenture. All things necessary to make the Securities
(as defined herein), when duly issued and executed by the Com-
pany, and authenticated and delivered hereunder, the valid ob-
ligations of the Company, and to make this Indenture a valid
and binding agreement of the Company have been done.
The Company and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of
the Holders of the Securities:
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"ACMI Contracted Aircraft" means an aircraft acquired
by the Company or its Subsidiaries and dedicated to a new ACMI
Contract entered into within 60 days of the acquisition of such
aircraft (which ACMI Contract shall not represent a renewal or
replacement of a prior ACMI Contract unless the aircraft dedi-
cated to such prior ACMI Contract was operated under an operat-
ing lease and returned to the lessor) which is in effect on the
date of calculation and has a remaining term of three years or
more on the date such aircraft was dedicated to such ACMI Con-
tract provided that in any calendar year two ACMI contracts may
have a term of not less than one year (subject to cancellation
terms, which may include the right to cancel on no less than
six months notice). Pro forma effect shall be given to the ac-
quisition of an ACMI Contracted Aircraft by adding to the ap-
propriate components of the Consolidated Fixed Charge Coverage
Ratio (i) the net projected annualized revenues from the opera-
tion of the ACMI Contracted Aircraft under such ACMI Contract
for that portion of the period for which the Consolidated Fixed
<PAGE> 8
-2-
Charge Coverage Ratio is being calculated prior to the acquisi-
tion of such aircraft, assuming operation for the minimum guar-
anteed number of block hours (less any block hours subject to
cancellation) at the minimum guaranteed rate under such ACMI
Contract less (ii) the projected annualized cash operating ex-
penses from such operation for the same period for which the
related projected revenues are determined in clause (i) above,
provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical
per block hour cash operating expenses of the Company for such
aircraft model for the four full fiscal quarters immediately
preceding the date of calculation, and provided, further, that
if such aircraft is of a model not then currently operated by
the Company, such projected cash operating expenses shall in-
clude maintenance costs which shall not be less than the aver-
age for such aircraft type disclosed on the most recently
available DOT Forms 41 with respect to such aircraft type or
any summary of such data as reported in a nationally recognized
industry publication or as provided in a written estimate pre-
pared by a nationally recognized air transportation consulting
group. For purposes of this definition, "ACMI Contract" shall
include contracts pursuant to which the Company does not pay
any crew costs, in which event pro forma effect shall be given
as described above but excluding from the projected annualized
cash operating expenses all crew costs. Cash operating ex-
penses means for purposes of this definition consolidated oper-
ating expenses, less consolidated depreciation and amortization
and consolidated rental expenses, to the extent included in
computing consolidated operating expenses.
"Acquired Indebtedness" means Indebtedness of a Per-
son (a) existing at the time such Person becomes a Subsidiary
or (b) assumed in connection with the acquisition of assets
from such Person.
"AFL II" means a new wholly-owned Unrestricted Sub-
sidiary to be formed for the sole purpose of owning and leasing
four 747-200 aircraft and eight spare engines currently owned
by the Company and financed by the Company's existing revolving
credit facility.
"Affiliate" means, with respect to any specified Per-
son, (i) any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with
such specified Person or (ii) any other Person that owns, di-
rectly or indirectly, 5% or more of such specified Person's
Capital Stock or any executive officer or director of any such
specified Person or other Persons or, with respect to any natu-
<PAGE> 9
-3-
ral Person, any Person having a relationship with such Person
by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control," when
used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-
registrar.
"Applicable Premium" means, with respect to a Secu-
rity at any Redemption Date, the greater of (i) 1.0% of the
principal amount of such Security and (ii) the excess of (A)
the present value at such time of (1) 105.250% of the principal
amount of such Security plus (2) all required interest payments
due on such Security through November 15, 2001, computed using
a discount rate equal to the Treasury Rate plus 100 basis
points, over (B) the principal amount of such Security.
"Appraised Fair Market Value" means the Adjusted Cur-
rent Market Value. Current Market Value is the most likely
trading price that, in the opinion of an appraiser, may be gen-
erated from an aircraft under the market conditions that are
perceived to exist at the time in question. Current Market
Value assumes that the aircraft is valued for its highest, best
use, that the parties to the hypothetical transaction are will-
ing, able, prudent and knowledgeable, and under no unusual
pressure for a prompt sale, and that the transaction would be
negotiated in an open and unrestricted market on an arm's
length basis, for cash or equivalent consideration, and given
an adequate amount of time for effective exposure to prospec-
tive buyers. Adjusted Current Market Value, in the opinion of
the appraiser, is the Current Market Value of the aircraft ad-
justed for the actual technical status and maintenance condi-
tion of the aircraft.
"Asset Sale" means any sale, issuance, conveyance,
transfer, lease or other disposition (including, without limi-
tation, by way of merger, consolidation or sale and leaseback
transaction) (collectively, a "transfer"), directly or indi-
rectly, in one or a series of related transactions, of (i) any
Capital Stock of any Subsidiary; (ii) all or substantially all
of the properties and assets of the Company or its Subsidiar-
ies; or (iii) any other properties or assets of the Company or
any Subsidiary, other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale"
<PAGE> 10
-4-
shall not include any transfer of properties or assets (A) that
is governed by the provisions of this Indenture, described in
Section 5.1, (B) by the Company to any Subsidiary, or by any
Subsidiary of the Company or any Subsidiary and in accordance
with the terms of the Indenture, (C) of aircraft engines, com-
ponents, parts or spare parts pursuant to customary pooling,
exchange or similar agreements or, (D) asset swaps involving
aircraft engines, components, parts or spare parts (provided
that the assets received by the Company or any Subsidiary have
a Fair Market Value at least equal to the asset transferred
(provided that with respect to any asset swap or series of re-
lated asset swaps involving assets with a Fair Market Value ex-
ceeding $3 million, such determination shall be made by the
Board of Directors)), (E) constituting an Investment that is
permitted under the Indenture in an Unrestricted Subsidiary,
joint venture or other Person in which the Company or a Sub-
sidiary retains an ownership interest, or (F) having a Fair
Market Value per transaction or series of related transactions
of less than $1,000,000.
"Atlas Freighter Leasing Transactions" means the
transactions in which Atlas Freighter Leasing, Inc. and AFL II,
each a wholly-owned Unrestricted Subsidiary of the Company, re-
financed and will refinance six 747-200 aircraft and four 747-
200 aircraft all previously owned by the Company, respectively.
"Aviation Act" means the Federal Aviation Act of
1958, as amended, and the applicable regulations thereunder.
"Bankruptcy Law" means Title 11, United States Code,
as amended, or any similar United States federal or state law
relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization or relief of debtors or any amend-
ment to, succession to or change in any such law.
"Board of Directors" means the Board of Directors of
any Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Board Resolution" means, with respect to any Person,
a copy of a resolution certified by the Secretary or an Assis-
tant Secretary of such Person to have been duly adopted by the
Board of Directors of such Person and to be in full force and
effect on the date of such certification, and delivered to the
Trustee.
<PAGE> 11
-5-
"Boeing Purchase Contract" means the agreement dated
June 9, 1997 between Atlas Air, Inc. and The Boeing Company to
purchase ten new 747-400 aircraft.
"Business Day" means each day which is not a Legal
Holiday.
"Capital Stock" of any Person means any and all
shares, interests, rights to purchase, warrants, options, par-
ticipations, rights in or other equivalents (however desig-
nated) of such Person's capital stock or other equity partici-
pations, including partnership interests, whether general or
limited, in such Person, including any Preferred Stock, and any
rights (other than debt securities convertible into capital
stock), warrants or options exchangeable for or convertible
into such capital stock, whether now outstanding or issued af-
ter the date of this Indenture.
"Capitalized Lease Obligation" of any Person means
any obligation of such Person and its subsidiaries on a con-
solidated basis under a lease of (or other agreement conveying
the right to sue) any property (whether real, personal or
mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of
the Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebt-
edness with a maturity of one year or less issued or directly
and fully guaranteed or insured by the United States of America
or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances and money market deposits with a maturity of one
year or less of any financial institution that is a member of
the Federal Reserve System, in each case having combined capi-
tal and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of one
year or less issued by a corporation that is not an Affiliate
of the Company and is organized under the laws of any state of
the United States or the District of Columbia and rated at
least A-1 by S&P or at least P-1 by Moody's and (iv) investment
in money market funds substantially all of whose assets are
comprised of Cash Equivalents described in clauses (i) through
(iii).
<PAGE> 12
-6-
"Cedel Bank" has the meaning set forth in Section
2.1.
"Change of Control" means the occurrence of any of
the following events: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has
the right to acquire, whether such right is exercisable immedi-
ately or only after the passage of time), directly or indi-
rectly, of more than 40% of the total outstanding Voting Stock
of the Company; (b) the Company consolidates with, or merges
with or into, another Person or conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to
any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is con-
verted into or exchanged for cash, securities or other prop-
erty, other than any such transaction where (i) the outstanding
Voting Stock of the Company is not converted or exchanged at
all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or is converted
into or exchanged for (A) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or
(B) cash, securities and other property (other than Capital
Stock of the Surviving Entity) in an amount that could be paid
by the Company as a Restricted Payment as described in Section
4.4 (or a combination of (A) and (B)) and (ii) immediately af-
ter such transaction, no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other
than Permitted Holders, is the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total
outstanding Voting Stock of the surviving transferee corpora-
tion; (c) during any consecutive two year period, individuals
who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose
election to such Board of Directors, or whose nomination for
election by the stockholders of the Company was approved by a
vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose elec-
tion or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of
<PAGE> 13
-7-
Directors of the Company then in office; or (d) the Company is
liquidated or dissolved or adopts a plan of liquidation or dis-
solution other than in a transaction which complies with the
provisions described in Section 5.1. For purposes of this
definition, a Permitted Holder shall be deemed to beneficially
own Voting Stock that has been pledged to a financial institu-
tion, unless the pledgee has the present right to vote such
Voting Stock in the election of directors or has exercised
remedies with respect to such Voting Stock.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company" means Atlas Air, Inc., a Delaware corpora-
tion until a successor replaces it and, thereafter, means the
successor.
"Commission" or "SEC" means the U.S. Securities and
Exchange Commission or its successor.
"Consolidated Adjusted Net Income" means, for any pe-
riod, the consolidated net income (or loss) of the Company and
all Subsidiaries for such period as determined in accordance
with GAAP, adjusted by excluding, without duplication, (a) any
net after-tax extraordinary gains or losses (less all fees and
expenses relating thereto), (b) any net after-tax gains or
losses (less, all fees and expenses relating thereto) attribut-
able to asset dispositions other than in the ordinary course of
business, (c) the portion of net income (or loss) of any Person
(other than the Company or a Subsidiary), including Unre-
stricted Subsidiaries, in which the Company or any Subsidiary
has an ownership interest, except to the extent of the amount
of dividends or other distributions actually paid to the Com-
pany or any Subsidiary in cash during such period, (d) for pur-
poses of calculating Consolidated Adjusted Net Income in Sec-
tion 4.4, the net income (or loss) of any Person combined with
the Company or any Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination and
(e) the net income of any Subsidiary, to the extent that the
declaration or payment of dividends or similar distributions by
such Subsidiary is not at the date of determination permitted,
directly or indirectly, by operation of the terms of its char-
ter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such
Subsidiary or its stockholders.
"Consolidated Fixed Charge Coverage Ratio" of the
Company means, for any period, the ratio of (a) the sum of Con-
<PAGE> 14
-8-
solidated Adjusted Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-Cash
Charges deducted in computing Consolidated Adjusted Net Income,
in each case, for such period, of the Company and all Subsidi-
aries as determined on a consolidated basis in accordance with
GAAP to (b) such Consolidated Interest Expense.
"Consolidated Income Tax Expense" means, for any pe-
riod, the provision for federal, state, local and foreign in-
come taxes of the Company and all Subsidiaries for such period
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" of the Company means,
for any period, without duplication, the sum of (a) the inter-
est expense of the Company and its Subsidiaries for such pe-
riod, including, without limitation, (i) amortization of debt
discount, (ii) the net cost of interest rate contracts
(including amortization of discounts), (iii) the interest por-
tion of any deferred payment obligation, (iv) amortization of
debt costs and (v) accrued interest and capitalized interest,
plus (b) the interest component of Capitalized Lease Obliga-
tions of the Company and its Subsidiaries during such period,
plus (c) cash dividends due (whether or not declared) on the
Redeemable Capital Stock by the Company and any Subsidiary (to
any Person other than the Company and any wholly owned Subsidi-
ary), in each case as determined on a consolidated basis in ac-
cordance with GAAP; provided that (x) the Consolidated Interest
Expense attributable to interest on any Indebtedness computed
on a pro forma basis and (A) bearing a floating interest rate
shall be computed as if the rate in effect on the date of com-
putation had been the applicable rate for the entire period and
(B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the
Company, a fixed or floating rate of interest, shall be com-
puted by applying at the option of the Company, either the
fixed or floating rate, and (y) in making such computation, the
Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility computed on a
pro forma basis shall be computed based upon the average daily
balance of such Indebtedness during the applicable period. For
purposes of clause (c) of the preceding sentence, dividends
shall be deemed to be an amount equal to the dividends due
(whether or not declared) divided by one minus the applicable
actual combined federal, state, provincial, local and foreign
income tax rate of the Company and its Subsidiaries (expressed
as a decimal).
<PAGE> 15
-9-
"Consolidated Non-Cash Charges" means, for any pe-
riod, the aggregate depreciation, amortization and other non-
cash items of the Company and any Subsidiary reducing Consoli-
dated Adjusted Net Income for such period, determined on a con-
solidated basis in accordance with GAAP (excluding any such
non-cash charge which represents an accrual of or reserve for
cash charges for any future period).
"Corporate Trust Office of the Trustee" shall be at
the address of the Trustee specified in Section 10.2 or such
other address as to which the Trustee may give notice to the
Company.
"Currency Agreements" means any spot or forward for-
eign exchange agreements and currency swap, currency option or
other similar financial agreements or arrangements entered into
by the Company or any of its Subsidiaries in the ordinary
course of business and designed to protect against or manage
exposure to fluctuations in foreign currency exchange rates.
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its
nominees and their respective successors and assigns, or such
other depository institution hereinafter appointed by the Com-
pany.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the
Board of Directors is required to deliver a resolution of the
Board of Directors under the Indenture, a member of the Board
of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or
series of transactions.
"Euroclear" has the meaning set forth in Section 2.1.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchange Securities" means the 10 3/4% Senior Notes
due 2005, Series B, to be issued in exchange for the Initial
Securities pursuant to the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset
or property, the sale value that would be obtained in an arm's-
length transaction between an informed and willing seller under
<PAGE> 16
-10-
no compulsion to sell and an informed and willing buyer under
no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP"
means generally accepted accounting principles in the United
States, consistently applied, that are in effect on the date of
this Indenture.
"guarantee" means, as applied to any obligation, (a)
a guarantee (other than by endorsement of negotiable instru-
ments for collection in the ordinary course of business), di-
rect or indirect, in any manner, of any part or all of such ob-
ligation and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any
way the payment or performance (or payment of damages in the
event of non-performance) of all or any part of such obliga-
tion, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the Securities by
any Subsidiary in accordance with the provisions of Section
4.10 hereof. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Holder" or "Securityholder" means the Person in
whose name a Security is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person,
without duplication, (a) all liabilities of such Person for
borrowed money (including overdrafts) or for the deferred pur-
chase price of property or services, excluding any trade pay-
ables and other accrued current liabilities (including out-
standing disbursements owed to trade creditors) incurred in the
ordinary course of business (whether or not evidenced by a
note), but including, without limitation, all obligations, con-
tingent or otherwise, of such Person in connection with any
letters of credit and acceptances issued under letter of credit
facilities, acceptance facilities or other similar facilities,
(b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness
of such Person created or arising under any conditional sale or
other title retention agreement with respect to property ac-
quired by such Person (even if the rights and remedies of the
seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), but ex-
cluding trade accounts payable arising in the ordinary course
of business, (d) all Capitalized Lease Obligations of such Per-
son, (e) all Indebtedness referred to in (but not excluded
<PAGE> 17
-11-
from) the preceding clauses of other Persons and all dividends
of other Persons, the payment of which is secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or
with respect to property (including, without limitation, ac-
counts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of
such Indebtedness (the amount of such obligation being deemed
to be the lesser of the value of such property or asset or the
amount of the obligation so secured), (f) all guarantees by
such Person of Indebtedness referred to in this definition of
any other Person, (g) all Redeemable Capital Stock of such Per-
son valued at the greater of its voluntary or involuntary maxi-
mum fixed repurchase price plus accrued and unpaid dividends
and (h) all obligations of such Person under or in respect of
Interest Rate Agreements or Currency Agreements. For purposes
hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Re-
deemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such
Redeemable Capital Stock, such Fair Market Value shall be de-
termined in good faith by the board of directors of the issuer
of such Redeemable Capital Stock.
"Indenture" means this Indenture as amended or sup-
plemented from time to time.
"Institutional Accredited Investor" means an institu-
tion that is an "accredited investor" as that term is defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of
an installment of interest on the Securities.
"Interest Rate Agreements" means any interest rate
protection agreements and other types of interest rate hedging
agreements or arrangements (including, without limitation, in-
terest rate swaps, caps, floors, collars and similar agree-
ments) designed to protect against or manage exposure to fluc-
tuations in interest rates in respect of Indebtedness.
"Investment" means, with respect to any Person, any
direct or indirect advance, loss or other extension of credit
or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or serv-
<PAGE> 18
-12-
ices for the account or use of others), or any purchase, acqui-
sition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities or evidences of Indebted-
ness issued or owned by, any other Person and all other items
that would be classified as investments on a balance sheet pre-
pared in accordance with GAAP. In addition, the Fair Market
Value of the net assets of any Subsidiary at the time that such
Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unre-
stricted Subsidiary at such time. "Investment" shall exclude
extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Initial Securities" has the meaning set forth in the
preamble to this Indenture.
"Issue Date" means the date of original issuance of
the Securities.
"Legal Holiday" has the meaning ascribed in Section
10.8.
"Lien" means any mortgage, charge, pledge, lien
(statutory or otherwise), privilege, security interest, hy-
pothecation, assignment for security, claims, or preference or
priority or other encumbrance upon or with respect to any prop-
erty of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own
subject to a Lien any property which such Person has acquired
or holds subject to the interest of a vendor or lessor under
any conditional sale, agreement, capital lease or other title
retention agreement.
"Maturity" means, with respect to any Security, the
date on which any principal of such Security becomes due and
payable as therein or herein provided, whether at the Stated
Maturity with respect to such principal, by sinking fund pay-
ment or by declaration of acceleration, call for redemption or
purchase or otherwise.
"Maturity Date" means August 1, 2005.
"Moody's" means Moody's Investors Service, Inc. and
its successors.
"Net Cash Proceeds" means (a) with respect to any As-
set Sale, the proceeds thereof in the form of cash or Cash
Equivalents including payments in respect of deferred payment
<PAGE> 19
-13-
obligations, but only when received in the form of, or stock or
other assets when disposed for, cash or Cash Equivalents
(except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary), net of
(i) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel and investment
banks) related to such Asset Sale, (ii) provisions for all
taxes payable as a result of such Asset Sale, (iii) payments
made to retire Indebtedness where payment of such Indebtedness
is secured by the assets or properties the subject of such As-
set Sale, (iv) amounts required to be paid to any Person (other
than the Company or any Subsidiary) owning a beneficial inter-
est in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Subsidiary, as the
case may be, as a reserve required in accordance with GAAP
against any liabilities associated with such Asset Sale and re-
tained by the Company or any Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities re-
lated to environmental matters and liabilities under any indem-
nification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Inden-
ture Trustee and (b) with respect to any issuance or sale of
Capital Stock or options, warrants or rights to purchase Capi-
tal Stock, or debt securities or Redeemable Capital Stock that
have been converted into or exchanged for Qualified Capital
Stock, as referred to in Section 4.4, the proceeds of such is-
suance or sale in the form of cash or Cash Equivalents, includ-
ing payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed
for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company
or any Subsidiary of the Company), net of attorney's fees, ac-
countant's fees and brokerage, consultation, underwriting and
other fees and expenses actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a re-
sult thereof.
"Offering Memorandum" means the Offering Memorandum
dated August 8, 1997 relating to the Securities;
"Officer" means the Chairman of the Board, the Presi-
dent, any Senior Vice President, any Vice President, the Treas-
urer or the Secretary of, the Company or any other officer des-
ignated by Board of Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by
two Officers.
<PAGE> 20
-14-
"Opinion of Counsel" means a written opinion from le-
gal counsel who is reasonably acceptable to the Trustee and
which complies, if applicable, with Section 10.5. The counsel
may be an employee of or counsel to the Company.
"Paying Agent" has the meaning provided in Section
2.3.
"Permitted Holders" means Michael A. Chowdry, the Re-
lated Parties and/or a trustee or other fiduciary holding Vot-
ing Stock under an employee benefit plan of the Company.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company in an aggregate
principal amount at any one time outstanding not to exceed
$100 million provided that such Indebtedness is incurred
to finance the acquisition of additional aircraft by the
Company and is secured by Liens on such aircraft;
(b) Indebtedness of the Company outstanding on the
Issue Date;
(c) Indebtedness of the Company to any wholly owned
Subsidiary; provided that any Indebtedness of the Company
owing to any such Subsidiary is made pursuant to an inter-
company note and is subordinated in right of payment from
and after such time as the Securities shall become due and
payable (whether at Stated Maturity, upon acceleration or
otherwise) to the payment and performance of the Company's
obligations under the Securities; provided further, that
any disposition, pledge or transfer of any such Indebted-
ness to a Person (other than the Company or another wholly
owned Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by the Company not permitted by this
clause (c);
(d) Indebtedness of the Company under Currency
Agreements and Interest Rate Agreements entered into in
the ordinary course of business, provided that the no-
tional amount of such obligations does not exceed the
amount of the related obligation on Indebtedness outstand-
ing or committed to be incurred on the date such Currency
Agreement or Interest Rate Agreements are entered into;
(e) any renewals, extensions, substitutions, refi-
nancings or replacements (each, for purposes of this
clause, a "refinancing") by the Company of any Indebted-
<PAGE> 21
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ness of the Company pursuant to clause (b) of this defini-
tion, including any successive refinancings by the Com-
pany, so long as (i) any such new Indebtedness shall be in
a principal amount that does not exceed the principal
amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be
due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determina-
tion) so refinanced, plus the amount of any premium re-
quired to be paid in connection with such refinancing pur-
suant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by the Company
as necessary to accomplish such refinancing, plus the
amount of expenses of the Company incurred in connection
with such refinancing, (ii) in the case of any refinancing
of Subordinated Indebtedness, such new Indebtedness is
made subordinate to the Securities at least to the same
extent as the Indebtedness being refinanced and (iii) such
new Indebtedness has no scheduled payment dates prior to
the final Stated Maturity of the Securities;
(f) Indebtedness of the Company in addition to any
amounts listed in clauses (a) through (e) above in an ag-
gregate principal amount at any one time outstanding not
to exceed $20 million less the amount of Permitted Sub-
sidiary Indebtedness then outstanding pursuant to clause
(f) of the definition hereof;
(g) Indebtedness under the Securities and this In-
denture;
(h) Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or simi-
lar instrument inadvertently (except in the case of day-
light overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of
incurrence; and
(i) Indebtedness of the Company and its Restricted
Subsidiaries incurred in connection with the acquisition
of ten new Boeing 747-400 aircraft pursuant to the Boeing
Purchase Contract provided that Indebtedness shall not ex-
ceed 80% of Appraised Fair Market Value of such aircraft
at the time of borrowing, neither individually nor in the
aggregate.
<PAGE> 22
-16-
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned
Subsidiary;
(c) Investments in Subsidiaries and Unrestricted
Subsidiaries in an amount not to exceed $20 million in ag-
gregate which Subsidiaries or Unrestricted Subsidiaries
are in the business of the Company as conducted on the Is-
sue Date or, a business reasonably related thereto or in-
volved in outsourcing for the air cargo industry or the
leasing of aircraft to the Company;
(d) Investments by the Company or any Subsidiary in
another Person, if as a result of such Investment (i) such
other Person becomes a wholly owned Subsidiary or (ii)
such other Person is merged or consolidated with or into,
or transfers or conveys all or substantially all of its
assets to, the Company or a wholly owned Subsidiary;
(e) Currency Agreements and Interest Rate Agree-
ments;
(f) Loans and advances to employees and officers of
the Company and its Subsidiaries in the ordinary course of
business not in excess of $2.0 million at any one time
outstanding;
(g) Investments in securities of trade creditors or
customers received pursuant to a plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers;
(h) Investments existing on the Issue Date; or
(i) Investments by the Company in AFL II.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date of this Indenture;
(b) Liens on any property or assets of a wholly
owned Subsidiary granted in favor of the Company or any
other wholly owned Subsidiary;
<PAGE> 23
-17-
(c) Liens on property acquired after the date of
this Indenture that secures Indebtedness permitted to be
incurred pursuant to Section 4.3 and provided further that
such Liens shall not extend to any other property of the
Company or its Subsidiaries;
(d) statutory Liens of landlords and carrier's,
warehouseman's, mechanics, supplier's, materialmen's, re-
pairmen's or other like Liens arising in the ordinary
course of business and with respect to amounts not yet de-
linquent or being contested in good faith by appropriate
proceeding, if a reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall
have been made therefor;
(e) Liens for taxes, assessments, government charges
or claims that are being contested in good faith by appro-
priate proceedings promptly instituted and diligently con-
ducted and if a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall
have been made therefor;
(f) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obliga-
tions, surety and appeal bonds, government contracts, per-
formance bonds and other obligations of a like nature in-
curred in the ordinary course of business (other than con-
tracts for the payment of money);
(g) easements, rights-of-way, restrictions and other
similar charges or encumbrances not interfering in any ma-
terial respect with the business of the Company or any
Subsidiary incurred in the ordinary course of business;
(h) Liens arising by reason of any judgment, decree
or order of any court so long as such Lien is adequately
bonded and any appropriate legal proceedings that may have
been duly initiated for the review of such judgment, de-
cree or order shall not have been finally terminated or
the period within which such proceedings may be initiated
shall not have expired; and
(i) any extension, renewal or replacement, in whole
or in part, of any Lien described in the foregoing clauses
(a) through (i); provided that any such extension, renewal
or replacement shall be no more restrictive in any mate-
rial respect that the Lien so extended, renewed or re-
<PAGE> 24
-18-
placed and shall not extend to any additional property or
assets.
"Permitted Subsidiary Indebtedness" means any of the
following:
(a) Indebtedness of Subsidiaries outstanding on the
Issue Date;
(b) Indebtedness of any Subsidiary under Currency
Agreements and Interest Rate Agreements, provided that the
notional principal amount of such obligations does not ex-
ceed the amount of Indebtedness outstanding or committed
to be incurred on the date such Currency Agreements or In-
terest Rate Agreements are entered into;
(c) Indebtedness of any wholly owned Subsidiary to
any other wholly owned Subsidiary or to the Company;
(d) any renewals, extensions, substitutions, refi-
nancings or replacements (each, for purposes of this
clause, a "refinancing") by any Subsidiary of any Indebt-
edness of such Subsidiary pursuant to clause (a) of this
definition, including any successive refinancings by such
Subsidiary, so long as any such new Indebtedness shall be
in a principal amount that does not exceed the principal
amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be
due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determina-
tion) so refinanced plus the amount of any premium re-
quired to be paid in connection with such refinancing pur-
suant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by such Sub-
sidiary as necessary to accomplish such refinancing, plus
the amount of expenses of such Subsidiary incurred in con-
nection with such refinancing;
(e) guarantees by Subsidiaries of Indebtedness of
the Company entered into in accordance with Section 4.10
and guarantees by Subsidiaries of Permitted Subsidiary In-
debtedness of wholly owned Subsidiaries; and
(f) Indebtedness of Subsidiaries in addition to any
amounts listed in clauses (a) through (e) above in an ag-
gregate principal amount at any one time outstanding not
to exceed $20 million, less the amount of Permitted In-
<PAGE> 25
-19-
debtedness then outstanding pursuant to clause (f) of the
definition hereof.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or gov-
ernment or any agency or political subdivision thereof.
"Physical Securities" has the meaning provided in
Section 2.1.
"Preferred Stock", means, with respect to any Person,
any and all shares, interests, participations or other equiva-
lents (however designated) of such person's preferred or pref-
erence stock whether outstanding on the date of this Indenture,
or issued thereafter, and including, without limitation, all
classes and series of preferred or preference stock of such
Person.
"Private Exchange Note" shall have the meaning pro-
vided in the Registration Rights Agreement.
"Private Placement Legend" has the meaning provided
in Section 2.15.
"Proceeds Purchase Date" has the meaning provided in
Section 4.8.
"QIB" means any "qualified institutional buyer" (as
defined under the Securities Act).
"Qualified Capital Stock" of any Person means any and
all Capital Stock of such Person other than Redeemable Capital
Stock.
"Record Date" means the record dates specified in the
Securities, whether or not a Legal Holiday.
"Redeemable Capital Stock" means any class or series
of Capital Stock that, either by its terms, by the terms of any
security into which it is convertible or exchangeable or by
contract or otherwise is, or upon the happening of an event or
passage of time would be, required to be redeemed prior to the
final Stated Maturity of the Securities or is redeemable at the
option of the holder thereof at any time prior to such final
Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to such final Stated Matur-
ity.
<PAGE> 26
-20-
"Redemption Date" when used with respect to any secu-
rity, means the date fixed for such redemption pursuant to this
Indenture and the Securities delivered pursuant to Section 3.3
as the date on which the Company has elected to redeem all of
the Securities pursuant to paragraph 7 of the Securities after
the occurrence of a Change of Control.
"Registrar" has the meaning provided for in Section
2.3.
"Registration Rights Agreement" means the Exchange
and Registration Rights Agreement, dated August 13, 1997, be-
tween the Company and Initial Purchaser.
"Regulation S" means Regulation S under the Securi-
ties Act.
"Regulation S Global Note" has the meaning set forth
in Section 2.1.
"Related Parties" means (a) the spouse, children or
other descendants (by blood or adoption), stepchildren, sib-
lings, and in-laws of Michael A. Chowdry or the spouse of Mi-
chael A. Chowdry; (b) the heirs, legatees, devisees, distribu-
tees, personal representatives, or the estate of Michael A.
Chowdry or of persons listed in the foregoing clause (a); (c)
any trust primarily for the benefit of Michael A. Chowdry or
any of the persons or entities listed in the foregoing clauses
of this definition; (d) any trust, corporation, limited or gen-
eral partnership, limited liability company or partnership or
other entity of which Michael A. Chowdry and/or any of the
other persons or entities listed in the foregoing clauses of
this definition are the beneficial owners (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securi-
ties that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of
time) of a controlling interest in the outstanding voting and
equity securities or interests; (e) a transferee pursuant to a
decree of dissolution of marriage relating to Michael A. Chow-
dry or a Person that has been immediately prior to the disposi-
tion a Related Party under any clause of this definition; or
(f) a transferee by disposition in an involuntary manner with-
out the consent of Michael A. Chowdry or a Person that has been
immediately prior to the disposition a Related Party under any
clause of this definition, including, but not limited to, dis-
position under judicial orders.
<PAGE> 27
-21-
"Responsible Officer" when used with respect to the
Trustee, means any officer within the corporate trust depart-
ment of the Trustee (or any successor group of the Trustee)
with direct responsibility for the administration of this In-
denture and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.
"Restricted Period" means 40 days after the later of
commencement of the offering of the Securities and the Issue
Date.
"Restricted Security" has the meaning assigned to
such term in Rule 144(a)(3) under the Securities Act; provided,
however, that the Trustee shall be entitled to request and con-
clusively rely on an Opinion of Counsel with respect to whether
any Security constitutes a Restricted Security.
"Rule 144A Global Note" has the meaning set forth in
Section 2.1.
"S&P" means Standard and Poor's Ratings Group, a di-
vision of McGraw-Hill, Inc., and its successors.
"Securities" means the Initial Securities and the Ex-
change Securities treated as a single class of securities, as
amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended and the rules and regulations of the Commission promul-
gated thereunder.
"Significant Subsidiary" means any Subsidiary of the
Company that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10%
of the consolidated revenues of the Company and its Subsidiar-
ies or (ii) as of the end of such fiscal year, was the owner of
more than 10% of the consolidated assets of the Company and its
Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fis-
cal year.
"Stated Maturity" means, when used with respect to
the Securities or any installment of interest thereon, the date
specified in the Security as the fixed date on which the prin-
cipal of the Security or such installment of interest is due
<PAGE> 28
-22-
and payable, and, when used with respect to any other Indebted-
ness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such
Indebtedness, or any installment of interest thereon, is due
and payable.
"Subordinated Indebtedness" means Indebtedness of the
Company that is expressly subordinated in right of payment to
the Securities.
"Subsidiary" means any Person a majority of the eq-
uity ownership or Voting Stock of which is at the time owned,
directly or indirectly, by the Company or by one or more other
Subsidiaries or by the Company and one or more other Subsidiar-
ies. For purposes of this Indenture, the term Subsidiary shall
not include any Unrestricted Subsidiary, except in the defini-
tion of Unrestricted Subsidiary.
"Surviving Entity" has the meaning provided in Sec-
tion 5.1.
"TIA" means the Trust Indenture Act of 1939 (15
U.S.C. SS 77aaa-77bbbb) as in effect on the date of this Inden-
ture; provided, however, that, in the event the Trust Indenture
Act of 1939 is amended after such date, "TIA" means, to the ex-
tent required by any such amendment, the Trust Indenture Act of
1939 as so amended.
"Trustee" means the party named as such in the pream-
ble to this Indenture until a successor replaces it in accor-
dance with the provisions of Article VII of this Indenture and,
thereafter, means the successor.
"Trust Officer" means any officer or assistant offi-
cer of the Trustee assigned by the Trustee to administer its
corporate trust matters.
"Unrestricted Subsidiary" means (a) any Subsidiary of
the Company that at the time of determination shall be an Unre-
stricted Subsidiary (as designated by the Board of Directors of
the Company, as provided below) and (b) any Subsidiary of an
Unrestricted Subsidiary and (c) Atlas Freighter Leasing, Inc.
is an Unrestricted Subsidiary as of the Issue Date. Atlas
Freighter Leasing II, Inc. ("AFL II") may be designated an Un-
restricted Subsidiary at any time on or after the Issue Date
(and such designation shall not be deemed a Restricted Payment
for purposes of Section 4.4, provided Investments by the Com-
pany in AFL II since the Issue Date and outstanding on the date
<PAGE> 29
-23-
of designation shall not exceed $5 million in the aggregate.
The Board of Directors of the Company may designate any Sub-
sidiary (including any newly acquired or newly formed Subsidi-
ary) to be an Unrestricted Subsidiary so long as (i) neither
the Company nor any Subsidiary is directly or indirectly liable
for any Indebtedness of such Subsidiary, (ii) no default with
respect to any Indebtedness of such Subsidiary would permit
(upon notice, lapse of time or otherwise) any holder of any
other Indebtedness of the Company or any Subsidiary to declare
a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated matur-
ity, (iii) any Investment in such Subsidiary made as a result
of designation of such Subsidiary an Unrestricted Subsidiary or
otherwise was permitted under paragraph (a), clause (iv) of
Section 4.4, (iv) neither the Company nor any Subsidiary has a
contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with such Subsidiary
other than those that might be obtained at the time from Per-
sons who are not affiliates of the Company, and (v) neither the
Company nor any Subsidiary has any obligation (1) to subscribe
for additional shares of Capital Stock or other equity inter-
ests in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results. Any such designa-
tion by the Board of Directors of the Company shall be evi-
denced to the Indenture Trustee by filing a board resolution
with the Indenture Trustee giving effect to such designation.
The Board of Directors of the Company may designate any Unre-
stricted Subsidiary as a Subsidiary if immediately after giving
effect to such designation, there would be no Default or Event
of Default under this Indenture and the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebt-
edness) pursuant to Section 4.3.
"U.S. Legal Tender" means such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
"Voting Stock" means, with respect to any Person, any
class or classes of Capital Stock pursuant to which the holders
thereof have the general voting power under ordinary circum-
stances to elect at least a majority of the board of directors,
managers or trustees of such Person (irrespective of whether or
not, at the time, stock of any other class or classes shall
have, or might have, voting power by reason of the happening of
any contingency).
<PAGE> 30
-24-
SECTION 1.2. Other Definitions.
Defined in
Term Section
"Agent Members" ....................... 2.16
"Change of Control Purchase Date" ..... 4.9
"Change of Control Purchase Price" .... 4.9
"covenant defeasance" ................. 8.1(b)
"Custodian" ........................... 6.1
"Event of Default" .................... 6.1
"Excess Proceeds" ..................... 4.8(b)
"Excess Proceeds Offer" ............... 4.8(c)
"Global Notes" ........................ 2.1
"incur" ............................... 4.3(a)
"legal defeasance" .................... 8.1(b)
"Offered Price" ....................... 4.8(c)
"Replacement Assets" .................. 4.8(b)
"Restricted Payment" .................. 4.4
"Rule 144A" ........................... 2.1
"Surviving Entity ..................... 5.1
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act. This Indenture is subject to the mandatory pro-
visions of the TIA which are incorporated by reference in and
made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Com-
pany, and any other obligor on the securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by the TIA reference to another
statute or defined under rules promulgated by the Commission
have the meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the
context otherwise requires:
<PAGE> 31
-25-
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
(6) references to Article and Section numbers refers
to the corresponding Articles and Sections of this Inden-
ture unless otherwise specified; and
(7) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE II
The Securities
SECTION 2.1. Form and Dating. The Initial Securi-
ties, and the Trustee's certificate of authentication thereon
shall be substantially in the form of Exhibit A hereto. The
Exchange Securities, and the Trustee's certificate of authenti-
cation thereon shall be substantially in the form of Exhibit B
hereto. The Securities may have notations, legends or endorse-
ments required by law, stock exchange rule or Depository rule
or usage. The Company and the Trustee shall approve the form
of the Securities and any notation, legend or endorsement on
them. Each Security shall be dated the date of its authentica-
tion.
The terms and provisions contained in the forms of
the Securities annexed hereto as Exhibits A and B, shall con-
stitute, and are hereby expressly made, a part of this Inden-
ture and, to the extent applicable, the Company and the Trus-
tee, by their execution and delivery of this Indenture, ex-
pressly agree to such terms and provisions and to be bound
thereby.
Securities offered and sold in reliance on Rule 144A
under the Securities Act ("Rule 144A") shall be issued ini-
<PAGE> 32
-26-
tially in the form of one or more permanent global notes in
registered form, in substantially the form set forth in Exhibit
A (the "Rule 144A Global Note"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The ag-
gregate principal amount of the Rule 144A Global Note may from
time to time be increased or decreased by adjustments made on
the records of the Trustee, as custodian for the Depositary, as
hereinafter provided. Securities offered and sold in reliance
on Regulation S under the Securities Act shall be issued in the
form of one or more permanent global notes in registered form
in substantially the form set forth in Exhibit A with the leg-
end set forth in Exhibit A-2 (the "Regulation S Global Note"
and together with the 144A Global Note, the "Global Notes").
The Regulation S Global Note, which shall be deposited with the
Trustee, as custodian for the Depositary, and registered in the
name of the Depositary or the nominee of the Depositary for the
accounts of designated agents holding on behalf of the Euro-
clear System ("Euroclear") or Cedel Bank, S.A. ("Cedel Bank").
The aggregate principal amount of the Regulation S Global Note
may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the De-
positary, as hereinafter provided.
Securities issued in exchange for interests in the
Rule 144A Global Note pursuant to Section 2.17 may be issued in
the form of permanent certificated Securities in registered
form in substantially the form set forth in Exhibit A (the
"Physical Securities").
Each of the Global Notes shall represent such amount
of the outstanding Securities as shall be specified therein and
each shall provide that it shall represent the aggregate amount
of outstanding Securities from time to time endorsed thereon
and that the aggregate amount of outstanding Securities repre-
sented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges and redemptions. Any en-
dorsement of a Global Note to reflect the amount of any in-
crease or decrease in the amount of outstanding Securities rep-
resented thereby shall be made by the Trustee in accordance
with instructions given by the Holder thereof as required by
Section 2.6 hereof.
The provisions of the "Operating Procedures of the
Euroclear System" and "Terms and Conditions Governing Use of
Euroclear" and the "Management Resolutions" and "Instructions
to Participants" of Cedel Bank shall be applicable to interests
<PAGE> 33
-27-
in the Regulation S Global Notes that are held by the Agent
Members through Euroclear or Cedel Bank.
SECTION 2.2. Execution and Authentication. (a)
Two Officers of the Company, or one Officer shall sign, and one
Officer or an Assistant Secretary (each of whom shall, in each
case, have been duly authorized by all requisite corporate ac-
tions) shall attest to, the Securities for the Company by man-
ual or facsimile signature. If an Officer whose signature is
on a Security no longer holds that office at the time the Secu-
rity is authenticated, the Security shall nevertheless be
valid.
(b) A Security shall not be valid until authenti-
cated by the manual signature of the Trustee. The signature of
the Trustee shall be conclusive evidence that the Security has
been authenticated under this Indenture.
(c) The Trustee shall authenticate (i) Initial Secu-
rities for original issue in the aggregate principal amount not
to exceed $150,000,000, (ii) Private Exchange Notes from time
to time in exchange for a like principal amount of Initial Se-
curities and (iii) Exchange Securities from time to time for
issue only in exchange for a like principal amount of Initial
Securities or Private Exchange Notes, as the case may be, in
each case upon receipt of a written order of the Company. Each
such written order shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be
authenticated, whether the Securities are to be Initial Securi-
ties, Private Exchange Notes or Exchange Securities and whether
the Securities are to be issued as Physical Securities or
Global Notes and such other information as the Trustee may rea-
sonably request. The aggregate principal amount of Securities
outstanding at any time may not exceed $150,000,000.
(d) The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Securities. Unless
limited by the terms of such appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do
so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticat-
ing agent has the same rights as an Agent to deal with the Com-
pany or an Affiliate.
(e) The Securities shall be issuable in fully regis-
tered form only, without coupons, in denominations of $1,000
and any integral multiple thereof.
<PAGE> 34
-28-
SECTION 2.3. Registrar and Paying Agent. (a) The
Company shall maintain an office or agency (which shall be lo-
cated in the Borough of Manhattan in the City of New York,
State of New York) where (i) Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii)
Securities may be presented for payment ("Paying Agent") and
(iii) notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Registrar
shall keep a register of the Securities and of their transfer
and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent, Registrar or co-registrar
without prior notice to any Securityholder. The Company shall
notify the Trustee and the Trustee shall notify the Security-
holders of the name and address of any Agent not a party to
this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall
act as such. The Company may act as Paying Agent, Registrar or
co-registrar. The Company shall enter into an appropriate
agency agreement with any Agent not a party to this Indenture,
which shall incorporate the provisions of the TIA. The agree-
ment shall implement the provisions of this Indenture that re-
late to such Agent. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails
to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be
entitled to appropriate compensation in accordance with Section
7.7.
(b) The Company initially appoints the Trustee as
Registrar, Paying Agent, authenticating agent and agent for
service of notices and demands in connection with the Securi-
ties. The Trustee's address for purposes of Section 2.3(a) is
61 Broadway, 15th Floor, New York, New York 10006.
(c) Any of the Registrar, the Paying Agent or any
other agent may resign upon 30 days' notice to the Company.
The office of the Paying Agent as Registrar for purposes of
this Section 2.03 shall initially be at 61 Broadway, Concourse
Level, New York, New York.
SECTION 2.4. Paying Agent to Hold Money in Trust.
The Company or any other obligor on the Securities shall re-
quire each Paying Agent other than the Trustee to agree in
writing that the Paying Agent shall hold in trust for the bene-
fit of the Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of, premium, if any,
<PAGE> 35
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and interest on the Securities, and shall notify the Trustee of
any Default by the Company or any other obligor on the Securi-
ties in making any such payment. While any such Default con-
tinues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company or any other obligor on
the Securities at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the
Trustee, the Paying Agent (if other than the Company) shall
have no further liability for the money delivered to the Trus-
tee. If the Company or any other obligor on the Securities
acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Securityholders all money
held by it as Paying Agent.
SECTION 2.5. Securityholder Lists. The Trustee
shall preserve in as current a form as is reasonably practica-
ble the most recent list available to it of the names and ad-
dresses of Securityholders and shall otherwise comply with TIA
S 312(a). If the Trustee is not the Registrar, the Company or
any other obligor on the Securities shall furnish to the Trus-
tee at least five Business Days before each Interest Payment
Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Security-
holders, including the aggregate principal amount of the Secu-
rities held by each thereof, and the Company or any other obli-
gor on the Securities shall otherwise comply with TIA S 312(a).
SECTION 2.6. Transfer and Exchange. (a) Subject
to Sections 2.16 and 2.17 where Securities are presented to the
Registrar or a co-registrar with a request to register the
transfer thereof or exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall reg-
ister the transfer or make the exchange if its requirements for
such transactions are met; provided, that any Security pre-
sented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar and the Trus-
tee duly executed by the Securityholder thereof or his attorney
duly authorized in writing. To permit registrations of trans-
fer and exchanges, the Company shall issue and the Trustee
shall authenticate Securities at the Registrar's request.
(b) The Company and the Registrar shall not be re-
quired (i) to issue, to register the transfer of or to exchange
Securities during a period beginning at the opening of business
on a Business Day 15 days before the day of any selection of
Securities for redemption pursuant to Article 3 and ending at
<PAGE> 36
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the close of business on the day of selection, (ii) to register
the transfer of or exchange any Security so selected for re-
demption in whole or in part, except the unredeemed portion of
any Security being redeemed in part or (iii) to register the
transfer or exchange of a Security between the Record Date and
the next succeeding Interest Payment Date.
(c) No service charge shall be made for any regis-
tration of a transfer or exchange (except as otherwise ex-
pressly permitted herein), but the Company may require payment
by the Securityholder of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection there-
with (other than such transfer tax or similar governmental
charge payable upon exchanges pursuant to Section 2.10, 3.6 or
9.5).
(d) Any Holder of either of the Global Notes shall,
by acceptance of such Global Note, agree that transfers of
beneficial interests in such Global Note may be effected only
through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial
interest in the Global Note shall be required to be reflected
in a book entry.
SECTION 2.7. Replacement Securities. (a) If any
mutilated Security is surrendered to the Trustee, or the Com-
pany and the Trustee receives evidence to its satisfaction of
the destruction, loss or theft of any Security, the Company
shall issue and the Trustee, upon receipt by it of the written
order of the Company signed by two Officers of the Company,
shall authenticate a replacement Security if the Trustee's re-
quirements for replacements of Securities are met. If required
by the Trustee or the Company, an indemnity bond must be sup-
plied by the Holder that is sufficient in the reasonable judg-
ment of the Trustee and the Company to protect the Company, the
Trustee, any Agent or any authenticating agent from any loss
which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge a Securityholder for reason-
able out-of-pocket expenses in replacing a Security, including
fees and expenses of counsel.
(b) Every replacement Security is an additional ob-
ligation of the Company and shall be entitled to the benefits
of this Indenture.
SECTION 2.8. Outstanding Securities. (a) The Se-
curities outstanding at any time are all the Securities authen-
ticated by the Trustee except for those cancelled by the Com-
<PAGE> 37
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pany or by the Trustee, those delivered to the Trustee for can-
cellation and those described in this Section as not outstand-
ing.
(b) If a Security is replaced pursuant to Section
2.7, it ceases to be outstanding unless and until the Trustee
receives proof satisfactory to it that the replaced Security is
held by a bona fide purchaser.
(c) If the principal amount of any Security is con-
sidered paid under Section 4.1, it ceases to be outstanding and
interest on it ceases to accrue.
(d) Subject to Section 2.9, a Security does not
cease to be outstanding because the Company or an Affiliate of
the Company holds the Security.
(e) If on a Redemption Date or the Maturity Date the
Paying Agent holds U.S. Legal Tender sufficient to pay all of
the principal, premium, if any, and interest due on the Securi-
ties payable on that date and is not prohibited from paying
such money to the Securityholders thereof pursuant to the terms
of this Indenture, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9. Treasury Securities. In determining
whether the Holders of the required principal amount of Securi-
ties have concurred in any direction, waiver or consent, Secu-
rities owned by the Company, or any of their respective Affili-
ates shall be considered as though not outstanding, except that
for purposes of determining whether the Trustee shall be pro-
tected in relying on any such direction, waiver or consent,
only Securities which a Responsible Officer knows to be so
owned shall be so considered.
SECTION 2.10. Temporary Securities. Until defini-
tive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities. Tem-
porary Securities shall be substantially in the form of defini-
tive Securities but may have variations that the Company and
the Trustee consider appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the written order of the Company
signed by two Officers of the Company, or one Officer shall
sign, and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite
corporate actions) shall authenticate, pursuant to Section
2.02, definitive Securities in exchange for temporary Securi-
<PAGE> 38
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ties. Until such exchange, temporary Securities shall be enti-
tled to the same rights, benefits and privileges under this In-
denture as definitive Securities.
SECTION 2.11. Cancellation. The Company at any time
may deliver Securities to the Trustee for cancellation. The
Registrar and Paying Agent shall forward to the Trustee any Se-
curities surrendered to them for registration of transfer, ex-
change or payment. The Trustee shall cancel all Securities, if
not already cancelled, surrendered for registration of trans-
fer, exchange, payment, replacement or cancellation and shall
destroy cancelled Securities (subject to the record retention
requirement of the Exchange Act), and deliver certification of
their destruction to the Company, unless by a written order,
signed by two Officers of the Company, or one Officer shall
sign, and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite
corporate actions), the Company shall direct that cancelled Se-
curities be returned to it. Subject to Section 2.07 the Com-
pany may not issue new Securities to replace Securities that it
has redeemed or paid or that have been delivered to the Trustee
for cancellation.
SECTION 2.12. Defaulted Interest. If the Company
defaults in a payment of interest on the Securities, it shall
pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to
the Persons who are Securityholders on a subsequent special re-
cord date, which date shall be at the earliest practicable date
but in all events at least five Business Days prior to the pay-
ment date, in each case at the rate provided in the Securities
and in Section 4.1. The Company shall, with the consent of the
Trustee, fix or cause to be fixed each such special record date
and payment date. At least 15 days before the special record
date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to Securityholders a notice
that states the special record date, the related payment date
and the amount of such interest to be paid.
SECTION 2.13. CUSIP Number. The Company in issuing
the Securities may use a "CUSIP" number, and if so, the Trustee
shall use the CUSIP number in notices of redemption or exchange
as a convenience to Securityholders; provided, that no repre-
sentation shall be deemed to be made by the Trustee as to the
correctness or accuracy of the CUSIP number printed in the no-
tice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
<PAGE> 39
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The Company shall promptly notify the Trustee of any change in
the CUSIP number.
SECTION 2.14. Deposit of Moneys. Prior to 11:00
a.m. New York City time on each Interest Payment Date and Ma-
turity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make
cash payments, if any, due on such Interest Payment Date or Ma-
turity Date, as the case may be, in a timely manner which per-
mits the Paying Agent to remit payment to the Securityholders
on such Interest Payment Date or Maturity Date, as the case may
be.
SECTION 2.15. Restrictive Legends. Each Global Note
and Physical Security that constitutes a Restricted Security
shall bear the following legend (the "Private Placement Leg-
end") on the face thereof until August 13, 1999 unless other-
wise agreed by the Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE SECURITYHOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 OF THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY
A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
<PAGE> 40
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PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
APPLICABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE
SECURITYHOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION" "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend
on the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY
SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY
OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY SUCH
NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
<PAGE> 41
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VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
The Regulation S Global Note shall bear the following
legend on the face thereof:
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S.
PERSON (AS SUCH TERM IS DEFINED IN REGULATION S UNDER
THE SECURITIES ACT) OR FOR THE ACCOUNT OR BENEFIT OF
A U.S. PERSON PRIOR TO THE EXPIRATION OF THE
RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE), AND
NO TRANSFER OR EXCHANGE OF THIS SECURITY MAY BE MADE
FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER
THE LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED
PERIOD AND THE DATE ON WHICH THE PROPER REQUIRED
CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN
PROVIDED IN ACCORDANCE WITH THE TERMS OF THE
INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR
OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
SECTION 2.16. Book-Entry Provisions for Global Secu-
rity. (a) Each Global Note initially shall (i) be registered
in the name of the Depositary or the nominee of such Deposi-
tary, (ii) be delivered to the Trustee as custodian for such
Depositary and (iii) bear legends as set forth in Section 2.15.
Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Indenture
with respect to any Global Note held on their behalf by the De-
positary, or the Trustee as its custodian, or under the Global
Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the ab-
solute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of custom-
ary practices governing the exercise of the rights of a Holder
of any Security.
(b) Transfers of a Global Note shall be limited to
transfers in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interest of benefi-
cial owners in a Global Note may be transferred or exchanged
for Physical Securities in accordance with the rules and proce-
dures of the Depositary, the provisions of Section 2.17 and the
<PAGE> 42
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limitation set forth in Section 2.1 with regard to the Regula-
tion S Global Note. In addition, Physical Securities shall be
transferred to all beneficial owners in exchange for their
beneficial interests in a Global Note if (i) the Depositary no-
tifies the Company that it is unwilling or unable to continue
as Depositary for the Global Note and a successor depository is
not appointed by the Company within 90 days of such notice or
(ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depositary to
issue Physical Securities.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in the Global Notes to bene-
ficial owners pursuant to paragraph (b) above, the Registrar
shall (if one or more Physical Securities are to be issued) re-
flect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note
to be transferred, and the Company shall execute, and the Trus-
tee shall authenticate and deliver, one or more Physical Secu-
rities of like tenor and amount.
(d) In connection with the transfer of an entire
Global Note to beneficial owners pursuant to paragraph (b)
above, a Global Note shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and
the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its benefi-
cial interest in such Global Note, an equal aggregate principal
amount of Physical Securities of authorized denominations.
(e) Any Physical Security constituting a Restricted
Security delivered in exchange for an interest in the Global
Note pursuant to paragraph (b) or (c) above shall, except as
otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applica-
ble to the Physical Securities set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Securityholder is entitled to take under
this Indenture or the Securities.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers of Global Notes; Transfers to Non-QIB
Institutional Accredited Investors and Non-U.S. Persons. The
following provisions shall apply with respect to the registra-
<PAGE> 43
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tion of any proposed transfer of a Security constituting of a
Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any
Security constituting a Restricted Security, whether or
not such Security bears the Private Placement Legend, if
(x) the requested transfer is after August 13, 1999; pro-
vided, however, that neither the Company nor any Affiliate
of the Company has held any beneficial interest in such
Security, or portion thereof, at any time on or prior to
August 13, 1999 or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB
(excluding Non-U.S.Persons), the proposed transferee has
delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in
the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member
holding a beneficial interest in the Rule 144A Global
Note, upon receipt by the Registrar of (x) the certifi-
cate, if any, required by paragraph (i) above and (y) in-
structions given in accordance with the Depositary's and
the Registrar's procedures, (a) the Registrar shall re-
flect on its books and records the date and (if the trans-
fer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of the Rule
144A Global Note in an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global
Note to be transferred, and (b)(1) the Company shall exe-
cute and the Trustee shall authenticate and deliver one or
more Physical Securities of like tenor and amount or (2)
the Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of
outstanding Physical Securities) an increase in the prin-
cipal amount of the Regulation S Global Note in an amount
equal to the principal amount of the beneficial interest
in the Rule 144A Global Note to be transferred.
(iii) if the proposed transferor is an Agent Member
holding a beneficial interest in the Regulation S Global
Note, upon receipt by the Registrar of (x) the certifi-
cate, if any, required by paragraph (i) above and (y) in-
structions given in accordance with the Depositary's and
the Registrar's procedures, (a) the Registrar shall re-
flect on its books and records the date and (if the trans-
<PAGE> 44
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fer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of the
Regulation S Global Note in an amount equal to the princi-
pal amount of the beneficial interest in the Regulation S
Global Note to be transferred, and (b)(1) the Company
shall execute and the Trustee shall authenticate and de-
liver one or more Physical Securities of like tenor and
amount or (2) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a
transfer of outstanding Physical Securities) an increase
in the principal amount of the Rule 144A Global Note in an
amount equal to the principal amount of the beneficial in-
terest in the Rule 144A Global Note to be transferred.
(b) Transfers to QIBs. The following provisions
shall apply with respect to the registration of any proposed
transfer of a Security constituting a Restricted Security to a
QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if
such transfer is being made by a proposed transferor who
has advised the Company and the Registrar in writing, that
the sale has been effected in compliance with the provi-
sions of Rule 144A to a transferee who has advised the
Company and the Registrar in writing, that it is purchas-
ing the Security for its own account or an account with
respect to which it exercises sole investment discretion
and that any such account is a QIB within the meaning of
Rule 144A, and it is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the
transferor is relying upon its foregoing representations
in order to claim the exemption from registration provided
by Rule 144A; and
(ii) if the proposed transferee is an Agent Member
and the Securities to be transferred consist of Physical
Securities which after transfer are to be evidenced by an
interest in the Rule 144A Global Note, upon receipt by the
Registrar of instructions given in accordance with the De-
positary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an in-
crease in the principal amount of the Rule 144A Global
Note in an amount equal to principal amount of the Physi-
cal Securities to be transferred, and the Trustee shall
cancel the Physical Securities so transferred.
<PAGE> 45
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(c) Transfers to Non-U.S. Persons. The following
provisions shall apply with respect to the registration of any
proposed transfer of a Security constituting a Restricted Secu-
rity to a Non-U.S. Persons:
(i) the Registrar shall register the transfer if
such transfer is being made by a proposed transferor who
has advised the Company and the Registrar in writing, that
the sale has been effected in compliance with the provi-
sions of Regulation S to a transferee who has advised the
Company and the Registrar in writing, that it is purchas-
ing the Security in compliance with Rule 904 under the Se-
curities Act, and it is aware that the sale to it is being
made in reliance on Regulation S and that it is aware that
the transferor is relying upon its foregoing representa-
tions in order to claim the exemption from registration
provided by Regulation S; and
(ii) if the proposed transferee is an Agent Member
and the Securities to be transferred consist of Physical
Securities which after transfer are to be evidenced by an
interest in the Regulation S Global Note, upon receipt by
the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an in-
crease in the principal amount of the Regulation S Global
Note in an amount equal to principal amount of the Physi-
cal Securities to be transferred, and the Trustee shall
cancel the Physical Securities so transferred.
(d) Private Placement Legend. Upon the registration
of the transfer, exchange or replacement of Securities not
bearing the Private Placement Legend, the Registrar shall de-
liver Securities that do not bear the Private Placement Legend.
Upon the registration of the transfer, exchange or replacement
of Securities bearing the Private Placement Legend, the Regis-
trar shall deliver only Securities that bear the Private Place-
ment Legend unless (i) the circumstance contemplated by para-
graph (a)(i)(x) of this Section 2.17 exists or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provi-
sions of the Securities Act.
(e) General. By its acceptance of any Security
bearing the Private Placement Legend, each Holder of such a Se-
curity acknowledges the restrictions on transfer of such Secu-
<PAGE> 46
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rity set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain for at least two years
copies of all letters, notices and other written communications
received pursuant to Section 2.16 or this Section 2.17. The
Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to
the Registrar.
SECTION 2.18. Persons Deemed Owners. Prior to due
presentment of a Security for registration of transfer and sub-
ject to Section 2.12, the Company, the Trustee, any Paying
Agent, any Registrar and any co-registrar may deem and treat
the Person in whose name any Security shall be registered upon
the register of Securities kept by the Registrar as the abso-
lute owner of such Security (whether or not such Security shall
be overdue and notwithstanding any notation of the ownership or
other writing thereon made by anyone other than the Company,
any Registrar or any co-registrar) for the purpose of receiving
payments of principal of or interest on such Security and for
all other purposes; and none of the Company, the Trustee, any
Paying Agent, any Registrar or any co-registrar shall be af-
fected by any notice to the contrary.
SECTION 2.19. Record Date. The record date for pur-
poses of determining the identity of Securityholders entitled
to vote or consent to any action by vote or consent authorized
or permitted under this Indenture shall be the later of (i) 30
days prior to the first solicitation of such consent or (ii)
the date of the most recent list of Holders furnished to the
Trustee, if applicable, pursuant to Section 2.5.
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee. If the Company
elects to redeem Securities pursuant to paragraph 5 of the Se-
curities, it shall notify the Trustee in writing of the Redemp-
tion Date and the principal amount of Securities to be re-
deemed.
<PAGE> 47
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The Company shall give each notice to the Trustee
provided for in this Section at least 30 days but no more than
60 days before the Redemption Date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an
Officers' Certificate from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.2. Selection of Securities To Be Re-
deemed. If fewer than all the Securities are to be redeemed,
the Trustee shall select the Securities to be redeemed in com-
pliance with the requirements of the principal national securi-
ties exchange, if any, on which such Securities are listed, or
if such Securities are not then listed on a national securities
exchange, on a pro rata basis, by lot or by such other method,
if any, and that the Trustee in its sole discretion considers
fair and appropriate; provided, however, that if a partial re-
demption is made with the proceeds of a Public Equity Offering,
selection of the Securities or portion thereof for redemption
shall be made by the Trustee only on a pro rata basis unless
such method is otherwise prohibited. The Trustee shall make
the selection from outstanding Securities not previously called
for redemption. The Trustee may select for redemption portions
of the principal of Securities that have denominations larger
than $1,000. Securities and portions of them the Trustee se-
lects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company in
writing promptly of the Securities or portions of Securities to
be redeemed.
SECTION 3.3. Notice of Redemption. At least 30
days but not more than 60 days before a date for redemption of
Securities, the Company shall mail a notice of redemption by
first-class mail to each Holder of Securities to be redeemed,
at such Holder's registered address.
The notice shall identify the Securities to be re-
deemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
<PAGE> 48
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(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price;
(5) if fewer than all the Securities are to be re-
deemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the aggre-
gate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities to be outstanding
after such partial redemption;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from
making such payment pursuant to the terms of this Inden-
ture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemp-
tion date;
(7) the CUSIP number, if any, printed on the Securi-
ties being redeemed;
(8) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be re-
deemed and that, after the redemption date upon surrender
of such Security, a new Security or Securities in princi-
pal amount equal to the unredeemed portion shall be is-
sued; and
(9) the paragraph of the Securities and/or Section
of this Indenture pursuant to which the Securities called
for redemption are being redeemed.
At the Company's request made in writing to the Trus-
tee at least 45 days (unless a shorter period is acceptable to
the Trustee) prior to the date fixed for redemption, the Trus-
tee shall give the notice of redemption in the name and the ex-
pense of the Company to each Holder whose Securities are to be
redeemed at the last address for such Holder then shown on the
registry books. In such event, the Company shall provide the
Trustee with the information required by this Section.
SECTION 3.4. Effect of Notice of Redemption. Once
notice of redemption is mailed, Securities called for redemp-
tion become due and payable on the redemption date and at the
redemption price stated in the notice. Upon surrender to the
Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the re-
demption date; provided, that if the redemption date is after a
<PAGE> 49
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regular Record Date and on or prior to the Interest Payment
Date, the accrued interest shall be payable to the Security-
holder of the redeemed Securities registered on the relevant
Record Date. Failure to give notice or any defect in the no-
tice to any Holder shall not affect the validity of the notice
to any other Holder.
SECTION 3.5. Deposit of Redemption Price. (a)
Prior to 11:00 a.m., New York City time, on the redemption
date, the Company shall deposit with the Trustee or with the
Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Securities to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to
the Company any money deposited with the Trustee or the Paying
Agent by the Company in excess of the amounts necessary to pay
the redemption price of, and accrued interest on, all Securi-
ties to be redeemed.
(b) Except as set forth in the last sentence of this
paragraph, on and after the redemption date, interest ceases to
accrue on the Securities or the portions of Securities called
for redemption. If a Security is redeemed on or after an in-
terest Record Date but on or prior to the related Interest Pay-
ment Date, then any accrued and unpaid interest shall be paid
to the Person in whose name such Security was registered at the
close of business on such record date. If any Security called
for redemption shall not be so paid upon surrender for redemp-
tion because of the failure of the Company to comply with the
preceding paragraph, interest shall be paid on the unpaid prin-
cipal, from the redemption date until such principal is paid
and, to the extent lawful, on any interest not paid on such un-
paid principal, in each case at the rate provided in the Secu-
rities and in Section 4.1.
SECTION 3.6. Securities Redeemed in Part. Upon
surrender of a Security that is redeemed in part, the Company
shall execute and the Trustee shall authenticate for and in the
name of the Holder (at the Company's expense), a new Security
equal in a principal amount to the unredeemed portion of the
Security surrendered.
<PAGE> 50
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ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities. The Company
shall promptly pay the principal of, premium, if any, and in-
terest on the Securities on the dates and in the manner pro-
vided in the Securities and in this Indenture. Principal, pre-
mium, if any, and interest shall be considered paid on the date
due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying
Agent, as the case may be, is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms
of this Indenture. Interest will be computed on the basis of a
360 day year comprised of twelve 30 day months.
The Company shall pay interest (including post-
position interest in any proceeding under any Bankruptcy Law)
on overdue principal at the rate specified therefor in the Se-
curities, and it shall pay interest (including post-position
interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable
grace period) at the same rate to the extent lawful.
SECTION 4.2. Reports. (a) The Company will file
on a timely basis with the Commission, to the extent such fil-
ings are accepted by the Commission and whether or not the Com-
pany has a class of securities registered under the Exchange
Act, the annual reports, quarterly reports and other documents
that the Company would be required to file if it were subject
to Section 13 or 15 of the Exchange Act.
(b) The Company will also be required (a) to file
with the Trustee, and provide to each holder of Securities,
without cost to such holder, copies of such reports and docu-
ments within 15 days after the date on which the Company files
such reports and documents with the Commission or the date on
which the Company would be required to file such reports and
documents if the Company were so required, and (b) if the fil-
ing of such reports and documents with the Commission is not
accepted by the Commission or is prohibited under the Exchange
Act, to supply at the Company's cost copies of such reports and
documents to any prospective holder of Securities promptly upon
written request. The Company will also comply with the other
provisions of TIA Section 314(a).
<PAGE> 51
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SECTION 4.3. Limitation on Incurrence of Additional
Indebtedness. (a) The Company will not create, issue, assume,
guarantee or in any manner become directly or indirectly liable
for the payment of, or otherwise incur (collectively, "incur"),
any Indebtedness (including any Acquired Indebtedness) other
than Permitted Indebtedness unless, at the time of any such in-
currence, the Consolidated Fixed Charge Coverage Ratio would
have been at least equal to 2.75 to 1.0 (after giving pro forma
effect to (i) the incurrence of such Indebtedness and (if ap-
plicable) the application of the net proceeds therefrom, in-
cluding to refinance other Indebtedness, as if such Indebted-
ness was incurred and the application of such proceeds occurred
on the first day of the period for which the Consolidated Fixed
Charge Coverage Ratio is calculated, (ii) the incurrence, re-
payment or retirement of any other Indebtedness by the Company
or any Subsidiary since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning
of such period (except that, in making such computation, the
amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such
Indebtedness during such period) and (iii) the acquisition
(whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any company, entity
or business acquired or disposed of by the Company or any Sub-
sidiary or ACMI Contracted Aircraft acquired by the Company or
any Subsidiary, in any such case, since the first day of such
period, as if such acquisition or disposition of a company, en-
tity or business, or such acquisition of an ACMI Contracted
Aircraft acquired by the Company or any Subsidiary, in any such
case, since the first day of such period, as if such acquisi-
tion or disposition of a company, entity or business, or such
acquisition of an ACMI Contracted Aircraft occurred at the be-
ginning of such period; provided, however, that pro forma ef-
fect shall not be given to a number of ACMI Contracted Aircraft
exceeding five in any four fiscal quarters.
(b) The Company will not permit any Subsidiary to
incur any Indebtedness (including any Acquired Indebtedness)
other than Permitted Subsidiary Indebtedness.
SECTION 4.4. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Subsidiary
to, directly or indirectly:
(i) declare or pay any dividend on, or make any dis-
tribution to holders of, any shares of the Capital Stock
of the Company (other than dividends or distributions pay-
able solely in shares of its Qualified Capital Stock or in
<PAGE> 52
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options, warrants or other rights to acquire such shares
of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire
for value, directly or indirectly, any shares of Capital
Stock of the Company or any Subsidiary or any Affiliate of
the Company, or any options, warrants or other rights to
acquire such shares of Capital Stock;
(iii) make any principal payment on, or repurchase,
redeem, defease or otherwise acquire or retire for value,
prior to any scheduled principal payment, sinking fund
payment or maturity, any Subordinated Indebtedness; or
(iv) make any Investment (other than any Permitted
Investment) in any Person
(such payments or any other actions described in (but not ex-
cluded from) clauses (i) through (iv) are collectively referred
to as "Restricted Payments"), unless at the time of, and imme-
diately after giving effect on a pro forma basis to, the pro-
posed Restricted Payment (the amount of any such Restricted
Payment, if other than cash, as determined by the Board of Di-
rectors of the Company, whose determination shall be conclusive
and evidenced by a Board Resolution), (1) no Default or Event
of Default shall have occurred and be continuing, (2) the Com-
pany could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in accordance with the pro-
visions described in Section 4.3 and (3) the aggregate amount
of all Restricted Payments declared or made after the Issue
Date shall not exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Ad-
justed Net Income of the Company accrued on a cumulative
basis during the period beginning on July 1, 1997 and end-
ing on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Pay-
ment (or, if such aggregate cumulative Consolidated Ad-
justed Net Income shall be a loss, minus 100% of such
amount), plus
(B) 100% of the aggregate Net Cash Proceeds received
after the Issue Date by the Company from the issuance or
sale (other than to any Subsidiary) of shares of Qualified
Capital Stock of the Company or warrants, options or
rights to purchase such shares of Qualified Capital Stock
of the Company, plus
<PAGE> 53
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(C) 100% of the aggregate Net Cash Proceeds received
after the Issue Date by the Company from the issuance or
sale (other than to any Subsidiary) of debt securities or
Redeemable Capital Stock that have been converted into or
exchanged for Qualified Capital Stock of the Company to
the extent such securities were originally sold for cash,
together with the aggregate Net Cash Proceeds received by
the Company at the time of such conversion or exchange,
plus
(D) to the extent not otherwise included in the Con-
solidated Adjusted Net Income of the Company, an amount
equal to the net reduction in Investments (other than re-
ductions in Permitted Investments) in any Person resulting
from payments in cash of interest on Indebtedness, divi-
dends, repayments of loans or advances, or other returns
of capital, in each case to the Company or a Subsidiary
after the date of the Indenture from any such Person not
to exceed the amount of Investments (other than Permitted
Investments) in such Persons by the Company and its Sub-
sidiaries, plus
(E) $10 million, plus
(F) without duplication, the sum of (1) the aggre-
gate amount returned in cash on or with respect to Invest-
ments (other than Permitted Investments) made subsequent
to the Issue Date whether through interest payments, prin-
cipal payments, dividends or other distributions or pay-
ments, (2) the net cash proceeds received by the Company
or any Subsidiary from the disposition of all or any por-
tion of such Investments (other than to a Subsidiary of
the Company) and (3) upon redesignation of an Unrestricted
Subsidiary as a Subsidiary, the fair market value of such
Subsidiary; provided, however, that with respect to all
Investments made in any Unrestricted Subsidiary or joint
venture, the sum of clauses (1), (2) and (3) above with
respect to such Investment shall not exceed the aggregate
amount of all such Investments made subsequent to the Is-
sue Date in such Unrestricted Subsidiary or joint venture.
(b) Notwithstanding paragraph (a) above, the Company
and any Subsidiary may take the following actions so long as
(with respect to clauses (ii), (iii), (iv), (v), (vi) and
(vii), below) no Default or Event of Default shall have oc-
curred and be continuing:
<PAGE> 54
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(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at such date of decla-
ration the payment of such dividend would have complied
with the provisions of paragraph (a) above and such pay-
ment shall be deemed to have been paid on such date of
declaration for purposes of the calculation required by
paragraph (a) above;
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the
Company or any warrants, rights or options to acquire
shares of Capital Stock, in exchange for, or out of the
Net Cash Proceeds of a substantially concurrent issuance
and sale (other than to a Subsidiary) of, shares of Quali-
fied Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated
Indebtedness or Redeemable Capital Stock in exchange for,
or out of the Net Cash Proceeds of a substantially concur-
rent issuance and sale (other than to a Subsidiary) of,
shares of Qualified Capital Stock of the Company;
(iv) the purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated In-
debtedness of the Company in exchange for, or out of the
Net Cash Proceeds of a substantially concurrent incurrence
or sale (other than to a Subsidiary) of, new Subordinated
Indebtedness of the Company so long as (A) the principal
amount of such new Indebtedness does not exceed the prin-
cipal amount (or, if such Subordinated Indebtedness being
refinanced provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of
determination) of the Subordinated Indebtedness being so
purchased, redeemed, defeased, acquired or retired, (B)
such new Subordinated Indebtedness is subordinated to the
Securities to the same extent as such Subordinated Indebt-
edness so purchased, redeemed, defeased, acquired or re-
tired and (C) such new Subordinated Indebtedness does not
have a scheduled principal payment earlier than the final
maturity of the Securities;
(v) the purchase, redemption or other acquisition or
retirement for value of shares of Capital Stock of the
Company held by any future, present or former employee or
director of the Company or any Subsidiary issued pursuant
to any management equity or stock option plan of the Com-
<PAGE> 55
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pany; provided that the aggregate consideration paid by
the Company for such shares so purchased, redeemed or oth-
erwise acquired or retired for value does not exceed $2.5
million in any fiscal year of the Company;
(vi) the making of any Investment (other than a Per-
mitted Investment) out of the Net Cash Proceeds of the
substantially concurrent issuance and sale (other than to
a Subsidiary) of Qualified Capital Stock of the Company;
and
(vii) the making of Investments in an aggregate amount
not to exceed $50,000,000 in wholly-owned Unrestricted
Subsidiaries to own and lease ACMI Contracted Aircraft or
other flight equipment utilized in the normal course of
business of the Company.
The actions described in clauses (i), (ii), (iii), (v) and (vi)
of this paragraph (b) shall be Restricted Payments that shall
be permitted to be taken in accordance with this paragraph (b)
but shall reduce the amount that would otherwise be available
for Restricted Payments under clause (3) of paragraph (a) and
the actions described in clause (iv) and (vii) of this para-
graph (b) shall be Restricted Payments that shall be permitted
to be taken in accordance with this paragraph and shall not re-
duce the amount that would otherwise be available for Re-
stricted Payments under clause (3) of paragraph (a) above.
(c) In computing Consolidated Adjusted Net Income of
the Company under paragraph (a) above, (1) the Company shall
use audited financial statements for the portions of the rele-
vant period for which audited financial statements are avail-
able on the date of determination and unaudited financial
statements and other current financial data based on the books
and records of the Company for the remaining portion of such
period and (2) the Company shall be permitted to rely in good
faith on the financial statements and other financial data de-
rived from the books and records of the Company that are avail-
able on the date of determination. If the Company makes a Re-
stricted Payment which, at the time of the making of such Re-
stricted Payment would in the good faith determination of the
Company be permitted under the requirements of the Indenture,
such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial
statements affecting Consolidated Adjusted Net Income of the
Company for any period.
<PAGE> 56
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SECTION 4.5. Limitation on Issuances and Sales of
Capital Stock of Subsidiaries. The Company (a) will not permit
any Subsidiary to issue any Capital Stock (other than to the
Company or a Subsidiary) and (b) will not permit any Person
(other than the Company or a Subsidiary) to own any Capital
Stock of any Subsidiary; provided, however, that this covenant
shall not prohibit (i) the issuance and sale of all, but not
less than all, of the issued and outstanding Capital Stock of
any Subsidiary owned by the Company or any Subsidiary in com-
pliance with the other provisions of the Indenture or (ii) the
ownership by directors of director's qualifying shares or the
ownership by foreign nationals of Capital Stock of any Subsidi-
ary, to the extent mandated by applicable law.
SECTION 4.6. Limitation on Transactions with Af-
filiates. The Company will not, and will not permit any Sub-
sidiary to, directly or indirectly, enter into or suffer to ex-
ist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with, or for the benefit
of, any Affiliate of the Company or any Subsidiary unless (i)
such transaction or series of related transactions is between
and among the Company and wholly owned Subsidiaries or (ii)(A)
such transaction or series of related transactions is on terms
that are no less favorable to the Company, or such Subsidiary,
as the case may be, than those that could have been obtained in
an arm's-length transaction with unrelated third parties; (B)
the Company shall have delivered an officer's certificate to
the Trustee certifying that such transaction or series of re-
lated transactions complies with clause (A); (C) if such trans-
action or series of related transactions involves consideration
of more than $3 million the Board of Directors (including a ma-
jority of the Disinterested Directors) has approved such trans-
action or series of transactions or the Company has obtained a
written opinion from a nationally recognized investment banking
firm to the effect set forth in the preceding clause (A); and
(D) if such transaction or series of related transactions in-
volves consideration of more than $10 million the Company has
obtained a written opinion from a nationally recognized invest-
ment banking firm to the effect set forth in the preceding
clause (A). This covenant will not apply to (i) the payment of
reasonable and customary compensation and fees to, and indemni-
fication of, directors of the Company or any Subsidiary who are
not employees of the Company or any Subsidiary or (ii) reason-
able and customary salaries, bonuses and other compensation
paid to employees of the Company or any Subsidiary in accor-
dance with past practice approved by the Compensation Committee
of the Company. Clauses (ii)(C) and (ii)(D) of Section 4.6
<PAGE> 57
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will not apply to transactions pursuant to the Atlas Freighter
Leasing Transactions.
SECTION 4.7. Limitation on Liens. The Company will
not, and will not permit any Subsidiary to, directly or indi-
rectly, create, incur, assume or suffer to exist any Lien of
any kind (other then Permitted Liens) on or with respect to any
of its property or assets including any shares of stock or in-
debtedness of any Subsidiary, whether owned at the date of the
Indenture or thereafter acquired, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to
receive income thereon.
SECTION 4.8. Limitation on Asset Sales and Disposi-
tion of Proceeds of Asset Sales. (a) The Company will not,
and will not permit any Subsidiary to, directly or indirectly
engage in any Asset Sale involving assets unless (i) the con-
sideration received by the Company or such Subsidiary for such
Asset Sale is not less than the Fair Market Value of the assets
sold (as determined by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by a
Board Resolution) and (ii) the consideration received by the
Company or the relevant Subsidiary in respect of such Asset
Sale consists of at least 75% cash or Cash Equivalents.
(b) If the Company or any Subsidiary engages in an
Asset Sale, the Company may use the Net Cash Proceeds thereof,
within 12 months after such Asset Sale, to (i) repay perma-
nently any then outstanding senior Indebtedness of the Company
or Indebtedness of any Subsidiary, (ii) invest (or enter into a
legally binding agreement to invest) in properties and assets
to replace the properties and assets that were the subject of
the Asset Sale or in properties and assets that will be used in
businesses of the Company or its Subsidiaries, as the case may
be, existing on the Issue Date or reasonably related thereto or
involving outsourcing for the air cargo industry ("Replacement
Assets"), or (iii) a combination of repayment and investment
permitted by the foregoing clauses (b)(i) and (b)(ii). If any
such legally binding agreement to invest such Net Cash Proceeds
is terminated, then the Company may, within 90 days of such
termination or within 12 months of such Asset Sale, whichever
is later, invest such Net Cash Proceeds as provided in clauses
(i), (ii) (without regard to the parenthetical contained in
such clause (ii)) or (iii) above. Pending the final applica-
tion of any such Net Cash Proceeds, the Company or such Sub-
sidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Cash Pro-
<PAGE> 58
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ceeds in Cash Equivalents. The amount of such Net Cash Pro-
ceeds not so used as set forth above in this paragraph (b) con-
stitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds ex-
ceeds $10 million, the Company shall, within 25 business days,
make an offer to purchase (an "Excess Proceeds Offer") from the
holders of Securities, on a pro rata basis, in accordance with
the procedures set forth below, the maximum principal amount of
Securities that may be purchased with the Excess Proceeds. The
offer price as to each Note shall be payable in cash in an
amount equal to 100% of the principal amount of such Note (as
adjusted for any prepayment of principal of the Securities),
plus accrued interest, if any (the "Offered Price"), to the
date such Excess Proceeds Offer is consummated. To the extent
that the adjusted aggregate principal amount of Securities ten-
dered pursuant to an Excess Proceeds Offer is less than the Ex-
cess Proceeds, the Company may use such deficiency for general
corporate purposes. If the aggregate principal amount of Secu-
rities validly tendered and not withdrawn by holders thereof
exceeds the Excess Proceeds, Securities to be purchased will be
selected on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset to zero.
(d) Notwithstanding the foregoing, the Company and
its Subsidiaries will be permitted to consummate an Asset Sale
without complying with paragraphs (a) and (b) above to the ex-
tent (i) at least 75% of the consideration for such Asset Sale
constitutes Replacement Assets and/or Cash Equivalents and (ii)
such Asset Sale is for Fair Market Value; provided, however,
that any consideration not constituting Replacement Assets re-
ceived by the Company or any Subsidiary in connection with any
Asset Sale permitted to be consummated under this paragraph
shall constitute Net Cash Proceeds subject to the provisions of
paragraphs (a) and (b) above.
(e) If the Company becomes obligated to make an Of-
fer pursuant to clause (c) above, the Securities shall be pur-
chased by the Company, at the option of the holder thereof, in
whole or in part in integral multiples of $1,000, on a date
that is not earlier than 30 days and not later than 60 days
from the date the notice is given to holders, or such later
date as may be necessary for the Company to comply with the re-
quirements under the Exchange Act, subject to proration in the
event the amount Excess Proceeds is less than the aggregate Of-
fered Price of all Securities tendered.
(f) Any notice pursuant to 4.8 shall contain all in-
structions and materials necessary to enable such Securityhold-
<PAGE> 59
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ers to tender Securities pursuant to the Excess Proceeds Offer
and shall state the following terms:
(1) that the Excess Proceeds Offer is being made
pursuant to Section 4.8 of this Indenture and that all Se-
curities tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Securi-
ties tendered in an Excess Proceeds Offer exceeds the ag-
gregate amount of the Excess Proceeds Offer, the Company
shall select the Securities to be purchased on a pro rata
basis (with such adjustments as may be deemed appropriate
by the Company so that only Notes in denominations of
$1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of ac-
crued interest) and the purchase date (which shall be 20
Business Days from the date of mailing of notice of such
Excess Proceeds Offer, or such longer period as required
by law) (the "Proceeds Purchase Date");
(3) that any Securities not tendered will continue
to accrue interest;
(4) that, unless the Company defaults in making pay-
ment therefor, any Security accepted for payment pursuant
to the Excess Proceeds Offer shall cease to accrue inter-
est after the Proceeds Purchase Date;
(5) that Securityholders electing to have a Security
purchased pursuant to an Excess Proceeds Offer will be re-
quired to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on
the third Business Day prior to the Proceeds Purchase
Date;
(6) that Securityholders will be entitled to with-
draw their election if the Paying Agent receives, not
later than five Business Days prior to the Proceeds Pur-
chase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Securityholder, the
principal amount of the Securities the Securityholder de-
livered for purchase and a statement that such Security-
holder is withdrawing his election to have such Security
purchased; and
<PAGE> 60
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(7) that Securityholders whose Securities are pur-
chased only in part will be issued new Securities in a
principal amount equal to the unpurchased portion of the
Securities surrendered; provided that each Security pur-
chased and each new Security issued shall be in an origi-
nal principal amount of $1,000 or integral multiples
thereof;
On or before the Proceeds Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof
tendered pursuant to the Excess Proceeds Offer which are to be
purchased in accordance with item (f)(1) above, (ii) deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Securities
to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Se-
curities or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail to the Securityholders of
Securities so accepted payment in an amount equal to the pur-
chase price plus accrued interest, if any. For purposes of
this Section 4.8, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of the Secu-
rities pursuant to an Excess Proceeds Offer shall be returned
by the Trustee to the Company.
(g) The Company will comply with the applicable ten-
der offer rules, including Rule 14e-1 under the Exchange Act,
in connection with an Excess Proceeds Offer and shall not be
deemed in violation of this covenant by reason of any action
required to be taken to effect such compliance. To the extent
that the provisions of any securities laws or regulations con-
flict with this Section 4.8, the Company shall comply with the
applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.8
by virtue thereof.
SECTION 4.9. Change of Control. (a) If a Change
of Control shall occur at any time, then each holder of Securi-
ties shall have the right to require that the Company purchase
such holder's Securities, in whole or in part in integral mul-
tiples of $1,000, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Securities, plus accrued interest, if
any, to the date of purchase (the "Change of Control Purchase
Date"), pursuant to the offer described in (b) below (the
"Change of Control Offer") and the other procedures set forth
in this Indenture.
<PAGE> 61
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(b) Within 30 days following the date upon which a
Change of Control occurs, the Company shall notify the Trustee
thereof and give written notice of such Change of Control to
each holder of Securities by first-class mail, postage prepaid,
at the address of such holder shown on the security register,
which notice shall govern the terms of the Change of Control
Office; such notice shall state:
(i) that the Change of Control Offer is being made
pursuant to Section 4.9 of this Indenture and that all Se-
curities validly tendered and not withdrawn will be ac-
cepted for payment;
(ii) the purchase price and the purchase date, which
shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such
later date as is necessary to comply with requirements un-
der the Exchange Act;
(iii) that any Securities not tendered will continue
to accrue interest;
(iv) that, unless the Company defaults in the payment
of the purchase price, any Securities accepted for payment
pursuant to the Change of Control Offer shall cease to ac-
crue interest after the Change of Control Purchase Date;
and
(v) that Securityholders electing to have a Security
purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled
"Option of Securityholder to Elect Purchase" on the re-
verse of the Security completed, to the Paying Agent and
Registrar for the Securities at the address specified in
the notice prior to the close of business on the third
Business Day prior to the Change of Control Purchase Date;
(vi) that Securityholders will be entitled to with-
draw their election if the Paying Agent receives, not
later than the second Business Day prior to the Change of
Control Purchase Date, a telegram, telex, facsimile trans-
mission or letter setting forth the name of the Security-
holder, the principal amount of the Securities the Securi-
tyholder delivered for purchase and a statement that such
Securityholder is withdrawing his election to have such
Security purchased;
<PAGE> 62
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(vii) that Securityholders whose Securities are pur-
chased only in part will be issued new Securities in a
principal amount equal to the unpurchased portion of the
Securities surrendered; provided, however, that each Secu-
rity purchased and each new Security issued shall be in a
principal amount of $1,000 or integral multiples thereof;
and
(viii) the circumstances and relevant facts regarding
such Change of Control.
(c) On or before the Change of Control Purchase
Date, the Company shall (i) accept for payment Securities or
portions thereof tendered pursuant to the Change of Control Of-
fer, (ii) deposit with the Paying Agent U.S. Legal Tender suf-
ficient to pay the purchase price plus accrued interest, if
any, of all Securities so tendered and (iii) deliver to the
Trustee Securities so accepted together with an Officers, Cer-
tificate stating the Securities or portions thereof being pur-
chased by the Company. The Paying Agent shall promptly mail to
the Securityholders of Securities so accepted payment in an
amount equal to the purchase price plus accrued interest, if
any, and the Trustee shall promptly authenticate and mail to
such Securityholders new Securities equal in principal amount
to any unpurchased portion of the Securities surrendered. Any
Securities not so accepted shall be promptly mailed by the Com-
pany to the Securityholder thereof. For purposes of this Sec-
tion 4.9, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securi-
ties pursuant to a Change of Control Offer shall be returned by
the Trustee to the Company.
(d) The Company will comply with the applicable ten-
der offer rules, including Rule 14e-1 under the Exchange Act,
in connection with a Change of Control Offer and shall not be
deemed in violation of this covenant by reason of any action
required to be taken to effect such compliance. To the extent
that the provisions of any securities laws or regulations con-
flict with the "Change of Control" provisions of this Inden-
ture, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached
its obligations relating to such Change of Control Offer by
virtue thereof.
SECTION 4.10. Limitation on Guarantees of Indebted-
ness by Subsidiaries. (a) The Company will not permit any
Subsidiary, directly or indirectly, to guarantee, assume or in
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any other manner become liable for the payment of any Indebted-
ness of the Company or Indebtedness of any other Subsidiary un-
less (i)(A) such Subsidiary simultaneously executes and deliv-
ers a supplemental indenture to the Indenture providing for a
Guarantee of payment of the Securities by such Subsidiary and
(B) with respect to any guarantee of Subordinated Indebtedness
by a Subsidiary, any such guarantee shall be subordinated to
such Subsidiary's Guarantee with respect to the Securities at
least to the same extent as such Subordinated Indebtedness is
subordinated to the Securities and (ii) such Subsidiary waives
and will not in any manner whatsoever claim or take the benefit
or advantage of, any rights of reimbursement, indemnity or sub-
rogation or any other rights against the Company or any other
Subsidiary as a result of any payment by such Subsidiary under
its Guarantee.
(b) Notwithstanding the foregoing, any Guarantee by
a Subsidiary of the Securities shall provide by its terms that
it shall be automatically and unconditionally released and dis-
charged upon (i) any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Capital Stock of
a Subsidiary owned by the Company or any Subsidiary in, or all
or substantially all the assets of, such Subsidiary (which
sale, exchange or transfer is not prohibited by the Indenture)
or (ii) the release or discharge of the guarantee which re-
sulted in the creation of such Guarantee (and any other guaran-
tees that would have resulted in the creation of such a Guaran-
tee), except a discharge or release by or as a result of pay-
ment under such guarantee.
SECTION 4.11. Limitation on Dividends and Other Pay-
ment Restrictions Affecting Subsidiaries. The Company will
not, and will not permit any Subsidiary to, directly or indi-
rectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the
ability of any Subsidiary to (a) pay dividends, in cash or oth-
erwise, or make any other distributions on or in respect of its
Capital Stock, (b) pay any Indebtedness owed to the Company or
any other Subsidiary, (c) make Investments in the Company or
any other Subsidiary, (d) transfer any of its properties or as-
sets to the Company or any other Subsidiary or (e) guarantee
any Indebtedness of the Company or any other Subsidiary, except
for such encumbrances or restrictions existing under or by rea-
son of (i) any agreement in effect on the date of this Inden-
ture, (ii) this Indenture, (iii) applicable law, (iv) customary
non-assignment provisions, (x) of any lease governing a lease-
hold interest of the Company or any Subsidiary or (y) of In-
debtedness secured by a Lien that is permitted to be incurred
<PAGE> 64
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under the Indebtedness that relates to the property subject to
such Lien, (v) any agreement or other instrument of a Person
acquired by the Company or any Subsidiary in existence at the
time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so
acquired, (vi) any restriction with respect to a Subsidiary of
the Company imposed pursuant to an agreement relating to the
sale of all or substantially all of the Capital Stock or as-
sets of such Subsidiary (so long as such restriction, by its
terms, terminates on the earlier of the termination of such
agreement or the consummation of such agreement), and (vii) any
restrictions existing under any agreement that refinances or
replaces any agreement containing restrictions permitted under
clause (i), (ii), (iv) or (v) or (vi), provided that the terms
and conditions of such restriction are not materially less fa-
vorable to the holder of the Securities than those under or
pursuant to the agreement refinanced or replaced.
SECTION 4.12. Further Instruments and Acts. Upon
request of the Trustee, the Company will execute and deliver
such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively
the purpose of this Indenture.
SECTION 4.13. Use of Proceeds. The Company shall
use the net proceeds from the sale of the Securities to consum-
mate the transactions contemplated in the section of the Offer-
ing Memorandum entitled "Use of Proceeds".
SECTION 4.14. Compliance Certificates. (a) The
Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate signed by its
principal executive officer, principal financial officer or
principal accounting officer stating that a review of the ac-
tivities of the Company and its Subsidiaries during the preced-
ing fiscal year has been made under the supervision of the
signing Officers with a view to determining whether each has
kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowl-
edge each has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in de-
fault in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default
or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have
<PAGE> 65
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knowledge and what action each is taking or proposes to take
with respect thereto).
(b) So long as not contrary to the then current rec-
ommendations of the American Institute of Certified Public Ac-
countants, the year-end financial statements delivered pursuant
to Section 4.2 above shall be accompanied by a written state-
ment of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making
the examination necessary for certification of such financial
statements nothing has come to their attention which would lead
them to believe that the Company has violated any provisions of
Article 4 or 5 or that there exists a Default or Event of De-
fault under Article 6 of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Securi-
ties are outstanding, deliver to the Trustee, within 5 days of
any Officer becoming aware of any Default or Event of Default,
an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to
take with respect thereto.
(d) The Company shall also comply with TIA S
314(a)(4).
SECTION 4.15. Maintenance of Office or Agency. (a)
The Company shall maintain in the Borough of Manhattan, in the
City of New York, an office or agency (which may be an office
of the Trustee or an affiliate of the Trustee, Registrar or
co-registrar) where Securities may be surrendered for registra-
tion of transfer or exchange and where notices and demands to
or upon the Company in respect of the Securities and this In-
denture may be served. The Company shall give prior written
notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate
one or more other offices or agencies where the Securities may
be presented or surrendered for any or all such purposes and
<PAGE> 66
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may from time to time rescind such designations; provided, how-
ever, that no such designation or rescission shall in any man-
ner relieve the Company of its obligation to maintain an office
or agency in the Borough of Manhattan, in the City of New York
for such purposes. The Company shall give prior written notice
to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
(c) The Company hereby designates the Trustee at 61
Broadway, 15th Floor, New York, New York 10006 as one such of-
fice or agency of the Company in accordance with Section 2.3.
SECTION 4.16. Taxes. The Company shall pay, prior
to delinquency, all material taxes, assessments, and governmen-
tal levies; provided, however, that there shall not be required
to be paid or discharged any such tax, assessment or charge,
the amount, applicability or validity of which is being con-
tested in good faith by appropriate proceedings and for which
adequate provision has been made or for which adequate re-
serves, to the extent required under GAAP, have been taken.
SECTION 4.17. Stay, Extension and Usury Laws. The
Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or
the performance of this Indenture (including, but not limited
to, the payment of the principal of or interest on the Securi-
ties); and the Company (to the extent that it may lawfully do
so) hereby expressly waive all benefit or advantage of any such
law, and covenant that they shall not, by resort to any such
law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execu-
tion of every such power as though no such law has been en-
acted.
SECTION 4.18. Corporate Existence. Subject to Arti-
cle V, the Company shall do or cause to be done all things nec-
essary to preserve and keep in full force and effect its corpo-
rate existence, and the corporate existence of each Subsidiary,
in accordance with the respective organizational documents (as
the same may be amended from time to time) of each Subsidiary
and the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that
the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other
existence of any Subsidiary, if the Board of Directors of the
<PAGE> 67
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Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company
and its Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Security-
holders.
ARTICLE V
Surviving Entity
SECTION 5.1. Limitations on Consolidations, Mergers
and Sales of Assets. (a) The Company will not in a single
transaction or a series of related transactions consolidate
with or merge with or into any other Person or sell, assign,
convey, transfer, lease or otherwise dispose of all or substan-
tially all of its properties and assets as an entirety to any
Person or Persons, and the Company will not permit any Subsidi-
ary to enter into any such transaction or series of transac-
tions if such transaction or series of transactions, in the ag-
gregate, would result in the sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially
all of the properties and assets of the Company and its Sub-
sidiaries on a consolidated basis to any Person or Persons, un-
less:
(i) either (a) the Company shall be the surviving
corporation or (b) the Person (if other than the Company)
formed by such consolidation or into which the Company or
such Subsidiary is merged or the Person which acquires by
sale, assignment, conveyance, transfer, lease or other
disposition all or substantially all of the properties and
assets of the Company or such Subsidiary, as the case may
be (the "Surviving Entity"), (1) shall be a corporation
organized and validly existing under the laws of the
United States of America, any state thereof or the Dis-
trict of Columbia that is a "certificated United States
air carrier" under the Aviation Act and (2) shall ex-
pressly assume, by indenture, supplemental to the Inden-
ture, executed and delivered to the Trustee, in form sat-
isfactory to the Trustee, the Company's obligation for the
due and punctual payment of the principal of (or premium,
if any, on) and interest on the Securities and the per-
formance and observance of every covenant of this Inden-
ture on the part of the Company to be performed or ob-
served;
<PAGE> 68
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(ii) immediately before and after giving effect to
such transaction or series of transactions on a pro forma
basis and treating any obligation of the Company or a Sub-
sidiary in connection with or as a result of such transac-
tion as having been incurred at the time of such transac-
tion, no Default or Event of Default shall have occurred
and be continuing;
(iii) immediately before and immediately after giving
effect to such transaction or series of transactions on a
pro forma basis (on the assumption that the transaction or
series of transactions occurred on the first day of the
four-quarter period immediately prior to the consummation
of such transaction or series of transactions with the ap-
propriate adjustments with respect to the transaction or
series of transactions being included in such pro forma
calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture)
could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the provisions
of Section 4.3;
(iv) if any of the property or assets of the Company
or any of its Subsidiaries would thereupon become subject
to any Lien, the provisions of Section 4.7 hereof are com-
plied with; and
(v) the Company or the Surviving Entity shall have
delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an officer's certificate and
an opinion of counsel, each stating that such consolida-
tion, merger, conveyance, transfer or lease, and if a sup-
plemental indenture is required in connection with such
transaction, such supplemental indenture, comply with the
terms of this Indenture and that all conditions precedent
therein provided for relating to such transaction have
been complied with.
(b) Upon any consolidation or merger, or any sale,
assignment, conveyance, transfer, lease or disposition of all
or substantially all of the properties and assets of the Com-
pany in accordance with the immediately preceding paragraph in
which the Company is not the continuing obligor under this In-
denture, the Surviving Entity shall succeed to, and be substi-
tuted for, and may exercise every right and power of, the Com-
pany under this Indenture with the same effect as if such suc-
cessor had been named as the Company therein. When a successor
assumes all the obligations of its predecessor under this In-
<PAGE> 69
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denture or the Securities, the predecessor shall be released
from those obligations; provided that in the case of a transfer
by lease, the predecessor shall not be released from the pay-
ment of principal and interest on the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of De-
fault" will occur under this Indenture if:
(i) there shall be a default in the payment of any
interest on the Securities when it becomes due and pay-
able, and continuance of such default for a period of 30
days;
(ii) there shall be a default in the payment of the
principal of (or premium, if any, on) the Securities at
their Maturity;
(iii) (A) there shall be a default in the perform-
ance, or breach, of any covenant or agreement of the Com-
pany contained in this Indenture (other than a default in
the performance, or breach, of a covenant or agreement
which is specifically dealt with in the immediately pre-
ceding clauses (i) or (ii), or in clauses (B), (C) and (D)
of this clause (iii)) and continuance of such default or
breach for a period of 30 days after written notice shall
have been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the Securities then out-
standing; (B) there shall be a default in the performance,
or breach, of the provisions of Section 4.8; (C) there
shall be a default in the performance or breach of the
provisions of Section 5.1 hereof; or (D) the Company shall
have failed to make or consummate a Change of Control Of-
fer in accordance with the provisions of Section 4.9
hereof;
(iv) (A) there shall have occurred one or more de-
faults in the payment of principal of (or premium, if any,
on) Indebtedness of the Company or any Subsidiary aggre-
gating $10 million or more, when the same becomes due and
payable at the stated maturity thereof, and such default
or defaults shall have continued after any applicable
<PAGE> 70
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grace period and shall not have been cured or waived or
(B) Indebtedness of the Company or any Subsidiary aggre-
gating $10 million or more shall have been accelerated or
otherwise declared due and payable, or required to be pre-
paid or repurchased (other than by regularly scheduled re-
quired prepayment), prior to the stated maturity thereof;
(v) one or more final judgments or orders rendered
against the Company or any Subsidiary which require the
payment of money, either individually or in an aggregate
amount, in excess of $10 million and either (A) an en-
forcement proceeding shall have been commenced by any
creditor upon such judgment or order or (B) there shall
have been a period of 30 days during which a stay of en-
forcement of such judgment or order, by reason of a pend-
ing appeal or otherwise, was not in effect; or
(vi) the Company or a Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against in an involuntary case;
(C) consents to the appointment of a Custodian
of it or for any substantial part of its property;
(D) makes a general assignment for the benefit
of its creditors;
(E) consents to or acquiesces in the institution
of a bankruptcy or an insolvency proceeding against
it, or
(F) takes any corporate action to authorize or
effect any of the foregoing;
or takes any comparable action under any foreign laws re-
lating to insolvency;
(vii) a court of competent jurisdiction enters an or-
der or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
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(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of
the property of the Company or any of its Significant
Subsidiaries; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws
and in each case the order, decree or relief remains un-
stayed and in effect for 60 days;
The foregoing will constitute Events of Default what-
ever the reason for any such Event of Default and whether it is
voluntary or involuntary or is effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body.
The term "Custodian" means any receiver, trustee, as-
signee, liquidator, custodian or similar official under any
Bankruptcy Law.
SECTION 6.2. Acceleration. If an Event of Default
(other than an Event of Default specified in Section 6.1(vi) or
(vii)) occurs and is continuing, the Trustee or the holders of
at least 25% in principal amount of the outstanding Securities
by notice to the Company may declare the principal of and ac-
crued and unpaid interest, if any, on all the Securities to be
due and payable. Upon such declaration, such principal and ac-
crued and unpaid interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(vi) or (vii)
occurs and is continuing, the principal of and accrued and un-
paid interest on all the Securities will become and be immedi-
ately due and payable without any declaration or other act on
the part of the Trustee or any holders. The Holders of a ma-
jority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and
if all existing Events of Default have been cured or waived ex-
cept nonpayment of principal or interest that has become due
solely because of acceleration. No such rescission shall af-
fect any subsequent Default or Event of Default or impair any
right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of De-
fault occurs and is continuing, the Trustee and the Security-
holders may pursue any available remedy to collect the payment
<PAGE> 72
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of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Inden-
ture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of
them in the proceeding. A delay or omission by the Trustee or
any Securityholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of De-
fault. No remedy is exclusive of any other remedy. All avail-
able remedies are cumulative to the extent permitted by law.
SECTION 6.4. Waiver of Past Defaults. The Holders
of a majority in principal amount of the outstanding Securities
by notice to the Trustee may waive an existing Default or Event
of Default and its consequences except (i) a Default or Event
of Default in the payment of the principal of, premium, if any,
or interest on a Security or (ii) a Default or Event of Default
in respect of a provision that under Section 9.2 cannot be
amended without the consent of each Securityholder affected.
When a Default or Event of Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any consequent
right.
SECTION 6.5. Control by Majority. Subject to Sec-
tion 2.9, the Holders of a majority in principal amount of the
Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. How-
ever, the Trustee may refuse to follow any direction that con-
flicts with law or this Indenture or, subject to Section 7.1,
that the Trustee determines is unduly prejudicial to the rights
of other Securityholders or would involve the Trustee in per-
sonal liability; provided, however, that the Trustee may take
any other action deemed proper by the Trustee that is not in-
consistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder
may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice
stating that an Event of Default is continuing;
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(2) the Holders of at least 25% in outstanding prin-
cipal amount of the Securities make a written request to
the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee rea-
sonable security or indemnity against any loss, liability
or expense;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
of security or indemnity; and
(5) the Holders of a majority in outstanding princi-
pal amount of the Securities do not give the Trustee a di-
rection that, in the opinion of the Trustee, is inconsis-
tent with the request during such 60-day period.
A Securityholder may not use this Indenture to preju-
dice the rights of another Securityholder or to obtain a pref-
erence or priority over another Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and in-
terest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring
suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an
Event of Default specified in Section 6.1(i) or (ii) or an ac-
celeration pursuant to Section 6.2 occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company or any other obligor of
the Securities for the whole amount then due and owing
(together with interest on any unpaid interest to the extent
lawful) and the amounts provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The
Trustee may file such proofs of claim and other papers or docu-
ments as may be necessary or advisable in order to have the
claims of the Trustee and the Securityholders allowed in any
judicial proceedings relative to the Company, its Subsidiaries
or their respective creditors or properties and, unless prohib-
ited by law or applicable regulations, may vote on behalf of
the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any
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such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the rea-
sonable compensation, expenses, disbursements and advances of
the Trustee, its agents and its counsel, and any other amounts
due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects
any money or property pursuant to this Article VI, it shall pay
out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section
7.7;
SECOND: if the Securityholders are forced to proceed
against the Company directly without the Trustee, to the
Securityholders for their collection costs;
THIRD: to Securityholders for amounts due and unpaid
on the Securities for principal and interest, ratably,
without preference or priority of any kind, according to
the amounts due and payable on the Securities for princi-
pal and interest, respectively; and
FOURTH: to the Company.
The Trustee, upon prior notice to the Company, may
fix a record date and payment date for any payment to Security-
holders pursuant to this Section 6.10. At least 15 days before
such record date, the Company shall mail to each Securityholder
and the Trustee a notice that states the record date, the pay-
ment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit
for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking
to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in the suit, having due regard
to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit
by the Trustee, a suit by a Holder pursuant to Section 6.7 or a
suit by Holders of more than 10% in outstanding principal
amount of the Securities.
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ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If a Default
or an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by
this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under
the circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an
Event of Default:
(1) yhe Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture or the TIA and no implied covenants or obliga-
tions shall be read into this Indenture against the Trus-
tee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Inden-
ture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act
or its own wilful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it
is proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(3) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in ac-
cordance with a direction received by it pursuant to Sec-
tion 6.5.
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(d) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b)
and (c) of this Section.
(e) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Company.
(f) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by
law.
(g) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur fi-
nancial liability in the performance of any of its duties here-
under or in the exercise of any of its rights or powers, if it
shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(h) Every provision of this Indenture relating to
the conduct or affecting the liability of or affording protec-
tion to the Trustee shall be subject to the provisions of this
Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. Subject to TIA
Section 315(a) through (d):
(a) The Trustee may rely and shall be protected in
acting or refraining from acting on any document believed
by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of
Counsel which shall conform to Section 12.5. The Trustee
shall not be liable for any action it takes or omits to
take in good faith in reliance on the Officers' Certifi-
cate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action
it takes or omits to take in good faith that it believes
to be authorized or within its rights or powers; provided,
however, that the Trustee's conduct does not constitute
wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Securities shall be
full and complete authorization and protection from li-
ability in respect to any action taken, omitted or suf-
<PAGE> 77
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however, that the Trustee's conduct does not constitute
wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Securities shall be
full and complete authorization and protection from li-
ability in respect to any action taken, omitted or suf-
fered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to ex-
ercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Secu-
rityholders, unless such Securityholders shall have of-
fered to the Trustee security or indemnity reasonably sat-
isfactory to the Trustee against the losses, expenses and
liabilities that might be incurred by it in compliance
with such request or direction.
(g) The Trustee shall not be liable with respect to
any action taken or omitted to be taken by it good faith
in accordance with the direction of the Securityholders of
a majority in aggregate principal amount of the Securities
at the time outstanding relating to the time, method and
place of conducting any proceeding for any remedy avail-
able to the Trustee or involving the exercise of any
right, duty, trust or power conferred upon the Trustee un-
der the TIA or this Indenture.
SECTION 7.3. Individual Rights of Trustee. The
Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities and may make loans to, ac-
cept deposits from, perform services for and otherwise deal
with the Company, or their Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Regis-
trar, co-registrar or co-paying agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10
and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee
shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Securities,
it shall not be accountable for the Company's use of the pro-
ceeds from the Securities, and it shall not be responsible for
any statement of the Company in this Indenture or in any docu-
ment issued in connection with the sale of the Securities or in
<PAGE> 78
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the Securities other than the Trustee's certificate of authen-
tication.
SECTION 7.5. Notice of Defaults. If a Default or
Event of Default occurs and is continuing and if a Trust Offi-
cer has knowledge thereof, the Trustee shall mail to each Secu-
rityholder in the manner and to the extent provided in TIA
S 313(a) notice of the Default or Event of Default within 5
days after it occurs, unless such Default or Event of Default
has been cured. Except in the case of a Default or Event of
Default in payment of principal, premium, if any, or interest
on any Security (including payments pursuant to the optional
redemption or required repurchase provisions of such Security,
if any), the Trustee may withhold the notice if and so long as
its board of directors, the executive committee of its board of
directors or a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As
promptly as practicable and within 60 days after each May 15
beginning with the May 15 following the date of this Indenture,
and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder, if required by TIA S 313(a)
a brief report dated as of such May 15 that complies with TIA S
313(a). The Trustee also shall comply with TIA S 313(b), (c)
and (d).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the Commission if required
by law and each stock exchange (if any) on which the Securities
are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and
of any delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Com-
pany shall pay to the Trustee from time to time reasonable com-
pensation for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances
incurred or made by it, including but not limited to costs of
collection, costs of preparing and reviewing reports, certifi-
cates and other documents, costs of preparation and mailing of
notices to Securityholders and reasonable costs of counsel re-
tained by the Trustee in connection with the delivery of an
Opinion of Counsel or otherwise, in addition to the compensa-
tion for its services. Such expenses shall include the reason-
<PAGE> 79
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able compensation and expenses, disbursements and advances of
the Trustee's agents, counsel, accountants and experts. The
Company shall indemnify the Trustee for, and hold it harmless
against, any and all loss, liability or expense (including rea-
sonable attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties
hereunder and under the Securities, including the costs and ex-
penses of enforcing this Indenture and the Securities
(including this Section 7.7) and of defending itself against
any claims or liabilities (whether asserted by any Security-
holder, the Company or otherwise) and of complying with any
process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties
under this Indenture. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend
the claim and the Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this
Section 7.7, the Trustee shall have a lien prior to the Securi-
ties on all money or property held or collected by the Trustee
other than money or property held in trust to pay principal of
and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall
not be subordinate to any other liability or indebtedness of
the Company.
The Company's payment obligations pursuant to this
Section shall survive the discharge of this Indenture. When
the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.1(7) or (8) with respect to the Company,
the expenses are intended to constitute expenses of administra-
tion under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee
may resign at any time by so notifying the Company in writing
at least 30 days in advance of such resignation. The Holders
of a majority in principal amount of the Securities may remove
the Trustee by so notifying the Trustee in writing and may ap-
point a successor Trustee. The Company shall remove the Trus-
tee if:
(1) the Trustee fails to comply with Section 7.10;
<PAGE> 80
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(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of act-
ing.
If the Trustee resigns or is removed by the Company
or by the Holders of a majority in principal amount of the Se-
curities and such Holders do not reasonably promptly appoint a
successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being re-
ferred to herein as the retiring Trustee), the Company shall
promptly appoint a successor Trustee.
A successor Trustee shall deliver a written accep-
tance of its appointment to the retiring Trustee and to the
Company. Thereupon the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under
this Indenture. The successor Trustee shall mail a notice of
its succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section
7.7.
A resignation or removal of the Trustee and appoint-
ment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided
in this Section 7.8.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a succes-
sor Trustee.
Notwithstanding the replacement of the Trustee pursu-
ant to this Section, the Company's obligations under Section
7.7 shall continue for the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or trans-
fers all or substantially all its corporate trust business or
assets to, another corporation or banking association, the re-
sulting, surviving or transferee corporation without any fur-
ther act shall be the successor Trustee.
<PAGE> 81
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In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall suc-
ceed to the trusts created by this Indenture, any of the Secu-
rities shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Se-
curities so authenticated; and in case at that time any of the
Securities shall not have been authenticated, any successor to
the Trustee may authenticate such Securities either in the name
of any predecessor hereunder or in the name of the successor to
the Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Securities or in
this Indenture provided that the certificate of the Trustee
shall have.
SECTION 7.10. Eligibility; Disqualification. The
Indenture shall at all times have a Trustee that satisfies the
requirements of TIA S 310(a). The Trustee shall have a com-
bined capital and surplus of at least $100 million as set forth
in its most recent published annual report of condition. The
Trustee shall comply with TIA S 310(b); provided, however, that
there shall be excluded from the operation of TIA S 310(b)(1)
any indenture or indentures under which other securities or
certificates of interest or participation in other securities
of the Company are outstanding if the requirements for such ex-
clusion set forth in TIA S 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims
Against Company. The Trustee shall comply with TIA S 311(a),
excluding any creditor relationship listed in TIA S 311(b). A
Trustee who has resigned or been removed shall be subject to
TIA S 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee
all outstanding Securities (other than Securities replaced pur-
suant to Section 2.7) for cancellation or (ii) all outstanding
Securities have become due and payable, whether at maturity or
as a result of the mailing of a notice of redemption pursuant
to Article 3 hereof and the Company irrevocably deposits with
the Trustee funds sufficient to pay at maturity or upon redemp-
tion all outstanding Securities (other than Securities replaced
<PAGE> 82
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pursuant to Section 2.7), including interest thereon to matur-
ity or such redemption date, and if in either case the Company
pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.1(e) and Section 8.6,
cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the
Company (accompanied by an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent specified
herein relating to the satisfaction and discharge of this In-
denture have been complied with) and at the cost and expense of
the Company.
(b) Defeasance and Discharge. Upon the Company's
exercise under Section 8.1(a) of the option applicable to this
Section 8.1(b), the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstand-
ing Securities on the date the conditions set forth in Section
8.2 are satisfied (hereinafter, "defeasance"). For this pur-
pose, such defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by
the outstanding Securities, except for the following which
shall survive until otherwise terminated or discharged hereun-
der:
(i) the rights of holders of outstanding Securities
to receive payments in respect of the principal of (and
premium, if any, on) and interest on such Securities when
such payments are due;
(ii) the Company's obligations to issue temporary Se-
curities, register the transfer or exchange of any Securi-
ties, replace mutilated, destroyed, lost or stolen Securi-
ties, maintain an office or agency for payments in respect
of the Securities and segregate and hold such payments in
trust;
(iii) the rights, powers, trusts, duties and immuni-
ties of the Trustee;
(iv) the defeasance provisions of this Article; and
(v) subject to compliance with this Article, the
Company may exercise its option under this Section 8.1(b)
notwithstanding the prior exercise of its options under
Section 8.1(c) with respect to the Securities.
(c) Covenant Defeasance. Upon the Company's exer-
cise under Section 8.1(a) of the option applicable to this Sec-
<PAGE> 83
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tion 8.1(c), the Company shall be released from its obligations
with respect to any covenant contained in Sections 4.2(b), 4.3,
4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.13 and 4.16 and
Sections 5.1(iii), 5.1(iv) and 5.1(v) with respect to the out-
standing Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed not to be
"outstanding" for the purposes of any direction, waiver, con-
sent or declaration or act of Holders (and the consequences of
any thereof) in connection with such covenants, but shall con-
tinue to be deemed "outstanding" for all other purposes hereun-
der. For this purposes, such covenant defeasance means that,
with respect to the outstanding Securities, the Company may
omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such cove-
nant, whether directly or indirectly, by reason of any refer-
ence elsewhere herein to any such covenant or by reason of any
reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1,
but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby, and any omis-
sion to comply with such obligations shall not constitute a De-
fault or an Event of Default with respect to the Securities.
(d) Upon satisfaction of the conditions set forth
herein and upon request of the Company, the Trustee shall ac-
knowledge in writing the discharge of those obligations that
the Company terminates.
(e) Notwithstanding the provisions of Sections
8.1(b) and (c), the Company's obligations in Sections 2.3, 2.4,
2.5, 2.6, 2.7, 7.7, 8.1(e), 8.4, 8.5 and 8.6 shall survive un-
til the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.7, 8.4, 8.5 and 8.6 shall
survive.
SECTION 8.2. Conditions to Defeasance. In order
for the Company to exercise its legal defeasance option or its
covenant defeasance option:
(i) the Company must irrevocably deposit or cause to
be deposited with the Trustee, in trust, specifically
pledged as security for, and dedicated solely to, the
benefit of the holders of the Securities, money in an
amount, or U.S. Government Obligations which through the
scheduled payment of principal and interest thereon will
provide money in an amount, or a combination thereof, suf-
<PAGE> 84
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ficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the
principal of (and premium, if any, on) and interest on the
outstanding Securities at maturity (or upon redemption, if
applicable) of such principal, premium or installment of
interest;
(ii) no Default or Event of Default shall have oc-
curred and be continuing on the date of such deposit or,
insofar as an event of bankruptcy under Section 6.1(vi) or
(vii) above is concerned, at any time during the period
ending on the 91st day after the date of such deposit;
(iii) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a de-
fault under this Indenture or any material agreement or
instrument to which the Company is a party or by which it
is bound;
(iv) in the case of defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel stat-
ing that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or
since the date hereof, there has been a change in applica-
ble federal income tax law, in either case to the effect,
and based thereon such opinion shall confirm that, the
holders of the outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defea-
sance had not occurred;
(v) in the case of covenant defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel
to the effect that the holders of the Securities outstand-
ing will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defea-
sance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had
not occurred;
(vi) in the case of defeasance or covenant defea-
sance, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States to the effect that
after the 91st day following the deposit or after the date
such opinion is delivered, the trust funds will not be
<PAGE> 85
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subject to the effect of any applicable bankruptcy, insol-
vency, reorganization or similar laws affecting creditors'
rights generally;
(vii) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not
made by the Company with the intent of preferring the
holders of the Securities over the other creditors of the
Company with the intent of hindering, delaying or defraud-
ing creditors of the Company; and
(viii) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relat-
ing to either the defeasance or the covenant defeasance,
as the case may be, have been complied with.
SECTION 8.3. Application of Trust Money. Subject
to Section 8.6, the Trustee or Paying Agent shall hold in trust
money or U.S. Government Obligations deposited with it pursuant
to this Article VIII. It shall apply the deposited money and
the money from U.S. Government Obligations through the Paying
Agent and in accordance with this Indenture and the Securities
to the payment of principal of and interest on the Securities.
Money and securities so held in trust are not subject to Arti-
cle X.
SECTION 8.4. Repayment to Company. Subject to Sec-
tions 7.7, 8.1 and 8.2, the Trustee and the Paying Agent shall
promptly turn over to the Company upon request set forth in an
Officers' Certificate any excess money or securities held by
them upon payment of all the obligations under this Indenture
and thereupon shall be relieved from all liability with respect
to such money.
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon re-
quest any money held by them for the payment of principal of or
interest on the Securities that remains unclaimed for two
years; provided, however, that the Company shall have either
caused notice of such payment to be mailed to each Security-
holder entitled thereto no less than 30 days prior to such re-
payment or within such period shall have published such notice
in a financial newspaper of widespread circulation published in
the City of New York and, thereafter, Securityholders entitled
to the money must look to the Company for payment as general
creditors and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
<PAGE> 86
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SECTION 8.5. Indemnity for U.S. Government Obliga-
tions. The Company shall pay and shall indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against deposited U.S. Government Obligations or the principal
and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Pay-
ing Agent is unable to apply any money or U.S. Government Obli-
gations in accordance with this Article VIII by reason of any
legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or oth-
erwise prohibiting such application, the obligations of the
Company under this Indenture and the Securities shall be re-
vived and reinstated as though no deposit had occurred pursuant
to this Article VIII until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided,
however, that, if the Company has made any payment of interest
on or principal of any Securities because of the reinstatement
of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such pay-
ment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. (a) The
Company and the Trustee may amend this Indenture or the Securi-
ties without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or in-
consistency; provided, that such amendment or supplement
does not, as evidenced by an Opinion of Counsel delivered
to the Trustee, adversely affect the rights of any Securi-
tyholder in any material respect;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in ad-
dition to or in place of certificated Securities; pro-
vided, however, that the uncertificated Securities are is-
sued in registered form for purposes of Section 163(f) of
the Code or in a manner such that the uncertificated Secu-
rities are described in Section 163(f)(2)(B) of the Code;
<PAGE> 87
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(4) to secure the Securities;
(5) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(6) to comply with any requirements of the SEC in
connection with qualifying this Indenture under the TIA;
(7) to make any change that does not adversely af-
fect the rights of any Securityholder;
(i) to surrender any right or power conferred
upon the Company;
(ii) to provide for a replacement Trustee under
Section 7.8 hereof; or
(iii) to provide for the issuance of the Exchange
Securities, which will have terms substantially iden-
tical in all material respects to the Initial Securi-
ties (except that the transfer restrictions contained
in the Initial Securities will be modified or elimi-
nated, as appropriate), and which will be treated,
together with any outstanding Initial Securities, as
a single issue of securities;
provided, that the Company has delivered to the Trustee an
Opinion of Counsel stating that any such amendment or supple-
ment complies with the provisions of this Section 9.1.
(b) Upon the request of the Company accompanied by a
Board Resolution of its Board of Directors authorizing the exe-
cution of any such supplemental indenture, and upon receipt by
the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements
and stipulations which may be therein contained, but the Trus-
tee shall not be obligated to enter into such supplemental in-
denture which affects its own rights, duties or immunities un-
der this Indenture or otherwise.
(c) After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. However, the failure to
give such notice to all Securityholders, or any defect therein,
<PAGE> 88
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shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.2. With Consent of Holders. (a) The
Company and the Trustee may amend this Indenture or the Securi-
ties with the consent of the Holders of at least a majority in
outstanding principal amount of the Securities (including con-
sents obtained in connection with a tender offer or exchange
offer for the Securities) and any existing Default and its con-
sequences (including, without limitation, an acceleration of
the Securities) or compliance with any provision of this Inden-
ture or the Securities may be waived with the consent of the
Holders of a majority in principal amount of the then outstand-
ing Securities (including consents obtained in connection with
a tender offer or exchange offer for the Securities). Further-
more, subject to Sections 6.4 and 6.7, the Holders of a major-
ity in aggregate principal amount of the Securities then out-
standing (including consents obtained in connection with a ten-
der offer or exchange offer for the Securities) may waive com-
pliance in a particular instance by the Company with any provi-
sion of this Indenture or the Securities. However, without the
consent of each Holder of a Security then outstanding, an
amendment may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for pay-
ment of interest on any Security;
(3) reduce the principal of or extend the Stated Ma-
turity of any Security;
(4) reduce the premium payable upon the redemption
or repurchase of any Security or change the time at which
any Security may or shall be redeemed or repurchased in
accordance with this Indenture;
(5) make any Security payable in money other than
that stated in the Security;
(6) modify or affect in any manner adverse to the
Holders, the terms and conditions of the obligation of the
Company for the due and punctual payment of the principal
of or interest on Securities or to institute suit for the
enforcement of any payment on or with respect to the Secu-
rities;
<PAGE> 89
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(7) waive a Default or Event of Default in the pay-
ment of principal of, premium, if any, or interest on, or
redemption payment with respect to, any Security
(excluding any principal or interest due solely as a re-
sult of the occurrence of a declaration of an Event of De-
fault); or
(8) make any change in Section 6.4 or 6.7 or the
third sentence of this Section;
(9) amend, change or modify in any material respect
the obligation of the Company to make and consummate a
Change of Control Offer in the event of a Change of Con-
trol or make and consummate an offer with respect to any
Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto;
(10) modify or change any provision of the Indenture
or the related definitions affecting the ranking of the
Securities in a manner which adversely affects the Holders
or
(11) make any change in the amendment provisions
which require each holder's consent or in the waiver pro-
visions.
(b) Upon the request of the Company accompanied by a
Board Resolution of its respective Board of Directors authoriz-
ing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Securityholders as aforesaid, and
upon receipt by the Trustee of the documents described in Sec-
tion 9.6, the Trustee shall join with the Company in the execu-
tion of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immuni-
ties under this Indenture or otherwise, in which case the Trus-
tee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
(c) It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of
any proposed amendment, but it shall be sufficient if such con-
sent approves the substance thereof.
(d) After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
<PAGE> 90
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impair or affect the validity of an amendment under this Sec-
tion.
SECTION 9.3. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall com-
ply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and
Waivers. A consent to an amendment or a waiver by a Holder of
a Security shall bind the Holder and every subsequent Holder of
that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation
of the consent or waiver is not made on the Security. However,
any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder's Security or portion of the Security
if the Trustee receives the notice of revocation before the
date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Se-
curityholder.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Securityholders
entitled to give their consent or take any other action de-
scribed above or required or permitted to be taken pursuant to
this Indenture. If a record date is fixed, then notwithstand-
ing the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give
such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to
be Holders after such record date. No such consent shall be-
come valid or effective more than 120 days after such record
date.
SECTION 9.5. Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee
may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the
Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so deter-
mines, the Company in exchange for the Security shall issue and
the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or to
issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trus-
tee shall sign any amendment authorized pursuant to this Arti-
<PAGE> 91
-85-
cle IX if the amendment does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, but need not sign it. In signing such amend-
ment the Trustee shall be entitled to receive indemnity rea-
sonably satisfactory to it and to receive, and (subject to Sec-
tion 7.1) shall be fully protected in relying upon, an Offi-
cers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE X
Miscellaneous
SECTION 10.1. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this In-
denture by the TIA, the provision required by the TIA shall
control. If any provision of this Indenture modifies or ex-
cludes any provision of the TIA that may be so modified or ex-
cluded, the latter provision shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
SECTION 10.2. Notices. Any notice or communication
shall be in writing and delivered in person or mailed by first-
class mail addressed as follows:
if to the Company:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial Officer
if to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent no-
tices or communications.
<PAGE> 92
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Any notice or communication mailed to a Security-
holder shall be mailed to the Securityholder at the Security-
holder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within
the time prescribed.
All notices and communications (other than those sent
to Securityholders) shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Busi-
ness Days after being deposited in the mail, postage prepaid,
if mailed.
Any notice or communication to a Securityholder shall
be mailed by first class mail, postage prepaid, to its address
shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described
in TIA S 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Securityholder or any de-
fect in it shall not affect its sufficiency with respect to
other Securityholders.
If a notice or communication is mailed to any Person
in the manner provided above within the time prescribed, it is
duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Se-
curityholders, it shall mail a copy to the Trustee and each
Agent at the same time.
SECTION 10.3. Communication by Holders with other
Holders. Securityholders may communicate pursuant to TIA S
312(b) with other Securityholders with respect to their rights
under this Indenture or the Securities. The Company, the Trus-
tee, the Registrar and anyone else shall have the protection of
TIA S 312(c).
SECTION 10.4. Certificate and Opinion as to Condi-
tions Precedent. Upon any request or application by the Com-
pany to the Trustee to take or refrain from taking any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall in-
clude the statements set forth in Section 10.5) stating
that, in the opinion of the signers, all conditions prece-
dent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
<PAGE> 93
-87-
(2) an Opinion of Counsel in form and substance rea-
sonably satisfactory to the Trustee (which shall include
the statements set forth in Section 10.5) stating that, in
the opinion of such counsel, all such conditions precedent
have been complied with.
SECTION 10.5. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compli-
ance with a covenant or condition provided for in this Inden-
ture shall include:
(1) a statement that the individual making such cer-
tificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such indi-
vidual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion
of such individual, such covenant or condition has been
complied with and such other opinions as the Trustee may
reasonably request.
SECTION 10.6. When Securities Disregarded. In de-
termining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or con-
sent, Securities owned by the Company or by any Person directly
or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be disregarded
and deemed not to be outstanding, except that, for the purpose
of determining whether the Trustee shall be protected in rely-
ing on any such direction, waiver or consent, only Securities
which the Trustee knows are so owned shall be so disregarded.
Also, subject to the foregoing, only Securities outstanding at
the time shall be considered in any such determination.
SECTION 10.7. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules for action by
or at a meeting of Securityholders. The Registrar and the Pay-
ing Agent may make reasonable rules for their functions.
<PAGE> 94
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SECTION 10.8. Legal Holidays. A "Legal Holiday" is
a Saturday, a Sunday or a day on which banking institutions are
not required to be open in the State of New York, or the State
in which the Corporate Trust Office is located. If a payment
date is a Legal Holiday, payment shall be made on the next suc-
ceeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is
a Legal Holiday, the record date shall not be affected.
SECTION 10.9. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving ef-
fect to applicable principles of conflicts of law to the extent
that the application of the laws of another jurisdiction would
be required thereby.
SECTION 10.10. No Recourse Against Others. A past,
present or future director, officer, employee or stockholder,
as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Inden-
ture or for any claim based on, in respect of or by reason of
such obligations or their creation. By accepting a Security,
each Securityholder shall waive and release all such liability.
The waiver and release shall be part of the consideration for
the issue of the Securities.
SECTION 10.11. Successors. All agreements of the
Company in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 10.12. Multiple Originals. The parties may
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the
same agreement. One signed copy is enough to prove this Inden-
ture.
SECTION 10.13. Variable Provisions. The Company ini-
tially appoints the Trustee as Paying Agent and Registrar and
custodian with respect to any Global Securities.
SECTION 10.14. Qualification of Indenture. The Com-
pany shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agree-
ment and shall pay all reasonable costs and expenses (including
attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited
to, costs and expenses of qualification of the Indenture and
<PAGE> 95
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the Securities and printing this Indenture and the Securities.
The Trustee shall be entitled to receive from the Company any
such Officers' Certificates, Opinions of Counsel or other docu-
mentation as it may reasonably request in connection with any
such qualification of this Indenture under the TIA.
SECTION 10.15. Table of Contents; Headings. The ta-
ble of contents, cross-reference sheet and headings of the Ar-
ticles and Sections of this Indenture have been inserted for
convenience of reference only, are not intended to be consid-
ered a part hereof and shall not modify or restrict any of the
terms or provisions hereof.
SECTION 10.16. Severability. In case any provision
in this Indenture or in the Securities shall be invalid, ille-
gal or unenforceable, in any respect for any reason, the valid-
ity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable
to the fullest extent permitted by law.
SECTION 10.17. No Adverse Interpretation of Other
Agreements. This Indenture may not be used to interpret an-
other indenture, loan or debt agreement of the Company or any
of its Subsidiaries. Any such indenture, loan or debt agree-
ment may not be used to interpret this Indenture.
<PAGE> 96
IN WITNESS WHEREOF, the parties have caused this In-
denture to be duly executed as of the date first written above.
ATLAS AIR, INC.
By:
------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
------------------------------
Name:
Title:
<PAGE> 97
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE SECURITYHOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 OF THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY
A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
APPLICABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE
SECURITYHOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
A-1
<PAGE> 98
THE TERMS "OFFSHORE TRANSACTION" "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY
SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY
OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY SUCH
NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
A-2
<PAGE> 99
CUSIP No:
(Front of Security)
No. 1 $___________
ATLAS AIR, INC.
10 3/4% Senior Notes due 2005
ATLAS AIR, INC., a Delaware corporation, for value received,
promises to pay to Cede & Co., as nominee of the Depository
Trust Company, or its registered assigns, the principal sum of
$150,000,000 on August 1, 2005.
Interest Payment Dates: February 1, and August 1, commencing
February 1, 1998.
Record Dates: January 15 and July 15 (whether or not a Business
Day).
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
ATLAS AIR, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
----------------------------
Authorized Officer
A-3
<PAGE> 100
(Reverse of Security)
ATLAS AIR, INC.
10 3/4% SENIOR NOTE DUE 2005
Capitalized terms used herein have the meanings as-
signed to them in the Indenture (as defined below) unless oth-
erwise indicated.
1. Interest. Atlas Air, Inc., a Delaware corpora-
tion (the "Company"), promises to pay interest on the principal
amount of this Security at the rate and in the manner specified
below. The Company shall pay, in cash, interest on the princi-
pal amount of this Security at the rate per annum of 10 3/4%.
The Company will pay interest semiannually in arrears on Febru-
ary 1 and August 1 of each year (each an "Interest Payment
Date"), commencing February 1, 1998, or if any such day is not
a Business Day on the next succeeding Business Day. Interest
will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most re-
cent Interest Payment Date to which interest has been paid or,
if no interest has been paid, from the date of the original is-
suance of the Securities. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of 2% per
annum in excess of the then applicable interest rate on the Se-
curities; it shall pay interest on overdue installments of in-
terest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
2. Method of Payment. The Company shall pay inter-
est on the Securities (except defaulted interest) to the Per-
sons who are registered Holders of Securities at the close of
business on the Record Date immediately preceding the Interest
Payment Date, even if such Securities are cancelled after such
Record Date and on or before such Interest Payment Date. Secu-
rityholders must surrender Securities to a Paying Agent to col-
lect principal payments. The Company shall pay principal, pre-
mium, if any, and interest in money of the United States that
at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company
may pay principal, premium, if any, and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any
such interest payment to the Paying Agent or to a Security-
holder at the Securityholder's registered address.
A-4
<PAGE> 101
3. Paying Agent and Registrar. Initially, the Trus-
tee will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-registrar without
prior notice to any Securityholder. The Company may act in any
such capacity.
4. Indenture. The Company issued the Securities un-
der an Indenture, dated as of August 13, 1997 (the
"Indenture"), among the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S. Code SS 77aaa-77bbbb) (the "TIA") as in
effect on the date the Indenture is qualified. The Securities
are subject to all such terms, and Securityholders are referred
to the Indenture and the TIA for a statement of such terms.
The terms of the Indenture shall govern any inconsistencies be-
tween the Indenture and the Securities. The Securities include
the Initial Securities and the Exchange Securities issued in
exchange for the Initial Securities pursuant to the Indenture.
The Initial Securities and the Exchange Securities are treated
as a single class of securities under the Indenture. Capital-
ized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Inden-
ture by reference to the TIA, as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein,
the Securities are subject to all such terms, and Securityhold-
ers of Securities are referred to the Indenture and said Act
for a statement of them. The Securities are unsecured senior
obligations of the Company limited to $150,000,000 in aggregate
principal amount.
5. (a) Optional Redemption. Except as set forth
below, the Securities will not be redeemable at the option of
the Company prior to August 1, 2001. On and after such date,
the Securities will be redeemable, at the Company's option, in
whole or in part, at any time upon not less than 30 nor more
than 60 days' prior notice mailed by first-class mail to each
holder's registered address, at the following redemption prices
(expressed in percentages of principal amount), if redeemed
during the 12-month period commencing on August 1 of the years
set forth below, plus accrued and unpaid interest to the re-
demption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant
interest payment date):
A-5
<PAGE> 102
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2001 ....................... 105.375%
2002 ....................... 102.688%
2003 and thereafter ........ 100.000%
</TABLE>
(b) Optional Redemption Upon Public Offerings. In
addition, at any time on or prior to August 1, 2000, the Com-
pany, at its option, may redeem up to 35% of the aggregate
principal amount of the Securities originally issued with the
net cash proceeds of one or more Public Equity Offerings at a
redemption price equal to 110.75% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to
the date of redemption; provided, however, that after any such
redemption the aggregate principal amount of the Securities
outstanding must equal at least 65% of the aggregate principal
amount of the Securities originally issued. In order to effect
the foregoing redemption with the proceeds of any Public Equity
Offering, the Company shall make such redemption not more than
90 days after the consummation of any such Public Equity Offer-
ing.
As used in the preceding paragraph, "Public Equity
Offering" means an underwritten primary public offering of
Qualified Capital Stock of the Company pursuant to a registra-
tion statement filed with the Commission in accordance with the
Securities Act.
6. Mandatory Redemption. The Securities are not
subject to mandatory redemption or sinking fund payments.
7. Repurchase at Option of Securityholder. Sections
4.8 and 4.9 of the Indenture provide that, after certain Asset
Sales (as defined in the Indenture) and upon the occurrence of
a Change of Control (as defined in the Indenture), and subject
to the further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Securities in
accordance with procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case
of any partial redemption, selection of the Securities for re-
demption will be made by the Trustee in compliance with the re-
quirements of the principal national securities exchange, if
any, on which such Securities are listed, or if such Securities
are not then listed on a national securities exchange, on a pro
rata basis, by lot or by such other method as the Trustee in
its sole discretion shall deem to be fair and appropriate; pro-
A-6
<PAGE> 103
vided, however, that if a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the Securi-
ties or portion thereof for redemption shall be made by the
Trustee only on a pro rata basis, unless such method is other-
wise prohibited. Securities may be redeemed in part in multi-
ples of $1,000 principal amount only. Notice of redemption
will be sent, by first class mail, postage prepaid, at least 45
days (unless a shorter period is acceptable to the Trustee)
prior to the date fixed for redemption to each holder whose Se-
curities are to be redeemed at the last address for such holder
then shown on the registry books. If any Security is to be re-
deemed in part only, the notice of redemption that relates to
such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in principal amount
equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original
Security. On and after any redemption date, interest will
cease to accrue on the Securities or part thereof called for
redemption as long as the Company has deposited with the Paying
Agent funds in satisfaction of the redemption price pursuant to
the Indenture.
9. Registration Rights. Pursuant to the Registra-
tion Rights Agreement, and subject to certain terms and condi-
tions stated therein, the Company will be obligated to consum-
mate an Exchange Offer pursuant to which the Holders of the
Initial Securities shall have the right to exchange this Secu-
rity for Exchange Securities, which have been registered under
the Securities Act, in like principal amount and having terms
identical in all material respect to the Initial Security. In
certain circumstances, and subject to certain terms and condi-
tions, Holders of the Initial Securities shall have the right
to receive liquidated damages if the Company shall have failed
to fulfill its obligations under the Registration Rights Agree-
ment.
10. Denominations, Transfer, Exchange. The Securi-
ties are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. The transfer of Secu-
rities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar and the Trustee may
require a Securityholder among other things, to furnish appro-
priate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any Se-
curity or portion of a Security selected for redemption. Also,
it need not exchange or register the transfer of any Securities
during a period beginning at the opening of business on a Busi-
A-7
<PAGE> 104
ness Day 15 days before the day of any selection of Securities to be redeemed
and ending at the close of business on the day of selection or during the
period between a Record Date and the corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to
the Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this Security
is registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
The registered Securityholder shall be treated as its owner for all purposes.
12. Amendments and Waivers. Subject to certain exceptions
provided in the Indenture, the Indenture or the Securities may be amended with
the written consent of the Holders of a majority in principal amount of the
then outstanding Securities, and any existing Default or Event of Default
(except a payment default) may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Securities. Without the
consent of any Securityholder, the Indenture or the Securities may be amended
to, among other things, cure any ambiguity, defect or inconsistency, to comply
with the requirements of the Commission in order to effect or maintain
qualification of the Indenture under the TIA or to make any change that does
not adversely affect in any material respect the rights of any Securityholder.
13. Defaults and Remedies. If an Event of Default occurs
and is continuing, the Trustee or the holders of at least 25% in principal
amount of the outstanding Securities by notice to the Company may declare the
principal of and accrued and unpaid interest, if any, on all the Securities to
be due and payable. Upon such a declaration, such principal and accrued and
unpaid interest shall be due and payable immediately, if an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Securities may rescind any such acceleration with respect to
the Securities and its consequences.
A-8
<PAGE> 105
14. Trustee Dealings with the Company. The Trustee under
the Indenture, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or any Affiliate of
the Company and may otherwise deal with the Company and their respective
Affiliates as if it were not Trustee.
15. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur liens, create restrictions on the ability
of a subsidiary to pay dividends or make certain payments, sell or issue
preferred stock of subsidiaries to third parties, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. Such limitations are
subject to a number of important qualifications and exceptions provided for in
the Indenture. The Company must annually report to the Trustee on compliance
with such limitations.
16. Authentication. This Security shall not be valid
until authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Defeasance. Subject to certain conditions provided
for in the Indenture, the Company at any time may terminate some or all of its
obligations under the Securities and the Indenture if the Company deposits with
the Trustee money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to redemption or maturity, as
the case may be.
18. Governing Law. The Laws of the State of New York
shall govern this Security and the Indenture, without regard to principles of
conflict of laws.
19. Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company. After that, all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance
with the Indenture, all the obligations of its predecessors under the
Securities and the Indenture, the predecessor will be released from those
obligations.
A-9
<PAGE> 106
21. No Recourse Against Others. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Securityholder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
22. Abbreviations. Customary abbreviations may be used in
the name of a Securityholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Securities and has
directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Securityholders. No representation is made as to the accuracy of
such numbers either as printed on the Securities or as contained in any notice
of redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture. Request may he made to:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial Officer
A-10
<PAGE> 107
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to
- --------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date:
---------------
Your Signature:
----------------------
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee:
- --------------------
A-11
<PAGE> 108
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.8 or Section 4.9 of the
Indenture check the appropriate box:
[ ] Section 4.8 [ ] Section 4.9
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.8 or Section 4.9 of the Indenture, state the
amount you elect to have purchased:
$
- ------------------
Date:
-------------
Your Signature:
-------------------
(Sign exactly as your name appears
on the face of this Security)
Signature Guarantee:
- --------------------
A-12
<PAGE> 109
EXHIBIT B
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR BENEFIT
OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED
IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY MAY BE MADE FOR
AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER THE LATER OF THE DATE OF
EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE PROPER REQUIRED
CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH
THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS
OF SUCH INTEREST ARE NOT U.S. PERSONS.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
B-1
<PAGE> 110
CUSIP No:
(Front of Security)
No.1 $
ATLAS AIR, INC. -----------
10 3/4% Senior Notes due 2005
ATLAS AIR, INC., a Delaware corporation, for value received, promises to pay to
Cede & Co., as nominee of the Depository Trust Company, or its registered
assigns, the principal sum of $150,000,000 on August 1, 2005.
Interest Payment Dates: February 1, and August 1, commencing February 1, 1998.
Record Dates: January 15 and July 15 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
ATLAS AIR, INC.
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the Securities referred to in the within-mentioned Indenture
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
--------------------
Authorized Officer
B-2
<PAGE> 111
(Reverse of Security)
ATLAS AIR, INC.
10 3/4% SENIOR NOTE DUE 2005
Capitalized terms used herein have the meanings assigned to
them in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Atlas Air, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate and in the manner specified below. The Company shall pay,
in cash, interest on the principal amount of this Security at the rate per
annum of 10 3/4%. The Company will pay interest semiannually in arrears on
February 1 and August I of each year (each an "Interest Payment Date"),
commencing February 1, 1998, or if any such day is not a Business Day on the
next succeeding Business Day. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Interest shall accrue from the
most recent Interest Payment Date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the
Securities. To the extent lawful, the Company shall pay interest on overdue
principal at the rate of 2% per annum in excess of the then applicable interest
rate on the Securities; it shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) at the same rate to
the extent lawful.
2. Method of Payment. The Company shall pay interest on
the Securities (except defaulted interest) to the Persons who are registered
Holders of Securities at the close of business on the Record Date immediately
preceding the Interest Payment Date, even if such Securities are cancelled
after such Record Date and on or before such Interest Payment Date.
Securityholders must surrender Securities to a Paying Agent to collect
principal payments. The Company shall pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal, premium, if any, and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Securityholder at the Securityholder's
registered address.
B-3
<PAGE> 112
3. Paying Agent and Registrar. Initially, the Trustee
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-registrar without prior notice to any Securityholder.
The Company may act in any such capacity.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of August 13, 1997 (the "Indenture"), among the Company and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the TIA as in effect on
the date the Indenture is qualified. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the TIA for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Securities. The Securities
include the Initial Securities and the Exchange Securities issued in exchange
for the Initial Securities pursuant to the Indenture. The Initial Securities
and the Exchange Securities are treated as a single class of securities under
the Indenture. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding anything to
the contrary herein, the Securities are subject to all such terms, and
Securityholders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are unsecured senior obligations of the
Company limited to $150,000,000 in aggregate principal amount.
5. (a) Optional Redemption. Except as set forth below,
the Securities will not be redeemable at the option of the Company prior to
August 1, 2001. On and after such date, the Securities will be redeemable,
at the Company's option, in whole or in part, at any time upon not less than 30
nor more than 60 days' prior notice mailed by first-class mail to each holder's
registered address, at the following redemption prices (expressed in
percentages of principal amount), if redeemed during the 12-month period
commencing on August 1 of the years set forth below, plus accrued and unpaid
interest to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date):
B-4
<PAGE> 113
Redemption
Year Price
2001 . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . 102.688%
2003 and thereafter . . . . . . 100.000%
(b) Optional Redemption Upon Public Offerings. In
addition, at any time on or prior to August 1, 2000, the Company, at its
option, may redeem up to 35% of the aggregate principal amount of the
Securities originally issued with the net cash proceeds of one or more Public
Equity Offerings at a redemption price equal to 110.75% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that after any such redemption the aggregate
principal amount of the Securities outstanding must equal at least 65% of the
aggregate principal amount of the Securities originally issued. in order to
effect the foregoing redemption with the proceeds of any Public Equity
Offering, the Company shall make such redemption not more than 90 days after
the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten primary public offering of Qualified Capital Stock of the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act.
6. Mandatory Redemption. The Securities are not subject to
mandatory redemption or sinking fund payments.
7. Repurchase at Option of Securityholder. Sections 4.8 and
4.9 of the Indenture provide that, after certain Asset Sales (as defined in the
Indenture) and upon the occurrence of a Change of Control (as defined in the
Indenture), and subject to the further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Securities in
accordance with procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any
partial redemption, selection of the Securities for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Securities are listed, or if such
Securities are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such other method as the Trustee in its sole discretion
shall deem to be fair and appropriate; pro-.
B-5
<PAGE> 114
vided, however, that if a partial redemption is made with the proceeds of a
Public Equity Offering, selection of the Securities or portion thereof for
redemption shall be made by the Trustee only on a pro rata basis, unless such
method is otherwise prohibited. Securities may be redeemed in part in multiples
of $1,000 principal amount only. Notice of redemption will be sent, by first
class mail, postage prepaid, at least 45 days (unless a shorter period is
acceptable to the Trustee) prior to the date fixed for redemption to each
holder whose Securities are to be redeemed at the last address for such holder
then shown on the registry books. If any Security is to be redeemed in part
only, the notice of redemption that relates to such Security shall state the
portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Security. On and
after any redemption date, interest will cease to accrue on the Securities or
part thereof called for redemption as long as the Company has deposited with
the Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
9. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Securityholder among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any Securities during a
period beginning at the opening of business on a Business Day 15 days before
the day of any selection of Securities to be redeemed and ending at the
close of business on the day of selection or during the period between a Record
Date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the
Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the company may deem and treat the Person in whose name this Security
is registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue, and neither the
Trustee, any Agent nor the Company
B-6
<PAGE> 115
shall be affected by notice to the contrary. The registered Securityholder
shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions
provided in the Indenture, the Indenture or the Securities may be amended with
the written consent of the Holders of a majority in principal amount of the
then outstanding Securities, and any existing Default or Event of Default
(except a payment default) may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Securities. Without the
consent of any Securityholder, the Indenture or the Securities may be amended
to, among other things, cure any ambiguity, defect or inconsistency, to comply
with the requirements of the Commission in order to effect or maintain
qualification of the Indenture under the TIA or to make any change that does
not adversely affect in any material respect the rights of any Securityholder.
12. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the holders of at least 25% in principal amount
of the outstanding Securities by notice to the Company may declare the
principal of and accrued and unpaid interest, if any, on all the Securities to
be due and payable. Upon such a declaration, such principal and accrued and
unpaid interest shall be due and payable immediately, if an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Securities may rescind any such acceleration with respect to
the Securities and its consequences.
13. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any Affiliate of the
Company and may otherwise deal with the Company and their respective Affiliates
as if it were not Trustee.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among other
things, incur additional indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain
B-7
<PAGE> 116
transactions with affiliates, incur liens, create restrictions on the ability
of a subsidiary to pay dividends or make certain payments, sell or issue
preferred stock of subsidiaries to third parties, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. Such limitations are
subject to a number of important qualifications and exceptions provided for in
the Indenture. The Company must annually report to the Trustee on compliance
with such limitations.
15. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. Defeasance. Subject to certain conditions provided for in
the Indenture, the Company at any time may terminate some or all of its
obligations under the Securities and the Indenture if the Company deposits with
the Trustee money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to redemption or maturity, as
the case may be.
17. Governing Law. The Laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
18. Abbreviations. Customary abbreviations may be used in the
name of a Securityholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
19. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessors under the Securities and
the Indenture, the predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company
B-8
<PAGE> 117
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Note by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
22. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Securities and has
directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Securityholders. No representation is made as to the accuracy of
such numbers either as printed on the Securities or as contained in any notice
of redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture. Request may be made to:
Atlas Air, Inc
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial officer
B-9
<PAGE> 118
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date:
---------------
Your Signature:
----------------
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee:
- ---------------------
B-10
<PAGE> 119
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.8 or Section 4.9 of the
Indenture check the appropriate box:
[ ] Section 4.8 [ ] Section 4.9
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.8 or Section 4.9 of the Indenture, state the
amount you elect to have purchase:
$
------------------
Date:
--------------
Your Signature:
-------------------
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee:
- --------------------
B-11
<PAGE> 120
EXHIBIT D
Form Of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Re: Atlas Air, Inc.
10 3/4% Senior Notes due 2005
Ladies and Gentlemen:
In connection with our proposed purchase of 10 3/4% Senior
Securities due 2005 (the "Securities") of Atlas Air, Inc. (the "Company"), we
confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated August 8, 1997 relating to the Securities and
such other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated on
pages (i) and (ii) of the Offering Memorandum and in the section entitled
"Transfer Restrictions" of the Offering Memorandum including the restrictions
on duplication and circulation of the offering Memorandum.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
indenture relating to the Securities (as described in the Offering Memorandum)
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the Securities may
not be offered or sold except as permitted in the following sentence. We agree,
on our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell or otherwise transfer any Securities
prior to the date which is two years after the
C-1
<PAGE> 121
original issuance of the Securities, we will do so only (i) to the Company or
any of its subsidiaries, (ii) inside the United States in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act), (iii) inside the United States to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee (as defined in the Indenture relating to the Securities), a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities, (iv) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (v) pursuant
to the exemption from registration provided by Rule 144 under the Securities
Act (if available), or (vi) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such purchaser that
resales of the Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of,
and will not transfer the Securities to, any pension or welfare plan (as
defined in Section 3 of the Employee Retirement Income Security Act of 1974),
except as permitted in the section entitled "Transfer Restrictions" of the
Offering Memorandum.
5. We understand that, on any proposed resale of any
Securities, we will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Securities purchased
by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
C-2
<PAGE> 122
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
By:
-----------------------------------
Name:
C-3
<PAGE> 123
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Re: Atlas Air, Inc.
(the "Company") 10 3/4% Senior
Notes due 2005 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(d) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
D-1
<PAGE> 124
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
Authorized Signature
D-2
<PAGE> 1
EXHIBIT 10.73
ATLAS AIR, INC.
$150,000,000
10 3/4% Senior Notes due 2005
PURCHASE AGREEMENT
August 8, 1997
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Dear Ladies and Gentlemen:
Atlas Air, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement with you (the "Initial Purchaser"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
$150,000,000 aggregate principal amount of its 10 3/4% Senior Notes due 2005
(the "Notes"). The Notes are to be issued under an indenture (the "Indenture")
to be dated as of August 13, 1997 by and among the Company and State Street
Bank and Trust Company, as trustee (the "Trustee").
The Notes will be offered and sold to the Initial Purchaser without
being registered under the Securities Act of 1933, as amended (the "Act"), in
reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated July 24, 1997 (the "Preliminary
Memorandum") and will prepare a final offering memorandum dated August 8, 1997
(the "Final Memorandum"; the Preliminary Memorandum and the Final Memorandum
each herein being referred to as a "Memorandum") each setting forth or
including a description of the terms of the Notes, the terms of the offering of
the Notes, a description of the Company and any material developments relating
to the Company occurring after the date of the most recent historical financial
statements included therein.
<PAGE> 2
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The Company understands that the Initial Purchaser proposes to make
an offering of the Notes only on the terms and in the manner set forth in the
Final Memorandum and Section 8 hereof as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered, to persons in
the United States whom the Initial Purchaser reasonably believes to be
qualified institutional buyers ("Qualified Institutional Buyers" or QIBs") as
defined in Rule 144A under the Act, as such rule may be amended from time to
time ("Rule 144A") and outside the United States to certain persons in reliance
on Regulations S under the Act.
The Initial Purchaser of the Notes and its direct and indirect
transferees will be entitled to the benefits of the Exchange and Registration
Rights Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), to be dated the Closing Date (as defined in
Section 3 below) pursuant to which the Company has agreed, among other things,
to file a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") registering the Notes or
the Exchange Notes (as defined in the Registration Rights Agreement) under the
Act.
2. Representations and Warranties. The Company represents and
warrants to, and agrees with, the Initial Purchaser that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as
defined in Section 3 below) contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information
relating to the Initial Purchaser furnished to the Company in writing by
the Initial Purchaser expressly for use in the Preliminary Memorandum, the
Final Memorandum or any amendment or supplement thereto.
(b) As of August 8, 1997, the Company has authorized 50,000,000
shares of common stock, $.01 par value, of which 22,450,229 shares are
issued and outstanding; and
<PAGE> 3
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10,000,000 shares of preferred stock, $1.00 par value, of which no shares
are issued and outstanding. As of the date hereof all of the subsidiaries
of the Company are listed in Schedule 1 attached hereto (collectively, the
"Subsidiaries"); all of the outstanding shares of capital stock of the
Company have been, and as of the Closing Date will be, duly authorized and
validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; except as set forth in the
Final Memorandum, all of the outstanding shares of capital stock of the
Company will be free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by the
Act and the securities or "Blue Sky" laws of certain jurisdictions) or
voting; except as set forth in the Final Memorandum, there are no
outstanding (i) options, warrants or other rights to purchase from the
Company, (ii) agreements or other obligations of the Company to issue or
(iii) other rights to convert any obligation into, or exchange any
securities for, shares of capital stock of or ownership interests in the
Company. Except as otherwise disclosed in the Final Memorandum, the
Company does not own, directly or indirectly, any capital stock or any
other equity or long-term debt securities or have any equity interest in
any company, firm, partnership, joint venture or other entity.
(c) Each of the Company and each of its Subsidiaries has been duly
incorporated, is validly existing and is in good standing as a corporation
under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority to own its properties and conduct its
business as now conducted, and as described in the Final Memorandum; each
of the Company and its Subsidiaries are duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of their properties or the conduct of their business
requires such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse
effect on the general affairs, management, business, condition (financial
or otherwise), prospects or results of operations of the Company and its
Subsidiaries, taken as a whole (any such material adverse effect, a
"Material Adverse Effect").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its
<PAGE> 4
-4-
obligations under the Notes and the Exchange Notes (as defined in the
Registration Rights Agreement), and the Private Exchange Notes (as defined
in the Registration Rights Agreement). The Notes, when issued, will be in
the form contemplated by the Indenture. The Notes, the Exchange Notes and
the Private Exchange Notes have each been duly and validly authorized by
the Company and, when executed by the Company and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the
case of the Notes, when delivered to and paid for by the Initial Purchaser
in accordance with the terms of this Agreement, will constitute valid and
legally binding obligations of the Company, entitled to the benefits of
the Indenture and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization or other similar laws now or
hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture. When
executed by the Company the Indenture will meet the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"TIA"). The Indenture has been duly and validly authorized by the Company
and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee), will constitute a
valid and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought.
(f) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration Rights
Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company,
will constitute a valid and legally binding agreement of the Company,
enforceable against the Company
<PAGE> 5
-5-
in accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization or other similar
laws now or hereafter in effect relating to creditors' rights generally,
(ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law) and (iii)
the enforceability of provisions imposing liquidated damages, penalties or
an increase in interest rate upon the occurrence of certain events may be
limited in certain circumstances.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly authorized, executed and delivered by the Company.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the
performance of this Agreement, the Registration Rights Agreement, or the
Indenture, by the Company or the consummation by the Company of the
transactions contemplated hereby, thereby or in the Final Memorandum that
are to be completed on or before the Closing Date, except such as have
been obtained and such as may be required under state securities or "Blue
Sky" laws in connection with the purchase and resale of the Notes by the
Initial Purchaser. None of the Company or the Subsidiaries is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them or
any of their respective properties or assets, except for any such breach
or violation which would not, individually or in the aggregate, have a
Material Adverse Effect, or (iii) in breach of or in default under (nor
has any event occurred which, with notice or passage of time or both,
would constitute a default under) or in violation of any of the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate, contract
or other agreement or instrument to which any of them is a party or to
which any of them or their respective properties or assets is subject
(collectively, "Contracts") except where such breach, default or violation
would not, individually or in the aggregate, have a Material Adverse
Effect and
<PAGE> 6
-6-
assuming the receipt by the Company of consents with respect to the
issuance of the aggregate principal amount of Notes contemplated hereby
from a sufficient number of lenders under each of (i) the Second Amended
and Restated Credit Agreement dated as of February 28, 1997 among the
Company, the Lender listed therein, Goldman Sachs Credit Partners L.P. and
Bankers Trust Company and (ii) the Credit Agreement dated as of May 29,
1997 among Atlas Freighter Leasing, the Lenders listed therein and Bankers
Trust Company.
(i) The execution, delivery and performance by the Company of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation by the Company of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof, and the
retention by the Company of BT Securities Corporation ("BTSC") and BTSC's
acting as contemplated hereby, will not conflict with or constitute or
result in a breach of or a default under (or an event which with notice or
passage of time or both would constitute a default under) or violation of
any of (i) the terms or provisions of any Contract except where such
breach, default or violation would not, individually or in the aggregate,
have a Material Adverse Effect, (ii) the certificate of incorporation or
by-laws (or similar organizational document) of the Company or any of the
Subsidiaries, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 8
hereof) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries or any of their
respective properties or assets except where such breach, default or
violation would not, individually or in the aggregate, have a Material
Adverse Effect.
(j) The audited consolidated financial statements of the Company and
the Subsidiaries included in the Final Memorandum present fairly in all
material respects the financial position, results of operations and cash
flows of the Company and the Subsidiaries at the dates and for the periods
to which they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein. The summary and selected financial and
statistical data in the Final Memorandum present fairly in all material
respects the information shown therein and, in the
<PAGE> 7
-7-
case of such financial data, have been prepared and compiled on a basis
consistent with the audited financial statements included therein, except
as otherwise stated therein. Arthur Andersen LLP, (the "Independent
Accountant") is an independent public accounting firm within the meaning
of the Act and the rules and regulations promulgated thereunder.
(k) There is not pending or, to the knowledge of the Company or the
Subsidiaries, threatened any action, suit, proceeding, inquiry or
investigation to which the Company or any of the Subsidiaries is a party,
or to which the property or assets of the Company or any of the
Subsidiaries are subject, before or brought by any court, arbitrator or
governmental agency or body which, if determined adversely to the Company
or any of the Subsidiaries would, individually or in the aggregate, have a
Material Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Notes
to be sold hereunder, or the consummation of the other transactions
described in the Final Memorandum.
(l) Each of the Company and the Subsidiaries owns or possesses
adequate licenses or other rights to use all material patents, trademarks,
service marks, trade names, copyrights and know-how necessary to conduct
the businesses now or proposed to be operated by it as described in the
Final Memorandum, and none of the Company or the Subsidiaries has received
any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with respect
to any patents, trademarks, service marks, trade names, copyrights or
know-how which, if such assertion of infringement or conflict were
sustained, would, individually or in the aggregate, have a Material
Adverse Effect.
(m) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals,
presently required or necessary to own or lease, as the case may be, and
to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final
Memorandum (collectively, the "Permits"), except where the failure to
<PAGE> 8
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obtain such Permits would not, individually or in the aggregate, have a
Material Adverse Effect; each of the Company and the Subsidiaries has
fulfilled and performed all of its obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any such Permit,
except where the failure to perform such obligation would not,
individually or in the aggregate, have a Material Adverse Effect; and none
of the Company or the Subsidiaries has received any notice of any
proceeding relating to revocation or modification of any such Permit,
except as described in the Final Memorandum and where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect.
(n) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described or contemplated therein, (i)
none of the Company or the Subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into or agreed to enter into
any transactions or contracts (written or oral) not in the ordinary course
of business which liabilities, obligations, transactions or contracts
would, individually or in the aggregate, be material to the general
affairs, management, business, condition (financial or otherwise),
prospects or results of operations of the Company and the Subsidiaries,
taken as a whole (a "Material Change"), (ii) none of the Company or the
Subsidiaries has purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind
on its capital stock, and (iii) there shall not have been any change in
the capital stock or long-term indebtedness of the Company or the
Subsidiaries which would, individually or in the aggregate, constitute a
Material Change.
(o) Each of the Company and the Subsidiaries has filed all necessary
federal, state, local and foreign income and franchise tax returns, except
where the failure to file such returns would not, individually or in the
aggregate, have Material Adverse Effect, and has paid all taxes shown as
due thereon; and other than tax deficiencies which the Company or any
Subsidiaries is contesting in good faith and for which the Company or such
Subsidiaries has provided adequate reserves, there is no tax defi-
<PAGE> 9
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ciency that has been asserted against the Company or any
of the Subsidiaries.
(p) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company and the
Subsidiaries believe to be reliable and accurate.
(q) None of the Company, the Subsidiaries or any agent acting on
their behalf has taken or will take any action that might cause this
Agreement or the sale of the Notes to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(r) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good and
marketable title to a leasehold estate in the real and personal property
described in the Final Memorandum as being leased by it free and clear of
all liens, charges, encumbrances or restrictions, except as described in
the Final Memorandum or to the extent the failure to have such title or
the existence of such liens, charges, encumbrances or restrictions would
not, individually or in the aggregate, have a Material Adverse Effect. All
leases, contracts and agreements to which the Company or any of the
Subsidiaries is a party or by which any of them is bound are valid and
enforceable against the Company or such Subsidiaries, and are valid and
enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not, individually or
in the aggregate, have a Material Adverse Effect.
(s) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary or any of their respective
properties or assets which would be required to be described in a
prospectus pursuant to the Securities Act that are not described in the
Final Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Securities Act that are not described in the Final Memorandum.
(t) Except as described in the Offering Memorandum
or as would not, individually or in the aggregate, be rea-
<PAGE> 10
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sonably expected to have a Material Adverse Effect (A) each of the Company
and the Subsidiaries is in compliance with and not subject to liability
under applicable Environmental Laws (as defined below), (B) each of the
Company and the Subsidiaries has made all filings and provided all notices
required under any applicable Environmental Law, and has and is in
compliance with all Permits required under any applicable Environmental
Laws and each of them is in full force and effect, (C) there is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter or request
for information pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened against the Company or any of the Subsidiaries
under any Environmental Law, (D) no lien, charge, encumbrance or
restriction has been recorded under any Environmental Law with respect to
any assets, facility or property owned, operated, leased or controlled by
the Company or any of the Subsidiaries, (E) none of the Company or the
Subsidiaries has received notice that it has been identified as a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or
any comparable state law, (F) no property or facility of the Company or
any of the Subsidiaries is (i) listed or proposed for listing on the
National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information
System List promulgated pursuant to CERCLA, or on any comparable list
maintained by any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated,
approved or entered thereunder, relating to pollution or protection of
public or employee health and safety or the environment, including,
without limitation, law relating to (i) emissions, discharges, releases or
threatened releases of hazardous materials, into the environment
(including, without limitation, ambient air, surface water, ground water,
land surface or subsurface strata), (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of hazardous materials, and (iii) underground and above ground
storage tanks, and related piping, and emissions, discharges, releases or
threatened releases therefrom.
<PAGE> 11
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(u) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or any of the Subsidiaries which is pending
or, to the knowledge of the Company or any of the Subsidiaries,
threatened.
(v) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks as it deems reasonable for the
conduct of its business and the value of its properties.
(w) None of the Company or the Subsidiaries has any liability for any
prohibited transaction (within the meaning of Section 4975(c) of the Code
or Part 4 of Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (or an accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of ERISA) or any
complete or partial withdrawal liability (within the meaning of Section
4201 of ERISA) with respect to any pension, profit sharing or other plan
which is subject to ERISA, to which the Company or any of the Subsidiaries
makes or ever has made a contribution and in which any employee of the
Company or of any Subsidiary is or has ever been a participant except
where such liability or deficiency would not, individually or in the
aggregate, have a Material Adverse Effect. With respect to such plans, the
Company and each Subsidiary is in compliance in all material respects with
all applicable provisions of ERISA, except where the failure to so comply
would not, individually or in the aggregate have a Material Adverse
Effect.
(x) None of the Company or the Subsidiaries will be an "investment
company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder.
(y) The Notes, the Indenture and the Registration Rights Agreement
will conform in all material respects to the descriptions thereof in the
Final Memorandum.
(z) No holder of securities of the Company or any Subsidiary will be
entitled to have such securities registered under the registration
statements required to be filed by the Company pursuant to the
Registration Rights Agreement other than as expressly permitted thereby.
<PAGE> 12
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(aa) None of the Company, the Subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any "security" (as
defined in the Act) which is or could be integrated with the sale of the
Notes in a manner that would require the registration under the Act of the
Notes or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Notes or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
No securities of the same class as the Notes have been issued and sold by
the Company within the six-month period immediately prior to the date
hereof.
(bb) Assuming (i) the accuracy of the representations and warranties
of the Initial Purchaser in Section 8 hereof and (ii) compliance by the
Initial Purchaser with the offering and transfer restrictions described in
the Final Memorandum and, it is not necessary in connection with the
offer, sale and delivery of the Notes to the Initial Purchaser in the
manner contemplated by this Agreement to register any of the Notes under
the Act or to qualify the Indenture under the TIA.
(cc) No securities of the Company or any Subsidiary are of the same
class (within the meaning of Rule 144A as promulgated under the Act ("Rule
144A")) as the Notes and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system.
(dd) None of the Company or the Subsidiaries has taken, nor will any
of them take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Notes.
(ee) None of the Company or the Subsidiaries, or any person acting on
any of their behalf (other than the Initial Purchaser) has engaged in any
directed selling efforts (as that term is defined in Regulation S under
the Act ("Regulation S")) with respect to the Notes; the Company and its
respective Affiliates and any person acting on any of their behalf (other
than the Initial Purchaser or any Affiliate of the Initial Purchaser) have
complied
<PAGE> 13
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with the offering restrictions requirement of Regulation
S.
(ff) Each of the Preliminary Memorandum and the Final Memorandum, as
of its respective date, contains all of the information that, if requested
by a prospective purchaser of the Notes, would be required to be provided
to such prospective purchaser to Rule 144A(d)(4) under the Act.
(gg) Neither the Company nor any of its Subsidiaries nor, to the
Company's knowledge, any officer or director purporting to act on behalf
of the Company or any of its Subsidiaries has at any time: (i) violated or
is in violation of any provision of the Foreign Corrupt Practices Act of
1977 or (ii) engaged in any transactions, maintained any bank account or
used any corporate funds except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and
records of the Company and its Subsidiaries.
Any certificate signed by any officer of the Company or any
Subsidiary and delivered to the Initial Purchaser or to counsel for the Initial
Purchaser shall be deemed a joint and several representation and warranty by
the Company and each of the Subsidiaries to the Initial Purchaser as to the
matters covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company the principal amount of Notes set forth opposite its
name on Schedule 2 hereto at 97.00% of their principal amount. One or more
certificates in definitive form for the Notes that the Initial Purchaser has
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Initial Purchaser requests upon notice
to the Company, at least 48 hours prior to the Closing Date shall be delivered
by or on behalf of the Company to the Initial Purchaser, against payment by or
on behalf of the Initial Purchaser of the purchase price therefor by wire
transfer (immediately available funds) to such account or accounts as the
Company shall specify prior to the Closing Date, or by such means as the
parties hereto shall agree prior to the Closing Date. Such delivery of and
payment for the Notes shall be made at the offices of White & Case, 1155 Avenue
of the Americas, New York, New York 10036 at 9:00 A.M., New York time,
<PAGE> 14
-14-
on August 13, 1997, or at such other place, time or date as the Initial
Purchaser, on the one hand, and the Company, on the other hand, may agree upon,
such time and date of delivery against payment being herein referred to as the
"Closing Date." The Company will make such certificate or certificates for the
Notes available for inspection and packaging by the Initial Purchaser at the
offices of the Initial Purchaser in New York, New York, or at such other place
as the Initial Purchaser may designate, at least 24 hours prior to the Closing
Date.
4. Offering by the Initial Purchaser. The Initial Purchaser proposes
to make an offering of the Notes at the price and upon the terms set forth in
the Final Memorandum, as soon as practicable after this Agreement is entered
into and as in the judgment of the Initial Purchaser is advisable.
5. Covenants of the Company. The Company covenants
and agrees with the Initial Purchaser that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall
not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to
which the Initial Purchaser shall not have consented. The Company will
promptly, upon the reasonable request of the Initial Purchaser or counsel
for the Initial Purchaser, make any amendments or supplements to the
Preliminary Memorandum or the Final Memorandum that may be necessary or
advisable in connection with the resale of the Notes by the Initial
Purchaser.
(b) The Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Notes for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchaser may designate and will continue such qualifications in effect
for as long as may be necessary to complete the resale of the Notes;
provided, however, that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchaser of the Notes or the Private Exchange Notes, any
event occurs or information
<PAGE> 15
-15-
becomes known as a result of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
or if for any other reason it is necessary at any time to amend or
supplement the Final Memorandum to comply with applicable law, the Company
will promptly notify the Initial Purchaser thereof and will prepare, at
the expense of the Company, an amendment or supplement to the Final
Memorandum that corrects such statement or omission or effects such
compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchaser may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) From the Closing Date until the date that no Notes are
outstanding under the Indenture, the Company will furnish to the Initial
Purchaser copies of all reports and other communications (financial or
otherwise) furnished by the Company to the Trustee, or the holders of the
Notes in such number of copies as may be reasonably requested by the
Initial Purchaser and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company with the
Commission or any national securities exchange on which any class of
securities of the Company may be listed in such number of copies as may be
reasonably requested by the Initial Purchaser.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any
unaudited interim financial statements of the Company and the Subsidiaries
for any period subsequent to the period covered by the most recent
financial statements appearing in the Final Memorandum.
(h) None of the Company or any of its affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale
of the
<PAGE> 16
-16-
Notes in a manner which would require the registration under the Act of
the Notes.
(i) None of the Company or its affiliates will engage in any form of
"general solicitation" or "general advertising" (as those terms are used
in Regulation D under the Act) in connection with the offering of the
Notes or in any manner involving a public offering of the Notes within the
meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company will make available, upon request, to any
seller of such Notes the information specified in Rule 144A(d)(4) under
the Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(k) The Company will use its best efforts to (i) permit the Notes to
be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private
Offerings, Resales and Trading through Automated Linkages market (the
"Portal Market") and (ii) permit the Notes to be eligible for clearance
and settlement through The Depository Trust Company.
(l) None of the Company or its affiliates nor any person acting on
its or their behalf will engage, in any directed selling efforts (as that
term is defined in Regulation S) with respect to the Notes, and the
Company will comply, and will cause its affiliates and each person acting
on its or their behalf to comply, with the offering restrictions
requirements of Regulation S.
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of their obligations under this Agreement, whether
or not the transactions contemplated herein are consummated or this Agreement
is terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any amendment
or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchaser of copies of the foregoing
documents, (iii) the fees and disbursements of counsel, accountants and any
other experts or advisors retained
<PAGE> 17
-17-
by the Company, (iv) preparation (including printing), issuance and delivery to
the Initial Purchaser of the Notes, (v) the qualification of the Notes under
state securities and "Blue Sky" laws, including filing fees and fees and
disbursements of counsel for the Initial Purchaser relating thereto, (vi) costs
and expenses in connection with any meetings with prospective investors in the
Notes, (vii) fees and expenses of the Trustee including fees and expenses of
counsel, (viii) all expenses and listing fees incurred in connection with the
application for quotation of the Notes on the PORTAL Market and (ix) any fees
charged by investment rating agencies for the rating of the Notes. If the sale
of the Notes provided for herein is not consummated because any condition to
the obligations of the Initial Purchaser set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated or because of any failure,
refusal or inability on the part of the Company to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
(other than solely by reason of a default by the Initial Purchaser of its
obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Company agrees to promptly reimburse the Initial
Purchaser upon demand for all out-of-pocket expenses (including all reasonable
fees, disbursements and charges of White & Case, counsel for the Initial
Purchaser) that shall have been incurred by the Initial Purchaser in connection
with the proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase and pay for the Notes shall, in
its sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received an
opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of David Brictson, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchaser:
(i) As of August 8, 1997, the Company has authorized 50,000,000
shares of common stock, $.01 par value, of which 22,450,229 shares
are issued and outstanding; and 10,000,000 shares of preferred stock,
$1.00 par value, of which no shares are issued and outstanding; all
of the outstanding shares of capital stock of the Company and the
Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and were not issued in
<PAGE> 18
-18-
violation of any preemptive or similar rights; all of the outstanding
shares of capital stock of the Subsidiaries are owned, directly or
indirectly, by the Company free and clear of all security interests
perfected, or otherwise, and to the knowledge of such counsel are
free and clear of all other liens, encumbrances, equities and claims
or restrictions on transferability or voting (other than those
imposed by the Act and the securities or Blue Sky laws of certain
jurisdictions).
(ii) To the knowledge of such counsel, (A) no options, warrants
or other rights to purchase from the Company or any Subsidiary shares
of capital stock or ownership interests in any Subsidiary are
outstanding, (B) no agreements or other obligations of the Company or
any Subsidiary to issue, or other rights to cause the Company or any
Subsidiary to convert, any obligation into, or exchange any
securities for, shares of capital stock or ownership interests in any
Subsidiary are outstanding and (C) no holder of securities of the
Company or any Subsidiary is entitled to have such securities
registered under a registration statement filed by the Company and
the Subsidiaries pursuant to the Registration Rights Agreement.
(iii) No legal or governmental proceedings are pending or to the
knowledge of such counsel threatened to which the Company is a party
or to which the property or assets of the Company is subject which,
if determined adversely to the Company, would reasonably be expected
to result, individually or in the aggregate, in a Material Adverse
Effect, or which seeks to restrain, enjoin, prevent the consummation
of or otherwise challenge the issuance or sale of the Notes to be
sold hereunder or the consummation of the other transactions
described in the Final Memorandum under the caption "Use of
Proceeds."
(b) On the Closing Date, the Initial Purchaser shall have received an
opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Cahill Gordon & Reindel, counsel for the Company, in form
and substance satisfactory to counsel for the Initial Purchaser which as
to matters other than under Delaware or New York Law, may rely on or be
supplemented by an opinion from another law
<PAGE> 19
-19-
firm reasonably satisfactory to the Initial Purchaser, to
the effect that:
(i) Each of the Company and the Subsidiaries is duly
incorporated, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation and has all requisite
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Final
Memorandum. Each of the Company and the Subsidiaries is duly
qualified as a foreign corporation and is in good standing in such
jurisdictions except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
(ii) The Company has all requisite corporate power and authority
to execute, deliver and perform its respective obligations under the
Indenture, the Notes, the Exchange Notes and the Private Exchange
Notes; the Indenture meets the requirements for qualification under
the TIA; the Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company
(assuming the due authorization, execution and delivery thereof by
the Trustee), will constitute the valid and legally binding agreement
of the Company enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization, or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles
of equity and the discretion of the court before which any proceeding
therefor may be brought.
(iii) The Notes are in the form contemplated by the Indenture. The
Notes have each been duly and validly authorized by the Company and
when duly executed and delivered by the Company and paid for by the
Initial Purchaser in accordance with the terms of this Agreement
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Notes by the Trustee in accordance with the Indenture), will
constitute the valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against
the Company in ac-
<PAGE> 20
-20-
cordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought and (iii) the enforceability of
provisions imposing liquidated damages, penalties or an increase in
interest rate upon the occurrence of certain events may be limited in
certain circumstances.
(iv) The Exchange Notes and the Private Exchange Notes have been
duly and validly authorized by the Company, and when the Exchange
Notes and the Private Exchange Notes have been duly executed and
delivered by the Company in accordance with the terms of the
Registration Rights Agreement and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the
Indenture), will constitute the valid and legally binding obligations
of the Company, entitled to the benefits of the Indenture, and
enforceable against the Company in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(v) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the
Registration Rights Agreement; the Registration Rights Agreement has
been duly and validly authorized by the Company and, when duly
executed and delivered by the Company (assuming due authorization,
execution and delivery thereof by the Initial Purchaser), will
constitute the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) general
principles
<PAGE> 21
-21-
of equity and the discretion of the court before which any proceeding
therefor may be brought and (iii) the enforceability of provisions
imposing liquidated damages, penalties or an increase in interest
rate upon the occurrence of certain events may be limited in certain
circumstances.
(vi) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby; this
Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the
Company.
(vii) The Indenture, the Notes, the Exchange Notes and the
Registration Rights Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(viii) The execution and delivery of this Agreement, the Indenture,
the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the Initial
Purchaser), will not conflict with or constitute or result in a
breach or a default under (or an event which with notice or passage
of time or both would constitute a default under) or violation of any
of (i) the terms or provisions of (a) the Pass Through Trust
Agreement dated as of November 30, 1995 between the Company and First
Fidelity Bank, National Association, as trustee, (the "Pass Through
Trust Agreement") and the indentures related thereto and (b) any
material Contract listed on Schedule 3 hereto, except (with respect
to clause (b) for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have a
Material Adverse Effect (ii) the certificate of incorporation or
bylaws (or similar organizational document) of the Company or any
Subsidiary, or (iii) (assuming compliance with all applicable state
securities or Blue Sky laws and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 8
hereof) based upon such counsel's review of those laws, rules and
regulations which, in the experience of such counsel, are normally
applicable to transac-
<PAGE> 22
-22-
tions of the type provided for in this Agreement, but without having
made any special investigation concerning any other laws, rules or
regulations will not conflict with, breach or violate any statute,
judgment, decree, order, rule or regulation known to such counsel to
be applicable to the Company, or any Subsidiaries or any or their
respective properties or assets, except for any such conflict, breach
or violation which would not, individually or in the aggregate, have
a Material Adverse Effect.
(ix) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by the
Company of the Notes to the Initial Purchaser or the other
transactions contemplated hereby, except such as may be required
under securities or Blue Sky laws, as to which such counsel need
express no opinion, and those which have previously been obtained.
(x) To the knowledge of such counsel, there are no legal or
governmental proceedings involving or affecting the Company or the
Subsidiaries or any of their respective properties or assets which
would be required to be described in a prospectus pursuant to the Act
that are not described in the Final Memorandum nor are there any
material contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not described
in the Final Memorandum.
(xi) None of the Company or the Subsidiaries is, or immediately
after the sale of the Notes to be sold hereunder and the application
of the proceeds from such sale (as described in the Final Memorandum
under the caption "Use of Proceeds") will be, an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended.
(xii) No registration under the Act of the Notes is required in
connection with the sale of the Notes to the Initial Purchaser as
contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior
to the commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the Shelf
Registration
<PAGE> 23
-23-
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) (A) that the purchasers who buy such Notes in the
initial resale thereof are qualified institutional buyers as defined
in Rule 144A promulgated under the Act ("QIBs") or (B) that the offer
or sale of the Notes is made in an offshore transaction as defined in
Regulation S under the Act, (ii) the accuracy of the Initial
Purchaser's representations in Section 8 hereof and those of the
Company contained in this Agreement regarding the absence of a
general solicitation in connection with the sale of such Notes to the
Initial Purchaser and the initial resale thereof and (iii) the due
performance by the Initial Purchaser of the agreements set forth in
Section 8 hereof.
(xiii) Neither the consummation of the transactions contemplated by
this Agreement nor the sale, issuance, execution or delivery of the
Notes will violate Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System.
(xiv) Such other opinions as the Initial Purchaser or its counsel
may reasonably request.
At the time the foregoing opinion is delivered, Cahill Gordon &
Reindel shall additionally state that it has participated in conferences
with officers and other representatives of the Company and the
Subsidiaries, representatives of the independent public accountants for
the Company, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which the contents of the Final Memorandum and
related matters were discussed, and, although it has not independently
verified and is not passing upon and assumes no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Final Memorandum (relying as to materiality to a large extent, upon the
opinions of officers and other representatives of the Company), no facts
have come to its attention which lead it to believe that the Final
Memorandum, on the date thereof or at the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such firm has not been re-
<PAGE> 24
-24-
quested to and does not express any comment with respect to the financial
statements and related notes thereto and the other financial, statistical
and accounting data included in the Final Memorandum). In rendering such
opinion, Cahill Gordon & Reindel shall have received and may rely upon
such certificates and other documents and information as it may reasonably
request to pass on such matters. The opinion of Cahill Gordon & Reindel
described in this Section shall be rendered to the Initial Purchaser at
the request of the Company and shall so state therein. In rendering the
foregoing opinions, Cahill Gordon & Reindel may state that their opinion
is limited to matters governed by the federal laws of the United States of
America, the laws of the State of New York and the corporate laws of the
State of Delaware.
References to the Final Memorandum in this subsection (c) shall
include any amendment or supplement thereto prepared in accordance with
the provisions of this Agreement at the Closing Date.
(c) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser,
dated as of the Closing Date and addressed to the Initial Purchaser, of
White & Case, counsel for the Initial Purchaser, with respect to certain
legal matters relating to this Agreement and such other related matters as
the Initial Purchaser may reasonably require. In rendering such opinion,
White & Case shall have received and may rely upon such certificates and
other documents and information as it may reasonably request to pass upon
such matters.
(d) The Initial Purchaser shall have received from Arthur Andersen
LLP comfort letters dated the date hereof and the Closing Date, in form
and substance satisfactory to counsel for the Initial Purchaser.
(e) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on and
as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date; the statements of the Company's officers made
pursuant to any certificate delivered in accordance with the provisions
hereof shall be true and correct in all material respects on and as of the
date made and on and as of the Closing Date; the Company shall have
performed all covenants and agreements in all material re-
<PAGE> 25
-25-
spects and satisfied in all material respects all conditions on their part
to be performed or satisfied hereunder at or prior to the Closing Date;
and, except as described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), subsequent to the
date of the most recent financial statements in such Final Memorandum,
there shall have been no event or development that, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(f) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the conduct of the business and operations of the
Company shall not have been interfered with by, fire, flood, hurricane,
accident or other calamity (whether or not insured) or from any strike,
labor dispute, slow down or work stoppage, or by any court or governmental
action, order or decree, and, except as otherwise stated therein, the
properties of the Company or any of the Subsidiaries shall not have
sustained any loss or damage (whether or not insured) as a result of any
such occurrence, except any such interference, loss or damage which would
not, individually or in the aggregate, have a Material Adverse Effect.
(h) The Initial Purchaser shall have received a certificate of the
Company, dated the Closing Date, signed by the Chairman of the Board,
President or any Senior Vice President and the Chief Financial Officer of
the Company, to the effect that:
(i) The representations and warranties of the Company contained
in this Agreement are true and correct in all material respects as of
the date hereof and as of the Closing Date, and the Company has
performed all covenants and agreements and satisfied in all material
respects all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the date
of the most recent financial statements in the Final Memorandum
(exclusive of any
<PAGE> 26
-26-
amendment or supplement thereto after the date hereof), except as
described in the Final Memorandum, no event or development has
occurred, no information has become known nor does any condition
exist that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect;
(iii) The sale of the Notes hereunder has not
been enjoined (temporarily or permanently);
(iv) Attached hereto is a true and correct calculation of the
Company's Consolidated Fixed Charge Coverage Ratio as such term is
defined in the Pass Through Trust Agreement dated as of November 30,
1995 between the Company and First Fidelity Bank, National
Association, as trustee (the "Pass Through Agreement") and the
indentures related thereto after giving pro forma effect to the
incurrence, on the Closing Date, of indebtedness in the form of the
$150 million 10 3/4% Senior Notes due 2005 as contemplated by this
Agreement and the proposed application of the net proceeds therefrom;
and
(v) Such other information as the Initial Purchaser or its
counsel may reasonably request.
(i) On the Closing Date, the Initial Purchaser shall have received
the Registration Rights Agreement duly executed by the Company and such
agreement shall be in full force and effect at all times from and after
the Closing Date.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchaser and counsel for the Initial Purchaser. The
Company shall furnish to the Initial Purchaser such conformed copies of such
documents, opinions, certificates, letters, schedules and
<PAGE> 27
-27-
instruments in such quantities as the Initial Purchaser shall reasonably
request.
8. Offering of Notes; Restrictions on Transfer.
(a) The Initial Purchaser represents and warrants that it is a QIB.
The Initial Purchaser agrees with the Company that (i) it has not and will not
solicit offers for, or offer or sell, the Notes by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act; and (ii) it has and will solicit offers for the
Notes only from, and will offer the Notes only to (A) in the case of offers
inside the United States, persons whom the Initial Purchaser reasonably
believes to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)); provided, however, that, in the case of this clause (B), in purchasing
such Notes such persons are deemed to have represented and agreed as provided
under the caption "Transfer Restrictions" contained in the Final Memorandum (or
if the Final Memorandum is not in existence, in the most recent Memorandum).
(b) The Initial Purchaser represents and warrants with respect to
offers and sales outside the United States that (i) it has and will comply with
all applicable laws and regulations in each jurisdiction in which it acquires,
offers, sells or delivers Notes or has in its possession or distributes any
Memorandum or any such other material, in all cases at its own expense; (ii)
the Notes have not been and will not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the Act or pursuant to an exemption from the
registration requirements of the Act; (iii) it has offered the Notes and will
offer and sell the Notes (A) as part of its distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the offering and
the Closing Date, only in accordance with Rule 903 of Regulation S and,
accordingly, nei-
<PAGE> 28
-28-
ther it nor any person acting on its behalf have engaged or will engage in any
directed selling efforts (within the meaning of Regulation S) with respect to
the Notes, and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S; and (iv) it agrees that, at or prior
to confirmation of sales of the Notes, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases Notes from it during the restricted period a confirmation or notice
to substantially the following effect:
"The Notes covered hereby have not been registered under the United States
Securities Act of 1933 (the "Securities Act") and may not be offered and
sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of the distribution of the Notes at any time or
(ii) otherwise until 40 days after the later of the commencement of the
offering and the closing date of the offering, except in either case in
accordance with Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meaning given to them in
Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
(c) The Initial Purchaser represents and warrants that the source of
funds being used by it to acquire the Notes does not include the assets of any
"employee benefit plan" (within the meaning of Section 3 of ERISA) or any
"plan" (within the meaning of Section 4975 of the Code).
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchaser and its respective affiliates, directors, officers, agents,
representatives and employees of such Initial Purchaser or its affiliates, and
each other person, if any, who controls the Initial Purchaser or its affiliates
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
to the full extent lawful against any losses, claims, damages or liabilities
(or action in respect thereof, including, without limitation, shareholder
derivative actions and arbitration proceedings) to which the Initial Purchaser
or such other person may become subject under the Act, the Exchange Act or
otherwise, insofar as any such losses,
<PAGE> 29
-29-
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto or
any application or other document, or any amendment or supplement thereto,
executed by the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify the
Notes under the securities or "Blue Sky" laws thereof or filed with any
securities association or securities exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and will reimburse, as incurred, the Initial Purchaser and each such other
person for any legal or other expenses incurred by the Initial Purchaser or
such other person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, the Company will not be liable
(i) in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information concerning the Initial Purchaser furnished
to the Company by the Initial Purchaser specifically for use therein or (ii)
with respect to the Preliminary Memorandum, to the extent that any such loss,
claim, damage or liability arises solely from the fact that the Initial
Purchaser sold Notes to a person to whom there was not sent or given, on or
prior to the written confirmation of such sale, a copy of the Final Memorandum,
as amended and supplemented, if the Company shall have previously furnished
copies thereof to the Initial Purchaser in accordance with this Agreement and
the Final Memorandum, as amended and supplemented, would have corrected any
such untrue statement or omission or alleged untrue statement or omission. This
indemnity agreement will be in addition to any liabilities or obligations that
the Company may otherwise have to the indemnified parties. The Company shall
not be liable under this Section 9 for any settlement of any
<PAGE> 30
-30-
claim or action effected without their consent, which shall not be unreasonably
withheld. The Initial Purchaser shall not, without the prior written consent of
the Company, effect any settlement or compromise of any pending or threatened
proceeding in respect of which the Company is or could have been a party, or
indemnity could have been sought hereunder by the Company, unless such
settlement (A) included an unconditional written release of the Company, in
form and substance reasonably satisfactory to the Company, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to
act by or on behalf of the Company.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto or any Application, or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in any Memorandum or any
amendment or supplement thereto or any Application, or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
the Initial Purchaser, furnished to the Company by the Initial Purchaser
specifically for use therein; and subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses incurred by the Company, or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will
be in addition to any liability that the Initial Purchaser may otherwise have
to the indemnified parties. The Initial Purchaser shall not be liable under
this Section 9 for any settlement of any claim or action effected without its
prior written consent, which shall not be unreasonably withheld. The Company
shall not, without the prior written consent of the Initial Purchaser, effect
any settlement
<PAGE> 31
-31-
or compromise of any pending or threatened proceeding in respect of which the
Initial Purchaser is or could have been a party, or indemnity could have been
sought hereunder by any Initial Purchaser, unless such settlement (A) includes
an unconditional written release of the Initial Purchaser, in form and
substance reasonably satisfactory to the Initial Purchaser, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to
act by or on behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses (ii) will not, in any event, relieve
the indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraphs (a) and (b) above. In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on be-
<PAGE> 32
-32-
half of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof and approval by such indemnified party of counsel appointed to defend
such action, the indemnifying party will not be liable to such indemnified
party under this Section 9 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof, unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the
immediately preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in
any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchaser in the case of paragraph (a) of this
Section 9 or the Company in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 9, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect (i) the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other
<PAGE> 33
-33-
in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and the Initial Purchaser on the other shall be deemed to be in
the same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by the Initial Purchaser. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand, or the Initial Purchaser on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or alleged statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company and the Initial
Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial
Purchaser shall not be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by the Initial Purchaser under this Agreement, less the aggregate
amount of any damages that the Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
the Initial Purchaser, and each director of the Company, each officer of the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Initial Purchaser set forth in this Agreement or made by or
on behalf of them pursuant to this Agreement shall remain in full force and
<PAGE> 34
-34-
effect, regardless of (i) any investigation made by or on behalf of the
Company, any of their respective officers or directors, the Initial Purchaser
or any other person referred to in Section 9 hereof and (ii) delivery of and
payment for the Notes. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6, 9 and 15 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. Termination.
(a) This Agreement may be terminated in the sole discretion of the
Initial Purchaser by notice to the Company given prior to the Closing Date in
the event that the Company shall have failed, refused or been unable to perform
all obligations and satisfy all conditions on their respective part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) any of the Company or the Subsidiaries shall have sustained any
loss or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work
stoppage or any legal or governmental proceeding, which loss or
interference, in the sole judgment of the Initial Purchaser, has had or
has a Material Adverse Effect, or there shall have been, in the sole
judgment of the Initial Purchaser, any event or development that,
individually or in the aggregate, has or could be reasonably likely to
have a Material Adverse Effect (including without limitation a change in
control of the Company or the Subsidiaries), except in each case as
described in the Final Memorandum (exclusive of any amendment or
supplement thereto);
(ii) trading in securities of the Company or in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or minimum or maximum prices
shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by
New York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other
<PAGE> 35
-35-
insurrection or armed conflict involving the United States or any other
national or international calamity or emergency, or (C) any material
change in the financial markets of the United States which, in the case of
(A), (B) or (C) above and in the sole judgment of the Initial Purchaser,
makes it impracticable or inadvisable to proceed with the public offering
or the delivery of the Notes as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization;
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The statements set
forth in paragraph 6 under the heading "Private Placement" in the Final
Memorandum (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and, if
sent to the Initial Purchaser, shall be mailed or delivered to BT Securities
Corporation, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department; with a copy to White & Case, 1155 Avenue of the Americas,
New York, NY 10036, Attention: John Reiss, Esq.; if sent to the Company, shall
be mailed or delivered to the Company at 538 Commons Drive, Golden, Colorado
80401. Attention: Chief Financial Officer, with a copy to Cahill Gordon &
Reindel, Eighty Pine Street, New York, New York 10005-1702, Attention: Stephen
A. Greene, Esq., or, in each case, to such other address as may be specified by
notice given in accordance with this Section 13.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser, the Company and their respective successors
and legal representatives,
<PAGE> 36
-36-
and nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company contained in Section 9 of this Agreement shall also be for the benefit
of any person or persons who control the Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchaser contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Company and officers and
any person or persons who control the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the
Initial Purchaser will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO
ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 37
-37-
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Initial Purchaser.
Very truly yours,
ATLAS AIR, INC.
By:
--------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT SECURITIES CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE> 38
SCHEDULE 1
Subsidiaries
Atlas One, Inc., a Delaware Corporation
Atlas Freighter Leasing, Inc., a Delaware Corporation
<PAGE> 39
SCHEDULE 2
[A
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
- ----------------- ----------------
<S> <C>
BT Securities Corporation $150,000,000
</TABLE>
<PAGE> 40
SCHEDULE 3
Material Contracts
1. Aircraft Agreement No. 97-01-01 between Atlas Air, Inc. and Frontier de
Colombia, S.A.
2. Aircraft Wet Lease Agreement No. 97-01-02 between Atlas Air, Inc. and Fast
Air Carrier S.A.
3. Aircraft Wet Lease Agreement No. 97-07-01 between Atlas Air, Inc. and Fast
Air Carrier S.A.
4. Wet Lease Agreement dated March 23, 1993 between Atlas Air, Inc. and China
Airlines Ltd.
5. Wet Lease Agreement dated November 9, 1995 between Atlas Air, Inc. and
China Airlines Ltd.
6. Wet Lease Agreement No. 96-09-01 between Atlas Air, Inc. and China
Airlines Ltd.
7. Wet Lease Agreement No. 96-09-02 between Atlas Air, Inc. and China
Airlines Ltd.
8. Wet Lease Agreement dated December 15, 1994 between Atlas Air, Inc. and
China Airlines Ltd.
9. Aircraft Wet Lease Agreement No. 96-08-03 between Atlas Air Services
Limited and British Airways World Cargo
10. Aircraft Charter Agreement No. 95-01-02 between Atlas Air, Inc. and
Lufthansa Cargo AG
11. Aircraft Charter Agreement No. 95-10-02 between Atlas Air, Inc. and
Scandinavian Airlines System
12. Aircraft Wet Lease Agreement dated June 17, 1996 between Atlas Air
Services Limited and Thai Airways International Public Company Limited
13. Aircraft Charter Agreement No. 96-06-01 between Atlas Air, Inc. and Viacao
Aerea Rio Grandense dba Varig Brazilian Airlines
<PAGE> 41
-2-
14. Aircraft Lease Agreement No. 2519 between Atlas Air, Inc. and KLM Royal
Dutch Airlines
15. Aircraft Lease Agreement No. 9612/1 between Atlas Air, Inc. and the
Airline of the United Arab Emirates
16. Secure Loan Agreement between Atlas Air, Inc. and Finova Capital
Corporation dated April 11, 1996 and related documents
17. Loan Agreement between Atlas Air, Inc. and Nationsbanc Leasing Corporation
dated March 28, 1997 and related documents
18. Second Amended and Restated Credit Agreement dated as of February 28, 1997
among Atlas Air, Inc., the Lenders listed therein, Goldman Sachs Credit
Partners L.P. and Bankers Trust Company
19. Credit Agreement among Atlas Freighter Leasing, Inc., the Lenders listed
therein and Bankers Trust Company dated May 29, 1997 and related documents
20. Aircraft General Terms Agreement between Atlas Air, Inc. and The Boeing
Company dated June 6, 1997
21. General Terms Agreement No. 6-9810 between Atlas Air, Inc. and General
Electric Company dated June 6, 1997
22. Engine Maintenance Agreement between Atlas Air, Inc. and General Electric
Company dated June 1996
23. Boeing 747 Maintenance Agreement between Atlas Air, Inc. and KLM Royal
Dutch Airlines
24. Maintenance Agreement between Atlas Air, Inc. and Hong Kong Aircraft
Engineering Company Limited dated April 12, 1995
<PAGE> 1
EXHIBIT 10.74
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 13, 1997
by and among
ATLAS AIR, INC.,
and
BT SECURITIES CORPORATION
(as Initial Purchaser)
===============================================================================
$150,000,000
10 3/4% SENIOR NOTES DUE 2005
<PAGE> 2
This Registration Rights Agreement is dated as of
August 13, 1997, by and among Atlas Air, Inc., a Delaware cor-
poration (the "Company") and BT Securities Corporation (the
"Initial Purchaser").
This Agreement is made pursuant to the Purchase
Agreement, dated August 8, 1997, among the Company and the Ini-
tial Purchaser (the "Purchase Agreement"), which provides for
the sale by the Company to the Initial Purchaser of
$150,000,000 aggregate principal amount of the Company's 10 3/4%
Senior Notes due 2005 (the "Notes"). In order to induce the
Initial Purchaser to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights provided
for in this Agreement to the Initial Purchaser and their re-
spective direct and indirect transferees and assigns. The exe-
cution and delivery of this Agreement is a condition to the
closing of the transactions contemplated by the Purchase Agree-
ment.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall
have the following meanings:
Additional Interest: As defined in Section 4(a)
hereof.
Affiliate: With respect to any specified person,
"Affiliate" shall mean any other person directly or indirectly
controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this
definition, "control," when used with respect to any person,
means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise and the terms
"affiliated," "controlling" and "controlled" have meanings cor-
relative to the foregoing.
Agreement: This Registration Rights Agreement, as
the same may be amended, supplemented or modified from time to
time in accordance with the terms hereof.
Business Day: Any day except a Saturday, a Sunday or
a day on which banking institutions in New York, New York gen-
erally are required or authorized by law or other government
action to be closed.
<PAGE> 3
-2-
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the
term "Exchange Offer", shall mean validly and lawfully to issue
and deliver the Exchange Notes pursuant to the Exchange Offer
for all Notes validly tendered and not validly withdrawn pursu-
ant thereto in accordance with the terms of this Agreement.
Consummation Date: 180 days following the Issue
Date.
Effectiveness Period: As defined in Section 3(a)
hereof.
Exchange Act: The Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the
SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 10 3/4% Senior Notes due 2005 of
the Company, that are identical to the Notes in all material
respects, except that the provisions regarding restrictions on
transfer shall be modified, as provided in the Indenture, and
the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement
in compliance with the Securities Act.
Exchange Offer: An offer to issue, in exchange for
any and all of the Notes, a like aggregate principal amount of
Exchange Notes, which offer shall be made by the Company pursu-
ant to Section 2 hereof.
Exchange Registration Statement: As defined in Sec-
tion 2(a) hereof.
Indemnified Person: As defined in Section 7(a)
hereof.
Indenture: The Indenture, dated as of August 13,
1997, among the Company and State Street Bank and Trust Com-
pany, as trustee thereunder, pursuant to which the Notes are
issued, as amended or supplemented from time to time in accor-
dance with the terms thereof.
Initial Purchaser: As defined in the preamble
hereof.
<PAGE> 4
-3-
Issue Date: As defined in Section 2(a).
Company: As defined in the preamble hereof.
Notes: As defined in the preamble hereof.
Participating Broker-Dealer: As defined in Section
2(e) hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c)
hereof.
Prospectus: The prospectus included in any Registra-
tion Statement (including, without limitation, a prospectus
that discloses information previously omitted from a prospectus
filed as part of an effective registration statement in reli-
ance upon Rule 430A promulgated pursuant to the Securities Act)
and any term sheet filed pursuant to Rule 434 under the Securi-
ties Act, as amended or supplemented by any prospectus supple-
ment, with respect to the terms of the offering of any portion
of the Notes, Exchange Notes or Private Exchange Notes covered
by such Registration Statement, and all other amendments and
supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such pro-
spectus.
Registration Default: As defined in Section 4(a)
hereof.
Registration Statement: Any registration statement
of the Company that covers any of the Notes, Exchange Notes or
Private Exchange Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre-
and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated
by reference, if any, in such registration statement.
Rule 144(k): Rule 144(k) promulgated by the SEC pur-
suant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter
adopted by the SEC as a replacement thereto having substan-
tially the same effect as such Rule.
<PAGE> 5
-4-
Rule 144A: Rule 144A promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by
the SEC as a replacement thereto having substantially the same
effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by
the SEC as a replacement thereto having substantially the same
effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by
the SEC as a replacement thereto having substantially the same
effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by
the SEC as a replacement thereto having substantially the same
effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by
the SEC as a replacement thereto having substantially the same
effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
Shelf Filing Event: As defined in Section 3(a)
hereof.
Shelf Registration: As defined in Section 3(a)
hereof.
Shelf Registration Statement: As defined in Section
3(a) hereof.
Special Counsel: White & Case, special counsel to
the holders of Transfer Restricted Notes, or such other counsel
as shall be agreed upon by the Company and holders of a major-
<PAGE> 6
-5-
ity in aggregate principal amount of Transfer Restricted Notes,
the reasonable expenses of which holders of Transfer Restricted
Notes will be reimbursed by the Company pursuant to Section 6
hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Note: Each Note, upon original
issuance thereof, and at all times subsequent thereto, each Ex-
change Note as to which Section 3(a)(ii) hereof is applicable
upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and
at all times subsequent thereto, until in the case of any such
Note, Exchange Note as to which Section 3(a)(ii) hereof is ap-
plicable or Private Exchange Note, as the case may be, the ear-
liest to occur of (i) the date on which any such Note has been
exchanged by a person other than a Participating Broker-Dealer
for an Exchange Note (other than with respect to an Exchange
Note as to which Section 3(a)(ii) hereof applies) pursuant to
the Exchange Offer, (ii) with respect to Exchange Notes re-
ceived by Participating Broker-Dealers in the Exchange Offer,
the earlier of (x) the date on which such Exchange Note has
been sold by such Participating Broker-Dealer by means of the
Prospectus contained in the Exchange Registration Statement and
(y) the date on which the Exchange Registration Statement has
been effective under the Securities Act for a period of six
months after the Consummation Date, (iii) a Shelf Registration
Statement covering such Note, Exchange Note or Private Exchange
Note has been declared effective by the SEC and such Note, Ex-
change Note or Private Exchange Note, as the case may be, has
been disposed of in accordance with such effective Shelf Regis-
tration Statement, (iv) the date on which such Note, Exchange
Note or Private Exchange Note, as the case may be, is eligible
for distribution to the public without volume or manner of sale
restrictions pursuant to Rule 144(k) or (v) the date on which
such Note, Exchange Note or Private Exchange Note, as the case
may be, ceases to be outstanding for purposes of the Indenture
or any other indenture under which such Exchange Note or Pri-
vate Exchange Note was issued.
Trustee: The trustee under the Indenture.
underwritten registration or underwritten offering:
A registration in connection with which securities are sold to
an underwriter for reoffering to the public pursuant to an ef-
fective Registration Statement.
<PAGE> 7
-6-
2. Exchange Offer
(a) To the extent not prohibited by any applicable
law or applicable interpretation of the staff of the SEC, the
Company shall (A) prepare and, on or prior to 45 days after the
date of original issuance of the Notes (the "Issue Date"), file
with the SEC a Registration Statement under the Securities Act
with respect to an offer by the Company to the holders of the
Notes to issue and deliver to such holders, in exchange for
Notes, a like principal amount of Exchange Notes, (B) use its
best efforts to cause the Registration Statement relating to
the Exchange Offer to be declared effective by the SEC under
the Securities Act on or prior to 150 days after the Issue
Date, and (C) and use its best efforts to consummate the Ex-
change Offer within 180 days after the Issue Date, the Exchange
Notes. The offer and sale of the Exchange Notes pursuant to
the Exchange Offer shall be registered pursuant to the Securi-
ties Act on an appropriate form (the "Exchange Registration
Statement") and duly registered or qualified under all applica-
ble state securities or Blue Sky laws and will comply with all
applicable tender offer rules and regulations under the Ex-
change Act and state securities or Blue Sky laws provided, how-
ever, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where they are not
then so qualified or (ii) take any action which would subject
them to general service of process or to taxation in excess of
a nominal dollar amount in any jurisdiction where it is not so
subject. The Exchange Offer shall not be subject to any condi-
tion, other than that the Exchange Offer does not violate any
applicable law or interpretation of the staff of the SEC. It
is further provided that if after the Exchange Registration
Statement is declared effective by the SEC, the Exchange Offer
or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or require-
ment of the SEC or any other governmental agency or court, such
Exchange Registration Statement shall be deemed not to have be-
come effective for purposes of this Agreement. Upon consumma-
tion of the Exchange Offer in accordance with this Section 2,
the Company shall have no further registration obligations
other than with respect to (i) Private Exchange Notes, (ii) Ex-
change Notes held by Participating Broker-Dealers and (iii)
Notes or Exchange Notes as to which Section 3(a)(iii) hereof
applies. No securities shall be included in the Exchange Reg-
istration Statement other than the Exchange Notes.
(b) The Company may require each holder of Notes, as
a condition to its participation in the Exchange Offer, to rep-
resent to the Company and their counsel in writing (which may
<PAGE> 8
-7-
be contained in the applicable letter of transmittal) that at
the time of the consummation of the Exchange Offer (i) any Ex-
change Notes received by such holder will be acquired in the
ordinary course of its business, (ii) such holder will have no
arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of
the Exchange Notes and (iii) such holder is not an Affiliate of
the Company, or if it is an Affiliate of the Company, it will
comply with the registration and prospectus delivery require-
ments of the Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer,
the Initial Purchaser holds any Notes acquired by it and hav-
ing, or which are reasonably likely to be determined to have,
the status of an unsold allotment in the initial distribution,
or any other holder of Notes is not entitled to participate in
the Exchange Offer, the Company, upon the request of the Ini-
tial Purchaser or any such holder, shall, simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue
and deliver to the Initial Purchaser and any such holder, in
exchange (the "Private Exchange") for such Notes held by the
Initial Purchaser and any such holder, a like principal amount
of debt securities of the Company, that are identical in all
material respects to the Exchange Notes (the "Private Exchange
Notes") (and which are issued pursuant to the same indenture as
the Exchange Notes). The Private Exchange Notes shall bear the
same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted
by any applicable law or interpretation of the staff of the
SEC, the Company shall mail the Exchange Offer Prospectus and
appropriate accompanying documents, including appropriate let-
ters of transmittal, to each holder of Notes providing, in ad-
dition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pur-
suant to this Agreement and that all Notes validly
tendered will be accepted for exchange;
(ii) the date of acceptance for exchange (the
"Exchange Date"), which date shall in no event be
later than the Consummation Date (unless otherwise
required by applicable law);
(iii) that a holder of a Note electing to have a
Note exchanged pursuant to the Exchange Offer will
be required to surrender such Note, together with
<PAGE> 9
-8-
the enclosed letters of transmittal, to the institu-
tion and at the address (located in the Borough of
Manhattan, The City of New York) specified in the
notice prior to the close of business on the Ex-
change Date; and
(iv) that holders of Notes that do not tender
all such securities pursuant to the Exchange Offer
may no longer have any registration rights hereunder
with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions
thereof validly tendered and not validly withdrawn pursu-
ant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trus-
tee for cancellation all Notes or portions thereof so ac-
cepted for exchange by the Company, and issue, cause the
Trustee under the Indenture (or the indenture pursuant to
which the Exchange Notes are issued) to authenticate, and
mail to each holder of Notes, Exchange Notes equal in
principal amount to the principal amount of the Notes sur-
rendered by such holder.
(e) The Company and the Initial Purchaser acknowl-
edge that the staff of the SEC has taken the position that any
broker-dealer that owns Exchange Notes that were received by
such broker-dealer for its own account in the Exchange Offer (a
"Participating Broker-Dealer") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must
deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Notes (other
than a resale of an unsold allotment resulting from the origi-
nal offering of the Notes).
The Company and the Initial Purchaser also acknowl-
edge that it is the SEC staff's position that if the Prospectus
contained in the Exchange Registration Statement includes a
plan of distribution containing a statement to the above effect
and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-
Dealers or specifying the amount of Exchange Notes owned by
them, such Prospectus may be delivered by Participating Broker-
Dealers to satisfy their prospectus delivery obligations under
the Securities Act in connection with resales of Exchange Notes
<PAGE> 10
-9-
for their own accounts, so long as the Prospectus otherwise
meets the requirements of the Securities Act.
In light of the foregoing, if requested by a Partici-
pating Broker-Dealer, the Company agrees (x) to use its best
efforts to keep the Exchange Registration Statement continu-
ously effective, and to amend and supplement the Prospectus
contained therein, for a period of up to six months after the
Consummation Date or such earlier date as each Participating
Broker-Dealer shall have notified the Company in writing that
such Participating Broker-Dealer has resold all Exchange Notes
acquired in the Exchange Offer, (y) to comply with the provi-
sions of Section 5 of this Agreement, as they relate to the Ex-
change Offer and the Exchange Registration Statement, and (z)
to deliver to such Participating Broker-Dealer a "cold comfort"
letter of the independent public accountants of the Company and
a legal opinion as to matters reasonably requested by such Par-
ticipating Broker-Dealer relating to the Exchange Registration
Statement and the related Prospectus and any amendments or sup-
plements thereto.
(f) The Initial Purchaser, in such capacity, shall
have no liability to any Participating Broker-Dealer with re-
spect to any request made pursuant to Section 2(e).
(g) Interest on the Exchange Notes and the Private
Exchange Notes will accrue from the last interest payment date
on which interest was paid on the Notes surrendered in exchange
therefor or, if no interest has been paid on the Notes, from
Issue Date.
(h) The Exchange Notes and the Private Exchange
Notes may be issued under (i) the Indenture or (ii) an inden-
ture identical in all material respects to the Indenture, which
in either event shall provide that (1) the Exchange Notes shall
not be subject to the transfer restrictions set forth in the
Indenture and (2) the Private Exchange Notes shall be subject
to the transfer restrictions set forth in the Indenture. The
Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Notes shall vote and
consent together on all matters as one class and that none of
the Exchange Notes, the Private Exchange Notes or the Notes
will have the right to vote or consent as a separate class on
any matter.
<PAGE> 11
-10-
3. Shelf Registration
(a) If (i) the Company is not permitted to file the
Exchange Offer Registration Statement or to consummate the Ex-
change Offer because the Exchange Offer is not permitted by any
applicable law or applicable interpretation of the staff of
the SEC or (ii) any holder of a Note notifies the Company on or
prior to the 45th day following the Issue Date that (A) due to
a change in law or policy it is not entitled to participate in
the Exchange Offer, (B) due to a change in law or policy it may
not resell Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the Prospec-
tus contained in the Exchange Registration Statement is not ap-
propriate or available for such resales by such holder or (C)
it owns Notes (including the Initial Purchaser that holds Notes
as part of an unsold allotment from the original offering of
the Notes) acquired directly from the Company or an Affiliate
of the Company or (iii) any holder of Private Exchange Notes so
requests after the consummation of the Private Exchange or (iv)
the holders of not less than a majority in aggregate principal
amount of the Transfer Restricted Notes reasonably determine
that the interests of the holders would be materially adversely
affected by consummation of the Exchange Offer or (v) the Com-
pany has not consummated the Exchange Offer within 180 days af-
ter the Issue Date (each such event referred to in clauses (i)
through (v), a "Shelf Filing Event"), the Company shall cause
to be filed with the SEC pursuant to Rule 415 a shelf registra-
tion statement (the "Shelf Registration Statement") prior to
the later of (x) 60 days after the Issue Date or (y) 45 days
after the occurrence of such Shelf Filing Event, relating to
all Transfer Restricted Notes (the "Shelf Registration") the
holders of which have provided the information required pursu-
ant to Section 3(b) hereof (provided that if the Shelf Filing
Event arises pursuant to clause (v) above, the Company shall
file the Shelf Registration Statement on the 181st day after
the Issue Date), and shall use its best efforts to have the
Shelf Registration Statement declared effective by the SEC on
or prior to 90 days after the filing of such Shelf Filing
Event. In such circumstances, the Company shall use its best
efforts to keep the Shelf Registration Statement continuously
effective under the Securities Act, until (A) 24 months follow-
ing the Issue Date or (B) if sooner, the date immediately fol-
lowing the date that all Transfer Restricted Notes covered by
the Shelf Registration Statement have been sold pursuant
thereto or otherwise cease to be Transfer Restricted Notes (the
"Effectiveness Period"); provided that the Effectiveness Period
shall be extended to the extent required to permit dealers to
<PAGE> 12
-11-
comply with the applicable prospectus delivery requirements of
Rule 174.
(b) No holder of Transfer Restricted Notes may in-
clude any of its Transfer Restricted Notes in any Shelf Regis-
tration Statement pursuant to this Agreement unless and until
such holder furnishes to the Company in writing, within 30 days
after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary pro-
spectus included therein. No holder of Transfer Restricted
Notes shall be entitled to Additional Interest pursuant to Sec-
tion 4 hereof unless and until such holder shall have provided
all such reasonably requested information. Each holder of
Transfer Restricted Notes as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to
make the information previously furnished to the Company by
such holder not materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of
Transfer Restricted Notes will suffer damages if the Company
fails to fulfill its obligations pursuant to Section 2 or Sec-
tion 3, as applicable, and that it would not be feasible to as-
certain the extent of such damages. Accordingly, in the event
that (i) the applicable Registration Statement is not filed
with the SEC on or prior to the date specified herein for such
filing, (ii) the applicable Registration Statement has not been
declared effective by the SEC on or prior to the date specified
herein for such effectiveness after such obligation arises,
(iii) if the Exchange Offer is required to be Consummated here-
under, the Company has not exchanged Exchange Notes for all
Notes validly tendered and not validly withdrawn in accordance
with the terms of the Exchange Offer by the 180th day after the
Issue Date or (iv) the applicable Registration Statement is
filed and declared effective but shall thereafter cease to be
effective or usable in connection with the Exchange Offer or
resales of Transfer Restricted Notes during a period in which
it is required to be effective hereunder without being suc-
ceeded immediately by any additional Registration Statement
covering the Notes, the Exchange Notes or the Private Exchange
Notes, as the case may be, which has been filed and declared
effective or (v) if applicable, the Shelf Registration State-
ment has been declared effective and such Shelf Registration
Statement ceases to be effective at any time during the Effec-
tiveness Period (each such event referred to in clauses (i)
<PAGE> 13
-12-
through (v), a "Registration Default"), then the interest rate
on Transfer Restricted Notes will increase ("Additional Inter-
est"), with respect to the first 90-day period immediately fol-
lowing the occurrence of such Registration Default, by 0.50%
per annum and will increase by an additional 0.50% per annum
with respect to each subsequent 90-day period until such Regis-
tration Default has been cured, up to a maximum amount of 1.0%
per annum with respect to all Registration Defaults. Following
the cure of a Registration Default, the accrual of Additional
Interest with respect to such Registration Default will cease
and upon the cure of all Registration Defaults the interest
rate will revert to the original rate.
(b) The Company shall notify the Trustee and paying
agent under the Indenture (or the trustee and paying agent un-
der such other indenture under which any Transfer Restricted
Notes are issued) within one Business Day upon the happening of
each and every Registration Default. The Company shall pay the
Additional Interest due on the Transfer Restricted Notes by de-
positing with the paying agent (which shall not be the Company
for these purposes) for the Transfer Restricted Notes, in
trust, for the benefit of the holders thereof, prior to 11:00
A.M. on the next interest payment date specified by the Inden-
ture (or such other indenture), sums sufficient to pay the Ad-
ditional Interest then due. The Additional Interest due shall
be payable on each interest payment date specified by the In-
denture (or such other indenture) to the record holders enti-
tled to receive the interest payment to be made on such date.
Each obligation to pay Additional Interest shall be deemed to
accrue from, and including, the applicable Registration De-
fault. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the
principal amount of the affected Transfer Restricted Notes of
such holders, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was appli-
cable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the de-
nominator of which is 360.
(c) The parties hereto agree that the Additional In-
terest provided for in this Section 4 constitutes a reasonable
estimate of the damages that will be suffered by holders of
Transfer Restricted Notes by reason of the happening of any
Registration Default.
<PAGE> 14
-13-
5. Registration Procedures
In connection with the Company's registration obliga-
tions hereunder, the Company shall effect such registrations on
the appropriate form available for the sale of the Notes, the
Exchange Notes or Private Exchange Notes, as applicable, to (i)
in the case of the Exchange Offer, permit the exchange of Ex-
change Notes for Notes in the Exchange Offer and, if applica-
ble, resales of Exchange Notes by Participating Broker-Dealers
and (ii) in the case of a Shelf Registration, permit the sale
of the applicable Transfer Restricted Notes in accordance with
the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Notes, and pursuant thereto
the Company shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reason-
able period of time prior to the initial filing of a Shelf
Registration Statement or Prospectus and a reasonable pe-
riod of time prior to the filing of any amendment or sup-
plement thereto (including any document that would be in-
corporated or deemed to be incorporated therein by refer-
ence), furnish to the holders of the Transfer Restricted
Notes included in such Shelf Registration Statement, their
Special Counsel and the managing underwriters, if any,
copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review
of such holders, their Special Counsel and such underwrit-
ers, if any, and cause the officers and directors of the
Company, counsel to the Company and independent certified
public accountants to the Company to respond to such rea-
sonable inquiries as shall be necessary, in the opinion of
respective counsel to such holders and such underwriters,
to conduct a reasonable investigation within the meaning
of the Securities Act; provided that the foregoing inspec-
tion and information gathering shall be coordinated by the
Initial Purchaser and on behalf of any other persons, by
one counsel designated by and on behalf of such other per-
sons; provided, however, that the Company shall not be
deemed to have kept a Shelf Registration Statement effec-
tive during the applicable period if it voluntarily takes
any unreasonable action or voluntarily fails to take any
reasonable action that directly results in holders of the
Transfer Restricted Notes covered thereby not being able
to sell such Transfer Restricted Notes pursuant to Federal
securities laws during that period unless such action is
required by applicable law or unless the Company complies
with this Agreement. The Company shall not file any such
<PAGE> 15
-14-
Shelf Registration Statement or related Prospectus or any
amendments or supplements thereto which the holders of a
majority in principal amount of the Transfer Restricted
Notes included in such Shelf Registration Statement shall
reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration
Statement continuously effective for the applicable time
period required hereunder; cause the related Prospectus to
be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under
the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration
Statement during such period in accordance with the in-
tended methods of disposition by the sellers thereof set
forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Notes
to be sold or, in the case of an Exchange Offer, tendered
for, their Special Counsel and the managing underwriters,
if any, promptly, and (if requested by any such person),
confirm such notice in writing, (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment
is proposed to be filed, and (B) with respect to a Regis-
tration Statement or any post-effective amendment, when
the same has become effective, (ii) of any request by the
SEC or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (iii)
of the issuance by the SEC, any state securities commis-
sion, any other governmental agency or any court of any
stop order or injunction suspending or enjoining the use
of a Prospectus or the effectiveness of a Registration
Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notifi-
cation with respect to the suspension of the qualification
or exemption from qualification of any of the Notes, Ex-
change Notes or Private Exchange Notes for sale in any ju-
risdiction, or the initiation or threatening of any pro-
ceeding for such purpose, and (v) of the happening of any
event or information becoming known to the Company that
makes any statement made in a Registration Statement or
related Prospectus or any document incorporated or deemed
<PAGE> 16
-15-
to be incorporated therein by reference untrue in any ma-
terial respect or that requires the making of any changes
in such Registration Statement, Prospectus or documents so
that it will not contain any untrue statement of a mate-
rial fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein, not misleading, and that in the case of a Pro-
spectus, it will not contain any untrue statement of a ma-
terial fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading;
(d) Use its best efforts to avoid the issuance of
or, if issued, obtain the withdrawal of any order enjoin-
ing or suspending the use of a Prospectus or the effec-
tiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from quali-
fication) of any of the Notes, Exchange Notes or Private
Exchange Notes for sale in any jurisdiction, at the earli-
est practicable moment;
(e) If a Shelf Registration Statement is filed pur-
suant to Section 3 hereof and if requested by the managing
underwriters, if any, or the holders of a majority in ag-
gregate principal amount of the Transfer Restricted Notes
being sold pursuant to such Shelf Registration Statement,
(i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing
underwriters, if any, and such holders reasonably believe
should be included therein, and (ii) make all required
filings of such Prospectus supplement or such post-
effective amendment under the Securities Act as soon as
practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supple-
ment or post-effective amendment, provided, however, that
the Company shall not be required to take any action pur-
suant to this Section 5(e) that would, in the opinion of
counsel for the Company, violate applicable law;
(f) Upon written request to the Company by a holder
of Notes, Exchange Notes or Private Exchange Notes to be
exchanged or sold pursuant to a Registration Statement,
their Special Counsel and each managing underwriter, if
any, without charge, furnish at least one conformed copy
of such Registration Statement and each amendment thereto,
including financial statements and schedules, all docu-
ments incorporated or deemed to be incorporated therein by
<PAGE> 17
-16-
reference, and all exhibits to the extent reasonably re-
quested (including those previously furnished or incorpo-
rated by reference) as soon as practicable after the fil-
ing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes
or Private Exchange Notes to be exchanged or sold pursuant
to a Registration Statement, their Special Counsel, and
the underwriters, if any, without charge, as many copies
of the Prospectus (including each form of prospectus) and
each amendment or supplement thereto as such persons rea-
sonably request; and the Company hereby consents to the
use of such Prospectus and each amendment or supplement
thereto by each of the selling holders of Transfer Re-
stricted Notes and the underwriters, if any, in connection
with the offering and sale of the Transfer Restricted
Notes in accordance with the terms thereof and with U.S.
Federal securities laws and Blue Sky laws covered by such
Prospectus and any amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange
Notes or Private Exchange Notes, use its best efforts to
register or qualify or cooperate with the holders of
Notes, Exchange Notes or Private Exchange Notes to be sold
or tendered for, the underwriters, if any, and their re-
spective counsel in connection with the registration or
qualification (or exemption from such registration or
qualification) of such Notes, Exchange Notes or Private
Exchange Notes for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United
States as any such holder or underwriter reasonably re-
quests in writing; keep each such registration or qualifi-
cation (or exemption therefrom) effective during the pe-
riod such Registration Statement is required to be kept
effective hereunder and do any and all other acts or
things necessary or advisable to enable the disposition in
such jurisdictions of the Notes, Exchange Notes or Private
Exchange Notes covered by the applicable Registration
Statement; provided, however, that the Company shall not
be required to (i) qualify generally to do business in any
jurisdiction where they are not then so qualified or (ii)
take any action which would subject them to general serv-
ice of process or to taxation in excess of a nominal dol-
lar amount in any jurisdiction where it is not so subject;
(i) In connection with any sale or transfer of
Transfer Restricted Notes that will result in such securi-
ties no longer being Transfer Restricted Notes, cooperate
<PAGE> 18
-17-
with the holders thereof and the managing underwriters, if
any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Notes to be
sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with
The Depository Trust Company and to enable such Transfer
Restricted Notes to be in such denominations and regis-
tered in such names as the managing underwriters, if any,
or such holders may reasonably request at least two Busi-
ness Days prior to any sale of Transfer Restricted Notes;
(j) Upon the occurrence of any event contemplated by
Section 5(c)(v), as promptly as reasonably practicable,
prepare a supplement or amendment, including, if appropri-
ate, a post-effective amendment, to each Registration
Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein
by reference, and file any other required document so
that, as thereafter delivered, such Prospectus will not
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(k) Prior to the effective date of the Exchange Reg-
istration Statement, to provide a CUSIP number for the Ex-
change Notes (and Private Exchange Notes, if applicable);
(l) If a Shelf Registration Statement is filed pur-
suant to Section 3 hereof, enter into such agreements
(including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and
take all such other reasonable actions in connection
therewith (including those reasonably requested by the
managing underwriters, if any, or the holders of a major-
ity in aggregate principal amount of the Transfer Re-
stricted Notes being sold) in order to expedite or facili-
tate the disposition of such Transfer Restricted Notes,
and, whether or not an underwriting agreement is entered
into and whether or not the registration is an underwrit-
ten registration, (i) make such representations and war-
ranties to the holders of such Transfer Restricted Notes
and the underwriters, if any, with respect to the business
of the Company and its subsidiaries (including with re-
spect to businesses or assets acquired or to be acquired
by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in
<PAGE> 19
-18-
form, substance and scope as are customarily made by issu-
ers to underwriters in underwritten offerings of debt se-
curities similar to the Notes, and confirm the same in
writing if and when customarily requested; (ii) obtain
opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing under-
writers, if any, and Special Counsel to the holders of the
Transfer Restricted Notes being sold), addressed to each
selling holder of Transfer Restricted Notes and each of
the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings of
debt securities similar to the Notes and such other mat-
ters as may be reasonably requested by such Special Coun-
sel and the managing underwriters, if any; (iii) use their
best efforts to obtain customary "cold comfort" letters
and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company
or any such subsidiary for which financial statements and
financial data is, or is required to be, included or in-
corporated by reference in the Shelf Registration State-
ment), addressed (where reasonably possible) to each sell-
ing holder of Transfer Restricted Notes and each of the
underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten of-
ferings; (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions
and procedures no less favorable to the selling holders
and the underwriters, if any, than those set forth in Sec-
tion 7 hereof (or such other provisions and procedures ac-
ceptable to holders of a majority in aggregate principal
amount of Transfer Restricted Notes covered by such Shelf
Registration Statement and the managing underwriters, if
any); and (v) deliver such documents and certificates as
may be reasonably requested by the holders of a majority
in aggregate principal amount of the Transfer Restricted
Notes being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity
of the representations and warranties made pursuant to
clause (i) above and to evidence compliance with any cus-
tomary conditions contained in the underwriting agreement
or other agreement entered into by the Company;
(m) In the case of a Shelf Registration, make avail-
able for inspection by a representative of the holders of
<PAGE> 20
-19-
Transfer Restricted Notes being sold, any underwriter par-
ticipating in any such disposition of Transfer Restricted
Notes, and any attorney, consultant or accountant retained
by such selling holders or underwriter, at the offices
where normally kept, during reasonable business hours, all
relevant financial and other records, pertinent corporate
documents of the Company and its subsidiaries (including
with respect to businesses and assets acquired or to be
acquired to the extent that such information is available
to the Company) as shall be reasonably necessary to enable
them to exercise any applicable due diligence, and cause
the officers, directors, agents and employees of the Com-
pany and its subsidiaries (including with respect to busi-
nesses and assets acquired or to be acquired to the extent
that such information is available to the Company) to sup-
ply all information in each case reasonably requested by
any such representative, underwriter, attorney, consultant
or accountant in connection with such Shelf Registration;
provided, however, that such persons shall first agree in
writing with the Company that any information that is rea-
sonably and in good faith designated by the Company in
writing as confidential at the time of delivery of such
information shall be kept confidential by such persons,
unless and to the extent that (i) disclosure of such in-
formation is required by court or administrative order or
is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is re-
quired by law (including any disclosure requirements pur-
suant to Federal securities laws in connection with the
filing of the Shelf Registration Statement or the use of
any Prospectus), or (iii) such information becomes gener-
ally available to the public other than as a result of a
disclosure or failure to safeguard such information by
such person; and provided, further, that the foregoing in-
spection and information gathering shall be coordinated on
behalf of the Initial Purchaser by the Initial Purchaser
and on behalf of any other persons, by one counsel desig-
nated by and on behalf of such other persons;
(n) Provide an indenture trustee for the Notes
and/or the Exchange Notes and Private Exchange Notes, as
the case may be, and cause an indenture to be qualified
under the TIA not later than the effective date of the
first Registration Statement relating to the Notes and/or
the Exchange Notes and Private Exchange Notes, as the case
may be; and if such indenture shall be the Indenture, in
connection therewith, cooperate with the Trustee and the
holders of the Notes and/or the Exchange Notes and Private
<PAGE> 21
-20-
Exchange Notes, to effect such changes to the Indenture,
if any, as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA; and
execute, and use its reasonable efforts to cause the Trus-
tee to execute, all customary documents as may be required
to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture
to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations
of the SEC and make generally available to its security-
holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereun-
der (or any similar rule promulgated under the Securities
Act), no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if
such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Transfer Restricted Notes are
sold to underwriters in a firm commitment or reasonable
efforts underwritten offering and (ii) if not sold to un-
derwriters in such an offering, commencing on the first
day of the first fiscal quarter after the effective date
of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158;
(p) Cooperate with each seller of Transfer Re-
stricted Notes covered by any Registration Statement and
each underwriter, if any, participating in the disposition
of such Transfer Restricted Notes and their respective
counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.;
and
(q) Use its best efforts to take all other steps
reasonably necessary to effect the registration of the
Transfer Restricted Notes covered by a Registration State-
ment contemplated hereby.
The Company may require a holder of Transfer Re-
stricted Notes to be included in a Registration Statement to
furnish to the Company such information regarding the distribu-
tion of such Transfer Restricted Notes as is required by law to
be disclosed in such Registration Statement and the Company may
exclude from such Registration Statement the Transfer Re-
stricted Notes of any holder who unreasonably fails to furnish
such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is be-
ing effected agrees to furnish promptly to the Company all in-
<PAGE> 22
-21-
formation required to be disclosed in order to make the infor-
mation previously furnished to the Company by such seller not
materially misleading.
If any such Registration Statement refers to any
holder by name or otherwise as the holder of any securities of
the Company, then such holder shall have the right to require
(i) the insertion therein of language, in form and substance
reasonably satisfactory to such holder, to the effect that the
holding by such holder of such securities is not to be con-
strued as a recommendation by such holder of the investment
quality of the Company's securities covered thereby and that
such holding does not imply that such holder will assist in
meeting any future financial requirements of the Company, or
(ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act, the deletion
of the reference to such holder in any amendment or supplement
to the Registration Statement filed or prepared subsequent to
the time that such reference ceases to be required.
In the case of a Shelf Registration pursuant to Sec-
tion 3 hereof, each holder of Transfer Restricted Notes agrees
by acquisition of such Transfer Restricted Notes that, upon re-
ceipt of any notice from the Company of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discon-
tinue disposition of such Transfer Restricted Notes covered by
such Registration Statement or Prospectus until such holder's
receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof, or until it is advised in
writing by the Company that the use of the applicable Prospec-
tus may be resumed, and, in either case, has received copies of
any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus.
6. Registration Expenses
(a) All fees and expenses incident to the perform-
ance of or compliance with this Agreement by the Company shall
be borne by the Company whether or not any Registration State-
ment is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or
sold pursuant to any Registration Statement. The fees and ex-
penses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with re-
spect to filings required to be made with the National Associa-
tion of Securities Dealers, Inc. and (B) in compliance with se-
<PAGE> 23
-22-
curities or Blue Sky laws), (ii) printing expenses (including,
without limitation, expenses of printing certificates for
Notes, Exchange Notes and Private Exchange Notes in a form eli-
gible for deposit with The Depository Trust Company and of
printing Prospectuses), (iii) reasonable fees and disbursements
of counsel for the Company and the Special Counsel (not to ex-
ceed one firm of counsel), (iv) fees and disbursements of all
independent certified public accountants referred to in Section
2(e) and Section 5(l)(iii) hereof (including, without limita-
tion, the expenses of any special audit and "cold comfort" let-
ters required by or incident to such performance), (v) if re-
quired, the reasonable fees and expenses of any "qualified in-
dependent underwriter" and its counsel as may be required by
the rules and regulations of the National Association of Secu-
rities Dealers, Inc., (vi) rating agency fees, if any, and any
fees associated with making the Notes, or Exchange Notes eligi-
ble for trading through the Depository Trust Company and (vii)
fees and expenses of all other persons retained by the Company.
In addition, the Company shall pay their internal expenses
(including, without limitation, all salaries and expenses of
their respective officers and employees performing legal or ac-
counting duties), the expense of any annual audit, and the fees
and expenses incurred in connection with the listing of the
Notes, Exchange Notes or Private Exchange Notes to be regis-
tered on any securities exchange. Notwithstanding the forego-
ing or anything in this Agreement to the contrary, each holder
of Transfer Restricted Notes shall pay all underwriting dis-
counts and commissions of any underwriters with respect to any
Notes, Exchange Notes or Private Exchange Notes sold by or on
behalf of it.
(b) The Company shall (i) reimburse the holders of
the Notes being registered in a Shelf Registration for the rea-
sonable fees and disbursements of not more than one counsel (in
addition to appropriate local counsel) chosen by the holders of
a majority in aggregate principal amount of the Notes to be in-
cluded in such Registration Statement and (ii) reimburse out-
of-pocket expenses (other than legal expenses) of holders of
the Notes incurred in connection with the registration and sale
of the Notes pursuant to a Shelf Registration or in connection
with the exchange of the Notes pursuant to the Exchange Offer.
7. Indemnification
(a) The Company agrees to indemnify and hold harm-
less (i) the Initial Purchaser, each holder of Notes, Exchange
Notes and Private Exchange Notes and each Participating Broker-
Dealer, (ii) each person, if any, who controls (within the
<PAGE> 24
-23-
meaning of Section 15 of the Act or Section 20 of the Exchange
Act) any of the foregoing (any of the persons referred to in
this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective affiliates, of-
ficers, directors, partners, employees, representatives and
agents of the Initial Purchaser, each holder of Notes, Exchange
Notes and Private Exchange Notes, each Participating Broker-
Dealer and any controlling person (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Person"), from and against any and all losses,
claims, damages, liabilities and judgments (including, without
limitation, the reasonable legal fees and other expenses actu-
ally incurred in connection with any suit, action or proceeding
or any claim asserted) arising out of or relating to any untrue
statement or alleged untrue statement of a material fact con-
tained in any Registration Statement, Prospectus or preliminary
prospectus or in any amendment or supplement thereto, or aris-
ing out of or relating to any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any
Prospectus or preliminary prospectus or supplement thereto, in
light of the circumstances under which they were made) not mis-
leading, except insofar as such losses, claims, damages, li-
abilities or judgments are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in
writing to the Company by or on behalf of such Indemnified Per-
son expressly for use therein; provided that the foregoing in-
demnity with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Person from whom the
person asserting such losses, claims, damages, liabilities and
judgments purchased securities if such untrue statement or
omission or alleged untrue statement or omission made in such
preliminary prospectus is eliminated or remedied in the Pro-
spectus and a copy of the Prospectus shall not have been fur-
nished to such person in a timely manner due to the wrongful
action or wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or
any such Prospectus or preliminary prospectus or any amendment
or supplement thereto and with respect to which indemnity may
be sought against the Company hereunder, such Indemnified Per-
son shall promptly notify the Company in writing and the Com-
pany shall assume the defense thereof along with the defense of
any other Person the Company may reasonably designate, includ-
ing the employment of counsel reasonably satisfactory to such
Indemnified Person and payment of all fees and expenses actu-
<PAGE> 25
-24-
ally incurred by such counsel related to such proceeding; pro-
vided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability
which it may have hereunder or otherwise (unless and only to
the extent that such failure directly results in the loss or
compromise of any material rights or defenses by the Indemnify-
ing Person and the Indemnifying Person was not otherwise aware
of such action or claim). Any Indemnified Person shall have
the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified
Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii)
the Company shall have failed within a reasonable period of
time to assume the defense and employ counsel or pay all such
fees and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified
Person and the Company and such Indemnified Person shall have
been advised by counsel that there may be one or more legal de-
fenses available to it which are different from or additional
to those available to the Company (in which case the Company
shall not have the right to assume the defense of such action
on behalf of such Indemnified Person, it being understood, how-
ever, that the Company shall not, in connection with any one
such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same gen-
eral allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such In-
demnified Persons, and that all such reasonable fees and ex-
penses shall be reimbursed as they are incurred). Any such
separate firm for the Indemnified Persons and such control Per-
sons of Indemnified Persons shall be designated in writing by
the Indemnified Persons who sold a majority interest of Trans-
fer Restricted Notes and Exchange Notes sold by all such par-
ticipants and any such separate firm for the Company, its di-
rectors, its officers and such control Persons of the Company
shall be designated in writing by the Company. The Company
shall not be liable for any settlement of any such action ef-
fected without its prior written consent (which consent shall
not be unreasonably withheld or delayed) but if settled with
such consent or if there be a final non-appealable judgment for
the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, the Company agrees
to indemnify and hold harmless each Indemnified Person from and
against any loss or liability by reason of such settlement or
judgement. Notwithstanding the foregoing sentence, if at any
<PAGE> 26
-26-
time an Indemnified Person shall have requested the Company to
reimburse the Indemnified Person for reasonable fees and ex-
penses actually incurred by counsel as contemplated by the sec-
ond sentence of this paragraph, the Company agrees that it
shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered
into more than 30 days after receipt by the Company of the
aforesaid request and (ii) the Company shall not have reim-
bursed the Indemnified Person in accordance with such request
prior to the date of such settlement; provided, however, that
the Company shall not be liable for any settlement effected
without its consent pursuant to this sentence if the Company is
contesting, in good faith, the request for reimbursement. The
Company shall not, without the prior written consent of each
Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Per-
son is a party and indemnity could have been sought hereunder
by such Indemnified Person, unless such settlement (A) includes
an unconditional release of such Indemnified Person, in form
and substance reasonably satisfactory to such Indemnified Per-
son, from all liability on claims that are the subject matter
of such proceeding and (B) does not include any statement as to
an admission of fault, culpability or failure to act by or on
behalf of any Indemnified Person.
(c) In connection with any Registration Statement
pursuant to which a holder of Transfer Restricted Notes offers
or sells Transfer Restricted Notes, such holder agrees, sever-
ally and not jointly, to indemnify and hold harmless the Com-
pany, its respective directors and officers and any person con-
trolling the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity in Section 7(b) above from
the Company to each Indemnified Person but only (i) with re-
spect to information relating to such holder furnished in writ-
ing to the Company by or on behalf of such holder expressly for
use in such Registration Statement or Prospectus, any amendment
or supplement thereto, or any preliminary prospectus or (ii)
with respect to any untrue statement or representation made by
such holder in writing to the Company. The liability of any
such holder under this paragraph shall in no event exceed the
proceeds received by such holder from sales of Transfer Re-
stricted Notes or Exchange Notes giving rise to such obliga-
tions. In any such case in which any action shall be brought
against the Company, any director or officer of the Company or
any person controlling the Company based on such Registration
Statement, or Prospectus, any amendment or supplement thereto,
or any preliminary prospectus and in respect of which indemnity
<PAGE> 27
-26-
may be sought against the holder of Transfer Restricted Notes,
such holder shall have the rights and duties given to the Com-
pany (except that if the Company shall have assumed the defense
thereof, such holder shall not be required to do so, but may
employ separate counsel therein and participate in the defense
thereof but the fees and expenses of such counsel shall be at
the expense of such holder), and the Company, their respective
directors and officers and any person controlling the Company
shall have the rights and duties given to the Indemnified Per-
sons by Section 7(b) hereof.
(d) If the indemnification provided for in this Sec-
tion 7 is unavailable to, or insufficient to hold harmless, an
indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemni-
fying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemni-
fied party as a result of such losses, claims, damages, li-
abilities and judgments (i) in such proportion as is appropri-
ate to reflect the relative benefits received by the indemnify-
ing party on the one hand and the indemnified party on the
other hand from the offering of the Notes, the Exchange Notes
or the Private Exchange Notes, as the case may be (it being ex-
pressly understood and agreed that the relative benefits re-
ceived by the Company from the offering of the Notes, Exchange
Notes or Private Exchange Notes, as the case may be, shall be
the amount of the net proceeds received by the Company from the
sale of the Notes to the Initial Purchaser), or (ii) if the al-
location provided by clause (i) above is not permitted by ap-
plicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the indemnifying party on the
one hand and the indemnified party on the other hand in connec-
tion with the statements or omissions or alleged statements or
omissions which resulted in such losses, claims, damages, li-
abilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party
on the one hand and the indemnified party on the other hand
shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material
fact relates to information supplied by the indemnifying party
or such indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to
<PAGE> 28
-27-
this Section 7(d) were determined by pro rata allocation (even
if all Indemnified Persons were treated as one entity for such
purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by
an indemnified party as a result of the losses, claims, dam-
ages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses rea-
sonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwith-
standing the provisions of this Section 7, no Indemnified Per-
son shall be required to contribute any amount in excess of the
amount by which the net proceeds received by it in connection
with the sale of the Notes, Exchange Notes or Private Exchange
Notes contemplated by this Agreement (or, in the case of an un-
derwriter that is an Indemnified Person, the total underwriting
discounts received by such underwriter) exceeds the amount of
any damages which such Indemnified Person has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepre-
sentation. The Indemnified Person's obligations to contribute
pursuant to this Section 7(d) are several in proportion to the
respective amount of Notes, Exchange Notes or Private Exchange
Notes included in any such Registration Statement, or Prospec-
tus, any amendment or supplement thereto, or a preliminary pro-
spectus by each Indemnified Person and not joint.
8. Rule 144A
The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and
the Exchange Act in a timely manner and, if at any time it is
not required to file such reports but in the past had been re-
quired to or did file such reports, it will, upon the request
of any holder of Transfer Restricted Notes, make available
other information as required by, and so long as necessary to
permit sales of Transfer Restricted Notes pursuant to Rule
144A. Notwithstanding the foregoing, nothing in this Section 8
shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
<PAGE> 29
-28-
9. Underwritten Registrations
If any of the Transfer Restricted Notes covered by
any Shelf Registration are to be sold in an underwritten offer-
ing, the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by
the holders of a majority in aggregate principal amount of the
Transfer Restricted Notes included in such offering, subject to
the consent of the Company (which will not be unreasonably
withheld or delayed).
No person may participate in any underwritten regis-
tration hereunder unless such person (i) agrees to sell such
Transfer Restricted Notes on the basis reasonably provided in
any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by an Com-
pany or by a holder of Notes, Exchange Notes or Private Ex-
change Notes of any of its obligations under this Agreement,
each holder of Notes, Exchange Notes or Private Exchange Notes
and the Company, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this
Agreement. Notwithstanding the provisions of Section 4 hereof,
the Company and each holder of Notes, Exchange Notes and Pri-
vate Exchange Notes agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a
breach of any of the provisions of this Agreement and each
hereby further agrees that, in the event of any action for spe-
cific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will
not enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the holders of
Notes, Exchange Notes and Private Exchange Notes and Indemni-
fied Persons in this Agreement or otherwise conflicts with the
provisions hereof. Without the written consent of the holders
of a majority in aggregate principal amount of the outstanding
Transfer Restricted Notes, the Company shall not grant to any
person any rights which conflict with or are inconsistent with
the provisions of this Agreement.
<PAGE> 30
-29-
(c) No Piggyback on Registrations. The Company
shall not grant to any of its securityholders (other than the
holders of Transfer Restricted Notes in such capacity) the
right to include any of their securities in any Registration
Statement other than Transfer Restricted Notes.
(d) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, oth-
erwise than with the prior written consent of the holders of
not less than a majority of the then outstanding aggregate
principal amount of Transfer Restricted Notes; provided, how-
ever, that, for the purposes of this Agreement, Transfer Re-
stricted Notes that are owned, directly or indirectly, by the
Company or any of its Affiliates are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that re-
lates exclusively to the rights of holders of Transfer Re-
stricted Notes whose securities are being sold or tendered pur-
suant to a Registration Statement and that does not directly or
indirectly affect the rights of other holders of Transfer Re-
stricted Notes may be given by holders of a majority in aggre-
gate principal amount of the Transfer Restricted Notes being
sold or tendered by such holders pursuant to such Registration
Statement; provided, however, that the provisions of this sen-
tence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding
sentence. Notwithstanding the foregoing, no amendment, modifi-
cation, supplement, waiver or consent with respect to Section 7
shall be made or given otherwise than with the prior written
consent of each Indemnified Person affected thereby.
(e) Notices. All notices and other communications
provided for herein shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return re-
ceipt requested, telex or telecopier:
(i) if to the Company, as provided in the Pur-
chase Agreement,
(ii) if to the Initial Purchaser, as provided
in the Purchase Agreement, or
(iii) if to any other person who is then the
registered holder of Notes, Exchange Notes or Pri-
vate Exchange Notes, to the address of such holder
<PAGE> 31
-30-
as it appears in the register therefor of the Com-
pany.
Except as otherwise provided in this Agreement, all
such communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one Business
Day after being timely delivered to a next-day air courier;
five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; and when
receipt is acknowledged by the recipient's telecopier machine,
if telecopied.
Copies of all such notices, demands or other communi-
cations shall be concurrently delivered by the Person giving
the same to the Trustee at the address and in the manner speci-
fied in such Indenture.
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the
benefit of each holder of Notes, Exchange Notes and Private Ex-
change Notes and each Indemnified Person, provided, however,
that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Transfer Restricted
Notes. Notwithstanding the foregoing, no successor or assignee
of the Company shall have any of the rights granted under this
Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such
person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in sepa-
rate counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall
constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
<PAGE> 32
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PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(i) Severability. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
If any term, provision, covenant or restriction of this Agree-
ment is held by a court of competent jurisdiction to be inva-
lid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall
use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restric-
tion. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(j) Notes Held by the Company or its Affiliates.
Whenever the consent or approval of holders of a specified per-
centage of Transfer Restricted Notes is required hereunder,
Transfer Restricted Notes held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or ap-
proval was given by the holders of such required percentage.
(k) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or other-
wise affect the meaning hereof. All references made in this
Agreement to "Section" and "paragraph" refer to such Section or
paragraph of this Agreement, unless expressly stated otherwise.
(l) Third Party Beneficiaries. Holders of Transfer
Restricted Notes and Participating Broker-Dealers are intended
third party beneficiaries of this Agreement and this Agreement
may be enforced by such Persons.
(m) This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and under-
standing of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warran-
ties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the
Company with respect to the Notes, the Exchange Notes and the
Private Exchange Notes. This Agreement supersedes all prior
<PAGE> 33
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agreements and understandings between the parties with respect
to such subject matter.
<PAGE> 34
IN WITNESS WHEREOF, the parties have caused this Reg-
istration Rights Agreement to be duly executed as of the date
first written above.
THE COMPANY:
ATLAS AIR, INC.
By:
-----------------------------
Name:
Title:
THE INITIAL PURCHASER:
BT SECURITIES CORPORATION
By:
---------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.75
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 5, 1997
AMONG
ATLAS FREIGHTER LEASING II, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders,
BANKERS TRUST COMPANY,
as Administrative Agent,
and
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS.............................................. 1
1.1 Certain Defined Terms.................................... 1
1.2 Accounting Terms; Utilization of GAAP
for Purposes of Calculations Under Agreement........... 19
1.3 Other Definitional Provisions............................ 20
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS............... 20
2.1 Commitments; Making of Loans; Notes; Register............ 20
A. Commitments..................................... 20
B. Borrowing Mechanics............................. 20
C. Disbursement of Funds........................... 21
D. Notes........................................... 22
E. The Register.................................... 22
2.2 Interest on the Loans.................................... 23
A. Rate of Interest................................ 23
B. Interest Periods................................ 24
C. Interest Payments............................... 24
D. Default Rate.................................... 24
E. Computation of Interest......................... 25
2.3 Fees..................................................... 25
2.4 Repayments and Prepayments; General
Provisions Regarding Payments.......................... 25
A. Mandatory Reduction of Commitments.............. 25
B. Scheduled Repayments of Loans................... 25
C. Prepayments..................................... 26
D. General Provisions Regarding Payments........... 31
2.5 Use of Proceeds.......................................... 32
A. Application of Proceeds......................... 32
B. Margin Regulations.............................. 32
</TABLE>
(i)
<PAGE> 3
<TABLE>
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2.6 Special Provisions Governing Loans........................ 32
A. Determination of Applicable Interest Rate........ 32
B. Inability to Determine Applicable Interest Rate.. 32
C. Illegality or Impracticability of Loans.......... 33
D. Compensation For Breakage or Non-Commencement of
of Interest Periods............................ 34
E. Booking of Loans................................. 34
F. Assumptions Concerning Funding of Loans.......... 34
G. Substitute Basis................................. 34
2.7 Increased Costs, Taxes; Capital Adequacy.................. 35
A. Compensation for Increased Costs and Taxes....... 35
B. Withholding of Taxes............................. 36
C. Capital Adequacy Adjustment...................... 39
D. Substitute Lenders............................... 40
2.8 Obligation of Lenders to Mitigate......................... 41
SECTION 3. CONDITIONS TO LOANS....................................... 41
3.1 Conditions to Loans....................................... 41
A. Borrower and Atlas Documents..................... 41
B. Aircraft Documents............................... 42
C. Notice of Borrowing.............................. 43
D. Necessary Consents............................... 43
E. Aircraft Chattel Mortgage........................ 43
F. Fairness Opinion................................. 43
G. Financial Condition Certificate.................. 43
H. Opinions of Borrower's Counsel................... 44
I. Opinion of Counsel............................... 44
J. Atlas Credit Agreement; Amended Leases........... 44
K. Opinions of FAA Counsel.......................... 44
L. Fees............................................. 44
M. Financial Statements............................. 44
N. Evidence of Insurance............................ 45
O. No Material Adverse Effect....................... 45
P. Representations and Warranties; Performance of
Agreements..................................... 45
Q. Compliance Certificate........................... 45
R. Transaction; Refinancing......................... 45
S. Completion of Proceedings........................ 46
T. Appraisals....................................... 46
</TABLE>
(ii)
<PAGE> 4
<TABLE>
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<S> <C> <C>
U. FAA Certification and Title...................... 46
V. Bankruptcy-Remote Subsidiary..................... 47
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES ................ 47
4.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries.............................. 47
A. Organization and Powers.......................... 47
B. Qualification and Good Standing.................. 47
C. Subsidiaries..................................... 47
D. Collateral Documents............................. 47
4.2 Authorization of Borrowing, etc........................... 48
A. Authorization of Borrowing....................... 48
B. No Conflict...................................... 48
C. Governmental Consents............................ 48
D. Binding Obligation............................... 49
4.3 Financial Condition....................................... 49
4.4 No Material Adverse Change; No Restricted Junior Payments. 50
4.5 Title to Properties, Liens................................ 50
4.6 Litigation, Adverse Facts................................. 50
4.7 Payment of Taxes.......................................... 51
4.8 Performance of Agreements................................. 51
4.9 Governmental Regulation................................... 51
4.10 Securities Activities..................................... 51
4.11 Compliance with ERISA..................................... 52
4.12 Certain Fees.............................................. 52
4.13 Environmental Protection.................................. 52
4.14 Employee Matters.......................................... 52
4.15 Solvency.................................................. 53
4.16 Disclosure................................................ 53
4.17 Section 1110.............................................. 53
4.18 Special Purpose Corporation............................... 54
4.19 Transaction............................................... 54
4.20 Representations and Warranties in Documents............... 54
4.21 Leases.................................................... 54
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS ..........................54
5.1 Financial Statements and Other Reports.................... 55
5.2 Corporate Existence....................................... 58
5.3 Payment of Taxes and Claims; Tax Consolidation............ 58
</TABLE>
(iii)
<PAGE> 5
<TABLE>
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5.4 Maintenance of Properties; Insurance...................... 59
5.5 Inspection; Lender Meeting................................ 59
5.6 Compliance with Laws, etc................................. 60
5.7 Environmental Indemnity................................... 60
5.8 Borrower's Remedial Action Regarding Hazardous Materials.. 60
5.9 Maintenance Contracts..................................... 60
5.10 Employee Benefit Plans.................................... 61
5.11 Further Assurances........................................ 61
5.12 Performance of Obligations................................ 61
5.13 Corporate Separateness. .................................. 61
SECTION 6. BORROWER'S NEGATIVE COVENANTS ............................ 62
6.1 Indebtedness.............................................. 62
6.2 Liens and Related Matters................................. 62
A. Prohibition on Liens............................. 62
B. No Negative Pledges.............................. 63
6.3 Investments; Joint Ventures............................... 63
6.4 Contingent Obligations.................................... 63
6.5 Restricted Junior Payments................................ 63
6.6 Restriction on Fundamental Changes; Asset Sales and
Acquisitions; New Subsidiaries......................... 63
6.7 Amendments of Material Agreements......................... 64
6.8 Restriction on Leases..................................... 64
6.9 Transaction with Shareholders and Affiliates.............. 64
6.10 Conduct of Business....................................... 64
SECTION 7. EVENTS OF DEFAULT ....................................... 65
7.1 Failure to Make Payments When Due......................... 65
7.2 Default Under Lease....................................... 65
7.3 Breach of Certain Covenants............................... 65
7.4 Breach of Warranty........................................ 65
7.5 Other Defaults Under Loan Documents....................... 66
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc...... 66
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc........ 66
7.8 Judgments and Attachments................................. 67
7.9 Dissolution............................................... 67
7.10 Change in Control......................................... 67
7.11 Failure of Security....................................... 67
7.12 Loss of United States Citizen Status...................... 68
</TABLE>
(iv)
<PAGE> 6
<TABLE>
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SECTION 8. AGENTS ................................................... 69
8.1 Appointment............................................... 69
8.2 Powers and Duties; General Immunity....................... 69
A. Powers; Duties Specified......................... 69
B. No Responsibility for Certain Matters............ 69
C. Exculpatory Provisions........................... 70
D. Agents Entitled to Act as Lender................. 70
8.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness.......................... 71
8.4 Right to Indemnity........................................ 71
8.5 Collateral Documents...................................... 72
8.6 Successor Administrative Agent............................ 72
SECTION 9. MISCELLANEOUS ............................................ 73
9.1 Assignments and Participations in Loans................... 73
A. General.......................................... 73
B. Assignments...................................... 73
C. Participations................................... 75
D. Assignments to Federal Reserve Banks and Others.. 75
E. Information...................................... 75
9.2 Expenses.................................................. 75
9.3 Indemnity................................................. 76
9.4 Set-Off................................................... 77
9.5 Ratable Sharing........................................... 78
9.6 Amendments and Waivers.................................... 78
9.7 Independence of Covenants................................. 80
9.8 Notices................................................... 80
9.9 Survival of Representations, Warranties and Agreements.... 80
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative..... 81
9.11 Marshalling: Payments Set Aside........................... 81
9.12 Severability.............................................. 81
9.13 Obligations Several; Independent Nature of Lenders' Rights 81
9.14 Headings.................................................. 82
9.15 Applicable Law............................................ 82
9.16 Successors and Assigns.................................... 82
9.17 Consent to Jurisdiction and Service of Process............ 82
9.18 Waiver of Jury Trial...................................... 83
9.19 Confidentiality........................................... 83
9.20 Counterparts; Effectiveness............................... 84
</TABLE>
(v)
<PAGE> 7
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTE
III FORM OF COMPLIANCE CERTIFICATE
IVA FORM OF OPINION OF CAHILL GORDON & REINDEL
IVB FORM OF SECTION 1110 OPINION
IVC FORM OF OPINION COVERING CERTAIN TAX ISSUES
IVD FORM OF OPINION OF COUNSEL OF BORROWER
IVE FORM OF OPINION OF FAA COUNSEL
V FORM OF ASSIGNMENT AGREEMENT
VI FORM OF CERTIFICATE RE NON-BANK STATUS
VII FORM OF FINANCIAL CONDITION CERTIFICATE - BORROWER
VIIA FORM OF FINANCIAL CONDITION CERTIFICATE - ATLAS
VIII FORM OF LEASE
IX FORM OF AIRCRAFT CHATTEL MORTGAGE
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
2.2 MAXIMUM LOAN AMOUNT FOR AIRCRAFT AND SPARE
ENGINES
<PAGE> 8
CREDIT AGREEMENT, dated as of September 5, 1997, among ATLAS FREIGHTER
LEASING II, INC., a Delaware corporation ("Atlas Leasing II" or the "Borrower"),
the lenders party hereto from time to time (each a "Lender", and collectively,
the "Lenders"), BANKERS TRUST COMPANY, as Administrative Agent for the Lenders
(in such capacity, the "Administrative Agent"), and GOLDMAN SACHS CREDIT
PARTNERS L.P., as Syndication Agent for the Lenders (in such capacity, the
"Syndication Agent" and together with the Administrative Agent, the "Agents").
W I T N E S S E T H :
WHEREAS, the Borrower has been established for the sole purpose of owning
and leasing to Atlas the Aircraft and Spare Engines;
WHEREAS, the Aircraft and Spare Engines are currently owned by Atlas;
WHEREAS, the Aircraft and Spare Engines are currently encumbered by certain
indebtedness which Atlas desires to refinance;
WHEREAS, in connection with the refinancing of such indebtedness, Atlas
will contribute the Aircraft and Spare Engines subject to certain indebtedness
to Atlas Leasing II;
WHEREAS, subject to and upon the terms and conditions herein set forth, the
Lenders are willing to make available to Borrower the credit facility provided
for herein to refinance the indebtedness relating to the Aircraft and Spare
Engines;
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"ACMI Contract" shall have the meaning provided therefor in the Leases.
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<PAGE> 9
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date,
the rate per annum obtained by dividing (rounded upward to the nearest 1/100 of
one percent) (x) the offered quotation, if any, to first class banks in the
interbank Eurodollar market by Administrative Agent for U.S. dollar deposits of
amounts in same day funds comparable to the principal amount of the Loans of
Administrative Agent for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such Interest Period as of
approximately 10:00 A.M. (New York time) on such Interest Rate Determination
Date by (y) a percentage equal to 100% minus the stated maximum rate of all
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 8.6.
"Affected Lender" has the meaning assigned to that term in subsection 2.6C.
"Affected Loans" has the meaning assigned to that term in subsection 2.6C.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AFL I First Amendment" means the First Amendment to the Lease Agreement,
dated as of September 5, 1997 between Atlas Air, Inc. as lessee and Atlas
Freighter Leasing, Inc. as lessor.
"Agents" has the meaning assigned to that term in the introduction to this
Agreement and also means and includes any successor Agent appointed pursuant to
subsection 8.6.
"Aggregate Amounts Due" has the meaning assigned to that term in subsection
9.5.
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<PAGE> 10
"Agreement" means this Credit Agreement dated as of September 5, 1997, as
it may be amended, supplemented or otherwise modified from time to time.
"Aircraft" means four Boeing 747-200 aircraft in full freighter
configuration with FAA Registration Nos. N523MC, N524MC, N526MC and N527MC,
including the Engines installed thereon and spare engines of the same type and
model, which aircraft (i) are in cargo configuration capable of immediate
operation in the business of Borrower, and (ii) have a maximum gross take-off
weight ("MTOW") of at least 800,000 pounds.
"Aircraft Chattel Mortgage" means, with respect to each Aircraft and Spare
Engine, a Security Agreement and Chattel Mortgage substantially in the form of
Exhibit IX annexed hereto granting to Administrative Agent for the benefit of
Lenders a first priority security interest in such Aircraft and Spare Engine, as
such Aircraft Chattel Mortgage may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"Aircraft Obligations" means all amounts owing by Atlas or any of its
Subsidiaries pursuant to the Amended Aircraft Credit Facility immediately prior
to giving effect to the third amendment and restatement thereof on the date
hereof and relating to the Aircraft and Spare Engines being contributed to the
Borrower pursuant to the Transaction.
"Airframe" means, as the context requires, an Airframe as defined in a
particular Aircraft Chattel Mortgage or all Airframes as defined in all Aircraft
Chattel Mortgages.
"Amended Aircraft Credit Facility" means the Third Amended and Restated
Credit Agreement, dated as of September 5, 1997, among Atlas Air, Inc., as
Borrower, the Lenders listed therein, Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Administrative Agent, but
without giving effect to any amendments, modifications, supplements or waivers
thereof.
"Applicable Margin" has the meaning assigned to that term in subsection
2.2A.
"Appraised Value" means, with respect to any Aircraft or Spare Engines, the
average of the appraised value of such Aircraft or Spare Engines by two Approved
Appraisers as determined pursuant to subsection 3.1T.
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<PAGE> 11
"Approved Appraiser" means either of BK Associates, Inc., Simat, Helliesen
& Eichner, Inc. or Morton Beyer, Agnew or any other nationally recognized firm
of aircraft appraisers reasonably satisfactory to Administrative Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) or
other disposition by Borrower to any other Person of any assets of Borrower
(whether tangible or intangible) excluding transactions related to aircraft
engines, components, parts or spare parts or other equipment, appliances,
instruments, appurtenances, accessories or furnishings of whatever nature which
may from time to time be removed from any Airframe or Engine in connection with
transactions permitted pursuant to and in accordance with Section 4(d) or
Section 4(e) of the Aircraft Chattel Mortgages.
"Assignment Agreement" means an Assignment Agreement in substantially the
form of Exhibit V annexed hereto.
"Atlas" means Atlas Air, Inc., a Delaware corporation.
"Atlas Asset Sales" means the sale (including any sale-leaseback
transaction) by Atlas or any of its Subsidiaries to any other Person of (i) any
of the stock of any of Atlas' Subsidiaries, (ii) substantially all of the assets
of any division or line of business of Atlas or any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of Atlas or any of its
Subsidiaries outside of the ordinary course of business.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the
rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Borrower" has the meaning assigned to that term in the introduction to
this Agreement.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
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<PAGE> 12
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"Certificate re Non-Bank Status" means a certificate substantially in the
form of Exhibit VI annexed hereto delivered by a Lender to Administrative Agent
pursuant to subsection 2.7B(iii).
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Collateral" means all of the properties and assets in which Liens are
purported to be granted by the Collateral Documents.
-5-
<PAGE> 13
"Collateral Documents" means each Aircraft Chattel Mortgage and any
security agreement executed pursuant to subsection 5.11.
"Commitment" means the commitment of each Lender as set forth on Schedule
2.1, as the same may be reduced or terminated pursuant to Section 2.4 and/or
Section 7.
"Compliance Certificate" means a certificate delivered to Administrative
Agent and Lenders by Borrower pursuant to subsection 3.1Q or 5.1(iii).
"Condemnation Proceeds" has the meaning assigned to that term in subsection
2.4C(ii)(b).
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Atlas, all of the foregoing as
determined on a consolidated basis for Atlas and its Subsidiaries in conformity
with GAAP.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Atlas and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Atlas and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Atlas and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined in conformity with GAAP; provided that there
shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Atlas) in which any other Person (other than Atlas or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Atlas or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Atlas or is merged
into or consolidated with Atlas or any of its Subsidiaries or that Person's
assets are acquired by Atlas or any of its Subsidiaries, (iii) the income of any
Subsidiary of
-6-
<PAGE> 14
Atlas to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary, (iv) any after-tax gains or losses attributable to Atlas Asset Sales
or returned surplus assets of any pension plan, and (v) (to the extent not
included in clauses (i) through (iv) above) any net extraordinary gains or net
non-cash extraordinary losses.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Atlas and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Atlas or any of its Subsidiaries is
a party as lessee (net of sublease income other than income from ACMI
Contracts).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Atlas and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the
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<PAGE> 15
obligation so guaranteed or otherwise supported or, if less, the amount to which
such Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Contribution" has the meaning assigned to that term in subsection 3.1R.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designated to protect Borrower against fluctuations in
currency values.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Effective Date" has the meaning assigned to that term in Section 9.20.
"Eligible Assignee" means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, and (B) any Lender and any Affiliate of any
Lender; provided that no Affiliate of Borrower shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Borrower or any of its ERISA Affiliates.
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<PAGE> 16
"Engine" means, as the context requires, an Engine as defined in a
particular Aircraft Chattel Mortgage or Engines as defined in all Aircraft
Chattel Mortgages.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means each of the events set forth in Section 7.
"Event of Loss" shall mean any of the following events with respect to any
Aircraft (whether the Airframe or an Engine of such Aircraft or Spare Engine or
both): (A) loss of such Aircraft or Spare Engine or the use thereof due to theft
or disappearance of such Aircraft or Spare Engine which shall result in the loss
of possession thereof for a period of 120 days (or for a shorter period ending
on the date on which there is an insurance settlement for a total loss on the
basis of the theft or disappearance of such Aircraft or Spare Engine); (B) the
destruction, damage beyond repair or rendition of such Aircraft or Spare Engine
permanently unfit for normal use for any reason whatsoever; (C) the
condemnation, confiscation or seizure of, or requisition of title to, or use or
possession (other than use by the United States Government if Borrower obtains
adequate compensation from the United States
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<PAGE> 17
Government) of such Aircraft or Spare Engine; (D) as a result of any rule,
regulation, order or other action by the FAA or other governmental body having
jurisdiction, the use of such Aircraft or Spare Engine in the normal course of
interstate air transportation of persons or cargo shall have been prohibited for
a period of more than nine consecutive months unless Borrower, prior to the
expiration of such nine month 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 Borrower or, in any event, if such use shall
have been prohibited for a period of twelve consecutive months; (E) the
operation or location of such Aircraft or Spare Engine, while under requisition
for use by the United States or any instrumentality or agency thereof, in any
area excluded from coverage by any insurance policy in effect with respect to
such Aircraft or Spare Engine, if Borrower shall be unable to obtain indemnity
or "war risk" insurance in lieu thereof from the United States; (F) any damage
which results in an insurance settlement with respect to such Aircraft or Spare
Engine on the basis of an actual or constructive total loss or (G) a divestiture
of such Airframe or Spare Engine as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage. An Event of Loss with respect to any
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe of such Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
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<PAGE> 18
"Final Maturity Date" means May 29, 2004.
"Fiscal Year" means the fiscal year of the Borrower.
"Funding and Payment Office" means the office of Administrative Agent
located at 130 Liberty Street, New York, New York 10006, Attention: Marguerite
Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession. Financial statements and other information required to be delivered
by Borrower to Lenders pursuant to clauses (i) and (ii) of subsection 5.1 shall
be prepared in accordance with GAAP as in effect at the time of such
preparation. Calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize accounting principles and
policies in conformity with GAAP as in effect on the date of this Agreement.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property of Borrower; and (ii) caused by, or
undertaken by or on behalf of, Borrower.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or
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<PAGE> 19
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and are not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 9.3.
"Indemnitee" has the meaning assigned to that term in subsection 9.3.
"Independent Director" means a director of Borrower that satisfies the
criteria for "Independent Director" set forth in the Certificate of
Incorporation of Borrower.
"Initial Borrowing Date" shall mean the date occurring on or after the
Effective Date on which the borrowing of the Loans occurs.
"Insurance Proceeds" has the meaning assigned to that term in subsection
2.4C(ii)(b).
"Interest Payment Date" means with respect to any Loan, the last day of
each Interest Period applicable to such Loan.
"Interest Period" has the meaning assigned to that term in subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Borrower against fluctuations in interest rates.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Borrower of, or of a beneficial interest in, any Securities of any other
Person or (ii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Borrower to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of busi-
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<PAGE> 20
ness. The amount of any Investment shall be the original cost of such Investment
plus the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease" or "Leases" shall mean each of the lease agreements, dated as of
September 5, 1997 between Atlas Freighter Leasing II, Inc., as Lessor and Atlas
Air, Inc., as Lessee, as the same may be amended, modified or supplemented from
time to time in accordance with the terms hereof. The term "Lease" shall include
any Lease Supplement entered into in accordance with the terms of any Lease.
"Lender" and "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of this Agreement, together with their successors and
permitted assigns pursuant to subsection 9.1.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under this Agreement on the
same day by all the Lenders to the Borrower and relating to one Aircraft and the
related Spare Engines but secured by all Collateral.
"Loan Documents" means this Agreement, the Notes, the Lease and the
Collateral Documents.
"Loan Exposure" means, with respect to any Lender as of any date of
determination the outstanding principal amount of the Loans of that Lender.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Borrower or (ii) the impairment of the ability of Borrower to
perform the Obligations,
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<PAGE> 21
or the impairment, as a result of actions or inaction by Borrower, of the
ability of Administrative Agent or Lenders to enforce the Obligations.
"Maximum Loan Amount" means, with respect to each Aircraft and related
Spare Engines, the amount set forth on Schedule 2.2 opposite the respective
Aircraft and Spare Engines.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including income taxes
reasonably estimated to be actually payable as a result of such Asset Sale
within two years of the date of such Asset Sale.
"Non-US Lender" has the meaning assigned to that term in subsection
2.7B(iii)(a).
"Notes" has the meaning assigned to that term in subsection 2.1D.
"Notice of Borrowing" means a notice delivered by Borrower to
Administrative Agent pursuant to subsection 2.1B.
"Obligations" means all obligations of every nature of Borrower from time
to time owed to Administrative Agent, Lenders or any of them under the Loan
Documents, whether for principal, interest, fees, expenses, indemnification or
otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
with respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
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<PAGE> 22
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements which related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 5.3;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested
in good faith by appropriate proceedings that do not involve any danger of
the sale, forfeiture or loss of any Collateral, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made therefor;
(iii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages; and
(iv) Liens granted pursuant to the Collateral Documents.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
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"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default.
"Pricing Certificate" has the meaning assigned to that term in subsection
5.1(xi).
"Pricing Reduction" means a pricing reduction in the Applicable Margin
equal to 0.25%, if at the end of any four fiscal quarter period commencing on or
after December 31, 1997 and ending on or prior to December 31, 1999:
The ratio of (x) Consolidated Adjusted EBITDA for such four fiscal
quarter period to (y) Consolidated Interest Expense for such period is
greater than 2.30:1.00; and
The ratio of (x) Consolidated Total Debt (less Cash and Cash
Equivalents in excess of $25 million) at the end of any such period
plus seven times Consolidated Rental Payments for such period to (y)
Consolidated Adjusted EBITDA for such period plus Consolidated Rental
Payments for such period is less than 5.00:1.00.
The Pricing Reduction shall be determined with reference to the most recent
Pricing Certificate delivered by Borrower to Administrative Agent pursuant to
subsection 5.1(xi). Any Pricing Reduction shall become effective on the day
following the delivery of the relevant Pricing Certificate to Administrative
Agent and subject to the next succeeding sentence, the Pricing Reduction shall
remain in effect for the remainder of the term of this Agreement.
Notwithstanding anything to the contrary herein, at any time an Event of Default
shall have occurred and be continuing, the Pricing Reduction shall be zero.
"Prime Rate" means the rate that Administrative Agent announces from time
to time as its prime lending rate, as in effect from time to time. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Administrative Agent or any other Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Rate.
"Pro Rata Share" means, with respect to each Lender, the percentage
obtained by dividing the Loan Exposure of that Lender by the aggregate Loan
Exposure of all Lenders, in each case as such percentage may be adjusted by
assignments permitted pursuant to subsection 9.1. The initial Pro Rata Share of
each Lender is set forth opposite the name of that Lender in Schedule 2.1
annexed hereto.
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"Proceedings" has the meaning assigned to that term in subsection
5.1(viii).
"Proceeds" has the meaning assigned to that term in subsection 2.4C(ii)(b).
"Projections" means the financial projections of Atlas and its Subsidiaries
delivered on or prior to the Initial Borrowing Date covering the five year
period ending on December 31, 2001.
"Refinancing" has the meaning assigned to that term in subsection 3.1R.
"Register" has the meaning assigned to that term in subsection 2.1.E.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Related Fund" means, with respect to any Lender that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Requisite Lenders" means Lenders having or holding 50.1% or more of the
aggregate Loan Exposure of all Lenders.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Borrower now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Borrower now or hereafter outstanding.
"S&P" means Standard & Poor's Ratings Services.
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"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Service Agreement" means the Service Agreement, dated as of September 5,
1997, between Atlas and Borrower.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Spare Engines" shall mean nine General Electric CF6-50E2 engines with
manufacturer's serial numbers 530168, 517790, 517530, 517547, 455167, 517602,
517538, 517539, and 517544.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies there-
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of is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
"Substitute Basis" has the meaning assigned to that term in subsection
2.6G.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Syndication Agent.
"Syndication Date" means the date on which Agents have completed, in
Agents' determination, the primary syndication of Loans.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its lending office)
is located on all or part of the net income, profits or gains of that Person
(whether worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or otherwise).
"Total Commitment" means the sum of the Commitments of the Lenders.
"Transaction" has the meaning assigned that term in subsection 3.1R.
"Transaction Documents" means the Amended Aircraft Credit Facility, any
bills of sale or certificates of transfer for each Aircraft and Spare Engines
(including bills of sale on AC Form 8050-2) delivered in connection with the
Transaction, the Leases, all documents relating to the Refinancing, and all
other agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Contribution.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code (or
any similar or equivalent legislation) as in effect from time to time in the
applicable jurisdiction.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
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Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP.
1.3 Other Definitional Provisions.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes; Register.
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Borrower herein set
forth, each Lender hereby severally agrees to make on the Initial Borrowing
Date, four Loans to Borrower in an aggregate amount not to exceed the Commitment
of such Lender. Each Loan of a Lender shall relate to one of the Aircraft and
certain Spare Engines designated in writing to relate to such Aircraft and shall
be in an amount equal to such Lender's Pro Rata Share on the Initial Borrowing
Date of the Maximum Loan Amount with respect to such Aircraft and related Spare
Engines. The Loans of all of the Lenders relating to one Aircraft and related
Spare Engines shall not exceed the Maximum Loan Amount for such Aircraft and
related Spare Engines and shall be made on the same day by the Lenders ratably
according to their respective Commitments. Once repaid, Loans borrowed hereunder
may not be reborrowed.
B. Borrowing Mechanics. (i) Each borrowing of Loans relating to a
particular Aircraft and related Spare Engines shall be made by the delivery of a
Notice of Borrowing by Borrower to Administrative Agent not later than 12:00
Noon (New York City time) on the third Business Day prior to the date of the
proposed borrowing. Administrative Agent shall give to each Lender prompt notice
thereof. Each such Notice of Borrowing shall be irrevocable and binding on
Borrower. Each such Notice of Borrowing shall be in the form of Exhibit I. The
Notice of Borrowing shall specify (i) the proposed borrowing date (which shall
be a Business Day), (ii) the amount of Loans requested and (iii) the Aircraft
and related Spare Engines to which the Loans relate. In lieu of delivering the
above described Notice of Borrowing, Borrower may
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<PAGE> 28
give Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
promptly confirmed in writing.
(ii) Neither Administrative Agent nor any Lender shall incur any liability
to Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of the Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Borrower shall have effected the Loans hereunder. Borrower
shall notify Administrative Agent prior to the funding of the Loans in the event
that any of the matters to which Borrower is required to certify in the Notice
of Borrowing is no longer true and correct as of the Initial Borrowing Date and
the acceptance by Borrower of the proceeds of any Loans shall constitute a
recertification by Borrower as of the Initial Borrowing Date, as to the matters
to which Borrower is required to certify in the applicable Notice of Borrowing.
C. Disbursement of Funds. All Loans under this Agreement shall be made by
Lenders simultaneously and proportionately to their respective Pro Rata Shares,
it being understood that no Lender shall be responsible for any default by any
other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make a Loan requested be
increased or decreased as a result of a default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder. Promptly after
receipt by Administrative Agent of a Notice of Borrowing pursuant to subsection
2.1B (or telephonic notice in lieu thereof), Administrative Agent shall notify
each Lender of the proposed borrowing. Each Lender shall make the amount of its
Loans available to Administrative Agent not later than 12:00 Noon (New York
time) on the Initial Borrowing Date, in each case in same day funds in Dollars,
at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to
the Initial Borrowing Date that such Lender does not intend to make available to
Administrative Agent the amount of such Lender's Loans so requested on the
Initial Borrowing Date, Administrative Agent may assume that such Lender has
made such amount available to Administrative Agent on the Initial Borrowing Date
and Administrative Agent may, in its sole discretion, but shall not be obligated
to, make available to Borrower a corresponding amount on the Initial Borrowing
Date. If such corresponding amount is not in fact made available to
Administrative Agent by such Lender, Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from the Initial Borrowing Date until the date
such amount is paid to Administrative Agent, at
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the customary rate set by Administrative Agent for the correction of errors
among banks for three Business Days. If such Lender does not pay such
corresponding amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify Borrower and Borrower shall
immediately pay such corresponding amount to Administrative Agent together with
interest thereon, for each day from the Initial Borrowing Date until the date
such amount is paid to Administrative Agent, at the rate payable under this
Agreement. Nothing in this subsection 2.1C shall be deemed to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to prejudice any
rights that Borrower may have against any Lender as a result of any default by
such Lender hereunder.
D. Notes. Borrower shall duly execute and deliver on the Initial Borrowing
Date to each Lender (or to Administrative Agent for that Lender) the Notes, each
substantially in the form of Exhibit II annexed hereto, to evidence that
Lender's Loans in respect of each Aircraft and related Spare Engines, in the
principal amount of such Lender's Pro Rata Share of the Maximum Loan Amount
relating to such Aircraft and related Spare Engines and with other appropriate
insertions (each a "Note" and collectively, the "Notes").
E. The Register.
(i) Administrative Agent shall maintain, at its address referred to in
subsection 9.8, a register (the "Register") for the recordation of the
names and addresses of Lenders and the Commitments and Loans of each Lender
from time to time and Administrative Agent shall record in the Register the
Commitment and the Loans from time to time of each Lender and each
repayment or prepayment in respect of the principal amount of the Loans of
each Lender. Such recordation shall be conclusive and binding on Borrower
and each Lender, absent manifest error; provided that failure to make any
such recordation, or any error in such recordation, shall not affect
Borrower's Obligations in respect of the applicable Loans. The Register
shall be available for inspection by Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(ii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each Loan
made by it and each payment in respect thereof. Any such recordation shall
be conclusive and binding on Borrower, absent manifest error; provided that
failure to make any such recordation, or any error in such recordation,
shall not affect Borrower's Obligations in respect of the applicable Loans;
and provided further
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that in the event of any inconsistency between the Register and any
Lender's records, the recordations in the Register shall govern.
(iii) Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
9.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Loan shall be owed to the Lender listed in the Register as the
owner thereof, and any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is
listed in the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding Commitments
or Loans.
(iv) Borrower hereby designates Administrative Agent to serve as
Borrower's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1E, and Borrower hereby agrees that, to the
extent Administrative Agent serves in such capacity, Administrative Agent
and its officers, directors, employees, agents and affiliates shall
constitute Indemnitees for all purposes under subsection 9.3.
2.2 Interest on the Loans.
A. Rate of Interest. (i) Subject to the provisions of Sections 2.6 and 2.7,
each Loan shall bear interest on the unpaid principal amount thereof from the
Initial Borrowing Date through maturity (whether by acceleration or otherwise)
at a rate determined by reference to the Adjusted Eurodollar Rate. The
applicable Interest Period for determining the rate of interest with respect to
the Loans shall be determined in accordance with subsection 2.2B.
(ii) Subject to the provisions of subsections 2.2D and 2.7, the Loans shall
bear interest through maturity at a per annum rate equal to the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin.
The "Applicable Margin" for each Loan shall be 2.25% less the Pricing
Reduction, if any, in effect from time to time. Notwithstanding anything to the
contrary herein, each Loan shall bear interest initially at the rate of 9.75%
from the
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Initial Borrowing Date to but not including September 9, 1997 and on such date
each Loan shall bear interest through maturity as provided in this subsection
2.2A.
B. Interest Periods. In connection with each Loan, the interest period
("Interest Period") to be applicable to such Loan on and after September 9, 1997
shall be, (x) from September 9, 1997 until November 29, 1997, 81 days and (y)
immediately after the completion of the initial Interest Period three months,
provided that:
(i) the initial Interest Period for each Loan shall commence on the
Initial Borrowing Date and expire on November 29, 1997;
(ii) each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period shall extend beyond the Final Maturity Date;
(vi) no Interest Period shall extend beyond a date on which Borrower
is required to make a scheduled payment of principal of the Loans;
(vii) there shall be no more than one Interest Period at any time.
C. Interest Payments. Subject to the provisions of subsection 2.2D,
interest on each Loan shall be payable in arrears on the last day of each
Interest Period applicable to that Loan, upon any prepayment of Loans (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. Default Rate. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent per-
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mitted by applicable law, any interest payments thereon not paid when due and
any fees and other amounts then due and payable hereunder, shall thereafter bear
interest (including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a
rate that is 2% per annum in excess of the interest rate otherwise payable under
this Agreement with respect to the applicable Loans (or, in the case of any such
fees and other amounts, at a rate which is 1% per annum in excess of the sum of
the Base Rate as in effect from time to time and the Applicable Margin);
provided that, upon the expiration of the Interest Period in effect at the time
any such increase in interest rate is effective, such Loans shall thereupon bear
interest payable upon demand at a rate which is 1% per annum in excess of the
sum of the Base Rate as in effect from time to time and the Applicable Margin.
Payment or acceptance of the increased rates of interest provided for in this
subsection 2.2D is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of Administrative Agent or any Lender.
E. Computation of Interest. Interest on each Loan shall be computed on the
basis of a 360-day year, in each case for the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of such Loan or the first day of an Interest Period applicable to
such Loan shall be included, and the date of payment of such Loan or the
expiration date of an Interest Period applicable to such Loan shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan.
2.3 Fees.
Borrower agrees to pay to Lenders and Agents such fees and in such amounts
and at such times as have been separately agreed in writing upon among Borrower
and Agents.
2.4 Repayments and Prepayments; General Provisions Regarding Payments.
A. Mandatory Reduction of Commitments. The Total Commitment (and the
Commitment of each Lender) shall terminate on the earlier of (x) the Initial
Borrowing Date, after giving effect to the incurrence of the Loans on such date
and (y) September 15, 1997.
B. Scheduled Repayments of Loans. Borrower shall make the following
scheduled payments on the Loans on each three month anniversary of November 29,
1997 commencing with the three month anniversary thereof: (i) the first two
scheduled
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principal payments shall be in the amount of $2,525,000; (ii) the next
succeeding 23 scheduled principal payments shall be in the amount of $5,650,000
and (iii) the final payment shall be in an amount equal to $50,000,000; provided
that such scheduled installments of principal of the Loans shall be reduced in
connection with any voluntary or mandatory prepayments of the Loans in
accordance with subsection 2.4C; and provided further, that the Loans and all
other amounts owed hereunder with respect to the Loans shall be paid in full no
later than the Final Maturity Date, and the final installment payable by
Borrower in respect of the Loans on such date shall be in an amount sufficient
to repay all amounts owing by Borrower under this Agreement with respect to the
Loans. Any payment pursuant to this subsection 2.4B will be applied ratably
among the Loans relating to all Aircraft and Spare Engines based on the
outstanding principal amount of each such Loan as compared to the total
outstanding principal amount of all Loans. If the date on which any scheduled
payment is due falls on a day that is not a Business Day, then such scheduled
repayment shall be made on the next succeeding Business Day; provided that, if
any such scheduled repayment would otherwise become due on a day that is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such scheduled repayment shall be made on the next
preceding Business Day.
C. Prepayments.
(i) Voluntary Prepayments. Borrower may, upon not less than three
Business Days' prior written or telephonic notice given to Administrative
Agent by 12:00 Noon (New York time) on the date required and, if given by
telephone, promptly confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time and
from time to time prepay, without premium or penalty, the Loans on any
Business Day in whole or in part in an aggregate minimum amount of
$5,000,000 and integral multiples of $500,000 in excess of that amount;
provided, however, that Loans may only be prepaid on the expiration of the
Interest Period applicable thereto. Notice of prepayment having been given
as aforesaid, the principal amount of the Loans specified in such notice
shall become due and payable on the prepayment date specified therein. Any
such voluntary prepayment shall be applied as specified in subsection
2.4C(iii).
(ii) Mandatory Prepayments.
(a) Prepayments and Reductions from Asset Sales. No later than
the second Business Day following the date of receipt by Borrower of
Cash Proceeds of any Asset Sale, Borrower shall prepay, without
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premium or penalty (other than pursuant to subsection 2.6D), Loans in
an amount equal to the Net Cash Proceeds of such Asset Sale.
Concurrently with any prepayment of the Loans pursuant to this
subsection 2.4C(ii)(a), Borrower shall deliver to Administrative Agent
an Officers' Certificate demonstrating the derivation of the Net Cash
Proceeds of the correlative Asset Sale from the gross sales price
thereof. In the event that Borrower shall, at any time after receipt
of Cash Proceeds of any Asset Sale requiring a prepayment pursuant to
this subsection 2.4C(ii)(a), determine that the prepayments previously
made in respect of such Asset Sale were in an aggregate amount less
than that required by the terms of this subsection 2.4C(ii)(a),
Borrower shall promptly make an additional prepayment of the Loans, as
the case may be, in the manner described above in an amount equal to
the amount of any such deficit, and Borrower shall concurrently
therewith deliver to Administrative Agent an Officers' Certificate
demonstrating the derivation of the additional Net Cash Proceeds
resulting in such deficit. Any mandatory prepayments pursuant to this
subsection 2.4C(ii)(a) shall be applied as specified in subsection
2.4C(iii).
(b) Prepayments and Reductions Due to Insurance and Condemnation
Proceeds. Within 270 days of receipt by Borrower of any cash payments
under any of the casualty insurance policies covering damage to or
loss of property maintained pursuant to subsection 5.4 or otherwise
resulting from damage to or loss of all or any portion of the
Collateral or any other tangible asset (net of actual and documented
reasonable costs incurred by Borrower in connection with adjustment
and settlement thereof and in connection with the reinvestment of
proceeds permitted hereby, "Insurance Proceeds") or any proceeds
resulting from the taking of assets by the power of eminent domain,
condemnation or otherwise (net of actual and documented reasonable
costs incurred by Borrower in connection with adjustment and
settlement thereof and in connection with the reinvestment of proceeds
permitted hereby, "Condemnation Proceeds", and collectively with
Insurance Proceeds, "Proceeds") (other than proceeds applied pursuant
to subsection 2.4C(ii)(c)) and so long as at the time of receipt of
such proceeds there shall exist no Potential Event of Default or Event
of Default, Borrower may reinvest such Proceeds in property
substantially similar to the property so damaged or lost so long as
the Administrative Agent receives a first priority perfected security
interest in such property pursuant to documentation acceptable to the
Administrative Agent, the property is duly leased to Atlas pursuant to
the applicable Lease and the
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Administrative Agent receives all documents and opinions in connection
therewith which it may reasonably request, including without
limitation, an opinion from counsel that Borrower as lessor and the
collateral agent as the assignee under the Lease are entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to such
property. If 270 days after receipt of any such Proceeds, Borrower has
not reinvested such Proceeds as described above or if at the time of
receipt of such proceeds or at the time of reinvestment there shall
exist a Potential Event of Default or an Event of Default then
Borrower shall immediately prepay, without premium or penalty (other
than pursuant to subsection 2.6D), those Loans relating to the
Aircraft and related Spare Engines in respect of which such Proceeds
were received based on the outstanding principal amount of each Loan
as compared to the total outstanding principal amount of all Loans
relating to such Aircraft and related Spare Engines. Any amount of the
Proceeds remaining (a) after prepayment of the Loans described in the
immediately preceding sentence and/or (b) after being reinvested in
the manner described in the second preceding sentence shall be applied
ratably to the prepayment of Loans relating to all of the remaining
Aircraft and related Spare Engines based on the outstanding principal
amount of each such Loan as compared to the total outstanding
principal amount of all Loans relating to all of the remaining
Aircraft and related Spare Engines. Any such mandatory prepayments
shall be applied as specified in subsection 2.4C(iii). Until such time
as such proceeds are reinvested or applied to repay Loans, all such
proceeds shall be held by the Administrative Agent in a cash
collateral account with the Administrative Agent as security for the
Obligations pursuant to a cash collateral agreement in form and
substance satisfactory to the Administrative Agent and providing that
such proceeds may be invested in Cash or Cash Equivalents at the
direction of Borrower with any earnings thereon being for the account
of Borrower.
(c) Prepayments and Reductions Due to an Event of Loss. Following
an Event of Loss with respect to an Aircraft or a related Spare
Engine, Borrower shall prepay, without premium or penalty (other than
pursuant to subsection 2.6(D)) the outstanding principal amount of
Loans relating to the Aircraft and related Spare Engines which is the
subject of the Event of Loss; provided that Borrower shall not be
required to make a prepayment pursuant to this subsection 2.4C(ii)(c)
in the event that Borrower receives Insurance Proceeds or Condemnation
Proceeds in connection with such Event of Loss so long as at the time
of reinvestment there exists no Potential Event of Default or Event of
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Default, in which case, such proceeds may, within 270 days of receipt
of any such Proceeds, be reinvested in aircraft or spare engines
substantially similar to the Aircraft or Spare Engines which was the
subject of the Event of Loss so long as such replacement aircraft or
Spare Engines are duly leased to Atlas pursuant to the applicable
Lease or Leases and the Administrative Agent receives all documents
and opinions in connection therewith which it may reasonably request,
including, without limitation, an opinion from counsel of the Borrower
to the extent that the Borrower as lessor and Administrative Agent as
the assignee under the Lease are entitled to the benefits of Section
1110 of the Bankruptcy Code with respect to such property. To the
extent Insurance Proceeds or Condemnation Proceeds received upon the
occurrence of an Event of Loss with respect to an Aircraft or Spare
Engine are not reinvested in accordance with the preceding sentence,
then Borrower shall prepay, without premium or penalty (other than
pursuant to subsection 2.6D), those Loans relating to the Aircraft and
related Spare Engines in respect of which such Insurance Proceeds or
Condemnation Proceeds were received based on the outstanding principal
amount of each Loan as compared to the total outstanding principal
amount of all Loans relating to such Aircraft and related Spare
Engines. Any amount of the Proceeds remaining (a) after prepayment of
the Loan described in the immediately preceding sentence and/or (b)
after being reinvested in the manner described in the second preceding
sentence, shall be applied ratably to the prepayment of Loans relating
to all of the remaining Aircraft and related Spare Engines based on
the outstanding principal amount of each such Loan as compared to the
total outstanding principal amount of all Loans relating to all of the
remaining Aircraft and related Spare Engines. Any such mandatory
prepayments shall be applied as specified in subsection 2.4C(iii).
Until such time as such Proceeds are reinvested in replacement
aircraft or spare engines or applied to repay Loans, such proceeds
shall be held by the Administrative Agent in a cash collateral account
with the Administrative Agent as security for the Obligations pursuant
to a cash collateral agreement in form and substance satisfactory to
the Administrative Agent and providing that such proceeds may be
invested in Cash or Cash Equivalents at the direction of Borrower with
any earnings thereon being for the account of Borrower.
(d) Prepayments under Leases. On any date on which Borrower
receives any prepayments of rent or other amounts pursuant to the
terms of any Lease, Borrower shall prepay, without premium or
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penalty (other than pursuant to subsection 2.6), the outstanding
principal amount of Loans relating to the Aircraft and related Spare
Engines which is the subject of the Lease pursuant to which such
prepayments were made and to the extent that such payments are in
excess of the principal amount of Loans relating to such Aircraft and
related Spare Engines such excess proceeds shall be applied to make an
additional prepayment of Loans. All such additional prepayments of
Loans shall be applied ratably among the Loans relating to all of the
remaining Aircraft and related Spare Engines based on the amount of
each such Loan as compared to the total outstanding amount of all
Loans.
(iii) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of Loans and
Order of Maturity. Any voluntary prepayments pursuant to subsection
2.4C(i) shall be applied ratably among the Loans relating to all of
the Aircraft and related Spare Engines based on the outstanding
principal amount of each such Loan as compared to the total
outstanding principal amount of all Loans. All voluntary prepayments
of the Loans pursuant to subsection 2.4C(i) shall be applied pro rata
to all scheduled amortization payments.
(b) Application of Mandatory Prepayments of Loans. Any mandatory
prepayments of the Loans pursuant to subsection 2.4C(ii) shall be
applied ratably among the Loans relating to all of the Aircraft and
related Spare Engines based on the outstanding principal amount of
each such Loan as compared to the total outstanding principal amount
of all Loans; provided that in the event of a prepayment pursuant to
subsection 2.4C(ii)(a) such prepayment shall be applied first to the
Loans relating to such Aircraft and related Spare Engines which is the
subject of the Asset Sale on a pro rata basis based on the outstanding
principal amount of each Loan as compared to the total outstanding
principal amount of all Loans relating to such Aircraft and related
Spare Engines and second, ratably among the Loans relating to all
other Aircraft and related Spare Engines on a pro rata basis based on
the outstanding principal amount of the Loan being prepaid as compared
to the total outstanding principal amount of all Loans relating to all
other Aircraft and related Spare Engines. Any mandatory prepayments of
the Loans pursuant to subsection 2.4C(ii)(b) or (c) shall be applied
to the Loans relating to the particular Aircraft and related Spare
Engines, retained by Borrower and/or applied ratably among the Loans
relating to all other
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Aircraft and related Spare Engines in accordance with such sections.
All mandatory prepayments of the Loans pursuant to subsection 2.4C(ii)
shall be applied to scheduled amortization payments in inverse order
of maturity.
D. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Borrower of principal,
interest, fees and other Obligations hereunder and under the Notes shall be
made in Dollars in same day funds, without defense, set-off or
counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 Noon (New York time) on the date
due at the Funding and Payment Office for the account of Lenders; funds
received by Administrative Agent after that time on such due date shall be
deemed to have been paid by Borrower on the next succeeding Business Day.
Borrower hereby authorizes Administrative Agent to charge its accounts with
Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts for
that purpose).
(ii) Application of Payments to Principal and Interest. All payments
in respect of the principal amount of any Loan shall include payment of
accrued interest on the principal amount being repaid or prepaid, and all
such payments shall be applied to the payment of interest before
application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of Loans shall be apportioned among all outstanding
Loans to which such payments relate, in each case proportionately to
Lenders' respective Pro Rata Share. Administrative Agent shall promptly
distribute to each Lender, at its address set forth below its name on the
signature page hereof or at such other address as such Lender may request,
its Pro Rata Share of all such payments received by Administrative Agent.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder.
(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations
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therein), that Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid;
provided that the failure to make (or any error in the making of) a
notation of any Loan made under such Note shall not limit or otherwise
affect the obligations of Borrower hereunder or under such Note with
respect to any Loan or any payments of principal or interest on such
Note.
2.5 Use of Proceeds.
A. Application of Proceeds. The proceeds of the Loans shall be applied
solely (I)(x) to consummate the Refinancing and (y) to pay fees and expenses
related to the Refinancing and the other transactions contemplated hereby and
(II) to the extent there are proceeds remaining after application pursuant to
preceding clause (I), for general corporate purposes, including the payment of
dividends to Atlas permitted hereunder.
B. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Borrower in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 Special Provisions Governing Loans.
Notwithstanding any other provisions of this Agreement to the contrary, the
following provisions shall govern with respect to Loans as to the matters
covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Loans for which an interest rate is then being determined for
the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Borrower and each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Loans, that by reason of circumstances
affecting the interbank
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Eurodollar market adequate and fair means do not exist for ascertaining the
interest rate applicable to such Loans on the basis provided for in the
definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date
give notice (by telefacsimile or by telephone confirmed in writing) to Borrower
and each Lender of such determination, whereupon (i) no Loans may be incurred
until such time as Administrative Agent notifies Borrower and Lenders that the
circumstances giving rise to such notice no longer exist or until Borrower,
Administrative Agent and the Lenders agree upon a Substitute Basis in accordance
with Section 2.6G and (ii) the rate of interest applicable to any Affected Loans
then outstanding shall be determined in accordance with Section 2.6G.
C. Illegality or Impracticability of Loans. In the event that on any date
any Lender shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto but shall be made only after
consultation with Borrower and Administrative Agent) that the making,
maintaining or continuation of its Loans (i) has become unlawful as a result of
compliance by such Lender in good faith with any law, treaty, governmental rule,
regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful) or (ii) has
become impracticable, or would cause such Lender material hardship, as a result
of contingencies occurring after the date of this Agreement which materially and
adversely affect the interbank Eurodollar market or the position of such Lender
in that market, then, and in any such event, such Lender shall be an "Affected
Lender" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Borrower and Administrative Agent of such determination
(which notice Administrative Agent shall promptly transmit to each other
Lender). Thereafter (a) the obligation of the Affected Lender to make Loans
shall be suspended until such notice shall be withdrawn by the Affected Lender,
(b) the Affected Lender's obligation to maintain its outstanding Loans (the
"Affected Loans") shall be suspended until such notice shall be withdrawn by the
Affected Lender, and (c) the parties shall follow the procedures set forth in
Section 2.6G with respect to the Affected Loans so long as, if following such
procedures the maintaining of such Loans is not unlawful. Notwithstanding the
foregoing, to the extent a determination by an Affected Lender as described
above relates to a borrowing then being requested by Borrower subject to the
provisions of subsection 2.6D, Borrower shall have the option, subject to the
provisions of subsection 2.6D, to rescind such borrowing as to all Lenders by
giving notice (by telefacsimile or by telephone confirmed in writing) to
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other
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than an Affected Lender to make or maintain Loans in accordance with the terms
of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Loans and any loss, expense or liability sustained by that Lender in
connection with the liquidation or re-employment of such funds) which that
Lender may sustain: (i) if for any reason (other than a default by that Lender)
a borrowing of any Loan does not occur on a date specified therefor in a Notice
of Borrowing or a telephonic request for borrowing, (ii) if any prepayment or
other principal payment occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its Loans is
not made on any date specified in a notice of prepayment given by Borrower, or
(iv) as a consequence of any other default by Borrower in the repayment of its
Loans when required by the terms of this Agreement.
E. Booking of Loans. Any Lender may make, carry or transfer Loans at, to,
or for the account of any of its branch offices or the office of an Affiliate of
that Lender.
F. Assumptions Concerning Funding of Loans. Calculation of all amounts
payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be
made as though that Lender had actually funded each of its relevant Loans
through the purchase of a Eurodollar deposit bearing interest at the rate
obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in
an amount equal to the amount of such Loan and having a maturity comparable to
the relevant Interest Period and through the transfer of such Eurodollar deposit
from an offshore office of that Lender to a domestic office of that Lender in
the United States of America; provided, however, that each Lender may fund each
of its Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
G. Substitute Basis. During the 30 days following the date of any notice
given to Borrower pursuant to subsections 2.6B and 2.6C, Administrative Agent,
the Lenders and Borrower shall negotiate in good faith in order to arrive at a
mutually acceptable alternative basis for determining the interest rate from
time to time applicable to the affected Loans (the "Substitute Basis"). If
within the 30 days following the date of any such notice to Borrower,
Administrative Agent, the Lenders and Borrower shall agree upon a Substitute
Basis, such Substitute Basis shall be retroactive
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to and effective from the first day of the then current Interest Period until
and including the last day of such Interest Period. If after 30 days from the
date of such notice, the Lenders and Borrower shall have failed to agree upon a
Substitute Basis, then each Lender shall certify in writing to Borrower through
Administrative Agent (such certification to be conclusive and binding on all of
the parties hereto absent manifest error) the interest rate at which such Lender
is prepared to make or maintain its affected Loan for such Interest Period, it
being understood that such Lender's interest rate shall be at a rate per annum
equal to the sum of the Applicable Margin plus a rate which adequately and
fairly reflects the cost to such Lender of obtaining the funds necessary to
maintain its affected Loan for such Interest Period, such interest rate to be
retroactive to and effective from the first day of such Interest Period. If no
Substitute Basis is established, upon receipt of notice of the interest rates at
which the Lenders are prepared to make or maintain their respective affected
Loans, Borrower shall have the right exercisable upon ten Business Days' prior
notice to any Lender through Administrative Agent (A) to continue to borrow
Loans at the interest rates so advised by the respective Lenders (as such rates
may be modified, from time to time, at the outset of each subsequent Interest
Period) or (B) to prepay in full the Affected Loans of any Lender, together with
accrued interest thereon at the interest rate certified in writing by such
Lender as provided above, whereupon such Affected Loans shall become due and
payable on the date specified by Borrower in such notice. In determining the
actual interest rate per annum to be charged on any Loan, the Substitute Basis
or the interest rate advised by the respective Lenders to apply to a Loan in
accordance with the provisions of this subsection 2.6G shall be increased to the
rate per annum obtained by dividing the Substitute Basis or such advised
interest rate by a percentage equal to 100% minus the then stated maximum rate
of all required reserve requirements under applicable law (including any
marginal, emergency, supplemental, special or other reserves) and applicable on
the date of determination of such interest rate to any member bank of the
Federal Reserve System in respect of "Eurocurrency liabilities" as defined in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time (or any successor category of liabilities under
Regulation D).
2.7 Increased Costs, Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions of
subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes
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effective after the date hereof, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any change in the rate of Tax on the overall net
income of such Lender) with respect to this Agreement or any of its
obligations hereunder or any payments to such Lender (or its applicable
lending office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Loans that are
reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Borrower shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Borrower (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Borrower under
this Agreement and the other Loan Documents shall be paid free and clear
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of and (except to the extent required by law) without any deduction or
withholding on account of any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed
by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments.
(ii) Grossing-up of Payments. If Borrower or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum paid or payable by Borrower to Administrative
Agent or any Lender under any of the Loan Documents:
(a) Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as
Borrower becomes aware of it;
(b) Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the
liability to pay is imposed on Borrower) for its own account or
(if that liability is imposed on Administrative Agent or such
Lender, as the case may be) on behalf of and in the name of
Administrative Agent or such Lender;
(c) the sum payable by Borrower in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the
making of that deduction, withholding or payment, Administrative
Agent or such Lender, as the case may be, receives on the due
date a net sum equal to what it would have received had no such
deduction, withholding or payment been required or made;
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within
30 days after the due date of payment of any Tax which it is
required by clause (b) above to pay, Borrower shall deliver to
Administrative Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority; and
(e) if any amounts are payable in respect of Taxes pursuant
to subsection 2.7B(ii)(c), Borrower agrees to reimburse each
Lender, upon the written request of such Lender, for taxes
imposed on or measured by the overall net income of such Lender
and for any
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withholding of taxes as such Lender shall determine are payable
by, or withheld from, such Lender, in respect of such amounts so
paid to or on behalf of such Lender pursuant to subsection
2.7B(ii)(c), and in respect of any amounts paid to or on behalf
of such Lender pursuant to this subsection 2.7B(ii)(e).
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative
Agent for transmission to Borrower, on or prior to the Effective
Date (in the case of each Lender listed on the signature pages
hereof) or on the date of the Assignment Agreement pursuant to
which it becomes a Lender (in the case of each other Lender), and
at such other times as may be necessary in the determination of
Borrower or Administrative Agent (each in the reasonable exercise
of its discretion), (1) two original copies of Internal Revenue
Service Form 1001 or 4224 (or any successor forms), properly
completed and duly executed by such Lender, together with any
other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
any payments to such Lender of principal, interest, fees or other
amounts payable under any of the Loan Documents or (2) if such
Lender is not a "bank" or other Person described in Section
881(c)(3) of the Internal Revenue Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (1)
above, a Certificate re Non-Bank Status together with two
original copies of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of
interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates
or other evidence with respect to United States federal income
tax withholding matters pursuant to subsection 2.7B(iii)(a)
hereby agrees, from time to time after the initial delivery by
such Lender of such forms, certifi-
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cates or other evidence, whenever a lapse in time or change in
circumstances renders such forms, certificates or other evidence
obsolete or inaccurate in any material respect, such Lender shall
(1) deliver to Administrative Agent for transmission to Borrower
two new original copies of Internal Revenue Service Form 1001 or
4224, or a Certificate re Non-Bank Status and two original copies
of Internal Revenue Service Form W-8, as the case may be,
properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required in
order to confirm or establish that such Lender is not subject to
deduction or withholding of United States federal income tax with
respect to payments to such Lender under the Loan Documents or
(2) immediately notify Administrative Agent and Borrower of its
inability to deliver any such forms, certificates or other
evidence in which case such Lender shall not be required to
deliver any such forms, certificates or other evidence pursuant
to this subsection 2.7B(iii)(b).
(c) Borrower shall not be required to pay any additional
amount to any Non-US Lender under clause (c) or (e) of subsection
2.7B(ii) if such Lender shall have failed to satisfy the
requirements of subsection 2.7B(iii)(a); provided that if such
Lender shall have satisfied such requirements on the Initial
Borrowing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment
Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this subsection 2.7B(iii)(c) shall
relieve Borrower of its obligation to pay any additional amounts
pursuant to clause (c) or (e) of subsection 2.7B(ii) in the event
that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such
Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date establishing
the fact that such Lender is not subject to withholding as
described in subsection 2.7B(iii)(a).
(iv) If Borrower pays any additional amount under this subsection
2.7B to a Lender and such Lender determines in its sole discretion
that it has actually received or realized in connection therewith any
refund or any reduction of, or credit against, its Tax liabilities in
or with respect to the taxable year in which the additional amount is
paid, such Lender shall pay to Borrower an amount that Lender shall,
in its sole discretion, determine is equal to the net benefit, after
tax, which was obtained by the Lender in such year as a consequence of
such refund, reduction or credit.
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C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or other obligations hereunder to a level
below that which such Lender or such controlling corporation could have achieved
but for such adoption, effectiveness, phase-in, applicability, change or
compliance (taking into consideration the policies of such Lender or such
controlling corporation with regard to capital adequacy), then from time to
time, within ten Business Days after receipt by Borrower from such Lender of the
statement referred to in the next sentence, Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Borrower (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
D. Substitute Lenders. In the event Borrower is required under the
provisions of subsection 2.6C or this subsection 2.7 to make payments in a
material amount to any Lender or in the event any Lender fails to lend to
Borrower in accordance with this Agreement, Borrower may, so long as no Event of
Default or Potential Event of Default shall have occurred and be continuing,
elect to terminate such Lender as a party to this Agreement; provided that,
concurrently with such termination, (i) Borrower shall pay that Lender all
principal, interest and fees and other amounts (including, without limitation,
amounts, if any, owed under subsection 2.6C or this subsection 2.7) owed to such
Lender through such date of termination, (ii) another financial institution
satisfactory to Borrower and Administrative Agent (or if Administrative Agent is
also the Lender to be terminated, the successor Administrative Agent) shall
agree, as of such date, to become a Lender for all purposes under this Agreement
(whether by assignment or amendment) and to assume all obligations of the Lender
to be terminated as of such date, and (iii) all documents and supporting
materials necessary, in the judgment of Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) to evidence the substitution of such Lender shall have
been received and approved by Administrative Agent as of such date.
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2.8 Obligation of Lenders to Mitigate.
Each Lender agrees that, as promptly as practicable after the officer of
such Lender responsible for administering the Loans of such Lender becomes aware
of the occurrence of an event or the existence of a condition that would cause
such Lender to become an Affected Lender or that would entitle such Lender to
receive payments under subsection 2.7, it will, to the extent not inconsistent
with the internal policies of such Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitment of such Lender or the Affected Loan of such Lender through another
lending office of such Lender, or (ii) take such other measures as such Lender
may deem reasonable, if as a result thereof the circumstances which would cause
such Lender to be an Affected Lender would cease to exist or the additional
amounts which would otherwise be required to be paid to such Lender pursuant to
subsection 2.7 would be materially reduced and if, as determined by such Lender
in its sole discretion, the making, issuing, funding or maintaining of such
Commitments or Loans through such other lending office or in accordance with
such other measures, as the case may be, would not otherwise materially
adversely affect such Commitments or Loans or the interests of such Lender;
provided that such Lender will not be obligated to utilize such other lending
office pursuant to this subsection 2.8 unless Borrower agrees to pay all
incremental expenses incurred by such Lender as a result of utilizing such other
lending office as described in clause (i) above. A certificate as to the amount
of any such expenses payable by Borrower pursuant to this subsection 2.8
(setting forth in reasonable detail the basis for requesting such amount)
submitted by such Lender to Borrower (with a copy to Administrative Agent) shall
be conclusive absent manifest error.
SECTION 3.
CONDITIONS TO LOANS
3.1 Conditions to Loans.
The obligations of Lenders to make the Loans on the Initial Borrowing Date
are subject to prior or concurrent satisfaction of the following conditions:
A. Borrower and Atlas Documents. On or before the Initial Borrowing Date,
Borrower shall deliver or cause to be delivered to Lenders (or to Administrative
Agent for Lenders with sufficient originally executed copies, where appropriate,
for each Lender and its counsel) the following, each, unless otherwise noted,
dated the Effective Date:
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(i) certified copies of the certificate or articles of incorporation
of Borrower and Atlas, together with a good standing certificate from the
Secretary of State of the State of Delaware and each other state in which
such corporation is qualified as a foreign corporation to do business and,
to the extent generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar taxes from
the appropriate taxing authority of each of such states, each dated a
recent date prior to the Effective Date;
(ii) copies of Bylaws of Borrower and Atlas, certified as of the
Effective Date by its corporate secretary or an assistant secretary;
(iii) resolutions of Board of Directors of Borrower and Atlas
approving and authorizing the execution, delivery and performance of this
Agreement, the other Loan Documents and the Transaction Documents (to the
extent such Person is a party thereto), certified as of the Effective Date
by such Person's corporate secretary or an assistant secretary as being in
full force and effect without modification or amendment;
(iv) signature and incumbency certificates of officers of Borrower and
Atlas executing this Agreement and the other Loan Documents;
(v) executed originals of this Agreement, the Notes (duly executed in
accordance with this Agreement) and the other Loan Documents, including
Aircraft Chattel Mortgages with respect to all of the Aircraft and Spare
Engines; and
(vi) such other documents as Administrative Agent may reasonably
request.
B. Aircraft Documents. With respect to each Aircraft and related Spare
Engines, the following documents shall have been duly authorized, executed and
delivered by the respective parties thereto, shall each be reasonably
satisfactory in form and substance to the Lenders and Agents and shall be in
full force and effect, and copies shall have been delivered to Administrative
Agent: all documents, including without limitation, any bills of sale,
certificates of transfer and bills of sale on AC Form 8050-2 evidencing the
conveyance of title of the Aircraft and Spare Engines from Atlas to Borrower and
such other evidence as Agents shall request confirming that Borrower has good
and valid title to each Aircraft and Spare Engine and that all registrations and
recordings necessary to evidence such title have been made, including, without
limitation, all recordings with the FAA to register the Aircraft in the name of
Borrower.
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C. Notice of Borrowing. Prior to the making of the Loans, Administrative
Agent shall have received such Notices of Borrowing as are required by
subsection 2.1B.
D. Necessary Consents. Borrower shall have obtained all consents necessary
or advisable in connection with the transactions contemplated by the Loan
Documents and the continued operation of the business of Borrower, and each of
the foregoing shall be in full force and effect and in form and substance
satisfactory to Administrative Agent.
E. Aircraft Chattel Mortgage. Administrative Agent shall have received a
copy of a first priority Aircraft Chattel Mortgage relating to each Aircraft and
the related Spare Engines, duly executed by Borrower, in substantially the form
of Exhibit IX hereto which Aircraft Chattel Mortgage provides a first priority
security interest in the Collateral for the benefit of the Lenders, securing all
the Obligations, together with:
(i) executed copies of proper financing statements to be filed under
the UCC in all jurisdictions where Administrative Agent may deem necessary
or desirable in order to perfect the security interests created by the
Aircraft Chattel Mortgages;
(ii) evidence of the completion of all recordings and filings with
respect to the Collateral that Administrative Agent may deem necessary or
desirable in order to perfect the security interest created by the Aircraft
Chattel Mortgages including, without limitation, all filings with the FAA;
and
(iii) evidence that all other actions necessary or, in the reasonable
opinion of Administrative Agent, desirable to establish, preserve and
perfect the first priority security interests created by the Aircraft
Chattel Mortgages in all Aircraft and Spare Engines have been taken
(including all FAA filings).
F. Fairness Opinion. On or prior to the Initial Borrowing Date, Borrower
shall have delivered or shall have caused to be delivered to Administrative
Agent a fairness opinion from BT Alex. Brown Incorporated stating that the
Transaction is on terms no less favorable to Atlas or the Borrower than those
which could have been obtained in an arm's length transaction with unrelated
third parties.
G. Financial Condition Certificate. Each of Borrower and Atlas shall have
delivered to Administrative Agent a Financial Condition Certificate dated the
Initial Borrowing Date, substantially in the form annexed hereto as Exhibit VII
and Exhibit VIIA respectively, with appropriate attachments demonstrating that,
after giving effect
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to the consummation of the financing transactions contemplated hereby, each of
Borrower and Atlas and its Subsidiaries is Solvent.
H. Opinions of Borrower's Counsel. Lenders and their respective counsel
shall have received (i) one or more favorable written opinions of Cahill Gordon
& Reindel, counsel for Borrower, in form and substance reasonably satisfactory
to Agents and their counsel, dated as of the Initial Borrowing Date and setting
forth substantially the matters in the opinions designated in Exhibit IVA
annexed hereto and as to such other matters as Administrative Agent acting on
behalf of Lenders may reasonably request, (ii) an opinion of Cahill Gordon &
Reindel regarding Section 1110 of the Bankruptcy Code, dated the Initial
Borrowing Date and setting forth substantially the matters in the opinions
designated in Exhibit IVB annexed hereto and (iii) an opinion of Cahill Gordon &
Reindel regarding certain bankruptcy matters other than those covered in the
opinion referred to in clause (ii) above, dated the Initial Borrowing Date and
setting forth substantially the matters in the opinions designated in Exhibit
IVC annexed hereto.
I. Opinion of Counsel. Lenders and their respective counsel shall have
received executed copies of one or more favorable written opinions of counsel of
Atlas and Borrower, in form and substance reasonably satisfactory to Agents and
their counsel, dated the Initial Borrowing Date, and setting forth substantially
the matters in the opinions designated in Exhibit IVD annexed hereto.
J. Atlas Credit Agreement; Amended Leases. The Amended Aircraft Credit
Facility and the AFL I First Amendment shall be effective and shall be in form
and substance satisfactory to Agents and Lenders so as to allow, according to
its terms, the Transaction and the Refinancing to be consummated.
K. Opinions of FAA Counsel. Lenders and their respective counsel shall have
received originally executed copies of one or more favorable written opinions of
FAA counsel in form and substance satisfactory to Agents and their counsel,
dated the Initial Borrowing Date, and setting forth substantially the matters in
the opinions designated in Exhibit IVE annexed hereto.
L. Fees. Borrower shall have paid to Agents, for distribution (as
appropriate) to Agents and Lenders, the fees payable on the Initial Borrowing
Date referred to in subsection 2.3.
M. Financial Statements. On or before the Initial Borrowing Date,
Administrative Agent shall have received from Borrower (i) an audited
consolidated and consolidating balance sheet of Atlas and its Subsidiaries as at
December 31, 1996, and
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the related consolidated and consolidating statements of income, stockholders'
equity and cash flows of Atlas and its Subsidiaries for such fiscal year,
accompanied by an opinion of a nationally recognized firm of independent public
accountants and (ii) the unaudited consolidated and consolidating balance sheet
of Atlas and its Subsidiaries as at June 30, 1997 and the related unaudited
consolidated and consolidating statements of income, stockholders' equity and
cash flows of Atlas and its Subsidiaries for the three-month period then ended
and (iii) the Projections, which financial statements and Projections shall be
in form and substance reasonably satisfactory to Agents.
N. Evidence of Insurance. Borrower shall have delivered to Administrative
Agent certificates of insurance naming Administrative Agent on behalf of
Administrative Agent and Lenders as loss payee under the casualty insurance
policies and Administrative Agent and Lenders as additional insured under the
liability policies of Borrower and a broker's report from Borrower's insurance
broker evidencing compliance with the requirements of each Aircraft Chattel
Mortgage, all as required pursuant to subsection 5.4 hereof or pursuant to the
Collateral Documents. All such certificates of insurance shall contain such
endorsements as are reasonably required by Administrative Agent.
O. No Material Adverse Effect. Since June 30, 1997, no Material Adverse
Effect (in the reasonable opinion of the Agents) shall have occurred.
P. Representations and Warranties; Performance of Agreements. On the
Initial Borrowing Date, (i) there shall exist no Potential Event of Default or
Event of Default and (ii) all representations and warranties in Section 4 hereof
are true, correct and complete in all material respects on and as of the Initial
Borrowing Date to the same extent as though made on and as of that date and the
Borrower shall have performed in all material respects all agreements and
satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before the Initial Borrowing Date except as otherwise
disclosed to and agreed to in writing by Agents and Requisite Lenders and
Borrower shall have delivered to Administrative Agent an Officer's Certificate,
in form and substance, satisfactory to Agents, to that effect.
Q. Compliance Certificate. Borrower shall have delivered to Administrative
Agent a Compliance Certificate dated the Initial Borrowing Date, substantially
in the form annexed hereto as Exhibit III.
R. Transaction; Refinancing. On or prior to the Initial Borrowing Date, the
following shall have occurred: (i) Atlas shall contribute to Borrower each of
the Aircraft and Spare Engines subject to the Aircraft Obligations (the
"Contribution"); (ii) Borrower shall lease each of the Aircraft and the related
Spare Engines to Atlas via
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the four Leases; (iii) all Aircraft Obligations shall have been indefeasibly
repaid in full from, among other sources, the proceeds of the borrowing
hereunder and (iv) all security interests and Liens encumbering the Aircraft or
any part thereof or the Spare Engines or any other assets of Borrower shall be
terminated and released (the actions taken in clauses (iii) and (iv)
collectively, the "Refinancing", and the actions taken in clauses (i) through
(iv) together with the incurrence of Loans hereunder collectively, the
"Transaction"). The Lenders shall have received true and correct copies of all
of the Transaction Documents, including, without limitation, all documentation
entered into in connection with the Contribution and the Leases, which Leases
shall be substantially in the form of Exhibit VIII annexed hereto and all terms
and conditions thereof shall be satisfactory to Agents (including, with respect
to the Leases, their terms, rental schedules, covenants, events of default and
remedies). All of the Transaction Documents shall have been duly executed and
delivered by all parties thereto, and shall be in full force and effect. Each of
the conditions precedent to the consummation of the Transaction set forth in the
Transaction Documents shall have been satisfied or waived, all to the
satisfaction of Agents, and on or prior to the Initial Borrowing Date, the
Transaction shall have been consummated in accordance with the Transaction
Documents and all applicable laws, rules and regulations.
S. Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Agents, acting
on behalf of Lenders, and their counsel shall be satisfactory in form and
substance to Agents and such counsel, and Administrative Agent and such counsel
shall have received all such counterpart originals or certified copies of such
documents as Administrative Agent may reasonably request.
T. Appraisals. Borrower shall have delivered to Administrative Agent
appraisals from two Approved Appraisers, in form and substance satisfactory to
the Lenders, which appraisals shall demonstrate to the Lenders' satisfaction
that the ratio of the Total Commitment to the Appraised Value of the Aircraft
and the Spare Engines does not exceed 80% and that the terms of the Lease,
including, without limitation, rental rates, economic life and residual value,
are at fair market value.
U. FAA Certification and Title. Agents shall have received evidence
satisfactory to it to the effect that Atlas is an air carrier certificated under
Sections 401 and 604(b) of the Federal Aviation Act and with respect to each
Aircraft, Administrative Agent shall received evidence that (i) each of the
Aircraft has been registered with and duly certified by the FAA as to type and
airworthiness in the name of Borrower and Administrative Agent shall have
received a copy of such certification and evidence satisfactory to the Lenders
that each Engine and each Spare Engine is
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being maintained in accordance with an FAA-approved or substantially similar
program and (ii) Borrower shall have good and marketable title to and a valid
ownership interest in the Collateral, including the Aircraft and each Spare
Engine, free and clear of all Liens other than Liens permitted by subsection
6.2.
V. Bankruptcy-Remote Subsidiary. Agents and Lenders shall be satisfied that
Borrower is a bankruptcy-remote Subsidiary of Atlas and that the certificate of
incorporation contains provisions under which the Borrower may not commence a
voluntary bankruptcy proceeding without the affirmative vote of all directors.
SECTION 4.
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, Borrower represents and warrants to each Lender, after giving effect to
the Transaction consummated on the Initial Borrowing Date, that the following
statements are true, correct and complete:
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Borrower has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and to carry out the transactions
contemplated thereby and by the Transaction Documents.
B. Qualification and Good Standing. Borrower is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. Subsidiaries. Borrower has no Subsidiaries.
D. Collateral Documents. The security interests created in favor of
Administrative Agent under the Collateral Documents will at all times from and
after the Initial Borrowing Date constitute, as security for the obligations
purported to be secured thereby, a legal, valid and enforceable first priority
perfected security interest
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in and Lien on all of the Collateral referred to therein in favor of
Administrative Agent for the benefit of the Lenders, perfected and prior to the
rights of all third persons in accordance with the requirements of all
applicable Collateral Documents. Borrower has good and marketable title to its
Collateral, and all such Collateral is free and clear of all Liens except for
Liens permitted by subsection 6.2. No consents, filings or recordings are
required in order to perfect (or maintain the perfection or priority of) the
security interests purported to be created by any of the Collateral Documents,
other than such as have been obtained and which remain in full force and effect
and Uniform Commercial Code financing statements to be filed, or delivered to
Administrative Agent for filing, on the Initial Borrowing Date and periodic
Uniform Commercial Code continuation filings or as is specifically otherwise
permitted by the terms of any applicable Collateral Document.
4.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents and the Transaction Documents have been duly authorized by
all necessary corporate action on the part of Borrower.
B. No Conflict. The execution, delivery and performance by Borrower of the
Loan Documents and the Transaction Documents and the consummation of the
Transaction and the transactions contemplated by the Loan Documents do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Borrower, the Certificate or Articles of Incorporation
or Bylaws of Borrower or any order, judgment or decree of any court or other
agency of government binding on Borrower, (ii) conflict with in any material
respect, result in a material breach of or constitute (with due notice or lapse
of time or both) a material default under any material Contractual Obligation of
Borrower, including the Pass Through Trust Documents and the Amended Aircraft
Credit Facility, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Borrower (other than any Liens
created under any of the Loan Documents in favor of Administrative Agent on
behalf of Lenders), or (iv) require any approval of stockholders or any approval
or consent of any Person under any Contractual Obligation of Borrower, except
for such approvals or consents which will be obtained on or before the Initial
Borrowing Date, disclosed in writing to Lenders and the terms and conditions of
which are acceptable to the Administrative Agent and the Lenders.
C. Governmental Consents. The execution, delivery and performance by
Borrower of the Loan Documents and the Transaction Documents and the
consummation of the Transaction and the transactions contemplated by the
Transaction Documents do not and will not require any registration with, consent
or approval of, or notice to,
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or other action to, with or by, any federal, state or other governmental
authority or regulatory body which has not been obtained or made on or prior to
the date required to be obtained or made.
D. Binding Obligation. Each of the Loan Documents and the Transaction
Documents has been duly executed and delivered by Borrower and is the legally
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
4.3 Financial Condition.
A. Borrower has heretofore delivered to Lenders the following financial
statements and information: (i) the audited consolidated and consolidating
balance sheets of Atlas and its Subsidiaries as at December 31, 1996, and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows of Atlas and its Subsidiaries for such fiscal year and
(ii) the unaudited consolidated and consolidating balance sheets of Atlas and
its Subsidiaries as at June 30, 1997 and the related unaudited consolidated and
consolidating statements of income, stockholders' equity and cash flows of Atlas
and its Subsidiaries for the three-month period then ended and (iii) the
Projections. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated, and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Atlas does not have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Atlas or any of its Subsidiaries.
B. Except as fully disclosed in the financial statements delivered pursuant
to Section 4.3A, there were as of the Effective Date no liabilities or
obligations with respect to Atlas and its Subsidiaries or to Borrower of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Atlas and its Subsidiaries taken as a whole but
excluding Borrower, or to Borrower on a stand-alone basis. As of the Effective
Date, neither Atlas nor Borrower knows of any basis for the
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assertion against it or, in the case of Atlas, against it or its Subsidiaries,
of any liability or obligation of any nature whatsoever that is not fully
disclosed in the financial statements delivered pursuant to Section 4.3A which,
either individually or in the aggregate, could reasonably be expected to be
material to Atlas and its Subsidiaries taken as a whole but excluding Borrower,
or to Borrower on a stand-alone basis.
4.4 No Material Adverse Change; No Restricted Junior Payments.
(i) Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
(ii) Since June 30, 1997, Borrower has not directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so, except as permitted by subsection 6.5.
4.5 Title to Properties, Liens.
A. Borrower has good, sufficient and legal title to all of its properties
and assets, including without limitation, all Aircraft and Spare Engines. Except
as permitted by this Agreement, all such properties and assets are free and
clear of Liens.
B. Each Aircraft has a current and valid airworthiness certificate issued
by the FAA pursuant to the Federal Aviation Act in effect and is in such
condition as may be necessary to enable the airworthiness certificate to be
maintained in good standing. Each Engine and Spare Engine has a rated takeoff
horsepower greater than 750 horsepower or the equivalent of such horsepower.
Each Aircraft is registered with the FAA in the name of Borrower and Atlas has
authority to operate such Aircraft.
4.6 Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Borrower) at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or any property of Borrower or with respect to the
Transaction that could reasonably be expected to result in a Material Adverse
Effect to Borrower's knowledge. Borrower is not (i) in violation of any
applicable laws that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in default
with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission,
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board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
4.7 Payment of Taxes.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of Borrower required to be filed by it have been timely filed, and all
taxes, assessments, fees and other governmental charges upon Borrower and upon
its respective properties, assets, income, businesses and franchises which are
due and payable have been paid when due and payable. Borrower does not know of
any proposed tax assessment against it which is not being actively contested by
it in good faith and by appropriate proceedings; provided that such reserves or
other appropriate provisions, if any, for liabilities for taxes as shall be
required in conformity with GAAP shall have been made or provided in the
financial statements of Borrower. There are no agreements with respect to taxes
between Borrower and any tax agency or authority.
4.8 Performance of Agreements.
Borrower is not in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any of its
Contractual Obligations, and no condition exists that, with the giving of notice
or the lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, would not
have a Material Adverse Effect.
4.9 Governmental Regulation.
Borrower is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Indebtedness or which may
otherwise render all or any portion of the Obligations unenforceable.
4.10 Securities Activities.
A. Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any Margin Stock.
B. No part of the proceeds of any Loan will be used (or has been used) to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any margin Stock. Neither the making of any Loan nor the
use of the
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proceeds thereof will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
4.11 Compliance with ERISA.
Borrower has no qualified retirement plans under Section 401(k) of the
Internal Revenue Code nor medical benefit plans. Borrower has never sponsored,
maintained, contributed to (or had an obligation to contribute to) any Employee
Benefit Plans.
4.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the transactions contemplated hereby, and Borrower
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.13 Environmental Protection.
A. All facilities and operations of Borrower are, and have been to the best
of Borrower's knowledge, in compliance in all material respects with all
applicable Environmental Laws.
B. There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Borrower
or (b) arising in connection with the operations of Borrower (including the
transportation of Hazardous Materials), which conditions, occurrences or
Hazardous Materials Activity could reasonably be expected to form the basis of
an Environmental Claim against Borrower and which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
C. To the best of Borrower's knowledge, there are no pending or threatened
Environmental Claims against Borrower, and Borrower has received no written
notices, inquiries, or requests for information with respect to any
Environmental Claims.
4.14 Employee Matters.
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There is no strike or work stoppage in existence or to Borrower's knowledge
threatened involving Borrower that could reasonably be expected to have a
Material Adverse Effect.
4.15 Solvency.
Borrower is and, upon the incurrence of any Obligations by Borrower on any
date on which this representation is made, will be, Solvent.
4.16 Disclosure.
No representation or warranty of Borrower contained in any Loan Document,
any Transaction Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Borrower for use in connection
with the transactions contemplated by this Agreement contains any untrue
statement of a material fact or omits to state a material fact (known to
Borrower, in the case of any document not furnished by them) necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by Lenders that the Projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by the Projections may differ from the projected results. There
are no facts known (or which should upon the reasonable exercise of diligence be
known) to Borrower (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
4.17 Section 1110.
(i) Borrower, as Lessor under the Leases, is entitled to the protection of
Section 1110 of the Bankruptcy Code with respect to each Aircraft and Spare
Engine in the event of a case under Chapter 11 of the Bankruptcy Code in which
Lessee is a debtor.
(ii) Administrative Agent will be entitled to the protection of Section
1110 of the Bankruptcy Code with respect to each Aircraft and Spare Engine in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a
debtor upon the exercise of Administrative Agent's remedies under each Aircraft
Chattel Mortgage.
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(iii) All assumptions made by the appraisers with respect to the Aircraft
and Spare Engines in the appraisals delivered to Administrative Agent which
would affect Approved Appraiser's determinations as set forth in such appraisal
shall be true and correct as of the Initial Borrowing Date with respect to each
Aircraft and Spare Engine.
4.18 Special Purpose Corporation.
Borrower was formed solely for the purpose of effecting the Transaction,
and except in connection therewith (and as contemplated by this Agreement) has
no assets or liabilities.
4.19 Transaction.
The Transaction has been consummated in accordance with applicable law and
the Transaction Documents.
4.20 Representations and Warranties in Documents.
All representations and warranties of Borrower set forth in the Loan
Documents and the Transaction Documents were true and correct in all material
respects as of the time such representations and warranties were made and shall
be true and correct in all material respects as of the Initial Borrowing Date as
if such representations and warranties were made on and as of such date, unless
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date.
4.21 Leases.
The Leases are in full force and effect and are leases for U.S. federal
income tax purposes of Lessor and Lessee thereunder.
SECTION 5.
BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations unless Requisite Lenders shall otherwise give prior
written consent, Borrower shall perform all covenants in this Section 5.
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5.1 Financial Statements and Other Reports.
Borrower will maintain a system of accounting established and administered
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP. Borrower will deliver to Administrative
Agent and Lenders:
(i) Quarterly Financials: as soon as available, and in any event
within 45 days after the end of each fiscal quarter of each Fiscal Year,
the balance sheet of Borrower as at the end of such fiscal quarter and the
related statements of income, stockholders' equity and cash flows of
Borrower for such fiscal quarter and for the period from the beginning of
the then current Fiscal Year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year, if applicable, in
reasonable detail and certified by the chief financial officer of Borrower
that they fairly present the financial condition of Borrower as at the
dates indicated and the results of its operations and its cash flows for
the periods indicated, subject to changes resulting from audit and normal
year-end adjustments.
(ii) Year-End Financials: as soon as available, and in any event
within 90 days after the end of each Fiscal Year, (a) the balance sheet of
Borrower as at the end of such Fiscal Year and the related statements of
income, stockholders' equity and cash flows of Borrower for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year, if applicable, in reasonable detail
and certified by the chief financial officer of Borrower that they fairly
present the financial condition of Borrower as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, and (b) in the case of such financial statements, a report
thereon of independent certified public accountants of recognized national
standing selected by Borrower and satisfactory to Agents, which report
shall be unqualified, shall express no doubts about the ability of Borrower
to continue as a going concern, and shall state that such financial
statements fairly present the financial position of Borrower as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Officers' and Compliance Certificates: together with each
delivery of financial statements of Borrower pursuant to subdivisions (i)
and (ii) above
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after the Effective Date, (a) an Officers' Certificate of Borrower stating
that the signers have reviewed the terms of this Agreement and have made,
or caused to be made under their supervision, a review in reasonable detail
of the transactions and condition of Borrower during the accounting period
covered by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes an Event
of Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action Borrower has taken, is taking and proposes to take
with respect thereto; and (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
quarterly and annual accounting periods with the restrictions contained in
Section 6;
(iv) Notices under Leases: within 3 Business Days, all notices and
other information or documents delivered or received under any of the
Leases by Lessor pursuant to Section 19 of the Leases, including, without
limitation, all additional financial statements and reports delivered
pursuant to Section 6(a) of the Leases;
(v) Accountants' Certification: together with each delivery of
financial statements of Borrower pursuant to subdivision (ii) above, a
written statement by the independent certified public accountants giving
the report thereon (a) stating that their audit examination has included a
review of the terms of this Agreement and the other Loan Documents as they
relate to accounting matters, (b) stating whether, in connection with their
audit examination, any condition or event that constitutes an Event of
Default or Potential Event of Default has come to their attention and, if
such a condition or event has come to their attention, specifying the
nature and period of existence thereof; provided that such accountants
shall not be liable by reason of any failure to obtain knowledge of any
such Event of Default or Potential Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (iii) above is not
correct or that the matters set forth in the Compliance Certificates
delivered therewith pursuant to clause (b) of subdivision (iii) above for
the applicable Fiscal Year are not stated in accordance with the terms of
this Agreement;
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(vi) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Borrower by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Borrower made by such accountants, including, without
limitation, any comment letter submitted by such accountants to management
in connection with their annual audit;
(vii) Events of Default, etc.: promptly upon any officer of Borrower
obtaining knowledge (a) of any condition or event that constitutes an Event
of Default or Potential Event of Default, or becoming aware that any Lender
has given any notice (other than to Administrative Agent) or taken any
other action with respect to a claimed Event of Default or Potential Event
of Default, (b) that any Person has given any notice to Borrower or taken
any other action with respect to a claimed default or event or condition of
the type referred to in subsection 7.2, or (c) of the occurrence of any
event or change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Borrower has taken, is taking
and proposes to take with respect thereto;
(viii) Litigation or Other Proceedings: (a) promptly upon any officer
of Borrower obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Borrower or any property of Borrower (collectively,
"Proceedings") not previously disclosed in writing by Borrower to Lenders
or (Y) any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be reasonably
available to Borrower to enable Lenders and their counsel to evaluate such
matters; and (b) within twenty days after the end of each fiscal quarter of
Borrower, a schedule of all Proceedings involving an alleged liability of, or
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claims against or affecting, Borrower equal to or greater than $1,000,000 and
promptly after request by Administrative Agent such other information as may be
reasonably requested by Administrative Agent to enable Administrative Agent and
its counsel to evaluate any of such Proceedings;
(ix) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by Borrower and all material insurance
coverage planned to be maintained by Borrower in the immediately succeeding
Fiscal Year;
(x) Environmental Audits and Reports: as soon as practicable following
receipt thereof, copies of all environmental audits and reports, whether
prepared by personnel of Borrower or by independent consultants, with
respect to significant environmental matters or which relate to an
Environmental Claim which could result in a Material Adverse Effect;
(xi) Pricing Certificate: in the event that Borrower believes it is
entitled to a Pricing Reduction, consolidated financial statements of Atlas
and its Subsidiaries for the most recently ended four fiscal quarter period
(which shall be audited in the case of the financial statements for
year-end) and a certificate setting forth the calculations necessary to
demonstrate Borrower's entitlement to a Pricing Reduction.
(xii) Other Information: with reasonable promptness, such other
information and data with respect to Borrower or Atlas, as the case may be,
as from time to time may be reasonably requested by any Lender.
5.2 Corporate Existence.
Borrower will, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will at all times maintain its corporate existence as a United States
Citizen.
5.3 Payment of Taxes and Claims; Tax Consolidation.
A. Borrower will pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
income, businesses or franchises before any penalty, fine or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums that have become due and payable and
that by law have or may become a Lien
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upon any of its properties or assets, prior to the time when any penalty, fine
or interest shall be incurred with respect thereto; provided that no such charge
or claim need be paid if being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such reserve or
other appropriate provision, if any, with respect to any liability for taxes, as
shall be required in conformity with GAAP shall have been made therefor in the
financial statements of Borrower.
B. Borrower will not file or consent to the filing of any consolidated
federal income tax return with any Person other than the affiliate group of
which Atlas is the parent corporation.
5.4 Maintenance of Properties; Insurance.
Borrower will maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Borrower and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business
against loss or damage (including, without limitation, flood insurance, if
necessary or advisable) of the kinds customarily carried or maintained under
similar circumstances by corporations of established reputation engaged in
similar businesses and Borrower will, with respect to each Aircraft and Spare
Engine, maintain the insurance specified in the Aircraft Chattel Mortgage with
respect to such Aircraft or Spare Engine.
5.5 Inspection; Lender Meeting.
Borrower will permit any authorized representatives designated by any
Lender to visit and inspect any of the properties of Borrower, including its and
their financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Borrower
may, if it so chooses, be present at or participate in any such discussion), all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may be reasonably requested; provided that so long as no Event
of Default shall have occurred and be continuing, such inspection shall not be
disruptive to Borrower's business, as reasonably determined by Borrower. Without
in any way limiting the foregoing, Borrower will, upon the request of Agents or
Requisite Lenders, participate in a meeting of Agents and Lenders once during
each Fiscal Year to be held at Borrower's corporate offices (or such other
location as may be agreed to by Borrower and Agents) at such time as may be
agreed to by Borrower and Agents.
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5.6 Compliance with Laws, etc.
Borrower will comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority (including, without
limitation, Environmental Laws), noncompliance with which could reasonably be
expected to cause a Material Adverse Effect. Borrower shall not conduct, and
shall not permit the conduct of, any Hazardous Materials Activity at any other
location which could reasonably be expected to form the basis of an
Environmental Claim against Borrower and which could reasonably be expected to
have a Material Adverse Effect.
5.7 Environmental Indemnity.
Borrower agrees to indemnify, defend, and hold harmless Agents and Lenders,
and the officers, directors, employees, agents and affiliates of Agents and
Lenders from and against any and all losses, claims, liability or expenses
arising in connection with Environmental Claims against Borrower or with any
Hazardous Materials Activity.
5.8 Borrower's Remedial Action Regarding Hazardous Materials.
Borrower will promptly take any and all necessary remedial action in
connection with the presence, storage, use, disposal, transportation or Release
of any Hazardous Materials on, under or about any facility in order to comply
with all applicable Environmental Laws and Governmental Authorizations. In the
event Borrower undertakes any remedial action with respect to any Hazardous
Materials on, under or about any such facility, Borrower will conduct and
complete such remedial action in compliance with all applicable Environmental
Laws, and in accordance with the policies, orders and directives of all federal,
state and local governmental authorities except when, and only to the extent
that, Borrower's liability for such presence, storage, use, disposal,
transportation or Release of any such Hazardous Materials is being contested in
good faith by Borrower. Notwithstanding anything to the contrary contained in
the Transaction Documents, Borrower or Lessee may engage in the transportation
of Hazardous Materials in the ordinary course of business so long as such is
conducted in compliance with all applicable Environmental Laws and all other
applicable laws, policies, orders, regulations and directives.
5.9 Maintenance Contracts.
Borrower shall maintain or shall cause to be maintained a maintenance
program with respect to the Aircraft and Spare Engines approved by the FAA.
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5.10 Employee Benefit Plans.
Borrower will not establish, contribute to (or have an obligation to
contribute to) or permit to be established any Employee Benefit Plans for
Borrower or any of its employees.
5.11 Further Assurances.
At any time or from time to time upon the request of Administrative Agent,
Borrower will, at its expense, promptly execute, acknowledge and deliver such
further documents and do such other acts and things as Administrative Agent may
reasonably request in order to effect fully the purposes of the Loan Documents
and to provide for payment of the Obligations in accordance with the terms of
this Agreement, the Notes and the other Loan Documents.
5.12 Performance of Obligations.
Borrower will perform all of its obligations under the terms of each Lease,
Collateral Document and Loan Document, contract or instrument by which it is
bound.
5.13 Corporate Separateness.
Borrower will take all such action as is necessary to keep its operations
separate and apart from those of Atlas or any of its Affiliates, including,
without limitation, ensuring that all customary corporate formalities, including
the maintenance of separate corporate records and documents and holding regular
meetings are followed. Any financial statements distributed to any creditors of
Borrower shall clearly establish the corporate separateness of Borrower from
Atlas and each of Atlas's other Subsidiaries. Borrower shall not take any action
or conduct its affairs in a manner which is likely to result in the corporate
existence of Borrower on the one hand and of Atlas or any Subsidiary of Atlas on
the other hand being disregarded, or in the assets and liabilities of Atlas or
any Subsidiary of Atlas being substantively consolidated with those of Borrower
in a bankruptcy, reorganization or other insolvency proceeding. Borrower shall
have at all times at least one Independent Director who shall be satisfactory to
the Administrative Agent. Borrower shall maintain its principal executive office
separate from Atlas or any of its Affiliates, which may be subleased from Atlas
on an arm's-length basis or maintained as provided in the Service Agreement.
Borrower shall pay out of its own funds fees for its directors and salaries
of its officers and employees, and shall promptly reimburse any Affiliate for
any services provided to Borrower by such Affiliate; provided, however, that
Atlas may advance
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funds on behalf of Borrower to pay for the expenses of its organization and
funding. All such advances shall be duly and properly recorded and promptly
repaid as intercompany advances. Borrower shall not commingle any of its funds
or other assets with the funds or assets of any other entity or person. Borrower
will maintain separate bank accounts in its own name.
The assets of Borrower shall be separately identified and segregated. All
of Borrower's assets shall at all times be held by or on behalf of Borrower,
and, if held on behalf of Borrower by another entity, shall at all times be kept
identifiable (in accordance with customary usages) as assets owned by Borrower.
In no event shall any of Borrower's assets be held by Atlas or by any other
Affiliate. Borrower shall pay from its assets all obligations and indebtedness
of any kind incurred by Borrower, and shall not pay from its assets any
obligations or indebtedness of any other entity or person. The liabilities of
Borrower will be separately managed from those of any Affiliate, and all
liabilities, including all administrative expenses, shall be paid from its own
separate assets; provided, however, Borrower will be included, to the extent
permitted by law, in the affiliated group of corporations of which Atlas is the
"common parent" for federal income tax returns filed for such affiliated group
by Atlas.
SECTION 6.
BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Borrower shall perform all covenants in this Section 6.
6.1 Indebtedness.
Borrower shall not directly or indirectly, create, incur, assume or
guaranty, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except Borrower may become and remain liable with
respect to the Obligations.
6.2 Liens and Related Matters.
A. Prohibition on Liens. Borrower shall not directly or indirectly, create,
incur, assume or permit to exist any Lien on or with respect to any property or
asset of any kind (including any document or instrument in respect of goods or
accounts receivable) of Borrower, whether now owned or hereafter acquired, or
any income or
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profits therefrom, or file or permit the filing of, or permit to remain in
effect, any financing statement or other similar notice of any Lien with respect
to any such property, asset, income or profits under the Uniform Commercial Code
of any state or under any similar recording or notice statute, except for
Permitted Encumbrances.
B. No Negative Pledges. Borrower shall not enter into any agreement
prohibiting the creation or assumption of any Lien upon any of its properties or
assets, whether now owned or hereafter acquired.
6.3 Investments; Joint Ventures.
Borrower shall not, directly or indirectly, make or own any Investment in
any Person, including any Joint Venture, except that Borrower may make and own
Investments in Cash Equivalents.
6.4 Contingent Obligations.
Borrower shall not, directly or indirectly, create or become or remain
liable with respect to any Contingent Obligation.
6.5 Restricted Junior Payments.
Borrower shall not directly or indirectly, declare, order, pay, make or set
apart any sum for any Restricted Junior Payment; provided that Borrower may make
payments pursuant to the Service Agreement in an aggregate annual amount not to
exceed $200,000 per annum; and provided further, that so long as no Event of
Default or Potential Event of Default has occurred and is continuing, or would
result therefrom, within five Business Days of any payment made under any of the
Leases by Atlas to Borrower, to the extent such payment is in excess of amounts
owing the Lenders under the Loan Documents, Borrower may dividend such excess
amounts to Atlas to the extent Borrower, after giving effect to such dividend,
has no other liabilities and maintains a reserve of Cash or Cash Equivalents
adequate to fund all expenses of Borrower (exclusive of payments under the Loan
Documents) to be incurred during the next four quarters following such dividend.
6.6 Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Borrower shall not enter into any transaction of merger or consolidation,
or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, sub-lease, transfer or otherwise dispose
of, in one transaction or a series of
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transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or any
portion of the business, property or assets of, or stock or other evidence of
beneficial ownership of, any Person or any division or line of business of any
Person or establish any Subsidiary, except Borrower may effect the Transaction
on or prior to the Initial Borrowing Date and Borrower may sell, lease or
dispose of assets so long as such transaction is effected in accordance with
Section 4(d) or 4(e) of the Aircraft Chattel Mortgages.
6.7 Amendments of Material Agreements.
Borrower shall not permit (i) its articles of incorporation or bylaws to be
amended or otherwise modified in any manner or (ii) any Lease to be amended or
otherwise modified in any manner.
6.8 Restriction on Leases.
Borrower shall not become liable in any way, whether directly or by
assignment or as a guarantor or other surety, for the obligations of the lessee
under any lease, whether such lease be an Operating Lease or a Capital Lease.
6.9 Transaction with Shareholders and Affiliates.
Borrower shall not directly or indirectly, enter into or permit to exist
any transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with Atlas or with any
other Affiliate of Borrower; provided that the foregoing restriction shall not
apply to (i) reasonable and customary fees paid to and indemnification of
members of the Board of Directors of Borrower, (ii) reasonable and customary
salaries, bonuses and other compensation paid to and indemnification of
employees of Borrower, (iii) the Transaction and (iv) the Service Agreement
providing for the rendering of accounting, administration and office services by
Atlas to Borrower on terms consistent with the terms of similar agreements
between unrelated parties in an aggregate amount not to exceed $200,000 per
annum.
6.10 Conduct of Business.
(a) From and after the Initial Borrowing Date, Borrower shall not engage in
any business other than in connection with owning the Aircraft and Spare Engines
or any replacement aircraft and spare engines and leasing of the Aircraft and
Spare Engines or any replacement aircraft and spare engines to Atlas and will
have no material assets (other than Cash, Cash Equivalents, the Aircraft, the
Spare Engines or any replacement
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aircraft, spare engines and the Leases) or liabilities (other than the Loans and
other liabilities which are expressly permitted hereunder); provided, however
that replacement aircraft and spare engines are substituted for Aircraft and
Spare Engines in accordance with the applicable Aircraft Chattel Mortgage.
(b) The Borrower shall not take any action or enter into any transaction
which requires the approval of the Independent Director without the consent of
the Independent Director.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
7.1 Failure to Make Payments When Due.
Failure by Borrower to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; or failure by Borrower to pay
any interest on any Loan or any fee or any other amount due under this Agreement
within five days after the date due; or
7.2 Default Under Lease.
Any Lease shall at any time be terminated other than by its terms or cease
to be in full force and effect other than by its terms, or there shall exist a
Default or a Lease Event of Default under, and as defined in, any of the Leases;
or
7.3 Breach of Certain Covenants.
Failure of Borrower to perform or comply in any material respect with any
term or condition contained in subsections 2.5, 5.1(vii), 5.2, 5.13, 6.1, 6.2,
6.5, 6.6, 6.7 or 6.10 of this Agreement or in clauses (i) and (ii) of Section
4(c), Section 4(d) or Section 4(g) of any Aircraft Chattel Mortgage; or
7.4 Breach of Warranty.
Any representation, warranty, certification or other statement made by
Atlas or Borrower in any Loan Document or in any Transaction Document or in any
statement
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or certificate at any time given by Atlas or Borrower in writing pursuant hereto
or thereto or in connection herewith or therewith shall be false in any material
respect on the date as of which made; or
7.5 Other Defaults Under Loan Documents.
Borrower shall default in the performance of or compliance with any term
contained in this Agreement or any of the other Loan Documents, other than any
such term referred to in any other subsection of this Section 7, and such
default shall not have been remedied or waived within 15 days after the earlier
of (a) an officer of Borrower becoming aware of such default or (b) receipt by
Borrower of notice from Administrative Agent or any Lender of such default; or
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Borrower in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against Borrower under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Borrower, or over all or a substantial part of its property, shall have been
entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of Borrower for all or a substantial part
of its property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Borrower, and
any such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; or
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Borrower shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Borrower shall make any assignment for the benefit of creditors; or (ii)
Borrower shall be unable, or shall fail generally, or shall admit in writing its
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inability, to pay its debts as such debts become due; or the Board of Directors
of Borrower (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or
7.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process (not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Borrower or
any of its assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
7.9 Dissolution.
Any order, judgment or decree shall be entered against Borrower decreeing
the dissolution or split up of Borrower and such order shall remain undischarged
or unstayed for a period in excess of 30 days; or
7.10 Change in Control.
Atlas shall cease to beneficially own and control all of the issued and
outstanding shares of capital stock of Borrower; or
7.11 Failure of Security.
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations or
any other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested in writing by Borrower, or
Administrative Agent shall not have or shall cease to have a valid security
interest in any Collateral purported to be covered thereby, perfected and with
the priority required by the relevant Collateral Document, for any reason,
subject only to Liens permitted under the applicable Collateral Documents or
Borrower, as lessor under a Lease or the Administrative Agent, as assignee of
Borrower's rights under such Lease, shall cease to be entitled to the benefits
of Section 1110 of the Bankruptcy Code with respect to the rights and remedies
under such Lease; or
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7.12 Loss of United States Citizen Status.
Borrower for any reason ceases to be a United States Citizen;
THEN (I) (i) upon the occurrence of any Event of Default described in subsection
7.6 or 7.7, each of (a) the unpaid principal amount of and accrued interest on
the Loans and (b) all other Obligations shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements of
any kind, all of which are hereby expressly waived by Borrower, and the
obligation of each Lender to make any Loan shall thereupon terminate and (ii)
upon the occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written consent
of Requisite Lenders, by written notice to Borrower, declare all or any portion
of the amounts described in clauses (a) and (b) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender
to make any Loan shall thereupon terminate and (II) upon the occurrence of any
Event of Default, the Administrative Agent upon the written request of the
Requisite Lenders, shall by written notice to Borrower enforce all of the Liens
and security interests created pursuant to the Collateral Documents and (III)
exercise all other remedies at law or in equity available under the Loan
Documents.
If at any time within 60 days after an acceleration of the Loans pursuant
to the preceding paragraph Borrower shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than
non-payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 9.6, then Requisite Lenders, by written notice to
Borrower, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended to
benefit Borrower and do not grant Borrower the right to require Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth
herein are met.
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SECTION 8.
AGENTS
8.1 Appointment.
Each Lender hereby appoints Bankers Trust Company as Administrative Agent
hereunder and under the other Loan Documents and each Lender hereby authorizes
Administrative Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents. Goldman Sachs Credit Partners L.P. is
hereby appointed Syndication Agent hereunder and each Lender hereby authorizes
Syndication Agent to act as its agent in accordance with the terms of this
Agreement. Agents agree to act upon the express conditions contained in this
Agreement and the other Loan Documents, as applicable. The provisions of this
Section 8 are solely for the benefit of Agents and Lenders, and Borrower shall
have no rights as a third-party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, each Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Borrower. Syndication Agent, without consent of or notice to any party
hereto, may assign any or all of its rights or obligations hereunder to any of
its Affiliates. As of the Initial Borrowing Date, all obligations of Syndication
Agent hereunder shall terminate.
8.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes Agents to
take such action on such Lender's behalf and to exercise such powers, rights and
remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to such Agent by the terms hereof and thereof, together
with such powers, rights and remedies as are reasonably incidental thereto.
Agents shall have only those duties and responsibilities that are expressly
specified in this Agreement and the other Loan Documents. Agents may exercise
such powers, rights and remedies and perform such duties by or through its
agents or employees. Agents shall not have, by reason of this Agreement or any
of the other Loan Documents, a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon Agents any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. Agents shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability,
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collectibility or sufficiency of this Agreement or any other Loan Document or
for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statements or in any financial or other
statements, instruments, reports or certificates or any other documents
furnished or made by either Agent to Lenders or by or on behalf of Borrower to
Agents or any Lender in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of
Borrower or any other Person liable for the payment of any Obligations, nor
shall Agents be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Loan Documents or as to the use of the proceeds of the
Loans or as to the existence or possible existence of any Event of Default or
Potential Event of Default. Anything contained in this Agreement to the contrary
notwithstanding, Agents shall not have any liability arising from confirmations
of the amount of outstanding Loans or the component amounts thereof.
C. Exculpatory Provisions. None of Agents nor any of their respective
officers, directors, partners, employees or agents shall be liable to Lenders
for any action taken or omitted by Agents under or in connection with any of the
Loan Documents except to the extent caused by their respective gross negligence
or willful misconduct. If either Agent shall request instructions from Lenders
with respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, such Agent
shall be entitled to refrain from such act or taking such action unless and
until such Agent shall have received instructions from Requisite Lenders.
Without prejudice to the generality of the foregoing, (i) each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Borrower), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against Agents as a result of Agents acting or (where so
instructed) refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders. Each Agent
shall be entitled to refrain from exercising any power, discretion or authority
vested in it under this Agreement or any of the other Loan Documents unless and
until it has obtained the instructions of Requisite Lenders.
D. Agents Entitled to Act as Lender. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, either Agent in its individual capacity as a Lender hereunder.
With respect to its participations in the Loans, each Agent shall have the same
rights and
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powers hereunder as any other Lender and may exercise the same as though it were
not performing the duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include each Agent in its individual capacity. Each Agent
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of banking, trust, financial advisory or other business with
Borrower or any of its Affiliates as if it were not performing the duties
specified herein, and may accept fees and other consideration from Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Atlas and its
Subsidiaries, Borrower and the Aircraft and Spare Engines in connection with the
making of the Loans hereunder and that it has made and shall continue to make
its own appraisal of the creditworthiness of Atlas and its Subsidiaries and
Borrower. Agents shall not have any duty or responsibility, either initially or
on a continuing basis, to make any such investigation or any such appraisal on
behalf of Lenders or to provide any Lender with any credit or other information
with respect thereto, whether coming into their possession before the making of
the Loans or at any time or times thereafter, and Agents shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
8.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Agents (and their respective affiliates and partners), to the extent
that Agents shall not have been reimbursed by Borrower, for and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including, without limitation, counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against either Agent in exercising its
powers, rights and remedies or performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as Agent, in any way relating
to or arising out of this Agreement or the other Loan Documents; provided that
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Agent's gross negligence or willful
misconduct.
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8.5 Collateral Documents.
Without limiting the generality of subsection 8.1, each Lender hereby
further authorizes Administrative Agent to enter into the Collateral Documents
as secured party on behalf of and for the benefit of such Lender and agrees to
be bound by the terms of each of the Collateral Documents; provided that, except
as otherwise provided below, Administrative Agent shall not enter into or
consent to any amendment, modification, termination or waiver of any provision
contained in any Collateral Document without prior written consent of Requisite
Lenders. Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the collateral under any Collateral
Document, it being understood and agreed that all powers, rights and remedies
under the Collateral Documents may be exercised solely by Administrative Agent
for the benefit of Lenders in accordance with the terms thereof. Each Lender
hereby authorizes Administrative Agent (i) to release or subordinate Collateral
as permitted or required under this Agreement or the Collateral Documents, and
agrees that a certificate executed by Administrative Agent evidencing such
release of Collateral shall be conclusive evidence of such release as to any
third party and (ii) to enter into any amendments of the Collateral Documents to
cure any ambiguity, defect or inconsistency or to amend provisions relating to
ministerial or administrative matters which do not materially adversely affect
the rights of the Lenders thereunder.
8.6 Successor Administrative Agent.
Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Borrower. Upon any such notice of
resignation, Requisite Lenders shall have the right, upon consultation with
Borrower, to appoint a successor Administrative Agent. Upon the acceptance of
any appointment hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring or removed Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
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SECTION 9.
MISCELLANEOUS
9.1 Assignments and Participations in Loans.
A. General. Each Lender shall have the right at any time to (i) sell,
assign or transfer to any Eligible Assignee, or (ii) sell participations to any
Person in, all or any part of its Commitment or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall, without the consent
of Borrower, require Borrower to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided
further, that no such sale, assignment or transfer described in clause (i) above
shall be effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 9.1B(ii). Except as otherwise
provided in this subsection 9.1, no Lender shall, as between Borrower and such
Lender, be relieved of any of its obligations hereunder as a result of any sale,
assignment or transfer of, or any granting of participations in, all or any part
of its Commitment or the Loans, or the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan or other
Obligation may (a) be assigned in any amount to another Lender, or to an
Affiliate or Related Fund of the assigning Lender or another Lender, with
the giving of notice to Borrower and Administrative Agent or (b) be
assigned in an aggregate amount of not less than $5,000,000 (or such lesser
amount as shall constitute the aggregate amount of the Commitments, Loans,
and other Obligations of the assigning Lender) to any other Eligible
Assignee with the giving of notice to Borrower and with the consent of
Administrative Agent and Borrower (which consent shall not be unreasonably
withheld) unless an Event of Default shall have occurred and be occurring,
in which case the consent of Borrower to such assignment shall not be
required. Any assignment of Loans hereunder shall effect a pro rata
assignment of the Notes with respect to each Aircraft and related Spare
Engine. To the extent of any such assignment in accordance with either
clause (a) or (b) above, the assigning Lender shall be relieved of its
obligations with respect to its Commitment, Loans, or other Obligations or
the portion thereof so assigned. The parties to each such assignment shall
execute and deliver to Administrative Agent, for its acceptance
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and recording in the Register, an Assignment Agreement, together with a
processing and recordation fee of $3,000 and such forms, certificates or
other evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Administrative Agent pursuant to subsection
2.7B(iii)(a); provided, however that such processing fee shall not be
required where the assignee is an existing Lender. Upon such execution,
delivery, acceptance and recording from and after the effective date
specified in such Assignment Agreement, (y) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and (z) the assigning
Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment Agreement,
relinquish its rights and be released from its obligations under this
Agreement (and, in the case of an Assignment Agreement covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) provided,
however, that the assigning Lender shall retain any right to payment
accrued under subsections 2.6C, 2.6D, 2.7, 9.2 or 9.3 unless such rights
are explicitly assigned to the assignee in the Assignment Agreement. The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee substantially in the form of Exhibit II annexed
hereto, with appropriate insertions, to reflect the new Commitment or
outstanding Loans, as the case may be, of the assignee and/or the assigning
Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register. Upon
its receipt of an Assignment Agreement executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee, together with the
processing and recordation fee referred to in subsection 9.1B(i) and any
forms, certificates or other evidence with respect to United States federal
income tax withholding matters that such assignee may be required to
deliver to Administrative Agent pursuant to subsection 2.7B(iii) (a),
Administrative Agent shall, if such Assignment Agreement has been completed
and is in substantially the form of Exhibit V hereto and if Administrative
Agent and Borrower have consented to the assignment evidenced thereby to
the extent such consent is required pursuant to subsection 9.1B(i)), (a)
accept such Assignment Agreement
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by executing a counterpart thereof as provided therein (which acceptance
shall evidence any required consent of Administrative Agent and Borrower to
such assignment), (b) record the information contained therein in the
Register and (c) give prompt notice thereof to Borrower. Administrative
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 9.1B(ii).
C. Participations. The holder of any participation, other than an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
affecting (i) the extension of the Final Maturity Date of any Loan allocated to
such participation, (ii) a reduction of the principal amount of or the rate of
interest payable on any Loan allocated to such participation or (iii) a release
of Collateral, and all amounts payable by Borrower hereunder (including without
limitation amounts payable to such Lender pursuant to subsections 2.6D and 2.7)
shall be determined as if such Lender had not sold such participation. Borrower
and each Lender hereby acknowledge and agree that, solely for purposes of
subsection 9.5, (a) any participation will give rise to a direct obligation of
Borrower to the participant and (b) the participant shall be considered to be a
"Lender".
D. Assignments to Federal Reserve Banks and Others. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 9.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to (i) any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank or (ii) if such Lender is a "fund", to its
lenders as collateral security to secure its indebtedness to said lenders;
provided that (i) no Lender shall, as between Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank or lender be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning Borrower
in the possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants), subject to subsection 9.19.
9.2 Expenses.
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Whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents; (ii) all the costs of furnishing
all opinions by counsel for Borrower (including without limitation any opinions
requested by Lenders as to any legal matters arising hereunder) and of
Borrower's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Agents in connection with the
negotiation, preparation, execution and administration of the Loan Documents and
the Loans and any consents, amendments, waivers or other modifications hereto or
thereto and any other documents or matters requested by Borrower; (iv) all the
costs and expenses of creating and perfecting the Liens in favor of
Administrative Agent for the benefit of Lenders pursuant to the Loan Documents,
including filing and recording fees and expenses, title insurance, fees and
expenses of counsel for providing such opinions as Lenders may reasonably
request and fees and expenses of legal counsel to Agents (including local
counsel); (v) all other actual and reasonable costs and expenses incurred by
Administrative Agent in connection with the syndication of the Commitments and
the Loans and the negotiation, preparation and execution of the Loan Documents
and the transactions contemplated hereby and thereby; provided that such costs
and expenses of syndication shall not exceed $25,000; and (vi) after the
occurrence of an Event of Default, all costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Administrative Agent and Lenders in enforcing any
Obligations of or in collecting any payments due from Borrower hereunder or
under the other Loan Documents by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings.
9.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 9.2, whether
or not the transactions contemplated hereby shall be consummated, Borrower
agrees to defend, indemnify, pay and hold harmless Administrative Agent and
Lenders, and the officers, directors, partners, employees, agents and affiliates
of Administrative Agent and Lenders (collectively called the "Indemnitees") from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including without limitation the reasonable
fees and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated
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as a party or a potential party thereto), whether direct, indirect or
consequential and whether based on any federal, state or foreign laws, statutes,
rules or regulations (including without limitation securities and commercial
laws, statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans hereunder or the use or intended use of the proceeds of any of
the Loans) or the statements contained in the commitment letter delivered by any
Lender to Borrower with respect thereto (collectively called the "Indemnified
Liabilities"); provided that Borrower shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend, indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, Borrower shall contribute
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
9.4 Set-Off.
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence of any Event of
Default each Lender is hereby authorized by Borrower at any time or from time to
time, without notice to Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other Indebtedness at any time held or owing
by that Lender to or for the credit or the account of Borrower against and on
account of the obligations and liabilities of Borrower to that Lender under this
Agreement, its Notes, and the other Loan Documents, including, but not limited
to, all claims of any nature or description arising out of or connected with
this Agreement, the Notes, or any other Loan Document, irrespective of whether
or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due hereunder
shall have become due and payable pursuant to Section 7 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.
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9.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment, by realization upon security, through the exercise of any
right of set-off or banker's lien, by counterclaim or cross action or by the
enforcement of any right under the Loan Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to that Lender
hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of Borrower or otherwise,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. Borrower expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Borrower to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
9.6 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to and departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes any Lender's Pro Rata
Share; changes in any manner the definition of "Requisite Lenders"; changes in
any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the Final
Maturity Date (but not the date of any scheduled installment of principal) of
any of the Loans; postpones the date on which any interest or any fees are
payable; decreases the interest rate borne by any of the Loans (other than any
waiver
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of any increase in the interest rate applicable to any of the Loans pursuant to
subsection 2.2D) or the amount of any fees payable hereunder; releases all or
substantially all of the Collateral; or changes in any manner the provisions
contained in this subsection 9.6 shall be effective only if evidenced by a
writing signed by or on behalf of all Lenders to whom are owed Obligations being
directly affected by such amendment, modification, termination, waiver or
consent. In addition, (i) no amendment, modification, termination or waiver of
any provision of any Note shall be effective without the written concurrence of
the Lender which is the holder of that Note, (ii) no increase in the Commitment
of any Lender over the amount thereof then in effect shall be effective without
the written concurrence of that Lender, it being understood and agreed that in
no event shall waivers or modifications of conditions precedent, covenants,
Events of Default, Potential Events of Default or of a mandatory prepayment or a
reduction of any or all of the Commitments be deemed to constitute an increase
of the Commitment of any Lender and that an increase in the available portion of
any Commitment of any Lender shall not be deemed to constitute an increase in
the Commitment of such Lender and (iii) no amendment, modification, termination
or waiver of any provision of Section 8 or of any other provision of this
Agreement which, by its terms, expressly requires the approval or concurrence of
either Agent shall be effective without the written concurrence of such Agent.
Administrative Agent may, but shall have no obligation to, with the concurrence
of any Lender, execute amendments, modifications, waivers or consents on behalf
of that Lender. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 9.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Borrower, on Borrower.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 9.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Borrower may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Borrower shall pay that Lender all principal, interest and fees and other
amounts owed to such Lender through such date of termination, (ii) another
financial institution satisfactory to Borrower and Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials neces-
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sary, in the judgment of Administrative Agent (or if Administrative Agent is
also the Lender to be terminated, the successor Administrative Agent) to
evidence the substitution of such Lender shall have been received and approved
by Administrative Agent as of such date.
9.7 Independence of Covenants.
All covenants under this Agreement shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
9.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to either Agent shall not be
effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Borrower and Agents, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
9.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in subsections 2.6D, 2.7, 9.2,
9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and
9.5 shall survive the payment of the Loans, and the termination of this
Agreement.
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9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any Lender in
the exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
9.11 Marshalling: Payments Set Aside.
Neither Administrative Agent nor any Lender shall be under any obligation
to marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the Obligations. To the extent that Borrower makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce
any security interests or exercise their rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or set-off had
not occurred.
9.12 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
9.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an
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association, a joint venture or any other kind of entity. The amounts payable at
any time hereunder to each Lender shall be a separate and independent debt, and
each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement and it shall not be necessary for any other Lender to be joined
as an additional party in any proceeding for such purpose.
9.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.15 Applicable Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
9.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 9.1). Neither Borrower's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Borrower without the prior written consent of all Lenders.
9.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN
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DOCUMENT OR SUCH OBLIGATION (SUBJECT TO ANY RIGHT TO APPEAL TO A COURT IN THE
STATE OF NEW YORK). Borrower hereby agrees that service of all process in any
such proceeding in any such court may be made by registered or certified mail,
return receipt requested, to Borrower at its address provided in subsection 9.8,
such service being hereby acknowledged by Borrower to be sufficient for personal
jurisdiction in any action against Borrower in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Lender to bring proceedings against Borrower in the
courts of any other jurisdiction.
9.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
9.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of the Transaction Documents which has been identified as
confidential
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by Borrower in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Borrower that in any event a Lender may make disclosures to any Person who
evaluates, approves, structures or administers the Loans on behalf of a Lender
and who is subject to this confidentiality provision, or, subject to this
Section 9.19, reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any participation therein (at which time, any such
assignee, transferee or participant shall be bound by this Section 9.19) or as
required or requested by any governmental or regulatory agency (including,
without limitation, the National Association of Insurance Commissions) or
representative thereof or pursuant to legal process or in accordance with any
applicable law or regulation; provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify Borrower of any request
by any governmental or regulatory agency or representative thereof (other than
any such request in connection with any examination of the financial condition
of such Lender by such governmental or regulatory agency) for disclosure of any
such non-public information prior to disclosure of such information; and
provided further, that in no event shall any Lender be obligated or required to
return any materials furnished by Borrower.
9.20 Counterparts; Effectiveness.
(i) This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(ii) This Agreement shall become effective upon the execution of a
counterpart hereof by (the "Effective Date") each of the parties hereto and
receipt by Company and Administrative Agent of written or telephonic
notification of such execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
ATLAS FREIGHTER LEASING II, INC.
By:
-------------------------------
Name:
Title:
Notice Address:
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
BANKERS TRUST COMPANY,
as Administrative Agent and Lender
By:
------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 93
GOLDMAN SACHS CREDIT
PARTNERS L.P.,
as Syndication Agent and Lender
By:
-------------------------------
Name:
Title:
Notice Address:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Stephen B. King
LENDERS:
PRIME INCOME TRUST
By:
-------------------------------
Name:
Title:
ING HIGH INCOME PRINCIPAL
PRESERVATION OFFERING, L.P.
By: ING Capital Advisors, Inc.,
as Investment Advisor
By:
-------------------------------
Name:
Title:
<PAGE> 94
KZH-ING-1 CORPORATION
By:
-------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
-------------------------------
Name:
Title:
METROPOLITAN LIFE INSURANCE
COMPANY
By:
-------------------------------
Name:
Title:
OCTAGON CREDIT INVESTORS
LOAN PORTFOLIO (a unit of the Chase
Manhattan Bank)
By:
-------------------------------
Name:
Title:
<PAGE> 95
KZH-SOLEIL CORPORATION
By:
-------------------------------
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.,
by: TCW Asset Management Company, its
Investment Manager
By:
-------------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By:
-------------------------------
Name:
Title:
<PAGE> 96
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:
-------------------------------
Name:
Title:
KZH-CRESCENT CORPORATION
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.76
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(N527MC)
DATED AS OF SEPTEMBER 5, 1997
BETWEEN
ATLAS FREIGHTER LEASING II, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-2D7B Aircraft
U.S. Registration No. N527MC
Manufacturer's Serial No. 22471
---------------------------
Three Spare Engines
Manufacturer's Serial Nos. 517538, 517539 and 455167
- --------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN
AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
EXHIBIT VIII
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions............................................. 1
SECTION 2. Acceptance and Lease.................................... 24
SECTION 3. Term and Rent........................................... 24
(a) Term and Basic Rent................................... 24
(b) Adjustments to Basic Rent............................. 25
(c) Supplemental Rent..................................... 25
(d) Payments in General................................... 25
(e) Minimum Rent.......................................... 26
(f) Prepayment of Rent Payments........................... 26
SECTION 4. Certain Representations and Warranties.................. 27
SECTION 5. Lessee's Representations and Warranties................. 28
SECTION 6. Lessee's Affirmative Covenants.......................... 34
SECTION 7. Lessee's Negative Covenants............................. 42
SECTION 8. Return of the Aircraft and Spare Engines................ 54
(a) Condition Upon Return................................. 54
(b) Overhaul and Repair................................... 54
(c) Repairs............................................... 55
(d) Modifications......................................... 55
(e) Airworthiness Directives.............................. 55
(f) Return of the Engines................................. 55
(g) Deferred Maintenance.................................. 55
(h) Corrosion Treatment................................... 55
(i) Manuals............................................... 56
(j) Storage Upon Return................................... 56
(k) Severable Parts....................................... 56
(l) Survival.............................................. 56
SECTION 9. Liens.................................................. 57
SECTION 10. Registration, Maintenance and Operation; Possession
and Subleases; Insignia................................ 57
</TABLE>
(2)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Maintenance and Operation............................. 57
(b) Possession............................................ 59
(c) Insignia.............................................. 61
(d) Holding Out........................................... 61
(e) No Pledging of Credit................................. 62
SECTION 11. Replacement and Pooling of Parts; Alterations,
Modifications and Additions............................ 62
SECTION 12. Indemnities............................................ 64
SECTION 13. Event of Loss.......................................... 66
SECTION 14. Insurance.............................................. 68
SECTION 15. Assignment............................................. 71
SECTION 16. Events of Default...................................... 71
SECTION 17. Remedies............................................... 74
SECTION 18. Lessee's Cooperation Concerning Certain Matters........ 77
SECTION 19. Notices................................................ 78
SECTION 20. Net Lease, True Lease, etc............................. 78
SECTION 21. Purchase Option........................................ 80
(a) Purchase Option....................................... 80
(b) Notice of Purchase.................................... 80
SECTION 22. Lessor's Right to Perform for Lessee................... 81
SECTION 23. Miscellaneous.......................................... 81
SECTION 24. Security for Lessor's Obligations...................... 82
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
</TABLE>
(3)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SCHEDULE 7(d)(4) Contingent Obligations
</TABLE>
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
(4)
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of September 5, 1997 between ATLAS FREIGHTER
LEASING II, INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of
this Lease;
WHEREAS, Lessor and Lessee desire that this be a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft and the Spare Engines to be leased pursuant to the
terms of this Lease and other similar aircraft and spare engines to be leased
pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has
a maximum gross takeoff weight of at least 800,000 pounds and is of the
equivalent or greater residual value, condition, utility, airworthiness, and
remaining useful life and which shall have been maintained, serviced, repaired
and overhauled in substantially the same
<PAGE> 6
manner as Lessee maintains, services, repairs and overhauls similar airframes
utilized by Lessee and without in any way discriminating against such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2 engine for
the aircraft bearing U.S. registration number N523MC, N524MC, N526MC, N527MC or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract
entered into at the time of the acquisition of such aircraft (which ACMI
Contract shall not represent a renewal or replacement of a prior ACMI Contract
unless the aircraft used pursuant to such prior ACMI Contract was operated
under an operating lease and returned to the lessor) which is in effect on the
date of calculation and has a remaining term of one year or more on the date
such aircraft was intended to be used in connection with such ACMI Contract
(subject to cancellation terms, which may include the right to cancel on six
months notice). When making any calculation on a Pro Forma Basis effect shall
be given to the acquisition of an ACMI Contracted Aircraft by adding to the
appropriate components of Consolidated Adjusted EBITDA (i) the net projected
annualized revenues from the operation of the ACMI Contracted Aircraft under
such ACMI Contract for that portion of the period for which Consolidated
Adjusted EBITDA is being calculated prior to the acquisition of such aircraft,
assuming operation for the minimum guaranteed number of block hours (less any
block hours subject to cancellation) at the minimum guaranteed rate under such
ACMI Contract less (ii) the projected annualized cash operating expenses from
such operation for the same period for which the related projected revenues are
determined in clause (i) above; provided that such projected cash operating
expenses shall not be less on a per block hour basis than the average
historical per block hour operating expenses of Lessee for the four full fiscal
quarters immedi-
-2-
<PAGE> 7
ately preceding the date of calculation, and provided further, that if such
aircraft is of a model other than a Boeing 747 freighter, such projected cash
operating expenses shall include maintenance costs which shall not be less than
the average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AFL I" means Atlas Freighter Leasing, Inc., a Delaware corporation.
"AFL I Aircraft" means (i) one Boeing 747-200 Aircraft, serial number
21048, with four Pratt & Whitney JT9D-7J engines attached and (ii) five Boeing
747-200 Aircraft, serial numbers 21221, 21251, 21380, 21644, and 22507, each
with four General Electric CF6-50E2 engines attached.
"AFL I Credit Agreement" means that certain Credit Agreement dated as of
May 29, 1997 by and among AFL I, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms hereof.
"AFL I Leases" means the Leases as such term is defined in the AFL I
Credit Agreement.
"AFL I Restructuring" means the following transactions which occurred
concurrently on May 29, 1997: (i) the termination of the leases relating to the
AFL I Aircraft in existence prior to May 29, 1997, (ii) the transfer, as a
dividend, of the AFL I Aircraft to Lessee and the simultaneous contribution of
the AFL I Aircraft to AFL I as a capital contribution, together with
approximately $10.4 million, (iii) the incurrence
-3-
<PAGE> 8
of indebtedness pursuant to the AFL I Credit Agreement and the simultaneous
repayment of the indebtedness previously secured by the AFL I Aircraft and (iv)
the entering into of the AFL I Leases.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Aircraft Obligations" means all amounts owing by the Lessee or any of its
Subsidiaries pursuant to the Amended Aircraft Credit Facility immediately prior
to giving effect to the third amendment and restatement thereof on the date
hereof and relating to the Aircraft and Spare Engines being contributed to the
Lessor pursuant to the Transaction.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement
and (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but
where title to which remains vested in Lessor in accordance with this Lease.
"Amended Aircraft Credit Facility" means the Third Amended and Restated
Credit Agreement dated as of September 5, 1997, among Lessee, as Borrower, the
lenders listed therein, Goldman Sachs Credit Partners L.P., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent, without giving
effect to any amendments, modifications, supplements or waivers thereof.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc., Morton Beyer, Agnew, or any other nationally recognized firm of
aircraft appraisers reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock
of any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets
-4-
<PAGE> 9
sold in any single transaction or related series of transactions is equal to
$1,000,000 or less, (B) transactions related to aircraft engines, components,
parts or spare parts pursuant to customary pooling, exchange or similar
arrangements, (C) asset swaps involving aircraft engines, components, parts or
spare parts; provided that the assets received by the Lessee or any Subsidiary
have a fair market value at least equal to the assets transferred (provided
that with respect to any asset swap or series of related asset swaps involving
assets of Lessee or any Subsidiary with a fair market value exceeding
$3,000,000, such determination shall be made by the Board of Directors of
Lessee)) and (D) asset sales involving obsolete, worn-out, excess or redundant
equipment as long as the proceeds therefrom are used to replace or to upgrade
the aircraft or the equipment installed thereon.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft and
the Spare Engines pursuant to Section 3(a) of this Lease adjusted as provided
in Section 3(b) of this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized
or required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of
the United States the obligations of which are backed by the full faith and
credit of the United States, in each case maturing within one year after such
date; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial
-5-
<PAGE> 10
paper maturing no more than one year from the date of creation thereof and
having, at the time of the acquisition thereof, a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year after such date and issued or accepted by
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of
not less than $500,000,000, and (c) has the highest rating obtainable from
either S&P or Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Atlas, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries)
by Lessee and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
-6-
<PAGE> 11
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3
of the Amended Aircraft Credit Facility on or before the Third Amended and
Restated Closing Date (as such term is defined in the Amended Aircraft Credit
Facility).
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Lessee or is
merged into or consolidated with Lessee or any of its Subsidiaries or that
Person's assets are acquired by Lessee or any of its Subsidiaries, (iii) the
income of any Subsidiary of Lessee to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any pension plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum
of the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts). For the avoidance of
-7-
<PAGE> 12
doubt, all rental payments to AFL I and Lessor shall not be included in
Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agreements. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guaranty, endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by
any other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement (contingent or
otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the case
of any agreement described under subclauses (X) or (Y) of this sentence, the
primary purpose or intent thereof is as described in the preceding sentence.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if less, the amount to
which such Contingent Obligation is specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a
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<PAGE> 13
party or by which it or any of its properties is bound or to which it or any of
its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
and Spare Engines subject to this Lease and the other aircraft and spare
engines to be leased pursuant to the Leases, subject to the Aircraft
Obligations.
"Credit Agreement" shall mean the Credit Agreement, dated as of September
5, 1997, by and among Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, and
Goldman Sachs Credit Partners L.P., as Syndication Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the NationsBanc Agreement, the AFL I Credit Agreement, the
Senior Note Documents, any Permitted Extension Indebtedness and any Other
Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsec- tion
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type
-9-
<PAGE> 14
and model, which (i) is in a cargo configuration capable of immediate operation
in the business of Lessee or is eligible for delivery under a modification
agreement with a delivery slot available within a six month period (or is
leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the General Electric CF6-50E2 aircraft engines
for the aircraft bearing U.S. registration numbers N523MC, N524MC, N526MC and
N527MC listed by manufacturer's serial numbers in the initial Lease Supplement
and installed on the Airframe at the time of the delivery to Lessee of such
Airframe, whether or not from time to time thereafter installed on such
Airframe or any other airframe; (ii) any Acceptable Alternate Engine which may
from time to time be substituted for any of such four engines pursuant to the
terms of the Lease; and (iii) in any case, any and all Parts which are from
time to time incorporated or installed in or attached to any such engine and
any and all parts removed therefrom so long as title thereto remains vested in
Lessor in accordance herewith. The term "Engines" means, as of any date of
determination, all Engines then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
-10-
<PAGE> 15
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member;
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or Spare Engine or
both): (A) loss of such Aircraft or Spare Engine or the use thereof due to
theft or disappearance of the Aircraft or Spare Engine which shall result in
the loss of possession thereof for a period of 120 days (or for a shorter
period ending on the date on which there is an insurance settlement for a total
loss on the basis of the theft or disappearance of such Aircraft or Spare
Engine); (B) the destruction, damage beyond repair or rendition of such
Aircraft or Spare Engine permanently unfit for normal use for any reason
whatsoever; (C) the condemnation, confiscation or seizure of, or requisition of
title to, or use or possession (other than use by the United States Government
if Lessee obtains adequate compensation from the United States Government) of
such Aircraft or Spare Engine; (D) as a result of any rule, regulation, order
or other action by the FAA or other governmental body having jurisdiction, the
use of such Aircraft or Spare Engine in the normal course of interstate air
transportation of persons or cargo shall have been prohibited for a period of
more than nine consecutive months unless Lessee, prior to the expiration of
such nine month period, shall have undertaken and shall be diligently carrying
forward all steps which are necessary or desirable to permit the normal use of
such property by Lessee or, in any event, if such use shall have been
prohibited for a period of twelve consecutive months; (E) the operation or
location of such Aircraft or Spare Engine, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area
excluded from coverage by any insurance policy in effect with respect to such
Aircraft or Spare Engine, if Lessee shall be unable to obtain indemnity or
"war-risk" insurance in lieu thereof from the United States; (F) any damage
which results in an insurance settlement with respect to such Aircraft or Spare
Engine on the basis of an actual or constructive total loss or (G) a
divestiture of such Airframe or Spare Engine as described in Section 4(d)(iii)
or Section 4(d)(vi) of any Aircraft Chattel Mortgage under
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the Credit Agreement. 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
of the Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of the Airframe or any Engine or Spare Engine
shall mean the value which would be obtained in an arm's-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 by a recognized independent aircraft appraiser, mutually agreed to by
the Agent and Lessee, or, if such appraiser cannot be agreed to within 20 days,
then either party may apply to the American Arbitration Association (or any
successor organization thereto) in New York City for the appointment of an
appraiser, whose determinations shall be final and binding upon the parties
hereto. In determining Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe, Engine or Spare Engine is in the
condition, location and overhaul status in which it is required to be returned
to Lessor pursuant to Section 8 of this Lease, that all modifications and
improvements shall be taken into account, that Lessee has removed all Parts
which it is entitled to remove pursuant to Section 11 of this Lease and that
the Aircraft, or Spare Engine, as the case may be, is not encumbered by this
Lease. Except as otherwise expressly provided in the Lease, all appraisal costs
will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation
of the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Final Maturity Date" means May 29, 2004.
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"Financed Aircraft" means all Financed Aircraft under and as defined in
the Amended Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in
effect as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under
any law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation
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<PAGE> 18
of any Hazardous Material (i) from, under, in, into or on the facilities or
surrounding property; and (ii) caused by, or undertaken by or on behalf of,
Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (iv) any
obligation owed for all or any part of the deferred purchase price of property
or services (excluding any such obligations incurred under ERISA), which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement
or arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Lessee or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement, purchase or other acquisition for value, by any
Subsidiary of Lessee from any Person other than Lessee or any of its
Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of
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<PAGE> 19
business) or capital contribution by Lessee or any of its Subsidiaries to any
other Person (other than a wholly-owned Subsidiary of Lessee), including all
indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft and Spare Engines under and pursuant to the
terms of the Lease, and any subsequent Lease Supplement entered into in
accordance with the terms of the Lease.
"Leases" means the Lease Agreements dated as of September 5, 1997 between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing II, Inc., as Lessor under the
Lease, and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or
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the transactions contemplated by this Lease or the operation of the
Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine, any Spare Engine or any Part
in the jurisdiction imposing the Tax, or (ii) the situs of
organization, any place of business or any activity of Lessee or any
other Person having use, possession or custody of the Aircraft, the
Airframe, any Engine, any Spare Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated
to Lessor's dealings with Lessee or to the transactions contemplated
by this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any security
interest) and any option, trust or other preferential arrangement having the
practical effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases, the AFL I
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Leases, the Senior Note Documents and agreements in respect of Permitted
Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"NationsBanc Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and NationsBanc Leasing
Corporation, as Lender, and as further amended, supplemented and modified in
accordance with this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease
other than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines, Spare Engines or engines, which are from time to time
incorporated or installed in or attached to the Airframe or any Engine, or
Spare Engine and all such items which are subsequently removed therefrom so
long as title thereto shall vest in Lessor in accordance with this Lease.
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<PAGE> 22
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust
Agreement and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.(i), (b) restriction or encumbrances that
the interest or title of such lessor or sublessor may be subject to, or
(c) subordination of the
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<PAGE> 23
interest of the lessee or sublessee under such lease to any restriction
or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages, (II) Sections 4(d) and 4(e) of the
aircraft chattel mortgages entered into in connection with the AFL I
Credit Agreement and (III) Sections 4(d) and 4(e) of the aircraft chattel
mortgages entered into in connection with the Amended Aircraft Credit
Facility;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens arising pursuant to the AFL I Credit Agreement; provided
that such Liens do not encumber any assets other than the AFL I Aircraft
and other assets of AFL I;
(xi) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xii) Liens granted pursuant to the Transaction Documents;
(xiii) Liens arising pursuant to the Amended Aircraft Credit
Facility; and
(xiv) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of
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<PAGE> 24
such Indebtedness, plus the amount of expenses of Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of Lessee hereunder at least to the same extent
as the Indebtedness immediately prior to such extension, (iv) such Permitted
Extension Indebtedness has a final stated maturity later than the end of the
stated maturity of the Indebtedness being extended immediately prior to such
extension and (v) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of Lessee and its Subsidiaries or
any less favorable, from the perspective of Lessor and Lenders than those
contained in the Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated
March 31, 1995, as modified pursuant to an acknowledgement dated December 31,
1996 by and between Philippine Airlines and Lessee, and as assigned to Atlas
Air, Inc. pursuant to an Assignment and Acceptance of Lease dated December 31,
1996 as the Lease Agreement may be further amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement and (ii)
that certain Lease Agreement dated as of January 1, 1995 by and between Bankers
Trust Company and Philippine Airlines, Inc., as the Lease Agreement may be
further amended, restated, supplemented or otherwise modified from time to time
in accordance with this Agreement, as modified pursuant to an acknowledgement
dated May 12, 1997 by and between Philippine Airlines and Lessee, and as
assigned to Lessee pursuant to an Assignment and Acceptance of Lease dated May
12, 1997 as the Lease Agreement may be further amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds
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thereof, the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business or any asset (including any ACMI Contracted Aircraft) by Lessee or any
of its Subsidiaries or any other related action which requires compliance on a
Pro Forma Basis. In making any determination of compliance on a Pro Forma
Basis, such determination shall be performed after good faith consultation with
Lessor and Agent using the consolidated financial statements of Lessee and its
Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition or other
related action had been consummated at the beginning of the period specified in
the covenant with respect to which Pro Forma Basis compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee
now or hereafter outstanding, except a dividend payable solely in shares of
that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Lessee now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Lessee now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Designated
Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general
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any instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of
the foregoing.
"Senior Notes Documents" means the Indenture, dated as of August 13, 1997
between Atlas Air, Inc. and State Street Bank and Trust Company relating to the
10 3/4% $150 million Senior Notes due 2005 of Lessee (the "Senior Notes") and
any and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of September 5, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Spare Engines" shall mean each General Electric CF6-50E2 aircraft engine
bearing manufacturer's serial numbers listed in the initial Lease Supplement.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely
for the purpose of refinancing Indebtedness associated with a Financed Aircraft
or acquiring or refinancing other aircraft with Permitted Extension
Indebtedness or Other Permitted Indebtedness the only assets of which are such
financed aircraft, leases of such aircraft and contracts related to the
modification of such aircraft and contributions to capital of such Subsidiary,
which together with all other contributions to capital made to other such
Subsidiaries, are not in excess of 15% of the consolidated book value of the
assets of the Lessee and its Subsidiaries, and the only liability of which is
the Permitted Extension Indebtedness or Other Permitted Indebtedness incurred
to refinance such
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Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on
the schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft and Spare Engines
shall mean as of any date, the amount set forth on Exhibit C opposite the
Stipulated Loss Determination Date immediately prior to such date, as such
amount may be reduced in accordance with Section 3(f) plus all accrued and
unpaid interest on the Loans relating to the Aircraft and Spare Engines on the
date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof. For all
purposes of this Agreement other than the financial covenants set forth in
subsection 7(f) and the definitions related thereto, Lessor shall not be
considered a Subsidiary of Lessee.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others
under any of the Transaction Documents, including payments of Stipulated Loss
Value and other amounts referred to in Section 3(c) of this Lease.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft and Spare Engines is leased
hereunder pursuant to Section 3(a) of the Lease, beginning on the Initial
Borrowing Date and ending on the Final Maturity Date, or such earlier date as
the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the Contribution, (ii) the leasing by
Lessor to Lessee of the Aircraft, Spare Engines and certain other aircraft and
other spare engines pursuant to the Leases, (iii) the repayment of the Aircraft
Obligations and (iv) the release and termination of all security interests and
Liens encumbering the Aircraft, Spare Engines and any part thereof and any
other assets of Lessor.
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"Transaction Documents" shall mean the Amended Aircraft Credit Facility,
any bills of sale or certificates of transfer for each Aircraft and the Spare
Engines (including bills of sale on AC Form 8050-2), the Leases, all documents
relating to the repayment of the Aircraft Obligations, the Loan Documents and
all other agreements and documentation executed and delivered in connection
with the Transaction, including, without limitation, in connection with the
Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility
to be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this
Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence
of the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee
hereunder, and Lessee hereby agrees to accept on the Initial Borrowing Date
from Lessor hereunder, the Aircraft and the Spare Engines as evidenced by the
execution by Lessor and Lessee of a Lease Supplement leasing the Aircraft and
the Spare Engines hereunder. Lessee agrees to appoint in writing one or more of
its employees as its authorized representative to accept delivery of the
Aircraft pursuant to the terms hereof. Lessee hereby agrees that acceptance of
delivery by such employee or employees shall, without further act, irrevocably
constitute acceptance by Lessee of the Aircraft for all purposes of this Lease
Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the Final Maturity Date or such
earlier date as this Lease may be terminated in accordance with the provisions
hereof. Basic Rent shall accrue during the Term in accordance with Exhibit B
hereto. Lessee shall pay to Lessor on each Basic Rent Payment Date an amount of
Basic Rent specified opposite each Basic Rent Payment Date on Exhibit B hereto
as such amounts may be adjusted pursuant to Section 3 plus accrued interest on
Basic Rent previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and
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notified to Lessor and Lessee prior to the Basic Rent Payment Date, which
represents the amount of interest due and payable on the Loans relating to the
Aircraft and the Spare Engines on such Basic Rent Payment Date and determined
in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor,
or to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or
by law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee
also will pay to Lessor, or to whomsoever shall be entitled thereto, as
assignee of Lessor, on demand, as Supplemental Rent, (i) interest at the Past
Due Rate with respect to any part of any installment of Basic Rent not paid
when due for any period for which the same shall be overdue and on any payment
of Supplemental Rent not paid when due for the period and, to the extent
permitted by law, on interest accrued on Basic Rent which itself was accrued
and not paid to the extent such accrued interest was not paid when due until
the same shall be paid and on any other amounts payable hereunder which are not
paid when due and (ii) all amounts payable by Lessor pursuant to subsections
2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however, to the
extent any Supplemental Rent required to be paid pursuant to this clause (ii)
of subsection 2(c) has been paid by Lessee pursuant to the terms of another
Lease, then Lessee's obligations hereunder shall be deemed to be satisfied by
the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to
the date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and the Spare Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to other
aircraft and other spare engines leased pursuant to the other Leases and after
taking into account all other payments of rent pursuant to the other Leases on
such date), then such excess amounts shall be paid by the Agent to Lessor at
its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
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payment shall be made on the next succeeding Business Day; provided, however,
if any date on which a payment of Rent becomes due is not a Business Day and is
a day of the month after which no further Business Day occurs in such month,
the payment of Rent shall be made on the next preceding Business Day. No
interest shall accrue on the amount of any payment made on the Business Day
next succeeding the regularly scheduled Basic Rent Payment Date, if such
payment is made on such next succeeding Business Day because the original date
of payment was not a Business Day (it being understood that the amount of Basic
Rent includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft and the Spare Engines required to be paid by
Lessor on or within five Business Days of the due date of such installment
of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft
and the Spare Engines and all other unpaid Obligations of Lessor (other
than principal and interest on Loans relating to other aircraft and other
spare engines and after taking into account all other payments of
Stipulated Loss Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft and the Spare Engines pursuant to Section
2.4C(ii) of the Credit Agreement, Lessor shall notify Lessee of such
required prepayment and Lessee shall immediately prepay an amount of Basic
Rent equal to the amount of such required prepayment less any required
payments of the Loans relating to the Aircraft and the Spare Engines
actually made by the Lessor from Insurance Proceeds or Condemnation
Proceeds (as each such term is defined in the Credit Agreement) received
directly by the Lessor.
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(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon
not less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f),
the schedules of Basic Rent and Stipulated Loss Value shall be adjusted so
as to preserve the after tax yield and after tax cash flows of the Lessor
and, to the extent consistent therewith, to minimize the net present value
of Basic Rent payments. All such computations shall be made on the basis
of the same assumptions and the method of computations employed in the
original calculations of Basic Rent and Stipulated Loss Values (except to
the extent such assumptions have been changed as a result of such
prepayment or any prior such adjustment). At the Lessee's written request,
independent public accountants mutually selected by the Lessor and the
Lessee shall confirm the required adjustments. The final determination of
any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing adjustments the revised Basic Rent
and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE AND
SPARE ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED
THAT THE AIRFRAME AND EACH ENGINE AND SPARE ENGINE ARE SUITABLE FOR ITS
PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY LENDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, SPARE ENGINE OR ANY
PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
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PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT AND SPARE ENGINES OR ANY PART
THEREOF, except that Lessor covenants that it will not, through its own actions
or inactions, in such capacity, interfere in Lessee's quiet enjoyment of the
Aircraft or Spare Engines unless this Lease shall have been declared or deemed
to have been declared in default pursuant to Section 17 hereof. None of the
provisions of this Section 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 any manufacturer, any affiliate
thereof, any subcontractor or supplier of any manufacturer or any affiliate
thereof, with respect to the Airframe, Engines, Spare Engines or any Parts, or
to release the manufacturer, any affiliate thereof, or any such subcontractor
or supplier from any such representation, warranty or obligation. Unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessor
agrees to make available to Lessee such rights as Lessor may have under any
warranty with respect to the Aircraft or Spare Engines made by the manufacturer
or any affiliate thereof or any of its subcontractors or suppliers and any
other claims against the manufacturer or any affiliate thereof, or any such
subcontractor or supplier with respect to the Aircraft or Spare Engines, all
pursuant to and in accordance with the terms of any applicable purchase
agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever
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necessary to carry out its business and operations, except in jurisdictions
where the failure to be so qualified or in good standing has not had and will
not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each
of its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under
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any Contractual Obligation of Lessee or any of its Subsidiaries, except for
such approvals or consents which will be obtained on or before the Initial
Borrowing Date and disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Lessee and its Subsidiaries as at December
31, 1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at June 30, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
three months then ended. All such statements were prepared in conformity with
GAAP and fairly present the financial position (on a consolidated and, where
applicable, consolidating basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of
the entities described therein for each of the periods then ended, subject, in
the case of any such unaudited financial statements, to changes resulting from
audit and normal year-end adjustments. Neither Lessee nor any of its
Subsidiaries has (and will not following the Initial Borrowing Date) have any
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment that is not reflected in the
foregoing financial statements or the notes thereto and which in any such case
is material in relation to the
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business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could
reasonably be expected to be material to Lessee and its Subsidiaries taken as a
whole. As of the Initial Borrowing Date, Lessee does not know of any basis for
the assertion against it of any liability or obligation of any nature
whatsoever that is not fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A) which, either individually or in the aggregate,
could reasonably be expected to be material to Lessee and its Subsidiaries
taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since June 30, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
Lessee and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant
to subsection 6(a), in each case except for assets disposed of since the date
of such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its
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Subsidiaries that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither Lessee nor any of its
Subsidiaries is (i) in violation of any applicable laws that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect or (ii) subject to or in default with respect to any final judgments,
writs, injunctions, decrees, rules or regulations of any court or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or
authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect,
of such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of its
obligations under the Transaction Documents unenforceable.
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(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee
or (b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or
threatened Environmental Claims against Lessee or any of its Subsidiaries, and
neither Lessee nor any of its Subsidiaries has received no written notices,
inquiries, or requests for information with respect to any Environmental
Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
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(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or
Lenders by or on behalf of Lessee or any of its Subsidiaries for use in
connection with the transactions contemplated by this Lease and the other
Transaction Documents contains any untrue statement of a material fact or omits
to state a material fact (known to Lessee, in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Lessee to be reasonable at the time made, it being recognized by Lessor, Agent
and Lenders that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results. There are no facts known (or
which should upon the reasonable exercise of diligence be known) to Lessee
(other than matters of a general economic nature) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and that have not been disclosed herein or in such other documents,
certificates and statements furnished to Lessor, Agent and Lenders for use in
connection with the transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
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(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such
monthly financial statements shall only be required to be delivered to
Agent to the extent such monthly financial statements are required to be
delivered under the Amended Aircraft Credit Facility as such agreement may
be amended, modified, supplemented, renewed or refinanced from time to
time;
(2) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each fiscal year,
(a) the consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the operations of
Lessee and its Subsidiaries in the form prepared for presentation to
senior management for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter; provided that delivery of Lessee's Form 10-Q for such fiscal
quarter shall be deemed to satisfy the requirements of this subsection
6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and
its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6(a)(12) for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief
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financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, (b) a narrative report describing the operations of Lessee and
its Subsidiaries in the form prepared for presentation to senior
management for such fiscal year, and (c) in the case of such consolidated
financial statements, a report thereon of Arthur Andersen LLP or other
independent certified public accountants of recognized national standing
selected by Lessee and satisfactory to Lessor and Agent, which report
shall be unqualified, shall express no doubts about the ability of Lessee
and its Subsidiaries to continue as a going concern, and shall state that
such consolidated financial statements fairly present the consolidated
financial position of Lessee and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards; provided that delivery of
Lessee's Form 10-K for such fiscal year shall be deemed to satisfy the
requirements of clauses (a) and (b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each
delivery of financial statements of Lessee and its Subsidiaries pursuant
to subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee stating that the signers have reviewed the
terms of this Lease and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Lessee and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the date
of such Officers' Certificate, of any condition or event that constitutes
a Default or Lease Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action Lessee has taken, is taking and proposes to take with
respect thereto; and (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
quarterly and annual accounting periods with the restrictions contained in
Section 7;
(5) Environmental Audits and Reports: as soon as practicable following
receipt thereof, copies of all environmental audits and reports, whether
prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which
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<PAGE> 41
relate to an Environmental Claim which could result in a Material Adverse
Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or
event that constitutes a Default or Lease Event of Default has come to
their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such Default or Lease Event of Default that would
not be disclosed in the course of their audit examination, and (c) stating
that based on their audit examination nothing has come to their attention
that causes them to believe either or both that the information contained
in the certificates delivered therewith pursuant to subdivision (4) above
is not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision (4)
above for the applicable fiscal year are not stated in accordance with the
terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of
(a) all financial statements, reports, notices and proxy statements sent
or made available generally by Lessee to its security holders, (b) all
regular and periodic reports and all registration statements (other than
on Form S-8 or a similar form) and prospectuses, if any, filed by Lessee
or any of its Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental or private
regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to
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<PAGE> 42
Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature
and period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer
of Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect
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<PAGE> 43
to a "multiemployer plan," within the meaning of Section 4001(a)(3) of
ERISA, and (c) such other documents or governmental reports or filings
relating to any Employee Benefit Plan as Lessor or Agent shall reasonably
request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion; and
(13) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to
its business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the interests of Lessee
and its Subsidiaries and is not materially disadvantageous to Lessor or to any
assignee of the Lease. Lessee will at all times maintain its corporate
existence as a United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Lessee.
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<PAGE> 44
(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage
(including, without limitation, flood insurance, if necessary or advisable) of
the kinds customarily carried or maintained under similar circumstances by
corporations engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine and any Spare Engine, and its and
their financial and accounting records, and, with the permission of Lessee
which shall not be unreasonably withheld, to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Lessee
may, if it so chooses, be present at or participate in any such discussion),
all upon reasonable notice and at such reasonable times during normal business
hours and as often as may be reasonably requested; provided that so long as no
Lease Event of Default shall have occurred and be continuing, such inspection
shall not be disruptive to Lessee's business, as reasonably determined by
Lessee. Without in any way limiting the foregoing, Lessee will, upon the
request of Lessor or Agent, participate in a meeting of Agent and Lenders once
during each fiscal year to be held at Lessee's corporate offices (or such other
location as may be agreed to by Lessee, Lessor and Agent) at such time as may
be agreed to by Lessee, Lessor and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reason-
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<PAGE> 45
ably be expected to cause a Material Adverse Effect. Lessee shall not conduct,
and shall not permit the conduct of, any Hazardous Materials Activity at any
facility or at any other location which could reasonably be expected to form
the basis of an Environmental Claim against Lessee and which could reasonably
be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the event
Lessee or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any facility, Lessee or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Lessee's or such Subsidiary's liability for
such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Lessee or such
Subsidiary. Notwithstanding anything to the contrary contained in this Lease,
Lessee and its Subsidiaries may engage in the transportation of Hazardous
Materials in the ordinary course of business so long as such is conducted in
compliance with all applicable Environmental Laws, and all other applicable
laws, policies, orders, directives and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
reasonably be expected to result in a liability for Lessee, under Title IV of
ERISA or the minimum funding standards of Part 3 of Subtitle B of Title I of
ERISA, in excess of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees that,
so long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
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<PAGE> 46
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(1) Lessee may become and remain liable with respect to the
obligations under the Amended Aircraft Credit Facility;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers
an Officers' Certificate to Lessor, Agent and Lenders, in form and
substance reasonably satisfactory to Lessor and Agent, confirming that, on
a Pro Forma Basis after giving effect to such incurrence of Indebtedness,
(i) the ratio of Consolidated Total Debt (less Cash and Cash Equivalents
held by Lessee in excess of $25 million) as of the last day of the most
recently ended fiscal quarter (the "Determination Date") plus seven times
Consolidated Rental Payments for the four fiscal quarter period ending on
such Determination Date to Consolidated Adjusted EBITDA plus Consolidated
Rental Payments for the four fiscal quarter period ending on such
Determination Date does not exceed the ratio set forth in subsection
7(f)(ii) for the fiscal quarter in which such Indebtedness is to be
incurred, (ii) the ratio of Consolidated Adjusted EBITDA for such four
fiscal
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<PAGE> 47
quarter period to Consolidated Interest Expense for such four fiscal
quarter period is not less than the ratio set forth in subsection 7(f)(i)
for the fiscal quarter in which such Indebtedness is to be incurred; and
(iii) Lessee will be in compliance with all covenants set forth in
subsection 7(f) hereof, Lessee and its Subsidiaries may incur Other
Permitted Indebtedness;
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding;
(8) Lessee may become and remain liable with respect to Indebtedness
under the NationsBanc Agreement;
(9) AFL I may become and remain liable with respect to all the
obligations under AFL I Credit Agreement and Lessee may become and remain
liable with respect to the AFL I Leases;
(10) Lessee may become and remain liable with respect to the Senior
Notes;
(11) Lessee and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed, without duplication, when added to the maximum aggregate
liability, contingent or otherwise, of Lessee and its Subsidiaries
outstanding in accordance with Section 7(d)(6), $30 million at any time
outstanding; and
(12) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
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<PAGE> 48
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any
assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event
shall Lessee create, incur, assume or permit to exist Liens on or with respect
to any assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule 7(b)
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL I Credit Agreement, Lessee will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary's capital stock to (i) pay dividends or make any
other distributions on any of such Subsidiary's capital stock owned by Lessee
or any other Subsidiary of Lessee, (ii) repay or prepay any Indebtedness owed
by such Subsidiary to Lessee or any other Subsidiary of Lessee, (iii) make
loans or advances to Lessee or any other Subsidiary of Lessee, or (iv) transfer
any of its property or assets to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's
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<PAGE> 49
Certificate in form and substance satisfactory to Lessor and Agent
demonstrating that such Special Purpose Subsidiary meets the requirements
set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal
year; provided that Lessee shall not incur liabilities related to any such
Joint Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed $15 million at any time outstanding.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with
Asset Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7(d)(4)
annexed hereto;
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<PAGE> 50
(5) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations to the extent such Contingent
Obligations are permitted pursuant to subsections 7(i) and 7(j); and
(6) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(11) shall at no time exceed
$30 million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Lessee may make scheduled payments of
principal, mandatory prepayments of principal (including through the exercise
of remedies) and payment of interest from time to time on Designated
Indebtedness; and provided further, that so long as no Default or Lease Event
of Default has occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may make Restricted Junior Payments with respect to its
Common Stock in an amount not to exceed in any fiscal year, the lesser of
25% of Consolidated Net Income for such fiscal year and $10 million;
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness; and
(4) Lessee may repurchase its Common Stock in an amount not to exceed
in any fiscal year $15 million for purposes of establishing or
contributing to an employee benefit plan; provided that any such
repurchased Common Stock resold to employees of Lessee shall, to the
extent of the price paid for such Common Stock by such employee, be
excluded from the calculation of the $15 million limit set forth above.
(f) Financial Covenants.
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<PAGE> 51
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
================================================================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
June 30, 1997 1.90:1.00
- --------------------------------------------------------------------------------
September 30, 1997 1.90:1.00
- --------------------------------------------------------------------------------
December 31, 1997 1.90:1.00
- --------------------------------------------------------------------------------
March 31, 1998 1.90:1.00
- --------------------------------------------------------------------------------
June 30, 1998 1.90:1.00
- --------------------------------------------------------------------------------
September 30, 1998 1.90:1.00
- --------------------------------------------------------------------------------
December 31, 1998 1.90:1.00
- --------------------------------------------------------------------------------
March 31, 1999 1.90:1.00
- --------------------------------------------------------------------------------
June 30, 1999 1.90:1.00
- --------------------------------------------------------------------------------
September 30, 1999 2.00:1.00
- --------------------------------------------------------------------------------
December 31, 1999 2.00:1.00
- --------------------------------------------------------------------------------
March 31, 2000 2.10:1.00
- --------------------------------------------------------------------------------
June 30, 2000 2.10:1.00
- --------------------------------------------------------------------------------
September 30, 2000 2.20:1.00
- --------------------------------------------------------------------------------
December 31, 2000 2.20:1.00
- --------------------------------------------------------------------------------
March 31, 2001 2.20:1.00
- --------------------------------------------------------------------------------
June 30, 2001 2.20:1.00
- --------------------------------------------------------------------------------
September 30, 2001 2.30:1.00
- --------------------------------------------------------------------------------
December 31, 2001 2.30:1.00
- --------------------------------------------------------------------------------
March 31, 2002 2.40:1.00
- --------------------------------------------------------------------------------
June 30, 2002 2.40:1.00
================================================================================
</TABLE>
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<PAGE> 52
<TABLE>
================================================================================
<S> <C>
September 30, 2002 2.50:1.00
- --------------------------------------------------------------------------------
December 31, 2002 2.50:1.00
- --------------------------------------------------------------------------------
March 31, 2003 2.60:1.00
- --------------------------------------------------------------------------------
Thereafter 2.70:1.00
================================================================================
</TABLE>
(ii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt at the end of any four fiscal quarter period ending
during one of the periods set forth below (less Cash and Cash Equivalents held
by Lessee in excess of $25 million as of such date) plus seven times
Consolidated Rental Payments for such four fiscal quarter period to (ii)
Consolidated Adjusted EBITDA plus Consolidated Rental Payments for such four
fiscal quarter period to exceed the correlative ratio indicated below:
<TABLE>
<CAPTION>
================================================================================
Fiscal Quarter Maximum
Ending Leverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
June 30, 1997 5.75:1.00
- --------------------------------------------------------------------------------
September 30, 1997 6.25:1.00
- --------------------------------------------------------------------------------
December 31, 1997 6.75:1.00
- --------------------------------------------------------------------------------
March 31, 1998 6.75:1.00
- --------------------------------------------------------------------------------
June 30, 1998 7.00:1.00
- --------------------------------------------------------------------------------
September 30, 1998 7.00:1.00
- --------------------------------------------------------------------------------
December 31, 1998 6.75:1.00
- --------------------------------------------------------------------------------
March 31, 1999 6.50:1.00
- --------------------------------------------------------------------------------
June 30, 1999 6.25:1.00
- --------------------------------------------------------------------------------
September 30, 1999 5.75:1.00
- --------------------------------------------------------------------------------
December 31, 1999 5.75:1.00
- --------------------------------------------------------------------------------
March 31, 2000 5.75:1.00
- --------------------------------------------------------------------------------
June 30, 2000 5.50:1.00
================================================================================
</TABLE>
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<PAGE> 53
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
September 30, 2000 5.50:1.00
- --------------------------------------------------------------------------------
December 31, 2000 5.25:1.00
- --------------------------------------------------------------------------------
March 31, 2001 5.25:1.00
- --------------------------------------------------------------------------------
June 30, 2001 5.25:1.00
- --------------------------------------------------------------------------------
September 30, 2001 5.00:1.00
- --------------------------------------------------------------------------------
December 31, 2001 5.00:1.00
- --------------------------------------------------------------------------------
March 31, 2002 4.75:1.00
- --------------------------------------------------------------------------------
June 30, 2002 4.75:1.00
- --------------------------------------------------------------------------------
September 30, 2002 4.50:1.00
- --------------------------------------------------------------------------------
December 31, 2002 4.50:1.00
- --------------------------------------------------------------------------------
March 31, 2003 4.50:1.00
- --------------------------------------------------------------------------------
Thereafter 4.25:1.00
================================================================================
</TABLE>
(iii) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
================================================================================
Minimum
Period Consolidated
Net Worth
- --------------------------------------------------------------------------------
<S> <C>
fiscal year 1997 $215 million
- --------------------------------------------------------------------------------
fiscal year 1998 $225 million
- --------------------------------------------------------------------------------
fiscal year 1999 $250 million
- --------------------------------------------------------------------------------
fiscal year 2000 $275 million
- --------------------------------------------------------------------------------
fiscal year 2001 $300 million
- --------------------------------------------------------------------------------
fiscal year 2002 $350 million
- --------------------------------------------------------------------------------
fiscal year 2003 $400 million
- --------------------------------------------------------------------------------
fiscal year 2004 $450 million
================================================================================
</TABLE>
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(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Lessee or any such
wholly-owned Subsidiary of Lessee; provided that, in the case of such a
merger, Lessee or such wholly-owned Subsidiary shall be the continuing or
surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of a division or line of
business of another Person provided that, (a) the acquisition primarily
involves the acquisition of assets to be used in the business of Lessee,
(b) with respect to such
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acquisition any newly acquired or created Subsidiary of Lessee shall be a
wholly-owned Subsidiary, (c) immediately before and after giving effect
thereto, no Default or Lease Event of Default shall have occurred and be
continuing, (d) immediately after giving effect to the acquisition, Lessee
shall be in compliance on a Pro Forma Basis with financial covenants in
subsection 7(f) and such compliance shall be evidenced by an Officer's
Certificate demonstrating such compliance, (e) Lessor and Agent shall have
reviewed and be reasonably satisfied with the nature and amount of all
contingent liabilities or other liabilities not on the balance sheet of
Lessee assumed in connection with such acquisition and a business plan
prepared by Lessee with respect to such acquisition and (f) the aggregate
amount of cash payments made in connection with all such acquisitions
other than with the proceeds from sales or issuances of equity by Lessee
does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of
spare parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business;
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter); and
(9) Lessee shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and operations
to Colorado; provided that the aggregate consideration paid with respect
to the acquisition of assets shall be in an amount not to exceed $20
million.
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(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation
or bylaws to be amended or otherwise modified in any manner which could
reasonably be expected to have a Material Adverse Effect or (ii) any Material
Agreement to be amended or otherwise modified in any manner with respect to any
provision providing material representations and warranties to Lessee,
indemnification rights to Lessee, or limiting Lessee's remedies or rights upon
the other party to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee
may become so obligated to the extent that, and only to the extent that,
immediately after giving effect to the incurrence of liability with respect to
such lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year do not exceed $60 million plus the amount of
Consolidated Rental Payments made during such fiscal year in respect of up to
four 747-400F aircraft, subject to the agreement dated June 9, 1997 between
Lessee and The Boeing Company regarding the purchase of 10 new 747-400F
aircraft, leased by the Lessee within twelve months following the Initial
Borrowing Date plus an amount not to exceed $12 million during any fiscal year,
equal to Consolidated Rental Payments incurred in connection with sale and
leaseback transactions described in subsection 7(j), plus Consolidated Rental
Payments assumed pursuant to acquisitions permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Lessee or any of its Subsidiaries
to any Person (other than Lessee or any of its Subsidiaries) in connection with
such lease; provided that Lessee and its Subsidiaries may become and remain
liable as lessee, guarantor or other surety with respect to any such lease if
and to the extent that Lessee or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease under subsection 7(i).
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(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Lessee or with any Affiliate of Lessee or of any
such holder, on terms that are less favorable to Lessee or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Lessee and its
Subsidiaries, (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Lessee or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Lessee or (iii) performance by Lessee of its obligations under and
in accordance with the Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of
any of its Subsidiaries, except to qualify directors if required by
applicable law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Lessee, another wholly-owned Subsidiary of
Lessee, or to qualify directors if required by applicable law.
Notwithstanding the foregoing, each of the Lessor and AFL I shall be
permitted to issue preferred stock in an amount not to exceed $100,000 each to
a third party.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
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SECTION 8. Return of the Aircraft and Spare Engines. (a) Condition Upon
Return. Unless the Aircraft or any Spare Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return the Aircraft or Spare
Engines to the Lessor hereunder, Lessee, at its own expense, will return the
Aircraft or Spare Engines to Lessor at a location specified by the Lessor to
the Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft and Spare Engines to be in compliance with the maintenance covenants
contained in this Lease and (ii) the Airframe will be fully equipped with the
Engines installed thereon.
At the time of such return, such Airframe, Engines and Spare Engines (A)
shall have an airworthiness certificate from the Federal Aviation
Administration and shall be in full compliance with the provisions of Federal
Aviation Regulations, Part 121 (or successor regulation), and shall be in
material compliance with all applicable FAA noise, corrosion, environmental and
aging aircraft requirements, (B) shall be free and clear of all Liens and (C)
in the case of the Aircraft, shall be in a full freighter configuration and in
the case of the Aircraft and Spare Engines in as good condition as when
originally delivered to Lessee, ordinary wear and tear excepted, and otherwise
in the condition required to be maintained under Lessee's FAA-approved
maintenance plan; and in all such cases the Aircraft and Spare Engines shall
not have been discriminated against as compared to other aircraft owned or
leased by Lessee whether by reason of its leased status or otherwise in
maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines, Spare Engines and all
Parts shall have been, and shall be properly documented to have been, repaired
or overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft and Spare Engines are eligible to
receive approval by the FAA (or its designee), if so required. All such repairs
shall be accompanied by all data and documentation necessary to substantiate
their certification, approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft and Spare Engines shall have approval or
certification by the FAA (or its designee) or certification if required. All
such modifications shall be accompanied by complete data and documentation
necessary to substantiate their certification and approval and methods of
compliance.
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(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines), Spare Engines or
Acceptable Alternate Engine or Parts, as well as all mandatory service
bulletins applicable to any of the foregoing, shall have been accomplished by
terminating action in compliance with the issuing agency's or the
manufacturer's specific instructions, as the case may be,taking into account,
any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate
Engine shall be delivered with the returned Airframe or in lieu of a Spare
Engine, 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 Acceptable Alternate Engine, in form and
substance reasonably satisfactory to Lessor (together with an opinion of
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 Acceptable Alternate Engines are free and clear of all Liens) against
receipt from Lessor of a bill of sale evidencing the transfer, without recourse
or warranty by Lessor to Lessee or its designee of all of Lessor's right, title
and interest in and to any Engine or Spare Engine not installed on the Airframe
at the time of the return of the Airframe.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft or Spare
Engines including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft and Spare
Engines shall have been maintained by cleaning and treating all mild and
moderate corrosion and correcting of all severe or exfoliate corrosion in
accordance with Lessee's approved maintenance program or manufacturer's
structural repair manual.
(i) Manuals. Upon the return of the Aircraft and Spare Engines upon any
termination of this Lease, Lessee shall deliver or cause to be delivered to
Lessor all logs, manuals and data and maintenance, inspection, modification and
overhaul records and similar records required to be maintained with respect to
the Aircraft and Spare Engines and Parts under FAA rules and the Aircraft
maintenance program. If any such logs, manuals, records or other data are
missing, incomplete or otherwise not in accordance with FAA standards
applicable to Lessee, Lessee shall re-accomplish the maintenance tasks
necessary to produce such records in accordance with its approved maintenance
program prior to delivery of the Aircraft or otherwise perform all necessary
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acts (without regard to any applicable waivers or deferrals) to obtain such
records in a manner satisfactory to the FAA and Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, Lessee receives from
Lessor a written request for storage of the Aircraft or Spare Engines upon its
return hereunder, Lessee will provide Lessor, or cause Lessor to be provided,
with storage facilities for the Aircraft or Spare Engines at Lessee's risk and
at Lessee's expense for a period not exceeding 30 days, and thereafter at
Lessor's risk and at Lessor's cost for insurance, maintenance and Lessee's
out-of-pocket expenses for such storage for a period not exceeding 90 days
(provided that if such termination occurs as a result of a Lease Event of
Default hereunder, such storage shall be at the cost of the Lessee), commencing
on the date the Aircraft or Spare Engine is returned substantially in the
condition required under this Section 8, at a location in the continental
United States selected by Lessee and used by Lessee as a location for the
long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft or Spare Engines are to
be returned to Lessor, Lessee shall, at Lessor's request, advise Lessor of the
nature and condition of all severable nonproprietary Parts (other than Parts
otherwise required by Sections 10 or 11 to be maintained on the Aircraft) 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 or Spare Engines in
accordance with Section 11 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 at their fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft or Spare
Engines, title thereto or any interest therein, except the lien of the Aircraft
Chattel Mortgage and Permitted Encumbrances. Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such Lien
not excepted above if the same shall arise at any time.
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SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, (i)
will be a "citizen of the United States" as defined in Section 40102(15) of
Title 49 of the United States Code and will be an air carrier certificated
under Sections 401 and 609 of the Act and hold all necessary air carrier
operating certificates; (ii) will cause ownership of the Aircraft and Spare
Engines to be duly registered and remain duly registered in the name of Lessor
in accordance with the Act and otherwise registered under all applicable laws
of the United States so as to be eligible to operate in commercial air service
under the Act; and (iii) will service, repair, inspect, test, maintain and
overhaul the Airframe, each Engine and each Spare Engine and install
replacement equipment and parts on the Airframe, each Engine and each Spare
Engine (A) so as to keep the Airframe, each Engine and each Spare Engine in
such operating condition as may be required to permit the Airframe, each Engine
and each Spare Engine to be utilized in commercial operations, (B) so as to
enable the airworthiness certification of the Airframe to be maintained in good
standing at all times under the Act, except when aircraft of the same type,
model or series as the Airframe (powered by engines of the same type as those
with which the Airframe shall be equipped at the time of grounding) registered
in the United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate of the
Aircraft shall be withdrawn, then subject to the provisions of Section 13
hereof, so long as Lessee is diligently taking or causing to be taken all
necessary action to promptly correct the condition which caused such
withdrawal, no Lease Event of Default shall arise from such withdrawal, (C) in
accordance with Lessee's FAA-approved maintenance, inspection and maintenance
control programs, and in the same manner and with the same care used by Lessee
with respect to the same or similar aircraft and engines owned or operated by
Lessee so as to keep the same in as good operating condition as when originally
leased hereunder, ordinary wear and tear excepted, which practices shall at all
times be at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. Lessee shall maintain all records, logs and other materials which may
be required to permit the Airframe, each Engine and each Spare Engine to be so
utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft, Engines and
Spare Engines. Neither the Airframe nor any Engine nor any Spare Engine will be
maintained, used or operated in violation of any
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law or any rule, regulation or order of any government or governmental
authority having jurisdiction (domestic or foreign), or in violation of any
airworthiness certificate, license or registration relating to the Airframe or
such Engine or Spare Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine or Spare Engine, Lessee, at its own cost and expense, will conform
thereto or obtain conformance therewith and will maintain the same in proper
operating condition under such laws, rules, regulations and orders, provided,
however, that Lessee may, in good faith (after having delivered to Lessor and
Agent an Officers' Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not, in Lessor's and Agent's opinion (in their
sole discretion), adversely affect the interests of Lessor, Agent or any
Lender.
Lessee will not operate, use or locate the Airframe or any Engine or Spare
Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 14 shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with respect
to the Airframe or such Engine or Spare Engine, except in the case of a
requisition for use by the United States of America, and then only if Lessee
obtains indemnity in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless the
Airframe or such Engine or Spare Engine is operated or used under contract with
the Government of the United States of America under which contract that
Government assumes liabilities for any damages, loss, destruction or failure to
return possession of the Airframe or such Engine or Spare Engine at the end of
the term of such contract and for injury to persons or damage to property of
others.
Lessee shall not use the Aircraft or any Spare Engine nor suffer it to be
used in any manner or for any purpose excepted from any of the insurance on or
in respect of the Aircraft or Spare Engine or for the purpose of carriage of
goods of any description excepted from such insurance nor do, or permit to be
done, anything which, or omit to do anything the omission of which, may
invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of
Agent and Lessor, sell, assign, lease or otherwise in any manner deliver,
transfer or relinquish possession or control of, or transfer the right, title
or interest of Lessee in, the Airframe or any Engine or Spare Engine except
that, unless a Default or Lease Event of Default shall have occurred and be
continuing, Lessee may without the prior written consent of the Agent and
Lessor, take the following actions so long as the actions to be taken shall not
deprive the Agent of the first priority Lien under the Aircraft Chattel
Mortgage in the assets subject thereto and so long as the actions to be taken
shall not
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deprive Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engine and shall not deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
or Spare Engine as assignee of Lessee's rights under this Lease pursuant to the
Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine or Spare Engine
other than by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as administered
pursuant to Executive Order 12656, or any substitute order) or any similar
or substitute programs;
(ii) transfer possession of the Airframe or any Engine or Spare
Engine to the manufacturer thereof for testing or other similar purposes
or any other organization for service, repairs, maintenance or overhaul
or, to the extent permitted by Section 11 hereof, for alterations or
modifications;
(iii) subject any Engine or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Lessee in the ordinary course
of business which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of the Airframe
or title to or use for the remainder of its useful life of such Engine or
Spare Engine; provided, however, that if Lessee's title to or use for the
remainder of its useful life, of the Airframe or any Engine or Spare
Engine shall be divested under any such agreement or arrangement, such
divesture shall be deemed to be an Event of Loss with respect to the
Airframe or such Engine or Spare Engine and Lessee shall comply with
Section 13 in respect thereof;
(iv) install an Engine or Spare Engine on an airframe which is owned
by Lessee free and clear of all Liens except (A) those permitted under
clauses (i) or (ii) of the definition of Permitted Encumbrances in the
Credit Agreement, (B) those that apply only to the engines (other than the
Engines and other than the Spare 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), and (C) the rights of any Domestic Air Carrier, under normal
interchange agreements which are customary in the airline industry and do
not contemplate or require the transfer of title to such airframe or the
engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased to Lessee
or owned by Lessee subject to a conditional sale or other security
agreement,
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provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and except Liens of the type permitted by
clause (iv) above; and (B) Agent and Lessor shall have received from the
lessor, conditional vendor or secured party and each of the purchasers,
mortgagees and encumbrancers of such lessor, conditional vendor or secured
party of such airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such airframe), whereby
such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party expressly and effectively agrees that neither it
nor its successors and assigns will acquire or claim any right, title or
interest in any Engine or Spare Engine by reason of such Engine or Spare
Engine being installed on such airframe at any time when such Engine or
Spare Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned by
Lessee, leased by Lessee or owned by Lessee subject to a conditional sale
or other security agreement under circumstances where neither clause (iv)
nor clause (v) above is applicable; provided that any divesture of title
to such Engine or Spare Engine resulting from such installation shall be
deemed to be an Event of Loss with respect to such Engine or Spare Engine
and Lessee shall comply with Section 13 in respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines, Spare Engines or engines installed thereon with any third
party pursuant to which Lessee has operational control of the Airframe and
any Engines or Spare Engines installed thereon such operation to be
performed solely by individuals under the operational control of Lessee
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by such
employees of similar functions within the United States; provided that
Lessee's obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine or Spare Engine permitted by the terms hereof shall
be made subject and subordinate to, and any lease permitted by this Section
10(b) shall be made expressly subject and subordinate to, the Lease and the
lien and security interest of the Aircraft Chattel Mortgage and all of Agent's
rights thereunder and Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such
transfer had not occurred, and any such instrument of transfer shall include
appropriate provisions for the maintenance and insurance of the Airframe or
such
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Engine or Spare Engine, and any such instrument of transfer shall expressly
prohibit any further transfer of the Airframe or such Engine or Spare Engine or
any assignment of the rights thereunder; and provided further, that no such
lease, pooling arrangement or other transfer or relinquishment of the
possession of the Airframe or any Engine or Spare Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the
Airframe and each Engine and Spare Engine to be legibly marked (in a reasonably
prominent location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing II,
Inc. and Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Lessor and Agent be appropriate or desirable to
evidence the fact that it is subject to the ownership of Lessor and the lien
and security interest created by the Aircraft Chattel Mortgage. Lessee shall
not remove or deface, or permit to be removed or defaced, any such plate, disk,
or other marking or the identifying manufacturer's serial number, and, in the
event of such removal or defacement, shall promptly cause such plate, disk, or
other marking or serial number to be promptly replaced. Except as provided
above, Lessee shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine or Spare Engine as a
designation that might be interpreted as a claim of ownership or of any
security interest therein, except that Lessee or any permitted lessee may place
its customary colors and insignia or the insignia of the manufacturer on the
Airframe or any Engine or Spare Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use
its best efforts to ensure that none of the Lessor, the Agent, any Lender or
any Affiliate of any of them is not at any time represented or held out) as
being in any way connected or associated with any operation of the Airframe,
any Engine or Spare Engine or any Part or any other operations or carriage
undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, any Spare Engine or any
Part, or for any other purpose whatsoever.
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SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or any
Spare Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever. In addition, in the ordinary course of
maintenance, service, repair or testing, Lessee at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that, except as otherwise provided in Section 11(d), Lessee at its own
cost and expense shall replace such Parts as promptly as practicable. All
replacement Parts shall be owned by Lessor free and clear of all Liens (except
Permitted Encumbrances and for pooling arrangements to the extent permitted by
Section 11(b)), and shall be in as good operating condition as, and shall have
a value and utility at least equal to, the Parts replaced assuming such parts
were in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine or any Spare
Engine shall remain the property of Lessor and shall remain subject to the lien
and security interest of the Aircraft Chattel Mortgage, no matter where
located, until such time as such Parts shall be replaced by parts which have
been incorporated or installed in or attached to the Airframe or any Engine or
any Spare Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Airframe or any Engine or any Spare Engine as
above provided, without further act, (A) title to such replacement Part shall
vest in and such replacement part shall become the property of Lessor and shall
become subject to this Lease and the lien and security interest of the Aircraft
Chattel Mortgage and shall be deemed part of the Airframe or such Engine or
Spare Engine for all purposes hereof to the same extent as the property
originally comprising, or installed on, such Airframe or such Engine or Spare
Engine, and (B) title to the replaced part shall no longer be the property of
Lessor and shall thereupon become free and clear of all rights of Lessor
hereunder and all rights derivative of Lessor's and shall no longer be deemed a
Part hereunder.
(b) Any Part removed from the Airframe or any Engine or Spare Engine as
provided in Section 11(a) may be subjected by Lessee to a normal pooling
arrangement of the type customary in the airline industry entered into by
Lessee in the ordinary course of its business and entered into with Domestic
Air Carriers that are not the subject of any bankruptcy, insolvency, or similar
proceeding, voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine or Spare Engine in accordance with Section 11(a) as promptly as possible
after the removal of such removed part. In addition, any
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replacement Part when incorporated or installed in or attached to the Airframe
or any Engine or Spare Engine in accordance with Section 11(a) may be owned by
any third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and
clear of all Liens (except Permitted Encumbrances and the Aircraft Chattel
Mortgage relating to the Aircraft or Spare Engine) or (B) replaces such
replacement Part by incorporating or installing in or attaching to the Airframe
or such Engine or Spare Engine a further replacement Part owned by Lessee which
shall become the property of Lessor subject to the lien and security interest
of the mortgage free and clear of all Liens (except Permitted Encumbrances and
the Aircraft Chattel Mortgage relating to the Aircraft or Spare Engine).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe, the
Engines and Spare Engines as may be required from time to time to meet the
standards of the FAA or other governmental authority having jurisdiction;
provided, that Lessee may, in good faith, contest the validity or application
of any such standard in any reasonable manner that shall not adversely affect
the Lessor's or Agent's respective interests. Lessee also agrees, at its own
cost and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe, the Engines and Spare Engines
as may be required from time to time to meet the standards or requirements of
any directive issued by a manufacturer relating to the Airframe or any Engine
or Spare Engine. In addition so long as no Default or Lease Event of Default
shall have occurred and be continuing, Lessee, at its own cost and expense, may
from time to time make such alterations and modifications in and additions to
the Airframe and any Engine or Spare Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine or Spare Engine below the value,
utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such Engine or
Spare Engine were then in the condition and airworthiness required to be
maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine or Spare Engine as the result of such alteration,
modification or addition shall, without further act, become the property of,
and title to such parts shall vest in Lessor and shall be subject to the lien
and security interest of the Aircraft Chattel Mortgage; provided that, so long
as no Default or Lease Event of Default, shall have occurred and be continuing,
Lessee may remove and not replace any such Part if it (A)
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is in addition to, and not in replacement of or in substitution for, any Part
incorporated or installed in or attached to the Airframe or such Engine or
Spare Engine on the date hereof, or any Part in replacement of or substitution
for any such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine or Spare Engine pursuant to
the terms of Section 10(a) hereof or any other provision of this Lease or the
Aircraft Chattel Mortgage and (C) can be removed from the Airframe or such
Engine or Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would have had
at such time had such alteration, modification or addition not occurred,
assuming the Airframe or such Engine or Spare Engine was otherwise in the
condition required by this Lease and the Aircraft Chattel Mortgage. Upon the
removal by Lessee of any such Part, as above provided, title thereto shall,
without further act, be free and clear of the interests of Lessor and all
rights derivative of Lessor's and such Part shall no longer be deemed a Part
hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine or Spare Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by Lessee for
any reason whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes,
levies, imposts, duties, charges or withholdings, together with any penalties,
fines or interest thereon (any of the foregoing for the purposes of this
Section 12 being called a "Tax"), which may from time to time be imposed on or
asserted against Lessor and its assignees, if any, or the Airframe or any
Engine or Spare Engine or any part thereof or interest therein by any Federal,
state or local government or other taxing authority in the United States or by
any foreign government or subdivision thereof or by any foreign taxing
authority in connection with, relating to or resulting from: (i) the Airframe
or any Engine or Spare Engine or any part thereof of interest therein; (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of the Airframe or any Engine or Spare
Engine; (iii) any rentals or other earnings therefor or arising therefrom or
the income or other proceeds received with respect thereto; or (iv) this Lease
or the Aircraft Chattel Mortgage; provided, however, that, there shall be
excluded from any indemnification under this Section 12(a) any Lessor Tax
unless the payment of any such Tax shall be a condition to the enforceability
of the Aircraft Chattel Mortgage or the perfection of the lien thereof or
unless proceedings shall have been commenced to foreclose any lien which may
have attached
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as security for such Tax, nothing in this Section shall require the payment of
any Tax so long as and to the extent that the validity thereof shall be
contested in good faith by appropriate legal proceedings promptly instituted
and diligently conducted and Lessee shall have set aside on its books adequate
reserves with respect thereto in accordance with generally accepted accounting
principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor,
Agent and each Lender, and the officers, directors, partners, employees, agents
and affiliates of Lessor, Agent and each Lender, (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct,
indirect or consequential and whether based on any federal, state or foreign
laws, statutes, rules or regulations (including without limitation securities
and commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Lease or the other Transaction Documents or
the transactions contemplated hereby or thereby (including without limitation
Lenders' agreement to make the Loans to Lessor or the use or intended use of
the proceeds of any of the Loans) (collectively called the "Indemnified
Liabilities"); provided that Lessee shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend,
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Lessee shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by the Indemnitees or any of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with
respect to an Airframe or an Engine or Spare Engine, Lessee will promptly
notify Lessor and Agent thereof in writing (in any event within five (5) days
of such occurrence) and will, not later than 180 days after the occurrence of
such Event of Loss, convey or cause to be conveyed to Lessor, free of all Liens
(other than Permitted Encumbrances) title to an Acceptable Alternate Airframe
or Acceptable Alternate Engine, as the case may be. Prior to or at the time of
any such conveyance, Lessee, at its own expense, will, as con-
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ditions to such transfer, (i) furnish Lessor with a warranty (as to title) bill
of sale, in form and substance reasonably satisfactory to Lessor, with respect
to such Acceptable Alternate Airframe or Acceptable Alternate Engine, (ii)
cause a Lease Supplement to be filed for recording pursuant to Title 49 of the
United States Code, as amended, (iii) furnish Lessor with such evidence of
Lessee's title to such Acceptable Alternate Airframe or Acceptable Alternate
Engine and of compliance with the insurance provisions of Section 14 hereof
with respect to such Acceptable Alternate Airframe or Acceptable Alternate
Engine as Lessor may reasonably request, (iv) furnish Lessor with an opinion of
Lessee's counsel to the effect that title to such Acceptable Alternate Airframe
or Acceptable Alternate Engine has been duly conveyed to Lessor free and clear
of all Liens except Permitted Encumbrances and Lessor and Agent continue to
have 1110 protection with respect to such Aircraft and (v) transfer to or at
the direction of Lessee without recourse or warranty all of Lessor's right,
title and interest, if any, in and to (A) the Airframe or Engine or Spare
Engine with respect to which such Event of Loss occurred and furnish to or at
the direction of Lessee, at Lessee's expense, a bill of sale in form and
substance reasonably satisfactory to Lessee, evidencing such transfer and (B)
all claims, if any, against third parties, for damage to or loss of the
Airframe or Engine or Spare Engine subject to such Event of Loss, and such
Airframe or Engine or Spare Engine shall thereupon cease to be an Airframe or
Engine or Spare Engine leased hereunder. Lessee shall cooperate with Lessor and
take all such actions as shall be requested by Lessor so that Lessor complies
with Section 4(f) of the Aircraft Chattel Mortgage. For all purposes hereof,
each such Acceptable Alternate Airframe or Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Airframe" or "Engine" or "Spare Engine", as the case may
be. No Event of Loss under the circumstance contemplated by the terms of this
paragraph (a) shall result in any reduction in Basic Rent.
(b) With respect to the Airframe or any Engine or Spare Engine, as between
the Lessor and Lessee, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for
in Section 14 below) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine or Spare Engine that has been or is being replaced
by Lessee pursuant to the terms hereof, so long as there shall exist no
Default or Lease Event of Default, such payment shall be paid over to or
retained by Lessee upon satisfaction of the conditions for replacement
contained in paragraph (a) above and until such time shall be held by
Lessor as security for the obligations of Lessee under the Lease; and
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(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine or Spare Engine, Lessee shall promptly notify
Lessor and Agent of such requisition and all of Lessee's obligations under the
Lease shall continue to the same extent as if such requisition had not
occurred. Any payments received by Lessor or Lessee from the United States
Government for the use of the Airframe or such Engine or Spare Engine, to the
extent allocable to the Term, shall be paid over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft and Spare Engines, at its own cost and expense,
public liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type
and covering the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated
with Lessee but in no event in an amount less than $500,000,000 per occurrence
(which shall include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when the Aircraft and Spare Engines
are on the ground and not in operation, Lessee may carry or cause to be
carried, in lieu of insurance required by this Section, insurance otherwise
conforming with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive airline
liability insurance, and the scope of risk covered and
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type of insurance shall be the same, as are customarily carried with respect to
similar aircraft on the ground by corporations engaged in the same or similar
business and similarly situated with Lessee. Any policies of insurance carried
in accordance with this Section 14 and any policies taken out in substitution
or replacement of any such policies (A) shall be amended to name Agent, Lenders
and Lessor as additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of the
liability, shall operate in the same manner as if there were a separate policy
covering each insured, and (D) shall provide that the insurer shall waive any
right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of
recognized responsibility and reputation on or with respect to the Aircraft and
Spare Engines, at its own cost and expense, aircraft ground and flight all-risk
hull insurance as well as fire and extended coverage insurance on Engines and
Spare Engines and other equipment while removed from the Airframe or airframe
(which shall include war risk, governmental confiscation and expropriation
(other than by the United States Government) and allied perils including (A)
strikes, riots, civil commotions or labor disturbances, (B) any malicious act
or act of sabotage and (C) hijacking (air piracy) or any unlawful seizure or
wrongful exercise of control of the Aircraft or Spare Engine or crew in flight
(including any attempt at such seizure or control) made by any person or
persons aboard the Aircraft or another aircraft acting without the consent of
the insured, if and to the extent the same shall be maintained by Lessee with
respect to similar aircraft owned or operated by Lessee on the same routes or
if the Aircraft or another aircraft is operated on routes where the custom is
for Domestic Air Carriers similarly situated with Lessee flying comparable
routes with similar aircraft to carry such insurance, of the type usually
carried by corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be for an
amount not less than the greater of the Stipulated Loss Value as of the closest
Stipulated Loss Determinate Date and $50,000,000. During any period when the
Aircraft or Spare Engine, as the case may be, is on the ground and not in
operation Lessee may carry or cause to be carried, in lieu of the insurance
required by this Section, insurance otherwise conforming hereto except that the
scope of risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee for
aircraft and spare engines on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name Agent, Lenders
and Lessor as additional insureds and loss payees to the extent their interest
may appear and shall provide that any loss to the Airframe or an Engine or a
Spare Engine in excess of $2,000,000 (and, if a Default or Lease Event of
Default has occurred and is continuing,
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any such loss) shall be payable to the Lessor and to the Agent for the benefit
of Lenders; and shall be primary without right of contribution from any other
insurance which is carried by Lessor or Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other
similar aircraft or spare engines in Lessee's fleet which are of a value
comparable to the Aircraft or Spare Engines, as the case may be, and as are not
substantially greater than amounts self-insured by corporations engaged in the
same or similar business and similarly situated with Lessee; provided, however,
that Lessee may not self-insure in an amount in excess of $1,000,000 without
the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Lessor, Agent or any Lender,
or if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Agent or any
Lender for thirty (30) days (seven (7) days, or such shorter or longer period
as may from time to time be customarily available in the industry, in the case
of any war risk and allied perils coverage) after receipt by Agent and Lessor
of written notice from such insurers of such cancellation, change or lapse; (D)
be in full force and effect throughout any geographical areas at any time
traversed by the Aircraft and shall be payable in U.S. dollars; (E) waive any
right of the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of Lessor and
Agent; and (F) waive all rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any
agency or instrumentality thereof in respect of the Airframe or any Engine or
Spare Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify Lessee against the same risks against which Lessee
is required hereunder to insure shall be considered adequate insurance with
respect to the Airframe or such
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Engine or Spare Engine to the extent of the risks and in the amounts that are
the subject of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect
to the Aircraft, the Engines and Spare Engines and stating that in the opinion
of such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of Lessee, Lessor and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance covered by the
report. Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or omission
on the part of Lessee of which such firm has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft or any Engine or Spare Engine and (y) at least thirty (30) days prior
to the expiration or termination date, or date of effectiveness of any material
change, of any insurance carried and maintained on the Aircraft or Spare
Engines hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft or Spare Engines
for its own account. Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft or Spare Engines in amounts in excess
of that required to be maintained by this Section 14. No insurance maintained
by Agent, Lessor or any Lender shall prevent Lessee from carrying the insurance
required or permitted by this Section. Proceeds of any such insurance carried
by Lessee, Agent or Lender shall be paid as provided in the insurance policy
relating thereto and no such Person shall have any duty to obtain any such
insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft or in the Spare Engines. Lessor agrees that
it will not assign or convey its right, title and interest in and to this Lease
or the Aircraft or Spare Engines except in accordance with the Credit
Agreement. Subject to the
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foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns and shall inure, to the direct benefit of, and shall also be
enforceable by the Agent and the Lenders, and their respective successors, as
assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days
after the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10
Business Days after written notice from Lessor or Agent, unless action has
been taken within 15 Business Days to remedy such breach and such action
is being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
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bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its
Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the appointment of an
interim receiver, trustee or other custodian of Lessee or any of its
Subsidiaries; or a warrant of attachment, execution or similar process
shall have been issued against any substantial part of the property of
Lessee or any of its subsidiaries, and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) Lessee or any of its Subsidiaries shall be unable, or
shall fail generally, or shall admit in writing its inability, to pay its
debts as such debts become due; or the Board of Directors of Lessee or any
of its Subsidiaries (or any committee thereof) shall adopt any resolution
or otherwise authorize any action to approve any of the actions referred
to in clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft or Spare Engine is canceled and is
not cured within 15 Business Days;
(i) The Aircraft or Spare Engine are arrested or detained in exercise
of any lien and Lessee does not procure the release of such Aircraft or
Spare Engine within 15 business days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Amended Aircraft Credit Facility (whether or not such
Event
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of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or
any items of Indebtedness with an aggregate principal amount of $10
million or more or (b) any Contingent Obligation in an individual
principal amount of $5 million or more or any Contingent Obligations with
an aggregate principal amount of $10 million or more, in each case beyond
the end of any grace period provided therefor; or (ii) there shall exist a
breach by Lessee or any of its Subsidiaries with respect to any other
material term of (a) any evidence of any Indebtedness in an individual
principal amount of $5 million or more or any items of Indebtedness with
an aggregate principal amount of $10 million or more or any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million
or more or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), if the effect
of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligations, as the case
may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Lessee or any of its Subsidiaries or any
of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days (or in any event later than
five days prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of
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Lessee representing at least 40% of the combined voting power of all
Securities of Lessee entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency, or (b) any Person or any two or more Persons acting in
concert (in any such case, excluding Mr. Chowdry) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Exchange Act), directly or indirectly,
of Securities of Lessee (or other Securities convertible into such
Securities) representing 20% or more of the combined voting power of all
Securities of Lessee entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency or (c) the Board of Directors of Lessee shall not consist of a
majority of Continuing Directors or (ii) a "Change of Control" shall occur
under the Pass Through Trust Documents or any other Material Agreement (as
in effect on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e), (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines or Spare Engines as Lessor in
its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, Airframe or any Engine or Spare 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 8 hereof as if such Airframe or Engine or Spare 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 Aircraft, Airframe or any Engine
or Spare Engine is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing
to Lessor for or by reason of such entry or taking of possession or
removal whether for the restoration of damage to property caused by such
action or otherwise, provided that if Lessee shall for any reason fail to
execute and deliver instruments deemed necessary or advisable by the
Lessor to obtain possession of the Aircraft, Airframe and Engines or Spare
Engine, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to
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immediate possession upon the Lessor and requiring Lessee to execute and
deliver such instruments to the Lessor;
(b) sell the Aircraft, Airframe or any Engine or Spare Engine at
public or private sale, as Lessor may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the Aircraft, Airframe or
any Engine or Spare 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 17; and without any duty to account
to Lessee with respect to such action or inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a) or (b) above
with respect to the Aircraft or Spare Engine, 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, any Basic
Rent due on or before the payment date so specified plus as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the
installments of Basic Rent for the Aircraft and Spare Engines due after
the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft and Spare Engines computed as of
the immediately preceding Stipulated Loss Determination Date, together
with interest, if any, at the Past Due Rate on the amount of such Basic
Rent and Stipulated Loss Value from the Stipulated Loss Determination Date
as of which Stipulated Loss Value is computed until the date of actual
payment; and upon such payment of liquidated damages and all Supplemental
Rent then due and payable by the Lessee hereunder, the Lessor shall
transfer (without any representation, recourse or warranty whatsoever) the
Aircraft and Spare Engines to the Lessee and the Lessor shall execute and
deliver such documents evidencing such transfer and take such further
action as the Lessee shall reasonably request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft and Spare Engines, Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to such Aircraft and Spare
Engines, may, if it shall so elect, demand that Lessee pay Lessor, and
Lessee shall pay to Lessor, on the date of such sale, any accrued rent
with respect to the Aircraft and Spare Engines due on or prior to such
date plus, as liquidated damages for loss of a bargain and not as a
penalty, 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 and Spare Engines, computed as of the date of
such sale together with interest, if any, on the amount of such
deficiency,
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at the Past Due Rate, from the date of such sale to the date of actual
payment of such amount;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses
incurred by Lessor and Agent and any Lender (including reasonable allocated
time charges of internal counsel for the Lender) in connection with the Lease
Event of Default, the exercise of remedies and the return of the Airframe or
any Engine or Spare Engine in accordance with the terms of Section 8 hereof or
in placing such Airframe or Engine or Spare Engine (which for purposes hereof,
shall include, without limitation all logs, manuals and data and inspection,
maintenance, modification and overhaul and similar records with respect
thereto) in the condition and airworthiness required by such Section. The
Lessee hereby acknowledges that it shall be directly liable for such costs and
expenses to any Person designated by the Lessor, the Agent or any Lender (as
the case may be) to provide services in connection with or to effect the return
of the Airframe or any Engine or Spare Engine in accordance with the terms of
Section 8 hereof or in placing such Airframe or Engine or Spare Engine (which
for purposes hereof shall include, without limitation, such logs, manuals and
records) in the condition and airworthiness required by such Section.
At any sale of the Aircraft, Spare Engine or any part thereof pursuant to
this Section 17, Lessor or Agent or any Lender 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 Spare Engine or of
the date on or after which will occur the execution of any contract providing
for any private sale. Except as otherwise expressly provided above, no remedy
referred to in this Section 17 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to 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
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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 Spare Engine or any part
thereof in mitigation of Lessor's damages as set forth in this Section 17 or
which may otherwise limit or modify any of Lessor's rights and remedies in this
Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so
long as any Loan relating to the Aircraft or Spare Engine or other Obligations
(other than principal and interest on Loans relating to other aircraft or other
spare engines) are outstanding under the Credit Agreement, all rights of Lessor
under this Section 17 shall be exercised only by the Agent as assignee of
Lessor's rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the
Lessor's interest hereunder, will cause such Lease Supplement (and, in the case
of the initial Lease Supplement, this Lease as well) or amendment to be duly
filed and recorded, and maintained of record, in accordance with the applicable
laws of the government of registry of the Aircraft and Spare Engines. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor and the Agent such further documents and take such further action as
Lessor and the Agent may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and the other
Transaction Documents and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor and Agent hereunder and
under the other Transaction Documents, including, without limitation, if
requested by Lessor and the Agent, the execution and delivery of supplements or
amendments hereto, at the expense of Lessee, each in recordable form, and all
financing statements and continuation statements, and all similar notices
required by applicable law at all times to be kept recorded and filed in such
manner and such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the
Agent promptly after execution and delivery of any supplement and amendment
hereto, an opinion of counsel satisfactory to Lessor and the Agent (which may
include Lessee's general counsel) stating that in the opinion of such counsel,
such supplement or amendment to the Lease (or a financing statement,
continuation statement or similar notice thereof if and to the extent permitted
or required by applicable law) has been properly recorded or filed for record
in all public offices in which such recording or filing is
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necessary to protect the right, title and interest of Lessor hereunder and the
Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Counsel, or to such other address as Lessee shall from time to
time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Marguerite
Sutton.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to
pay Rent and all other amounts payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) any setoff, counterclaim, recoupment,
defense or other right which the Lessee may have against the Lessor, the Agent,
the Lenders, any manufacturer, any supplier or any other Person for any reason
whatsoever, (ii) any defect in the title, airworthiness, eligibility for
registration under Title 49 of the United States Code, as amended or other
applicable law, condition, design, compliance with specifications, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft or
Spare Engines, or any theft, interference, interruption or cessation in or
prohibition of the use or possession thereof by the Lessee or any sublessee for
any reason whatsoever, including, without limitation, any such interference,
interruption, cessation or prohibition resulting from the act of any
governmental authority, (iii) any Liens, encumbrances or rights of any other
Person with respect to the Aircraft or Spare Engines, (iv) the invalidity or
unenforceability or lack of due authorization or other infirmity of this Lease
or any other Transaction Document or document or instrument executed pursuant
hereto or thereto, or any lack of right, power or authority of the Lessor or
the Lessee or any other party
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to any other Transaction Document to enter into this Lease or any other
Transaction Document or any such document or instrument, (v) any loss of or
damage to the Aircraft, Airframe, any Engine or Spare Engine or any Part, (vi)
any insolvency, bankruptcy, reorganization or similar proceedings by or against
the Lessee or any other Person, or (vii) any failure, breach or delay by the
Lessor or any other Person in performing or complying with any term of this
Lease or any other cause whether similar or dissimilar to the foregoing, any
present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to
any setoff or any reduction for any reason whatsoever, including any present or
future claims of Lessee against Lessor or any other Person under this Lease or
otherwise. Lessee hereby waives, and hereby agrees to waive at any future time
at the request of Lessor, to the full extent now or then permitted by
applicable law any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express
terms hereof. Each payment of Rent made by Lessee to Lessor shall be final as
to Lessor and Lessee. Lessee will not seek to recover all or any part of any
such payment of Rent from Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft
Chattel Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines, Spare Engines and
Parts as provided herein, and in any circumstances where more than one
construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. ss. 1110 or
any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the Federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft or Spare Engines, as the case may
be, in compliance with the provisions of this Lease shall not be affected by
the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or
any analogue provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any
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<PAGE> 84
tax returns in a manner or take any other action or position inconsistent with
the foregoing or with the Lessor's ownership of the Aircraft or Spare Engines.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft or Spare Engines except as a
Lessee only. The Aircraft and Spare Engines shall at all times during the term
of this Lease be the sole and exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft and the
Spare Engines at the end of the Term for a purchase price equal to the higher
of the Fair Market Sales Value (assuming that the Aircraft and Spare Engines
are in the condition required by the Lease) as of such date and Stipulated Loss
Value plus all accrued Rent and all Supplemental Rent then due. Upon the
payment by Lessee of the full of such amounts, Lessor shall convey to Lessee
all right, title and interest of Lessor in and to the Aircraft and Spare
Engines on an "as-is, where is" basis, without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not
more than 360 days) irrevocable prior written notice to Lessor. The Lessee will
give Lessor prior written irrevocable notice not less than 90 days (but not
more than 360 days) before the expiration of the Term of its determination to
return the Aircraft and Spare Engines and not exercise any purchase option
under this Section 21. If Lessee fails to give notice as required herein,
Lessee will be deemed to have elected to return the Aircraft and Spare Engines
to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be
obligated hereunder to do so, and the amount of such payment and the amount of
the reasonable expenses of Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand.
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<PAGE> 85
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
or Spare Engines except as a lessee only. Neither Lessee nor any Affiliate of
Lessee will file any tax returns in a manner inconsistent with the foregoing
fact or with Lessor's ownership of the Aircraft and Spare Engines or with the
parties' agreement that this Lease be treated as a tax lease for purposes of
the Internal Revenue Code. 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
reference herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE
OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR
BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE
LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This
Lease may be executed by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect
to the subject matter hereof and thereof, except any agreements referred to
herein.
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<PAGE> 86
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations
under this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among
other things, to assign to the Agent this Lease and the Lease Supplements and
to mortgage in favor of the Agent the Aircraft and the Spare Engines, subject
to the reservations and conditions therein set forth. All rights of the Lessor
hereunder are subject to the Aircraft Chattel Mortgage and the Lessor and the
Lessee agree that so long as the lien of the Aircraft Chattel Mortgage has not
been discharged in accordance with its terms, (i) all payments hereunder shall
be made to the Agent for the benefit of Lenders to the extent of the Lenders'
interest in such payments; (ii) all notices from or to the Lessor shall be
copied to the Agent and (iii) the Lessee shall not take any actions that the
Lessor would be prohibited from taking under the terms of the Aircraft Chattel
Mortgage. Lessee hereby acknowledges due notice of, and consents to, such
assignment and to the creation of such mortgage and security interest. To the
extent, if any, that this Lease and any Lease Supplement constitutes chattel
paper (as such term is in effect in any applicable jurisdiction), no security
interest in this Lease or any Lease Supplement may be created through the
transfer or possession of any counterpart other than the original executed
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof or thereof.
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<PAGE> 87
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.
Lessor
By
-----------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
-----------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of September, 1997.
BANKERS TRUST COMPANY,
as Agent
By
----------------------------
Name:
Title:
<PAGE> 88
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING II, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of September 5, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe, Engines and Spare Engines under the Lease as and when delivered
by Lessor to Lessee in accordance with the terms thereof.
[(1)The Lease relates to the Airframe, Engines and Spare Engines described
below, and a counterpart of the Lease is attached hereto, and made a part
hereof, and this Lease Supplement together with such attachment, is being filed
for recordation on the date hereof with the Federal Aviation Administration as
one document.]
- --------
(1) This language for Lease Supplement No. 1.
<PAGE> 89
EXHIBIT A
Page 2
[(2)The Lease relates to the Airframe, Engines and Spare Engines described
below, and a counterpart of the Lease, together with Lease Supplement No. 1
dated September 5, 1997, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on __________ __, 1997, as one document and
assigned Conveyance No. ____________.]
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
------;
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______] (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower); and
(iii) Two Spare Engines: two (2) aircraft engines bearing,
respectively, manufacturer's serial nos. [__________________ and
___________] (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The closing date of the Aircraft and Spare Engines is the date of this
Lease Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft and Spare Engines shall
commence on the closing date and end on the Final Maturity Date.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
and Spare Engines for all purposes hereof and of the Lease as being airworthy,
- --------
(2) This language for other Lease Supplements.
<PAGE> 90
EXHIBIT A
Page 3
in good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that
nothing contained herein or in the Lease shall in any way diminish or otherwise
affect any right Lessee or Lessor may have with respect to the Aircraft or
Spare Engines against the manufacturer, any affiliate thereof, or any
subcontractor or supplier of the manufacturer or any affiliate thereof, under
any purchase agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 91
EXHIBIT A
Page 4
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.,
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on September ___, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Name:
Title:
<PAGE> 92
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
---- -------------------
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 93
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 94
EXHIBIT D
to
Lease Agreement
[FORM OF COMPLIANCE CERTIFICATE]
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) We are the duly elected [Title] and [Title] of Atlas Air, Inc., a
Delaware corporation ("Atlas");
(2) We have reviewed the terms of the four Lease Agreements, dated as
of September 5, 1997, between Atlas Freighter Leasing II, Inc., as Lessor
and Atlas, as Lessee (the "Leases") and the other Transaction Loan
Documents, and we have made, or have caused to be made under our
supervision, a review in reasonable detail of the transactions and the
condition of Atlas and its Subsidiaries during the accounting period
covered by the attached financial statements.*** The terms defined therein
and not otherwise defined in this Certificate (including Attachment No. 1
annexed hereto and made a part hereof) shall be used in this Certificate
as therein defined; and
(3) The examination described in paragraph (2) above did not
disclose, and we have no knowledge of, the existence of any condition or
event which constitutes a Default or Lease Event of Default under any
Lease during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate[,
except as set forth below].
[Set forth [below] [in a separate attachment to this Certificate] are all
exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Atlas has taken, is taking, or proposes to take with respect to each such
condition or event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------]
- --------
*** Compliance Certificate delivered on the date on which the Leases are
executed and delivered shall provide financials for the fourth quarter
fiscal period most recently ended.
<PAGE> 95
EXHIBIT D
Page 2
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this _____________ day of ____________, 199__ pursuant to subsection
6(a)(4) of each Lease.
ATLAS AIR, INC.
By:
---------------------------
Name:
Title:
<PAGE> 96
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of _____________, 199__ and pertains to the period from
_____________, 199__ to _________________, 199__. Subsection references herein
relate to subsections of each Lease.
A. Indebtedness
1. Indebtedness permitted under subsection 7(a)(11): $__________
2. Aggregate liability, contingent or otherwise,
outstanding under subsection 7(d)(6): $__________
3. Maximum permitted under subsection 7(a)(11)
($30,000,000)-(A.2)): $__________
B. Liens
1. Indebtedness secured by Liens permitted under
subsection 7(b)A(iii): $__________
2. Maximum permitted under subsection 7(b)A(iii): $10,000,000
C. Investments
1. Consolidated book value of the assets of Atlas
and its Subsidiaries: $_________
2. 15% of C.1: $_________
3. Investments permitted under subsection 7(c)(iii): $_________
4. Maximum permitted under subsection 7(c)(iii)(C.2): $_________
5. Investments permitted under subsection 7(c)(vi): $_________
6. Maximum permitted under subsection 7(c)(vi): $15,000,000
<PAGE> 97
D. Investments in Joint Ventures(1)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared or paid during fiscal year: $_________
3. Contributions to capital of Special Purpose
Subsidiaries during fiscal year: $_________
4. Investments made under subsection 7(c)(iv): $_________
5. Maximum permitted under subsection 7(c)(iv) (1-2-3): $_________
E. Contingent Obligations
1. Contingent Obligations permitted under sub-
section 7(d)(6): $_________
2. Indebtedness outstanding under subsection
section 7(a)(11): $_________
3. Maximum permitted under subsection 7(d)(6)
($30,000,000 - (E.2)): $__________
F. Restricted Junior Payments(2)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared and paid under sub-
section 7(e)(2): $_________
3. Maximum permitted under subsection 7(e)(2) (F.1): $_________
- --------
(1) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of such fiscal year.
(2) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of fiscal year.
<PAGE> 98
G. Minimum Interest Coverage Ratio (for the four-fiscal quarter period ending
___________, 199__)
1. Consolidated Net Income: $_________
2. Consolidated Interest Expense: $_________
3. Provisions for taxes based on income: $_________
4. Total depreciation expense: $_________
5. Total amortization expense: $_________
6. Other non-cash items reducing Consolidated Net
Income: $_________
7. Other non-cash items increasing Consolidated
Net Income: $_________
8. All cash expenditures relating to reserves on
the June 30, 1997 balance sheet: $_________
9. Consolidated Adjusted EBITDA (adjusted for
periods ending prior to December 31, 1996)
(1 + 2 + 3 + 4 + 5 + 6 - 7) - 8 : $_________
10. Interest Coverage Ratio (9):(2): ____:1.00
11. Minimum ratio required under subsection 7(f)(i): ____:1.00
H. Maximum Leverage Ratio (as of _____________, 199__)
1. Consolidated Total Debt: $_________
2. Cash and Cash Equivalents in excess of
$25,000,000: $_________
3. Consolidated Rental Payments: $__________
4. Consolidated Adjusted EBITDA (G.9 above): $_________
5. Leverage Ratio (H.1 - H.2) + (7 x H.3) : (H.4 + H.3): ____:1.00
<PAGE> 99
6. Maximum ratio permitted under subsection 7(f)(ii): ____:1.00
I. Minimum Consolidated Net Worth (as of ___________, 199__)
1. Consolidated Net Worth: $_________
2. Minimum required under subsection 7(f)(iii): $_________
J. Fundamental Changes
1. Aggregate value of assets sold in Asset Sales
during current fiscal year permitted under
subsection 7(g)(3): $_________
2. Maximum permitted under subsection 7(g)(3): $100,000,000
3. Aggregate value of assets sold in Asset Sales
after Closing Date in one or more transactions
permitted under subsection 7(g)(3): $_________
4. Maximum permitted under subsection 7(g)(3): $500,000,000
K. Consolidated Capital Expenditures
1. Consolidated Capital Expenditures for fiscal
year-to-date: $_________
2. Maximum Consolidated Capital Expenditures Amount
permitted under subsection 7(g)(8) for fiscal year: $_________
L. Leases
1. Consolidated Rental Payments incurred in connection with the
sale-leaseback transactions described in Subsection 7(j) of
the Leases in an amount not to exceed $12 million plus
Consolidated Rental Payments pursuant to acquisitions
permitted under Subsection
7(g)(5): $_________
2. Consolidated Rental Payments in effect during
current fiscal year: $_________
<PAGE> 100
3. Maximum permitted under subsection 7(i) (L.1 +
$60,000,000): $_________
<PAGE> 1
EXHIBIT 10.77
===============================================================================
LEASE AGREEMENT
(N523MC)
DATED AS OF SEPTEMBER 5, 1997
BETWEEN
ATLAS FREIGHTER LEASING II, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-2D7B Aircraft
U.S. Registration No. N523MC
Manufacturer's Serial No. 21782
---------------------------
Two Spare Engines
Manufacturer's Serial Nos. 530168 and 517530
===============================================================================
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN
AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions................................................... 1
SECTION 2. Acceptance and Lease.......................................... 24
SECTION 3. Term and Rent................................................. 24
(a) Term and Basic Rent......................................... 24
(b) Adjustments to Basic Rent................................... 25
(c) Supplemental Rent........................................... 25
(d) Payments in General......................................... 25
(e) Minimum Rent................................................ 26
(f) Prepayment of Rent Payments................................. 26
SECTION 4. Certain Representations and Warranties........................ 27
SECTION 5. Lessee's Representations and Warranties....................... 28
SECTION 6. Lessee's Affirmative Covenants................................ 34
SECTION 7. Lessee's Negative Covenants................................... 42
SECTION 8. Return of the Aircraft and Spare Engines...................... 54
(a) Condition Upon Return....................................... 54
(b) Overhaul and Repair......................................... 54
(c) Repairs..................................................... 55
(d) Modifications............................................... 55
(e) Airworthiness Directives.................................... 55
(f) Return of the Engines....................................... 55
(g) Deferred Maintenance........................................ 55
(h) Corrosion Treatment......................................... 55
(i) Manuals..................................................... 56
(j) Storage Upon Return......................................... 56
(k) Severable Parts............................................. 56
(l) Survival.................................................... 56
SECTION 9. Liens......................................................... 57
SECTION 10. Registration, Maintenance and Operation; Possession
and Subleases; Insignia.............................................. 57
(2)
<PAGE> 3
Page
----
(a) Maintenance and Operation................................... 57
(b) Possession.................................................. 59
(c) Insignia.................................................... 61
(d) Holding Out................................................. 61
(e) No Pledging of Credit....................................... 62
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.................................................... 62
SECTION 12. Indemnities.................................................. 64
SECTION 13. Event of Loss................................................ 66
SECTION 14. Insurance.................................................... 68
SECTION 15. Assignment................................................... 71
SECTION 16. Events of Default............................................ 71
SECTION 17. Remedies..................................................... 74
SECTION 18. Lessee's Cooperation Concerning Certain Matters.............. 77
SECTION 19. Notices...................................................... 78
SECTION 20. Net Lease, True Lease, etc................................... 78
SECTION 21. Purchase Option.............................................. 80
(a) Purchase Option............................................. 80
(b) Notice of Purchase.......................................... 80
SECTION 22. Lessor's Right to Perform for Lessee......................... 81
SECTION 23. Miscellaneous................................................ 81
SECTION 24. Security for Lessor's Obligations............................ 82
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
(3)
<PAGE> 4
Page
----
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
(4)
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of September 5, 1997 between ATLAS FREIGHTER
LEASING II, INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft and the Spare Engines to be leased pursuant to the
terms of this Lease and other similar aircraft and spare engines to be leased
pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has
a maximum gross takeoff weight of at least 800,000 pounds and is of the
equivalent or greater residual value, condition, utility, airworthiness, and
remaining useful life and which shall have been maintained, serviced, repaired
and overhauled in substantially the same
-1-
<PAGE> 6
manner as Lessee maintains, services, repairs and overhauls similar airframes
utilized by Lessee and without in any way discriminating against such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2 engine for
the aircraft bearing U.S. registration number N523MC, N524MC, N526MC, N527MC or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract
entered into at the time of the acquisition of such aircraft (which ACMI
Contract shall not represent a renewal or replacement of a prior ACMI Contract
unless the aircraft used pursuant to such prior ACMI Contract was operated
under an operating lease and returned to the lessor) which is in effect on the
date of calculation and has a remaining term of one year or more on the date
such aircraft was intended to be used in connection with such ACMI Contract
(subject to cancellation terms, which may include the right to cancel on six
months notice). When making any calculation on a Pro Forma Basis effect shall
be given to the acquisition of an ACMI Contracted Aircraft by adding to the
appropriate components of Consolidated Adjusted EBITDA (i) the net projected
annualized revenues from the operation of the ACMI Contracted Aircraft under
such ACMI Contract for that portion of the period for which Consolidated
Adjusted EBITDA is being calculated prior to the acquisition of such aircraft,
assuming operation for the minimum guaranteed number of block hours (less any
block hours subject to cancellation) at the minimum guaranteed rate under such
ACMI Contract less (ii) the projected annualized cash operating expenses from
such operation for the same period for which the related projected revenues are
determined in clause (i) above; provided that such projected cash operating
expenses shall not be less on a per block hour basis than the average
historical per block hour operating expenses of Lessee for the four full fiscal
quarters immedi-
-2-
<PAGE> 7
ately preceding the date of calculation, and provided further, that if
such aircraft is of a model other than a Boeing 747 freighter, such projected
cash operating expenses shall include maintenance costs which shall not be less
than the average for such aircraft type disclosed on the most recently
available DOT Forms 41 with respect to such aircraft type or any summary of
such data as reported in a nationally recognized industry publication. For
purposes of this definition, "ACMI Contract" shall include contracts pursuant
to which Lessee does not pay any crew costs, in which event pro forma effect
shall be given as described above but excluding from the projected annualized
cash operating expenses all crew costs. Cash operating expenses means for
purposes of this definition consolidated operating expenses, less consolidated
depreciation and amortization and Consolidated Rental Payments, to the extent
included in computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AFL I" means Atlas Freighter Leasing, Inc., a Delaware corporation.
"AFL I Aircraft" means (i) one Boeing 747-200 Aircraft, serial number
21048, with four Pratt & Whitney JT9D-7J engines attached and (ii) five Boeing
747-200 Aircraft, serial numbers 21221, 21251, 21380, 21644, and 22507, each
with four General Electric CF6-50E2 engines attached.
"AFL I Credit Agreement" means that certain Credit Agreement dated as of
May 29, 1997 by and among AFL I, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms hereof.
"AFL I Leases" means the Leases as such term is defined in the AFL I
Credit Agreement.
"AFL I Restructuring" means the following transactions which occurred
concurrently on May 29, 1997: (i) the termination of the leases relating to the
AFL I Aircraft in existence prior to May 29, 1997, (ii) the transfer, as a
dividend, of the AFL I Aircraft to Lessee and the simultaneous contribution of
the AFL I Aircraft to AFL I as a capital contribution, together with
approximately $10.4 million, (iii) the incurrence
-3-
<PAGE> 8
of indebtedness pursuant to the AFL I Credit Agreement and the simultaneous
repayment of the indebtedness previously secured by the AFL I Aircraft and (iv)
the entering into of the AFL I Leases.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Aircraft Obligations" means all amounts owing by the Lessee or any of its
Subsidiaries pursuant to the Amended Aircraft Credit Facility immediately prior
to giving effect to the third amendment and restatement thereof on the date
hereof and relating to the Aircraft and Spare Engines being contributed to the
Lessor pursuant to the Transaction.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement
and (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but
where title to which remains vested in Lessor in accordance with this Lease.
"Amended Aircraft Credit Facility" means the Third Amended and Restated
Credit Agreement dated as of September 5, 1997, among Lessee, as Borrower, the
lenders listed therein, Goldman Sachs Credit Partners L.P., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent, without giving
effect to any amendments, modifications, supplements or waivers thereof.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc., Morton Beyer, Agnew, or any other nationally recognized firm of
aircraft appraisers reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock
of any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets
-4-
<PAGE> 9
sold in any single transaction or related series of transactions is equal
to $1,000,000 or less, (B) transactions related to aircraft engines,
components, parts or spare parts pursuant to customary pooling, exchange or
similar arrangements, (C) asset swaps involving aircraft engines, components,
parts or spare parts; provided that the assets received by the Lessee or any
Subsidiary have a fair market value at least equal to the assets transferred
(provided that with respect to any asset swap or series of related asset swaps
involving assets of Lessee or any Subsidiary with a fair market value exceeding
$3,000,000, such determination shall be made by the Board of Directors of
Lessee)) and (D) asset sales involving obsolete, worn-out, excess or redundant
equipment as long as the proceeds therefrom are used to replace or to upgrade
the aircraft or the equipment installed thereon.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft and
the Spare Engines pursuant to Section 3(a) of this Lease adjusted as provided
in Section 3(b) of this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized
or required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of
the United States the obligations of which are backed by the full faith and
credit of the United States, in each case maturing within one year after such
date; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial
-5-
<PAGE> 10
paper maturing no more than one year from the date of creation thereof and
having, at the time of the acquisition thereof, a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year after such date and issued or accepted by
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of
not less than $500,000,000, and (c) has the highest rating obtainable from
either S&P or Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Atlas, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries)
by Lessee and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
-6-
<PAGE> 11
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3
of the Amended Aircraft Credit Facility on or before the Third Amended and
Restated Closing Date (as such term is defined in the Amended Aircraft Credit
Facility).
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Lessee or is
merged into or consolidated with Lessee or any of its Subsidiaries or that
Person's assets are acquired by Lessee or any of its Subsidiaries, (iii) the
income of any Subsidiary of Lessee to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any pension plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum
of the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts). For the avoidance of
-7-
<PAGE> 12
doubt, all rental payments to AFL I and Lessor shall not be included in
Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agreements. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guaranty, endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by
any other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement (contingent or
otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the case
of any agreement described under subclauses (X) or (Y) of this sentence, the
primary purpose or intent thereof is as described in the preceding sentence.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if less, the amount to
which such Contingent Obligation is specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a
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<PAGE> 13
party or by which it or any of its properties is bound or to which it or
any of its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
and Spare Engines subject to this Lease and the other aircraft and spare
engines to be leased pursuant to the Leases, subject to the Aircraft
Obligations.
"Credit Agreement" shall mean the Credit Agreement, dated as of September
5, 1997, by and among Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, and
Goldman Sachs Credit Partners L.P., as Syndication Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the NationsBanc Agreement, the AFL I Credit Agreement, the
Senior Note Documents, any Permitted Extension Indebtedness and any Other
Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsec- tion
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type
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and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the General Electric CF6-50E2 aircraft engines
for the aircraft bearing U.S. registration numbers N523MC, N524MC, N526MC and
N527MC listed by manufacturer's serial numbers in the initial Lease Supplement
and installed on the Airframe at the time of the delivery to Lessee of such
Airframe, whether or not from time to time thereafter installed on such
Airframe or any other airframe; (ii) any Acceptable Alternate Engine which may
from time to time be substituted for any of such four engines pursuant to the
terms of the Lease; and (iii) in any case, any and all Parts which are from
time to time incorporated or installed in or attached to any such engine and
any and all parts removed therefrom so long as title thereto remains vested in
Lessor in accordance herewith. The term "Engines" means, as of any date of
determination, all Engines then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
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"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member;
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or Spare Engine or
both): (A) loss of such Aircraft or Spare Engine or the use thereof due to
theft or disappearance of the Aircraft or Spare Engine which shall result in
the loss of possession thereof for a period of 120 days (or for a shorter
period ending on the date on which there is an insurance settlement for a total
loss on the basis of the theft or disappearance of such Aircraft or Spare
Engine); (B) the destruction, damage beyond repair or rendition of such
Aircraft or Spare Engine permanently unfit for normal use for any reason
whatsoever; (C) the condemnation, confiscation or seizure of, or requisition of
title to, or use or possession (other than use by the United States Government
if Lessee obtains adequate compensation from the United States Government) of
such Aircraft or Spare Engine; (D) as a result of any rule, regulation, order
or other action by the FAA or other governmental body having jurisdiction, the
use of such Aircraft or Spare Engine in the normal course of interstate air
transportation of persons or cargo shall have been prohibited for a period of
more than nine consecutive months unless Lessee, prior to the expiration of
such nine month period, shall have undertaken and shall be diligently carrying
forward all steps which are necessary or desirable to permit the normal use of
such property by Lessee or, in any event, if such use shall have been
prohibited for a period of twelve consecutive months; (E) the operation or
location of such Aircraft or Spare Engine, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area
excluded from coverage by any insurance policy in effect with respect to such
Aircraft or Spare Engine, if Lessee shall be unable to obtain indemnity or
"war-risk" insurance in lieu thereof from the United States; (F) any damage
which results in an insurance settlement with respect to such Aircraft or Spare
Engine on the basis of an actual or constructive total loss or (G) a
divestiture of such Airframe or Spare Engine as described in Section 4(d)(iii)
or Section 4(d)(vi) of any Aircraft Chattel Mortgage under
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<PAGE> 16
the Credit Agreement. 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 of the Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of the Airframe or any Engine or Spare Engine
shall mean the value which would be obtained in an arm's-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 by a recognized independent aircraft appraiser, mutually agreed to by
the Agent and Lessee, or, if such appraiser cannot be agreed to within 20 days,
then either party may apply to the American Arbitration Association (or any
successor organization thereto) in New York City for the appointment of an
appraiser, whose determinations shall be final and binding upon the parties
hereto. In determining Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe, Engine or Spare Engine is in the
condition, location and overhaul status in which it is required to be returned
to Lessor pursuant to Section 8 of this Lease, that all modifications and
improvements shall be taken into account, that Lessee has removed all Parts
which it is entitled to remove pursuant to Section 11 of this Lease and that
the Aircraft, or Spare Engine, as the case may be, is not encumbered by this
Lease. Except as otherwise expressly provided in the Lease, all appraisal costs
will be shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation
of the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Final Maturity Date" means May 29, 2004.
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<PAGE> 17
"Financed Aircraft" means all Financed Aircraft under and as defined in
the Amended Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in
effect as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under
any law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation
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<PAGE> 18
of any Hazardous Material (i) from, under, in, into or on the facilities
or surrounding property; and (ii) caused by, or undertaken by or on behalf of,
Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (iv) any
obligation owed for all or any part of the deferred purchase price of property
or services (excluding any such obligations incurred under ERISA), which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement
or arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Lessee or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement, purchase or other acquisition for value, by any
Subsidiary of Lessee from any Person other than Lessee or any of its
Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of
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<PAGE> 19
business) or capital contribution by Lessee or any of its Subsidiaries to
any other Person (other than a wholly-owned Subsidiary of Lessee), including
all indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft and Spare Engines under and pursuant to the
terms of the Lease, and any subsequent Lease Supplement entered into in
accordance with the terms of the Lease.
"Leases" means the Lease Agreements dated as of September 5, 1997 between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing II, Inc., as Lessor under the
Lease, and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or
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<PAGE> 20
the transactions contemplated by this Lease or the operation of the
Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine, any Spare Engine or any Part
in the jurisdiction imposing the Tax, or (ii) the situs of
organization, any place of business or any activity of Lessee or any
other Person having use, possession or custody of the Aircraft, the
Airframe, any Engine, any Spare Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any security
interest) and any option, trust or other preferential arrangement having the
practical effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases, the AFL I
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Leases, the Senior Note Documents and agreements in respect of Permitted
Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"NationsBanc Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and NationsBanc Leasing
Corporation, as Lender, and as further amended, supplemented and modified in
accordance with this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease
other than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines, Spare Engines or engines, which are from time to time
incorporated or installed in or attached to the Airframe or any Engine, or
Spare Engine and all such items which are subsequently removed therefrom so
long as title thereto shall vest in Lessor in accordance with this Lease.
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<PAGE> 22
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust
Agreement and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the
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<PAGE> 23
interest of the lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages, (II) Sections 4(d) and 4(e) of the
aircraft chattel mortgages entered into in connection with the AFL I
Credit Agreement and (III) Sections 4(d) and 4(e) of the aircraft chattel
mortgages entered into in connection with the Amended Aircraft Credit
Facility;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens arising pursuant to the AFL I Credit Agreement; provided
that such Liens do not encumber any assets other than the AFL I Aircraft
and other assets of AFL I;
(xi) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xii) Liens granted pursuant to the Transaction Documents;
(xiii) Liens arising pursuant to the Amended Aircraft Credit
Facility; and
(xiv) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of
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<PAGE> 24
such Indebtedness, plus the amount of expenses of Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of Lessee hereunder at least to the same extent
as the Indebtedness immediately prior to such extension, (iv) such Permitted
Extension Indebtedness has a final stated maturity later than the end of the
stated maturity of the Indebtedness being extended immediately prior to such
extension and (v) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of Lessee and its Subsidiaries or
any less favorable, from the perspective of Lessor and Lenders than those
contained in the Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated
March 31, 1995, as modified pursuant to an acknowledgement dated December 31,
1996 by and between Philippine Airlines and Lessee, and as assigned to Atlas
Air, Inc. pursuant to an Assignment and Acceptance of Lease dated December 31,
1996 as the Lease Agreement may be further amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement and (ii)
that certain Lease Agreement dated as of January 1, 1995 by and between Bankers
Trust Company and Philippine Airlines, Inc., as the Lease Agreement may be
further amended, restated, supplemented or otherwise modified from time to time
in accordance with this Agreement, as modified pursuant to an acknowledgement
dated May 12, 1997 by and between Philippine Airlines and Lessee, and as
assigned to Lessee pursuant to an Assignment and Acceptance of Lease dated May
12, 1997 as the Lease Agreement may be further amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds
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thereof, the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business or any asset (including any ACMI Contracted Aircraft) by Lessee or any
of its Subsidiaries or any other related action which requires compliance on a
Pro Forma Basis. In making any determination of compliance on a Pro Forma Basis,
such determination shall be performed after good faith consultation with Lessor
and Agent using the consolidated financial statements of Lessee and its
Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition or other
related action had been consummated at the beginning of the period specified in
the covenant with respect to which Pro Forma Basis compliance is required.
"Proceedings" has the meaning assigned to that term in subsection
6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee
now or hereafter outstanding, except a dividend payable solely in shares of
that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Lessee now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Lessee now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Designated
Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general
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any instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Senior Notes Documents" means the Indenture, dated as of August 13, 1997
between Atlas Air, Inc. and State Street Bank and Trust Company relating to the
10 3/4% $150 million Senior Notes due 2005 of Lessee (the "Senior Notes") and
any and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of September 5, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Spare Engines" shall mean each General Electric CF6-50E2 aircraft engine
bearing manufacturer's serial numbers listed in the initial Lease Supplement.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
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Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on
the schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft and Spare Engines
shall mean as of any date, the amount set forth on Exhibit C opposite the
Stipulated Loss Determination Date immediately prior to such date, as such
amount may be reduced in accordance with Section 3(f) plus all accrued and
unpaid interest on the Loans relating to the Aircraft and Spare Engines on the
date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof. For all
purposes of this Agreement other than the financial covenants set forth in
subsection 7(f) and the definitions related thereto, Lessor shall not be
considered a Subsidiary of Lessee.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others
under any of the Transaction Documents, including payments of Stipulated Loss
Value and other amounts referred to in Section 3(c) of this Lease.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft and Spare Engines is leased
hereunder pursuant to Section 3(a) of the Lease, beginning on the Initial
Borrowing Date and ending on the Final Maturity Date, or such earlier date as
the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the Contribution, (ii) the leasing by
Lessor to Lessee of the Aircraft, Spare Engines and certain other aircraft and
other spare engines pursuant to the Leases, (iii) the repayment of the Aircraft
Obligations and (iv) the release and termination of all security interests and
Liens encumbering the Aircraft, Spare Engines and any part thereof and any
other assets of Lessor.
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"Transaction Documents" shall mean the Amended Aircraft Credit Facility,
any bills of sale or certificates of transfer for each Aircraft and the Spare
Engines (including bills of sale on AC Form 8050-2), the Leases, all documents
relating to the repayment of the Aircraft Obligations, the Loan Documents and
all other agreements and documentation executed and delivered in connection
with the Transaction, including, without limitation, in connection with the
Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility
to be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this
Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence
of the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee
hereunder, and Lessee hereby agrees to accept on the Initial Borrowing Date
from Lessor hereunder, the Aircraft and the Spare Engines as evidenced by the
execution by Lessor and Lessee of a Lease Supplement leasing the Aircraft and
the Spare Engines hereunder. Lessee agrees to appoint in writing one or more of
its employees as its authorized representative to accept delivery of the
Aircraft pursuant to the terms hereof. Lessee hereby agrees that acceptance of
delivery by such employee or employees shall, without further act, irrevocably
constitute acceptance by Lessee of the Aircraft for all purposes of this Lease
Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the Final Maturity Date or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
Basic Rent shall accrue during the Term in accordance with Exhibit B hereto.
Lessee shall pay to Lessor on each Basic Rent Payment Date an amount of Basic
Rent specified opposite each Basic Rent Payment Date on Exhibit B hereto as such
amounts may be adjusted pursuant to Section 3 plus accrued interest on Basic
Rent previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and
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notified to Lessor and Lessee prior to the Basic Rent Payment Date, which
represents the amount of interest due and payable on the Loans relating to the
Aircraft and the Spare Engines on such Basic Rent Payment Date and determined in
accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor,
or to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or
by law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee
also will pay to Lessor, or to whomsoever shall be entitled thereto, as
assignee of Lessor, on demand, as Supplemental Rent, (i) interest at the Past
Due Rate with respect to any part of any installment of Basic Rent not paid
when due for any period for which the same shall be overdue and on any payment
of Supplemental Rent not paid when due for the period and, to the extent
permitted by law, on interest accrued on Basic Rent which itself was accrued
and not paid to the extent such accrued interest was not paid when due until
the same shall be paid and on any other amounts payable hereunder which are not
paid when due and (ii) all amounts payable by Lessor pursuant to subsections
2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however, to the
extent any Supplemental Rent required to be paid pursuant to this clause (ii)
of subsection 2(c) has been paid by Lessee pursuant to the terms of another
Lease, then Lessee's obligations hereunder shall be deemed to be satisfied by
the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to
the date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and the Spare Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to
other aircraft and other spare engines leased pursuant to the other Leases
and after taking into account all other payments of rent pursuant to the other
Leases on such date), then such excess amounts shall be paid by the Agent to
Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
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payment shall be made on the next succeeding Business Day; provided, however,
if any date on which a payment of Rent becomes due is not a Business Day and is
a day of the month after which no further Business Day occurs in such month,
the payment of Rent shall be made on the next preceding Business Day. No
interest shall accrue on the amount of any payment made on the Business Day
next succeeding the regularly scheduled Basic Rent Payment Date, if such
payment is made on such next succeeding Business Day because the original date
of payment was not a Business Day (it being understood that the amount of Basic
Rent includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft and the Spare Engines required to be paid by
Lessor on or within five Business Days of the due date of such installment
of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft
and the Spare Engines and all other unpaid Obligations of Lessor (other
than principal and interest on Loans relating to other aircraft and other
spare engines and after taking into account all other payments of
Stipulated Loss Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft and the Spare Engines pursuant to Section
2.4C(ii) of the Credit Agreement, Lessor shall notify Lessee of such
required prepayment and Lessee shall immediately prepay an amount of Basic
Rent equal to the amount of such required prepayment less any required
payments of the Loans relating to the Aircraft and the Spare Engines
actually made by the Lessor from Insurance Proceeds or Condemnation
Proceeds (as each such term is defined in the Credit Agreement) received
directly by the Lessor.
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(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon
not less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f),
the schedules of Basic Rent and Stipulated Loss Value shall be adjusted so
as to preserve the after tax yield and after tax cash flows of the Lessor
and, to the extent consistent therewith, to minimize the net present value
of Basic Rent payments. All such computations shall be made on the basis
of the same assumptions and the method of computations employed in the
original calculations of Basic Rent and Stipulated Loss Values (except to
the extent such assumptions have been changed as a result of such
prepayment or any prior such adjustment). At the Lessee's written request,
independent public accountants mutually selected by the Lessor and the
Lessee shall confirm the required adjustments. The final determination of
any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing adjustments the revised Basic Rent
and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE AND
SPARE ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED
THAT THE AIRFRAME AND EACH ENGINE AND SPARE ENGINE ARE SUITABLE FOR ITS
PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY LENDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, SPARE ENGINE OR ANY
PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
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PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT AND SPARE ENGINES OR ANY PART
THEREOF, except that Lessor covenants that it will not, through its own actions
or inactions, in such capacity, interfere in Lessee's quiet enjoyment of the
Aircraft or Spare Engines unless this Lease shall have been declared or deemed
to have been declared in default pursuant to Section 17 hereof. None of the
provisions of this Section 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 any manufacturer, any affiliate
thereof, any subcontractor or supplier of any manufacturer or any affiliate
thereof, with respect to the Airframe, Engines, Spare Engines or any Parts, or
to release the manufacturer, any affiliate thereof, or any such subcontractor
or supplier from any such representation, warranty or obligation. Unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessor
agrees to make available to Lessee such rights as Lessor may have under any
warranty with respect to the Aircraft or Spare Engines made by the manufacturer
or any affiliate thereof or any of its subcontractors or suppliers and any
other claims against the manufacturer or any affiliate thereof, or any such
subcontractor or supplier with respect to the Aircraft or Spare Engines, all
pursuant to and in accordance with the terms of any applicable purchase
agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever
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necessary to carry out its business and operations, except in jurisdictions
where the failure to be so qualified or in good standing has not had and will
not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each
of its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under
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any Contractual Obligation of Lessee or any of its Subsidiaries, except for
such approvals or consents which will be obtained on or before the Initial
Borrowing Date and disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Lessee and its Subsidiaries as at December
31, 1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at June 30, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
three months then ended. All such statements were prepared in conformity with
GAAP and fairly present the financial position (on a consolidated and, where
applicable, consolidating basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of
the entities described therein for each of the periods then ended, subject, in
the case of any such unaudited financial statements, to changes resulting from
audit and normal year-end adjustments. Neither Lessee nor any of its
Subsidiaries has (and will not following the Initial Borrowing Date) have any
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment that is not reflected in the
foregoing financial statements or the notes thereto and which in any such case
is material in relation to the
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business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could
reasonably be expected to be material to Lessee and its Subsidiaries taken as a
whole. As of the Initial Borrowing Date, Lessee does not know of any basis for
the assertion against it of any liability or obligation of any nature
whatsoever that is not fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A) which, either individually or in the aggregate,
could reasonably be expected to be material to Lessee and its Subsidiaries
taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since June 30, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
Lessee and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant
to subsection 6(a), in each case except for assets disposed of since the date
of such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its
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Subsidiaries or any property of Lessee or any of its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither Lessee nor any of its Subsidiaries is (i) in
violation of any applicable laws that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect or (ii) subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or
authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect,
of such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of its
obligations under the Transaction Documents unenforceable.
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(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee
or (b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or
threatened Environmental Claims against Lessee or any of its Subsidiaries, and
neither Lessee nor any of its Subsidiaries has received no written notices,
inquiries, or requests for information with respect to any Environmental
Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
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(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or
Lenders by or on behalf of Lessee or any of its Subsidiaries for use in
connection with the transactions contemplated by this Lease and the other
Transaction Documents contains any untrue statement of a material fact or omits
to state a material fact (known to Lessee, in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Lessee to be reasonable at the time made, it being recognized by Lessor, Agent
and Lenders that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results. There are no facts known (or
which should upon the reasonable exercise of diligence be known) to Lessee
(other than matters of a general economic nature) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and that have not been disclosed herein or in such other documents,
certificates and statements furnished to Lessor, Agent and Lenders for use in
connection with the transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and
agrees that, so long as any amounts under this Lease remain unpaid, Lessee
shall perform, and will cause each of its Subsidiaries to perform, all
covenants in this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
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(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such
monthly financial statements shall only be required to be delivered to
Agent to the extent such monthly financial statements are required to be
delivered under the Amended Aircraft Credit Facility as such agreement may
be amended, modified, supplemented, renewed or refinanced from time to
time;
(2) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each fiscal year,
(a) the consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the operations of
Lessee and its Subsidiaries in the form prepared for presentation to
senior management for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter; provided that delivery of Lessee's Form 10-Q for such fiscal
quarter shall be deemed to satisfy the requirements of this subsection
6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the
end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and
its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6(a)(12) for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief
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financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, (b) a narrative report describing the operations of Lessee and
its Subsidiaries in the form prepared for presentation to senior
management for such fiscal year, and (c) in the case of such consolidated
financial statements, a report thereon of Arthur Andersen LLP or other
independent certified public accountants of recognized national standing
selected by Lessee and satisfactory to Lessor and Agent, which report
shall be unqualified, shall express no doubts about the ability of Lessee
and its Subsidiaries to continue as a going concern, and shall state that
such consolidated financial statements fairly present the consolidated
financial position of Lessee and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards; provided that delivery of
Lessee's Form 10-K for such fiscal year shall be deemed to satisfy the
requirements of clauses (a) and (b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each
delivery of financial statements of Lessee and its Subsidiaries pursuant
to subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee stating that the signers have reviewed the
terms of this Lease and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Lessee and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the date
of such Officers' Certificate, of any condition or event that constitutes
a Default or Lease Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action Lessee has taken, is taking and proposes to take with
respect thereto; and (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
quarterly and annual accounting periods with the restrictions contained in
Section 7;
(5) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which
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relate to an Environmental Claim which could result in a Material Adverse
Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or
event that constitutes a Default or Lease Event of Default has come to
their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such Default or Lease Event of Default that would
not be disclosed in the course of their audit examination, and (c) stating
that based on their audit examination nothing has come to their attention
that causes them to believe either or both that the information contained
in the certificates delivered therewith pursuant to subdivision (4) above
is not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision (4)
above for the applicable fiscal year are not stated in accordance with the
terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of
(a) all financial statements, reports, notices and proxy statements sent
or made available generally by Lessee to its security holders, (b) all
regular and periodic reports and all registration statements (other than
on Form S-8 or a similar form) and prospectuses, if any, filed by Lessee
or any of its Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental or private
regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of
Lessee obtaining knowledge (a) of any condition or event that constitutes
a Default or Lease Event of Default, (b) that any Person has given any
notice to
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Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature
and period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer
of Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect
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to each Employee Benefit Plan, (b) any notices received by Lessee or any
of its ERISA Affiliates with respect to a "multiemployer plan," within the
meaning of Section 4001(a)(3) of ERISA, and (c) such other documents or
governmental reports or filings relating to any Employee Benefit Plan as
Lessor or Agent shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion; and
(13) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the interests of Lessee
and its Subsidiaries and is not materially disadvantageous to Lessor or to any
assignee of the Lease. Lessee will at all times maintain its corporate
existence as a United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Lessee.
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(ii) Lessee will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage
(including, without limitation, flood insurance, if necessary or advisable) of
the kinds customarily carried or maintained under similar circumstances by
corporations engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine and any Spare Engine, and its and
their financial and accounting records, and, with the permission of Lessee
which shall not be unreasonably withheld, to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Lessee
may, if it so chooses, be present at or participate in any such discussion),
all upon reasonable notice and at such reasonable times during normal business
hours and as often as may be reasonably requested; provided that so long as no
Lease Event of Default shall have occurred and be continuing, such inspection
shall not be disruptive to Lessee's business, as reasonably determined by
Lessee. Without in any way limiting the foregoing, Lessee will, upon the
request of Lessor or Agent, participate in a meeting of Agent and Lenders once
during each fiscal year to be held at Lessee's corporate offices (or such other
location as may be agreed to by Lessee, Lessor and Agent) at such time as may
be agreed to by Lessee, Lessor and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reason-
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ably be expected to cause a Material Adverse Effect. Lessee shall not conduct,
and shall not permit the conduct of, any Hazardous Materials Activity at any
facility or at any other location which could reasonably be expected to form
the basis of an Environmental Claim against Lessee and which could reasonably
be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the event
Lessee or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any facility, Lessee or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Lessee's or such Subsidiary's liability for
such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Lessee or such
Subsidiary. Notwithstanding anything to the contrary contained in this Lease,
Lessee and its Subsidiaries may engage in the transportation of Hazardous
Materials in the ordinary course of business so long as such is conducted in
compliance with all applicable Environmental Laws, and all other applicable
laws, policies, orders, directives and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee
Benefit Plans for Lessee or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
reasonably be expected to result in a liability for Lessee, under Title IV of
ERISA or the minimum funding standards of Part 3 of Subtitle B of Title I of
ERISA, in excess of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees
that, so long as any amounts remain owing under this Lease, Lessee shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
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(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(1) Lessee may become and remain liable with respect to the
obligations under the Amended Aircraft Credit Facility;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers
an Officers' Certificate to Lessor, Agent and Lenders, in form and
substance reasonably satisfactory to Lessor and Agent, confirming that,
on a Pro Forma Basis after giving effect to such incurrence of
Indebtedness, (i) the ratio of Consolidated Total Debt (less Cash and Cash
Equivalents held by Lessee in excess of $25 million) as of the last day of
the most recently ended fiscal quarter (the "Determination Date") plus
seven times Consolidated Rental Payments for the four fiscal quarter
period ending on such Determination Date to Consolidated Adjusted EBITDA
plus Consolidated Rental Payments for the four fiscal quarter period
ending on such Determination Date does not exceed the ratio set forth in
subsection 7(f)(ii) for the fiscal quarter in which such Indebtedness is
to be incurred, (ii) the ratio of Consolidated Adjusted EBITDA for such
four fiscal
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quarter period to Consolidated Interest Expense for such four fiscal
quarter period is not less than the ratio set forth in subsection 7(f)(i)
for the fiscal quarter in which such Indebtedness is to be incurred; and
(iii) Lessee will be in compliance with all covenants set forth in
subsection 7(f) hereof, Lessee and its Subsidiaries may incur Other
Permitted Indebtedness;
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding;
(8) Lessee may become and remain liable with respect to Indebtedness
under the NationsBanc Agreement;
(9) AFL I may become and remain liable with respect to all the
obligations under AFL I Credit Agreement and Lessee may become and remain
liable with respect to the AFL I Leases;
(10) Lessee may become and remain liable with respect to the Senior
Notes;
(11) Lessee and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed, without duplication, when added to the maximum aggregate
liability, contingent or otherwise, of Lessee and its Subsidiaries
outstanding in accordance with Section 7(d)(6), $30 million at any time
outstanding; and
(12) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits there- from, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
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(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and
Other Permitted Indebtedness; provided that such Liens encumber only
assets subject to purchase money Liens securing such Indebtedness and
do not encumber any assets subject to the Aircraft Chattel Mortgages;
and
(iii) other Liens securing Indebtedness in an aggregate amount
not to exceed $10 million at any time outstanding which do not
encumber any assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event
shall Lessee create, incur, assume or permit to exist Liens on or with respect
to any assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule 7(b)
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL I Credit Agreement, Lessee will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary's capital stock to (i) pay dividends or make any
other distributions on any of such Subsidiary's capital stock owned by Lessee
or any other Subsidiary of Lessee, (ii) repay or prepay any Indebtedness owed
by such Subsidiary to Lessee or any other Subsidiary of Lessee, (iii) make
loans or advances to Lessee or any other Subsidiary of Lessee, or (iv) transfer
any of its property or assets to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, make or own any Investment in any Person, including
any Joint Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the
Investments owned by them as of the Initial Borrowing Date in any
Subsidiaries of Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's
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Certificate in form and substance satisfactory to Lessor and Agent
demonstrating that such Special Purpose Subsidiary meets the requirements
set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an
aggregate amount not to exceed in any fiscal year, (A) the lesser of 25%
of Consolidated Net Income for such fiscal year and $10 million less (B)
the sum of (x) the aggregate amount of dividends on the Common Stock of
Lessee declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal
year; provided that Lessee shall not incur liabilities related to any such
Joint Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7(c)(v) annexed hereto
and Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed $15 million at any time
outstanding.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements and Currency
Agreements arising under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may
remain liable with respect to Contingent Obligations described in Schedule
7(d)(4) annexed hereto;
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(5) Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations to the extent such Contingent
Obligations are permitted pursuant to subsections 7(i) and 7(j); and
(6) Lessee and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(11) shall at no time exceed
$30 million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Lessee may make scheduled payments of
principal, mandatory prepayments of principal (including through the exercise
of remedies) and payment of interest from time to time on Designated
Indebtedness; and provided further, that so long as no Default or Lease Event
of Default has occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds
of Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may make Restricted Junior Payments with respect to
its Common Stock in an amount not to exceed in any fiscal year, the lesser
of 25% of Consolidated Net Income for such fiscal year and $10 million;
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness; and
(4) Lessee may repurchase its Common Stock in an amount not to
exceed in any fiscal year $15 million for purposes of establishing or
contributing to an employee benefit plan; provided that any such
repurchased Common Stock resold to employees of Lessee shall, to the
extent of the price paid for such Common Stock by such employee, be
excluded from the calculation of the $15 million limit set forth above.
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(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
Expense for any four fiscal quarter period ending as of the last day of
any fiscal quarter of Lessee set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
<S> <C>
June 30, 1997 1.90:1.00
September 30, 1997 1.90:1.00
December 31, 1997 1.90:1.00
March 31, 1998 1.90:1.00
June 30, 1998 1.90:1.00
September 30, 1998 1.90:1.00
December 31, 1998 1.90:1.00
March 31, 1999 1.90:1.00
June 30, 1999 1.90:1.00
September 30, 1999 2.00:1.00
December 31, 1999 2.00:1.00
March 31, 2000 2.10:1.00
June 30, 2000 2.10:1.00
September 30, 2000 2.20:1.00
December 31, 2000 2.20:1.00
March 31, 2001 2.20:1.00
June 30, 2001 2.20:1.00
September 30, 2001 2.30:1.00
December 31, 2001 2.30:1.00
March 31, 2002 2.40:1.00
June 30, 2002 2.40:1.00
</TABLE>
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<TABLE>
<S> <C>
September 30, 2002 2.50:1.00
December 31, 2002 2.50:1.00
March 31, 2003 2.60:1.00
Thereafter 2.70:1.00
</TABLE>
(ii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt at the end of any four fiscal quarter period ending
during one of the periods set forth below (less Cash and Cash Equivalents held
by Lessee in excess of $25 million as of such date) plus seven times
Consolidated Rental Payments for such four fiscal quarter period to (ii)
Consolidated Adjusted EBITDA plus Consolidated Rental Payments for such four
fiscal quarter period to exceed the correlative ratio indicated below:
<TABLE>
<CAPTION>
Fiscal Quarter Maximum
Ending Leverage Ratio
<S> <C>
June 30, 1997 5.75:1.00
September 30, 1997 6.25:1.00
December 31, 1997 6.75:1.00
March 31, 1998 6.75:1.00
June 30, 1998 7.00:1.00
September 30, 1998 7.00:1.00
December 31, 1998 6.75:1.00
March 31, 1999 6.50:1.00
June 30, 1999 6.25:1.00
</TABLE>
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<TABLE>
<S> <C>
September 30, 1999 5.75:1.00
December 31, 1999 5.75:1.00
March 31, 2000 5.75:1.00
June 30, 2000 5.50:1.00
September 30, 2000 5.50:1.00
December 31, 2000 5.25:1.00
March 31, 2001 5.25:1.00
June 30, 2001 5.25:1.00
September 30, 2001 5.00:1.00
December 31, 2001 5.00:1.00
March 31, 2002 4.75:1.00
June 30, 2002 4.75:1.00
September 30, 2002 4.50:1.00
December 31, 2002 4.50:1.00
March 31, 2003 4.50:1.00
Thereafter 4.25:1.00
</TABLE>
(iii) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
Minimum
Period Consolidated
Net Worth
<S> <C>
fiscal year 1997 $215 million
fiscal year 1998 $225 million
fiscal year 1999 $250 million
fiscal year 2000 $275 million
fiscal year 2001 $300 million
fiscal year 2002 $350 million
fiscal year 2003 $400 million
fiscal year 2004 $450 million
</TABLE>
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<PAGE> 54
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or
any wholly-owned Subsidiary of Lessee, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Lessee or any such
wholly-owned Subsidiary of Lessee; provided that, in the case of such a
merger, Lessee or such wholly-owned Subsidiary shall be the continuing or
surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess of
$100 million in any fiscal year or $500 million in the aggregate;
provided that (x) the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof; (y) the
consideration received shall be at least 75% cash; and (z) the proceeds
of such Asset Sales shall be applied to repay permanently senior bank
debt or prepay Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the
extent expressly permitted by the mortgages encumbering such Financed
Aircraft as in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of a division or line of
business of another Person provided that, (a) the acquisition primarily
involves the acquisition of assets to be used in the business of Lessee,
(b) with respect to such
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<PAGE> 55
acquisition any newly acquired or created Subsidiary of Lessee shall be a
wholly-owned Subsidiary, (c) immediately before and after giving effect
thereto, no Default or Lease Event of Default shall have occurred and be
continuing, (d) immediately after giving effect to the acquisition,
Lessee shall be in compliance on a Pro Forma Basis with financial
covenants in subsection 7(f) and such compliance shall be evidenced by an
Officer's Certificate demonstrating such compliance, (e) Lessor and Agent
shall have reviewed and be reasonably satisfied with the nature and
amount of all contingent liabilities or other liabilities not on the
balance sheet of Lessee assumed in connection with such acquisition and a
business plan prepared by Lessee with respect to such acquisition and (f)
the aggregate amount of cash payments made in connection with all such
acquisitions other than with the proceeds from sales or issuances of
equity by Lessee does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of
Eligible Aircraft permitted to be purchased, but not purchased, during
the previous fiscal year (but in no event shall any such number of
Eligible Aircraft once carried forward to the next fiscal year be carried
forward to any fiscal year thereafter) together with Consolidated Capital
Expenditures with respect to the acquisition, in the normal course of
business, of spare parts and spare engines associated with such Eligible
Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business;
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year;
provided that any amount of such other Consolidated Capital Expenditures
permitted, but not made, in any fiscal year may be carried forward to and
made during the immediately succeeding fiscal year (but no amount once
carried forward to the next fiscal year may be carried forward to any
fiscal year thereafter); and
(9) Lessee shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and
operations to Colorado; provided that the aggregate consideration paid
with respect to the acquisition of assets shall be in an amount not to
exceed $20 million.
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<PAGE> 56
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation
or bylaws to be amended or otherwise modified in any manner which could
reasonably be expected to have a Material Adverse Effect or (ii) any Material
Agreement to be amended or otherwise modified in any manner with respect to any
provision providing material representations and warranties to Lessee,
indemnification rights to Lessee, or limiting Lessee's remedies or rights upon
the other party to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee
may become so obligated to the extent that, and only to the extent that,
immediately after giving effect to the incurrence of liability with respect to
such lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year do not exceed $60 million plus the amount of
Consolidated Rental Payments made during such fiscal year in respect of up to
four 747-400F aircraft, subject to the agreement dated June 9, 1997 between
Lessee and The Boeing Company regarding the purchase of 10 new 747-400F
aircraft, leased by the Lessee within twelve months following the Initial
Borrowing Date plus an amount not to exceed $12 million during any fiscal year,
equal to Consolidated Rental Payments incurred in connection with sale and
leaseback transactions described in subsection 7(j), plus Consolidated Rental
Payments assumed pursuant to acquisitions permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Lessee or any of its Subsidiaries
to any Person (other than Lessee or any of its Subsidiaries) in connection with
such lease; provided that Lessee and its Subsidiaries may become and remain
liable as lessee, guarantor or other surety with respect to any such lease if
and to the extent that Lessee or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease under subsection 7(i).
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<PAGE> 57
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Lessee or with any Affiliate of Lessee or of any
such holder, on terms that are less favorable to Lessee or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Lessee and its
Subsidiaries, (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Lessee or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Lessee or (iii) performance by Lessee of its obligations under and
in accordance with the Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Lessee, another wholly-owned Subsidiary of
Lessee, or to qualify directors if required by applicable law.
Notwithstanding the foregoing, each of the Lessor and AFL I shall be
permitted to issue preferred stock in an amount not to exceed $100,000 each to
a third party.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
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<PAGE> 58
SECTION 8. Return of the Aircraft and Spare Engines. (a) Condition Upon
Return. Unless the Aircraft or any Spare Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return the Aircraft or Spare
Engines to the Lessor hereunder, Lessee, at its own expense, will return the
Aircraft or Spare Engines to Lessor at a location specified by the Lessor to
the Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft and Spare Engines to be in compliance with the maintenance covenants
contained in this Lease and (ii) the Airframe will be fully equipped with the
Engines installed thereon.
At the time of such return, such Airframe, Engines and Spare Engines (A)
shall have an airworthiness certificate from the Federal Aviation
Administration and shall be in full compliance with the provisions of Federal
Aviation Regulations, Part 121 (or successor regulation), and shall be in
material compliance with all applicable FAA noise, corrosion, environmental and
aging aircraft requirements, (B) shall be free and clear of all Liens and (C)
in the case of the Aircraft, shall be in a full freighter configuration and in
the case of the Aircraft and Spare Engines in as good condition as when
originally delivered to Lessee, ordinary wear and tear excepted, and otherwise
in the condition required to be maintained under Lessee's FAA-approved
maintenance plan; and in all such cases the Aircraft and Spare Engines shall
not have been discriminated against as compared to other aircraft owned or
leased by Lessee whether by reason of its leased status or otherwise in
maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines, Spare Engines and all
Parts shall have been, and shall be properly documented to have been, repaired
or overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft and Spare Engines are eligible to
receive approval by the FAA (or its designee), if so required. All such repairs
shall be accompanied by all data and documentation necessary to substantiate
their certification, approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial
Borrowing Date which deviate from the certified configuration and which are
still in existence on the Aircraft and Spare Engines shall have approval or
certification by the FAA (or its designee) or certification if required. All
such modifications shall be accompanied by complete data and documentation
necessary to substantiate their certification and approval and methods of
compliance.
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<PAGE> 59
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines), Spare Engines or
Acceptable Alternate Engine or Parts, as well as all mandatory service
bulletins applicable to any of the foregoing, shall have been accomplished by
terminating action in compliance with the issuing agency's or the
manufacturer's specific instructions, as the case may be,taking into account,
any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate
Engine shall be delivered with the returned Airframe or in lieu of a Spare
Engine, 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 Acceptable Alternate Engine, in form and
substance reasonably satisfactory to Lessor (together with an opinion of
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 Acceptable Alternate Engines are free and clear of all Liens) against
receipt from Lessor of a bill of sale evidencing the transfer, without recourse
or warranty by Lessor to Lessee or its designee of all of Lessor's right, title
and interest in and to any Engine or Spare Engine not installed on the Airframe
at the time of the return of the Airframe.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft or Spare
Engines including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft and Spare
Engines shall have been maintained by cleaning and treating all mild and
moderate corrosion and correcting of all severe or exfoliate corrosion in
accordance with Lessee's approved maintenance program or manufacturer's
structural repair manual.
(i) Manuals. Upon the return of the Aircraft and Spare Engines upon any
termination of this Lease, Lessee shall deliver or cause to be delivered to
Lessor all logs, manuals and data and maintenance, inspection, modification and
overhaul records and similar records required to be maintained with respect to
the Aircraft and Spare Engines and Parts under FAA rules and the Aircraft
maintenance program. If any such logs, manuals, records or other data are
missing, incomplete or otherwise not in accordance with FAA standards
applicable to Lessee, Lessee shall re-accomplish the maintenance tasks
necessary to produce such records in accordance with its approved maintenance
program prior to delivery of the Aircraft or otherwise perform all necessary
acts (without regard to any applicable waivers or deferrals) to obtain such
records in a manner satisfactory to the FAA and Lessor.
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<PAGE> 60
(j) Storage Upon Return. If, at least 15 days prior to termination of
this Lease at the end of the Term or pursuant to Section 17, Lessee receives
from Lessor a written request for storage of the Aircraft or Spare Engines upon
its return hereunder, Lessee will provide Lessor, or cause Lessor to be
provided, with storage facilities for the Aircraft or Spare Engines at Lessee's
risk and at Lessee's expense for a period not exceeding 30 days, and thereafter
at Lessor's risk and at Lessor's cost for insurance, maintenance and Lessee's
out-of-pocket expenses for such storage for a period not exceeding 90 days
(provided that if such termination occurs as a result of a Lease Event of
Default hereunder, such storage shall be at the cost of the Lessee), commencing
on the date the Aircraft or Spare Engine is returned substantially in the
condition required under this Section 8, at a location in the continental
United States selected by Lessee and used by Lessee as a location for the
long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft or Spare Engines are
to be returned to Lessor, Lessee shall, at Lessor's request, advise Lessor of
the nature and condition of all severable nonproprietary Parts (other than
Parts otherwise required by Sections 10 or 11 to be maintained on the Aircraft)
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 or Spare Engines in
accordance with Section 11 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 at their fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft or Spare
Engines, title thereto or any interest therein, except the lien of the Aircraft
Chattel Mortgage and Permitted Encumbrances. Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such Lien
not excepted above if the same shall arise at any time.
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SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, (i)
will be a "citizen of the United States" as defined in Section 40102(15) of
Title 49 of the United States Code and will be an air carrier certificated
under Sections 401 and 609 of the Act and hold all necessary air carrier
operating certificates; (ii) will cause ownership of the Aircraft and Spare
Engines to be duly registered and remain duly registered in the name of Lessor
in accordance with the Act and otherwise registered under all applicable laws
of the United States so as to be eligible to operate in commercial air service
under the Act; and (iii) will service, repair, inspect, test, maintain and
overhaul the Airframe, each Engine and each Spare Engine and install
replacement equipment and parts on the Airframe, each Engine and each Spare
Engine (A) so as to keep the Airframe, each Engine and each Spare Engine in
such operating condition as may be required to permit the Airframe, each Engine
and each Spare Engine to be utilized in commercial operations, (B) so as to
enable the airworthiness certification of the Airframe to be maintained in good
standing at all times under the Act, except when aircraft of the same type,
model or series as the Airframe (powered by engines of the same type as those
with which the Airframe shall be equipped at the time of grounding) registered
in the United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate of the
Aircraft shall be withdrawn, then subject to the provisions of Section 13
hereof, so long as Lessee is diligently taking or causing to be taken all
necessary action to promptly correct the condition which caused such
withdrawal, no Lease Event of Default shall arise from such withdrawal, (C) in
accordance with Lessee's FAA-approved maintenance, inspection and maintenance
control programs, and in the same manner and with the same care used by Lessee
with respect to the same or similar aircraft and engines owned or operated by
Lessee so as to keep the same in as good operating condition as when originally
leased hereunder, ordinary wear and tear excepted, which practices shall at all
times be at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. Lessee shall maintain all records, logs and other materials which may
be required to permit the Airframe, each Engine and each Spare Engine to be so
utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft, Engines and
Spare Engines. Neither the Airframe nor any Engine nor any Spare Engine will be
maintained, used or operated in violation of any
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<PAGE> 62
law or any rule, regulation or order of any government or governmental
authority having jurisdiction (domestic or foreign), or in violation of any
airworthiness certificate, license or registration relating to the Airframe or
such Engine or Spare Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine or Spare Engine, Lessee, at its own cost and expense, will conform
thereto or obtain conformance therewith and will maintain the same in proper
operating condition under such laws, rules, regulations and orders, provided,
however, that Lessee may, in good faith (after having delivered to Lessor and
Agent an Officers' Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not, in Lessor's and Agent's opinion (in their
sole discretion), adversely affect the interests of Lessor, Agent or any
Lender.
Lessee will not operate, use or locate the Airframe or any Engine or
Spare Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 14 shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with respect
to the Airframe or such Engine or Spare Engine, except in the case of a
requisition for use by the United States of America, and then only if Lessee
obtains indemnity in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless the
Airframe or such Engine or Spare Engine is operated or used under contract with
the Government of the United States of America under which contract that
Government assumes liabilities for any damages, loss, destruction or failure to
return possession of the Airframe or such Engine or Spare Engine at the end of
the term of such contract and for injury to persons or damage to property of
others.
Lessee shall not use the Aircraft or any Spare Engine nor suffer it to be
used in any manner or for any purpose excepted from any of the insurance on or
in respect of the Aircraft or Spare Engine or for the purpose of carriage of
goods of any description excepted from such insurance nor do, or permit to be
done, anything which, or omit to do anything the omission of which, may
invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of
Agent and Lessor, sell, assign, lease or otherwise in any manner deliver,
transfer or relinquish possession or control of, or transfer the right, title
or interest of Lessee in, the Airframe or any Engine or Spare Engine except
that, unless a Default or Lease Event of Default shall have occurred and be
continuing, Lessee may without the prior written consent of the Agent and
Lessor, take the following actions so long as the actions to be taken shall not
deprive the Agent of the first priority Lien under the Aircraft Chattel
Mortgage in the assets subject thereto and so long as the actions to be taken
shall not
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<PAGE> 63
deprive Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engine and shall not deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
or Spare Engine as assignee of Lessee's rights under this Lease pursuant to the
Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine or Spare
Engine other than by lease to the United States of America or any
instrumentality thereof pursuant to the Civil Reserve Air Fleet Program
(as administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine or Spare
Engine to the manufacturer thereof for testing or other similar purposes
or any other organization for service, repairs, maintenance or overhaul
or, to the extent permitted by Section 11 hereof, for alterations or
modifications;
(iii) subject any Engine or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Lessee in the ordinary course
of business which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of the Airframe
or title to or use for the remainder of its useful life of such Engine or
Spare Engine; provided, however, that if Lessee's title to or use for the
remainder of its useful life, of the Airframe or any Engine or Spare
Engine shall be divested under any such agreement or arrangement, such
divesture shall be deemed to be an Event of Loss with respect to the
Airframe or such Engine or Spare Engine and Lessee shall comply with
Section 13 in respect thereof;
(iv) install an Engine or Spare Engine on an airframe which is
owned by Lessee free and clear of all Liens except (A) those permitted
under clauses (i) or (ii) of the definition of Permitted Encumbrances in
the Credit Agreement, (B) those that apply only to the engines (other
than the Engines and other than the Spare 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), and (C) the rights of any Domestic Air Carrier, under
normal interchange agreements which are customary in the airline industry
and do not contemplate or require the transfer of title to such airframe
or the engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased to
Lessee or owned by Lessee subject to a conditional sale or other security
agreement,
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provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and except Liens of the type permitted
by clause (iv) above; and (B) Agent and Lessor shall have received from
the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which may
be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party and
each of the purchasers, mortgagees and encumbrancers of such lessor,
conditional vendor or secured party expressly and effectively agrees that
neither it nor its successors and assigns will acquire or claim any
right, title or interest in any Engine or Spare Engine by reason of such
Engine or Spare Engine being installed on such airframe at any time when
such Engine or Spare Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned by
Lessee, leased by Lessee or owned by Lessee subject to a conditional sale
or other security agreement under circumstances where neither clause (iv)
nor clause (v) above is applicable; provided that any divesture of title
to such Engine or Spare Engine resulting from such installation shall be
deemed to be an Event of Loss with respect to such Engine or Spare Engine
and Lessee shall comply with Section 13 in respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines, Spare Engines or engines installed thereon with any third
party pursuant to which Lessee has operational control of the Airframe
and any Engines or Spare Engines installed thereon such operation to be
performed solely by individuals under the operational control of Lessee
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by
such employees of similar functions within the United States; provided
that Lessee's obligations hereunder shall continue in full force and
effect notwithstanding any such ACMI Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine or Spare Engine permitted by the terms hereof shall
be made subject and subordinate to, and any lease permitted by this Section
10(b) shall be made expressly subject and subordinate to, the Lease and the
lien and security interest of the Aircraft Chattel Mortgage and all of Agent's
rights thereunder and Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such
transfer had not occurred, and any such instrument of transfer shall include
appropriate provisions for the maintenance and insurance of the Airframe or
such
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Engine or Spare Engine, and any such instrument of transfer shall expressly
prohibit any further transfer of the Airframe or such Engine or Spare Engine or
any assignment of the rights thereunder; and provided further, that no such
lease, pooling arrangement or other transfer or relinquishment of the
possession of the Airframe or any Engine or Spare Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the
Airframe and each Engine and Spare Engine to be legibly marked (in a reasonably
prominent location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing II,
Inc. and Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Lessor and Agent be appropriate or desirable to
evidence the fact that it is subject to the ownership of Lessor and the lien
and security interest created by the Aircraft Chattel Mortgage. Lessee shall
not remove or deface, or permit to be removed or defaced, any such plate, disk,
or other marking or the identifying manufacturer's serial number, and, in the
event of such removal or defacement, shall promptly cause such plate, disk, or
other marking or serial number to be promptly replaced. Except as provided
above, Lessee shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine or Spare Engine as a
designation that might be interpreted as a claim of ownership or of any
security interest therein, except that Lessee or any permitted lessee may place
its customary colors and insignia or the insignia of the manufacturer on the
Airframe or any Engine or Spare Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use
its best efforts to ensure that none of the Lessor, the Agent, any Lender or
any Affiliate of any of them is not at any time represented or held out) as
being in any way connected or associated with any operation of the Airframe,
any Engine or Spare Engine or any Part or any other operations or carriage
undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that
it will not purport to, pledge the credit of the Lessor, any Lender or the
Agent for any maintenance, service, repairs, or overhauls of, modifications to,
or changes or alterations in, the Airframe, any Engine, any Spare Engine or any
Part, or for any other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
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(a) Except as otherwise provided in Section 11(d), Lessee, at its own
cost and expense, will promptly replace all Parts, which may from time to time
be incorporated or installed in or attached to the Airframe or any Engine or
any Spare Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever. In addition, in the ordinary course of
maintenance, service, repair or testing, Lessee at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that, except as otherwise provided in Section 11(d), Lessee at its own
cost and expense shall replace such Parts as promptly as practicable. All
replacement Parts shall be owned by Lessor free and clear of all Liens (except
Permitted Encumbrances and for pooling arrangements to the extent permitted by
Section 11(b)), and shall be in as good operating condition as, and shall have
a value and utility at least equal to, the Parts replaced assuming such parts
were in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine or any
Spare Engine shall remain the property of Lessor and shall remain subject to
the lien and security interest of the Aircraft Chattel Mortgage, no matter
where located, until such time as such Parts shall be replaced by parts which
have been incorporated or installed in or attached to the Airframe or any
Engine or any Spare Engine and which meet the requirements for replacement
parts specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any Engine or any
Spare Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine or Spare Engine for all purposes hereof to the same
extent as the property originally comprising, or installed on, such Airframe or
such Engine or Spare Engine, and (B) title to the replaced part shall no longer
be the property of Lessor and shall thereupon become free and clear of all
rights of Lessor hereunder and all rights derivative of Lessor's and shall no
longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine or Spare Engine as
provided in Section 11(a) may be subjected by Lessee to a normal pooling
arrangement of the type customary in the airline industry entered into by
Lessee in the ordinary course of its business and entered into with Domestic
Air Carriers that are not the subject of any bankruptcy, insolvency, or similar
proceeding, voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine or Spare Engine in accordance with Section 11(a) as promptly as possible
after the removal of such removed part. In addition, any
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replacement Part when incorporated or installed in or attached to the Airframe
or any Engine or Spare Engine in accordance with Section 11(a) may be owned by
any third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and
clear of all Liens (except Permitted Encumbrances and the Aircraft Chattel
Mortgage relating to the Aircraft or Spare Engine) or (B) replaces such
replacement Part by incorporating or installing in or attaching to the Airframe
or such Engine or Spare Engine a further replacement Part owned by Lessee which
shall become the property of Lessor subject to the lien and security interest
of the mortgage free and clear of all Liens (except Permitted Encumbrances and
the Aircraft Chattel Mortgage relating to the Aircraft or Spare Engine).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe, the
Engines and Spare Engines as may be required from time to time to meet the
standards of the FAA or other governmental authority having jurisdiction;
provided, that Lessee may, in good faith, contest the validity or application
of any such standard in any reasonable manner that shall not adversely affect
the Lessor's or Agent's respective interests. Lessee also agrees, at its own
cost and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe, the Engines and Spare Engines
as may be required from time to time to meet the standards or requirements of
any directive issued by a manufacturer relating to the Airframe or any Engine
or Spare Engine. In addition so long as no Default or Lease Event of Default
shall have occurred and be continuing, Lessee, at its own cost and expense, may
from time to time make such alterations and modifications in and additions to
the Airframe and any Engine or Spare Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine or Spare Engine below the value,
utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such Engine or
Spare Engine were then in the condition and airworthiness required to be
maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine or Spare Engine as the result of such alteration,
modification or addition shall, without further act, become the property of,
and title to such parts shall vest in Lessor and shall be subject to the lien
and security interest of the Aircraft Chattel Mortgage; provided that, so long
as no Default or Lease Event of Default, shall have occurred and be continuing,
Lessee may remove and not replace any such Part if it (A)
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is in addition to, and not in replacement of or in substitution for, any Part
incorporated or installed in or attached to the Airframe or such Engine or
Spare Engine on the date hereof, or any Part in replacement of or substitution
for any such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine or Spare Engine pursuant to
the terms of Section 10(a) hereof or any other provision of this Lease or the
Aircraft Chattel Mortgage and (C) can be removed from the Airframe or such
Engine or Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would have had
at such time had such alteration, modification or addition not occurred,
assuming the Airframe or such Engine or Spare Engine was otherwise in the
condition required by this Lease and the Aircraft Chattel Mortgage. Upon the
removal by Lessee of any such Part, as above provided, title thereto shall,
without further act, be free and clear of the interests of Lessor and all
rights derivative of Lessor's and such Part shall no longer be deemed a Part
hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever
for (i) any alteration or modification of, or addition to, the Airframe or any
Engine or Spare Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by Lessee for
any reason whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis,
Lessor and its assignees, if any, from and against, any and all fees and taxes,
levies, imposts, duties, charges or withholdings, together with any penalties,
fines or interest thereon (any of the foregoing for the purposes of this
Section 12 being called a "Tax"), which may from time to time be imposed on or
asserted against Lessor and its assignees, if any, or the Airframe or any
Engine or Spare Engine or any part thereof or interest therein by any Federal,
state or local government or other taxing authority in the United States or by
any foreign government or subdivision thereof or by any foreign taxing
authority in connection with, relating to or resulting from: (i) the Airframe
or any Engine or Spare Engine or any part thereof of interest therein; (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of the Airframe or any Engine or Spare
Engine; (iii) any rentals or other earnings therefor or arising therefrom or
the income or other proceeds received with respect thereto; or (iv) this Lease
or the Aircraft Chattel Mortgage; provided, however, that, there shall be
excluded from any indemnification under this Section 12(a) any Lessor Tax
unless the payment of any such Tax shall be a condition to the enforceability
of the Aircraft Chattel Mortgage or the perfection of the lien thereof or
unless proceedings shall have been commenced to foreclose any lien which may
have attached
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as security for such Tax, nothing in this Section shall require
the payment of any Tax so long as and to the extent that the validity thereof
shall be contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and Lessee shall have set aside on its
books adequate reserves with respect thereto in accordance with generally
accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor,
Agent and each Lender, and the officers, directors, partners, employees, agents
and affiliates of Lessor, Agent and each Lender, (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct,
indirect or consequential and whether based on any federal, state or foreign
laws, statutes, rules or regulations (including without limitation securities
and commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Lease or the other Transaction Documents or
the transactions contemplated hereby or thereby (including without limitation
Lenders' agreement to make the Loans to Lessor or the use or intended use of
the proceeds of any of the Loans) (collectively called the "Indemnified
Liabilities"); provided that Lessee shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend,
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Lessee shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by the Indemnitees or any of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with
respect to an Airframe or an Engine or Spare Engine, Lessee will promptly
notify Lessor and Agent thereof in writing (in any event within five (5) days
of such occurrence) and will, not later than 180 days after the occurrence of
such Event of Loss, convey or cause to be conveyed to Lessor, free of all Liens
(other than Permitted Encumbrances) title to an Acceptable Alternate Airframe
or Acceptable Alternate Engine, as the case may be. Prior to or at the time of
any such conveyance, Lessee, at its own expense, will, as
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conditions to such transfer, (i) furnish Lessor with a warranty (as to title)
bill of sale, in form and substance reasonably satisfactory to Lessor, with
respect to such Acceptable Alternate Airframe or Acceptable Alternate Engine,
(ii) cause a Lease Supplement to be filed for recording pursuant to Title 49 of
the United States Code, as amended, (iii) furnish Lessor with such evidence of
Lessee's title to such Acceptable Alternate Airframe or Acceptable Alternate
Engine and of compliance with the insurance provisions of Section 14 hereof
with respect to such Acceptable Alternate Airframe or Acceptable Alternate
Engine as Lessor may reasonably request, (iv) furnish Lessor with an opinion of
Lessee's counsel to the effect that title to such Acceptable Alternate Airframe
or Acceptable Alternate Engine has been duly conveyed to Lessor free and clear
of all Liens except Permitted Encumbrances and Lessor and Agent continue to
have 1110 protection with respect to such Aircraft and (v) transfer to or at
the direction of Lessee without recourse or warranty all of Lessor's right,
title and interest, if any, in and to (A) the Airframe or Engine or Spare
Engine with respect to which such Event of Loss occurred and furnish to or at
the direction of Lessee, at Lessee's expense, a bill of sale in form and
substance reasonably satisfactory to Lessee, evidencing such transfer and (B)
all claims, if any, against third parties, for damage to or loss of the
Airframe or Engine or Spare Engine subject to such Event of Loss, and such
Airframe or Engine or Spare Engine shall thereupon cease to be an Airframe or
Engine or Spare Engine leased hereunder. Lessee shall cooperate with Lessor and
take all such actions as shall be requested by Lessor so that Lessor complies
with Section 4(f) of the Aircraft Chattel Mortgage. For all purposes hereof,
each such Acceptable Alternate Airframe or Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Airframe" or "Engine" or "Spare Engine", as the case may
be. No Event of Loss under the circumstance contemplated by the terms of this
paragraph (a) shall result in any reduction in Basic Rent.
(b) With respect to the Airframe or any Engine or Spare Engine, as
between the Lessor and Lessee, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of which is
provided for in Section 14 below) received from any government authority or
other person shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss
to an Airframe or Engine or Spare Engine that has been or is being
replaced by Lessee pursuant to the terms hereof, so long as there shall
exist no Default or Lease Event of Default, such payment shall be paid
over to or retained by Lessee upon satisfaction of the conditions for
replacement contained in paragraph (a) above and until such time shall be
held by Lessor as security for the obligations of Lessee under the Lease;
and
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(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine or Spare Engine, Lessee shall promptly notify
Lessor and Agent of such requisition and all of Lessee's obligations under the
Lease shall continue to the same extent as if such requisition had not
occurred. Any payments received by Lessor or Lessee from the United States
Government for the use of the Airframe or such Engine or Spare Engine, to the
extent allocable to the Term, shall be paid over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft and Spare Engines, at its own cost and expense,
public liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type
and covering the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated
with Lessee but in no event in an amount less than $500,000,000 per occurrence
(which shall include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when the Aircraft and Spare Engines
are on the ground and not in operation, Lessee may carry or cause to be
carried, in lieu of insurance required by this Section, insurance otherwise
conforming with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive airline
liability insurance, and the scope of risk covered and
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type of insurance shall be the same, as are customarily carried with respect to
similar aircraft on the ground by corporations engaged in the same or similar
business and similarly situated with Lessee. Any policies of insurance carried
in accordance with this Section 14 and any policies taken out in substitution
or replacement of any such policies (A) shall be amended to name Agent, Lenders
and Lessor as additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of the
liability, shall operate in the same manner as if there were a separate policy
covering each insured, and (D) shall provide that the insurer shall waive any
right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of
recognized responsibility and reputation on or with respect to the Aircraft and
Spare Engines, at its own cost and expense, aircraft ground and flight all-risk
hull insurance as well as fire and extended coverage insurance on Engines and
Spare Engines and other equipment while removed from the Airframe or airframe
(which shall include war risk, governmental confiscation and expropriation
(other than by the United States Government) and allied perils including (A)
strikes, riots, civil commotions or labor disturbances, (B) any malicious act
or act of sabotage and (C) hijacking (air piracy) or any unlawful seizure or
wrongful exercise of control of the Aircraft or Spare Engine or crew in flight
(including any attempt at such seizure or control) made by any person or
persons aboard the Aircraft or another aircraft acting without the consent of
the insured, if and to the extent the same shall be maintained by Lessee with
respect to similar aircraft owned or operated by Lessee on the same routes or
if the Aircraft or another aircraft is operated on routes where the custom is
for Domestic Air Carriers similarly situated with Lessee flying comparable
routes with similar aircraft to carry such insurance, of the type usually
carried by corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be for an
amount not less than the greater of the Stipulated Loss Value as of the closest
Stipulated Loss Determinate Date and $50,000,000. During any period when the
Aircraft or Spare Engine, as the case may be, is on the ground and not in
operation Lessee may carry or cause to be carried, in lieu of the insurance
required by this Section, insurance otherwise conforming hereto except that the
scope of risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee for
aircraft and spare engines on the ground in an amount at least equal to the
applicable amount provided above. All such insurance shall name Agent, Lenders
and Lessor as additional insureds and loss payees to the extent their interest
may appear and shall provide that any loss to the Airframe or an Engine or a
Spare Engine in excess of $2,000,000 (and, if a Default or Lease Event of
Default has occurred and is continuing,
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any such loss) shall be payable to the Lessor and to the Agent for the benefit
of Lenders; and shall be primary without right of contribution from any other
insurance which is carried by Lessor or Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other
similar aircraft or spare engines in Lessee's fleet which are of a value
comparable to the Aircraft or Spare Engines, as the case may be, and as are not
substantially greater than amounts self-insured by corporations engaged in the
same or similar business and similarly situated with Lessee; provided, however,
that Lessee may not self-insure in an amount in excess of $1,000,000 without
the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a)
or paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders
as additional named insureds, but without Lessor, Agent or Lenders being
thereby liable for premiums (and the insurance companies waiving their right
with respect thereto); (B) provide that in respect of the interest of (x)
Lessor or (y) Agent or Lenders in such policies the insurance shall not be
invalidated by any action or inaction of (x) Lessee or (y) Lessee or Lessor,
respectively, and shall insure the interests of Agent and Lenders regardless of
any breach or violation by Lessee, Lessor or any Person (other than Agent) of
any warranty, declaration, condition or exclusion from coverage contained in
such policies; (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the interest of Lessor,
Agent or any Lender, or if such insurance is allowed to lapse for nonpayment of
premium, such cancellation, change or lapse shall not be effective as to
Lessor, Agent or any Lender for thirty (30) days (seven (7) days, or such
shorter or longer period as may from time to time be customarily available in
the industry, in the case of any war risk and allied perils coverage) after
receipt by Agent and Lessor of written notice from such insurers of such
cancellation, change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft and shall be payable
in U.S. dollars; (E) waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise in
respect of any liability of Lessor and Agent; and (F) waive all rights of
subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any
agency or instrumentality thereof in respect of the Airframe or any Engine or
Spare Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify Lessee against the same risks against which Lessee
is required hereunder to insure shall be considered adequate insurance with
respect to the Airframe or such
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Engine or Spare Engine to the extent of the risks and in the amounts that are
the subject of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior
to January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect
to the Aircraft, the Engines and Spare Engines and stating that in the opinion
of such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of Lessee, Lessor and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance covered by the
report. Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or omission
on the part of Lessee of which such firm has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft or any Engine or Spare Engine and (y) at least thirty (30) days prior
to the expiration or termination date, or date of effectiveness of any material
change, of any insurance carried and maintained on the Aircraft or Spare
Engines hereunder.
(f) All insurance payments and other payments received by Agent, Lessor
or Lessee from insurance referred to in paragraph (b) above shall be, if
received by Lessor or Lessee, immediately paid to Agent, as agent for itself
and Lessor and shall be paid to Lessee upon compliance by Lessee with the terms
of Section 13, provided that no Default or Lease Event of Default shall have
occurred and be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft or Spare Engines
for its own account. Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft or Spare Engines in amounts in excess
of that required to be maintained by this Section 14. No insurance maintained
by Agent, Lessor or any Lender shall prevent Lessee from carrying the insurance
required or permitted by this Section. Proceeds of any such insurance carried
by Lessee, Agent or Lender shall be paid as provided in the insurance policy
relating thereto and no such Person shall have any duty to obtain any such
insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section
10, Lessee will not, without the prior written consent of Lessor, assign any of
its rights hereunder or in the Aircraft or in the Spare Engines. Lessor agrees
that it will not assign or convey its right, title and interest in and to this
Lease or the Aircraft or Spare Engines except in accordance with the Credit
Agreement. Subject to the
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foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns and shall inure, to the direct benefit of, and shall also be
enforceable by the Agent and the Lenders, and their respective successors, as
assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated
Loss Value or any other amounts owing pursuant to this Lease within 5
days after the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as
defined in, any other Lease or Lessee shall fail to perform or observe
any other covenant or condition set forth in this Lease or any other
Transaction Document, which failure shall remain unremedied for a period
of 10 Business Days after written notice from Lessor or Agent, unless
action has been taken within 15 Business Days to remedy such breach and
such action is being diligently pursued; provided such breach is capable
of being remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other
similar relief shall be granted under any applicable federal or state
law, or (ii) an involuntary case shall be commenced against Lessee or any
of its Subsidiaries under the Bankruptcy Code or under any other
applicable
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bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over Lessee or any of its
Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the appointment of an
interim receiver, trustee or other custodian of Lessee or any of its
Subsidiaries; or a warrant of attachment, execution or similar process
shall have been issued against any substantial part of the property of
Lessee or any of its subsidiaries, and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall
consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; or
Lessee or any of its Subsidiaries shall make any assignment for the
benefit of creditors; or (ii) Lessee or any of its Subsidiaries shall be
unable, or shall fail generally, or shall admit in writing its inability,
to pay its debts as such debts become due; or the Board of Directors of
Lessee or any of its Subsidiaries (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee
or any of its Subsidiaries decreeing the dissolution or split up of
Lessee or any of its Subsidiaries and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft or Spare Engine is canceled and is
not cured within 15 Business Days;
(i) The Aircraft or Spare Engine are arrested or detained in
exercise of any lien and Lessee does not procure the release of such
Aircraft or Spare Engine within 15 business days; or
(j) There shall have occurred an Event of Default or Potential
Event of Default under the Amended Aircraft Credit Facility (whether or
not such Event
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of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the
meaning of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on
any Indebtedness in an individual principal amount of $5 million or more
or any items of Indebtedness with an aggregate principal amount of $10
million or more or (b) any Contingent Obligation in an individual
principal amount of $5 million or more or any Contingent Obligations with
an aggregate principal amount of $10 million or more, in each case beyond
the end of any grace period provided therefor; or (ii) there shall exist
a breach by Lessee or any of its Subsidiaries with respect to any other
material term of (a) any evidence of any Indebtedness in an individual
principal amount of $5 million or more or any items of Indebtedness with
an aggregate principal amount of $10 million or more or any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million
or more or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), if the effect
of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its
stated maturity or the stated maturity of any underlying obligations, as
the case may be (upon the giving or receiving of notice, lapse of time,
both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Lessee or any of its Subsidiaries or
any of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days (or in any event later than
five days prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of
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Lessee representing at least 40% of the combined voting power of all
Securities of Lessee entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency, or (b) any Person or any two or more Persons acting in
concert (in any such case, excluding Mr. Chowdry) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Exchange Act), directly or indirectly,
of Securities of Lessee (or other Securities convertible into such
Securities) representing 20% or more of the combined voting power of all
Securities of Lessee entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency or (c) the Board of Directors of Lessee shall not consist of
a majority of Continuing Directors or (ii) a "Change of Control" shall
occur under the Pass Through Trust Documents or any other Material
Agreement (as in effect on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e), (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines or Spare Engines as Lessor in
its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, Airframe or any Engine or Spare 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 8 hereof as if such Airframe or Engine or Spare 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 Aircraft, Airframe or any
Engine or Spare Engine is located and take immediate possession of and
remove the same by summary proceedings or otherwise, all without
liability accruing to Lessor for or by reason of such entry or taking of
possession or removal whether for the restoration of damage to property
caused by such action or otherwise, provided that if Lessee shall for any
reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe
and Engines or Spare Engine, the Lessor shall be entitled, in a
proceeding to which Lessee shall be a necessary party, to a judgment for
specific performance, conferring the right to immediate possession upon
the Lessor and requiring Lessee to execute and deliver such instruments
to the Lessor;
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(b) sell the Aircraft, Airframe or any Engine or Spare Engine at
public or private sale, as Lessor may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the Aircraft, Airframe
or any Engine or Spare 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 17; and without any duty to account
to Lessee with respect to such action or inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a) or (b) above
with respect to the Aircraft or Spare Engine, 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,
any Basic Rent due on or before the payment date so specified plus as
liquidated damages for loss of a bargain and not as a penalty (in lieu of
the installments of Basic Rent for the Aircraft and Spare Engines due
after the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft and Spare Engines computed as of
the immediately preceding Stipulated Loss Determination Date, together
with interest, if any, at the Past Due Rate on the amount of such Basic
Rent and Stipulated Loss Value from the Stipulated Loss Determination
Date as of which Stipulated Loss Value is computed until the date of
actual payment; and upon such payment of liquidated damages and all
Supplemental Rent then due and payable by the Lessee hereunder, the
Lessor shall transfer (without any representation, recourse or warranty
whatsoever) the Aircraft and Spare Engines to the Lessee and the Lessor
shall execute and deliver such documents evidencing such transfer and
take such further action as the Lessee shall reasonably request to effect
such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall
have sold the Aircraft and Spare Engines, Lessor, in lieu of exercising
its rights under paragraph (c) above with respect to such Aircraft and
Spare Engines, may, if it shall so elect, demand that Lessee pay Lessor,
and Lessee shall pay to Lessor, on the date of such sale, any accrued
rent with respect to the Aircraft and Spare Engines due on or prior to
such date plus, as liquidated damages for loss of a bargain and not as a
penalty, 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 and Spare Engines, computed as of 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;
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(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover
damages for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses
incurred by Lessor and Agent and any Lender (including reasonable allocated
time charges of internal counsel for the Lender) in connection with the Lease
Event of Default, the exercise of remedies and the return of the Airframe or
any Engine or Spare Engine in accordance with the terms of Section 8 hereof or
in placing such Airframe or Engine or Spare Engine (which for purposes hereof,
shall include, without limitation all logs, manuals and data and inspection,
maintenance, modification and overhaul and similar records with respect
thereto) in the condition and airworthiness required by such Section. The
Lessee hereby acknowledges that it shall be directly liable for such costs and
expenses to any Person designated by the Lessor, the Agent or any Lender (as
the case may be) to provide services in connection with or to effect the return
of the Airframe or any Engine or Spare Engine in accordance with the terms of
Section 8 hereof or in placing such Airframe or Engine or Spare Engine (which
for purposes hereof shall include, without limitation, such logs, manuals and
records) in the condition and airworthiness required by such Section.
At any sale of the Aircraft, Spare Engine or any part thereof pursuant to
this Section 17, Lessor or Agent or any Lender 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 Spare Engine or of
the date on or after which will occur the execution of any contract providing
for any private sale. Except as otherwise expressly provided above, no remedy
referred to in this Section 17 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to 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
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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 Spare Engine or any part
thereof in mitigation of Lessor's damages as set forth in this Section 17 or
which may otherwise limit or modify any of Lessor's rights and remedies in this
Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so
long as any Loan relating to the Aircraft or Spare Engine or other Obligations
(other than principal and interest on Loans relating to other aircraft or other
spare engines) are outstanding under the Credit Agreement, all rights of Lessor
under this Section 17 shall be exercised only by the Agent as assignee of
Lessor's rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a)
Forthwith upon the execution and delivery of each Lease Supplement from time to
time required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the
Lessor's interest hereunder, will cause such Lease Supplement (and, in the case
of the initial Lease Supplement, this Lease as well) or amendment to be duly
filed and recorded, and maintained of record, in accordance with the applicable
laws of the government of registry of the Aircraft and Spare Engines. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor and the Agent such further documents and take such further action as
Lessor and the Agent may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and the other
Transaction Documents and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor and Agent hereunder and
under the other Transaction Documents, including, without limitation, if
requested by Lessor and the Agent, the execution and delivery of supplements or
amendments hereto, at the expense of Lessee, each in recordable form, and all
financing statements and continuation statements, and all similar notices
required by applicable law at all times to be kept recorded and filed in such
manner and such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the
Agent promptly after execution and delivery of any supplement and amendment
hereto, an opinion of counsel satisfactory to Lessor and the Agent (which may
include Lessee's general counsel) stating that in the opinion of such counsel,
such supplement or amendment to the Lease (or a financing statement,
continuation statement or similar notice thereof if and to the extent permitted
or required by applicable law) has been properly recorded or filed for record
in all public offices in which such recording or filing is necessary to protect
the right, title and interest of Lessor hereunder and the Agent under the Loan
Documents.
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SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Counsel, or to such other address as Lessee shall from time to
time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor
shall from time to time designate in writing to Lessee with a copy to the
Agent at 130 Liberty Street, New York, New York 10006, Attention:
Marguerite Sutton.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to
pay Rent and all other amounts payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) any setoff, counterclaim, recoupment,
defense or other right which the Lessee may have against the Lessor, the Agent,
the Lenders, any manufacturer, any supplier or any other Person for any reason
whatsoever, (ii) any defect in the title, airworthiness, eligibility for
registration under Title 49 of the United States Code, as amended or other
applicable law, condition, design, compliance with specifications, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft or
Spare Engines, or any theft, interference, interruption or cessation in or
prohibition of the use or possession thereof by the Lessee or any sublessee for
any reason whatsoever, including, without limitation, any such interference,
interruption, cessation or prohibition resulting from the act of any
governmental authority, (iii) any Liens, encumbrances or rights of any other
Person with respect to the Aircraft or Spare Engines, (iv) the invalidity or
unenforceability or lack of due authorization or other infirmity of this Lease
or any other Transaction Document or document or instrument executed pursuant
hereto or thereto, or any lack of right, power or authority of the Lessor or
the Lessee or any other party
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to any other Transaction Document to enter into this Lease or any other
Transaction Document or any such document or instrument, (v) any loss of or
damage to the Aircraft, Airframe, any Engine or Spare Engine or any Part, (vi)
any insolvency, bankruptcy, reorganization or similar proceedings by or against
the Lessee or any other Person, or (vii) any failure, breach or delay by the
Lessor or any other Person in performing or complying with any term of this
Lease or any other cause whether similar or dissimilar to the foregoing, any
present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to
any setoff or any reduction for any reason whatsoever, including any present or
future claims of Lessee against Lessor or any other Person under this Lease or
otherwise. Lessee hereby waives, and hereby agrees to waive at any future time
at the request of Lessor, to the full extent now or then permitted by
applicable law any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express
terms hereof. Each payment of Rent made by Lessee to Lessor shall be final as
to Lessor and Lessee. Lessee will not seek to recover all or any part of any
such payment of Rent from Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft
Chattel Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines, Spare Engines and
Parts as provided herein, and in any circumstances where more than one
construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. ss. 1110 or
any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the Federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft or Spare Engines, as the case may
be, in compliance with the provisions of this Lease shall not be affected by
the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or
any analogue provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any
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tax returns in a manner or take any other action or position inconsistent with
the foregoing or with the Lessor's ownership of the Aircraft or Spare Engines.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft or Spare Engines except as a
Lessee only. The Aircraft and Spare Engines shall at all times during the term
of this Lease be the sole and exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred
and is continuing, Lessee shall have the option to purchase the Aircraft and
the Spare Engines at the end of the Term for a purchase price equal to the
higher of the Fair Market Sales Value (assuming that the Aircraft and Spare
Engines are in the condition required by the Lease) as of such date and
Stipulated Loss Value plus all accrued Rent and all Supplemental Rent then due.
Upon the payment by Lessee of the full of such amounts, Lessor shall convey to
Lessee all right, title and interest of Lessor in and to the Aircraft and Spare
Engines on an "as-is, where is" basis, without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not
more than 360 days) irrevocable prior written notice to Lessor. The Lessee will
give Lessor prior written irrevocable notice not less than 90 days (but not
more than 360 days) before the expiration of the Term of its determination to
return the Aircraft and Spare Engines and not exercise any purchase option
under this Section 21. If Lessee fails to give notice as required herein,
Lessee will be deemed to have elected to return the Aircraft and Spare Engines
to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be
obligated hereunder to do so, and the amount of such payment and the amount of
the reasonable expenses of Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand.
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SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
or Spare Engines except as a lessee only. Neither Lessee nor any Affiliate of
Lessee will file any tax returns in a manner inconsistent with the foregoing
fact or with Lessor's ownership of the Aircraft and Spare Engines or with the
parties' agreement that this Lease be treated as a tax lease for purposes of
the Internal Revenue Code. 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
reference herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE
OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR
BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE
LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This
Lease may be executed by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect
to the subject matter hereof and thereof, except any agreements referred to
herein.
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(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations
under this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among
other things, to assign to the Agent this Lease and the Lease Supplements and
to mortgage in favor of the Agent the Aircraft and the Spare Engines, subject
to the reservations and conditions therein set forth. All rights of the Lessor
hereunder are subject to the Aircraft Chattel Mortgage and the Lessor and the
Lessee agree that so long as the lien of the Aircraft Chattel Mortgage has not
been discharged in accordance with its terms, (i) all payments hereunder shall
be made to the Agent for the benefit of Lenders to the extent of the Lenders'
interest in such payments; (ii) all notices from or to the Lessor shall be
copied to the Agent and (iii) the Lessee shall not take any actions that the
Lessor would be prohibited from taking under the terms of the Aircraft Chattel
Mortgage. Lessee hereby acknowledges due notice of, and consents to, such
assignment and to the creation of such mortgage and security interest. To the
extent, if any, that this Lease and any Lease Supplement constitutes chattel
paper (as such term is in effect in any applicable jurisdiction), no security
interest in this Lease or any Lease Supplement may be created through the
transfer or possession of any counterpart other than the original executed
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof or thereof.
-82-
<PAGE> 87
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.
Lessor
By
------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of September, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------
Name:
Title:
<PAGE> 88
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING II, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of September 5, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe, Engines and Spare Engines under the Lease as and when delivered
by Lessor to Lessee in accordance with the terms thereof.
[(1)The Lease relates to the Airframe, Engines and Spare Engines
described below, and a counterpart of the Lease is attached hereto, and made a
part hereof, and this Lease Supplement together with such attachment, is being
filed for recordation on the date hereof with the Federal Aviation
Administration as one document.]
- --------
(1) This language for Lease Supplement No. 1.
<PAGE> 89
EXHIBIT A
Page 2
[(2)The Lease relates to the Airframe, Engines and Spare Engines
described below, and a counterpart of the Lease, together with Lease Supplement
No. 1 dated September 5, 1997, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on __________ __, 1997, as one document and
assigned Conveyance No. ____________.]
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial
no. ______;
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______] (each of
which engines has 750 or more rated takeoff horsepower or the equivalent
of such horsepower); and
(iii) Two Spare Engines: two (2) aircraft engines bearing,
respectively, manufacturer's serial nos. [__________________ and
___________] (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The closing date of the Aircraft and Spare Engines is the date of this
Lease Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft and Spare Engines shall
commence on the closing date and end on the Final Maturity Date.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
and Spare Engines for all purposes hereof and of the Lease as being airworthy,
- --------
(2) This language for other Lease Supplements.
<PAGE> 90
EXHIBIT A
Page 3
in good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that
nothing contained herein or in the Lease shall in any way diminish or otherwise
affect any right Lessee or Lessor may have with respect to the Aircraft or
Spare Engines against the manufacturer, any affiliate thereof, or any
subcontractor or supplier of the manufacturer or any affiliate thereof, under
any purchase agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated
by reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 91
EXHIBIT A
Page 4
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
to be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.,
Lessor
By
------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on September ___, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------
Name:
Title:
<PAGE> 92
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 93
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 94
EXHIBIT D
to
Lease Agreement
[FORM OF COMPLIANCE CERTIFICATE]
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) We are the duly elected [Title] and [Title] of Atlas Air, Inc.,
a Delaware corporation ("Atlas");
(2) We have reviewed the terms of the four Lease Agreements, dated
as of September 5, 1997, between Atlas Freighter Leasing II, Inc., as
Lessor and Atlas, as Lessee (the "Leases") and the other Transaction Loan
Documents, and we have made, or have caused to be made under our
supervision, a review in reasonable detail of the transactions and the
condition of Atlas and its Subsidiaries during the accounting period
covered by the attached financial statements.*** The terms defined
therein and not otherwise defined in this Certificate (including
Attachment No. 1 annexed hereto and made a part hereof) shall be used in
this Certificate as therein defined; and
(3) The examination described in paragraph (2) above did not
disclose, and we have no knowledge of, the existence of any condition or
event which constitutes a Default or Lease Event of Default under any
Lease during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate[,
except as set forth below].
[Set forth [below] [in a separate attachment to this Certificate] are all
exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Atlas has taken, is taking, or proposes to take with respect to each such
condition or event:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------
*** Compliance Certificate delivered on the date on which the Leases are
executed and delivered shall provide financials for the fourth quarter
fiscal period most recently ended.
<PAGE> 95
EXHIBIT D
Page 2
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this _____________ day of ____________, 199__ pursuant to subsection
6(a)(4) of each Lease.
ATLAS AIR, INC.
By
------------------------------
Name:
Title:
<PAGE> 96
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of _____________, 199__ and pertains to the period from
_____________, 199__ to _________________, 199__. Subsection references herein
relate to subsections of each Lease.
A. Indebtedness
1. Indebtedness permitted under subsection 7(a)(11): $__________
2. Aggregate liability, contingent or otherwise,
outstanding under subsection 7(d)(6): $__________
3. Maximum permitted under subsection 7(a)(11)
($30,000,000)-(A.2)): $__________
B. Liens
1. Indebtedness secured by Liens permitted under
subsection 7(b)A(iii): $__________
2. Maximum permitted under subsection 7(b)A(iii): $10,000,000
C. Investments
1. Consolidated book value of the assets of Atlas
and its Subsidiaries: $__________
2. 15% of C.1: $__________
3. Investments permitted under subsection 7(c)(iii): $__________
4. Maximum permitted under subsection 7(c)(iii)(C.2): $__________
5. Investments permitted under subsection 7(c)(vi): $__________
6. Maximum permitted under subsection 7(c)(vi): $15,000,000
<PAGE> 97
D. Investments in Joint Ventures(1)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared or paid during fiscal year: $_________
3. Contributions to capital of Special Purpose
Subsidiaries during fiscal year: $_________
4. Investments made under subsection 7(c)(iv): $_________
5. Maximum permitted under subsection 7(c)(iv) (1-2-3): $_________
E. Contingent Obligations
1. Contingent Obligations permitted under sub-
section 7(d)(6): $_________
2. Indebtedness outstanding under subsection
section 7(a)(11): $_________
3. Maximum permitted under subsection 7(d)(6)
($30,000,000 - (E.2)): $__________
F. Restricted Junior Payments(2)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared and paid under sub-
section 7(e)(2): $_________
3. Maximum permitted under subsection 7(e)(2) (F.1): $_________
- --------
(1) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of such fiscal year.
(2) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of fiscal year.
<PAGE> 98
G. Minimum Interest Coverage Ratio (for the four-fiscal quarter
period ending ___________, 199__)
1. Consolidated Net Income: $_________
2. Consolidated Interest Expense: $_________
3. Provisions for taxes based on income: $_________
4. Total depreciation expense: $_________
5. Total amortization expense: $_________
6. Other non-cash items reducing Consolidated Net
Income: $_________
7. Other non-cash items increasing Consolidated
Net Income: $_________
8. All cash expenditures relating to reserves on
the June 30, 1997 balance sheet: $_________
9. Consolidated Adjusted EBITDA (adjusted for
periods ending prior to December 31, 1996)
(1 + 2 + 3 + 4 + 5 + 6 - 7) - 8 : $_________
10.Interest Coverage Ratio (9):(2): ____:1.00
11.Minimum ratio required under subsection 7(f)(i): ____:1.00
H. Maximum Leverage Ratio (as of _____________, 199__)
1. Consolidated Total Debt: $_________
2. Cash and Cash Equivalents in excess of
$25,000,000: $_________
3. Consolidated Rental Payments: $_________
4. Consolidated Adjusted EBITDA (G.9 above): $_________
5. Leverage Ratio (H.1 - H.2) + (7 x H.3) : (H.4 + H.3): ____:1.00
<PAGE> 99
6. Maximum ratio permitted under subsection 7(f)(ii): ____:1.00
I. Minimum Consolidated Net Worth (as of ___________, 199__)
1. Consolidated Net Worth: $_________
2. Minimum required under subsection 7(f)(iii): $_________
J. Fundamental Changes
1. Aggregate value of assets sold in Asset Sales
during current fiscal year permitted under
subsection 7(g)(3): $_________
2. Maximum permitted under subsection 7(g)(3): $100,000,000
3. Aggregate value of assets sold in Asset Sales
after Closing Date in one or more transactions
permitted under subsection 7(g)(3): $_________
4. Maximum permitted under subsection 7(g)(3): $500,000,000
K. Consolidated Capital Expenditures
1. Consolidated Capital Expenditures for fiscal
year-to-date: $_________
2. Maximum Consolidated Capital Expenditures Amount
permitted under subsection 7(g)(8) for fiscal year: $_________
L. Leases
1. Consolidated Rental Payments incurred in connection with the
sale-leaseback transactions described in Subsection 7(j) of
the Leases in an amount not to exceed $12 million plus
Consolidated Rental Payments pursuant to acquisitions
permitted under Subsection
7(g)(5): $_________
2. Consolidated Rental Payments in effect during
current fiscal year: $_________
3. Maximum permitted under subsection 7(i) (L.1 +
$60,000,000): $_________
<PAGE> 1
EXHIBIT 10.78
EXHIBIT VIII
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(N524MC)
DATED AS OF SEPTEMBER 5, 1997
BETWEEN
ATLAS FREIGHTER LEASING II, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-2D7B Aircraft
U.S. Registration No. N524MC
Manufacturer's Serial No. 21784
---------------------------
Two Spare Engines
Manufacturer's Serial Nos. 517790 and 517602
- -------------------------------------------------------------------------------
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
EXHIBIT VIII
TABLE OF CONTENTS
Page
SECTION 1. Definitions................................................... 1
SECTION 2. Acceptance and Lease.......................................... 24
SECTION 3. Term and Rent................................................. 24
(a) Term and Basic Rent......................................... 24
(b) Adjustments to Basic Rent................................... 25
(c) Supplemental Rent........................................... 25
(d) Payments in General......................................... 25
(e) Minimum Rent................................................ 26
(f) Prepayment of Rent Payments................................. 26
SECTION 4. Certain Representations and Warranties........................ 27
SECTION 5. Lessee's Representations and Warranties....................... 28
SECTION 6. Lessee's Affirmative Covenants................................ 34
SECTION 7. Lessee's Negative Covenants................................... 42
SECTION 8. Return of the Aircraft and Spare Engines...................... 54
(a) Condition Upon Return....................................... 54
(b) Overhaul and Repair......................................... 54
(c) Repairs..................................................... 55
(d) Modifications............................................... 55
(e) Airworthiness Directives.................................... 55
(f) Return of the Engines....................................... 55
(g) Deferred Maintenance........................................ 55
(h) Corrosion Treatment......................................... 55
(i) Manuals..................................................... 56
(j) Storage Upon Return......................................... 56
(k) Severable Parts............................................. 56
(l) Survival.................................................... 56
SECTION 9. Liens......................................................... 57
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.............................................. 57
(2)
<PAGE> 3
Page
(a) Maintenance and Operation................................... 57
(b) Possession.................................................. 59
(c) Insignia.................................................... 61
(d) Holding Out................................................. 61
(e) No Pledging of Credit....................................... 62
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.................................................... 62
SECTION 12. Indemnities.................................................. 64
SECTION 13. Event of Loss................................................ 66
SECTION 14. Insurance.................................................... 68
SECTION 15. Assignment................................................... 71
SECTION 16. Events of Default............................................ 71
SECTION 17. Remedies..................................................... 74
SECTION 18. Lessee's Cooperation Concerning Certain Matters.............. 77
SECTION 19. Notices...................................................... 78
SECTION 20. Net Lease, True Lease, etc................................... 78
SECTION 21. Purchase Option.............................................. 80
(a) Purchase Option............................................. 80
(b) Notice of Purchase.......................................... 80
SECTION 22. Lessor's Right to Perform for Lessee......................... 81
SECTION 23. Miscellaneous................................................ 81
SECTION 24. Security for Lessor's Obligations............................ 82
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
(3)
<PAGE> 4
Page
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
(4)
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of September 5, 1997 between ATLAS FREIGHTER
LEASING II, INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft and the Spare Engines to be leased pursuant to the
terms of this Lease and other similar aircraft and spare engines to be leased
pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same
-1-
<PAGE> 6
manner as Lessee maintains, services, repairs and overhauls similar airframes
utilized by Lessee and without in any way discriminating against such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2 engine for
the aircraft bearing U.S. registration number N523MC, N524MC, N526MC, N527MC or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and suitable
for installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immedi-
-2-
<PAGE> 7
ately preceding the date of calculation, and provided further, that if such
aircraft is of a model other than a Boeing 747 freighter, such projected cash
operating expenses shall include maintenance costs which shall not be less than
the average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AFL I" means Atlas Freighter Leasing, Inc., a Delaware corporation.
"AFL I Aircraft" means (i) one Boeing 747-200 Aircraft, serial number
21048, with four Pratt & Whitney JT9D-7J engines attached and (ii) five Boeing
747-200 Aircraft, serial numbers 21221, 21251, 21380, 21644, and 22507, each
with four General Electric CF6-50E2 engines attached.
"AFL I Credit Agreement" means that certain Credit Agreement dated as of
May 29, 1997 by and among AFL I, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms hereof.
"AFL I Leases" means the Leases as such term is defined in the AFL I Credit
Agreement.
"AFL I Restructuring" means the following transactions which occurred
concurrently on May 29, 1997: (i) the termination of the leases relating to the
AFL I Aircraft in existence prior to May 29, 1997, (ii) the transfer, as a
dividend, of the AFL I Aircraft to Lessee and the simultaneous contribution of
the AFL I Aircraft to AFL I as a capital contribution, together with
approximately $10.4 million, (iii) the incurrence
-3-
<PAGE> 8
of indebtedness pursuant to the AFL I Credit Agreement and the simultaneous
repayment of the indebtedness previously secured by the AFL I Aircraft and (iv)
the entering into of the AFL I Leases.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Aircraft Obligations" means all amounts owing by the Lessee or any of its
Subsidiaries pursuant to the Amended Aircraft Credit Facility immediately prior
to giving effect to the third amendment and restatement thereof on the date
hereof and relating to the Aircraft and Spare Engines being contributed to the
Lessor pursuant to the Transaction.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"Amended Aircraft Credit Facility" means the Third Amended and Restated
Credit Agreement dated as of September 5, 1997, among Lessee, as Borrower, the
lenders listed therein, Goldman Sachs Credit Partners L.P., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent, without giving effect
to any amendments, modifications, supplements or waivers thereof.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc., Morton Beyer, Agnew, or any other nationally recognized firm of
aircraft appraisers reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets
-4-
<PAGE> 9
sold in any single transaction or related series of transactions is equal to
$1,000,000 or less, (B) transactions related to aircraft engines, components,
parts or spare parts pursuant to customary pooling, exchange or similar
arrangements, (C) asset swaps involving aircraft engines, components, parts or
spare parts; provided that the assets received by the Lessee or any Subsidiary
have a fair market value at least equal to the assets transferred (provided that
with respect to any asset swap or series of related asset swaps involving assets
of Lessee or any Subsidiary with a fair market value exceeding $3,000,000, such
determination shall be made by the Board of Directors of Lessee)) and (D) asset
sales involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft and the
Spare Engines pursuant to Section 3(a) of this Lease adjusted as provided in
Section 3(b) of this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial
-5-
<PAGE> 10
paper maturing no more than one year from the date of creation thereof and
having, at the time of the acquisition thereof, a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year after such date and issued or accepted by
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Atlas, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
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"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3 of
the Amended Aircraft Credit Facility on or before the Third Amended and Restated
Closing Date (as such term is defined in the Amended Aircraft Credit Facility).
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Lessee or is merged
into or consolidated with Lessee or any of its Subsidiaries or that Person's
assets are acquired by Lessee or any of its Subsidiaries, (iii) the income of
any Subsidiary of Lessee to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts). For the avoidance of
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<PAGE> 12
doubt, all rental payments to AFL I and Lessor shall not be included in
Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a
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party or by which it or any of its properties is bound or to which it or any of
its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
and Spare Engines subject to this Lease and the other aircraft and spare engines
to be leased pursuant to the Leases, subject to the Aircraft Obligations.
"Credit Agreement" shall mean the Credit Agreement, dated as of September
5, 1997, by and among Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, and
Goldman Sachs Credit Partners L.P., as Syndication Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the NationsBanc Agreement, the AFL I Credit Agreement, the
Senior Note Documents, any Permitted Extension Indebtedness and any Other
Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type
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<PAGE> 14
and model, which (i) is in a cargo configuration capable of immediate operation
in the business of Lessee or is eligible for delivery under a modification
agreement with a delivery slot available within a six month period (or is leased
for a period of longer than six months until a delivery slot is available), and
(ii) has a maximum gross take-off weight ("MTOW") of at least 800,000 pounds, in
the case of any 747-200, 747-300, or 747-400 aircraft and 630,000 pounds in the
case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the General Electric CF6-50E2 aircraft engines
for the aircraft bearing U.S. registration numbers N523MC, N524MC, N526MC and
N527MC listed by manufacturer's serial numbers in the initial Lease Supplement
and installed on the Airframe at the time of the delivery to Lessee of such
Airframe, whether or not from time to time thereafter installed on such Airframe
or any other airframe; (ii) any Acceptable Alternate Engine which may from time
to time be substituted for any of such four engines pursuant to the terms of the
Lease; and (iii) in any case, any and all Parts which are from time to time
incorporated or installed in or attached to any such engine and any and all
parts removed therefrom so long as title thereto remains vested in Lessor in
accordance herewith. The term "Engines" means, as of any date of determination,
all Engines then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
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<PAGE> 15
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or Spare Engine or
both): (A) loss of such Aircraft or Spare Engine or the use thereof due to theft
or disappearance of the Aircraft or Spare Engine which shall result in the loss
of possession thereof for a period of 120 days (or for a shorter period ending
on the date on which there is an insurance settlement for a total loss on the
basis of the theft or disappearance of such Aircraft or Spare Engine); (B) the
destruction, damage beyond repair or rendition of such Aircraft or Spare Engine
permanently unfit for normal use for any reason whatsoever; (C) the
condemnation, confiscation or seizure of, or requisition of title to, or use or
possession (other than use by the United States Government if Lessee obtains
adequate compensation from the United States Government) of such Aircraft or
Spare Engine; (D) as a result of any rule, regulation, order or other action by
the FAA or other governmental body having jurisdiction, the use of such Aircraft
or Spare Engine in the normal course of interstate air transportation of persons
or cargo shall have been prohibited for a period of more than nine consecutive
months unless Lessee, prior to the expiration of such nine month period, shall
have undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such property by Lessee or,
in any event, if such use shall have been prohibited for a period of twelve
consecutive months; (E) the operation or location of such Aircraft or Spare
Engine, while under requisition for use by the United States or any
instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Aircraft or Spare Engine, if
Lessee shall be unable to obtain indemnity or "war-risk" insurance in lieu
thereof from the United States; (F) any damage which results in an insurance
settlement with respect to such Aircraft or Spare Engine on the basis of an
actual or constructive total loss or (G) a divestiture of such Airframe or Spare
Engine as described in Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft
Chattel Mortgage under
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<PAGE> 16
the Credit Agreement. 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
of the Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of the Airframe or any Engine or Spare Engine
shall mean the value which would be obtained in an arm's-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 by a recognized independent aircraft appraiser, mutually agreed to by
the Agent and Lessee, or, if such appraiser cannot be agreed to within 20 days,
then either party may apply to the American Arbitration Association (or any
successor organization thereto) in New York City for the appointment of an
appraiser, whose determinations shall be final and binding upon the parties
hereto. In determining Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe, Engine or Spare Engine is in the
condition, location and overhaul status in which it is required to be returned
to Lessor pursuant to Section 8 of this Lease, that all modifications and
improvements shall be taken into account, that Lessee has removed all Parts
which it is entitled to remove pursuant to Section 11 of this Lease and that the
Aircraft, or Spare Engine, as the case may be, is not encumbered by this Lease.
Except as otherwise expressly provided in the Lease, all appraisal costs will be
shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Final Maturity Date" means May 29, 2004.
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<PAGE> 17
"Financed Aircraft" means all Financed Aircraft under and as defined in the
Amended Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation
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<PAGE> 18
of any Hazardous Material (i) from, under, in, into or on the facilities or
surrounding property; and (ii) caused by, or undertaken by or on behalf of,
Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of
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business) or capital contribution by Lessee or any of its Subsidiaries to any
other Person (other than a wholly-owned Subsidiary of Lessee), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft and Spare Engines under and pursuant to the
terms of the Lease, and any subsequent Lease Supplement entered into in
accordance with the terms of the Lease.
"Leases" means the Lease Agreements dated as of September 5, 1997 between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing II, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or
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the transactions contemplated by this Lease or the operation of the
Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine, any Spare Engine or any Part
in the jurisdiction imposing the Tax, or (ii) the situs of
organization, any place of business or any activity of Lessee or any
other Person having use, possession or custody of the Aircraft, the
Airframe, any Engine, any Spare Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases, the AFL I
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Leases, the Senior Note Documents and agreements in respect of Permitted
Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"NationsBanc Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and NationsBanc Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines, Spare Engines or engines, which are from time to time
incorporated or installed in or attached to the Airframe or any Engine, or Spare
Engine and all such items which are subsequently removed therefrom so long as
title thereto shall vest in Lessor in accordance with this Lease.
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"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the
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interest of the lessee or sublessee under such lease to any restriction
or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages, (II) Sections 4(d) and 4(e) of the aircraft
chattel mortgages entered into in connection with the AFL I Credit
Agreement and (III) Sections 4(d) and 4(e) of the aircraft chattel
mortgages entered into in connection with the Amended Aircraft Credit
Facility;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens arising pursuant to the AFL I Credit Agreement; provided
that such Liens do not encumber any assets other than the AFL I Aircraft
and other assets of AFL I;
(xi) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xii) Liens granted pursuant to the Transaction Documents;
(xiii) Liens arising pursuant to the Amended Aircraft Credit Facility;
and
(xiv) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of
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such Indebtedness, plus the amount of expenses of Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of Lessee hereunder at least to the same extent
as the Indebtedness immediately prior to such extension, (iv) such Permitted
Extension Indebtedness has a final stated maturity later than the end of the
stated maturity of the Indebtedness being extended immediately prior to such
extension and (v) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of Lessee and its Subsidiaries or
any less favorable, from the perspective of Lessor and Lenders than those
contained in the Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Lease.
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds
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thereof, the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business or any asset (including any ACMI Contracted Aircraft) by Lessee or any
of its Subsidiaries or any other related action which requires compliance on a
Pro Forma Basis. In making any determination of compliance on a Pro Forma
Basis, such determination shall be performed after good faith consultation with
Lessor and Agent using the consolidated financial statements of Lessee and its
Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition or other
related action had been consummated at the beginning of the period specified in
the covenant with respect to which Pro Forma Basis compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general
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any instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of
the foregoing.
"Senior Notes Documents" means the Indenture, dated as of August 13, 1997
between Atlas Air, Inc. and State Street Bank and Trust Company relating to the
10 3/4% $150 million Senior Notes due 2005 of Lessee (the "Senior Notes") and
any and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of September 5, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Spare Engines" shall mean each General Electric CF6-50E2 aircraft engine
bearing manufacturer's serial numbers listed in the initial Lease Supplement.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for the
purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness
or Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are
not in excess of 15% of the consolidated book value of the assets of the Lessee
and its Subsidiaries, and the only liability of which is the Permitted
Extension Indebtedness or Other Permitted Indebtedness incurred to refinance
such
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Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft and Spare Engines
shall mean as of any date, the amount set forth on Exhibit C opposite the
Stipulated Loss Determination Date immediately prior to such date, as such
amount may be reduced in accordance with Section 3(f) plus all accrued and
unpaid interest on the Loans relating to the Aircraft and Spare Engines on the
date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft and Spare Engines is leased
hereunder pursuant to Section 3(a) of the Lease, beginning on the Initial
Borrowing Date and ending on the Final Maturity Date, or such earlier date as
the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the Contribution, (ii) the leasing by
Lessor to Lessee of the Aircraft, Spare Engines and certain other aircraft and
other spare engines pursuant to the Leases, (iii) the repayment of the Aircraft
Obligations and (iv) the release and termination of all security interests and
Liens encumbering the Aircraft, Spare Engines and any part thereof and any other
assets of Lessor.
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"Transaction Documents" shall mean the Amended Aircraft Credit Facility,
any bills of sale or certificates of transfer for each Aircraft and the Spare
Engines (including bills of sale on AC Form 8050-2), the Leases, all documents
relating to the repayment of the Aircraft Obligations, the Loan Documents and
all other agreements and documentation executed and delivered in connection with
the Transaction, including, without limitation, in connection with the
Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft and the Spare Engines as evidenced by the execution by
Lessor and Lessee of a Lease Supplement leasing the Aircraft and the Spare
Engines hereunder. Lessee agrees to appoint in writing one or more of its
employees as its authorized representative to accept delivery of the Aircraft
pursuant to the terms hereof. Lessee hereby agrees that acceptance of delivery
by such employee or employees shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the Final Maturity Date or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
Basic Rent shall accrue during the Term in accordance with Exhibit B hereto.
Lessee shall pay to Lessor on each Basic Rent Payment Date an amount of Basic
Rent specified opposite each Basic Rent Payment Date on Exhibit B hereto as
such amounts may be adjusted pursuant to Section 3 plus accrued interest on
Basic Rent previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and
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notified to Lessor and Lessee prior to the Basic Rent Payment Date, which
represents the amount of interest due and payable on the Loans relating to the
Aircraft and the Spare Engines on such Basic Rent Payment Date and determined
in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when due until the same shall be paid
and on any other amounts payable hereunder which are not paid when due and (ii)
all amounts payable by Lessor pursuant to subsections 2.6D, 2.7, 9.2 and 9.3 of
the Credit Agreement; provided, however, to the extent any Supplemental Rent
required to be paid pursuant to this clause (ii) of subsection 2(c) has been
paid by Lessee pursuant to the terms of another Lease, then Lessee's obligations
hereunder shall be deemed to be satisfied by the payments made pursuant to such
other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and the Spare Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to
other aircraft and other spare engines leased pursuant to the other Leases and
after taking into account all other payments of rent pursuant to the other
Leases on such date), then such excess amounts shall be paid by the Agent to
Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
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payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft and the Spare Engines required to be paid by
Lessor on or within five Business Days of the due date of such installment
of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
the Spare Engines and all other unpaid Obligations of Lessor (other than
principal and interest on Loans relating to other aircraft and other spare
engines and after taking into account all other payments of Stipulated Loss
Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft and the Spare Engines pursuant to Section 2.4C(ii)
of the Credit Agreement, Lessor shall notify Lessee of such required
prepayment and Lessee shall immediately prepay an amount of Basic Rent
equal to the amount of such required prepayment less any required payments
of the Loans relating to the Aircraft and the Spare Engines actually made
by the Lessor from Insurance Proceeds or Condemnation Proceeds (as each
such term is defined in the Credit Agreement) received directly by the
Lessor.
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(ii) The Lessee shall also be permitted to voluntarily prepay
Basic Rent at any time and from time to time, without premium or
penalty upon not less than three Business Days prior to written or
telephonic notice to Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section
3(f), the schedules of Basic Rent and Stipulated Loss Value shall be
adjusted so as to preserve the after tax yield and after tax cash
flows of the Lessor and, to the extent consistent therewith, to
minimize the net present value of Basic Rent payments. All such
computations shall be made on the basis of the same assumptions and
the method of computations employed in the original calculations of
Basic Rent and Stipulated Loss Values (except to the extent such
assumptions have been changed as a result of such prepayment or any
prior such adjustment). At the Lessee's written request, independent
public accountants mutually selected by the Lessor and the Lessee
shall confirm the required adjustments. The final determination of any
adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by
the Agent. The reasonable fees, cost and expenses of the verifying
accounting firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary
notwithstanding, after giving effect to the foregoing adjustments the
revised Basic Rent and Stipulated Loss Values shall permit to the
Lessee to comply with Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE AND
SPARE ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED
THAT THE AIRFRAME AND EACH ENGINE AND SPARE ENGINE ARE SUITABLE FOR ITS
PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY LENDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, SPARE ENGINE OR ANY
PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
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<PAGE> 32
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT AND SPARE ENGINES OR ANY PART
THEREOF, except that Lessor covenants that it will not, through its own actions
or inactions, in such capacity, interfere in Lessee's quiet enjoyment of the
Aircraft or Spare Engines unless this Lease shall have been declared or deemed
to have been declared in default pursuant to Section 17 hereof. None of the
provisions of this Section 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 any manufacturer, any affiliate
thereof, any subcontractor or supplier of any manufacturer or any affiliate
thereof, with respect to the Airframe, Engines, Spare Engines or any Parts, or
to release the manufacturer, any affiliate thereof, or any such subcontractor
or supplier from any such representation, warranty or obligation. Unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessor
agrees to make available to Lessee such rights as Lessor may have under any
warranty with respect to the Aircraft or Spare Engines made by the manufacturer
or any affiliate thereof or any of its subcontractors or suppliers and any
other claims against the manufacturer or any affiliate thereof, or any such
subcontractor or supplier with respect to the Aircraft or Spare Engines, all
pursuant to and in accordance with the terms of any applicable purchase
agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever
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necessary to carry out its business and operations, except in jurisdictions
where the failure to be so qualified or in good standing has not had and will
not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each of
its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under
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any Contractual Obligation of Lessee or any of its Subsidiaries, except for
such approvals or consents which will be obtained on or before the Initial
Borrowing Date and disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by the
Lessee and its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated by
this Lease and the other Transaction Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body which has not been obtained or made on or prior to the date required to be
obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Lessee and its Subsidiaries as at December
31, 1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at June 30, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
three months then ended. All such statements were prepared in conformity with
GAAP and fairly present the financial position (on a consolidated and, where
applicable, consolidating basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of
the entities described therein for each of the periods then ended, subject, in
the case of any such unaudited financial statements, to changes resulting from
audit and normal year-end adjustments. Neither Lessee nor any of its
Subsidiaries has (and will not following the Initial Borrowing Date) have any
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment that is not reflected in the
foregoing financial statements or the notes thereto and which in any such case
is material in relation to the
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business, operations, properties, assets, condition (financial
or otherwise) or prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 5(c)(A) which, either individually or in the aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since June 30, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
Lessee and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its
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Subsidiaries or any property of Lessee or any of its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither Lessee nor any of its Subsidiaries is (i) in
violation of any applicable laws that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect or (ii) subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
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(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee or
(b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or threatened
Environmental Claims against Lessee or any of its Subsidiaries, and neither
Lessee nor any of its Subsidiaries has received no written notices, inquiries,
or requests for information with respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
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(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
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(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such monthly
financial statements shall only be required to be delivered to Agent to the
extent such monthly financial statements are required to be delivered under
the Amended Aircraft Credit Facility as such agreement may be amended,
modified, supplemented, renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
and (b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter; provided that
delivery of Lessee's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the
end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6(a)(12) for the fiscal year covered by
such financial statements, all in reasonable detail and certified by the
chief
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financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Lessee and satisfactory to Lessor and Agent, which report shall be
unqualified, shall express no doubts about the ability of Lessee and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a) and
(b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each delivery
of financial statements of Lessee and its Subsidiaries pursuant to
subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee stating that the signers have reviewed the
terms of this Lease and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Lessee and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes a Default
or Lease Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section 7;
(5) Environmental Audits and Reports: as soon as practicable following
receipt thereof, copies of all environmental audits and reports, whether
prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which
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relate to an Environmental Claim which could result in a Material Adverse
Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Lease Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Lease Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (4) above is not
correct or that the matters set forth in the Compliance Certificates
delivered therewith pursuant to clause (b) of subdivision (4) above for the
applicable fiscal year are not stated in accordance with the terms of this
Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any
of its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to
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Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect
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to a "multiemployer plan," within the meaning of Section 4001(a)(3) of
ERISA, and (c) such other documents or governmental reports or filings
relating to any Employee Benefit Plan as Lessor or Agent shall reasonably
request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion; and
(13) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such Subsidiary
may be terminated if such termination is in the interests of Lessee and its
Subsidiaries and is not materially disadvantageous to Lessor or to any assignee
of the Lease. Lessee will at all times maintain its corporate existence as a
United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Lessee.
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(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage (including,
without limitation, flood insurance, if necessary or advisable) of the kinds
customarily carried or maintained under similar circumstances by corporations
engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine and any Spare Engine, and its and
their financial and accounting records, and, with the permission of Lessee which
shall not be unreasonably withheld, to make copies and take extracts therefrom,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that Lessee may, if it so
chooses, be present at or participate in any such discussion), all upon
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested; provided that so long as no Lease Event
of Default shall have occurred and be continuing, such inspection shall not be
disruptive to Lessee's business, as reasonably determined by Lessee. Without in
any way limiting the foregoing, Lessee will, upon the request of Lessor or
Agent, participate in a meeting of Agent and Lenders once during each fiscal
year to be held at Lessee's corporate offices (or such other location as may be
agreed to by Lessee, Lessor and Agent) at such time as may be agreed to by
Lessee, Lessor and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably
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be expected to cause a Material Adverse Effect. Lessee shall not conduct, and
shall not permit the conduct of, any Hazardous Materials Activity at any
facility or at any other location which could reasonably be expected to form
the basis of an Environmental Claim against Lessee and which could reasonably
be expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event Lessee or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any facility, Lessee or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Lessee or such Subsidiary. Notwithstanding
anything to the contrary contained in this Lease, Lessee and its Subsidiaries
may engage in the transportation of Hazardous Materials in the ordinary course
of business so long as such is conducted in compliance with all applicable
Environmental Laws, and all other applicable laws, policies, orders, directives
and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA Affiliate
to establish any Employee Benefit Plan which, in either case, could reasonably
be expected to result in a liability for Lessee, under Title IV of ERISA or the
minimum funding standards of Part 3 of Subtitle B of Title I of ERISA, in excess
of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees that,
so long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
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(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(1) Lessee may become and remain liable with respect to the
obligations under the Amended Aircraft Credit Facility;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") plus seven times
Consolidated Rental Payments for the four fiscal quarter period ending on
such Determination Date to Consolidated Adjusted EBITDA plus Consolidated
Rental Payments for the four fiscal quarter period ending on such
Determination Date does not exceed the ratio set forth in subsection
7(f)(ii) for the fiscal quarter in which such Indebtedness is to be
incurred, (ii) the ratio of Consolidated Adjusted EBITDA for such four
fiscal
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quarter period to Consolidated Interest Expense for such four fiscal
quarter period is not less than the ratio set forth in subsection 7(f)(i)
for the fiscal quarter in which such Indebtedness is to be incurred; and
(iii) Lessee will be in compliance with all covenants set forth in
subsection 7(f) hereof, Lessee and its Subsidiaries may incur Other
Permitted Indebtedness;
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding;
(8) Lessee may become and remain liable with respect to Indebtedness
under the NationsBanc Agreement;
(9) AFL I may become and remain liable with respect to all the
obligations under AFL I Credit Agreement and Lessee may become and remain
liable with respect to the AFL I Leases;
(10) Lessee may become and remain liable with respect to the Senior
Notes;
(11) Lessee and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed, without duplication, when added to the maximum aggregate liability,
contingent or otherwise, of Lessee and its Subsidiaries outstanding in
accordance with Section 7(d)(6), $30 million at any time outstanding; and
(12) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording
or notice statute, except:
-43-
<PAGE> 48
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and
Other Permitted Indebtedness; provided that such Liens encumber only
assets subject to purchase money Liens securing such Indebtedness and
do not encumber any assets subject to the Aircraft Chattel Mortgages;
and
(iii) other Liens securing Indebtedness in an aggregate amount
not to exceed $10 million at any time outstanding which do not
encumber any assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule 7(b)
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL I Credit Agreement, Lessee will not, and will not permit any
of its Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary's capital stock to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Lessee or any
other Subsidiary of Lessee, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Lessee or any other Subsidiary of Lessee, (iii) make loans or
advances to Lessee or any other Subsidiary of Lessee, or (iv) transfer any of
its property or assets to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's
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<PAGE> 49
Certificate in form and substance satisfactory to Lessor and Agent
demonstrating that such Special Purpose Subsidiary meets the requirements
set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal year;
provided that Lessee shall not incur liabilities related to any such Joint
Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed $15 million at any time outstanding.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto;
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<PAGE> 50
(5) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations to the extent such Contingent Obligations
are permitted pursuant to subsections 7(i) and 7(j); and
(6) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(11) shall at no time exceed $30
million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may make Restricted Junior Payments with respect to its
Common Stock in an amount not to exceed in any fiscal year, the lesser of
25% of Consolidated Net Income for such fiscal year and $10 million;
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness; and
(4) Lessee may repurchase its Common Stock in an amount not to exceed
in any fiscal year $15 million for purposes of establishing or contributing
to an employee benefit plan; provided that any such repurchased Common
Stock resold to employees of Lessee shall, to the extent of the price paid
for such Common Stock by such employee, be excluded from the calculation
of the $15 million limit set forth above.
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<PAGE> 51
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
================================================================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
June 30, 1997 1.90:1.00
- --------------------------------------------------------------------------------
September 30, 1997 1.90:1.00
- --------------------------------------------------------------------------------
December 31, 1997 1.90:1.00
- --------------------------------------------------------------------------------
March 31, 1998 1.90:1.00
- --------------------------------------------------------------------------------
June 30, 1998 1.90:1.00
- --------------------------------------------------------------------------------
September 30, 1998 1.90:1.00
- --------------------------------------------------------------------------------
December 31, 1998 1.90:1.00
- --------------------------------------------------------------------------------
March 31, 1999 1.90:1.00
- --------------------------------------------------------------------------------
June 30, 1999 1.90:1.00
- --------------------------------------------------------------------------------
September 30, 1999 2.00:1.00
- --------------------------------------------------------------------------------
December 31, 1999 2.00:1.00
- --------------------------------------------------------------------------------
March 31, 2000 2.10:1.00
- --------------------------------------------------------------------------------
June 30, 2000 2.10:1.00
- --------------------------------------------------------------------------------
September 30, 2000 2.20:1.00
- --------------------------------------------------------------------------------
December 31, 2000 2.20:1.00
- --------------------------------------------------------------------------------
March 31, 2001 2.20:1.00
- --------------------------------------------------------------------------------
June 30, 2001 2.20:1.00
- --------------------------------------------------------------------------------
September 30, 2001 2.30:1.00
- --------------------------------------------------------------------------------
December 31, 2001 2.30:1.00
- --------------------------------------------------------------------------------
March 31, 2002 2:40:1.00
- --------------------------------------------------------------------------------
June 30, 2002 2:40:1:00
================================================================================
</TABLE>
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<PAGE> 52
<TABLE>
================================================================================
<S> <C>
September 30, 2002 2.50:1.00
- --------------------------------------------------------------------------------
December 31, 2002 2.50:1.00
- --------------------------------------------------------------------------------
March 31, 2003 2.60:1.00
- --------------------------------------------------------------------------------
Thereafter 2.70:1.00
================================================================================
</TABLE>
(ii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt at the end of any four fiscal quarter period ending
during one of the periods set forth below (less Cash and Cash Equivalents held
by Lessee in excess of $25 million as of such date) plus seven times
Consolidated Rental Payments for such four fiscal quarter period to (ii)
Consolidated Adjusted EBITDA plus Consolidated Rental Payments for such four
fiscal quarter period to exceed the correlative ratio indicated below:
<TABLE>
<CAPTION>
================================================================================
Fiscal Quarter Maximum
Ending Leverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
June 30, 1997 5.75:1.00
- --------------------------------------------------------------------------------
September 30, 1997 6.25:1.00
- --------------------------------------------------------------------------------
December 31, 1997 6.75:1.00
- --------------------------------------------------------------------------------
March 31, 1998 6.75:1.00
- --------------------------------------------------------------------------------
June 30, 1998 7.00:1.00
- --------------------------------------------------------------------------------
September 30, 1998 7.00:1.00
- --------------------------------------------------------------------------------
December 31, 1998 6.75:1.00
- --------------------------------------------------------------------------------
March 31, 1999 6.50:1.00
- -------------------------------------------------------------------------------
June 30, 1999 6.25:1.00
================================================================================
</TABLE>
-48-
<PAGE> 53
<TABLE>
<CAPTION>
================================================================================
<S> <C>
September 30, 1999 5.75:1.00
- --------------------------------------------------------------------------------
<S> <C>
December 31, 1999 5.75:1.00
- --------------------------------------------------------------------------------
March 31, 2000 5.75:1.00
- -------------------------------------------------------------------------------
June 30, 2000 5.50:1.00
- --------------------------------------------------------------------------------
September 30, 2000 5.50:1.00
- --------------------------------------------------------------------------------
December 31, 2000 5.25:1.00
- --------------------------------------------------------------------------------
March 31, 2001 5.25:1.00
- --------------------------------------------------------------------------------
June 30, 2001 5.25:1.00
- --------------------------------------------------------------------------------
September 30, 2001 5.00:1.00
- --------------------------------------------------------------------------------
December 31, 2001 5.00:1.00
- --------------------------------------------------------------------------------
March 31, 2002 4.75:1.00
- --------------------------------------------------------------------------------
June 30, 2002 4.75:1.00
- --------------------------------------------------------------------------------
September 30, 2002 4.50:1.00
- --------------------------------------------------------------------------------
December 31, 2002 4.50:1.00
- --------------------------------------------------------------------------------
March 31, 2003 4.50:1.00
- --------------------------------------------------------------------------------
Thereafter 4.25:1.00
===============================================================================
</TABLE>
(iii) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
================================================================================
Minimum
Period Consolidated
Net Worth
- --------------------------------------------------------------------------------
<S> <C>
fiscal year 1997 $215 million
- --------------------------------------------------------------------------------
fiscal year 1998 $225 million
- --------------------------------------------------------------------------------
fiscal year 1999 $250 million
- --------------------------------------------------------------------------------
fiscal year 2000 $275 million
- --------------------------------------------------------------------------------
fiscal year 2001 $300 million
- --------------------------------------------------------------------------------
fiscal year 2002 $350 million
- --------------------------------------------------------------------------------
fiscal year 2003 $400 million
- --------------------------------------------------------------------------------
fiscal year 2004 $450 million
================================================================================
</TABLE>
-49-
<PAGE> 54
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of a division or line of
business of another Person provided that, (a) the acquisition primarily
involves the acquisition of assets to be used in the business of Lessee,
(b) with respect to such
-50-
<PAGE> 55
acquisition any newly acquired or created Subsidiary of Lessee shall be a
wholly-owned Subsidiary, (c) immediately before and after giving effect
thereto, no Default or Lease Event of Default shall have occurred and be
continuing, (d) immediately after giving effect to the acquisition, Lessee
shall be in compliance on a Pro Forma Basis with financial covenants in
subsection 7(f) and such compliance shall be evidenced by an Officer's
Certificate demonstrating such compliance, (e) Lessor and Agent shall have
reviewed and be reasonably satisfied with the nature and amount of all
contingent liabilities or other liabilities not on the balance sheet of
Lessee assumed in connection with such acquisition and a business plan
prepared by Lessee with respect to such acquisition and (f) the aggregate
amount of cash payments made in connection with all such acquisitions other
than with the proceeds from sales or issuances of equity by Lessee does not
exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business;
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter); and
(9) Lessee shall be permitted to dispose of or acquire assets pursuant
to the consolidation and relocation of its offices and operations to
Colorado; provided that the aggregate consideration paid with respect to
the acquisition of assets shall be in an amount not to exceed $20 million.
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<PAGE> 56
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation or
bylaws to be amended or otherwise modified in any manner which could reasonably
be expected to have a Material Adverse Effect or (ii) any Material Agreement to
be amended or otherwise modified in any manner with respect to any provision
providing material representations and warranties to Lessee, indemnification
rights to Lessee, or limiting Lessee's remedies or rights upon the other party
to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
fiscal year do not exceed $60 million plus the amount of Consolidated Rental
Payments made during such fiscal year in respect of up to four 747-400F
aircraft, subject to the agreement dated June 9, 1997 between Lessee and The
Boeing Company regarding the purchase of 10 new 747-400F aircraft, leased by the
Lessee within twelve months following the Initial Borrowing Date plus an amount
not to exceed $12 million during any fiscal year, equal to Consolidated Rental
Payments incurred in connection with sale and leaseback transactions described
in subsection 7(j), plus Consolidated Rental Payments assumed pursuant to
acquisitions permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries intends
to use for substantially the same purpose as any other property which has been
or is to be sold or transferred by Lessee or any of its Subsidiaries to any
Person (other than Lessee or any of its Subsidiaries) in connection with such
lease; provided that Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to the
extent that Lessee or any of its Subsidiaries would be permitted to enter into,
and remain liable under, such lease under subsection 7(i).
-52-
<PAGE> 57
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 10% or more of any class of equity
Securities of Lessee or with any Affiliate of Lessee or of any such holder, on
terms that are less favorable to Lessee or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
(i) reasonable and customary fees paid to and indemnification of members of the
Boards of Directors of Lessee and its Subsidiaries, (ii) reasonable and
customary salaries, bonuses and other compensation paid to and indemnification
of employees of Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of Lessee or (iii)
performance by Lessee of its obligations under and in accordance with the
Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
Notwithstanding the foregoing, each of the Lessor and AFL I shall be
permitted to issue preferred stock in an amount not to exceed $100,000 each to a
third party.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
-53-
<PAGE> 58
SECTION 8. Return of the Aircraft and Spare Engines. (a) Condition Upon
Return. Unless the Aircraft or any Spare Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return the Aircraft or Spare Engines
to the Lessor hereunder, Lessee, at its own expense, will return the Aircraft or
Spare Engines to Lessor at a location specified by the Lessor to the Lessee in
writing. At the time of such return, (i) Lessee will cause the Aircraft and
Spare Engines to be in compliance with the maintenance covenants contained in
this Lease and (ii) the Airframe will be fully equipped with the Engines
installed thereon.
At the time of such return, such Airframe, Engines and Spare Engines (A)
shall have an airworthiness certificate from the Federal Aviation Administration
and shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 121 (or successor regulation), and shall be in material
compliance with all applicable FAA noise, corrosion, environmental and aging
aircraft requirements, (B) shall be free and clear of all Liens and (C) in the
case of the Aircraft, shall be in a full freighter configuration and in the case
of the Aircraft and Spare Engines in as good condition as when originally
delivered to Lessee, ordinary wear and tear excepted, and otherwise in the
condition required to be maintained under Lessee's FAA-approved maintenance
plan; and in all such cases the Aircraft and Spare Engines shall not have been
discriminated against as compared to other aircraft owned or leased by Lessee
whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines, Spare Engines and all Parts
shall have been, and shall be properly documented to have been, repaired or
overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft and Spare Engines are eligible to receive
approval by the FAA (or its designee), if so required. All such repairs shall be
accompanied by all data and documentation necessary to substantiate their
certification, approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft and Spare Engines shall have approval or certification
by the FAA (or its designee) or certification if required. All such
modifications shall be accompanied by complete data and documentation necessary
to substantiate their certification and approval and methods of compliance.
-54-
<PAGE> 59
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines), Spare Engines or Acceptable
Alternate Engine or Parts, as well as all mandatory service bulletins applicable
to any of the foregoing, shall have been accomplished by terminating action in
compliance with the issuing agency's or the manufacturer's specific
instructions, as the case may be,taking into account, any waiver, deferral or
deviation from such directives, regulations or bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe or in lieu of a Spare Engine,
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 Acceptable Alternate Engine, in form and substance
reasonably satisfactory to Lessor (together with an opinion of 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
Acceptable Alternate Engines are free and clear of all Liens) against receipt
from Lessor of a bill of sale evidencing the transfer, without recourse or
warranty by Lessor to Lessee or its designee of all of Lessor's right, title and
interest in and to any Engine or Spare Engine not installed on the Airframe at
the time of the return of the Airframe.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft or Spare
Engines including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft and Spare
Engines shall have been maintained by cleaning and treating all mild and
moderate corrosion and correcting of all severe or exfoliate corrosion in
accordance with Lessee's approved maintenance program or manufacturer's
structural repair manual.
(i) Manuals. Upon the return of the Aircraft and Spare Engines upon any
termination of this Lease, Lessee shall deliver or cause to be delivered to
Lessor all logs, manuals and data and maintenance, inspection, modification and
overhaul records and similar records required to be maintained with respect to
the Aircraft and Spare Engines and Parts under FAA rules and the Aircraft
maintenance program. If any such logs, manuals, records or other data are
missing, incomplete or otherwise not in accordance with FAA standards applicable
to Lessee, Lessee shall re-accomplish the maintenance tasks necessary to produce
such records in accordance with its approved maintenance program prior to
delivery of the Aircraft or otherwise perform all necessary
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<PAGE> 60
acts (without regard to any applicable waivers or deferrals) to obtain such
records in a manner satisfactory to the FAA and Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, Lessee receives from
Lessor a written request for storage of the Aircraft or Spare Engines upon its
return hereunder, Lessee will provide Lessor, or cause Lessor to be provided,
with storage facilities for the Aircraft or Spare Engines at Lessee's risk and
at Lessee's expense for a period not exceeding 30 days, and thereafter at
Lessor's risk and at Lessor's cost for insurance, maintenance and Lessee's
out-of-pocket expenses for such storage for a period not exceeding 90 days
(provided that if such termination occurs as a result of a Lease Event of
Default hereunder, such storage shall be at the cost of the Lessee), commencing
on the date the Aircraft or Spare Engine is returned substantially in the
condition required under this Section 8, at a location in the continental United
States selected by Lessee and used by Lessee as a location for the long-term
parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft or Spare Engines are to
be returned to Lessor, Lessee shall, at Lessor's request, advise Lessor of the
nature and condition of all severable nonproprietary Parts (other than Parts
otherwise required by Sections 10 or 11 to be maintained on the Aircraft) 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 or Spare Engines in accordance
with Section 11 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 at their fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft or Spare
Engines, title thereto or any interest therein, except the lien of the Aircraft
Chattel Mortgage and Permitted Encumbrances. Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such Lien
not excepted above if the same shall arise at any time.
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<PAGE> 61
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, (i)
will be a "citizen of the United States" as defined in Section 40102(15) of
Title 49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Aircraft and Spare Engines to be
duly registered and remain duly registered in the name of Lessor in accordance
with the Act and otherwise registered under all applicable laws of the United
States so as to be eligible to operate in commercial air service under the Act;
and (iii) will service, repair, inspect, test, maintain and overhaul the
Airframe, each Engine and each Spare Engine and install replacement equipment
and parts on the Airframe, each Engine and each Spare Engine (A) so as to keep
the Airframe, each Engine and each Spare Engine in such operating condition as
may be required to permit the Airframe, each Engine and each Spare Engine to be
utilized in commercial operations, (B) so as to enable the airworthiness
certification of the Airframe to be maintained in good standing at all times
under the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of grounding) registered in the United States have
been grounded by the FAA; provided, however, that if following its issuance, the
United States FAA airworthiness certificate of the Aircraft shall be withdrawn,
then subject to the provisions of Section 13 hereof, so long as Lessee is
diligently taking or causing to be taken all necessary action to promptly
correct the condition which caused such withdrawal, no Lease Event of Default
shall arise from such withdrawal, (C) in accordance with Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same manner
and with the same care used by Lessee with respect to the same or similar
aircraft and engines owned or operated by Lessee so as to keep the same in as
good operating condition as when originally leased hereunder, ordinary wear and
tear excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar equipment,
and (D) in such manner as may be necessary to maintain in full force all
warranties of the manufacturers thereof. Lessee shall maintain all records, logs
and other materials which may be required to permit the Airframe, each Engine
and each Spare Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft, Engines and Spare
Engines. Neither the Airframe nor any Engine nor any Spare Engine will be
maintained, used or operated in violation of any
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law or any rule, regulation or order of any government or governmental authority
having jurisdiction (domestic or foreign), or in violation of any airworthiness
certificate, license or registration relating to the Airframe or such Engine or
Spare Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of the Airframe or any Engine or
Spare Engine, Lessee, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders, provided, however,
that Lessee may, in good faith (after having delivered to Lessor and Agent an
Officers' Certificate stating the facts with respect thereto), contest the
validity or application of any such law, rule, regulation or order in any
reasonable manner which does not, in Lessor's and Agent's opinion (in their sole
discretion), adversely affect the interests of Lessor, Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine or Spare
Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 14 shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with respect to
the Airframe or such Engine or Spare Engine, except in the case of a requisition
for use by the United States of America, and then only if Lessee obtains
indemnity in lieu of such insurance from the United States of America against
the risks and in the amounts required by said Section covering such area, or
(II) in any recognized or threatened area of hostilities unless the Airframe or
such Engine or Spare Engine is operated or used under contract with the
Government of the United States of America under which contract that Government
assumes liabilities for any damages, loss, destruction or failure to return
possession of the Airframe or such Engine or Spare Engine at the end of the term
of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft or any Spare Engine nor suffer it to be
used in any manner or for any purpose excepted from any of the insurance on or
in respect of the Aircraft or Spare Engine or for the purpose of carriage of
goods of any description excepted from such insurance nor do, or permit to be
done, anything which, or omit to do anything the omission of which, may
invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine or Spare Engine except that, unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessee
may without the prior written consent of the Agent and Lessor, take the
following actions so long as the actions to be taken shall not deprive the Agent
of the first priority Lien under the Aircraft Chattel Mortgage in the assets
subject thereto and so long as the actions to be taken shall not
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deprive Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engine and shall not deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the
Aircraft or Spare Engine as assignee of Lessee's rights under this Lease
pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine or Spare Engine
other than by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as administered
pursuant to Executive Order 12656, or any substitute order) or any similar
or substitute programs;
(ii) transfer possession of the Airframe or any Engine or Spare Engine
to the manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Lessee in the ordinary course
of business which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of the Airframe
or title to or use for the remainder of its useful life of such Engine or
Spare Engine; provided, however, that if Lessee's title to or use for the
remainder of its useful life, of the Airframe or any Engine or Spare Engine
shall be divested under any such agreement or arrangement, such divesture
shall be deemed to be an Event of Loss with respect to the Airframe or such
Engine or Spare Engine and Lessee shall comply with Section 13 in respect
thereof;
(iv) install an Engine or Spare Engine on an airframe which is owned
by Lessee free and clear of all Liens except (A) those permitted under
clauses (i) or (ii) of the definition of Permitted Encumbrances in the
Credit Agreement, (B) those that apply only to the engines (other than the
Engines and other than the Spare 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), and (C) the
rights of any Domestic Air Carrier, under normal interchange agreements
which are customary in the airline industry and do not contemplate or
require the transfer of title to such airframe or the engines installed
thereon;
(v) install an Engine or Spare Engine on an airframe leased to Lessee
or owned by Lessee subject to a conditional sale or other security
agreement,
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provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clause (iv) above; and (B) Agent and Lessor shall have
received from the lessor, conditional vendor or secured party and each of
the purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which may be
the lease, conditional sale agreement or mortgage covering such airframe),
whereby such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional vendor
or secured party expressly and effectively agrees that neither it nor its
successors and assigns will acquire or claim any right, title or interest
in any Engine or Spare Engine by reason of such Engine or Spare Engine
being installed on such airframe at any time when such Engine or Spare
Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned by Lessee,
leased by Lessee or owned by Lessee subject to a conditional sale or other
security agreement under circumstances where neither clause (iv) nor clause
(v) above is applicable; provided that any divesture of title to such
Engine or Spare Engine resulting from such installation shall be deemed to
be an Event of Loss with respect to such Engine or Spare Engine and Lessee
shall comply with Section 13 in respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines, Spare Engines or engines installed thereon with any third
party pursuant to which Lessee has operational control of the Airframe and
any Engines or Spare Engines installed thereon such operation to be
performed solely by individuals under the operational control of Lessee
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by such
employees of similar functions within the United States; provided that
Lessee's obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine or Spare Engine permitted by the terms hereof shall
be made subject and subordinate to, and any lease permitted by this Section
10(b) shall be made expressly subject and subordinate to, the Lease and the lien
and security interest of the Aircraft Chattel Mortgage and all of Agent's rights
thereunder and Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such transfer
had not occurred, and any such instrument of transfer shall include appropriate
provisions for the maintenance and insurance of the Airframe or such
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Engine or Spare Engine, and any such instrument of transfer shall expressly
prohibit any further transfer of the Airframe or such Engine or Spare Engine or
any assignment of the rights thereunder; and provided further, that no such
lease, pooling arrangement or other transfer or relinquishment of the possession
of the Airframe or any Engine or Spare Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine and Spare Engine to be legibly marked (in a reasonably prominent
location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing II,
Inc. and Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Lessor and Agent be appropriate or desirable to evidence
the fact that it is subject to the ownership of Lessor and the lien and security
interest created by the Aircraft Chattel Mortgage. Lessee shall not remove or
deface, or permit to be removed or defaced, any such plate, disk, or other
marking or the identifying manufacturer's serial number, and, in the event of
such removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided above,
Lessee shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine or Spare Engine as a designation that might
be interpreted as a claim of ownership or of any security interest therein,
except that Lessee or any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any Engine or
Spare Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or Spare Engine or any Part or any other operations or carriage undertaken by
Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, any Spare Engine or any
Part, or for any other purpose whatsoever.
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SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or any
Spare Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever. In addition, in the ordinary course of
maintenance, service, repair or testing, Lessee at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that, except as otherwise provided in Section 11(d), Lessee at its own
cost and expense shall replace such Parts as promptly as practicable. All
replacement Parts shall be owned by Lessor free and clear of all Liens (except
Permitted Encumbrances and for pooling arrangements to the extent permitted by
Section 11(b)), and shall be in as good operating condition as, and shall have a
value and utility at least equal to, the Parts replaced assuming such parts were
in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine or any Spare
Engine shall remain the property of Lessor and shall remain subject to the lien
and security interest of the Aircraft Chattel Mortgage, no matter where located,
until such time as such Parts shall be replaced by parts which have been
incorporated or installed in or attached to the Airframe or any Engine or any
Spare Engine and which meet the requirements for replacement parts specified
above. Immediately upon any replacement Part becoming incorporated or installed
in or attached to the Airframe or any Engine or any Spare Engine as above
provided, without further act, (A) title to such replacement Part shall vest in
and such replacement part shall become the property of Lessor and shall become
subject to this Lease and the lien and security interest of the Aircraft Chattel
Mortgage and shall be deemed part of the Airframe or such Engine or Spare Engine
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine or Spare Engine, and
(B) title to the replaced part shall no longer be the property of Lessor and
shall thereupon become free and clear of all rights of Lessor hereunder and all
rights derivative of Lessor's and shall no longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine or Spare Engine as
provided in Section 11(a) may be subjected by Lessee to a normal pooling
arrangement of the type customary in the airline industry entered into by Lessee
in the ordinary course of its business and entered into with Domestic Air
Carriers that are not the subject of any bankruptcy, insolvency, or similar
proceeding, voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine or Spare Engine in accordance with Section 11(a) as promptly as possible
after the removal of such removed part. In addition, any
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replacement Part when incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine in accordance with Section 11(a) may be
owned by any third party subject to such a pooling arrangement, provided Lessee,
at its expense, as promptly thereafter as possible, either (A) causes such
replacement Part to become property of Lessor and subject to the lien and
security interest of the Aircraft Chattel Mortgage in accordance with Section
11(a) free and clear of all Liens (except Permitted Encumbrances and the
Aircraft Chattel Mortgage relating to the Aircraft or Spare Engine) or (B)
replaces such replacement Part by incorporating or installing in or attaching to
the Airframe or such Engine or Spare Engine a further replacement Part owned by
Lessee which shall become the property of Lessor subject to the lien and
security interest of the mortgage free and clear of all Liens (except Permitted
Encumbrances and the Aircraft Chattel Mortgage relating to the Aircraft or Spare
Engine).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe, the Engines
and Spare Engines as may be required from time to time to meet the standards of
the FAA or other governmental authority having jurisdiction; provided, that
Lessee may, in good faith, contest the validity or application of any such
standard in any reasonable manner that shall not adversely affect the Lessor's
or Agent's respective interests. Lessee also agrees, at its own cost and
expense, to make or cause to be made such alterations and modifications in and
additions to the Airframe, the Engines and Spare Engines as may be required
from time to time to meet the standards or requirements of any directive issued
by a manufacturer relating to the Airframe or any Engine or Spare Engine. In
addition so long as no Default or Lease Event of Default shall have occurred
and be continuing, Lessee, at its own cost and expense, may from time to time
make such alterations and modifications in and additions to the Airframe and
any Engine or Spare Engine as Lessee may deem desirable in the proper conduct
of its business, provided no such alteration, modification or addition
diminishes the value or utility or impairs the condition or airworthiness of
the Airframe or such Engine or Spare Engine below the value, utility, condition
or airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine or Spare Engine were then in the
condition and airworthiness required to be maintained by the terms of this
Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine or Spare Engine as the result of such alteration,
modification or addition shall, without further act, become the property of, and
title to such parts shall vest in Lessor and shall be subject to the lien and
security interest of the Aircraft Chattel Mortgage; provided that, so long as no
Default or Lease Event of Default, shall have occurred and be continuing, Lessee
may remove and not replace any such Part if it (A)
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is in addition to, and not in replacement of or in substitution for, any Part
incorporated or installed in or attached to the Airframe or such Engine or Spare
Engine on the date hereof, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or attached or
added to the Airframe or such Engine or Spare Engine pursuant to the terms of
Section 10(a) hereof or any other provision of this Lease or the Aircraft
Chattel Mortgage and (C) can be removed from the Airframe or such Engine or
Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would have had
at such time had such alteration, modification or addition not occurred,
assuming the Airframe or such Engine or Spare Engine was otherwise in the
condition required by this Lease and the Aircraft Chattel Mortgage. Upon the
removal by Lessee of any such Part, as above provided, title thereto shall,
without further act, be free and clear of the interests of Lessor and all rights
derivative of Lessor's and such Part shall no longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine or Spare Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by Lessee for
any reason whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or Spare Engine
or any part thereof or interest therein by any Federal, state or local
government or other taxing authority in the United States or by any foreign
government or subdivision thereof or by any foreign taxing authority in
connection with, relating to or resulting from: (i) the Airframe or any Engine
or Spare Engine or any part thereof of interest therein; (ii) the manufacture,
purchase, ownership, mortgaging, lease, sublease, use, storage, maintenance,
sale or other disposition of the Airframe or any Engine or Spare Engine; (iii)
any rentals or other earnings therefor or arising therefrom or the income or
other proceeds received with respect thereto; or (iv) this Lease or the
Aircraft Chattel Mortgage; provided, however, that, there shall be excluded
from any indemnification under this Section 12(a) any Lessor Tax unless the
payment of any such Tax shall be a condition to the enforceability of the
Aircraft Chattel Mortgage or the perfection of the lien thereof or unless
proceedings shall have been commenced to foreclose any lien which may have
attached
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as security for such Tax, nothing in this Section shall require the payment of
any Tax so long as and to the extent that the validity thereof shall be
contested in good faith by appropriate legal proceedings promptly instituted
and diligently conducted and Lessee shall have set aside on its books adequate
reserves with respect thereto in accordance with generally accepted accounting
principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, partners, employees, agents and
affiliates of Lessor, Agent and each Lender, (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation the
reasonable fees and disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding, commenced or
threatened by any Person, whether or not any such Indemnitee shall be designated
as a party or a potential party thereto), whether direct, indirect or
consequential and whether based on any federal, state or foreign laws, statutes,
rules or regulations (including without limitation securities and commercial
laws, statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "Indemnified Liabilities"); provided that
Lessee shall not have any obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, Lessee shall contribute the maximum portion that
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine or Spare Engine, Lessee will promptly notify Lessor
and Agent thereof in writing (in any event within five (5) days of such
occurrence) and will, not later than 180 days after the occurrence of such Event
of Loss, convey or cause to be conveyed to Lessor, free of all Liens (other than
Permitted Encumbrances) title to an Acceptable Alternate Airframe or Acceptable
Alternate Engine, as the case may be. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will, as
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conditions to such transfer, (i) furnish Lessor with a warranty (as to title)
bill of sale, in form and substance reasonably satisfactory to Lessor, with
respect to such Acceptable Alternate Airframe or Acceptable Alternate Engine,
(ii) cause a Lease Supplement to be filed for recording pursuant to Title 49 of
the United States Code, as amended, (iii) furnish Lessor with such evidence of
Lessee's title to such Acceptable Alternate Airframe or Acceptable Alternate
Engine and of compliance with the insurance provisions of Section 14 hereof
with respect to such Acceptable Alternate Airframe or Acceptable Alternate
Engine as Lessor may reasonably request, (iv) furnish Lessor with an opinion of
Lessee's counsel to the effect that title to such Acceptable Alternate Airframe
or Acceptable Alternate Engine has been duly conveyed to Lessor free and clear
of all Liens except Permitted Encumbrances and Lessor and Agent continue to
have 1110 protection with respect to such Aircraft and (v) transfer to or at
the direction of Lessee without recourse or warranty all of Lessor's right,
title and interest, if any, in and to (A) the Airframe or Engine or Spare
Engine with respect to which such Event of Loss occurred and furnish to or at
the direction of Lessee, at Lessee's expense, a bill of sale in form and
substance reasonably satisfactory to Lessee, evidencing such transfer and (B)
all claims, if any, against third parties, for damage to or loss of the
Airframe or Engine or Spare Engine subject to such Event of Loss, and such
Airframe or Engine or Spare Engine shall thereupon cease to be an Airframe or
Engine or Spare Engine leased hereunder. Lessee shall cooperate with Lessor and
take all such actions as shall be requested by Lessor so that Lessor complies
with Section 4(f) of the Aircraft Chattel Mortgage. For all purposes hereof,
each such Acceptable Alternate Airframe or Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Airframe" or "Engine" or "Spare Engine", as the case may
be. No Event of Loss under the circumstance contemplated by the terms of this
paragraph (a) shall result in any reduction in Basic Rent.
(b) With respect to the Airframe or any Engine or Spare Engine, as between
the Lessor and Lessee, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for in
Section 14 below) received from any government authority or other person shall
be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine or Spare Engine that has been or is being replaced by
Lessee pursuant to the terms hereof, so long as there shall exist no
Default or Lease Event of Default, such payment shall be paid over to or
retained by Lessee upon satisfaction of the conditions for replacement
contained in paragraph (a) above and until such time shall be held by
Lessor as security for the obligations of Lessee under the Lease; and
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(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine or Spare Engine, Lessee shall promptly notify
Lessor and Agent of such requisition and all of Lessee's obligations under the
Lease shall continue to the same extent as if such requisition had not occurred.
Any payments received by Lessor or Lessee from the United States Government for
the use of the Airframe or such Engine or Spare Engine, to the extent allocable
to the Term, shall be paid over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft and Spare Engines, at its own cost and expense,
public liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per occurrence (which
shall include war risk, governmental confiscation and expropriation and allied
perils coverage). During any period when the Aircraft and Spare Engines are on
the ground and not in operation, Lessee may carry or cause to be carried, in
lieu of insurance required by this Section, insurance otherwise conforming with
the provisions of this Section except that the amounts of coverage shall not be
required to exceed the amounts of comprehensive airline liability insurance, and
the scope of risk covered and
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type of insurance shall be the same, as are customarily carried with respect to
similar aircraft on the ground by corporations engaged in the same or similar
business and similarly situated with Lessee. Any policies of insurance carried
in accordance with this Section 14 and any policies taken out in substitution
or replacement of any such policies (A) shall be amended to name Agent, Lenders
and Lessor as additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of the
liability, shall operate in the same manner as if there were a separate policy
covering each insured, and (D) shall provide that the insurer shall waive any
right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft and Spare
Engines, at its own cost and expense, aircraft ground and flight all-risk hull
insurance as well as fire and extended coverage insurance on Engines and Spare
Engines and other equipment while removed from the Airframe or airframe (which
shall include war risk, governmental confiscation and expropriation (other than
by the United States Government) and allied perils including (A) strikes, riots,
civil commotions or labor disturbances, (B) any malicious act or act of sabotage
and (C) hijacking (air piracy) or any unlawful seizure or wrongful exercise of
control of the Aircraft or Spare Engine or crew in flight (including any attempt
at such seizure or control) made by any person or persons aboard the Aircraft or
another aircraft acting without the consent of the insured, if and to the extent
the same shall be maintained by Lessee with respect to similar aircraft owned or
operated by Lessee on the same routes or if the Aircraft or another aircraft is
operated on routes where the custom is for Domestic Air Carriers similarly
situated with Lessee flying comparable routes with similar aircraft to carry
such insurance, of the type usually carried by corporations engaged in the same
or similar business and similarly situated with Lessee; provided that such
insurance (including any self-insurance to the extent permitted below) shall at
all times be for an amount not less than the greater of the Stipulated Loss
Value as of the closest Stipulated Loss Determinate Date and $50,000,000. During
any period when the Aircraft or Spare Engine, as the case may be, is on the
ground and not in operation Lessee may carry or cause to be carried, in lieu of
the insurance required by this Section, insurance otherwise conforming hereto
except that the scope of risk covered and type of insurance shall be the same as
are from time to time customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated with
Lessee for aircraft and spare engines on the ground in an amount at least equal
to the applicable amount provided above. All such insurance shall name Agent,
Lenders and Lessor as additional insureds and loss payees to the extent their
interest may appear and shall provide that any loss to the Airframe or an Engine
or a Spare Engine in excess of $2,000,000 (and, if a Default or Lease Event of
Default has occurred and is continuing,
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any such loss) shall be payable to the Lessor and to the Agent for the benefit
of Lenders; and shall be primary without right of contribution from any other
insurance which is carried by Lessor or Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft or spare engines in Lessee's fleet which are of a value comparable to
the Aircraft or Spare Engines, as the case may be, and as are not substantially
greater than amounts self-insured by corporations engaged in the same or similar
business and similarly situated with Lessee; provided, however, that Lessee may
not self-insure in an amount in excess of $1,000,000 without the prior written
consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Lessor, Agent or any Lender,
or if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Agent or any
Lender for thirty (30) days (seven (7) days, or such shorter or longer period
as may from time to time be customarily available in the industry, in the case
of any war risk and allied perils coverage) after receipt by Agent and Lessor
of written notice from such insurers of such cancellation, change or lapse; (D)
be in full force and effect throughout any geographical areas at any time
traversed by the Aircraft and shall be payable in U.S. dollars; (E) waive any
right of the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of Lessor and
Agent; and (F) waive all rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine or Spare
Engine, a valid agreement by the United States or such agency or instrumentality
to indemnify Lessee against the same risks against which Lessee is required
hereunder to insure shall be considered adequate insurance with respect to the
Airframe or such
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Engine or Spare Engine to the extent of the risks and in the amounts that are
the subject of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft, the Engines and Spare Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of Lessee, Lessor and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance covered by the
report. Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or omission on
the part of Lessee of which such firm has knowledge and which might invalidate
or render unenforceable, in whole or in part, any insurance on the Aircraft or
any Engine or Spare Engine and (y) at least thirty (30) days prior to the
expiration or termination date, or date of effectiveness of any material change,
of any insurance carried and maintained on the Aircraft or Spare Engines
hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft or Spare Engines
for its own account. Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft or Spare Engines in amounts in excess
of that required to be maintained by this Section 14. No insurance maintained
by Agent, Lessor or any Lender shall prevent Lessee from carrying the insurance
required or permitted by this Section. Proceeds of any such insurance carried
by Lessee, Agent or Lender shall be paid as provided in the insurance policy
relating thereto and no such Person shall have any duty to obtain any such
insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft or in the Spare Engines. Lessor agrees that
it will not assign or convey its right, title and interest in and to this Lease
or the Aircraft or Spare Engines except in accordance with the Credit Agreement.
Subject to the
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foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns and shall inure, to the direct benefit of, and shall also be
enforceable by the Agent and the Lenders, and their respective successors, as
assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
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bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft or Spare Engine is canceled and is
not cured within 15 Business Days;
(i) The Aircraft or Spare Engine are arrested or detained in exercise
of any lien and Lessee does not procure the release of such Aircraft or
Spare Engine within 15 business days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Amended Aircraft Credit Facility (whether or not such
Event
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of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of
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Lessee representing at least 40% of the combined voting power of all
Securities of Lessee entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency, or (b) any Person or any two or more Persons acting in concert
(in any such case, excluding Mr. Chowdry) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of Securities
of Lessee (or other Securities convertible into such Securities)
representing 20% or more of the combined voting power of all Securities of
Lessee entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency or (c)
the Board of Directors of Lessee shall not consist of a majority of
Continuing Directors or (ii) a "Change of Control" shall occur under the
Pass Through Trust Documents or any other Material Agreement (as in effect
on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e), (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines or Spare Engines as Lessor in
its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, Airframe or any Engine or Spare 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 8 hereof as if such Airframe or Engine or Spare 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 Aircraft, Airframe or any Engine
or Spare Engine is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing
to Lessor for or by reason of such entry or taking of possession or
removal whether for the restoration of damage to property caused by such
action or otherwise, provided that if Lessee shall for any reason fail to
execute and deliver instruments deemed necessary or advisable by the
Lessor to obtain possession of the Aircraft, Airframe and Engines or Spare
Engine, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to
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immediate possession upon the Lessor and requiring Lessee to execute and
deliver such instruments to the Lessor;
(b) sell the Aircraft, Airframe or any Engine or Spare Engine at
public or private sale, as Lessor may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the Aircraft, Airframe or
any Engine or Spare 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 17; and without any duty to account
to Lessee with respect to such action or inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above with
respect to the Aircraft or Spare Engine, 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, any Basic Rent
due on or before the payment date so specified plus as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the installments of
Basic Rent for the Aircraft and Spare Engines due after the date specified
in such notice if any), an amount equal to the Stipulated Loss Value for
the Aircraft and Spare Engines computed as of the immediately preceding
Stipulated Loss Determination Date, together with interest, if any, at the
Past Due Rate on the amount of such Basic Rent and Stipulated Loss Value
from the Stipulated Loss Determination Date as of which Stipulated Loss
Value is computed until the date of actual payment; and upon such payment
of liquidated damages and all Supplemental Rent then due and payable by the
Lessee hereunder, the Lessor shall transfer (without any representation,
recourse or warranty whatsoever) the Aircraft and Spare Engines to the
Lessee and the Lessor shall execute and deliver such documents evi-
dencing such transfer and take such further action as the Lessee shall
reasonably request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft and Spare Engines, Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to such Aircraft and Spare
Engines, may, if it shall so elect, demand that Lessee pay Lessor, and
Lessee shall pay to Lessor, on the date of such sale, any accrued rent with
respect to the Aircraft and Spare Engines due on or prior to such date
plus, as liquidated damages for loss of a bargain and not as a penalty, 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 and Spare Engines, computed as of the date of such sale
together with interest, if any, on the amount of such deficiency,
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at the Past Due Rate, from the date of such sale to the date of actual
payment of such amount;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
or Spare Engine in accordance with the terms of Section 8 hereof or in placing
such Airframe or Engine or Spare Engine (which for purposes hereof, shall
include, without limitation all logs, manuals and data and inspection,
maintenance, modification and overhaul and similar records with respect thereto)
in the condition and airworthiness required by such Section. The Lessee hereby
acknowledges that it shall be directly liable for such costs and expenses to any
Person designated by the Lessor, the Agent or any Lender (as the case may be) to
provide services in connection with or to effect the return of the Airframe or
any Engine or Spare Engine in accordance with the terms of Section 8 hereof or
in placing such Airframe or Engine or Spare Engine (which for purposes hereof
shall include, without limitation, such logs, manuals and records) in the
condition and airworthiness required by such Section.
At any sale of the Aircraft, Spare Engine or any part thereof pursuant to
this Section 17, Lessor or Agent or any Lender 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 Spare Engine or of
the date on or after which will occur the execution of any contract providing
for any private sale. Except as otherwise expressly provided above, no remedy
referred to in this Section 17 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to 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
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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 Spare Engine or
any part thereof in mitigation of Lessor's damages as set forth in this Section
17 or which may otherwise limit or modify any of Lessor's rights and remedies in
this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or Spare Engine or other Obligations (other
than principal and interest on Loans relating to other aircraft or other spare
engines) are outstanding under the Credit Agreement, all rights of Lessor under
this Section 17 shall be exercised only by the Agent as assignee of Lessor's
rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the
Lessor's interest hereunder, will cause such Lease Supplement (and, in the case
of the initial Lease Supplement, this Lease as well) or amendment to be duly
filed and recorded, and maintained of record, in accordance with the applicable
laws of the government of registry of the Aircraft and Spare Engines. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor and the Agent such further documents and take such further action as
Lessor and the Agent may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and the other
Transaction Documents and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor and Agent hereunder and
under the other Transaction Documents, including, without limitation, if
requested by Lessor and the Agent, the execution and delivery of supplements or
amendments hereto, at the expense of Lessee, each in recordable form, and all
financing statements and continuation statements, and all similar notices
required by applicable law at all times to be kept recorded and filed in such
manner and such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is
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necessary to protect the right, title and interest of Lessor hereunder and the
Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Counsel, or to such other address as Lessee shall from time to
time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Marguerite
Sutton.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration under Title
49 of the United States Code, as amended or other applicable law, condition,
design, compliance with specifications, operation or fitness for use of, or any
damage to or loss or destruction of, the Aircraft or Spare Engines, or any
theft, interference, interruption or cessation in or prohibition of the use or
possession thereof by the Lessee or any sublessee for any reason whatsoever,
including, without limitation, any such interference, interruption, cessation or
prohibition resulting from the act of any governmental authority, (iii) any
Liens, encumbrances or rights of any other Person with respect to the Aircraft
or Spare Engines, (iv) the invalidity or unenforceability or lack of due
authorization or other infirmity of this Lease or any other Transaction Document
or document or instrument executed pursuant hereto or thereto, or any lack of
right, power or authority of the Lessor or the Lessee or any other party
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to any other Transaction Document to enter into this Lease or any other
Transaction Document or any such document or instrument, (v) any loss of or
damage to the Aircraft, Airframe, any Engine or Spare Engine or any Part, (vi)
any insolvency, bankruptcy, reorganization or similar proceedings by or against
the Lessee or any other Person, or (vii) any failure, breach or delay by the
Lessor or any other Person in performing or complying with any term of this
Lease or any other cause whether similar or dissimilar to the foregoing, any
present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to
any setoff or any reduction for any reason whatsoever, including any present or
future claims of Lessee against Lessor or any other Person under this Lease or
otherwise. Lessee hereby waives, and hereby agrees to waive at any future time
at the request of Lessor, to the full extent now or then permitted by
applicable law any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express
terms hereof. Each payment of Rent made by Lessee to Lessor shall be final as
to Lessor and Lessee. Lessee will not seek to recover all or any part of any
such payment of Rent from Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines, Spare Engines and
Parts as provided herein, and in any circumstances where more than one
construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. ss. 1110 or
any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the Federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft or Spare Engines, as the case may
be, in compliance with the provisions of this Lease shall not be affected by the
provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or any
analogue provisions of any superseding statute or any power of the bankruptcy
court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any
-79-
<PAGE> 84
tax returns in a manner or take any other action or position inconsistent with
the foregoing or with the Lessor's ownership of the Aircraft or Spare Engines.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft or Spare Engines except as a
Lessee only. The Aircraft and Spare Engines shall at all times during the term
of this Lease be the sole and exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft and the
Spare Engines at the end of the Term for a purchase price equal to the higher of
the Fair Market Sales Value (assuming that the Aircraft and Spare Engines are in
the condition required by the Lease) as of such date and Stipulated Loss Value
plus all accrued Rent and all Supplemental Rent then due. Upon the payment by
Lessee of the full of such amounts, Lessor shall convey to Lessee all right,
title and interest of Lessor in and to the Aircraft and Spare Engines on an
"as-is, where is" basis, without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and Spare Engines and not exercise any purchase option under this
Section 21. If Lessee fails to give notice as required herein, Lessee will be
deemed to have elected to return the Aircraft and Spare Engines to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, together
with interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
-80-
<PAGE> 85
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft or
Spare Engines except as a lessee only. Neither Lessee nor any Affiliate of
Lessee will file any tax returns in a manner inconsistent with the foregoing
fact or with Lessor's ownership of the Aircraft and Spare Engines or with the
parties' agreement that this Lease be treated as a tax lease for purposes of the
Internal Revenue Code. 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 reference
herein to numbered sections, unless otherwise indicated, are to sections of this
Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE OR ANY OTHER TRANSACTION
DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER
ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE
PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE LESSOR'S OBLIGATIONS
UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
-81-
<PAGE> 86
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft and the Spare Engines, subject to
the reservations and conditions therein set forth. All rights of the Lessor
hereunder are subject to the Aircraft Chattel Mortgage and the Lessor and the
Lessee agree that so long as the lien of the Aircraft Chattel Mortgage has not
been discharged in accordance with its terms, (i) all payments hereunder shall
be made to the Agent for the benefit of Lenders to the extent of the Lenders'
interest in such payments; (ii) all notices from or to the Lessor shall be
copied to the Agent and (iii) the Lessee shall not take any actions that the
Lessor would be prohibited from taking under the terms of the Aircraft Chattel
Mortgage. Lessee hereby acknowledges due notice of, and consents to, such
assignment and to the creation of such mortgage and security interest. To the
extent, if any, that this Lease and any Lease Supplement constitutes chattel
paper (as such term is in effect in any applicable jurisdiction), no security
interest in this Lease or any Lease Supplement may be created through the
transfer or possession of any counterpart other than the original executed
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof or thereof.
-82-
<PAGE> 87
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of September, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Name:
Title:
<PAGE> 88
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING II, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of September 5, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe, Engines and Spare Engines under the Lease as and when delivered by
Lessor to Lessee in accordance with the terms thereof.
[(1)The Lease relates to the Airframe, Engines and Spare Engines described
below, and a counterpart of the Lease is attached hereto, and made a part
hereof, and this Lease Supplement together with such attachment, is being filed
for recordation on the date hereof with the Federal Aviation Administration as
one document.]
- --------
(1) This language for Lease Supplement No. 1.
<PAGE> 89
EXHIBIT A
Page 2
[(2)The Lease relates to the Airframe, Engines and Spare Engines described
below, and a counterpart of the Lease, together with Lease Supplement No. 1
dated September 5, 1997, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on __________ __, 1997, as one document and
assigned Conveyance No. ____________.]
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______;
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______] (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower); and
(iii) Two Spare Engines: two (2) aircraft engines bearing,
respectively, manufacturer's serial nos. [__________________ and
___________] (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The closing date of the Aircraft and Spare Engines is the date of this
Lease Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft and Spare Engines shall
commence on the closing date and end on the Final Maturity Date.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
and Spare Engines for all purposes hereof and of the Lease as being airworthy,
- --------
(2) This language for other Lease Supplements.
<PAGE> 90
EXHIBIT A
Page 3
in good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that nothing
contained herein or in the Lease shall in any way diminish or otherwise affect
any right Lessee or Lessor may have with respect to the Aircraft or Spare
Engines against the manufacturer, any affiliate thereof, or any subcontractor or
supplier of the manufacturer or any affiliate thereof, under any purchase
agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 91
EXHIBIT A
Page 4
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged this ____ day of September, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Name:
Title:
<PAGE> 92
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 93
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 94
EXHIBIT D
to
Lease Agreement
[FORM OF COMPLIANCE CERTIFICATE]
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) We are the duly elected [Title] and [Title] of Atlas Air, Inc., a
Delaware corporation ("Atlas");
(2) We have reviewed the terms of the four Lease Agreements, dated as
of September 5, 1997, between Atlas Freighter Leasing II, Inc., as Lessor
and Atlas, as Lessee (the "Leases") and the other Transaction Loan
Documents, and we have made, or have caused to be made under our
supervision, a review in reasonable detail of the transactions and the
condition of Atlas and its Subsidiaries during the accounting period
covered by the attached financial statements.*** The terms defined therein
and not otherwise defined in this Certificate (including Attachment No. 1
annexed hereto and made a part hereof) shall be used in this Certificate as
therein defined; and
(3) The examination described in paragraph (2) above did not disclose,
and we have no knowledge of, the existence of any condition or event which
constitutes a Default or Lease Event of Default under any Lease during or
at the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate[, except as set forth
below].
[Set forth [below] [in a separate attachment to this Certificate] are
all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Atlas has taken, is taking, or proposes to take with respect to each such
condition or event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------]
- ------------
*** Compliance Certificate delivered on the date on which the Leases are
executed and delivered shall provide financials for the fourth quarter
fiscal period most recently ended.
<PAGE> 95
EXHIBIT D
Page 2
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this _____________ day of ____________, 199__ pursuant to subsection
6(a)(4) of each Lease.
ATLAS AIR, INC.
By:_______________________________
Name:
Title:
<PAGE> 96
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of _____________, 199__ and pertains to the period from
_____________, 199__ to _________________, 199__. Subsection references herein
relate to subsections of each Lease.
A. Indebtedness
1. Indebtedness permitted under subsection 7(a)(11): $__________
2. Aggregate liability, contingent or otherwise,
outstanding under subsection 7(d)(6): $__________
3. Maximum permitted under subsection 7(a)(11)
($30,000,000)-(A.2)): $__________
B. Liens
1. Indebtedness secured by Liens permitted under
subsection 7(b)A(iii): $__________
2. Maximum permitted under subsection 7(b)A(iii): $10,000,000
C. Investments
1. Consolidated book value of the assets of Atlas
and its Subsidiaries: $_________
2. 15% of C.1: $_________
3. Investments permitted under subsection 7(c)(iii): $_________
4. Maximum permitted under subsection 7(c)(iii)(C.2): $_________
5. Investments permitted under subsection 7(c)(vi): $_________
6. Maximum permitted under subsection 7(c)(vi): $15,000,000
<PAGE> 97
D. Investments in Joint Ventures(1)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared or paid during fiscal year: $_________
3. Contributions to capital of Special Purpose
Subsidiaries during fiscal year: $_________
4. Investments made under subsection 7(c)(iv): $_________
5. Maximum permitted under subsection 7(c)(iv) (1-2-3): $_________
E. Contingent Obligations
1. Contingent Obligations permitted under sub-
section 7(d)(6): $_________
2. Indebtedness outstanding under subsection
section 7(a)(11): $_________
3. Maximum permitted under subsection 7(d)(6)
($30,000,000 - (E.2)): $_________
F. Restricted Junior Payments(2)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared and paid under sub-
section 7(e)(2): $_________
3. Maximum permitted under subsection 7(e)(2) (F.1): $_________
- --------
(1) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of such fiscal year.
(2) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of fiscal year.
<PAGE> 98
G. Minimum Interest Coverage Ratio (for the four-fiscal quarter
period ending ___________, 199__)
1. Consolidated Net Income: $_________
2. Consolidated Interest Expense: $_________
3. Provisions for taxes based on income: $_________
4. Total depreciation expense: $_________
5. Total amortization expense: $_________
6. Other non-cash items reducing Consolidated Net
Income: $_________
7. Other non-cash items increasing Consolidated
Net Income: $_________
8. All cash expenditures relating to reserves on
the June 30, 1997 balance sheet: $_________
9. Consolidated Adjusted EBITDA (adjusted for
periods ending prior to December 31, 1996)
(1 + 2 + 3 + 4 + 5 + 6 - 7) - 8 : $_________
10.Interest Coverage Ratio (9):(2): ____:1.00
11.Minimum ratio required under subsection 7(f)(i): ____:1.00
H. Maximum Leverage Ratio (as of _____________, 199__)
1. Consolidated Total Debt: $_________
2. Cash and Cash Equivalents in excess of
$25,000,000: $_________
3. Consolidated Rental Payments: $_________
4. Consolidated Adjusted EBITDA (G.9 above): $_________
5. Leverage Ratio (H.1 - H.2) + (7 x H.3) : (H.4 + H.3): ____:1.00
<PAGE> 99
6. Maximum ratio permitted under subsection 7(f)(ii): ____:1.00
I. Minimum Consolidated Net Worth (as of ___________, 199__)
1. Consolidated Net Worth: $_________
2. Minimum required under subsection 7(f)(iii): $_________
J. Fundamental Changes
1. Aggregate value of assets sold in Asset Sales
during current fiscal year permitted under
subsection 7(g)(3): $_________
2. Maximum permitted under subsection 7(g)(3): $100,000,000
3. Aggregate value of assets sold in Asset Sales
after Closing Date in one or more transactions
permitted under subsection 7(g)(3): $_________
4. Maximum permitted under subsection 7(g)(3): $500,000,000
K. Consolidated Capital Expenditures
1. Consolidated Capital Expenditures for fiscal
year-to-date: $_________
2. Maximum Consolidated Capital Expenditures Amount
permitted under subsection 7(g)(8) for fiscal year: $_________
L. Leases
1. Consolidated Rental Payments incurred in connection with the
sale-leaseback transactions described in Subsection 7(j) of
the Leases in an amount not to exceed $12 million plus
Consolidated Rental Payments pursuant to acquisitions
permitted under Subsection
7(g)(5): $_________
2. Consolidated Rental Payments in effect during
current fiscal year: $_________
3. Maximum permitted under subsection 7(i) (L.1 +
$60,000,000): $_________
<PAGE> 1
EXHIBIT 10.79
EXHIBIT VIII
LEASE AGREEMENT N526MC
LEASE AGREEMENT
(N526MC)
DATED AS OF SEPTEMBER 5, 1997
BETWEEN
ATLAS FREIGHTER LEASING II, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-2D7B Aircraft
U.S. Registration No. N526MC
Manufacturer's Serial No. 22337
---------------------------
Two Spare Engines
Manufacturer's Serial Nos. 517544 and 517547
LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions.................................................... 1
SECTION 2. Acceptance and Lease........................................... 24
SECTION 3. Term and Rent.................................................. 24
(a) Term and Basic Rent.......................................... 24
(b) Adjustments to Basic Rent.................................... 25
(c) Supplemental Rent............................................ 25
(d) Payments in General.......................................... 25
(e) Minimum Rent................................................. 26
(f) Prepayment of Rent Payments.................................. 26
SECTION 4. Certain Representations and Warranties......................... 27
SECTION 5. Lessee's Representations and Warranties........................ 28
SECTION 6. Lessee's Affirmative Covenants................................. 34
SECTION 7. Lessee's Negative Covenants.................................... 42
SECTION 8. Return of the Aircraft and Spare Engines....................... 54
(a) Condition Upon Return........................................ 54
(b) Overhaul and Repair.......................................... 54
(c) Repairs...................................................... 55
(d) Modifications................................................ 55
(e) Airworthiness Directives..................................... 55
(f) Return of the Engines........................................ 55
(g) Deferred Maintenance......................................... 55
(h) Corrosion Treatment.......................................... 55
(i) Manuals...................................................... 56
(j) Storage Upon Return.......................................... 56
(k) Severable Parts.............................................. 56
(l) Survival..................................................... 56
SECTION 9. Liens.......................................................... 57
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia............................................... 57
(a) Maintenance and Operation.................................... 57
(b) Possession................................................... 59
(c) Insignia..................................................... 61
(d) Holding Out.................................................. 61
(e) No Pledging of Credit........................................ 62
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions..................................................... 62
SECTION 12. Indemnities................................................... 64
SECTION 13. Event of Loss................................................. 66
SECTION 14. Insurance..................................................... 68
SECTION 15. Assignment.................................................... 71
SECTION 16. Events of Default............................................. 71
SECTION 17. Remedies...................................................... 74
SECTION 18. Lessee's Cooperation Concerning Certain Matters............... 77
SECTION 19. Notices....................................................... 78
SECTION 20. Net Lease, True Lease, etc.................................... 78
SECTION 21. Purchase Option............................................... 80
(a) Purchase Option.............................................. 80
(b) Notice of Purchase........................................... 80
SECTION 22. Lessor's Right to Perform for Lessee.......................... 81
SECTION 23. Miscellaneous................................................. 81
SECTION 24. Security for Lessor's Obligations............................. 82
</TABLE>
<TABLE>
<S> <C>
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
</TABLE>
<PAGE> 4
EXHIBITS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
</TABLE>
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT dated as of September 5, 1997 between ATLAS FREIGHTER
LEASING II, INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., 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 upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft and the Spare Engines to be leased pursuant to the
terms of this Lease and other similar aircraft and spare engines to be leased
pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same
<PAGE> 6
manner as Lessee maintains, services, repairs and overhauls similar airframes
utilized by Lessee and without in any way discriminating against such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2 engine for
the aircraft bearing U.S. registration number N523MC, N524MC, N526MC, N527MC or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and suitable
for installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI Contracted Aircraft" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immedi-
-2-
<PAGE> 7
ately preceding the date of calculation, and provided further, that if such
aircraft is of a model other than a Boeing 747 freighter, such projected cash
operating expenses shall include maintenance costs which shall not be less than
the average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AFL I" means Atlas Freighter Leasing, Inc., a Delaware corporation.
"AFL I Aircraft" means (i) one Boeing 747-200 Aircraft, serial number
21048, with four Pratt & Whitney JT9D-7J engines attached and (ii) five Boeing
747-200 Aircraft, serial numbers 21221, 21251, 21380, 21644, and 22507, each
with four General Electric CF6-50E2 engines attached.
"AFL I Credit Agreement" means that certain Credit Agreement dated as of
May 29, 1997 by and among AFL I, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms hereof.
"AFL I Leases" means the Leases as such term is defined in the AFL I Credit
Agreement.
"AFL I Restructuring" means the following transactions which occurred
concurrently on May 29, 1997: (i) the termination of the leases relating to the
AFL I Aircraft in existence prior to May 29, 1997, (ii) the transfer, as a
dividend, of the AFL I Aircraft to Lessee and the simultaneous contribution of
the AFL I Aircraft to AFL I as a capital contribution, together with
approximately $10.4 million, (iii) the incurrence
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of indebtedness pursuant to the AFL I Credit Agreement and the simultaneous
repayment of the indebtedness previously secured by the AFL I Aircraft and (iv)
the entering into of the AFL I Leases.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Aircraft Obligations" means all amounts owing by the Lessee or any of its
Subsidiaries pursuant to the Amended Aircraft Credit Facility immediately prior
to giving effect to the third amendment and restatement thereof on the date
hereof and relating to the Aircraft and Spare Engines being contributed to the
Lessor pursuant to the Transaction.
"Airframe" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"Amended Aircraft Credit Facility" means the Third Amended and Restated
Credit Agreement dated as of September 5, 1997, among Lessee, as Borrower, the
lenders listed therein, Goldman Sachs Credit Partners L.P., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent, without giving effect
to any amendments, modifications, supplements or waivers thereof.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
Eichner, Inc., Morton Beyer, Agnew, or any other nationally recognized firm of
aircraft appraisers reasonably satisfactory to Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets
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sold in any single transaction or related series of transactions is equal to
$1,000,000 or less, (B) transactions related to aircraft engines, components,
parts or spare parts pursuant to customary pooling, exchange or similar
arrangements, (C) asset swaps involving aircraft engines, components, parts or
spare parts; provided that the assets received by the Lessee or any Subsidiary
have a fair market value at least equal to the assets transferred (provided that
with respect to any asset swap or series of related asset swaps involving assets
of Lessee or any Subsidiary with a fair market value exceeding $3,000,000, such
determination shall be made by the Board of Directors of Lessee)) and (D) asset
sales involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Basic Rent" means, for the Term, the rent payable for the Aircraft and the
Spare Engines pursuant to Section 3(a) of this Lease adjusted as provided in
Section 3(b) of this Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial
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paper maturing no more than one year from the date of creation thereof and
having, at the time of the acquisition thereof, a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year after such date and issued or accepted by
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidating Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Atlas, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
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"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3 of
the Amended Aircraft Credit Facility on or before the Third Amended and Restated
Closing Date (as such term is defined in the Amended Aircraft Credit Facility).
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Lessee or is merged
into or consolidated with Lessee or any of its Subsidiaries or that Person's
assets are acquired by Lessee or any of its Subsidiaries, (iii) the income of
any Subsidiary of Lessee to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts). For the avoidance of
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doubt, all rental payments to AFL I and Lessor shall not be included in
Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a
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party or by which it or any of its properties is bound or to which it or any of
its properties is subject.
"Contribution" means the contribution by Lessee to Lessor of the Aircraft
and Spare Engines subject to this Lease and the other aircraft and spare engines
to be leased pursuant to the Leases, subject to the Aircraft Obligations.
"Credit Agreement" shall mean the Credit Agreement, dated as of September
5, 1997, by and among Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, and
Goldman Sachs Credit Partners L.P., as Syndication Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"Default" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the NationsBanc Agreement, the AFL I Credit Agreement, the
Senior Note Documents, any Permitted Extension Indebtedness and any Other
Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type
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<PAGE> 14
and model, which (i) is in a cargo configuration capable of immediate operation
in the business of Lessee or is eligible for delivery under a modification
agreement with a delivery slot available within a six month period (or is leased
for a period of longer than six months until a delivery slot is available), and
(ii) has a maximum gross take-off weight ("MTOW") of at least 800,000 pounds, in
the case of any 747-200, 747-300, or 747-400 aircraft and 630,000 pounds in the
case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the General Electric CF6-50E2 aircraft engines
for the aircraft bearing U.S. registration numbers N523MC, N524MC, N526MC and
N527MC listed by manufacturer's serial numbers in the initial Lease Supplement
and installed on the Airframe at the time of the delivery to Lessee of such
Airframe, whether or not from time to time thereafter installed on such Airframe
or any other airframe; (ii) any Acceptable Alternate Engine which may from time
to time be substituted for any of such four engines pursuant to the terms of the
Lease; and (iii) in any case, any and all Parts which are from time to time
incorporated or installed in or attached to any such engine and any and all
parts removed therefrom so long as title thereto remains vested in Lessor in
accordance herewith. The term "Engines" means, as of any date of determination,
all Engines then leased under this Lease.
"Environmental Claim" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
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"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or Spare Engine or
both): (A) loss of such Aircraft or Spare Engine or the use thereof due to theft
or disappearance of the Aircraft or Spare Engine which shall result in the loss
of possession thereof for a period of 120 days (or for a shorter period ending
on the date on which there is an insurance settlement for a total loss on the
basis of the theft or disappearance of such Aircraft or Spare Engine); (B) the
destruction, damage beyond repair or rendition of such Aircraft or Spare Engine
permanently unfit for normal use for any reason whatsoever; (C) the
condemnation, confiscation or seizure of, or requisition of title to, or use or
possession (other than use by the United States Government if Lessee obtains
adequate compensation from the United States Government) of such Aircraft or
Spare Engine; (D) as a result of any rule, regulation, order or other action by
the FAA or other governmental body having jurisdiction, the use of such Aircraft
or Spare Engine in the normal course of interstate air transportation of persons
or cargo shall have been prohibited for a period of more than nine consecutive
months unless Lessee, prior to the expiration of such nine month period, shall
have undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such property by Lessee or,
in any event, if such use shall have been prohibited for a period of twelve
consecutive months; (E) the operation or location of such Aircraft or Spare
Engine, while under requisition for use by the United States or any
instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Aircraft or Spare Engine, if
Lessee shall be unable to obtain indemnity or "war-risk" insurance in lieu
thereof from the United States; (F) any damage which results in an insurance
settlement with respect to such Aircraft or Spare Engine on the basis of an
actual or constructive total loss or (G) a divestiture of such Airframe or Spare
Engine as described in Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft
Chattel Mortgage under
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the Credit Agreement. 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
of the Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of the Airframe or any Engine or Spare Engine
shall mean the value which would be obtained in an arm's-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 by a recognized independent aircraft appraiser, mutually agreed to by
the Agent and Lessee, or, if such appraiser cannot be agreed to within 20 days,
then either party may apply to the American Arbitration Association (or any
successor organization thereto) in New York City for the appointment of an
appraiser, whose determinations shall be final and binding upon the parties
hereto. In determining Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe, Engine or Spare Engine is in the
condition, location and overhaul status in which it is required to be returned
to Lessor pursuant to Section 8 of this Lease, that all modifications and
improvements shall be taken into account, that Lessee has removed all Parts
which it is entitled to remove pursuant to Section 11 of this Lease and that the
Aircraft, or Spare Engine, as the case may be, is not encumbered by this Lease.
Except as otherwise expressly provided in the Lease, all appraisal costs will be
shared equally by Lessor and Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Final Maturity Date" means May 29, 2004.
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"Financed Aircraft" means all Financed Aircraft under and as defined in the
Amended Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of Agent located at 130
Liberty Street, New York, New York 10006, Attention: Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation
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of any Hazardous Material (i) from, under, in, into or on the facilities or
surrounding property; and (ii) caused by, or undertaken by or on behalf of,
Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"Initial Borrowing Date" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of
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business) or capital contribution by Lessee or any of its Subsidiaries to any
other Person (other than a wholly-owned Subsidiary of Lessee), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft and Spare Engines under and pursuant to the
terms of the Lease, and any subsequent Lease Supplement entered into in
accordance with the terms of the Lease.
"Leases" means the Lease Agreements dated as of September 5, 1997 between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing II, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or
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the transactions contemplated by this Lease or the operation of the
Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine, any Spare Engine or any Part
in the jurisdiction imposing the Tax, or (ii) the situs of
organization, any place of business or any activity of Lessee or any
other Person having use, possession or custody of the Aircraft, the
Airframe, any Engine, any Spare Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases, the AFL I
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Leases, the Senior Note Documents and agreements in respect of Permitted
Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"NationsBanc Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and NationsBanc Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"Obligations" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate which does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor or Lenders, than any other Designated
Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines, Spare Engines or engines, which are from time to time
incorporated or installed in or attached to the Airframe or any Engine, or Spare
Engine and all such items which are subsequently removed therefrom so long as
title thereto shall vest in Lessor in accordance with this Lease.
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<PAGE> 22
"Pass Through Trust Documents" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the
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interest of the lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages, (II) Sections 4(d) and 4(e) of the aircraft
chattel mortgages entered into in connection with the AFL I Credit
Agreement and (III) Sections 4(d) and 4(e) of the aircraft chattel
mortgages entered into in connection with the Amended Aircraft Credit
Facility;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens arising pursuant to the AFL I Credit Agreement; provided
that such Liens do not encumber any assets other than the AFL I Aircraft
and other assets of AFL I;
(xi) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xii) Liens granted pursuant to the Transaction Documents;
(xiii) Liens arising pursuant to the Amended Aircraft Credit Facility;
and
(xiv) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of
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<PAGE> 24
such Indebtedness, plus the amount of expenses of Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of Lessee hereunder at least to the same extent
as the Indebtedness immediately prior to such extension, (iv) such Permitted
Extension Indebtedness has a final stated maturity later than the end of the
stated maturity of the Indebtedness being extended immediately prior to such
extension and (v) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of Lessee and its Subsidiaries or
any less favorable, from the perspective of Lessor and Lenders than those
contained in the Indebtedness immediately prior to such extension.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Philippine Leases" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Lease.
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds
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thereof, the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business or any asset (including any ACMI Contracted Aircraft) by Lessee or any
of its Subsidiaries or any other related action which requires compliance on a
Pro Forma Basis. In making any determination of compliance on a Pro Forma Basis,
such determination shall be performed after good faith consultation with Lessor
and Agent using the consolidated financial statements of Lessee and its
Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition or other
related action had been consummated at the beginning of the period specified in
the covenant with respect to which Pro Forma Basis compliance is required.
"Proceedings" has the meaning assigned to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general
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any instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Senior Notes Documents" means the Indenture, dated as of August 13, 1997
between Atlas Air, Inc. and State Street Bank and Trust Company relating to the
10 3/4% $150 million Senior Notes due 2005 of Lessee (the "Senior Notes") and
any and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of September 5, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Spare Engines" shall mean each General Electric CF6-50E2 aircraft engine
bearing manufacturer's serial numbers listed in the initial Lease Supplement.
"Special Purpose Subsidiary" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
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Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Aircraft and Spare Engines
shall mean as of any date, the amount set forth on Exhibit C opposite the
Stipulated Loss Determination Date immediately prior to such date, as such
amount may be reduced in accordance with Section 3(f) plus all accrued and
unpaid interest on the Loans relating to the Aircraft and Spare Engines on the
date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft and Spare Engines is leased
hereunder pursuant to Section 3(a) of the Lease, beginning on the Initial
Borrowing Date and ending on the Final Maturity Date, or such earlier date as
the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the Contribution, (ii) the leasing by
Lessor to Lessee of the Aircraft, Spare Engines and certain other aircraft and
other spare engines pursuant to the Leases, (iii) the repayment of the Aircraft
Obligations and (iv) the release and termination of all security interests and
Liens encumbering the Aircraft, Spare Engines and any part thereof and any other
assets of Lessor.
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"Transaction Documents" shall mean the Amended Aircraft Credit Facility,
any bills of sale or certificates of transfer for each Aircraft and the Spare
Engines (including bills of sale on AC Form 8050-2), the Leases, all documents
relating to the repayment of the Aircraft Obligations, the Loan Documents and
all other agreements and documentation executed and delivered in connection with
the Transaction, including, without limitation, in connection with the
Contribution.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"Unsecured Revolving Credit Facility" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for a $25,000,000 revolving working capital line of credit and a
$1,000,000 term real estate loan, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft and the Spare Engines as evidenced by the execution by
Lessor and Lessee of a Lease Supplement leasing the Aircraft and the Spare
Engines hereunder. Lessee agrees to appoint in writing one or more of its
employees as its authorized representative to accept delivery of the Aircraft
pursuant to the terms hereof. Lessee hereby agrees that acceptance of delivery
by such employee or employees shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the Final Maturity Date or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
Basic Rent shall accrue during the Term in accordance with Exhibit B hereto.
Lessee shall pay to Lessor on each Basic Rent Payment Date an amount of Basic
Rent specified opposite each Basic Rent Payment Date on Exhibit B hereto as such
amounts may be adjusted pursuant to Section 3 plus accrued interest on Basic
Rent previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and
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notified to Lessor and Lessee prior to the Basic Rent Payment Date, which
represents the amount of interest due and payable on the Loans relating to the
Aircraft and the Spare Engines on such Basic Rent Payment Date and determined in
accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when due until the same shall be paid
and on any other amounts payable hereunder which are not paid when due and (ii)
all amounts payable by Lessor pursuant to subsections 2.6D, 2.7, 9.2 and 9.3 of
the Credit Agreement; provided, however, to the extent any Supplemental Rent
required to be paid pursuant to this clause (ii) of subsection 2(c) has been
paid by Lessee pursuant to the terms of another Lease, then Lessee's obligations
hereunder shall be deemed to be satisfied by the payments made pursuant to such
other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of Lessor in the continental United States or such other account as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and the Spare Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to other
aircraft and other spare engines leased pursuant to the other Leases and after
taking into account all other payments of rent pursuant to the other Leases on
such date), then such excess amounts shall be paid by the Agent to Lessor at its
above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
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payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft and the Spare Engines required to be paid by
Lessor on or within five Business Days of the due date of such installment
of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic Rent due and payable in connection therewith) is at
least equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
the Spare Engines and all other unpaid Obligations of Lessor (other than
principal and interest on Loans relating to other aircraft and other spare
engines and after taking into account all other payments of Stipulated Loss
Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft and the Spare Engines pursuant to Section 2.4C(ii)
of the Credit Agreement, Lessor shall notify Lessee of such required
prepayment and Lessee shall immediately prepay an amount of Basic Rent
equal to the amount of such required prepayment less any required payments
of the Loans relating to the Aircraft and the Spare Engines actually made
by the Lessor from Insurance Proceeds or Condemnation Proceeds (as each
such term is defined in the Credit Agreement) received directly by the
Lessor.
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(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f),
the schedules of Basic Rent and Stipulated Loss Value shall be adjusted so
as to preserve the after tax yield and after tax cash flows of the Lessor
and, to the extent consistent therewith, to minimize the net present value
of Basic Rent payments. All such computations shall be made on the basis of
the same assumptions and the method of computations employed in the
original calculations of Basic Rent and Stipulated Loss Values (except to
the extent such assumptions have been changed as a result of such
prepayment or any prior such adjustment). At the Lessee's written request,
independent public accountants mutually selected by the Lessor and the
Lessee shall confirm the required adjustments. The final determination of
any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing adjustments the revised Basic Rent and
Stipulated Loss Values shall permit to the Lessee to comply with Section
3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE AND
SPARE ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE AND LESSEE TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED
THAT THE AIRFRAME AND EACH ENGINE AND SPARE ENGINE ARE SUITABLE FOR ITS
PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND,
AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY LENDER MAKES, HAS MADE OR SHALL BE
DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT, SPARE ENGINE OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY
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PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT AND SPARE ENGINES OR ANY PART THEREOF,
except that Lessor covenants that it will not, through its own actions or
inactions, in such capacity, interfere in Lessee's quiet enjoyment of the
Aircraft or Spare Engines unless this Lease shall have been declared or deemed
to have been declared in default pursuant to Section 17 hereof. None of the
provisions of this Section 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 any manufacturer, any affiliate
thereof, any subcontractor or supplier of any manufacturer or any affiliate
thereof, with respect to the Airframe, Engines, Spare Engines or any Parts, or
to release the manufacturer, any affiliate thereof, or any such subcontractor or
supplier from any such representation, warranty or obligation. Unless a Default
or Lease Event of Default shall have occurred and be continuing, Lessor agrees
to make available to Lessee such rights as Lessor may have under any warranty
with respect to the Aircraft or Spare Engines made by the manufacturer or any
affiliate thereof or any of its subcontractors or suppliers and any other claims
against the manufacturer or any affiliate thereof, or any such subcontractor or
supplier with respect to the Aircraft or Spare Engines, all pursuant to and in
accordance with the terms of any applicable purchase agreements or warranty
agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever
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necessary to carry out its business and operations, except in jurisdictions
where the failure to be so qualified or in good standing has not had and will
not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each of
its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor of
the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under
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any Contractual Obligation of Lessee or any of its Subsidiaries, except for such
approvals or consents which will be obtained on or before the Initial Borrowing
Date and disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by the
Lessee and its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated by
this Lease and the other Transaction Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body which has not been obtained or made on or prior to the date required to be
obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at June 30, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the three
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Neither Lessee nor any of its Subsidiaries has (and
will not following the Initial Borrowing Date) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the
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business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 5(c)(A) which, either individually or in the aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since June 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since June 30, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens.
Lessee and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its
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Subsidiaries or any property of Lessee or any of its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither Lessee nor any of its Subsidiaries is (i) in
violation of any applicable laws that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect or (ii) subject to
or in default with respect to any final judgments, writs, injunctions, decrees,
rules or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or authority.
(h) Performance of Agreements.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) Governmental Regulation.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
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(j) Employee Benefit Plans.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded liabilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries are,
and have been to the best of Lessee's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or Hazardous
Materials Activity, (a) arising at any facilities owned or operated by Lessee or
(b) arising in connection with the operations of Lessee or any of its
Subsidiaries (including the transportation of Hazardous Materials), which
conditions, occurrences or Hazardous Materials Activity could reasonably be
expected to form the basis of an Environmental Claim against Lessee and which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or threatened
Environmental Claims against Lessee or any of its Subsidiaries, and neither
Lessee nor any of its Subsidiaries has received no written notices, inquiries,
or requests for information with respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Lessee or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
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(n) Solvency.
Lessee and each of its Subsidiaries is and, upon the incurrence of any
obligations by Lessee under the Leases, will be, after giving effect to the
transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
Lessee will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
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(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such monthly
financial statements shall only be required to be delivered to Agent to the
extent such monthly financial statements are required to be delivered under
the Amended Aircraft Credit Facility as such agreement may be amended,
modified, supplemented, renewed or refinanced from time to time;
(2) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of Lessee and its Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
subsection 6(a)(12)), all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
and (b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter; provided that
delivery of Lessee's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Lessee and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
delivered pursuant to subsection 6(a)(12) for the fiscal year covered by
such financial statements, all in reasonable detail and certified by the
chief
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financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
(b) a narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management for
such fiscal year, and (c) in the case of such consolidated financial
statements, a report thereon of Arthur Andersen LLP or other independent
certified public accountants of recognized national standing selected by
Lessee and satisfactory to Lessor and Agent, which report shall be
unqualified, shall express no doubts about the ability of Lessee and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a) and
(b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each delivery
of financial statements of Lessee and its Subsidiaries pursuant to
subdivisions (2) and (3) above after the Initial Borrowing Date, (a) an
Officers' Certificate of Lessee stating that the signers have reviewed the
terms of this Lease and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Lessee and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes a Default
or Lease Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section 7;
(5) Environmental Audits and Reports: as soon as practicable following
receipt thereof, copies of all environmental audits and reports, whether
prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which
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relate to an Environmental Claim which could result in a Material Adverse
Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Lease Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Lease Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating that
based on their audit examination nothing has come to their attention that
causes them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (4) above is not
correct or that the matters set forth in the Compliance Certificates
delivered therewith pursuant to clause (b) of subdivision (4) above for the
applicable fiscal year are not stated in accordance with the terms of this
Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to
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Lessee or any of its Subsidiaries or taken any other action with respect to
a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the
end of each fiscal quarter of Lessee, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting,
Lessee or any of its Subsidiaries equal to or greater than $1,000,000
and promptly after request by Lessor and Agent such other information
as may be reasonably requested by Lessor and Agent to enable Agent
and their counsel to evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect
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to a "multiemployer plan," within the meaning of Section 4001(a)(3) of
ERISA, and (c) such other documents or governmental reports or filings
relating to any Employee Benefit Plan as Lessor or Agent shall reasonably
request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion; and
(13) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such Subsidiary
may be terminated if such termination is in the interests of Lessee and its
Subsidiaries and is not materially disadvantageous to Lessor or to any assignee
of the Lease. Lessee will at all times maintain its corporate existence as a
United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Lessee.
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(ii) Lessee will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than any Subsidiary of Lessor or Lessee).
(d) Maintenance of Properties; Insurance.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage (including,
without limitation, flood insurance, if necessary or advisable) of the kinds
customarily carried or maintained under similar circumstances by corporations
engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine and any Spare Engine, and its and
their financial and accounting records, and, with the permission of Lessee which
shall not be unreasonably withheld, to make copies and take extracts therefrom,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that Lessee may, if it so
chooses, be present at or participate in any such discussion), all upon
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested; provided that so long as no Lease Event
of Default shall have occurred and be continuing, such inspection shall not be
disruptive to Lessee's business, as reasonably determined by Lessee. Without in
any way limiting the foregoing, Lessee will, upon the request of Lessor or
Agent, participate in a meeting of Agent and Lenders once during each fiscal
year to be held at Lessee's corporate offices (or such other location as may be
agreed to by Lessee, Lessor and Agent) at such time as may be agreed to by
Lessee, Lessor and Agent.
(f) Compliance with Laws, etc.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably
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be expected to cause a Material Adverse Effect. Lessee shall not conduct, and
shall not permit the conduct of, any Hazardous Materials Activity at any
facility or at any other location which could reasonably be expected to form the
basis of an Environmental Claim against Lessee and which could reasonably be
expected to have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event Lessee or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any facility, Lessee or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Lessee or such Subsidiary. Notwithstanding
anything to the contrary contained in this Lease, Lessee and its Subsidiaries
may engage in the transportation of Hazardous Materials in the ordinary course
of business so long as such is conducted in compliance with all applicable
Environmental Laws, and all other applicable laws, policies, orders, directives
and regulations.
(h) Employee Benefit Plans.
Lessee will not establish or permit to be established any Employee Benefit
Plans for Lessee or any of its employees and will not permit any ERISA Affiliate
to establish any Employee Benefit Plan which, in either case, could reasonably
be expected to result in a liability for Lessee, under Title IV of ERISA or the
minimum funding standards of Part 3 of Subtitle B of Title I of ERISA, in excess
of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees that,
so long as any amounts remain owing under this Lease, Lessee shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
7.
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<PAGE> 46
(a) Indebtedness.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(1) Lessee may become and remain liable with respect to the
obligations under the Amended Aircraft Credit Facility;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the cash proceeds from such Permitted Extension
Indebtedness are sufficient to repay in full the Indebtedness associated
with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") plus seven times
Consolidated Rental Payments for the four fiscal quarter period ending on
such Determination Date to Consolidated Adjusted EBITDA plus Consolidated
Rental Payments for the four fiscal quarter period ending on such
Determination Date does not exceed the ratio set forth in subsection
7(f)(ii) for the fiscal quarter in which such Indebtedness is to be
incurred, (ii) the ratio of Consolidated Adjusted EBITDA for such four
fiscal
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quarter period to Consolidated Interest Expense for such four fiscal
quarter period is not less than the ratio set forth in subsection 7(f)(i)
for the fiscal quarter in which such Indebtedness is to be incurred; and
(iii) Lessee will be in compliance with all covenants set forth in
subsection 7(f) hereof, Lessee and its Subsidiaries may incur Other
Permitted Indebtedness;
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding;
(8) Lessee may become and remain liable with respect to Indebtedness
under the NationsBanc Agreement;
(9) AFL I may become and remain liable with respect to all the
obligations under AFL I Credit Agreement and Lessee may become and remain
liable with respect to the AFL I Leases;
(10) Lessee may become and remain liable with respect to the Senior
Notes;
(11) Lessee and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed, without duplication, when added to the maximum aggregate liability,
contingent or otherwise, of Lessee and its Subsidiaries outstanding in
accordance with Section 7(d)(6), $30 million at any time outstanding; and
(12) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) Liens and Related Matters.
A. Prohibition on Liens. Lessee shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits there from, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any state or under any similar recording or
notice statute, except:
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(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule 7(b)
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL I Credit Agreement, Lessee will not, and will not permit any
of its Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary's capital stock to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Lessee or any
other Subsidiary of Lessee, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Lessee or any other Subsidiary of Lessee, (iii) make loans or
advances to Lessee or any other Subsidiary of Lessee, or (iv) transfer any of
its property or assets to Lessee or any other Subsidiary of Lessee.
(c) Investments; Joint Ventures.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint
Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's
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<PAGE> 49
Certificate in form and substance satisfactory to Lessor and Agent
demonstrating that such Special Purpose Subsidiary meets the requirements
set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate amount of dividends on the Common Stock of Lessee
declared or paid in such fiscal year and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in such fiscal year;
provided that Lessee shall not incur liabilities related to any such Joint
Venture in excess of Lessee's Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed $15 million at any time outstanding.
(d) Contingent Obligations.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto;
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<PAGE> 50
(5) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations to the extent such Contingent Obligations
are permitted pursuant to subsections 7(i) and 7(j); and
(6) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(11) shall at no time exceed $30
million.
(e) Restricted Junior Payments.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may make Restricted Junior Payments with respect to its
Common Stock in an amount not to exceed in any fiscal year, the lesser of
25% of Consolidated Net Income for such fiscal year and $10 million;
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness; and
(4) Lessee may repurchase its Common Stock in an amount not to exceed
in any fiscal year $15 million for purposes of establishing or contributing
to an employee benefit plan; provided that any such repurchased Common
Stock resold to employees of Lessee shall, to the extent of the price paid
for such Common Stock by such employee, be excluded from the calculation of
the $15 million limit set forth above.
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<PAGE> 51
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
<S> <C>
June 30, 1997 1.90:1.00
September 30, 1997 1.90:1.00
December 31, 1997 1.90:1.00
March 31, 1998 1.90:1.00
June 30, 1998 1.90:1.00
September 30, 1998 1.90:1.00
December 31, 1998 1.90:1.00
March 31, 1999 1.90:1.00
June 30, 1999 1.90:1.00
September 30, 1999 2.00:1.00
December 31, 1999 2.00:1.00
March 31, 2000 2.10:1.00
June 30, 2000 2.10:1.00
September 30, 2000 2.20:1.00
December 31, 2000 2.20:1.00
March 31, 2001 2.20:1.00
June 30, 2001 2.20:1.00
September 30, 2001 2.30:1.00
December 31, 2001 2.30:1.00
March 31, 2002 2.40:1.00
June 30, 2002 2.40:1.00
</TABLE>
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<PAGE> 52
<TABLE>
<S> <C>
September 30, 2002 2.50:1.00
December 31, 2002 2.50:1.00
March 31, 2003 2.60:1.00
Thereafter 2.70:1.00
</TABLE>
(ii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt at the end of any four fiscal quarter period ending
during one of the periods set forth below (less Cash and Cash Equivalents held
by Lessee in excess of $25 million as of such date) plus seven times
Consolidated Rental Payments for such four fiscal quarter period to (ii)
Consolidated Adjusted EBITDA plus Consolidated Rental Payments for such four
fiscal quarter period to exceed the correlative ratio indicated below:
<TABLE>
<CAPTION>
Fiscal Quarter Maximum
Ending Leverage Ratio
<S> <C>
June 30, 1997 5.75:1.00
September 30, 1997 6.25:1.00
December 31, 1997 6.75:1.00
March 31, 1998 6.75:1.00
June 30, 1998 7.00:1.00
September 30, 1998 7.00:1.00
December 31, 1998 6.75:1.00
March 31, 1999 6.50:1.00
June 30, 1999 6.25:1.00
September 30, 1999 5.75:1.00
December 31, 1999 5.75:1.00
March 31, 2000 5.75:1.00
June 30, 2000 5.50:1.00
</TABLE>
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<PAGE> 53
<TABLE>
<S> <C>
September 30, 2000 5.50:1.00
December 31, 2000 5.25:1.00
March 31, 2001 5.25:1.00
June 30, 2001 5.25:1.00
September 30, 2001 5.00:1.00
December 31, 2001 5.00:1.00
March 31, 2002 4.75:1.00
June 30, 2002 4.75:1.00
September 30, 2002 4.50:1.00
December 31, 2002 4.50:1.00
March 31, 2003 4.50:1.00
Thereafter 4.25:1.00
</TABLE>
(iii) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
Minimum
Period Consolidated
Net Worth
<S> <C>
fiscal year 1997 $215 million
fiscal year 1998 $225 million
fiscal year 1999 $250 million
fiscal year 2000 $275 million
fiscal year 2001 $300 million
fiscal year 2002 $350 million
fiscal year 2003 $400 million
fiscal year 2004 $450 million
</TABLE>
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<PAGE> 54
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions; New
Subsidiaries.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of a division or line of
business of another Person provided that, (a) the acquisition primarily
involves the acquisition of assets to be used in the business of Lessee,
(b) with respect to such
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<PAGE> 55
acquisition any newly acquired or created Subsidiary of Lessee shall be a
wholly-owned Subsidiary, (c) immediately before and after giving effect
thereto, no Default or Lease Event of Default shall have occurred and be
continuing, (d) immediately after giving effect to the acquisition, Lessee
shall be in compliance on a Pro Forma Basis with financial covenants in
subsection 7(f) and such compliance shall be evidenced by an Officer's
Certificate demonstrating such compliance, (e) Lessor and Agent shall have
reviewed and be reasonably satisfied with the nature and amount of all
contingent liabilities or other liabilities not on the balance sheet of
Lessee assumed in connection with such acquisition and a business plan
prepared by Lessee with respect to such acquisition and (f) the aggregate
amount of cash payments made in connection with all such acquisitions other
than with the proceeds from sales or issuances of equity by Lessee does not
exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business;
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter); and
(9) Lessee shall be permitted to dispose of or acquire assets pursuant to the
consolidation and relocation of its offices and operations to Colorado;
provided that the aggregate consideration paid with respect to the
acquisition of assets shall be in an amount not to exceed $20 million.
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<PAGE> 56
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation or
bylaws to be amended or otherwise modified in any manner which could reasonably
be expected to have a Material Adverse Effect or (ii) any Material Agreement to
be amended or otherwise modified in any manner with respect to any provision
providing material representations and warranties to Lessee, indemnification
rights to Lessee, or limiting Lessee's remedies or rights upon the other party
to such agreements failing to perform.
(i) Restriction on Leases.
Lessee shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the lessee under any lease, whether an Operating
Lease or a Capital Lease (other than intercompany leases between Lessee and its
wholly-owned Subsidiaries, including Lessor); provided, however, that Lessee may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
fiscal year do not exceed $60 million plus the amount of Consolidated Rental
Payments made during such fiscal year in respect of up to four 747-400F
aircraft, subject to the agreement dated June 9, 1997 between Lessee and The
Boeing Company regarding the purchase of 10 new 747-400F aircraft, leased by the
Lessee within twelve months following the Initial Borrowing Date plus an amount
not to exceed $12 million during any fiscal year, equal to Consolidated Rental
Payments incurred in connection with sale and leaseback transactions described
in subsection 7(j), plus Consolidated Rental Payments assumed pursuant to
acquisitions permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital Lease,
of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Lessee or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Lessee or
any of its Subsidiaries) or (ii) which Lessee or any of its Subsidiaries intends
to use for substantially the same purpose as any other property which has been
or is to be sold or transferred by Lessee or any of its Subsidiaries to any
Person (other than Lessee or any of its Subsidiaries) in connection with such
lease; provided that Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to the
extent that Lessee or any of its Subsidiaries would be permitted to enter into,
and remain liable under, such lease under subsection 7(i).
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<PAGE> 57
(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 10% or more of any class of equity
Securities of Lessee or with any Affiliate of Lessee or of any such holder, on
terms that are less favorable to Lessee or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
(i) reasonable and customary fees paid to and indemnification of members of the
Boards of Directors of Lessee and its Subsidiaries, (ii) reasonable and
customary salaries, bonuses and other compensation paid to and indemnification
of employees of Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of Lessee or (iii)
performance by Lessee of its obligations under and in accordance with the
Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law or to a wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
Notwithstanding the foregoing, each of the Lessor and AFL I shall be
permitted to issue preferred stock in an amount not to exceed $100,000 each to a
third party.
(m) Conduct of Business.
From and after the Initial Borrowing Date, Lessee shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
businesses engaged in by Lessee and its Subsidiaries on the Initial Borrowing
Date and similar or related businesses.
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SECTION 8. Return of the Aircraft and Spare Engines. (a) Condition Upon
Return. Unless the Aircraft or any Spare Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return the Aircraft or Spare Engines
to the Lessor hereunder, Lessee, at its own expense, will return the Aircraft or
Spare Engines to Lessor at a location specified by the Lessor to the Lessee in
writing. At the time of such return, (i) Lessee will cause the Aircraft and
Spare Engines to be in compliance with the maintenance covenants contained in
this Lease and (ii) the Airframe will be fully equipped with the Engines
installed thereon.
At the time of such return, such Airframe, Engines and Spare Engines (A)
shall have an airworthiness certificate from the Federal Aviation Administration
and shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 121 (or successor regulation), and shall be in material
compliance with all applicable FAA noise, corrosion, environmental and aging
aircraft requirements, (B) shall be free and clear of all Liens and (C) in the
case of the Aircraft, shall be in a full freighter configuration and in the case
of the Aircraft and Spare Engines in as good condition as when originally
delivered to Lessee, ordinary wear and tear excepted, and otherwise in the
condition required to be maintained under Lessee's FAA-approved maintenance
plan; and in all such cases the Aircraft and Spare Engines shall not have been
discriminated against as compared to other aircraft owned or leased by Lessee
whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines, Spare Engines and all Parts
shall have been, and shall be properly documented to have been, repaired or
overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft and Spare Engines are eligible to receive
approval by the FAA (or its designee), if so required. All such repairs shall be
accompanied by all data and documentation necessary to substantiate their
certification, approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft and Spare Engines shall have approval or certification
by the FAA (or its designee) or certification if required. All such
modifications shall be accompanied by complete data and documentation necessary
to substantiate their certification and approval and methods of compliance.
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<PAGE> 59
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines), Spare Engines or Acceptable
Alternate Engine or Parts, as well as all mandatory service bulletins applicable
to any of the foregoing, shall have been accomplished by terminating action in
compliance with the issuing agency's or the manufacturer's specific
instructions, as the case may be,taking into account, any waiver, deferral or
deviation from such directives, regulations or bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe or in lieu of a Spare Engine,
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 Acceptable Alternate Engine, in form and substance
reasonably satisfactory to Lessor (together with an opinion of 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
Acceptable Alternate Engines are free and clear of all Liens) against receipt
from Lessor of a bill of sale evidencing the transfer, without recourse or
warranty by Lessor to Lessee or its designee of all of Lessor's right, title and
interest in and to any Engine or Spare Engine not installed on the Airframe at
the time of the return of the Airframe.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft or Spare
Engines including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft and Spare
Engines shall have been maintained by cleaning and treating all mild and
moderate corrosion and correcting of all severe or exfoliate corrosion in
accordance with Lessee's approved maintenance program or manufacturer's
structural repair manual.
(i) Manuals. Upon the return of the Aircraft and Spare Engines upon any
termination of this Lease, Lessee shall deliver or cause to be delivered to
Lessor all logs, manuals and data and maintenance, inspection, modification and
overhaul records and similar records required to be maintained with respect to
the Aircraft and Spare Engines and Parts under FAA rules and the Aircraft
maintenance program. If any such logs, manuals, records or other data are
missing, incomplete or otherwise not in accordance with FAA standards applicable
to Lessee, Lessee shall re-accomplish the maintenance tasks necessary to produce
such records in accordance with its approved maintenance program prior to
delivery of the Aircraft or otherwise perform all necessary
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acts (without regard to any applicable waivers or deferrals) to obtain such
records in a manner satisfactory to the FAA and Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, Lessee receives from
Lessor a written request for storage of the Aircraft or Spare Engines upon its
return hereunder, Lessee will provide Lessor, or cause Lessor to be provided,
with storage facilities for the Aircraft or Spare Engines at Lessee's risk and
at Lessee's expense for a period not exceeding 30 days, and thereafter at
Lessor's risk and at Lessor's cost for insurance, maintenance and Lessee's
out-of-pocket expenses for such storage for a period not exceeding 90 days
(provided that if such termination occurs as a result of a Lease Event of
Default hereunder, such storage shall be at the cost of the Lessee), commencing
on the date the Aircraft or Spare Engine is returned substantially in the
condition required under this Section 8, at a location in the continental United
States selected by Lessee and used by Lessee as a location for the long-term
parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft or Spare Engines are to
be returned to Lessor, Lessee shall, at Lessor's request, advise Lessor of the
nature and condition of all severable nonproprietary Parts (other than Parts
otherwise required by Sections 10 or 11 to be maintained on the Aircraft) 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 or Spare Engines in accordance
with Section 11 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 at their fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to the Aircraft or Spare
Engines, title thereto or any interest therein, except the lien of the Aircraft
Chattel Mortgage and Permitted Encumbrances. Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such Lien
not excepted above if the same shall arise at any time.
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SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, (i)
will be a "citizen of the United States" as defined in Section 40102(15) of
Title 49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Aircraft and Spare Engines to be
duly registered and remain duly registered in the name of Lessor in accordance
with the Act and otherwise registered under all applicable laws of the United
States so as to be eligible to operate in commercial air service under the Act;
and (iii) will service, repair, inspect, test, maintain and overhaul the
Airframe, each Engine and each Spare Engine and install replacement equipment
and parts on the Airframe, each Engine and each Spare Engine (A) so as to keep
the Airframe, each Engine and each Spare Engine in such operating condition as
may be required to permit the Airframe, each Engine and each Spare Engine to be
utilized in commercial operations, (B) so as to enable the airworthiness
certification of the Airframe to be maintained in good standing at all times
under the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of grounding) registered in the United States have
been grounded by the FAA; provided, however, that if following its issuance, the
United States FAA airworthiness certificate of the Aircraft shall be withdrawn,
then subject to the provisions of Section 13 hereof, so long as Lessee is
diligently taking or causing to be taken all necessary action to promptly
correct the condition which caused such withdrawal, no Lease Event of Default
shall arise from such withdrawal, (C) in accordance with Lessee's FAAapproved
maintenance, inspection and maintenance control programs, and in the same manner
and with the same care used by Lessee with respect to the same or similar
aircraft and engines owned or operated by Lessee so as to keep the same in as
good operating condition as when originally leased hereunder, ordinary wear and
tear excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar equipment,
and (D) in such manner as may be necessary to maintain in full force all
warranties of the manufacturers thereof. Lessee shall maintain all records, logs
and other materials which may be required to permit the Airframe, each Engine
and each Spare Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft, Engines and Spare
Engines. Neither the Airframe nor any Engine nor any Spare Engine will be
maintained, used or operated in violation of any
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law or any rule, regulation or order of any government or governmental authority
having jurisdiction (domestic or foreign), or in violation of any airworthiness
certificate, license or registration relating to the Airframe or such Engine or
Spare Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of the Airframe or any Engine or
Spare Engine, Lessee, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders, provided, however,
that Lessee may, in good faith (after having delivered to Lessor and Agent an
Officers' Certificate stating the facts with respect thereto), contest the
validity or application of any such law, rule, regulation or order in any
reasonable manner which does not, in Lessor's and Agent's opinion (in their sole
discretion), adversely affect the interests of Lessor, Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine or Spare
Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 14 shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with respect to
the Airframe or such Engine or Spare Engine, except in the case of a requisition
for use by the United States of America, and then only if Lessee obtains
indemnity in lieu of such insurance from the United States of America against
the risks and in the amounts required by said Section covering such area, or
(II) in any recognized or threatened area of hostilities unless the Airframe or
such Engine or Spare Engine is operated or used under contract with the
Government of the United States of America under which contract that Government
assumes liabilities for any damages, loss, destruction or failure to return
possession of the Airframe or such Engine or Spare Engine at the end of the term
of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft or any Spare Engine nor suffer it to be
used in any manner or for any purpose excepted from any of the insurance on or
in respect of the Aircraft or Spare Engine or for the purpose of carriage of
goods of any description excepted from such insurance nor do, or permit to be
done, anything which, or omit to do anything the omission of which, may
invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine or Spare Engine except that, unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessee
may without the prior written consent of the Agent and Lessor, take the
following actions so long as the actions to be taken shall not deprive the Agent
of the first priority Lien under the Aircraft Chattel Mortgage in the assets
subject thereto and so long as the actions to be taken shall not
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deprive Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engine and shall not deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
or Spare Engine as assignee of Lessee's rights under this Lease pursuant to the
Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine or Spare Engine
other than by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as administered
pursuant to Executive Order 12656, or any substitute order) or any similar
or substitute programs;
(ii) transfer possession of the Airframe or any Engine or Spare Engine
to the manufacturer thereof for testing or other similar purposes or any
other organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
(iii) subject any Engine or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Lessee in the ordinary course
of business which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of the Airframe
or title to or use for the remainder of its useful life of such Engine or
Spare Engine; provided, however, that if Lessee's title to or use for the
remainder of its useful life, of the Airframe or any Engine or Spare Engine
shall be divested under any such agreement or arrangement, such divesture
shall be deemed to be an Event of Loss with respect to the Airframe or such
Engine or Spare Engine and Lessee shall comply with Section 13 in respect
thereof;
(iv) install an Engine or Spare Engine on an airframe which is owned
by Lessee free and clear of all Liens except (A) those permitted under
clauses (i) or (ii) of the definition of Permitted Encumbrances in the
Credit Agreement, (B) those that apply only to the engines (other than the
Engines and other than the Spare 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),
and (C) the rights of any Domestic Air Carrier, under normal interchange
agreements which are customary in the airline industry and do not
contemplate or require the transfer of title to such airframe or the
engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased to Lessee
or owned by Lessee subject to a conditional sale or other security
agreement,
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provided: (A) such airframe is free and clear of all Liens, except the
rights of the parties to the lease or conditional sale or other security
agreement covering such airframe and except Liens of the type permitted by
clause (iv) above; and (B) Agent and Lessor shall have received from the
lessor, conditional vendor or secured party and each of the purchasers,
mortgagees and encumbrancers of such lessor, conditional vendor or secured
party of such airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such airframe), whereby
such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional vendor
or secured party expressly and effectively agrees that neither it nor its
successors and assigns will acquire or claim any right, title or interest
in any Engine or Spare Engine by reason of such Engine or Spare Engine
being installed on such airframe at any time when such Engine or Spare
Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned by Lessee,
leased by Lessee or owned by Lessee subject to a conditional sale or other
security agreement under circumstances where neither clause (iv) nor clause
(v) above is applicable; provided that any divesture of title to such
Engine or Spare Engine resulting from such installation shall be deemed to
be an Event of Loss with respect to such Engine or Spare Engine and Lessee
shall comply with Section 13 in respect thereof; and
(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines, Spare Engines or engines installed thereon with any third
party pursuant to which Lessee has operational control of the Airframe and
any Engines or Spare Engines installed thereon such operation to be
performed solely by individuals under the operational control of Lessee
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by such
employees of similar functions within the United States; provided that
Lessee's obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine or Spare Engine permitted by the terms hereof shall
be made subject and subordinate to, and any lease permitted by this Section
10(b) shall be made expressly subject and subordinate to, the Lease and the lien
and security interest of the Aircraft Chattel Mortgage and all of Agent's rights
thereunder and Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such transfer
had not occurred, and any such instrument of transfer shall include appropriate
provisions for the maintenance and insurance of the Airframe or such
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Engine or Spare Engine, and any such instrument of transfer shall expressly
prohibit any further transfer of the Airframe or such Engine or Spare Engine or
any assignment of the rights thereunder; and provided further, that no such
lease, pooling arrangement or other transfer or relinquishment of the possession
of the Airframe or any Engine or Spare Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine and Spare Engine to be legibly marked (in a reasonably prominent
location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing II,
Inc. and Mortgaged to Bankers Trust Company, as Agent" or such other legend, as
shall in the opinion of Lessor and Agent be appropriate or desirable to evidence
the fact that it is subject to the ownership of Lessor and the lien and security
interest created by the Aircraft Chattel Mortgage. Lessee shall not remove or
deface, or permit to be removed or defaced, any such plate, disk, or other
marking or the identifying manufacturer's serial number, and, in the event of
such removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided above,
Lessee shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine or Spare Engine as a designation that might
be interpreted as a claim of ownership or of any security interest therein,
except that Lessee or any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any Engine or
Spare Engine.
(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or Spare Engine or any Part or any other operations or carriage undertaken by
Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, any Spare Engine or any
Part, or for any other purpose whatsoever.
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SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or any
Spare Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever. In addition, in the ordinary course of
maintenance, service, repair or testing, Lessee at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that, except as otherwise provided in Section 11(d), Lessee at its own
cost and expense shall replace such Parts as promptly as practicable. All
replacement Parts shall be owned by Lessor free and clear of all Liens (except
Permitted Encumbrances and for pooling arrangements to the extent permitted by
Section 11(b)), and shall be in as good operating condition as, and shall have a
value and utility at least equal to, the Parts replaced assuming such parts were
in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine or any Spare
Engine shall remain the property of Lessor and shall remain subject to the lien
and security interest of the Aircraft Chattel Mortgage, no matter where located,
until such time as such Parts shall be replaced by parts which have been
incorporated or installed in or attached to the Airframe or any Engine or any
Spare Engine and which meet the requirements for replacement parts specified
above. Immediately upon any replacement Part becoming incorporated or installed
in or attached to the Airframe or any Engine or any Spare Engine as above
provided, without further act, (A) title to such replacement Part shall vest in
and such replacement part shall become the property of Lessor and shall become
subject to this Lease and the lien and security interest of the Aircraft Chattel
Mortgage and shall be deemed part of the Airframe or such Engine or Spare Engine
for all purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine or Spare Engine, and
(B) title to the replaced part shall no longer be the property of Lessor and
shall thereupon become free and clear of all rights of Lessor hereunder and all
rights derivative of Lessor's and shall no longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine or Spare Engine as
provided in Section 11(a) may be subjected by Lessee to a normal pooling
arrangement of the type customary in the airline industry entered into by Lessee
in the ordinary course of its business and entered into with Domestic Air
Carriers that are not the subject of any bankruptcy, insolvency, or similar
proceeding, voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe or such
Engine or Spare Engine in accordance with Section 11(a) as promptly as possible
after the removal of such removed part. In addition, any
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replacement Part when incorporated or installed in or attached to the Airframe
or any Engine or Spare Engine in accordance with Section 11(a) may be owned by
any third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft or Spare Engine) or (B) replaces such replacement Part
by incorporating or installing in or attaching to the Airframe or such Engine or
Spare Engine a further replacement Part owned by Lessee which shall become the
property of Lessor subject to the lien and security interest of the mortgage
free and clear of all Liens (except Permitted Encumbrances and the Aircraft
Chattel Mortgage relating to the Aircraft or Spare Engine).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe, the Engines
and Spare Engines as may be required from time to time to meet the standards of
the FAA or other governmental authority having jurisdiction; provided, that
Lessee may, in good faith, contest the validity or application of any such
standard in any reasonable manner that shall not adversely affect the Lessor's
or Agent's respective interests. Lessee also agrees, at its own cost and
expense, to make or cause to be made such alterations and modifications in and
additions to the Airframe, the Engines and Spare Engines as may be required from
time to time to meet the standards or requirements of any directive issued by a
manufacturer relating to the Airframe or any Engine or Spare Engine. In addition
so long as no Default or Lease Event of Default shall have occurred and be
continuing, Lessee, at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe and any Engine or
Spare Engine as Lessee may deem desirable in the proper conduct of its business,
provided no such alteration, modification or addition diminishes the value or
utility or impairs the condition or airworthiness of the Airframe or such Engine
or Spare Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition assuming the
Airframe or such Engine or Spare Engine were then in the condition and
airworthiness required to be maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine or Spare Engine as the result of such alteration,
modification or addition shall, without further act, become the property of, and
title to such parts shall vest in Lessor and shall be subject to the lien and
security interest of the Aircraft Chattel Mortgage; provided that, so long as no
Default or Lease Event of Default, shall have occurred and be continuing, Lessee
may remove and not replace any such Part if it (A)
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is in addition to, and not in replacement of or in substitution for, any Part
incorporated or installed in or attached to the Airframe or such Engine or Spare
Engine on the date hereof, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or attached or
added to the Airframe or such Engine or Spare Engine pursuant to the terms of
Section 10(a) hereof or any other provision of this Lease or the Aircraft
Chattel Mortgage and (C) can be removed from the Airframe or such Engine or
Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would have had
at such time had such alteration, modification or addition not occurred,
assuming the Airframe or such Engine or Spare Engine was otherwise in the
condition required by this Lease and the Aircraft Chattel Mortgage. Upon the
removal by Lessee of any such Part, as above provided, title thereto shall,
without further act, be free and clear of the interests of Lessor and all rights
derivative of Lessor's and such Part shall no longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine or Spare Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by Lessee for
any reason whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or Spare Engine
or any part thereof or interest therein by any Federal, state or local
government or other taxing authority in the United States or by any foreign
government or subdivision thereof or by any foreign taxing authority in
connection with, relating to or resulting from: (i) the Airframe or any Engine
or Spare Engine or any part thereof of interest therein; (ii) the manufacture,
purchase, ownership, mortgaging, lease, sublease, use, storage, maintenance,
sale or other disposition of the Airframe or any Engine or Spare Engine; (iii)
any rentals or other earnings therefor or arising therefrom or the income or
other proceeds received with respect thereto; or (iv) this Lease or the Aircraft
Chattel Mortgage; provided, however, that, there shall be excluded from any
indemnification under this Section 12(a) any Lessor Tax unless the payment of
any such Tax shall be a condition to the enforceability of the Aircraft Chattel
Mortgage or the perfection of the lien thereof or unless proceedings shall have
been commenced to foreclose any lien which may have attached
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as security for such Tax, nothing in this Section shall require the payment of
any Tax so long as and to the extent that the validity thereof shall be
contested in good faith by appropriate legal proceedings promptly instituted and
diligently conducted and Lessee shall have set aside on its books adequate
reserves with respect thereto in accordance with generally accepted accounting
principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, partners, employees, agents and
affiliates of Lessor, Agent and each Lender, (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation the
reasonable fees and disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding, commenced or
threatened by any Person, whether or not any such Indemnitee shall be designated
as a party or a potential party thereto), whether direct, indirect or
consequential and whether based on any federal, state or foreign laws, statutes,
rules or regulations (including without limitation securities and commercial
laws, statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "Indemnified Liabilities"); provided that
Lessee shall not have any obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Lessee shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine or Spare Engine, Lessee will promptly notify Lessor
and Agent thereof in writing (in any event within five (5) days of such
occurrence) and will, not later than 180 days after the occurrence of such Event
of Loss, convey or cause to be conveyed to Lessor, free of all Liens (other than
Permitted Encumbrances) title to an Acceptable Alternate Airframe or Acceptable
Alternate Engine, as the case may be. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will, as conditions
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to such transfer, (i) furnish Lessor with a warranty (as to title) bill of sale,
in form and substance reasonably satisfactory to Lessor, with respect to such
Acceptable Alternate Airframe or Acceptable Alternate Engine, (ii) cause a Lease
Supplement to be filed for recording pursuant to Title 49 of the United States
Code, as amended, (iii) furnish Lessor with such evidence of Lessee's title to
such Acceptable Alternate Airframe or Acceptable Alternate Engine and of
compliance with the insurance provisions of Section 14 hereof with respect to
such Acceptable Alternate Airframe or Acceptable Alternate Engine as Lessor may
reasonably request, (iv) furnish Lessor with an opinion of Lessee's counsel to
the effect that title to such Acceptable Alternate Airframe or Acceptable
Alternate Engine has been duly conveyed to Lessor free and clear of all Liens
except Permitted Encumbrances and Lessor and Agent continue to have 1110
protection with respect to such Aircraft and (v) transfer to or at the direction
of Lessee without recourse or warranty all of Lessor's right, title and
interest, if any, in and to (A) the Airframe or Engine or Spare Engine with
respect to which such Event of Loss occurred and furnish to or at the direction
of Lessee, at Lessee's expense, a bill of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if any,
against third parties, for damage to or loss of the Airframe or Engine or Spare
Engine subject to such Event of Loss, and such Airframe or Engine or Spare
Engine shall thereupon cease to be an Airframe or Engine or Spare Engine leased
hereunder. Lessee shall cooperate with Lessor and take all such actions as shall
be requested by Lessor so that Lessor complies with Section 4(f) of the Aircraft
Chattel Mortgage. For all purposes hereof, each such Acceptable Alternate
Airframe or Acceptable Alternate Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an "Airframe" or
"Engine" or "Spare Engine", as the case may be. No Event of Loss under the
circumstance contemplated by the terms of this paragraph (a) shall result in any
reduction in Basic Rent.
(b) With respect to the Airframe or any Engine or Spare Engine, as between
the Lessor and Lessee, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for in
Section 14 below) received from any government authority or other person shall
be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine or Spare Engine that has been or is being replaced by
Lessee pursuant to the terms hereof, so long as there shall exist no
Default or Lease Event of Default, such payment shall be paid over to or
retained by Lessee upon satisfaction of the conditions for replacement
contained in paragraph (a) above and until such time shall be held by
Lessor as security for the obligations of Lessee under the Lease; and
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(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor and following the foregoing
application, the balance, if any, of such payments shall be distributed
between Lessee and Lessor as their respective interests may appear;
(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine or Spare Engine, Lessee shall promptly notify
Lessor and Agent of such requisition and all of Lessee's obligations under the
Lease shall continue to the same extent as if such requisition had not occurred.
Any payments received by Lessor or Lessee from the United States Government for
the use of the Airframe or such Engine or Spare Engine, to the extent allocable
to the Term, shall be paid over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or 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 the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such 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 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft and Spare Engines, at its own cost and expense,
public liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per occurrence (which
shall include war risk, governmental confiscation and expropriation and allied
perils coverage). During any period when the Aircraft and Spare Engines are on
the ground and not in operation, Lessee may carry or cause to be carried, in
lieu of insurance required by this Section, insurance otherwise conforming with
the provisions of this Section except that the amounts of coverage shall not be
required to exceed the amounts of comprehensive airline liability insurance, and
the scope of risk covered and
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type of insurance shall be the same, as are customarily carried with respect to
similar aircraft on the ground by corporations engaged in the same or similar
business and similarly situated with Lessee. Any policies of insurance carried
in accordance with this Section 14 and any policies taken out in substitution or
replacement of any such policies (A) shall be amended to name Agent, Lenders and
Lessor as additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of the
liability, shall operate in the same manner as if there were a separate policy
covering each insured, and (D) shall provide that the insurer shall waive any
right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft and Spare
Engines, at its own cost and expense, aircraft ground and flight all-risk hull
insurance as well as fire and extended coverage insurance on Engines and Spare
Engines and other equipment while removed from the Airframe or airframe (which
shall include war risk, governmental confiscation and expropriation (other than
by the United States Government) and allied perils including (A) strikes, riots,
civil commotions or labor disturbances, (B) any malicious act or act of sabotage
and (C) hijacking (air piracy) or any unlawful seizure or wrongful exercise of
control of the Aircraft or Spare Engine or crew in flight (including any attempt
at such seizure or control) made by any person or persons aboard the Aircraft or
another aircraft acting without the consent of the insured, if and to the extent
the same shall be maintained by Lessee with respect to similar aircraft owned or
operated by Lessee on the same routes or if the Aircraft or another aircraft is
operated on routes where the custom is for Domestic Air Carriers similarly
situated with Lessee flying comparable routes with similar aircraft to carry
such insurance, of the type usually carried by corporations engaged in the same
or similar business and similarly situated with Lessee; provided that such
insurance (including any self-insurance to the extent permitted below) shall at
all times be for an amount not less than the greater of the Stipulated Loss
Value as of the closest Stipulated Loss Determinate Date and $50,000,000. During
any period when the Aircraft or Spare Engine, as the case may be, is on the
ground and not in operation Lessee may carry or cause to be carried, in lieu of
the insurance required by this Section, insurance otherwise conforming hereto
except that the scope of risk covered and type of insurance shall be the same as
are from time to time customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated with
Lessee for aircraft and spare engines on the ground in an amount at least equal
to the applicable amount provided above. All such insurance shall name Agent,
Lenders and Lessor as additional insureds and loss payees to the extent their
interest may appear and shall provide that any loss to the Airframe or an Engine
or a Spare Engine in excess of $2,000,000 (and, if a Default or Lease Event of
Default has occurred and is continuing,
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any such loss) shall be payable to the Lessor and to the Agent for the benefit
of Lenders; and shall be primary without right of contribution from any other
insurance which is carried by Lessor or Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft or spare engines in Lessee's fleet which are of a value comparable to
the Aircraft or Spare Engines, as the case may be, and as are not substantially
greater than amounts self-insured by corporations engaged in the same or similar
business and similarly situated with Lessee; provided, however, that Lessee may
not self-insure in an amount in excess of $1,000,000 without the prior written
consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the insurance shall not be invalidated by
any action or inaction of (x) Lessee or (y) Lessee or Lessor, respectively, and
shall insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee, Lessor or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such policies;
(C) provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Lessor, Agent or any Lender,
or if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Agent or any
Lender for thirty (30) days (seven (7) days, or such shorter or longer period as
may from time to time be customarily available in the industry, in the case of
any war risk and allied perils coverage) after receipt by Agent and Lessor of
written notice from such insurers of such cancellation, change or lapse; (D) be
in full force and effect throughout any geographical areas at any time traversed
by the Aircraft and shall be payable in U.S. dollars; (E) waive any right of the
insurers to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise in respect of any liability of Lessor and Agent; and (F)
waive all rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine or Spare
Engine, a valid agreement by the United States or such agency or instrumentality
to indemnify Lessee against the same risks against which Lessee is required
hereunder to insure shall be considered adequate insurance with respect to the
Airframe or such
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Engine or Spare Engine to the extent of the risks and in the amounts that are
the subject of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft, the Engines and Spare Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of Lessee, Lessor and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance covered by the
report. Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or omission on
the part of Lessee of which such firm has knowledge and which might invalidate
or render unenforceable, in whole or in part, any insurance on the Aircraft or
any Engine or Spare Engine and (y) at least thirty (30) days prior to the
expiration or termination date, or date of effectiveness of any material change,
of any insurance carried and maintained on the Aircraft or Spare Engines
hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Lessee upon compliance by Lessee with the terms of Section
13, provided that no Default or Lease Event of Default shall have occurred and
be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft or Spare Engines
for its own account. Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft or Spare Engines in amounts in excess of
that required to be maintained by this Section 14. No insurance maintained by
Agent, Lessor or any Lender shall prevent Lessee from carrying the insurance
required or permitted by this Section. Proceeds of any such insurance carried by
Lessee, Agent or Lender shall be paid as provided in the insurance policy
relating thereto and no such Person shall have any duty to obtain any such
insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft or in the Spare Engines. Lessor agrees that
it will not assign or convey its right, title and interest in and to this Lease
or the Aircraft or Spare Engines except in accordance with the Credit Agreement.
Subject to the
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foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns and shall inure, to the direct benefit of, and shall also be
enforceable by the Agent and the Lenders, and their respective successors, as
assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
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bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft or Spare Engine is canceled and is
not cured within 15 Business Days;
(i) The Aircraft or Spare Engine are arrested or detained in exercise
of any lien and Lessee does not procure the release of such Aircraft or
Spare Engine within 15 business days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Amended Aircraft Credit Facility (whether or not such
Event
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of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
(n) (i)(a) Michael A. Chowdry, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of
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Lessee representing at least 40% of the combined voting power of all
Securities of Lessee entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency, or (b) any Person or any two or more Persons acting in concert
(in any such case, excluding Mr. Chowdry) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of Securities
of Lessee (or other Securities convertible into such Securities)
representing 20% or more of the combined voting power of all Securities of
Lessee entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency or (c)
the Board of Directors of Lessee shall not consist of a majority of
Continuing Directors or (ii) a "Change of Control" shall occur under the
Pass Through Trust Documents or any other Material Agreement (as in effect
on the date of such occurrence).
SECTION 17. 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 to be in default,
except that upon the occurrence of a Lease Event of Default referred to in
clauses (e), (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, Lessor
may do one or more of the following with respect to all or any part of the
Aircraft, Airframe and any or all of the Engines or Spare Engines as Lessor in
its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, Airframe or any Engine or Spare 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 8 hereof as if such Airframe or Engine or Spare 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 Aircraft, Airframe or any Engine
or Spare Engine is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing to
Lessor for or by reason of such entry or taking of possession or removal
whether for the restoration of damage to property caused by such action or
otherwise, provided that if Lessee shall for any reason fail to execute and
deliver instruments deemed necessary or advisable by the Lessor to obtain
possession of the Aircraft, Airframe and Engines or Spare Engine, the
Lessor shall be entitled, in a proceeding to which Lessee shall be a
necessary party, to a judgment for specific performance, conferring the
right to
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immediate possession upon the Lessor and requiring Lessee to execute and
deliver such instruments to the Lessor;
(b) sell the Aircraft, Airframe or any Engine or Spare Engine at
public or private sale, as Lessor may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the Aircraft, Airframe or
any Engine or Spare 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 17; and without any duty to account
to Lessee with respect to such action or inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above with
respect to the Aircraft or Spare Engine, 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, any Basic Rent
due on or before the payment date so specified plus as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the installments of
Basic Rent for the Aircraft and Spare Engines due after the date specified
in such notice if any), an amount equal to the Stipulated Loss Value for
the Aircraft and Spare Engines computed as of the immediately preceding
Stipulated Loss Determination Date, together with interest, if any, at the
Past Due Rate on the amount of such Basic Rent and Stipulated Loss Value
from the Stipulated Loss Determination Date as of which Stipulated Loss
Value is computed until the date of actual payment; and upon such payment
of liquidated damages and all Supplemental Rent then due and payable by the
Lessee hereunder, the Lessor shall transfer (without any representation,
recourse or warranty whatsoever) the Aircraft and Spare Engines to the
Lessee and the Lessor shall execute and deliver such documents evi-
dencing such transfer and take such further action as the Lessee shall
reasonably request to effect such transfer;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft and Spare Engines, Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to such Aircraft and Spare
Engines, may, if it shall so elect, demand that Lessee pay Lessor, and
Lessee shall pay to Lessor, on the date of such sale, any accrued rent with
respect to the Aircraft and Spare Engines due on or prior to such date
plus, as liquidated damages for loss of a bargain and not as a penalty, 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 and Spare Engines, computed as of the date of such sale
together with interest, if any, on the amount of such deficiency,
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at the Past Due Rate, from the date of such sale to the date of actual
payment of such amount;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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 and for all reasonable legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
or Spare Engine in accordance with the terms of Section 8 hereof or in placing
such Airframe or Engine or Spare Engine (which for purposes hereof, shall
include, without limitation all logs, manuals and data and inspection,
maintenance, modification and overhaul and similar records with respect thereto)
in the condition and airworthiness required by such Section. The Lessee hereby
acknowledges that it shall be directly liable for such costs and expenses to any
Person designated by the Lessor, the Agent or any Lender (as the case may be) to
provide services in connection with or to effect the return of the Airframe or
any Engine or Spare Engine in accordance with the terms of Section 8 hereof or
in placing such Airframe or Engine or Spare Engine (which for purposes hereof
shall include, without limitation, such logs, manuals and records) in the
condition and airworthiness required by such Section.
At any sale of the Aircraft, Spare Engine or any part thereof pursuant to
this Section 17, Lessor or Agent or any Lender 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 Spare Engine or of
the date on or after which will occur the execution of any contract providing
for any private sale. Except as otherwise expressly provided above, no remedy
referred to in this Section 17 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to 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
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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 Spare Engine or
any part thereof in mitigation of Lessor's damages as set forth in this Section
17 or which may otherwise limit or modify any of Lessor's rights and remedies in
this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or Spare Engine or other Obligations (other
than principal and interest on Loans relating to other aircraft or other spare
engines) are outstanding under the Credit Agreement, all rights of Lessor under
this Section 17 shall be exercised only by the Agent as assignee of Lessor's
rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft and Spare Engines. In addition,
Lessee at its expense will promptly and duly execute and deliver to Lessor and
the Agent such further documents and take such further action as Lessor and the
Agent may from time to time reasonably request in order more effectively to
carry out the intent and purpose of this Lease and the other Transaction
Documents and to establish and protect the rights and remedies created or
intended to be created in favor of Lessor and Agent hereunder and under the
other Transaction Documents, including, without limitation, if requested by
Lessor and the Agent, the execution and delivery of supplements or amendments
hereto, at the expense of Lessee, each in recordable form, and all financing
statements and continuation statements, and all similar notices required by
applicable law at all times to be kept recorded and filed in such manner and
such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is
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<PAGE> 82
necessary to protect the right, title and interest of Lessor hereunder and the
Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Counsel, or to such other address as Lessee shall from time to
time designate in writing to Lessor; and
(ii) if to Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as Lessor shall
from time to time designate in writing to Lessee with a copy to the Agent
at 130 Liberty Street, New York, New York 10006, Attention: Marguerite
Sutton.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration under Title
49 of the United States Code, as amended or other applicable law, condition,
design, compliance with specifications, operation or fitness for use of, or any
damage to or loss or destruction of, the Aircraft or Spare Engines, or any
theft, interference, interruption or cessation in or prohibition of the use or
possession thereof by the Lessee or any sublessee for any reason whatsoever,
including, without limitation, any such interference, interruption, cessation or
prohibition resulting from the act of any governmental authority, (iii) any
Liens, encumbrances or rights of any other Person with respect to the Aircraft
or Spare Engines, (iv) the invalidity or unenforceability or lack of due
authorization or other infirmity of this Lease or any other Transaction Document
or document or instrument executed pursuant hereto or thereto, or any lack of
right, power or authority of the Lessor or the Lessee or any other party
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<PAGE> 83
to any other Transaction Document to enter into this Lease or any other
Transaction Document or any such document or instrument, (v) any loss of or
damage to the Aircraft, Airframe, any Engine or Spare Engine or any Part, (vi)
any insolvency, bankruptcy, reorganization or similar proceedings by or against
the Lessee or any other Person, or (vii) any failure, breach or delay by the
Lessor or any other Person in performing or complying with any term of this
Lease or any other cause whether similar or dissimilar to the foregoing, any
present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to any
setoff or any reduction for any reason whatsoever, including any present or
future claims of Lessee against Lessor or any other Person under this Lease or
otherwise. Lessee hereby waives, and hereby agrees to waive at any future time
at the request of Lessor, to the full extent now or then permitted by applicable
law any and all rights which it may now have or which at any time hereafter may
be conferred upon it, by statute or otherwise, to terminate, cancel, quit or
surrender this Lease except in accordance with the express terms hereof. Each
payment of Rent made by Lessee to Lessor shall be final as to Lessor and Lessee.
Lessee will not seek to recover all or any part of any such payment of Rent from
Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Airframe, Engines, Spare Engines and
Parts as provided herein, and in any circumstances where more than one
construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. ss. 1110 or
any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the Federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft or Spare Engines, as the case may
be, in compliance with the provisions of this Lease shall not be affected by the
provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or any
analogue provisions of any superseding statute or any power of the bankruptcy
court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any
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<PAGE> 84
tax returns in a manner or take any other action or position inconsistent with
the foregoing or with the Lessor's ownership of the Aircraft or Spare Engines.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft or Spare Engines except as a Lessee
only. The Aircraft and Spare Engines shall at all times during the term of this
Lease be the sole and exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft and the
Spare Engines at the end of the Term for a purchase price equal to the higher of
the Fair Market Sales Value (assuming that the Aircraft and Spare Engines are in
the condition required by the Lease) as of such date and Stipulated Loss Value
plus all accrued Rent and all Supplemental Rent then due. Upon the payment by
Lessee of the full of such amounts, Lessor shall convey to Lessee all right,
title and interest of Lessor in and to the Aircraft and Spare Engines on an
"as-is, where is" basis, without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and Spare Engines and not exercise any purchase option under this
Section 21. If Lessee fails to give notice as required herein, Lessee will be
deemed to have elected to return the Aircraft and Spare Engines to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement but shall not be obligated
hereunder to do so, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, together
with interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
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<PAGE> 85
SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft or
Spare Engines except as a lessee only. Neither Lessee nor any Affiliate of
Lessee will file any tax returns in a manner inconsistent with the foregoing
fact or with Lessor's ownership of the Aircraft and Spare Engines or with the
parties' agreement that this Lease be treated as a tax lease for purposes of the
Internal Revenue Code. 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 reference
herein to numbered sections, unless otherwise indicated, are to sections of this
Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE OR ANY OTHER TRANSACTION
DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER
ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE
PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER
THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
-81-
<PAGE> 86
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft and the Spare Engines, subject to
the reservations and conditions therein set forth. All rights of the Lessor
hereunder are subject to the Aircraft Chattel Mortgage and the Lessor and the
Lessee agree that so long as the lien of the Aircraft Chattel Mortgage has not
been discharged in accordance with its terms, (i) all payments hereunder shall
be made to the Agent for the benefit of Lenders to the extent of the Lenders'
interest in such payments; (ii) all notices from or to the Lessor shall be
copied to the Agent and (iii) the Lessee shall not take any actions that the
Lessor would be prohibited from taking under the terms of the Aircraft Chattel
Mortgage. Lessee hereby acknowledges due notice of, and consents to, such
assignment and to the creation of such mortgage and security interest. To the
extent, if any, that this Lease and any Lease Supplement constitutes chattel
paper (as such term is in effect in any applicable jurisdiction), no security
interest in this Lease or any Lease Supplement may be created through the
transfer or possession of any counterpart other than the original executed
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof or thereof.
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<PAGE> 87
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.
Lessor
By
------------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of September, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------------
Name:
Title:
<PAGE> 88
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING II, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of September 5, 1997, relating to one Boeing B747-200
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe, Engines and Spare Engines under the Lease as and when delivered by
Lessor to Lessee in accordance with the terms thereof.
[(1) The Lease relates to the Airframe, Engines and Spare Engines described
below, and a counterpart of the Lease is attached hereto, and made a part
hereof, and this Lease Supplement together with such attachment, is being filed
for recordation on the date hereof with the Federal Aviation Administration as
one document.]
- --------
(1) This language for Lease Supplement No. 1.
<PAGE> 89
EXHIBIT A
Page 2
[(2)The Lease relates to the Airframe, Engines and Spare Engines described
below, and a counterpart of the Lease, together with Lease Supplement No. 1
dated September 5, 1997, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on __________ __, 1997, as one document and
assigned Conveyance No. ____________.]
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______;
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______] (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower); and
(iii) Two Spare Engines: two (2) aircraft engines bearing,
respectively, manufacturer's serial nos. [__________________ and
___________] (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The closing date of the Aircraft and Spare Engines is the date of this
Lease Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft and Spare Engines shall
commence on the closing date and end on the Final Maturity Date.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
and Spare Engines for all purposes hereof and of the Lease as being airworthy,
- --------
(2) This language for other Lease Supplements.
<PAGE> 90
EXHIBIT A
Page 3
in good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that nothing
contained herein or in the Lease shall in any way diminish or otherwise affect
any right Lessee or Lessor may have with respect to the Aircraft or Spare
Engines against the manufacturer, any affiliate thereof, or any subcontractor or
supplier of the manufacturer or any affiliate thereof, under any purchase
agreement or otherwise.
4. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Lease Supplement to the same extent as if fully set forth
herein.
5. 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.
<PAGE> 91
EXHIBIT A
Page 4
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING II, INC.
Lessor
By
------------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease Supplement is hereby
acknowledged on September ___, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------------
Name:
Title:
<PAGE> 92
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
<PAGE> 93
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
<PAGE> 94
EXHIBIT D
to
Lease Agreement
[FORM OF COMPLIANCE CERTIFICATE]
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) We are the duly elected [Title] and [Title] of Atlas Air, Inc., a
Delaware corporation ("Atlas");
(2) We have reviewed the terms of the four Lease Agreements, dated as
of September 5, 1997, between Atlas Freighter Leasing II, Inc., as Lessor
and Atlas, as Lessee (the "Leases") and the other Transaction Loan
Documents, and we have made, or have caused to be made under our
supervision, a review in reasonable detail of the transactions and the
condition of Atlas and its Subsidiaries during the accounting period
covered by the attached financial statements.(***) The terms defined
therein and not otherwise defined in this Certificate (including Attachment
No. 1 annexed hereto and made a part hereof) shall be used in this
Certificate as therein defined; and
(3) The examination described in paragraph (2) above did not disclose,
and we have no knowledge of, the existence of any condition or event which
constitutes a Default or Lease Event of Default under any Lease during or
at the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate[, except as set forth
below].
[Set forth [below] [in a separate attachment to this Certificate] are
all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Atlas has taken, is taking, or proposes to take with respect to each such
condition or event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------]
- --------
(***) Compliance Certificate delivered on the date on which the Leases are
executed and delivered shall provide financials for the fourth quarter
fiscal period most recently ended.
<PAGE> 95
EXHIBIT D
Page 2
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this _____________ day of ____________, 199__ pursuant to subsection
6(a)(4) of each Lease.
ATLAS AIR, INC.
By:_______________________________
Name:
Title:
<PAGE> 96
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of _____________, 199__ and pertains to the period from
_____________, 199__ to _________________, 199__. Subsection references herein
relate to subsections of each Lease.
A. Indebtedness
1. Indebtedness permitted under subsection 7(a)(11): $__________
2. Aggregate liability, contingent or otherwise,
outstanding under subsection 7(d)(6): $___________
3. Maximum permitted under subsection 7(a)(11)
($30,000,000)-(A.2)): $___________
B. Liens
1. Indebtedness secured by Liens permitted under
subsection 7(b)A(iii): $___________
2. Maximum permitted under subsection 7(b)A(iii): $10,000,000
C. Investments
1. Consolidated book value of the assets of Atlas
and its Subsidiaries: $_________
2. 15% of C.1: $_________
3. Investments permitted under subsection 7(c)(iii): $_________
4. Maximum permitted under subsection 7(c)(iii)(C.2): $_________
5. Investments permitted under subsection 7(c)(vi): $_________
6. Maximum permitted under subsection 7(c)(vi): $15,000,000
<PAGE> 97
D. Investments in Joint Ventures1
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared or paid during fiscal year: $_________
3. Contributions to capital of Special Purpose
Subsidiaries during fiscal year: $_________
4. Investments made under subsection 7(c)(iv): $_________
5. Maximum permitted under subsection 7(c)(iv) (1-2-3): $_________
E. Contingent Obligations
1. Contingent Obligations permitted under sub-
section 7(d)(6): $_________
2. Indebtedness outstanding under subsection
section 7(a)(11): $_________
3. Maximum permitted under subsection 7(d)(6)
($30,000,000 - (E.2)): $_________
F. Restricted Junior Payments(2)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared and paid under sub-
section 7(e)(2): $_________
3. Maximum permitted under subsection 7(e)(2) (F.1): $_________
- --------
(1) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of such fiscal year.
(2) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of fiscal year.
<PAGE> 98
G. Minimum Interest Coverage Ratio (for the four-fiscal quarter
period ending ___________, 199__)
1. Consolidated Net Income: $_________
2. Consolidated Interest Expense: $_________
3. Provisions for taxes based on income: $_________
4. Total depreciation expense: $_________
5. Total amortization expense: $_________
6. Other non-cash items reducing Consolidated Net
Income: $_________
7. Other non-cash items increasing Consolidated
Net Income: $_________
8. All cash expenditures relating to reserves on
the June 30, 1997 balance sheet: $_________
9. Consolidated Adjusted EBITDA (adjusted for
periods ending prior to December 31, 1996)
(1 + 2 + 3 + 4 + 5 + 6 - 7) - 8 : $_________
10. Interest Coverage Ratio (9):(2): ____:1.00
11. Minimum ratio required under subsection 7(f)(i): ____:1.00
H. Maximum Leverage Ratio (as of _____________, 199__)
1. Consolidated Total Debt: $_________
2. Cash and Cash Equivalents in excess of
$25,000,000: $_________
3. Consolidated Rental Payments: $__________
4. Consolidated Adjusted EBITDA (G.9 above): $_________
5. Leverage Ratio (H.1 - H.2) + (7 x H.3) :
(H.4 + H.3): ____:1.00
<PAGE> 99
6. Maximum ratio permitted under subsection 7(f)(ii): ____:1.00
I. Minimum Consolidated Net Worth (as of ___________, 199__)
1. Consolidated Net Worth: $_________
2. Minimum required under subsection 7(f)(iii): $_________
J. Fundamental Changes
1. Aggregate value of assets sold in Asset Sales
during current fiscal year permitted under
subsection 7(g)(3): $_________
2. Maximum permitted under subsection 7(g)(3): $100,000,000
3. Aggregate value of assets sold in Asset Sales
after Closing Date in one or more transactions
permitted under subsection 7(g)(3): $_________
4. Maximum permitted under subsection 7(g)(3): $500,000,000
K. Consolidated Capital Expenditures
1. Consolidated Capital Expenditures for fiscal
year-to-date: $_________
2. Maximum Consolidated Capital Expenditures Amount
permitted under subsection 7(g)(8) for fiscal
year: $_________
L. Leases
1. Consolidated Rental Payments incurred in connection
with the sale-leaseback transactions described in
Subsection 7(j) of the Leases in an amount not to
exceed $12 million plus Consolidated Rental
Payments pursuant to acquisitions permitted
under Subsection 7(g)(5): $_________
2. Consolidated Rental Payments in effect during
current fiscal year: $_________
<PAGE> 100
3. Maximum permitted under subsection 7(i) (L.1 +
$60,000,000): $_________
<PAGE> 1
EXHIBIT 10.80
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO.N523MC)
(SPARE ENGINE NOS. 530168 and 517530)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of September 5,
1997, (this "Mortgage"), and entered into by and between ATLAS AIR, INC., a
Delaware corporation (the "Lessee"), ATLAS FREIGHTER LEASING II, INC., a
Delaware corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as
administrative agent for and representative of (in such capacity, the "Agent")
the financial institutions ("Lenders") party to the Credit Agreement referred to
below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of September 5, 1997
(said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with
Lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent, and Agent,
pursuant to which Lenders have agreed, on the terms and conditions set forth in
the Credit Agreement, to make term loans to Company in the principal amount of
up to $185 million (the "Loans") to enable Company to refinance certain
indebtedness currently encumbering the Aircraft Collateral (as defined below).
The indebtedness with respect to Loans made by Lenders is to be evidenced by
certain promissory notes of Company to the order of Lenders of even date
herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
-1-
<PAGE> 2
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security interest in the Aircraft and the Spare Engines (the
"Aircraft Collateral") and a first priority security interest in all estate,
right, title and interest of Company in, to and under, the other below described
property wherever the same may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and
interest in and to:
(i) the airframe (the Aircraft except for the Engines or
engines from time to time installed thereon), which is described on
Schedule I hereto and any replacement airframe which may be substituted
for such airframe in accordance with the provisions of Section 4(f)
hereof together with any and all Parts (as hereinafter defined)
incorporated or installed in or attached to such airframe and all Parts
removed from such airframe until such Parts are replaced in accordance
with Section 4(e) hereof (such airframe, together with any replacement
airframe and all such Parts, hereinafter referred to as the
"Airframe");
(ii) each of the engines and spare engines (the "Spare
Engines"), which are listed in Schedule II hereto or which are
described in a Supplemental Chattel Mortgage (a "Supplemental Chattel
Mortgage") substantially in the form of Exhibit A attached hereto,
supplementing this Mortgage, and listed by manufacturer's serial
numbers in such Schedule or in such Supplemental Chattel Mortgage,
whether or not from time to time thereafter installed on the airframe
or on any other airframe or aircraft, and any replacement engine which
may be substituted for such engine or spare engine in accordance with
the provisions of Section 4(f) hereof, together, in each case, with any
and all Parts incorporated or installed in or attached thereto and any
and all Parts removed therefrom, until such Parts are replaced in
accordance with Section 4(e) hereof (each such engine, and replacement
engine, together with any and all such Parts, hereinafter referred to
as an "Engine" and collectively, the "Engines");
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(iii) all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other
than complete Engines, Spare Engines or engines), which may from time
to time be incorporated or installed in or attached to the Airframe or
any Engine or Spare Engine, including all such appliances, parts,
instruments, appurtenances, accessories, furnishings and other
equipment purchased by Company for incorporation or installation in or
attachment to the Airframe or any Engine or Spare Engine pursuant to
the terms of any agreement whether or not identified in a Supplemental
Chattel Mortgage (collectively referred to herein as "Parts"); and
(iv) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i), (ii) and (iii)
above (together with such Airframe and Engines (other than the Spare
Engines), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title
and interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien of
this Mortgage including, without limitation, all payments or proceeds
payable to Company after termination of the Lease with respect to the
Aircraft and Spare Engines as the result of the sale, lease or other
disposition thereof, and all estate, right, title interest of every
nature whatsoever of Company in and to the same and every part thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held or
required to be held by Agent hereunder or paid to Agent in accordance
with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase
or modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights
to receive title to parts and materials to the extent same relates to
the Aircraft or Spare Engines including any agreement assigned
therewith;
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(iv) all amounts payable to Company by any manufacturer,
supplier or vendor of any of the Aircraft Collateral or any component
thereof pursuant to any warranty or indemnity covering any such
Aircraft Collateral;
(v) all amounts payable as proceeds of insurance, as an award
or otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and other
payments of any kind thereunder, and including all rights of Company,
as lessor, to execute any election or option or to give any notice,
consent, waiver or approval under or in respect of the Lease or to
accept any surrender of any of the Aircraft or Spare Engines or any
part thereof, as well as any rights, powers or remedies on the part of
the Lessor, whether arising under the Lease or by statute or at law or
in equity, or otherwise, arising out of any Lease Event of Default (as
defined in the Lease), including, without limitation, all rights under
Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to the Aircraft, any Engine or any Spare Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft and
Spare Engines. All property referred to in this granting clause, whenever
acquired by the Lessor under the Lease, shall secure all Secured Obligations.
Company does hereby warrant and represent that it has not assigned or pledged,
and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or interest
hereby assigned to anyone other than Agent, and that it will not, except as
provided herein or in the Credit Agreement, enter into any agreement amending or
supplementing any purchase agreement, modification agreement to the extent such
agreement relates to the Aircraft or Spare Engines, or execute any waiver or
modification of, or consent under, any such agreement, or settle or compromise
any claim arising under any such agreement or submit or consent to the
submission of any dispute, difference or other matter arising under or in any
respect of any such agreement to arbitration thereunder.
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SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Lessee maintains, services, repairs and overhauls similar
airframes utilized by Lessee and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2
aircraft engine for the aircraft bearing U.S. registration numbers N523MC,
N524MC, N526MC and N527MC or an engine of the same or another manufacturer
of equivalent or greater residual value, condition, utility, airworthiness,
and remaining useful life and suitable for installation and use on the
Airframe; provided that such 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 747-200
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant
to which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Lessee's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
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"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of September __,
1997, by and between Atlas Freighter Leasing II, Inc., as Lessor, and Atlas
Air, Inc., as Lessee, for the lease of the Aircraft and Spare Engines,
together with any amendments, modifications, supplements or additions
thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
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"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engines" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine or each Spare Engine initially or subsequently mortgaged hereunder
on the date the Airframe, such Engine or Spare Engine is mortgaged hereunder as
follows:
(a) Company has good and marketable title to the Aircraft
Collateral free and clear of all Liens except for the lien of this
Mortgage and Permitted Encumbrances and the Lease and has full power
and authority to mortgage and grant the lien and security interest in
the Aircraft Collateral and Aircraft Related Collateral intended by the
terms hereof and in the manner aforesaid and has not assigned or
pledged any of its right, title or interest hereby assigned to anyone
other than Agent.
(b) Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name
of Company in accordance with the Act; and the Airframe is not
registered under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the
case may be, is in due form for recording in accordance with the Act
and has been duly filed for recording in accordance with the Act
against the Aircraft or such Engine(s) or Spare Engine as the case may
be.
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(e) An airworthiness certificate has been duly issued under
the Act for the Aircraft (evidence of which has been supplied to
Agent), and the airworthiness certificate for the Aircraft is in full
force and effect.
(f) The Aircraft, Engines and Spare Engines are in such
condition so as to comply with the requirements of Section 4(c) hereof;
and the insurance required by Section 4(g) hereof is in full force and
effect.
(g) This Mortgage or this Mortgage as supplemented by a
Supplemental Chattel Mortgage constitutes the legally valid and binding
obligation of Company enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws or equitable principles
relating to or limiting creditors' rights generally, and creates a
valid, perfected and first priority mortgage on and security interest
in the Aircraft Collateral, securing the payment and performance of the
Secured Obligations.
(h) Company has delivered to Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States
of Colorado and New York and such other states as may be required with
respect to that portion of the Aircraft Collateral not covered by the
filing system established under the Act and with respect to the
Aircraft Related Collateral; and except for the filings described in
this paragraph and in paragraph (d) above of this Section 3, no filing
or recording of any instrument shall be required to establish and
perfect a first priority security interest in the Aircraft Collateral
and Aircraft Related Collateral under the laws of the United States or
any State thereof.
(i) The chief place of business and the chief executive office
of Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien, on or with respect to any of
the Aircraft Collateral, or Aircraft Related Collateral, title thereto
or any interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. Company will promptly, at its own
expense, take such action as may be
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necessary to duly discharge any such Lien not excepted above if the
same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from
and against, any and all fees and taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or interest
thereon (any of the foregoing for the purposes of this Section 4(b)
being called a "Tax"), which may from time to time be imposed on or
asserted against Agent or any Lender or the Airframe or any Engine or
any Spare Engine or any part thereof or interest therein by any
Federal, state or local government or other taxing authority in the
United States or by any foreign government or subdivision thereof or by
any foreign taxing authority in connection with, relating to or
resulting from: (i) the Airframe or any Engine or any Spare Engine or
any part thereof of interest therein; (ii) the manufacture, purchase,
ownership, mortgaging, lease, sublease, use, storage, maintenance, sale
or other disposition of the Airframe or any Engine or any Spare Engine;
(iii) any rentals or other earnings therefor or arising therefrom or
the income or other proceeds received with respect thereto; or (iv)
this Mortgage; provided, however, that there shall be excluded from any
indemnification any Lessor Tax (as defined in the Lease) and unless the
payment of any such Tax shall be a condition to the enforceability of
this Mortgage or the perfection of the lien hereof or unless
proceedings shall have been commenced to foreclose any lien which may
have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and Company
shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its
own cost and expense, (i) will be a "citizen of the United States" as
defined in Section 40102(15) of Title 49 of the United States Code;
(ii) will cause ownership of the Aircraft and Spare Engines to be duly
registered and remain duly registered in the name of Company in
accordance with the Act; and (iii) will cause Lessee to service,
repair, inspect, test, maintain, overhaul the Airframe and each Engine
and each Spare Engine and install replacement equipment and parts on
the Aircraft, each Engine and each Spare Engine (A) so as to keep the
Airframe and each Engine and each Spare Engine in such operating
condition as may be required to permit the Airframe and each Engine to
be utilized in commercial operations, (B) so as to enable the
airworthiness certification of the Airframe to be maintained in good
standing at all times under
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the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the
Airframe shall be equipped at the time of grounding) registered in the
United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate
of the Aircraft shall be withdrawn, then subject to the provisions of
Section 4(f) hereof, so long as Company is diligently taking or causing
to be taken all necessary action to promptly correct the condition
which caused such withdrawal, no Event of Default shall arise from such
withdrawal, (C) in accordance with Lessee's FAA-approved maintenance,
inspection and maintenance control programs, and in the same manner and
with the same care used by Lessee with respect to the same or similar
aircraft and engines owned or operated by Lessee so as to keep the same
in as good operating condition as when originally mortgaged hereunder,
ordinary wear and tear excepted, which practices shall at all times be
at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as may
be necessary to maintain in full force all warranties of the
manufacturers thereof. Company shall maintain, or shall cause Lessee to
maintain, all records, logs and other materials which may be required
to permit the Airframe, each Engine and each Spare Engine to be so
utilized.
Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the
manufacturer or supplier) in such condition so as to comply with the
provisions of this Mortgage and the rules and regulations of the FAA
from time to time in force and applicable to the Aircraft, Engines and
Spare Engines. Neither the Airframe nor any Engine nor any Spare Engine
will be maintained, used or operated in violation of any law or any
rule, regulation or order of any government or governmental authority
having jurisdiction (domestic or foreign), or in violation of any
airworthiness certificate, license or registration relating to the
Airframe or such Engine or such Spare Engine issued by any such
authority, and in the event that such laws, rules, regulations or
orders require alteration of the Airframe or any Engine or any Spare
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper
operating condition under such laws, rules, regulations and orders;
provided, however, that Company may, in good faith (after having
delivered to Agent an Officer's Certificate stating the facts with
respect thereto), contest the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not, in
Agent's opinion, adversely affect the interests under this Mortgage of
Agent or any Lender.
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Company will not operate, use or locate the Airframe or any
Engine or any Spare Engine, (I) in any area in which any insurance
required to be maintained pursuant to Section 4(g) shall not be at the
time in full force and effect, or in any area excluded from coverage by
an insurance policy in effect with respect to the Airframe or such
Engine or such Spare Engine, except in the case of a requisition for
use by the United States of America, and then only if Company obtains
indemnity or "war risk" insurance in lieu of such insurance from the
United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or
threatened area of hostilities unless fully covered to Agent's
satisfaction by war risk and political risk and allied perils insurance
or unless the Airframe or such Engine or such Spare Engine is operated
or used under contract with the Government of the United States of
America under which contract that Government provides "war risk"
insurance or assumes liabilities for any damages, loss, destruction or
failure to return possession of the Airframe or such Engine or such
Spare Engine at the end of the term of such contract and for injury to
persons or damage to property of others.
Company shall not use the Aircraft or any Spare Engines nor
suffer it to be used in any manner or for any purpose excepted from any
of the insurance on or in respect of the Aircraft or any Spare Engines
or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or
admit to do anything the admission of which, may invalidate any of such
insurance.
(d) Possession. Company will not, without the prior written
consent of Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer
the right, title or interest of Company in, the Airframe or any Engine
or any Spare Engine except that Company may enter into and perform all
provisions and terms of the Lease and Lessee or the Company, unless a
Potential Event of Default or Event of Default shall have occurred and
be continuing, without the prior written consent of Agent, may take the
following actions so long as the actions to be taken shall not deprive
the Agent of the first priority Lien of this Mortgage on the assets
subject hereto and so long as the actions to be taken shall not deprive
Company as Lessor of the protections of Section 1110 of the Bankruptcy
Code with respect to the Aircraft or Spare Engines nor shall such
actions deprive the Agent of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft or Spare Engines as
assignee of Company's rights under this Mortgage:
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(i) transfer possession of the Airframe or any Engine
or Spare Engine other than by lease to the United States of
America or any instrumentality thereof pursuant to the Civil
Reserve Air Fleet Program (as administered pursuant to
Executive Order 12656, or any substitute order) or any similar
or substitute programs;
(ii) transfer possession of the Airframe or any
Engine or Spare Engine to the manufacturer thereof for testing
or other similar purposes or any other organization for
service, repairs, maintenance or overhaul or, to the extent
permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine or Spare Engine to normal
interchange or pooling agreements or arrangements of the type
customary in the United States airline industry and entered
into by Company or Lessee in the ordinary course of business
which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of
the Airframe or title to, or use for the remainder of its
useful life of such Engine or Spare Engine; provided, however
if Company's title to or use for the remainder of its useful
life, of the Airframe or any Engines or Spare Engines shall be
divested under any such agreement or arrangement, such
divesture shall be deemed to be an Event of Loss with respect
to the Airframe or such Engine or Spare Engine and Company
shall comply with Section 4(f) in respect thereof;
(iv) install an Engine or Spare Engine on an airframe
which is owned by Lessee; provided that such airframe is free
and clear of all Liens on property of Lessee except (A) Liens
permitted under the Lease, (B) Liens that apply only to the
engines (other than the Engines or Spare 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), and (C) the
rights of any Domestic Air Carrier, under normal interchange
agreements which are customary in the airline industry and do
not contemplate or require the transfer of title to such
airframe or the engines installed thereon;
(v) install an Engine or Spare Engine on an airframe
leased to Lessee or owned by Lessee subject to a conditional
sale or other security agreement, provided: (A) such airframe
is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security
agreement covering such airframe and except Liens of the
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type permitted by clause (iv) above; and (B) Agent shall have
received from the lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of
such lessor, conditional vendor or secured party of such
airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers
of such lessor, conditional vendor or secured party expressly
and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in
any Engine or Spare Engine by reason of such Engine or Spare
Engine being installed on such airframe at any time when such
Engine or Spare Engine is subject to this Mortgage;
(vi) install an Engine or Spare Engine on an airframe
owned or leased by Lessee subject to a conditional sale or
other security agreement under circumstances where neither
clause (iv) nor clause (v) above is applicable; provided that
any divesture of title to such Engine or Spare Engine
resulting from such installation shall be deemed to be an
Event of Loss with respect to such Engine or Spare Engine and
Company shall comply with Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an
ACMI Contract or wet lease for the Airframe and the Engines
and Spare Engines or engines installed thereon with any third
party pursuant to which Company has operational control of the
Airframe and any Engines and Spare Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current
certificates and licenses that would be required under the
applicable laws of the United States for the performance by
such employees of similar functions within the United States;
provided that Company's obligations hereunder shall continue
in full force and effect notwithstanding any such ACMI
Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine or Spare Engine permitted by
the terms hereof shall be made subject and subordinate to, and the
Leases shall be made expressly subject and subordinate to, the lien and
security interest of this Mortgage and all of Agent's rights hereunder
and Company shall remain primarily liable hereunder for the performance
of all the terms of this Mortgage to the same extent as if such
transfer had not occurred, and any such instrument of transfer shall
include appropriate provisions for the maintenance and insurance of the
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Airframe or such Engine or Spare Engine, and any such instrument of
transfer (other than the Lease) shall expressly prohibit any further
transfer of the Airframe or such Engine or Spare Engine or any
assignment of the rights thereunder; and provided, further, that no
such lease, pooling arrangement or other transfer or relinquishment of
the possession of the Airframe or any Engine or Spare Engine shall in
any way discharge or diminish any of Company's obligations to Agent
hereunder or under the Credit Agreement. In the event Agent shall have
received from the lessor, conditional vendor or secured party of any
airframe leased to Lessee or purchased by Lessee subject to a
conditional sale or other security agreement, a written agreement
complying with clause (B) of Section 4(d)(v), and the lease or
conditional sale or other security agreement covering such airframe
also covers an engine, engines or spare engines owned by the lessor
under such lease, conditionally owned by the conditional vendor under
such conditional sale agreement, or subject to such security agreement,
Agent hereby agrees for the benefit of such lessor, conditional vendor
or secured party that Agent will not acquire or claim, as against such
lessor, conditional vendor or secured party, any right, title or
interest in any such engine or spare engine as the result of such
engine or spare engine being installed on the Airframe at any time
while such engine or spare engine is subject to such lease or
conditional sale or other security agreement and owned by such lessor,
conditionally owned by such conditional vendor or subject to such
security agreement.
(e) Replacement and Pooling of Parts: Alterations,
Modifications and Additions.
(i) Except as otherwise provided in Section 4(e)(iv),
Company, at its own cost and expense, will promptly replace
all Parts, which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine or
Spare Engine and which may from time to time become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of
maintenance, service, repair or testing, Company at its own
cost and expense may remove any Parts, whether or not worn
out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided
that, except as otherwise provided in Section 4(e)(iv),
Company at its own cost and expense shall replace such Parts
as promptly as practicable. All replacement Parts shall be
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease, and for pooling arrangements to
the extent permitted by
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Section 4(e)(ii)), and shall be in as good operating condition
as, and shall have a value and utility at least equal to, the
Parts replaced assuming such property were in the condition
and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or
any Engine or any Spare Engine shall remain the property of
Company and shall remain subject to the lien and security
interest of this Mortgage, no matter where located until such
time as such Parts shall be replaced by parts which have been
incorporated or installed in or attached to the Airframe or
any Engine or Spare Engine and which meet the requirements for
replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or
attached to the Airframe or any Engine or Spare Engine as
above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall
become the property of Company and shall become subject to the
lien and security interest of this Mortgage and shall be
deemed part of the Airframe or such Engine or Spare Engine for
all purposes hereof to the same extent as the property
originally comprising, or installed on, such Airframe or such
Engine or Spare Engine, and (B) title to the replaced part
shall no longer be the property of Company and shall thereupon
become free and clear of all rights of Agent hereunder and
shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine
or Spare Engine as provided in Section 4(e)(i) may be
subjected by Company or Lessee to a normal pooling arrangement
of the type customary in the airline industry entered into by
Lessee in the ordinary course of its business and entered into
with Domestic Air Carriers that are not the subject of any
bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part
shall be incorporated or installed in or attached to the
Airframe or such Engine or Spare Engine in accordance with
Section 4(e)(i) as promptly as possible after the removal of
such removed part. In addition, any replacement Part when
incorporated or installed in or attached to the Airframe or
any Engine or Spare Engine in accordance with Section 4(e)(i)
may be owned subject to such a pooling arrangement, provided
Company, at its expense, as promptly thereafter as possible,
either (A) causes such replacement Part to become subject to
the lien and security interest of this Mortgage in accordance
with Section 4(e)(i) by Company's acquiring title thereto for
the benefit of Agent free and clear
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of all Liens (except Permitted Encumbrances and the Lease) or
(B) replaces such replacement Part by incorporating or
installing in or attaching to the Airframe or such Engine or
Spare Engine a further replacement Part owned by Company free
and clear of all Liens (except Permitted Encumbrances and the
Lease).
(iii) Company, at its own cost and expense, shall
make or cause to be made such alterations and modifications in
and additions to the Airframe and the Engines and Spare
Engines as may be required from time to time to meet the
standards of the FAA or other governmental authority having
jurisdiction; provided that Company may, in good faith,
contest the validity or application of any such standard in
any reasonable matter that shall not adversely affect the Lien
of this Mortgage or Lenders' interests therein. Company also
agrees, at its own cost and expense, to make or cause to be
made such alterations and modifications in and additions to
the Airframe and the Engines and Spare Engines as may be
required from time to time to meet the standards or
requirements of any directive issued by a manufacturer
relating to the Airframe or any Engine or Spare Engine. In
addition so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company, at its
own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe
and any Engine or Spare Engine as Company may deem desirable
in the proper conduct of its business or to accommodate the
business of Lessee, provided no such alteration, modification
or addition diminishes the value or utility or impairs the
condition or airworthiness of the Airframe or such Engine or
Spare Engine below the value, utility, condition or
airworthiness thereof immediately prior to such alteration,
modification or addition assuming the Airframe or such Engine
or Spare Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or
attached to or added to the Airframe or any Engine or Spare
Engine as the result of such alteration, modification or
addition shall, without further act, become the property of,
and title to such parts shall vest in Company and shall be
subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or
Event of Default shall have occurred and be continuing,
Company may remove and not replace any such Part if it (A) is
in addition to, and not in replacement of or in substitution
for, any Part incorporated or installed in or attached to the
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<PAGE> 17
Airframe or such Engine or Spare Engine on the date hereof, on
the date the Engine or Spare Engine first becomes subject to
the lien of this Mortgage, or any Part in replacement of or
substitution for any such Part, (B) is not required to be
incorporated or installed in or attached or added to the
Airframe or such Engine or Spare Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage
and (C) can be removed from the Airframe, such Engine or Spare
Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare
Engine would have had at such time had such alteration,
modification or addition not occurred, assuming the Aircraft
Collateral was otherwise in the condition required by this
Mortgage. Upon the removal by Company of any such Part, as
above provided, title thereto shall, without further act, be
free and clear of all rights of the Agent hereunder and such
Part shall no longer be deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all
obligations of Company pursuant to this Section 4(e) shall be
performed by the Lessee, at the Lessee's own cost and expense,
and all Parts and alterations, improvements or modifications
in and additions to the Aircraft shall become subject to the
Lien of this Mortgage and shall be leased to the Lessee under
the applicable Lease. In no event shall the Lessor bear any
liability or cost whatsoever for (i) any alteration or
modification of, or addition to, the Airframe or any Engine or
Spare Engine, (ii) any grounding of the Aircraft, (iii)
suspension of certification of the Aircraft, or (iv) loss of
revenue suffered by the Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to
an Airframe or an Engine or Spare Engine, Company will
promptly notify Agent thereof in writing (in any event within
five (5) days of such occurrence) and will, not later than 180
days after the receipt of Proceeds in connection with such
Event of Loss, mortgage hereunder, by complying with all of
the terms of subsection (ii) below and otherwise taking all
necessary actions to provide that Company (and the Agent upon
foreclosure of Company's interest in the Lease) will continue
to be entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the replacement airframe or
engine referred to below, an
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<PAGE> 18
Acceptable Alternate Airframe or Acceptable Alternate Engine
free of all Liens (other than Permitted Encumbrances and the
Lease). Upon compliance with the preceding sentence within
such 180-day period, Agent will execute and deliver to Company
a partial release, in recordable form, releasing the lien of
this Mortgage to the extent that it covers such Airframe or
Engine or Spare Engine with respect to which such Event of
Loss has occurred. Such Acceptable Alternate Airframe or
Acceptable Alternate Engine shall thereupon constitute an
"Airframe" or an "Engine" or "Spare Engine", as the case may
be, for all purposes hereof and shall be deemed to constitute
part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or
Engine to the lien and security interest of this Mortgage (as
contemplated by paragraph (i) above), Company will on or prior
thereto:
(A) deliver to Agent and duly file for
recording under the Act, a Supplemental Chattel
Mortgage substantially in the form of Exhibit A
hereto duly executed by Company appropriately
describing such engine to be subjected to the lien
and security interest of this Mortgage;
(B) deliver to Agent for filing financing
statements under Article 9 of the Uniform Commercial
Code of the States of Colorado and New York (or such
other States as may be required at such time)
covering the security interest created by this
Mortgage to perfect the security interest of Agent in
the Airframe or Engine or Spare Engine to be
subjected to the lien and security interest of this
Mortgage;
(C) deliver to Agent an Officers'
Certificate dated the date of execution of said
Supplemental Chattel Mortgage, stating:
(I) that the representations and
warranties contained in Section 3 hereof are
true and correct on and as of such date of
execution with respect to such Airframe or
Engine or Spare Engine and Company;
(II) that, upon consummation of the
terms of this Section 4(f), no Potential
Event of Default or Event of Default will
exist; and
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<PAGE> 19
(III) that all conditions precedent
contemplated in this Section 4(f)(ii) have
been complied with.
(D) furnish Agent with evidence of
compliance with the insurance provisions of Section
4(g) hereof with respect to such Airframe or Engine
or Spare Engine as Agent may reasonably request;
(E) furnish Agent with a warranty (as to
title) bill of sale, in form and substance reasonably
satisfactory to Agent with respect to such Airframe
or Engine or Spare Engine;
(F) furnish Agent with such evidence of
title such as the bill of sale as Agent may
reasonably request concerning such Airframe or Engine
or Spare Engine;
(G) cause to be delivered to Agent an
appraisal by the Approved Appraisers relating to the
Airframe or Engine or Spare Engine to be subjected to
the lien and the security interest of this Mortgage
stating that it has a value and utility at least
equal to, and in as good operating condition as the
Airframe or Engine or Spare Engine subject to such
Event of Loss immediately prior to such Event of
Loss, assuming compliance by Company with all the
terms of this Mortgage with respect to such Airframe
or Engine or Spare Engine; and
(H) cause to be delivered to Agent an
opinion or opinions of counsel dated the date of
execution of such Supplemental Chattel Mortgage,
stating:
(I) that the Airframe or Engine or
Spare Engine specifically described in said
Supplemental Chattel Mortgage, is free and
clear of all recorded Liens,
(II) that said Supplemental Chattel
Mortgage (1) has been duly authorized,
executed and delivered by Company, and (2)
creates a valid, perfected and first
priority security interest in and to the
Airframe or Engine or Spare Engine described
in said Supplemental Chattel Mortgage,
enforceable against all third parties and
securing the payment of all obligations
purported to be
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<PAGE> 20
secured thereby and that all action
required to perfect fully such security
interest has been taken and completed,
(III) that said Supplemental Chattel
Mortgage has been duly filed for recordation
in accordance with the provisions of the Act
to continue the perfection and priority of
the security interest intended to be created
by the Mortgage, and
(IV) that Company (and the Agent
upon succeeding to Company's interest in the
Lease) will continue to be entitled to the
benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the
Airframe or Engine or Spare Engine described
in said Supplemental Chattel Mortgage.
(V) as to such other matters as
Agent may reasonably request.
Promptly upon the recording of each Supplemental Chattel
Mortgage under the Act, Company will cause to be delivered to
Agent an opinion of counsel for Company as to the due
recording of such Supplemental Chattel Mortgage in accordance
with the Act.
(iii) With respect to the Airframe or any Engine or
Spare Engine as between the Agent and Company, any payments on
account of an Event of Loss (other than insurance proceeds or
other payments the application of which is provided for in
Section 4(g) below and under the terms of the Credit
Agreement) received from any government authority or other
person shall be applied as follows:
(A) if such payments are received with
respect to an Event of Loss to an Airframe or Engine
or Spare Engine that has been or is being replaced by
Company pursuant to the terms hereof, so long as
there shall exist no Event of Default or Potential
Event of Default, such payment shall be paid over to
or retained by Company or Lessee upon satisfaction of
the conditions for replacement contained in paragraph
(ii) above and until such time shall be held by Agent
in accordance with the provisions hereof as security
for the Secured Obligations; and
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<PAGE> 21
(B) if such payments are received with
respect to an Event of Loss with respect to which no
replacement is being effected, such payments shall be
applied to the prepayment of the Notes required
pursuant to the terms of the Credit Agreement and
shall be held pursuant to the terms of this Mortgage,
and the balance, if any, shall be paid over to or
retained by Company.
(iv) In the event of a requisition for use by the
United States Government of the Airframe or any Engine or
Spare Engine, Company shall promptly notify Agent of such
requisition and all of Company's obligations under this
Mortgage shall continue to the same extent as if such
requisition had not occurred. Any payments received by Agent
or Company from the United States Government for the use of
the Airframe or such Engine or Spare Engine, shall be paid
over to, or retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv)
of this Section 4(f) which is payable to or retained by
Company shall not be paid to Company or retained by Company,
if at the time of such payment or retention any Event of
Default or a Potential Event of Default shall have occurred
and be continuing, but shall be held by or paid over to Agent
as security for the obligations of Company under this Mortgage
and the other Loan Documents, and, if Agent shall declare the
Credit Agreement to be in default, shall be applied against
Company's obligations hereunder and thereunder as and when
due. At such time as there shall not be continuing any such
Event of Default or Potential Event of Default, such amount
shall be paid to Company to the extent not previously applied
in accordance with the preceding sentence. In addition, and
whether or not there shall exist an Event of Default or
Potential Event of Default, until such time as Company shall
request to be paid any amount referred to in paragraph (iii)
or (iv) in order to effect the mortgaging hereunder of a
replacement Airframe or Engine or Spare Engine, any amounts
referred to in paragraphs (iii) or (iv) of this Section 4(f)
shall be held by the Agent as security for the obligations of
Company under this Mortgage and the other Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and
maintain on or with respect to the Aircraft and Spare Engines, at
Lessee's own cost and expense, public liability (including without
limitation, contractual liability, cargo
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<PAGE> 22
liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and property
damage insurance with insurers of recognized responsibility and
reputation in amounts, of the type and covering the risks customarily
carried with respect to similar aircraft by corporations engaged in the
same or similar business and similarly situated with Lessee but in no
event in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when the Aircraft and Spare
Engines are on the ground and not in operation, Lessee may carry or
cause to be carried, in lieu of insurance required by this Section,
insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed the
amounts of comprehensive airline liability insurance, and the scope of
risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly
situated with Lessee. Any policies of insurance carried in accordance
with this Section 4(g) and any policies taken out in substitution or
replacement of any such policies (A) shall be amended to name Agent and
Lenders as additional named insureds, (B) shall be primary without
right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except
the limits of the liability, shall operate in the same manner as if
there were a separate policy covering each insured, and (D) shall
provide that the insurer shall waive any right of subrogation against
Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Aircraft and Spare Engines, at Lessee's own cost
and expense, aircraft ground and flight all-risk hull insurance as well
as fire and extended coverage insurance on Engines and other equipment
while removed from the Airframe or airframe (which shall include war
risk, governmental confiscation and expropriation (other than by the
United States Government) and allied perils including (A) strikes,
riots, civil commotions or labor disturbances, (B) any malicious act or
act of sabotage and (C) hijacking (air piracy) or any unlawful seizure
or wrongful exercise of control of the Aircraft or Spare Engines or
crew in flight (including any attempt at such seizure or control) made
by any person or persons aboard the Aircraft or another aircraft acting
without the consent of the insured, if and to the extent the same shall
be maintained by Lessee with respect to similar aircraft owned or
operated by Lessee on the same routes or if the Aircraft or another
aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with Lessee flying comparable routes with
similar aircraft to carry such insurance, of the type usually carried
by
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<PAGE> 23
corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be for
an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when the Aircraft
or Spare Engines, as the case may be, are on the ground and not in
operation Lessee may carry or cause to be carried, in lieu of the
insurance required by this Section, insurance otherwise conforming
hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with
respect to similar aircraft or spare engines by corporations engaged in
the same or similar business and similarly situated with Lessee for
aircraft and spare engines on the ground in an amount at least equal to
the applicable amount provided above. All such insurance shall name
Agent and Lenders as additional insureds and loss payees to the extent
their interest may appear and shall provide that any loss to the
Airframe or an Engine or Spare Engine in excess of $2,000,000 (and, if
a Potential Event of Default or Event of Default has occurred and is
continuing, any such loss) shall be payable to Agent for the benefit of
Lenders; and shall be primary without right of contribution from any
other insurance which is carried by Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts as
are then applicable to other similar aircraft or spare engines in
Lessee's fleet which are of a value comparable to the Aircraft or Spare
Engines, as the case may be, and as are not substantially greater than
amounts self-insured by corporations engaged in the same or similar
business and similarly situated with Lessee; provided, however, that
Company shall not permit Lessee to self-insure in an amount in excess
of $1,000,000 without the prior written consent of Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in respect
of the interest of Agent or Lenders in such policies the insurance
shall not be invalidated by any action or inaction of Lessee and shall
insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such
policies; (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the interest of
Agent or any Lender, or if such insurance is allowed to lapse for
nonpayment of premium, such cancellation,
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<PAGE> 24
change or lapse shall not be effective as to Agent for thirty (30) days
(seven (7) days, or such shorter or longer period as may from time to
time be customarily available in the industry, in the case of any war
risk and allied perils coverage) after receipt by Agent of written
notice from such insurers of such cancellation, change or lapse; (D) be
in full force and effect throughout any geographical areas at any time
traversed by the Aircraft or Spare Engines and shall be payable in U.S.
dollars; (E) waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise
in respect of any liability of Agent; and (F) waive all rights of
subrogation against Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe or
any Engine or Spare Engine, a valid agreement by the United States or
such agency or instrumentality to indemnify Lessee against the same
risks against which Lessee is required hereunder to insure shall be
considered adequate insurance with respect to the Airframe or such
Engine or Spare Engine to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 31, Company will cause the Lessee to furnish to
Agent (A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried and
maintained on or with respect to the Aircraft and the Engines and Spare
Engines and stating that in the opinion of such firm such insurance
complies with the terms of this Section 4(g) and is adequate to protect
the interests of Lessee, Company and Agent, and (B) certificates of the
insurer or insurers evidencing the insurance covered by the report.
Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or
omission on the part of Lessee of which such firm has knowledge and
which might invalidate or render unenforceable, in whole or in part,
any insurance on the Aircraft or any Engine or Spare Engine and (y) at
least thirty (30) days prior to the expiration or termination date, or
date of effectiveness of any material change, of any insurance carried
and maintained on the Aircraft or Spare Engines hereunder.
(vi) All insurance payments and other payments received by
Agent or Company from insurance referred to in paragraph (ii) above
shall be, if received by Company, immediately paid to Agent and shall
be held by Agent as security
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<PAGE> 25
for the Secured Obligations and all other obligations required to be
paid in accordance with the terms of this Mortgage and the Credit
Agreement and such payments shall be paid to Company upon compliance by
Company with the terms of Subsection 4(f) with respect to the
replacement of an airframe or an engine, as the case may be, provided
that no Potential Event of Default or Event of Default shall have
occurred and be continuing.
All insurance payments and other payments received by Agent or Company
from insurance referred to in paragraph (ii) above and paid other than
as a result of an Event of Loss shall be paid by Agent to or be
retained by Company, and promptly applied by Company to the extent
necessary to repair the damage to the Airframe or the Engine or Spare
Engine for which such insurance was paid, provided that Agent shall not
be required to make any such payment to Company if a Potential Event of
Default or Event of Default has occurred and is continuing, but shall
be held or paid over to Agent as security for the obligations of
Company under this Mortgage and the other Loan Documents, and, if Agent
shall declare the Credit Agreement to be in default, shall be applied
against Company's obligations hereunder and thereunder as and when due.
Retention by Agent of any amounts pursuant to the preceding sentence
shall not relieve Company of its obligations to make promptly all
repairs and replacements required by Sections 4(c) and (e) hereof and
to pay for the same with Company's funds or cause payment of the same
under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or
any Lender from obtaining insurance with respect to the Aircraft or
Spare Engines for its own account. Company may, at its own expense,
carry insurance with respect to its interest in the Aircraft or Spare
Engines in amounts in excess of that required to be maintained by this
Section 4(g). No insurance maintained by Agent or any Lender shall
prevent Company from causing Lessee to carry the insurance required or
permitted by this Section or adversely affect such insurance or the
cost thereof. Proceeds of any such insurance carried by Agent or Lender
shall be paid as provided in the insurance policy relating thereto and
Agent shall have no duty to obtain any such insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and Aircraft
Related Collateral. or any part thereof, and to examine, copy or make extracts
from, any and all books, records and documents in the possession of Company
relating to such Collateral or any part thereof and performance of this
Mortgage, all at such reasonable times and as often
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<PAGE> 26
as may be requested. Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of making
or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant to
the Lease, cause the Airframe and each Engine and Spare Engine included in the
Aircraft Collateral to be legibly marked (in a reasonably prominent location,
which in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size, and
bearing the legend "Owned by Atlas Freighter Leasing, II Inc. and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the opinion
of Agent be appropriate or desirable to evidence the fact that it is subject to
the lien and security interest created by this Mortgage. Company shall not
remove or deface, or permit to be removed or defaced, any such plate, disk, or
other marking or the identifying manufacturer's serial number, and, in the event
of such removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided above,
Company shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine or Spare Engine as a designation that might
be interpreted as a claim of ownership or of any security interest therein,
except that any permitted lessee may place its customary colors and insignia or
the insignia of the manufacturer on the Airframe or any Engine or Spare Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing,
then Agent may, without notice of any kind to Company, exercise in
respect of the Aircraft Collateral and Aircraft Related Collateral, (i)
all the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect at the time in any applicable
jurisdiction (whether or not the Uniform Commercial Code applies to the
affected Aircraft Collateral), (ii) any and all remedies under the
Leases and all of the rights and remedies of the Lessor under the
Lease, (iii) all the rights and remedies provided for in this Mortgage,
the Credit Agreement and any other Loan Document, and in any other
agreement between Company and Agent, and (iv) such other rights and
remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
Agent may, without notice, take possession of the Aircraft Collateral
or any part thereof and may exclude Company and Lessee, and all persons
claiming under Company or Lessee, wholly or partly therefrom. At the
request of Agent,
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<PAGE> 27
Company shall promptly deliver or cause Lessee to deliver to Agent or
to whomsoever Agent shall designate, at such time or times and place or
places as Agent may specify, and fly or cause to be flown to such
airport or airports in the United States as Agent may specify, without
risk or expense to Agent, the Aircraft Collateral or any part thereof.
In addition, Company will provide, or cause Lessee to provide, without
cost or expense to Agent, storage facilities for the Aircraft
Collateral. If Company or Lessee shall for any reason fail to deliver
the Aircraft Collateral or any part thereof after demand by Agent,
Agent may, without being responsible for loss or damage, (i) obtain a
judgment conferring on Agent the right to immediate possession or
requiring Company and Lessee to deliver immediate possession of the
Aircraft Collateral or any part thereof to Agent, the entry of which
judgment Company hereby specifically consents and the Lessor's consent
to which will be obtained by Company under the Lease, or (ii) with or
without such judgment, pursue the Aircraft Collateral or any part
thereof wherever it may be found and may enter any of the premises of
Company and Lessee where the Aircraft Collateral may be and search for
the Aircraft Collateral and take possession of and remove the same.
Company agrees to pay to Agent, upon demand, all expenses incurred in
taking any such action; and all such expenses shall, until paid, be
secured by the lien of this Mortgage. Upon every such taking of
possession, Agent may, from time to time, make all such reasonable
expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Aircraft
Collateral, as it may deem proper. In each such case, Agent shall have
the right to maintain, use, operate, store, lease, control or manage
the Aircraft Collateral or any part thereof and to carry on the
business and exercise all rights and powers of Company relating to the
Aircraft Collateral, as Agent shall deem best, including the right to
enter into any and all such agreements with respect to the maintenance,
use, operation, storage, leasing, control, management or disposition of
the Aircraft Collateral or any part thereof as Agent may determine.
Further, after the occurrence and during the continuation of an Event
of Default, Agent shall be entitled to collect and receive directly all
tolls, rents, revenues, issues, income, products and profits of the
Aircraft Collateral or any part thereof, including without limitation,
all payments under any of the Leases. Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the
expenses of the use, operation, storage, leasing, control, management
or disposition of the Aircraft Collateral, and of all maintenance,
insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments which Agent may be required or
may elect to make, if any, for taxes, assessments, or other proper
charges upon the Aircraft Collateral and all other payments which Agent
may be required or authorized to make under any provision of this
Mortgage, as well as just and reasonable compensation for the
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<PAGE> 28
services of Agent and of all persons properly engaged and employed for
such purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or
more sales, as an entirety or in separate lots or parcels, the
Aircraft Collateral or any part thereof, at public or private
sale, at such place or places and at such time or times and
upon such terms, including terms of credit (which may include
the retention of title by Agent to the property so sold), as
Agent may determine, whether or not the Aircraft Collateral
shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under
this Mortgage by suit, whether for specific performance of any
covenant herein contained or in aid of the exercise of any
power herein granted or for the foreclosure of this Mortgage
and the sale of the Aircraft Collateral under the judgment or
decree of a court of competent jurisdiction or for the
enforcement of any other right.
(d) After an Event of Default has occurred and is continuing,
Company agrees to the fullest extent that it lawfully may, that it and
Lessee will not (and hereby irrevocably waives its right to) at any
time plead, or claim the benefit or advantage of, any appraisement,
valuation, stay, extension, moratorium, or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement of
this Mortgage or the absolute sale of the Aircraft Collateral. Company,
for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have all or any portion of the Aircraft
Collateral marshalled upon any foreclosure hereof.
(e) Each and every remedy of Agent shall be cumulative and
shall not be exclusive of any other remedies provided now or hereafter
at law, in equity or otherwise. Company shall reimburse Agent, upon
demand, for all fees and other expenses paid or incurred by Agent in
exercising any rights, powers or remedies granted hereby. All such fees
and expenses shall, until paid, be secured by the lien of this
Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to
the
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<PAGE> 29
exclusion of Company, to declare the Lease in default in accordance
with its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale,
lease, disposition or other realization, including reasonable
compensation to Agent's agents and counsel, and all expenses,
liabilities and advances made or incurred by Agent in connection
therewith, including, without limitation, taxes upon or with respect to
the sale, lease, disposition or realization and the payment of taxes
and Liens, if any, prior to the lien and security interest of this
Mortgage (except any taxes or Liens to which the respective sale,
lease, disposition or realization shall have been subject) and to the
payment of expenses and the reimbursement of payments incurred or made
by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and
unpaid on the Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes,
which payment shall be applied to the principal installments of the
Notes in the manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company
under the Credit Agreement, this Mortgage or any other Loan Document,
and otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive
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<PAGE> 30
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Aircraft Collateral and Aircraft Related Collateral, (ii)
to make all necessary transfers of all or any part of the Aircraft Collateral
and Aircraft Related Collateral in connection with any sale, lease or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale, lease or other disposition, and (iv) generally to
do, at Agent's option and Company's cost and expense, at any time, or from time
to time, all acts and things that Agent deems necessary to protect, preserve or
realize upon the Aircraft Collateral and Aircraft Related Collateral and Agent's
security interest therein, in order to effect the intent of this Mortgage, all
as fully and effectively as Company might do, Company hereby ratifying and
confirming all that its said attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section, and
all monies if any, required to be paid to Agent hereunder, which disposition is
not elsewhere herein otherwise specifically provided for, shall be held by Agent
and applied from time to time as provided herein and in the Credit Agreement and
the other Loan Documents and shall be held in an account in the name of Agent
and invested in Cash Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent
may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
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<PAGE> 31
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender herein
or otherwise. Upon the indefeasible payment in full of the Secured Obligations,
the security interest granted hereby shall terminate and all rights to the
Aircraft Collateral and Aircraft Related Collateral shall revert to Company.
Upon any such termination. Agent will execute and deliver to Company, at
Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by
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<PAGE> 32
applicable law, Company hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect. No term or
provision of this Mortgage may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Company and Agent. The
captions and headings in this Mortgage are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Agent to bring proceedings against Company in the courts of
any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Article 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
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<PAGE> 33
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 34
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:____________________________
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:____________________________
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 35
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
Boeing 747-2D7B 21782 N523MC
</TABLE>
<PAGE> 36
SCHEDULE II-A
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 528105
General Electric CF6-50E2 530166
General Electric CF6-50E2 517353
General Electric CF6-50E2 517265
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 37
SCHEDULE II-B
to Security Agreement
and Chattel Mortgage
SPARE ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 530168
General Electric CF6-50E2 517530
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 38
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.______
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated ________, 199[ ] between Atlas
Freighter Leasing II, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, "Agent") the financial institutions ("Lenders") party to the Credit
Agreement dated as of September __, 1997 among Company, the Lenders, Goldman
Sachs Credit Partners L.P., as Syndication Agent, and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated _______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine and Spare Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine
and Spare Engine to Agent.
The Mortgage relates to the Engine(s) and Spare Engine(s) described below
and a counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on __________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine or Spare Engine shall be installed on
or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
<PAGE> 39
EXHIBIT A
Page 2
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 40
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:________________________________
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
BANKERS TRUST COMPANY,
as Agent
By:____________________________________
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 41
SCHEDULE I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 42
SCHEDULE I-B
to Supplemental
Chattel Mortgage
SCHEDULE OF SPARE ENGINES
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.81
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO.N524MC)
(SPARE ENGINE NOS. 517790 and 517602)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of September 5,
1997, (this "Mortgage"), and entered into by and between ATLAS AIR, INC., a
Delaware corporation (the "Lessee"), ATLAS FREIGHTER LEASING II, INC., a
Delaware corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as
administrative agent for and representative of (in such capacity, the "Agent")
the financial institutions ("Lenders") party to the Credit Agreement referred to
below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of September 5, 1997
(said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with
Lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent, and Agent,
pursuant to which Lenders have agreed, on the terms and conditions set forth in
the Credit Agreement, to make term loans to Company in the principal amount of
up to $185 million (the "Loans") to enable Company to refinance certain
indebtedness currently encumbering the Aircraft Collateral (as defined below).
The indebtedness with respect to Loans made by Lenders is to be evidenced by
certain promissory notes of Company to the order of Lenders of even date
herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
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<PAGE> 2
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security interest in the Aircraft and the Spare Engines (the
"Aircraft Collateral") and a first priority security interest in all estate,
right, title and interest of Company in, to and under, the other below described
property wherever the same may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in and
to:
(i) the airframe (the Aircraft except for the Engines or engines from
time to time installed thereon), which is described on Schedule I hereto
and any replacement airframe which may be substituted for such airframe in
accordance with the provisions of Section 4(f) hereof together with any and
all Parts (as hereinafter defined) incorporated or installed in or attached
to such airframe and all Parts removed from such airframe until such Parts
are replaced in accordance with Section 4(e) hereof (such airframe,
together with any replacement airframe and all such Parts, hereinafter
referred to as the "Airframe");
(ii) each of the engines and spare engines (the "Spare Engines"),
which are listed in Schedule II hereto or which are described in a
Supplemental Chattel Mortgage (a "Supplemental Chattel Mortgage")
substantially in the form of Exhibit A attached hereto, supplementing this
Mortgage, and listed by manufacturer's serial numbers in such Schedule or
in such Supplemental Chattel Mortgage, whether or not from time to time
thereafter installed on the airframe or on any other airframe or aircraft,
and any replacement engine which may be substituted for such engine or
spare engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or installed in
or attached thereto and any and all Parts removed therefrom, until such
Parts are replaced in accordance with Section 4(e) hereof (each such
engine, and replacement engine, together with any and all such Parts,
hereinafter referred to as an "Engine" and collectively, the "Engines");
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<PAGE> 3
(iii) all appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (other than complete
Engines, Spare Engines or engines), which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or
Spare Engine, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased by
Company for incorporation or installation in or attachment to the Airframe
or any Engine or Spare Engine pursuant to the terms of any agreement
whether or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
(iv) all records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and materials
maintained in the ordinary course of business with respect to the
properties described in paragraphs (i), (ii) and (iii) above (together with
such Airframe and Engines (other than the Spare Engines), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and interest
in and to:
(i) all the tolls, rents, issues, profits, revenues and other income
of the property subject or required to be subject to the lien of this
Mortgage including, without limitation, all payments or proceeds payable to
Company after termination of the Lease with respect to the Aircraft and
Spare Engines as the result of the sale, lease or other disposition
thereof, and all estate, right, title interest of every nature whatsoever
of Company in and to the same and every part thereof;
(ii) all monies and securities deposited or required to be deposited
with Agent pursuant to any term of this Mortgage and held or required to be
held by Agent hereunder or paid to Agent in accordance with the terms of
the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of Company
(including such indemnities, rights of assignment, rights and remedies for
breach of any warranty and/or claims for damages, rights to receive title
to parts and materials to the extent same relates to the Aircraft or Spare
Engines including any agreement assigned therewith;
-3-
<PAGE> 4
(iv) all amounts payable to Company by any manufacturer, supplier or
vendor of any of the Aircraft Collateral or any component thereof pursuant
to any warranty or indemnity covering any such Aircraft Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation, requisition or
other taking of any Aircraft Collateral to the extent payable to Company
under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and other
payments of any kind thereunder, and including all rights of Company, as
lessor, to execute any election or option or to give any notice, consent,
waiver or approval under or in respect of the Lease or to accept any
surrender of any of the Aircraft or Spare Engines or any part thereof, as
well as any rights, powers or remedies on the part of the Lessor, whether
arising under the Lease or by statute or at law or in equity, or otherwise,
arising out of any Lease Event of Default (as defined in the Lease),
including, without limitation, all rights under Section 1110 of the
Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described above,
including, without limitation, all payments under insurance proceeds or
payment under any indemnity, payable by reason of any loss or damage to the
Aircraft, any Engine or any Spare Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft and
Spare Engines. All property referred to in this granting clause, whenever
acquired by the Lessor under the Lease, shall secure all Secured Obligations.
Company does hereby warrant and represent that it has not assigned or pledged,
and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or interest
hereby assigned to anyone other than Agent, and that it will not, except as
provided herein or in the Credit Agreement, enter into any agreement amending or
supplementing any purchase agreement, modification agreement to the extent such
agreement relates to the Aircraft or Spare Engines, or execute any waiver or
modification of, or consent under, any such agreement, or settle or compromise
any claim arising under any such agreement or submit or consent to the
submission of any dispute, difference or other matter arising under or in any
respect of any such agreement to arbitration thereunder.
-4-
<PAGE> 5
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Lessee maintains, services, repairs and overhauls similar
airframes utilized by Lessee and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2
aircraft engine for the aircraft bearing U.S. registration numbers N523MC,
N524MC, N526MC and N527MC or an engine of the same or another manufacturer
of equivalent or greater residual value, condition, utility, airworthiness,
and remaining useful life and suitable for installation and use on the
Airframe; provided that such 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 747-200
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant
to which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Lessee's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
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<PAGE> 6
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of September __,
1997, by and between Atlas Freighter Leasing II, Inc., as Lessor, and Atlas
Air, Inc., as Lessee, for the lease of the Aircraft and Spare Engines,
together with any amendments, modifications, supplements or additions
thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
-6-
<PAGE> 7
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engines" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine or each Spare Engine initially or subsequently mortgaged hereunder
on the date the Airframe, such Engine or Spare Engine is mortgaged hereunder as
follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof and
in the manner aforesaid and has not assigned or pledged any of its right,
title or interest hereby assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) or Spare Engine as the case may be.
-7-
<PAGE> 8
(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft, Engines and Spare Engines are in such condition so
as to comply with the requirements of Section 4(c) hereof; and the
insurance required by Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Aircraft Collateral,
securing the payment and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 3, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. Company will promptly, at its own
expense, take such action as may be
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necessary to duly discharge any such Lien not excepted above if the same
shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against Agent
or any Lender or the Airframe or any Engine or any Spare Engine or any part
thereof or interest therein by any Federal, state or local government or
other taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any Spare
Engine or any part thereof of interest therein; (ii) the manufacture,
purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of the Airframe or any Engine or any
Spare Engine; (iii) any rentals or other earnings therefor or arising
therefrom or the income or other proceeds received with respect thereto; or
(iv) this Mortgage; provided, however, that there shall be excluded from
any indemnification any Lessor Tax (as defined in the Lease) and unless the
payment of any such Tax shall be a condition to the enforceability of this
Mortgage or the perfection of the lien hereof or unless proceedings shall
have been commenced to foreclose any lien which may have attached as
security for such Tax, nothing in this Section shall require the payment of
any Tax so long as and to extent that validity thereof shall be contested
in good faith by appropriate legal proceedings promptly instituted and
diligently conducted and Company shall have set aside on its books adequate
reserves with respect thereto in accordance with generally accepted
accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft and Spare Engines to be duly registered and
remain duly registered in the name of Company in accordance with the Act;
and (iii) will cause Lessee to service, repair, inspect, test, maintain,
overhaul the Airframe and each Engine and each Spare Engine and install
replacement equipment and parts on the Aircraft, each Engine and each Spare
Engine (A) so as to keep the Airframe and each Engine and each Spare Engine
in such operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations, (B) so as to enable
the airworthiness certification of the Airframe to be maintained in good
standing at all times under
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the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the
Airframe shall be equipped at the time of grounding) registered in the
United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate of
the Aircraft shall be withdrawn, then subject to the provisions of Section
4(f) hereof, so long as Company is diligently taking or causing to be taken
all necessary action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care
used by Lessee with respect to the same or similar aircraft and engines
owned or operated by Lessee so as to keep the same in as good operating
condition as when originally mortgaged hereunder, ordinary wear and tear
excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar
equipment, and (D) in such manner as may be necessary to maintain in full
force all warranties of the manufacturers thereof. Company shall maintain,
or shall cause Lessee to maintain, all records, logs and other materials
which may be required to permit the Airframe, each Engine and each Spare
Engine to be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or supplier)
in such condition so as to comply with the provisions of this Mortgage and
the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft, Engines and Spare Engines. Neither the Airframe
nor any Engine nor any Spare Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration
relating to the Airframe or such Engine or such Spare Engine issued by any
such authority, and in the event that such laws, rules, regulations or
orders require alteration of the Airframe or any Engine or any Spare
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders; provided,
however, that Company may, in good faith (after having delivered to Agent
an Officer's Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in
any reasonable manner which does not, in Agent's opinion, adversely affect
the interests under this Mortgage of Agent or any Lender.
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Company will not operate, use or locate the Airframe or any Engine or
any Spare Engine, (I) in any area in which any insurance required to be
maintained pursuant to Section 4(g) shall not be at the time in full force
and effect, or in any area excluded from coverage by an insurance policy in
effect with respect to the Airframe or such Engine or such Spare Engine,
except in the case of a requisition for use by the United States of
America, and then only if Company obtains indemnity or "war risk" insurance
in lieu of such insurance from the United States of America against the
risks and in the amounts required by said Section covering such area, or
(II) in any recognized or threatened area of hostilities unless fully
covered to Agent's satisfaction by war risk and political risk and allied
perils insurance or unless the Airframe or such Engine or such Spare Engine
is operated or used under contract with the Government of the United States
of America under which contract that Government provides "war risk"
insurance or assumes liabilities for any damages, loss, destruction or
failure to return possession of the Airframe or such Engine or such Spare
Engine at the end of the term of such contract and for injury to persons or
damage to property of others.
Company shall not use the Aircraft or any Spare Engines nor suffer it
to be used in any manner or for any purpose excepted from any of the
insurance on or in respect of the Aircraft or any Spare Engines or for the
purpose of carriage of goods of any description excepted from such
insurance nor do, or permit to be done, anything which, or admit to do
anything the admission of which, may invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Agent, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine or any Spare Engine
except that Company may enter into and perform all provisions and terms of
the Lease and Lessee or the Company, unless a Potential Event of Default or
Event of Default shall have occurred and be continuing, without the prior
written consent of Agent, may take the following actions so long as the
actions to be taken shall not deprive the Agent of the first priority Lien
of this Mortgage on the assets subject hereto and so long as the actions to
be taken shall not deprive Company as Lessor of the protections of Section
1110 of the Bankruptcy Code with respect to the Aircraft or Spare Engines
nor shall such actions deprive the Agent of the protections of Section 1110
of the Bankruptcy Code with respect to the Aircraft or Spare Engines as
assignee of Company's rights under this Mortgage:
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<PAGE> 12
(i) transfer possession of the Airframe or any Engine or Spare
Engine other than by lease to the United States of America or any
instrumentality thereof pursuant to the Civil Reserve Air Fleet
Program (as administered pursuant to Executive Order 12656, or any
substitute order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine or Spare
Engine to the manufacturer thereof for testing or other similar
purposes or any other organization for service, repairs, maintenance
or overhaul or, to the extent permitted by Section 4(e) hereof, for
alterations or modifications;
(iii) subject any Engine or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Company or Lessee in the
ordinary course of business which do not contemplate or require the
transfer of title to, use for the remainder of its useful life, or
registration of the Airframe or title to, or use for the remainder of
its useful life of such Engine or Spare Engine; provided, however if
Company's title to or use for the remainder of its useful life, of the
Airframe or any Engines or Spare Engines shall be divested under any
such agreement or arrangement, such divesture shall be deemed to be an
Event of Loss with respect to the Airframe or such Engine or Spare
Engine and Company shall comply with Section 4(f) in respect thereof;
(iv) install an Engine or Spare Engine on an airframe which is
owned by Lessee; provided that such airframe is free and clear of all
Liens on property of Lessee except (A) Liens permitted under the
Lease, (B) Liens that apply only to the engines (other than the
Engines or Spare 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), and (C) the rights of any Domestic Air Carrier, under
normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to
such airframe or the engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased to
Lessee or owned by Lessee subject to a conditional sale or other
security agreement, provided: (A) such airframe is free and clear of
all Liens, except the rights of the parties to the lease or
conditional sale or other security agreement covering such airframe
and except Liens of the
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type permitted by clause (iv) above; and (B) Agent shall have received
from the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which
may be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine or Spare Engine by
reason of such Engine or Spare Engine being installed on such airframe
at any time when such Engine or Spare Engine is subject to this
Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned or
leased by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such
Engine or Spare Engine resulting from such installation shall be
deemed to be an Event of Loss with respect to such Engine or Spare
Engine and Company shall comply with Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines and Spare
Engines or engines installed thereon with any third party pursuant to
which Company has operational control of the Airframe and any Engines
and Spare Engines installed thereon such operation to be performed
solely by individuals under the operational control of Company
possessing all current certificates and licenses that would be
required under the applicable laws of the United States for the
performance by such employees of similar functions within the United
States; provided that Company's obligations hereunder shall continue
in full force and effect notwithstanding any such ACMI Contract or wet
lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine or Spare Engine permitted by the
terms hereof shall be made subject and subordinate to, and the Leases
shall be made expressly subject and subordinate to, the lien and security
interest of this Mortgage and all of Agent's rights hereunder and Company
shall remain primarily liable hereunder for the performance of all the
terms of this Mortgage to the same extent as if such transfer had not
occurred, and any such instrument of transfer shall include appropriate
provisions for the maintenance and insurance of the
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<PAGE> 14
Airframe or such Engine or Spare Engine, and any such instrument of
transfer (other than the Lease) shall expressly prohibit any further
transfer of the Airframe or such Engine or Spare Engine or any assignment
of the rights thereunder; and provided, further, that no such lease,
pooling arrangement or other transfer or relinquishment of the possession
of the Airframe or any Engine or Spare Engine shall in any way discharge
or diminish any of Company's obligations to Agent hereunder or under the
Credit Agreement. In the event Agent shall have received from the lessor,
conditional vendor or secured party of any airframe leased to Lessee or
purchased by Lessee subject to a conditional sale or other security
agreement, a written agreement complying with clause (B) of Section
4(d)(v), and the lease or conditional sale or other security agreement
covering such airframe also covers an engine, engines or spare engines
owned by the lessor under such lease, conditionally owned by the
conditional vendor under such conditional sale agreement, or subject to
such security agreement, Agent hereby agrees for the benefit of such
lessor, conditional vendor or secured party that Agent will not acquire or
claim, as against such lessor, conditional vendor or secured party, any
right, title or interest in any such engine or spare engine as the result
of such engine or spare engine being installed on the Airframe at any time
while such engine or spare engine is subject to such lease or conditional
sale or other security agreement and owned by such lessor, conditionally
owned by such conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts: Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company, at
its own cost and expense, will promptly replace all Parts, which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine and which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such Parts
as promptly as practicable. All replacement Parts shall be owned by
Company free and clear of all Liens (except Permitted Encumbrances and
the Lease, and for pooling arrangements to the extent permitted by
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Section 4(e)(ii)), and shall be in as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced
assuming such property were in the condition and repair required to be
maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine or
any Spare Engine shall remain the property of Company and shall remain
subject to the lien and security interest of this Mortgage, no matter
where located until such time as such Parts shall be replaced by parts
which have been incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine and which meet the requirements
for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to
the Airframe or any Engine or Spare Engine as above provided, without
further act, (A) title to such replacement Part shall vest in and such
replacement part shall become the property of Company and shall become
subject to the lien and security interest of this Mortgage and shall
be deemed part of the Airframe or such Engine or Spare Engine for all
purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine or Spare
Engine, and (B) title to the replaced part shall no longer be the
property of Company and shall thereupon become free and clear of all
rights of Agent hereunder and shall no longer be deemed a Part
hereunder.
(ii) Any Part removed from the Airframe or any Engine or Spare
Engine as provided in Section 4(e)(i) may be subjected by Company or
Lessee to a normal pooling arrangement of the type customary in the
airline industry entered into by Lessee in the ordinary course of its
business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe
or such Engine or Spare Engine in accordance with Section 4(e)(i) as
promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or
attached to the Airframe or any Engine or Spare Engine in accordance
with Section 4(e)(i) may be owned subject to such a pooling
arrangement, provided Company, at its expense, as promptly thereafter
as possible, either (A) causes such replacement Part to become subject
to the lien and security interest of this Mortgage in accordance with
Section 4(e)(i) by Company's acquiring title thereto for the benefit
of Agent free and clear
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<PAGE> 16
of all Liens (except Permitted Encumbrances and the Lease) or (B)
replaces such replacement Part by incorporating or installing in or
attaching to the Airframe or such Engine or Spare Engine a further
replacement Part owned by Company free and clear of all Liens (except
Permitted Encumbrances and the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines and Spare Engines as may be required from
time to time to meet the standards of the FAA or other governmental
authority having jurisdiction; provided that Company may, in good
faith, contest the validity or application of any such standard in any
reasonable matter that shall not adversely affect the Lien of this
Mortgage or Lenders' interests therein. Company also agrees, at its
own cost and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe and the Engines and
Spare Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer
relating to the Airframe or any Engine or Spare Engine. In addition so
long as no Potential Event of Default or Event of Default shall have
occurred and be continuing, Company, at its own cost and expense, may
from time to time make such alterations and modifications in and
additions to the Airframe and any Engine or Spare Engine as Company
may deem desirable in the proper conduct of its business or to
accommodate the business of Lessee, provided no such alteration,
modification or addition diminishes the value or utility or impairs
the condition or airworthiness of the Airframe or such Engine or Spare
Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition
assuming the Airframe or such Engine or Spare Engine were then in the
condition and airworthiness required to be maintained by the terms of
this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine or Spare Engine as the result of
such alteration, modification or addition shall, without further act,
become the property of, and title to such parts shall vest in Company
and shall be subject to the lien and security interest of this
Mortgage; provided, that, so long as no Potential Event of Default or
Event of Default shall have occurred and be continuing, Company may
remove and not replace any such Part if it (A) is in addition to, and
not in replacement of or in substitution for, any Part incorporated or
installed in or attached to the
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<PAGE> 17
Airframe or such Engine or Spare Engine on the date hereof, on the
date the Engine or Spare Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine or Spare Engine
pursuant to the terms of Section 4(c) hereof or any other provision of
this Mortgage and (C) can be removed from the Airframe, such Engine or
Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would
have had at such time had such alteration, modification or addition
not occurred, assuming the Aircraft Collateral was otherwise in the
condition required by this Mortgage. Upon the removal by Company of
any such Part, as above provided, title thereto shall, without further
act, be free and clear of all rights of the Agent hereunder and such
Part shall no longer be deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine or Spare Engine, (ii) any grounding of the Aircraft, (iii)
suspension of certification of the Aircraft, or (iv) loss of revenue
suffered by the Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine or Spare Engine, Company will promptly notify Agent
thereof in writing (in any event within five (5) days of such
occurrence) and will, not later than 180 days after the receipt of
Proceeds in connection with such Event of Loss, mortgage hereunder,
by complying with all of the terms of subsection (ii) below and
otherwise taking all necessary actions to provide that Company (and
the Agent upon foreclosure of Company's interest in the Lease) will
continue to be entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the replacement airframe or engine
referred to below, an
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Acceptable Alternate Airframe or Acceptable Alternate Engine free of
all Liens (other than Permitted Encumbrances and the Lease). Upon
compliance with the preceding sentence within such 180-day period,
Agent will execute and deliver to Company a partial release, in
recordable form, releasing the lien of this Mortgage to the extent
that it covers such Airframe or Engine or Spare Engine with respect to
which such Event of Loss has occurred. Such Acceptable Alternate
Airframe or Acceptable Alternate Engine shall thereupon constitute an
"Airframe" or an "Engine" or "Spare Engine", as the case may be, for
all purposes hereof and shall be deemed to constitute part of the
Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to the
lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form of
Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine or Spare Engine to be subjected to the lien
and security interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the date
of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine or
Spare Engine and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
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(III) that all conditions precedent contemplated in
this Section 4(f)(ii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine or Spare Engine as Agent may reasonably
request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent with
respect to such Airframe or Engine or Spare Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine or Spare Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine or Spare
Engine to be subjected to the lien and the security interest of
this Mortgage stating that it has a value and utility at least
equal to, and in as good operating condition as the Airframe or
Engine or Spare Engine subject to such Event of Loss immediately
prior to such Event of Loss, assuming compliance by Company with
all the terms of this Mortgage with respect to such Airframe or
Engine or Spare Engine; and
(H) cause to be delivered to Agent an opinion or opinions of
counsel dated the date of execution of such Supplemental Chattel
Mortgage, stating:
(I) that the Airframe or Engine or Spare Engine
specifically described in said Supplemental Chattel
Mortgage, is free and clear of all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Airframe or Engine or Spare Engine
described in said Supplemental Chattel Mortgage, enforceable
against all third parties and securing the payment of all
obligations purported to be
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secured thereby and that all action required to perfect
fully such security interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
and
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine or
Spare Engine described in said Supplemental Chattel
Mortgage.
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Agent an opinion
of counsel for Company as to the due recording of such Supplemental
Chattel Mortgage in accordance with the Act.
(iii) With respect to the Airframe or any Engine or Spare Engine
as between the Agent and Company, any payments on account of an Event
of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 4(g) below and under
the terms of the Credit Agreement) received from any government
authority or other person shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Airframe or Engine or Spare Engine that has been or
is being replaced by Company pursuant to the terms hereof, so
long as there shall exist no Event of Default or Potential Event
of Default, such payment shall be paid over to or retained by
Company or Lessee upon satisfaction of the conditions for
replacement contained in paragraph (ii) above and until such time
shall be held by Agent in accordance with the provisions hereof
as security for the Secured Obligations; and
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(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United States
Government of the Airframe or any Engine or Spare Engine, Company
shall promptly notify Agent of such requisition and all of Company's
obligations under this Mortgage shall continue to the same extent as
if such requisition had not occurred. Any payments received by Agent
or Company from the United States Government for the use of the
Airframe or such Engine or Spare Engine, shall be paid over to, or
retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such payment
or retention any Event of Default or a Potential Event of Default
shall have occurred and be continuing, but shall be held by or paid
over to Agent as security for the obligations of Company under this
Mortgage and the other Loan Documents, and, if Agent shall declare the
Credit Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such time as
there shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to Company to the extent
not previously applied in accordance with the preceding sentence. In
addition, and whether or not there shall exist an Event of Default or
Potential Event of Default, until such time as Company shall request
to be paid any amount referred to in paragraph (iii) or (iv) in order
to effect the mortgaging hereunder of a replacement Airframe or Engine
or Spare Engine, any amounts referred to in paragraphs (iii) or (iv)
of this Section 4(f) shall be held by the Agent as security for the
obligations of Company under this Mortgage and the other Loan
Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain on or
with respect to the Aircraft and Spare Engines, at Lessee's own cost and
expense, public liability (including without limitation, contractual
liability, cargo
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<PAGE> 22
liability, passenger legal liability, bodily injury and product liability,
but excluding manufacturer's product liability) and property damage
insurance with insurers of recognized responsibility and reputation in
amounts, of the type and covering the risks customarily carried with
respect to similar aircraft by corporations engaged in the same or similar
business and similarly situated with Lessee but in no event in an amount
less than $500,000,000 per occurrence (which shall include war risk,
governmental confiscation and expropriation and allied perils coverage).
During any period when the Aircraft and Spare Engines are on the ground
and not in operation, Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise conforming with
the provisions of this Section except that the amounts of coverage shall
not be required to exceed the amounts of comprehensive airline liability
insurance, and the scope of risk covered and type of insurance shall be
the same, as are customarily carried with respect to similar aircraft on
the ground by corporations engaged in the same or similar business and
similarly situated with Lessee. Any policies of insurance carried in
accordance with this Section 4(g) and any policies taken out in
substitution or replacement of any such policies (A) shall be amended to
name Agent and Lenders as additional named insureds, (B) shall be primary
without right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except
the limits of the liability, shall operate in the same manner as if there
were a separate policy covering each insured, and (D) shall provide that
the insurer shall waive any right of subrogation against Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and maintain with
insurers of recognized responsibility and reputation on or with respect to
the Aircraft and Spare Engines, at Lessee's own cost and expense, aircraft
ground and flight all-risk hull insurance as well as fire and extended
coverage insurance on Engines and other equipment while removed from the
Airframe or airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States
Government) and allied perils including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of sabotage
and (C) hijacking (air piracy) or any unlawful seizure or wrongful
exercise of control of the Aircraft or Spare Engines or crew in flight
(including any attempt at such seizure or control) made by any person or
persons aboard the Aircraft or another aircraft acting without the consent
of the insured, if and to the extent the same shall be maintained by
Lessee with respect to similar aircraft owned or operated by Lessee on the
same routes or if the Aircraft or another aircraft is operated on routes
where the custom is for Domestic Carriers similarly situated with Lessee
flying comparable routes with similar aircraft to carry such insurance, of
the type usually carried by
-22-
<PAGE> 23
corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be for an
amount not less than the greater of the amount required by the applicable
Lease and $50,000,000. During any period when the Aircraft or Spare
Engines, as the case may be, are on the ground and not in operation Lessee
may carry or cause to be carried, in lieu of the insurance required by
this Section, insurance otherwise conforming hereto except that the scope
of risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft or spare
engines by corporations engaged in the same or similar business and
similarly situated with Lessee for aircraft and spare engines on the
ground in an amount at least equal to the applicable amount provided
above. All such insurance shall name Agent and Lenders as additional
insureds and loss payees to the extent their interest may appear and shall
provide that any loss to the Airframe or an Engine or Spare Engine in
excess of $2,000,000 (and, if a Potential Event of Default or Event of
Default has occurred and is continuing, any such loss) shall be payable to
Agent for the benefit of Lenders; and shall be primary without right of
contribution from any other insurance which is carried by Agent with
respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent provisions
in insurance policies, the risks required to be insured against pursuant
to this Section 4(g)(ii) in such reasonable amounts as are then applicable
to other similar aircraft or spare engines in Lessee's fleet which are of
a value comparable to the Aircraft or Spare Engines, as the case may be,
and as are not substantially greater than amounts self-insured by
corporations engaged in the same or similar business and similarly
situated with Lessee; provided, however, that Company shall not permit
Lessee to self-insure in an amount in excess of $1,000,000 without the
prior written consent of Agent.
(iii) Any policies of insurance required pursuant to either paragraph
(i) or paragraph (ii) above shall: (A) be amended to name Agent and
Lenders as additional named insureds, but without Agent or Lenders being
thereby liable for premiums; (B) provide that in respect of the interest
of Agent or Lenders in such policies the insurance shall not be
invalidated by any action or inaction of Lessee and shall insure the
interests of Agent and Lenders regardless of any breach or violation by
Lessee or any Person (other than Agent) of any warranty, declaration,
condition or exclusion from coverage contained in such policies; (C)
provide that if such insurance is cancelled, or if any material change is
made in the coverage which affects the interest of Agent or any Lender, or
if such insurance is allowed to lapse for nonpayment of premium, such
cancellation,
-23-
<PAGE> 24
change or lapse shall not be effective as to Agent for thirty (30) days
(seven (7) days, or such shorter or longer period as may from time to time
be customarily available in the industry, in the case of any war risk and
allied perils coverage) after receipt by Agent of written notice from such
insurers of such cancellation, change or lapse; (D) be in full force and
effect throughout any geographical areas at any time traversed by the
Aircraft or Spare Engines and shall be payable in U.S. dollars; (E) waive
any right of the insurers to any setoff or counterclaim or any other
deduction, whether by attachment or otherwise in respect of any liability
of Agent; and (F) waive all rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States or any
agency or instrumentality thereof in respect of the Airframe or any Engine
or Spare Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify Lessee against the same risks against which
Lessee is required hereunder to insure shall be considered adequate
insurance with respect to the Airframe or such Engine or Spare Engine to
the extent of the risks and in the amounts that are the subject of any
such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 31, Company will cause the Lessee to furnish to Agent (A)
a report signed by a firm of independent aircraft insurance brokers,
appointed by Lessee and not objected to by Agent, describing in reasonable
detail acceptable to Agent the insurance then carried and maintained on or
with respect to the Aircraft and the Engines and Spare Engines and stating
that in the opinion of such firm such insurance complies with the terms of
this Section 4(g) and is adequate to protect the interests of Lessee,
Company and Agent, and (B) certificates of the insurer or insurers
evidencing the insurance covered by the report. Lessee will cause such
brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of
Lessee of which such firm has knowledge and which might invalidate or
render unenforceable, in whole or in part, any insurance on the Aircraft
or any Engine or Spare Engine and (y) at least thirty (30) days prior to
the expiration or termination date, or date of effectiveness of any
material change, of any insurance carried and maintained on the Aircraft
or Spare Engines hereunder.
(vi) All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above shall be, if
received by Company, immediately paid to Agent and shall be held by Agent
as security
-24-
<PAGE> 25
for the Secured Obligations and all other obligations required to be paid
in accordance with the terms of this Mortgage and the Credit Agreement and
such payments shall be paid to Company upon compliance by Company with the
terms of Subsection 4(f) with respect to the replacement of an airframe or
an engine, as the case may be, provided that no Potential Event of Default
or Event of Default shall have occurred and be continuing.
All insurance payments and other payments received by Agent or Company
from insurance referred to in paragraph (ii) above and paid other than as
a result of an Event of Loss shall be paid by Agent to or be retained by
Company, and promptly applied by Company to the extent necessary to repair
the damage to the Airframe or the Engine or Spare Engine for which such
insurance was paid, provided that Agent shall not be required to make any
such payment to Company if a Potential Event of Default or Event of
Default has occurred and is continuing, but shall be held or paid over to
Agent as security for the obligations of Company under this Mortgage and
the other Loan Documents, and, if Agent shall declare the Credit Agreement
to be in default, shall be applied against Company's obligations hereunder
and thereunder as and when due. Retention by Agent of any amounts pursuant
to the preceding sentence shall not relieve Company of its obligations to
make promptly all repairs and replacements required by Sections 4(c) and
(e) hereof and to pay for the same with Company's funds or cause payment
of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft or Spare
Engines for its own account. Company may, at its own expense, carry
insurance with respect to its interest in the Aircraft or Spare Engines in
amounts in excess of that required to be maintained by this Section 4(g).
No insurance maintained by Agent or any Lender shall prevent Company from
causing Lessee to carry the insurance required or permitted by this
Section or adversely affect such insurance or the cost thereof. Proceeds
of any such insurance carried by Agent or Lender shall be paid as provided
in the insurance policy relating thereto and Agent shall have no duty to
obtain any such insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and Aircraft
Related Collateral. or any part thereof, and to examine, copy or make extracts
from, any and all books, records and documents in the possession of Company
relating to such Collateral or any part thereof and performance of this
Mortgage, all at such reasonable times and as often
-25-
<PAGE> 26
as may be requested. Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of making
or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant to
the Lease, cause the Airframe and each Engine and Spare Engine included in the
Aircraft Collateral to be legibly marked (in a reasonably prominent location,
which in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size, and
bearing the legend "Owned by Atlas Freighter Leasing, II Inc. and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the opinion
of Agent be appropriate or desirable to evidence the fact that it is subject to
the lien and security interest created by this Mortgage. Company shall not
remove or deface, or permit to be removed or defaced, any such plate, disk, or
other marking or the identifying manufacturer's serial number, and, in the event
of such removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided above,
Company shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine or Spare Engine as a designation that might
be interpreted as a claim of ownership or of any security interest therein,
except that any permitted lessee may place its customary colors and insignia or
the insignia of the manufacturer on the Airframe or any Engine or Spare Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as
in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii)
any and all remedies under the Leases and all of the rights and remedies of
the Lessor under the Lease, (iii) all the rights and remedies provided for
in this Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other rights
and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any part
thereof and may exclude Company and Lessee, and all persons claiming under
Company or Lessee, wholly or partly therefrom. At the request of Agent,
-26-
<PAGE> 27
Company shall promptly deliver or cause Lessee to deliver to Agent or to
whomsoever Agent shall designate, at such time or times and place or places
as Agent may specify, and fly or cause to be flown to such airport or
airports in the United States as Agent may specify, without risk or expense
to Agent, the Aircraft Collateral or any part thereof. In addition, Company
will provide, or cause Lessee to provide, without cost or expense to Agent,
storage facilities for the Aircraft Collateral. If Company or Lessee shall
for any reason fail to deliver the Aircraft Collateral or any part thereof
after demand by Agent, Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Agent the right to immediate
possession or requiring Company and Lessee to deliver immediate possession
of the Aircraft Collateral or any part thereof to Agent, the entry of which
judgment Company hereby specifically consents and the Lessor's consent to
which will be obtained by Company under the Lease, or (ii) with or without
such judgment, pursue the Aircraft Collateral or any part thereof wherever
it may be found and may enter any of the premises of Company and Lessee
where the Aircraft Collateral may be and search for the Aircraft Collateral
and take possession of and remove the same. Company agrees to pay to Agent,
upon demand, all expenses incurred in taking any such action; and all such
expenses shall, until paid, be secured by the lien of this Mortgage. Upon
every such taking of possession, Agent may, from time to time, make all
such reasonable expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the
Aircraft Collateral, as it may deem proper. In each such case, Agent shall
have the right to maintain, use, operate, store, lease, control or manage
the Aircraft Collateral or any part thereof and to carry on the business
and exercise all rights and powers of Company relating to the Aircraft
Collateral, as Agent shall deem best, including the right to enter into any
and all such agreements with respect to the maintenance, use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral or any part thereof as Agent may determine. Further, after the
occurrence and during the continuation of an Event of Default, Agent shall
be entitled to collect and receive directly all tolls, rents, revenues,
issues, income, products and profits of the Aircraft Collateral or any part
thereof, including without limitation, all payments under any of the
Leases. Such tolls, rents, revenues, issues, income, products and profits
shall be applied to pay the expenses of the use, operation, storage,
leasing, control, management or disposition of the Aircraft Collateral, and
of all maintenance, insurance, repairs, replacements, alterations,
additions and improvements, and to make all payments which Agent may be
required or may elect to make, if any, for taxes, assessments, or other
proper charges upon the Aircraft Collateral and all other payments which
Agent may be required or authorized to make under any provision of this
Mortgage, as well as just and reasonable compensation for the
-27-
<PAGE> 28
services of Agent and of all persons properly engaged and employed for such
purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as
an entirety or in separate lots or parcels, the Aircraft Collateral or
any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the retention of title by Agent to the
property so sold), as Agent may determine, whether or not the Aircraft
Collateral shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the absolute
sale of the Aircraft Collateral. Company, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have all
or any portion of the Aircraft Collateral marshalled upon any foreclosure
hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any rights,
powers or remedies granted hereby. All such fees and expenses shall, until
paid, be secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
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<PAGE> 29
exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest of this Mortgage (except any taxes or Liens to which
the respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of payments
incurred or made by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive
-29-
<PAGE> 30
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Aircraft Collateral and Aircraft Related Collateral, (ii)
to make all necessary transfers of all or any part of the Aircraft Collateral
and Aircraft Related Collateral in connection with any sale, lease or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale, lease or other disposition, and (iv) generally to
do, at Agent's option and Company's cost and expense, at any time, or from time
to time, all acts and things that Agent deems necessary to protect, preserve or
realize upon the Aircraft Collateral and Aircraft Related Collateral and Agent's
security interest therein, in order to effect the intent of this Mortgage, all
as fully and effectively as Company might do, Company hereby ratifying and
confirming all that its said attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section, and
all monies if any, required to be paid to Agent hereunder, which disposition is
not elsewhere herein otherwise specifically provided for, shall be held by Agent
and applied from time to time as provided herein and in the Credit Agreement and
the other Loan Documents and shall be held in an account in the name of Agent
and invested in Cash Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent
may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
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<PAGE> 31
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender herein
or otherwise. Upon the indefeasible payment in full of the Secured Obligations,
the security interest granted hereby shall terminate and all rights to the
Aircraft Collateral and Aircraft Related Collateral shall revert to Company.
Upon any such termination. Agent will execute and deliver to Company, at
Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by
-31-
<PAGE> 32
applicable law, Company hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect. No term or
provision of this Mortgage may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Company and Agent. The
captions and headings in this Mortgage are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Agent to bring proceedings against Company in the courts of
any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Article 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
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<PAGE> 33
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 34
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:
-------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
-------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 35
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Boeing 747-2D7B 21784 N524MC
================================================================================
</TABLE>
<PAGE> 36
SCHEDULE II-A
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's
Manufacturer Model Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
General Electric CF6-50E2 528419
- --------------------------------------------------------------------------------
General Electric CF6-50E2 517343
- --------------------------------------------------------------------------------
General Electric CF6-50E2 517545
- --------------------------------------------------------------------------------
General Electric CF6-50E2 517791
================================================================================
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 37
SCHEDULE II-B
to Security Agreement
and Chattel Mortgage
SPARE ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's
Manufacturer Model Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
General Electric CF6-50E2 517790
- --------------------------------------------------------------------------------
General Electric CF6-50E2 517602
================================================================================
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 38
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated _________, 199[ ] between Atlas
Freighter Leasing II, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, "Agent") the financial institutions ("Lenders") party to the Credit
Agreement dated as of September __, 1997 among Company, the Lenders, Goldman
Sachs Credit Partners L.P., as Syndication Agent, and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated _______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine and Spare Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine
and Spare Engine to Agent.
The Mortgage relates to the Engine(s) and Spare Engine(s) described below
and a counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on __________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine or Spare Engine shall be installed on
or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
<PAGE> 39
EXHIBIT A
Page 2
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 40
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:
--------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 41
SCHEDULE I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 42
SCHEDULE I-B
to Supplemental
Chattel Mortgage
SCHEDULE OF SPARE ENGINES
<TABLE>
<CAPTION>
================================================================================
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.82
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO.N526MC)
(SPARE ENGINE NOS. 517544 and 517547)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of September
5, 1997, (this "Mortgage"), and entered into by and between ATLAS AIR, INC., a
Delaware corporation (the "Lessee"), ATLAS FREIGHTER LEASING II, INC., a
Delaware corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as
administrative agent for and representative of (in such capacity, the "Agent")
the financial institutions ("Lenders") party to the Credit Agreement referred
to below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of September 5,
1997 (said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with
Lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent, and Agent,
pursuant to which Lenders have agreed, on the terms and conditions set forth in
the Credit Agreement, to make term loans to Company in the principal amount of
up to $185 million (the "Loans") to enable Company to refinance certain
indebtedness currently encumbering the Aircraft Collateral (as defined below).
The indebtedness with respect to Loans made by Lenders is to be evidenced by
certain promissory notes of Company to the order of Lenders of even date
herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this
Mortgage be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make the Loans, Company hereby agrees with Agent as follows:
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<PAGE> 2
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with
accrued interest thereon, and all other amounts from time to time payable by
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(as defined below) (including payment of amounts that would become due but for
the operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security interest in the Aircraft and the Spare Engines (the
"Aircraft Collateral") and a first priority security interest in all estate,
right, title and interest of Company in, to and under, the other below
described property wherever the same may be located (the "Aircraft Related
Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest
in and to:
(i) the airframe (the Aircraft except for the Engines or engines
from time to time installed thereon), which is described on Schedule
I hereto and any replacement airframe which may be substituted for
such airframe in accordance with the provisions of Section 4(f)
hereof together with any and all Parts (as hereinafter defined)
incorporated or installed in or attached to such airframe and all
Parts removed from such airframe until such Parts are replaced in
accordance with Section 4(e) hereof (such airframe, together with any
replacement airframe and all such Parts, hereinafter referred to as
the "Airframe");
(ii) each of the engines and spare engines (the "Spare
Engines"), which are listed in Schedule II hereto or which are
described in a Supplemental Chattel Mortgage (a "Supplemental Chattel
Mortgage") substantially in the form of Exhibit A attached hereto,
supplementing this Mortgage, and listed by manufacturer's serial
numbers in such Schedule or in such Supplemental Chattel Mortgage,
whether or not from time to time thereafter installed on the airframe
or on any other airframe or aircraft, and any replacement engine
which may be substituted for such engine or spare engine in
accordance with the provisions of Section 4(f) hereof, together, in
each case, with any and all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom, until such
Parts are replaced in accordance with Section 4(e) hereof (each such
engine, and replacement engine, together with any and all such Parts,
hereinafter referred to as an "Engine" and collectively, the
"Engines");
-2-
<PAGE> 3
(iii) all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature
(other than complete Engines, Spare Engines or engines), which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine, including all such
appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment purchased by Company for
incorporation or installation in or attachment to the Airframe or any
Engine or Spare Engine pursuant to the terms of any agreement whether
or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
(iv) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i), (ii) and (iii)
above (together with such Airframe and Engines (other than the Spare
Engines), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to Company after termination of the Lease with
respect to the Aircraft and Spare Engines as the result of the sale,
lease or other disposition thereof, and all estate, right, title
interest of every nature whatsoever of Company in and to the same and
every part thereof;
(ii) all monies and securities deposited or required to be
deposited with Agent pursuant to any term of this Mortgage and held
or required to be held by Agent hereunder or paid to Agent in
accordance with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase
or modification agreement or manufacturer's warranty, together with
all rights, powers, privileges, options, licenses and other benefits
of Company (including such indemnities, rights of assignment, rights
and remedies for breach of any warranty and/or claims for damages,
rights to receive title to parts and materials to the extent same
relates to the Aircraft or Spare Engines including any agreement
assigned therewith;
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<PAGE> 4
(iv) all amounts payable to Company by any manufacturer,
supplier or vendor of any of the Aircraft Collateral or any component
thereof pursuant to any warranty or indemnity covering any such
Aircraft Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to Company under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and
other payments of any kind thereunder, and including all rights of
Company, as lessor, to execute any election or option or to give any
notice, consent, waiver or approval under or in respect of the Lease
or to accept any surrender of any of the Aircraft or Spare Engines or
any part thereof, as well as any rights, powers or remedies on the
part of the Lessor, whether arising under the Lease or by statute or
at law or in equity, or otherwise, arising out of any Lease Event of
Default (as defined in the Lease), including, without limitation, all
rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any
loss or damage to the Aircraft, any Engine or any Spare Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft and
Spare Engines. All property referred to in this granting clause, whenever
acquired by the Lessor under the Lease, shall secure all Secured Obligations.
Company does hereby warrant and represent that it has not assigned or pledged,
and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or
interest hereby assigned to anyone other than Agent, and that it will not,
except as provided herein or in the Credit Agreement, enter into any agreement
amending or supplementing any purchase agreement, modification agreement to the
extent such agreement relates to the Aircraft or Spare Engines, or execute any
waiver or modification of, or consent under, any such agreement, or settle or
compromise any claim arising under any such agreement or submit or consent to
the submission of any dispute, difference or other matter arising under or in
any respect of any such agreement to arbitration thereunder.
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<PAGE> 5
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is
in cargo configuration capable of immediate operation in the business
of Lessee and has a maximum gross takeoff weight of at least 800,000
pounds and is of the equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and which shall
have been maintained, serviced, repaired and overhauled in
substantially the same manner as Lessee maintains, services, repairs
and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2
aircraft engine for the aircraft bearing U.S. registration numbers
N523MC, N524MC, N526MC and N527MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition,
utility, airworthiness, and remaining useful life and suitable for
installation and use on the Airframe; provided that such 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 747-200 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.
"ACMI Contract" means (i) any contract entered into by Lessee
pursuant to which Lessee furnishes the aircraft, crew, maintenance
and insurance and customers bear all other operating expenses and
(ii) any similar contract in which the customer provides the flight
crew, all in accordance with Lessee's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar
legislation of the United States enacted to supersede, amend or
supplement such Act and the rules and regulations promulgated
thereunder.
-5-
<PAGE> 6
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1
hereof.
"Aircraft Related Collateral" has the meaning specified in
Section 1 hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of
this instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations,
that is operating in accordance with the operating certificate and
appropriate operations specifications issued under Part 121 or any
successor regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the
Credit Agreement.
"Lease" means that certain Lease Agreement, dated as of
September __, 1997, by and between Atlas Freighter Leasing II, Inc.,
as Lessor, and Atlas Air, Inc., as Lessee, for the lease of the
Aircraft and Spare Engines, together with any amendments,
modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of
this Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
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<PAGE> 7
"Mortgage" has the meaning specified in the first paragraph of
this instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1
hereof.
"Spare Engines" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in
Section 1 hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the
Airframe or each Engine or each Spare Engine initially or subsequently
mortgaged hereunder on the date the Airframe, such Engine or Spare Engine is
mortgaged hereunder as follows:
(a) Company has good and marketable title to the Aircraft
Collateral free and clear of all Liens except for the lien of this
Mortgage and Permitted Encumbrances and the Lease and has full power
and authority to mortgage and grant the lien and security interest in
the Aircraft Collateral and Aircraft Related Collateral intended by
the terms hereof and in the manner aforesaid and has not assigned or
pledged any of its right, title or interest hereby assigned to anyone
other than Agent.
(b) Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not
registered under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the
case may be, is in due form for recording in accordance with the Act
and has been duly filed for recording in accordance with the Act
against the Aircraft or such Engine(s) or Spare Engine as the case
may be.
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<PAGE> 8
(e) An airworthiness certificate has been duly issued under the
Act for the Aircraft (evidence of which has been supplied to Agent),
and the airworthiness certificate for the Aircraft is in full force
and effect.
(f) The Aircraft, Engines and Spare Engines are in such
condition so as to comply with the requirements of Section 4(c)
hereof; and the insurance required by Section 4(g) hereof is in full
force and effect.
(g) This Mortgage or this Mortgage as supplemented by a
Supplemental Chattel Mortgage constitutes the legally valid and
binding obligation of Company enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws or equitable
principles relating to or limiting creditors' rights generally, and
creates a valid, perfected and first priority mortgage on and
security interest in the Aircraft Collateral, securing the payment
and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the
States of Colorado and New York and such other states as may be
required with respect to that portion of the Aircraft Collateral not
covered by the filing system established under the Act and with
respect to the Aircraft Related Collateral; and except for the
filings described in this paragraph and in paragraph (d) above of
this Section 3, no filing or recording of any instrument shall be
required to establish and perfect a first priority security interest
in the Aircraft Collateral and Aircraft Related Collateral under the
laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office
of Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien, on or with respect to any
of the Aircraft Collateral, or Aircraft Related Collateral, title
thereto or any interest therein, except the lien of this Mortgage and
Permitted Encumbrances, including the Lease. Company will promptly,
at its own expense, take such action as may be
-8-
<PAGE> 9
necessary to duly discharge any such Lien not excepted above if
the same shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from
and against, any and all fees and taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this
Section 4(b) being called a "Tax"), which may from time to time be
imposed on or asserted against Agent or any Lender or the Airframe or
any Engine or any Spare Engine or any part thereof or interest
therein by any Federal, state or local government or other taxing
authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection
with, relating to or resulting from: (i) the Airframe or any Engine
or any Spare Engine or any part thereof of interest therein; (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use,
storage, maintenance, sale or other disposition of the Airframe or
any Engine or any Spare Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds
received with respect thereto; or (iv) this Mortgage; provided,
however, that there shall be excluded from any indemnification any
Lessor Tax (as defined in the Lease) and unless the payment of any
such Tax shall be a condition to the enforceability of this Mortgage
or the perfection of the lien hereof or unless proceedings shall have
been commenced to foreclose any lien which may have attached as
security for such Tax, nothing in this Section shall require the
payment of any Tax so long as and to extent that validity thereof
shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and Company shall have
set aside on its books adequate reserves with respect thereto in
accordance with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own
cost and expense, (i) will be a "citizen of the United States" as
defined in Section 40102(15) of Title 49 of the United States Code;
(ii) will cause ownership of the Aircraft and Spare Engines to be
duly registered and remain duly registered in the name of Company in
accordance with the Act; and (iii) will cause Lessee to service,
repair, inspect, test, maintain, overhaul the Airframe and each
Engine and each Spare Engine and install replacement equipment and
parts on the Aircraft, each Engine and each Spare Engine (A) so as to
keep the Airframe and each Engine and each Spare Engine in such
operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations, (B) so as to
enable the airworthiness certification of the Airframe to be
maintained in good standing at all times under
-9-
<PAGE> 10
the Act, except when aircraft of the same type, model or series
as the Airframe (powered by engines of the same type as those with
which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA;
provided, however, that if following its issuance, the United States
FAA airworthiness certificate of the Aircraft shall be withdrawn,
then subject to the provisions of Section 4(f) hereof, so long as
Company is diligently taking or causing to be taken all necessary
action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C)
in accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the
same care used by Lessee with respect to the same or similar aircraft
and engines owned or operated by Lessee so as to keep the same in as
good operating condition as when originally mortgaged hereunder,
ordinary wear and tear excepted, which practices shall at all times
be at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as
may be necessary to maintain in full force all warranties of the
manufacturers thereof. Company shall maintain, or shall cause Lessee
to maintain, all records, logs and other materials which may be
required to permit the Airframe, each Engine and each Spare Engine to
be so utilized.
Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the
manufacturer or supplier) in such condition so as to comply with the
provisions of this Mortgage and the rules and regulations of the FAA
from time to time in force and applicable to the Aircraft, Engines
and Spare Engines. Neither the Airframe nor any Engine nor any Spare
Engine will be maintained, used or operated in violation of any law
or any rule, regulation or order of any government or governmental
authority having jurisdiction (domestic or foreign), or in violation
of any airworthiness certificate, license or registration relating to
the Airframe or such Engine or such Spare Engine issued by any such
authority, and in the event that such laws, rules, regulations or
orders require alteration of the Airframe or any Engine or any Spare
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper
operating condition under such laws, rules, regulations and orders;
provided, however, that Company may, in good faith (after having
delivered to Agent an Officer's Certificate stating the facts with
respect thereto), contest the validity or application of any such
law, rule, regulation or order in any reasonable manner which does
not, in Agent's opinion, adversely affect the interests under this
Mortgage of Agent or any Lender.
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<PAGE> 11
Company will not operate, use or locate the Airframe or any
Engine or any Spare Engine, (I) in any area in which any insurance
required to be maintained pursuant to Section 4(g) shall not be at
the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the
Airframe or such Engine or such Spare Engine, except in the case of a
requisition for use by the United States of America, and then only if
Company obtains indemnity or "war risk" insurance in lieu of such
insurance from the United States of America against the risks and in
the amounts required by said Section covering such area, or (II) in
any recognized or threatened area of hostilities unless fully covered
to Agent's satisfaction by war risk and political risk and allied
perils insurance or unless the Airframe or such Engine or such Spare
Engine is operated or used under contract with the Government of the
United States of America under which contract that Government
provides "war risk" insurance or assumes liabilities for any damages,
loss, destruction or failure to return possession of the Airframe or
such Engine or such Spare Engine at the end of the term of such
contract and for injury to persons or damage to property of others.
Company shall not use the Aircraft or any Spare Engines nor
suffer it to be used in any manner or for any purpose excepted from
any of the insurance on or in respect of the Aircraft or any Spare
Engines or for the purpose of carriage of goods of any description
excepted from such insurance nor do, or permit to be done, anything
which, or admit to do anything the admission of which, may invalidate
any of such insurance.
(d) Possession. Company will not, without the prior written
consent of Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer
the right, title or interest of Company in, the Airframe or any
Engine or any Spare Engine except that Company may enter into and
perform all provisions and terms of the Lease and Lessee or the
Company, unless a Potential Event of Default or Event of Default
shall have occurred and be continuing, without the prior written
consent of Agent, may take the following actions so long as the
actions to be taken shall not deprive the Agent of the first priority
Lien of this Mortgage on the assets subject hereto and so long as the
actions to be taken shall not deprive Company as Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to
the Aircraft or Spare Engines nor shall such actions deprive the
Agent of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engines as assignee of Company's
rights under this Mortgage:
-11-
<PAGE> 12
(i) transfer possession of the Airframe or any Engine or
Spare Engine other than by lease to the United States of America
or any instrumentality thereof pursuant to the Civil Reserve Air
Fleet Program (as administered pursuant to Executive Order
12656, or any substitute order) or any similar or substitute
programs;
(ii) transfer possession of the Airframe or any Engine or
Spare Engine to the manufacturer thereof for testing or other
similar purposes or any other organization for service, repairs,
maintenance or overhaul or, to the extent permitted by Section
4(e) hereof, for alterations or modifications;
(iii) subject any Engine or Spare Engine to normal
interchange or pooling agreements or arrangements of the type
customary in the United States airline industry and entered into
by Company or Lessee in the ordinary course of business which do
not contemplate or require the transfer of title to, use for the
remainder of its useful life, or registration of the Airframe or
title to, or use for the remainder of its useful life of such
Engine or Spare Engine; provided, however if Company's title to
or use for the remainder of its useful life, of the Airframe or
any Engines or Spare Engines shall be divested under any such
agreement or arrangement, such divesture shall be deemed to be
an Event of Loss with respect to the Airframe or such Engine or
Spare Engine and Company shall comply with Section 4(f) in
respect thereof;
(iv) install an Engine or Spare Engine on an airframe which
is owned by Lessee; provided that such airframe is free and
clear of all Liens on property of Lessee except (A) Liens
permitted under the Lease, (B) Liens that apply only to the
engines (other than the Engines or Spare 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), and (C) the rights of
any Domestic Air Carrier, under normal interchange agreements
which are customary in the airline industry and do not
contemplate or require the transfer of title to such airframe or
the engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased
to Lessee or owned by Lessee subject to a conditional sale or
other security agreement, provided: (A) such airframe is free
and clear of all Liens, except the rights of the parties to the
lease or conditional sale or other security agreement covering
such airframe and except Liens of the
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<PAGE> 13
type permitted by clause (iv) above; and (B) Agent shall
have received from the lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers
of such lessor, conditional vendor or secured party of such
airframe a written agreement (which may be the lease,
conditional sale agreement or mortgage covering such airframe),
whereby such lessor, conditional vendor or secured party and
each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and
effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in
any Engine or Spare Engine by reason of such Engine or Spare
Engine being installed on such airframe at any time when such
Engine or Spare Engine is subject to this Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned
or leased by Lessee subject to a conditional sale or other
security agreement under circumstances where neither clause (iv)
nor clause (v) above is applicable; provided that any divesture
of title to such Engine or Spare Engine resulting from such
installation shall be deemed to be an Event of Loss with respect
to such Engine or Spare Engine and Company shall comply with
Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines and Spare
Engines or engines installed thereon with any third party
pursuant to which Company has operational control of the
Airframe and any Engines and Spare Engines installed thereon
such operation to be performed solely by individuals under the
operational control of Company possessing all current
certificates and licenses that would be required under the
applicable laws of the United States for the performance by such
employees of similar functions within the United States;
provided that Company's obligations hereunder shall continue in
full force and effect notwithstanding any such ACMI Contract or
wet lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine or Spare Engine permitted by
the terms hereof shall be made subject and subordinate to, and the
Leases shall be made expressly subject and subordinate to, the lien
and security interest of this Mortgage and all of Agent's rights
hereunder and Company shall remain primarily liable hereunder for the
performance of all the terms of this Mortgage to the same extent as
if such transfer had not occurred, and any such instrument of
transfer shall include appropriate provisions for the maintenance and
insurance of the
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<PAGE> 14
Airframe or such Engine or Spare Engine, and any such instrument of
transfer (other than the Lease) shall expressly prohibit any further
transfer of the Airframe or such Engine or Spare Engine or any
assignment of the rights thereunder; and provided, further, that no
such lease, pooling arrangement or other transfer or relinquishment
of the possession of the Airframe or any Engine or Spare Engine shall
in any way discharge or diminish any of Company's obligations to
Agent hereunder or under the Credit Agreement. In the event Agent
shall have received from the lessor, conditional vendor or secured
party of any airframe leased to Lessee or purchased by Lessee subject
to a conditional sale or other security agreement, a written
agreement complying with clause (B) of Section 4(d)(v), and the lease
or conditional sale or other security agreement covering such
airframe also covers an engine, engines or spare engines owned by the
lessor under such lease, conditionally owned by the conditional
vendor under such conditional sale agreement, or subject to such
security agreement, Agent hereby agrees for the benefit of such
lessor, conditional vendor or secured party that Agent will not
acquire or claim, as against such lessor, conditional vendor or
secured party, any right, title or interest in any such engine or
spare engine as the result of such engine or spare engine being
installed on the Airframe at any time while such engine or spare
engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor, conditionally owned by such
conditional vendor or subject to such security agreement.
(e) Replacement and Pooling of Parts: Alterations,
Modifications and Additions.
(i) Except as otherwise provided in Section 4(e)(iv),
Company, at its own cost and expense, will promptly replace all
Parts, which may from time to time be incorporated or installed
in or attached to the Airframe or any Engine or Spare Engine and
which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In
addition, in the ordinary course of maintenance, service, repair
or testing, Company at its own cost and expense may remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit
for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such
Parts as promptly as practicable. All replacement Parts shall be
owned by Company free and clear of all Liens (except Permitted
Encumbrances and the Lease, and for pooling arrangements to the
extent permitted by
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<PAGE> 15
Section 4(e)(ii)), and shall be in as good operating
condition as, and shall have a value and utility at least equal
to, the Parts replaced assuming such property were in the
condition and repair required to be maintained by the terms
hereof.
All Parts at any time removed from the Airframe or any
Engine or any Spare Engine shall remain the property of Company
and shall remain subject to the lien and security interest of
this Mortgage, no matter where located until such time as such
Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine or Spare
Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any
Engine or Spare Engine as above provided, without further act,
(A) title to such replacement Part shall vest in and such
replacement part shall become the property of Company and shall
become subject to the lien and security interest of this
Mortgage and shall be deemed part of the Airframe or such Engine
or Spare Engine for all purposes hereof to the same extent as
the property originally comprising, or installed on, such
Airframe or such Engine or Spare Engine, and (B) title to the
replaced part shall no longer be the property of Company and
shall thereupon become free and clear of all rights of Agent
hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine or
Spare Engine as provided in Section 4(e)(i) may be subjected by
Company or Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the
ordinary course of its business and entered into with Domestic
Air Carriers that are not the subject of any bankruptcy,
insolvency, or similar proceeding, voluntary or involuntary,
provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or such
Engine or Spare Engine in accordance with Section 4(e)(i) as
promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in
or attached to the Airframe or any Engine or Spare Engine in
accordance with Section 4(e)(i) may be owned subject to such a
pooling arrangement, provided Company, at its expense, as
promptly thereafter as possible, either (A) causes such
replacement Part to become subject to the lien and security
interest of this Mortgage in accordance with Section 4(e)(i) by
Company's acquiring title thereto for the benefit of Agent free
and clear
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<PAGE> 16
of all Liens (except Permitted Encumbrances and the Lease)
or (B) replaces such replacement Part by incorporating or
installing in or attaching to the Airframe or such Engine or
Spare Engine a further replacement Part owned by Company free
and clear of all Liens (except Permitted Encumbrances and the
Lease).
(iii) Company, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and
additions to the Airframe and the Engines and Spare Engines as
may be required from time to time to meet the standards of the
FAA or other governmental authority having jurisdiction;
provided that Company may, in good faith, contest the validity
or application of any such standard in any reasonable matter
that shall not adversely affect the Lien of this Mortgage or
Lenders' interests therein. Company also agrees, at its own cost
and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe and the Engines
and Spare Engines as may be required from time to time to meet
the standards or requirements of any directive issued by a
manufacturer relating to the Airframe or any Engine or Spare
Engine. In addition so long as no Potential Event of Default or
Event of Default shall have occurred and be continuing, Company,
at its own cost and expense, may from time to time make such
alterations and modifications in and additions to the Airframe
and any Engine or Spare Engine as Company may deem desirable in
the proper conduct of its business or to accommodate the
business of Lessee, provided no such alteration, modification or
addition diminishes the value or utility or impairs the
condition or airworthiness of the Airframe or such Engine or
Spare Engine below the value, utility, condition or
airworthiness thereof immediately prior to such alteration,
modification or addition assuming the Airframe or such Engine or
Spare Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to
or added to the Airframe or any Engine or Spare Engine as the
result of such alteration, modification or addition shall,
without further act, become the property of, and title to such
parts shall vest in Company and shall be subject to the lien and
security interest of this Mortgage; provided, that, so long as
no Potential Event of Default or Event of Default shall have
occurred and be continuing, Company may remove and not replace
any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the
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<PAGE> 17
Airframe or such Engine or Spare Engine on the date hereof,
on the date the Engine or Spare Engine first becomes subject to
the lien of this Mortgage, or any Part in replacement of or
substitution for any such Part, (B) is not required to be
incorporated or installed in or attached or added to the
Airframe or such Engine or Spare Engine pursuant to the terms of
Section 4(c) hereof or any other provision of this Mortgage and
(C) can be removed from the Airframe, such Engine or Spare
Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine
would have had at such time had such alteration, modification or
addition not occurred, assuming the Aircraft Collateral was
otherwise in the condition required by this Mortgage. Upon the
removal by Company of any such Part, as above provided, title
thereto shall, without further act, be free and clear of all
rights of the Agent hereunder and such Part shall no longer be
deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to
the Aircraft shall become subject to the Lien of this Mortgage
and shall be leased to the Lessee under the applicable Lease. In
no event shall the Lessor bear any liability or cost whatsoever
for (i) any alteration or modification of, or addition to, the
Airframe or any Engine or Spare Engine, (ii) any grounding of
the Aircraft, (iii) suspension of certification of the Aircraft,
or (iv) loss of revenue suffered by the Company for any reason
whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an
Airframe or an Engine or Spare Engine, Company will promptly
notify Agent thereof in writing (in any event within five (5)
days of such occurrence) and will, not later than 180 days after
the receipt of Proceeds in connection with such Event of Loss,
mortgage hereunder, by complying with all of the terms of
subsection (ii) below and otherwise taking all necessary actions
to provide that Company (and the Agent upon foreclosure of
Company's interest in the Lease) will continue to be entitled to
the benefits of Section 1110 of the Bankruptcy Code with respect
to the replacement airframe or engine referred to below, an
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<PAGE> 18
Acceptable Alternate Airframe or Acceptable Alternate
Engine free of all Liens (other than Permitted Encumbrances and
the Lease). Upon compliance with the preceding sentence within
such 180-day period, Agent will execute and deliver to Company a
partial release, in recordable form, releasing the lien of this
Mortgage to the extent that it covers such Airframe or Engine or
Spare Engine with respect to which such Event of Loss has
occurred. Such Acceptable Alternate Airframe or Acceptable
Alternate Engine shall thereupon constitute an "Airframe" or an
"Engine" or "Spare Engine", as the case may be, for all purposes
hereof and shall be deemed to constitute part of the Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine
to the lien and security interest of this Mortgage (as
contemplated by paragraph (i) above), Company will on or prior
thereto:
(A) deliver to Agent and duly file for recording under
the Act, a Supplemental Chattel Mortgage substantially in
the form of Exhibit A hereto duly executed by Company
appropriately describing such engine to be subjected to the
lien and security interest of this Mortgage;
(B) deliver to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the
States of Colorado and New York (or such other States as
may be required at such time) covering the security
interest created by this Mortgage to perfect the security
interest of Agent in the Airframe or Engine or Spare Engine
to be subjected to the lien and security interest of this
Mortgage;
(C) deliver to Agent an Officers' Certificate dated
the date of execution of said Supplemental Chattel
Mortgage, stating:
(I) that the representations and warranties
contained in Section 3 hereof are true and correct on
and as of such date of execution with respect to such
Airframe or Engine or Spare Engine and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event
of Default will exist; and
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<PAGE> 19
(III) that all conditions precedent contemplated
in this Section 4(f)(ii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to
such Airframe or Engine or Spare Engine as Agent may
reasonably request;
(E) furnish Agent with a warranty (as to title) bill
of sale, in form and substance reasonably satisfactory to
Agent with respect to such Airframe or Engine or Spare
Engine;
(F) furnish Agent with such evidence of title such as
the bill of sale as Agent may reasonably request concerning
such Airframe or Engine or Spare Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine or
Spare Engine to be subjected to the lien and the security
interest of this Mortgage stating that it has a value and
utility at least equal to, and in as good operating
condition as the Airframe or Engine or Spare Engine subject
to such Event of Loss immediately prior to such Event of
Loss, assuming compliance by Company with all the terms of
this Mortgage with respect to such Airframe or Engine or
Spare Engine; and
(H) cause to be delivered to Agent an opinion or
opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the Airframe or Engine or Spare Engine
specifically described in said Supplemental Chattel
Mortgage, is free and clear of all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1)
has been duly authorized, executed and delivered by
Company, and (2) creates a valid, perfected and first
priority security interest in and to the Airframe or
Engine or Spare Engine described in said Supplemental
Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
purported to be
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<PAGE> 20
secured thereby and that all action required to
perfect fully such security interest has been taken
and completed,
(III) that said Supplemental Chattel Mortgage has
been duly filed for recordation in accordance with the
provisions of the Act to continue the perfection and
priority of the security interest intended to be
created by the Mortgage, and
(IV) that Company (and the Agent upon succeeding
to Company's interest in the Lease) will continue to
be entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the lease of the
Airframe or Engine or Spare Engine described in said
Supplemental Chattel Mortgage.
(V) as to such other matters as Agent may
reasonably request.
Promptly upon the recording of each Supplemental Chattel Mortgage
under the Act, Company will cause to be delivered to Agent an opinion of
counsel for Company as to the due recording of such Supplemental Chattel
Mortgage in accordance with the Act.
(iii) With respect to the Airframe or any Engine or Spare Engine
as between the Agent and Company, any payments on account of an Event
of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 4(g) below and under
the terms of the Credit Agreement) received from any government
authority or other person shall be applied as follows:
(A) if such payments are received with respect to an
Event of Loss to an Airframe or Engine or Spare Engine that
has been or is being replaced by Company pursuant to the
terms hereof, so long as there shall exist no Event of
Default or Potential Event of Default, such payment shall
be paid over to or retained by Company or Lessee upon
satisfaction of the conditions for replacement contained in
paragraph (ii) above and until such time shall be held by
Agent in accordance with the provisions hereof as security
for the Secured Obligations; and
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<PAGE> 21
(B) if such payments are received with respect to an
Event of Loss with respect to which no replacement is being
effected, such payments shall be applied to the prepayment
of the Notes required pursuant to the terms of the Credit
Agreement and shall be held pursuant to the terms of this
Mortgage, and the balance, if any, shall be paid over to or
retained by Company.
(iv) In the event of a requisition for use by the United
States Government of the Airframe or any Engine or Spare Engine,
Company shall promptly notify Agent of such requisition and all
of Company's obligations under this Mortgage shall continue to
the same extent as if such requisition had not occurred. Any
payments received by Agent or Company from the United States
Government for the use of the Airframe or such Engine or Spare
Engine, shall be paid over to, or retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of
this Section 4(f) which is payable to or retained by Company
shall not be paid to Company or retained by Company, if at the
time of such payment or retention any Event of Default or a
Potential Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Agent as
security for the obligations of Company under this Mortgage and
the other Loan Documents, and, if Agent shall declare the Credit
Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such
time as there shall not be continuing any such Event of Default
or Potential Event of Default, such amount shall be paid to
Company to the extent not previously applied in accordance with
the preceding sentence. In addition, and whether or not there
shall exist an Event of Default or Potential Event of Default,
until such time as Company shall request to be paid any amount
referred to in paragraph (iii) or (iv) in order to effect the
mortgaging hereunder of a replacement Airframe or Engine or
Spare Engine, any amounts referred to in paragraphs (iii) or
(iv) of this Section 4(f) shall be held by the Agent as security
for the obligations of Company under this Mortgage and the other
Loan Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft and Spare Engines, at Lessee's own
cost and expense, public liability (including without limitation,
contractual liability, cargo
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<PAGE> 22
liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and
property damage insurance with insurers of recognized responsibility
and reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation
and expropriation and allied perils coverage). During any period when
the Aircraft and Spare Engines are on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risk covered and type
of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in
the same or similar business and similarly situated with Lessee. Any
policies of insurance carried in accordance with this Section 4(g)
and any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name Agent and Lenders as additional
named insureds, (B) shall be primary without right of contribution
from any other insurance which is carried by Lessee, (C) shall
expressly provide that all provisions thereof, except the limits of
the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the
insurer shall waive any right of subrogation against Agent or
Lenders.
(ii) Company will cause Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Aircraft and Spare Engines, at Lessee's own
cost and expense, aircraft ground and flight all-risk hull insurance
as well as fire and extended coverage insurance on Engines and other
equipment while removed from the Airframe or airframe (which shall
include war risk, governmental confiscation and expropriation (other
than by the United States Government) and allied perils including (A)
strikes, riots, civil commotions or labor disturbances, (B) any
malicious act or act of sabotage and (C) hijacking (air piracy) or
any unlawful seizure or wrongful exercise of control of the Aircraft
or Spare Engines or crew in flight (including any attempt at such
seizure or control) made by any person or persons aboard the Aircraft
or another aircraft acting without the consent of the insured, if and
to the extent the same shall be maintained by Lessee with respect to
similar aircraft owned or operated by Lessee on the same routes or if
the Aircraft or another aircraft is operated on routes where the
custom is for Domestic Carriers similarly situated with Lessee flying
comparable routes with similar aircraft to carry such insurance, of
the type usually carried by
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<PAGE> 23
corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when the Aircraft
or Spare Engines, as the case may be, are on the ground and not in
operation Lessee may carry or cause to be carried, in lieu of the
insurance required by this Section, insurance otherwise conforming
hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with
respect to similar aircraft or spare engines by corporations engaged
in the same or similar business and similarly situated with Lessee
for aircraft and spare engines on the ground in an amount at least
equal to the applicable amount provided above. All such insurance
shall name Agent and Lenders as additional insureds and loss payees
to the extent their interest may appear and shall provide that any
loss to the Airframe or an Engine or Spare Engine in excess of
$2,000,000 (and, if a Potential Event of Default or Event of Default
has occurred and is continuing, any such loss) shall be payable to
Agent for the benefit of Lenders; and shall be primary without right
of contribution from any other insurance which is carried by Agent
with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft or spare engines in
Lessee's fleet which are of a value comparable to the Aircraft or
Spare Engines, as the case may be, and as are not substantially
greater than amounts self-insured by corporations engaged in the same
or similar business and similarly situated with Lessee; provided,
however, that Company shall not permit Lessee to self-insure in an
amount in excess of $1,000,000 without the prior written consent of
Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in
respect of the interest of Agent or Lenders in such policies the
insurance shall not be invalidated by any action or inaction of
Lessee and shall insure the interests of Agent and Lenders regardless
of any breach or violation by Lessee or any Person (other than Agent)
of any warranty, declaration, condition or exclusion from coverage
contained in such policies; (C) provide that if such insurance is
cancelled, or if any material change is made in the coverage which
affects the interest of Agent or any Lender, or if such insurance is
allowed to lapse for nonpayment of premium, such cancellation,
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<PAGE> 24
change or lapse shall not be effective as to Agent for thirty
(30) days (seven (7) days, or such shorter or longer period as may
from time to time be customarily available in the industry, in the
case of any war risk and allied perils coverage) after receipt by
Agent of written notice from such insurers of such cancellation,
change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft or Spare
Engines and shall be payable in U.S. dollars; (E) waive any right of
the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of
Agent; and (F) waive all rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe
or any Engine or Spare Engine, a valid agreement by the United States
or such agency or instrumentality to indemnify Lessee against the
same risks against which Lessee is required hereunder to insure shall
be considered adequate insurance with respect to the Airframe or such
Engine or Spare Engine to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 31, Company will cause the Lessee to furnish to
Agent (A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
Spare Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 4(g) and is
adequate to protect the interests of Lessee, Company and Agent, and
(B) certificates of the insurer or insurers evidencing the insurance
covered by the report. Lessee will cause such brokers to advise Agent
in writing (x) promptly of any default in the payment of any premium
and of any other act or omission on the part of Lessee of which such
firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or
any Engine or Spare Engine and (y) at least thirty (30) days prior to
the expiration or termination date, or date of effectiveness of any
material change, of any insurance carried and maintained on the
Aircraft or Spare Engines hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if received by Company, immediately paid to Agent and shall be
held by Agent as security
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<PAGE> 25
for the Secured Obligations and all other obligations required to be
paid in accordance with the terms of this Mortgage and the Credit
Agreement and such payments shall be paid to Company upon compliance
by Company with the terms of Subsection 4(f) with respect to the
replacement of an airframe or an engine, as the case may be, provided
that no Potential Event of Default or Event of Default shall have
occurred and be continuing.
All insurance payments and other payments received by Agent or
Company from insurance referred to in paragraph (ii) above and paid
other than as a result of an Event of Loss shall be paid by Agent to
or be retained by Company, and promptly applied by Company to the
extent necessary to repair the damage to the Airframe or the Engine
or Spare Engine for which such insurance was paid, provided that
Agent shall not be required to make any such payment to Company if a
Potential Event of Default or Event of Default has occurred and is
continuing, but shall be held or paid over to Agent as security for
the obligations of Company under this Mortgage and the other Loan
Documents, and, if Agent shall declare the Credit Agreement to be in
default, shall be applied against Company's obligations hereunder and
thereunder as and when due. Retention by Agent of any amounts
pursuant to the preceding sentence shall not relieve Company of its
obligations to make promptly all repairs and replacements required by
Sections 4(c) and (e) hereof and to pay for the same with Company's
funds or cause payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft or Spare
Engines for its own account. Company may, at its own expense, carry
insurance with respect to its interest in the Aircraft or Spare
Engines in amounts in excess of that required to be maintained by
this Section 4(g). No insurance maintained by Agent or any Lender
shall prevent Company from causing Lessee to carry the insurance
required or permitted by this Section or adversely affect such
insurance or the cost thereof. Proceeds of any such insurance carried
by Agent or Lender shall be paid as provided in the insurance policy
relating thereto and Agent shall have no duty to obtain any such
insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and
Aircraft Related Collateral. or any part thereof, and to examine, copy or
make extracts from, any and all books, records and documents in the
possession of Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often
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<PAGE> 26
as may be requested. Agent shall have no duty to make any such
inspection or examination and shall not incur any liability or obligation
by reason of making or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant
to the Lease, cause the Airframe and each Engine and Spare Engine included
in the Aircraft Collateral to be legibly marked (in a reasonably prominent
location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing,
II Inc. and Mortgaged to Bankers Trust Company, as Agent" or such other
legend, as shall in the opinion of Agent be appropriate or desirable to
evidence the fact that it is subject to the lien and security interest
created by this Mortgage. Company shall not remove or deface, or permit to
be removed or defaced, any such plate, disk, or other marking or the
identifying manufacturer's serial number, and, in the event of such
removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided
above, Company shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine or Spare Engine as
a designation that might be interpreted as a claim of ownership or of any
security interest therein, except that any permitted lessee may place its
customary colors and insignia or the insignia of the manufacturer on the
Airframe or any Engine or Spare Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then
Agent may, without notice of any kind to Company, exercise in respect
of the Aircraft Collateral and Aircraft Related Collateral, (i) all
the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect at the time in any applicable
jurisdiction (whether or not the Uniform Commercial Code applies to
the affected Aircraft Collateral), (ii) any and all remedies under
the Leases and all of the rights and remedies of the Lessor under the
Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other
rights and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
Agent may, without notice, take possession of the Aircraft Collateral
or any part thereof and may exclude Company and Lessee, and all
persons claiming under Company or Lessee, wholly or partly therefrom.
At the request of Agent,
-26-
<PAGE> 27
Company shall promptly deliver or cause Lessee to deliver to
Agent or to whomsoever Agent shall designate, at such time or times
and place or places as Agent may specify, and fly or cause to be
flown to such airport or airports in the United States as Agent may
specify, without risk or expense to Agent, the Aircraft Collateral or
any part thereof. In addition, Company will provide, or cause Lessee
to provide, without cost or expense to Agent, storage facilities for
the Aircraft Collateral. If Company or Lessee shall for any reason
fail to deliver the Aircraft Collateral or any part thereof after
demand by Agent, Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Agent the right to
immediate possession or requiring Company and Lessee to deliver
immediate possession of the Aircraft Collateral or any part thereof
to Agent, the entry of which judgment Company hereby specifically
consents and the Lessor's consent to which will be obtained by
Company under the Lease, or (ii) with or without such judgment,
pursue the Aircraft Collateral or any part thereof wherever it may be
found and may enter any of the premises of Company and Lessee where
the Aircraft Collateral may be and search for the Aircraft Collateral
and take possession of and remove the same. Company agrees to pay to
Agent, upon demand, all expenses incurred in taking any such action;
and all such expenses shall, until paid, be secured by the lien of
this Mortgage. Upon every such taking of possession, Agent may, from
time to time, make all such reasonable expenditures for maintenance,
insurance, repairs, replacements, alterations, additions and
improvements to and of the Aircraft Collateral, as it may deem
proper. In each such case, Agent shall have the right to maintain,
use, operate, store, lease, control or manage the Aircraft Collateral
or any part thereof and to carry on the business and exercise all
rights and powers of Company relating to the Aircraft Collateral, as
Agent shall deem best, including the right to enter into any and all
such agreements with respect to the maintenance, use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral or any part thereof as Agent may determine. Further, after
the occurrence and during the continuation of an Event of Default,
Agent shall be entitled to collect and receive directly all tolls,
rents, revenues, issues, income, products and profits of the Aircraft
Collateral or any part thereof, including without limitation, all
payments under any of the Leases. Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the
expenses of the use, operation, storage, leasing, control, management
or disposition of the Aircraft Collateral, and of all maintenance,
insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments which Agent may be required or
may elect to make, if any, for taxes, assessments, or other proper
charges upon the Aircraft Collateral and all other payments which
Agent may be required or authorized to make under any provision of
this Mortgage, as well as just and reasonable compensation for the
-27-
<PAGE> 28
services of Agent and of all persons properly engaged and
employed for such purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more
sales, as an entirety or in separate lots or parcels, the
Aircraft Collateral or any part thereof, at public or private
sale, at such place or places and at such time or times and upon
such terms, including terms of credit (which may include the
retention of title by Agent to the property so sold), as Agent
may determine, whether or not the Aircraft Collateral shall be
at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any
covenant herein contained or in aid of the exercise of any power
herein granted or for the foreclosure of this Mortgage and the
sale of the Aircraft Collateral under the judgment or decree of
a court of competent jurisdiction or for the enforcement of any
other right.
(d) After an Event of Default has occurred and is continuing,
Company agrees to the fullest extent that it lawfully may, that it
and Lessee will not (and hereby irrevocably waives its right to) at
any time plead, or claim the benefit or advantage of, any
appraisement, valuation, stay, extension, moratorium, or redemption
law now or hereafter in force, in order to prevent or hinder the
enforcement of this Mortgage or the absolute sale of the Aircraft
Collateral. Company, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have all or
any portion of the Aircraft Collateral marshalled upon any
foreclosure hereof.
(e) Each and every remedy of Agent shall be cumulative and shall
not be exclusive of any other remedies provided now or hereafter at
law, in equity or otherwise. Company shall reimburse Agent, upon
demand, for all fees and other expenses paid or incurred by Agent in
exercising any rights, powers or remedies granted hereby. All such
fees and expenses shall, until paid, be secured by the lien of this
Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right,
to the
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<PAGE> 29
exclusion of Company, to declare the Lease in default in
accordance with its terms and to exercise all remedies set forth in
the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances
made or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest of this Mortgage (except any taxes or Liens to which
the respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of payments
incurred or made by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which
payment shall be applied to the principal installments of the Notes in the
manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive
-29-
<PAGE> 30
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Aircraft Collateral and Aircraft Related Collateral, (ii)
to make all necessary transfers of all or any part of the Aircraft Collateral
and Aircraft Related Collateral in connection with any sale, lease or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale, lease or other disposition, and (iv) generally
to do, at Agent's option and Company's cost and expense, at any time, or from
time to time, all acts and things that Agent deems necessary to protect,
preserve or realize upon the Aircraft Collateral and Aircraft Related
Collateral and Agent's security interest therein, in order to effect the intent
of this Mortgage, all as fully and effectively as Company might do, Company
hereby ratifying and confirming all that its said attorney (or any substitute)
shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section,
and all monies if any, required to be paid to Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by Agent and applied from time to time as provided herein and in the
Credit Agreement and the other Loan Documents and shall be held in an account
in the name of Agent and invested in Cash Equivalents for the benefit and at
the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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,
Agent may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
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<PAGE> 31
SECTION 10. Further Assurances.
Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect,
error or omission which may at any time hereafter be discovered in the contents
of this Mortgage or in the execution or delivery hereof, and/or in order to
more effectively carry out the intent and purpose of this Mortgage and to
establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of Agent hereunder, including,
without limitation, the execution, delivery and filing of any instruments with
the FAA and of any Uniform Commercial Code financing and continuation
statements with respect to the security interests created hereby, in form and
substance satisfactory to Agent, in such jurisdictions as Agent may reasonably
request. Company hereby authorizes Agent to file any such statements without
the signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and
its successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender
herein or otherwise. Upon the indefeasible payment in full of the Secured
Obligations, the security interest granted hereby shall terminate and all
rights to the Aircraft Collateral and Aircraft Related Collateral shall revert
to Company. Upon any such termination. Agent will execute and deliver to
Company, at Company's expense, such instruments of release and termination as
Company may reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by
-31-
<PAGE> 32
applicable law, Company hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect. No term or
provision of this Mortgage may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Company and Agent. The
captions and headings in this Mortgage are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage.
Company hereby agrees that service of process in any such proceeding in any
such court may be made by registered or certified mail return receipt requested
to Company at its address provided on the signature pages of the Mortgage, such
service being hereby acknowledged by Company to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of Agent to bring proceedings against Company in the
courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of New York are used herein as therein defined.
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<PAGE> 33
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
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<PAGE> 34
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:
--------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:
--------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 35
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- -------------- -------------
<S> <C> <C> <C>
Boeing 747-2D7B 22337 N526MC
</TABLE>
<PAGE> 36
SCHEDULE II-A
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 530169
General Electric CF6-50E2 517718
General Electric CF6-50E2 517506
General Electric CF6-50E2 517569
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the
equivalent thereof.
<PAGE> 37
SCHEDULE II-B
to Security Agreement
and Chattel Mortgage
SPARE ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 517544
General Electric CF6-50E2 517547
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the
equivalent thereof.
<PAGE> 38
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated , 199[ ] between Atlas
Freighter Leasing II, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, "Agent") the financial institutions ("Lenders") party to the Credit
Agreement dated as of September __, 1997 among Company, the Lenders, Goldman
Sachs Credit Partners L.P., as Syndication Agent, and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement
and Chattel Mortgage dated _______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine and Spare Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine
and Spare Engine to Agent.
The Mortgage relates to the Engine(s) and Spare Engine(s) described below
and a counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on __________, 1997, and has been assigned Conveyance No.
______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate,
right, title and interest of Company in and to the property described in
Schedule I annexed hereto (whether or not such Engine or Spare Engine shall be
installed on or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and
confirmed.
<PAGE> 39
EXHIBIT A
Page 2
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 40
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:
--------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
BANKERS TRUST COMPANY,
as Agent
By:
--------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 41
SCHEDULE I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- -------------- -------------
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 42
SCHEDULE I-B
to Supplemental
Chattel Mortgage
SCHEDULE OF SPARE ENGINES
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- -------------
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.84
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO.N527MC)
(SPARE ENGINE NOS. 517538, 517539 and 455167)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of September 5,
1997, (this "Mortgage"), and entered into by and between ATLAS AIR, INC., a
Delaware corporation (the "Lessee"), ATLAS FREIGHTER LEASING II, INC., a
Delaware corporation ("Company" or "Lessor"), and BANKERS TRUST COMPANY, as
administrative agent for and representative of (in such capacity, the "Agent")
the financial institutions ("Lenders") party to the Credit Agreement referred to
below.
PRELIMINARY STATEMENTS
Company has entered into a credit agreement dated as of September 5, 1997
(said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with
Lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent, and Agent,
pursuant to which Lenders have agreed, on the terms and conditions set forth in
the Credit Agreement, to make term loans to Company in the principal amount of
up to $185 million (the "Loans") to enable Company to refinance certain
indebtedness currently encumbering the Aircraft Collateral (as defined below).
The indebtedness with respect to Loans made by Lenders is to be evidenced by
certain promissory notes of Company to the order of Lenders of even date
herewith issued under and pursuant to the Credit Agreement (such promissory
notes, as they may be amended, modified, supplemented, renewed, converted or
extended from time to time, being the "Notes"). It is a condition precedent to
the making by Lenders of the Loans under the Credit Agreement that this Mortgage
be executed, delivered and filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the Loans, Company hereby agrees with Agent as follows:
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<PAGE> 2
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
Company under the Credit Agreement, this Mortgage and the other Loan Documents
(all such payment and performance obligations of Company, the "Secured
Obligations"), Company hereby mortgages to Agent, for the benefit of Lenders,
and their respective successors and assigns, and hereby grants and assigns to
Agent, for the benefit of Lenders, and their respective successors and assigns,
a first priority security interest in the Aircraft and the Spare Engines (the
"Aircraft Collateral") and a first priority security interest in all estate,
right, title and interest of Company in, to and under, the other below described
property wherever the same may be located (the "Aircraft Related Collateral"):
(a) Aircraft Collateral. All of Company's right, title and interest in and
to:
(i) the airframe (the Aircraft except for the Engines or engines from
time to time installed thereon), which is described on Schedule I hereto
and any replacement airframe which may be substituted for such airframe in
accordance with the provisions of Section 4(f) hereof together with any and
all Parts (as hereinafter defined) incorporated or installed in or attached
to such airframe and all Parts removed from such airframe until such Parts
are replaced in accordance with Section 4(e) hereof (such airframe,
together with any replacement airframe and all such Parts, hereinafter
referred to as the "Airframe");
(ii) each of the engines and spare engines (the "Spare Engines"),
which are listed in Schedule II hereto or which are described in a
Supplemental Chattel Mortgage (a "Supplemental Chattel Mortgage")
substantially in the form of Exhibit A attached hereto, supplementing this
Mortgage, and listed by manufacturer's serial numbers in such Schedule or
in such Supplemental Chattel Mortgage, whether or not from time to time
thereafter installed on the airframe or on any other airframe or aircraft,
and any replacement engine which may be substituted for such engine or
spare engine in accordance with the provisions of Section 4(f) hereof,
together, in each case, with any and all Parts incorporated or installed in
or attached thereto and any and all Parts removed therefrom, until such
Parts are replaced in accordance with Section 4(e) hereof (each such
engine, and replacement engine, together with any and all such Parts,
hereinafter referred to as an "Engine" and collectively, the "Engines");
-2-
<PAGE> 3
(iii) all appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (other than complete
Engines, Spare Engines or engines), which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or
Spare Engine, including all such appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment purchased by
Company for incorporation or installation in or attachment to the Airframe
or any Engine or Spare Engine pursuant to the terms of any agreement
whether or not identified in a Supplemental Chattel Mortgage (collectively
referred to herein as "Parts"); and
(iv) all records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and materials
maintained in the ordinary course of business with respect to the
properties described in paragraphs (i), (ii) and (iii) above (together with
such Airframe and Engines (other than the Spare Engines), the "Aircraft").
(b) Aircraft Related Collateral. All of Company's right, title and interest
in and to:
(i) all the tolls, rents, issues, profits, revenues and other income
of the property subject or required to be subject to the lien of this
Mortgage including, without limitation, all payments or proceeds payable to
Company after termination of the Lease with respect to the Aircraft and
Spare Engines as the result of the sale, lease or other disposition
thereof, and all estate, right, title interest of every nature whatsoever
of Company in and to the same and every part thereof;
(ii) all monies and securities deposited or required to be deposited
with Agent pursuant to any term of this Mortgage and held or required to be
held by Agent hereunder or paid to Agent in accordance with the terms of
the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of Company
(including such indemnities, rights of assignment, rights and remedies for
breach of any warranty and/or claims for damages, rights to receive title
to parts and materials to the extent same relates to the Aircraft or Spare
Engines including any agreement assigned therewith;
-3-
<PAGE> 4
(iv) all amounts payable to Company by any manufacturer, supplier or
vendor of any of the Aircraft Collateral or any component thereof pursuant
to any warranty or indemnity covering any such Aircraft Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any confiscation, condemnation, requisition or
other taking of any Aircraft Collateral to the extent payable to Company
under the Lease or to Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent,
Supplemental Rent, insurance proceeds, requisition, indemnity and other
payments of any kind thereunder, and including all rights of Company, as
lessor, to execute any election or option or to give any notice, consent,
waiver or approval under or in respect of the Lease or to accept any
surrender of any of the Aircraft or Spare Engines or any part thereof, as
well as any rights, powers or remedies on the part of the Lessor, whether
arising under the Lease or by statute or at law or in equity, or otherwise,
arising out of any Lease Event of Default (as defined in the Lease),
including, without limitation, all rights under Section 1110 of the
Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described above,
including, without limitation, all payments under insurance proceeds or
payment under any indemnity, payable by reason of any loss or damage to the
Aircraft, any Engine or any Spare Engine.
Company shall deliver to Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Aircraft and
Spare Engines. All property referred to in this granting clause, whenever
acquired by the Lessor under the Lease, shall secure all Secured Obligations.
Company does hereby warrant and represent that it has not assigned or pledged,
and hereby covenants that it will not assign or pledge, so long as the
assignment hereunder shall remain in effect, any of its right, title or interest
hereby assigned to anyone other than Agent, and that it will not, except as
provided herein or in the Credit Agreement, enter into any agreement amending or
supplementing any purchase agreement, modification agreement to the extent such
agreement relates to the Aircraft or Spare Engines, or execute any waiver or
modification of, or consent under, any such agreement, or settle or compromise
any claim arising under any such agreement or submit or consent to the
submission of any dispute, difference or other matter arising under or in any
respect of any such agreement to arbitration thereunder.
-4-
<PAGE> 5
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Airframe" means a Boeing 747-200 which is in
cargo configuration capable of immediate operation in the business of
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds
and is of the equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and which shall have been
maintained, serviced, repaired and overhauled in substantially the same
manner as Lessee maintains, services, repairs and overhauls similar
airframes utilized by Lessee and without in any way discriminating against
such airframe.
"Acceptable Alternate Engine" means a General Electric CF6-50E2
aircraft engine for the aircraft bearing U.S. registration numbers N523MC,
N524MC, N526MC and N527MC or an engine of the same or another manufacturer
of equivalent or greater residual value, condition, utility, airworthiness,
and remaining useful life and suitable for installation and use on the
Airframe; provided that such 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 747-200
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.
"ACMI Contract" means (i) any contract entered into by Lessee pursuant
to which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract
in which the customer provides the flight crew, all in accordance with
Lessee's historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and
the rules and regulations promulgated thereunder.
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"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" has the meaning specified in Section 1 hereof.
"Aircraft Collateral" has the meaning specified in Section 1 hereof.
"Aircraft Related Collateral" has the meaning specified in Section 1
hereof.
"Airframe" has the meaning specified in Section 1 hereof.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary
Statements.
"Domestic Air Carrier" means any United States "domestic air carrier,"
as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor
regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of September __,
1997, by and between Atlas Freighter Leasing II, Inc., as Lessor, and Atlas
Air, Inc., as Lessee, for the lease of the Aircraft and Spare Engines,
together with any amendments, modifications, supplements or additions
thereto.
"Lessee" means Atlas Air, Inc.
"Lessor" has the meaning specified in the first paragraph of this
Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
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<PAGE> 7
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engines" has the meaning specified in Section 1 hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
Company hereby represents and warrants that, in the case of the Airframe or
each Engine or each Spare Engine initially or subsequently mortgaged hereunder
on the date the Airframe, such Engine or Spare Engine is mortgaged hereunder as
follows:
(a) Company has good and marketable title to the Aircraft Collateral
free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft
Collateral and Aircraft Related Collateral intended by the terms hereof and
in the manner aforesaid and has not assigned or pledged any of its right,
title or interest hereby assigned to anyone other than Agent.
(b) Company is a "citizen of the United States" as defined in Section
40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
Company in accordance with the Act; and the Airframe is not registered
under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or
such Engine(s) or Spare Engine as the case may be.
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(e) An airworthiness certificate has been duly issued under the Act
for the Aircraft (evidence of which has been supplied to Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft, Engines and Spare Engines are in such condition so
as to comply with the requirements of Section 4(c) hereof; and the
insurance required by Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Aircraft Collateral,
securing the payment and performance of the Secured Obligations.
(h) Company has delivered to Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of Colorado
and New York and such other states as may be required with respect to that
portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related
Collateral; and except for the filings described in this paragraph and in
paragraph (d) above of this Section 3, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Aircraft Collateral and Aircraft Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. Company will promptly, at its own
expense, take such action as may be
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necessary to duly discharge any such Lien not excepted above if the same
shall arise at any time.
(b) Taxes. Company will pay, and hereby indemnifies Agent from and
against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any
of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against Agent
or any Lender or the Airframe or any Engine or any Spare Engine or any part
thereof or interest therein by any Federal, state or local government or
other taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any Spare
Engine or any part thereof of interest therein; (ii) the manufacture,
purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of the Airframe or any Engine or any
Spare Engine; (iii) any rentals or other earnings therefor or arising
therefrom or the income or other proceeds received with respect thereto; or
(iv) this Mortgage; provided, however, that there shall be excluded from
any indemnification any Lessor Tax (as defined in the Lease) and unless the
payment of any such Tax shall be a condition to the enforceability of this
Mortgage or the perfection of the lien hereof or unless proceedings shall
have been commenced to foreclose any lien which may have attached as
security for such Tax, nothing in this Section shall require the payment of
any Tax so long as and to extent that validity thereof shall be contested
in good faith by appropriate legal proceedings promptly instituted and
diligently conducted and Company shall have set aside on its books adequate
reserves with respect thereto in accordance with generally accepted
accounting principles.
(c) Registration; Maintenance and Operation. Company, at its own cost
and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft and Spare Engines to be duly registered and
remain duly registered in the name of Company in accordance with the Act;
and (iii) will cause Lessee to service, repair, inspect, test, maintain,
overhaul the Airframe and each Engine and each Spare Engine and install
replacement equipment and parts on the Aircraft, each Engine and each Spare
Engine (A) so as to keep the Airframe and each Engine and each Spare Engine
in such operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations, (B) so as to enable
the airworthiness certification of the Airframe to be maintained in good
standing at all times under
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<PAGE> 10
the Act, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the
Airframe shall be equipped at the time of grounding) registered in the
United States have been grounded by the FAA; provided, however, that if
following its issuance, the United States FAA airworthiness certificate of
the Aircraft shall be withdrawn, then subject to the provisions of Section
4(f) hereof, so long as Company is diligently taking or causing to be taken
all necessary action to promptly correct the condition which caused such
withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care
used by Lessee with respect to the same or similar aircraft and engines
owned or operated by Lessee so as to keep the same in as good operating
condition as when originally mortgaged hereunder, ordinary wear and tear
excepted, which practices shall at all times be at or above the standard of
the industry in the United States for prudent maintenance of similar
equipment, and (D) in such manner as may be necessary to maintain in full
force all warranties of the manufacturers thereof. Company shall maintain,
or shall cause Lessee to maintain, all records, logs and other materials
which may be required to permit the Airframe, each Engine and each Spare
Engine to be so utilized.
Company will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements
affecting the same (including those issued by the manufacturer or supplier)
in such condition so as to comply with the provisions of this Mortgage and
the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft, Engines and Spare Engines. Neither the Airframe
nor any Engine nor any Spare Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration
relating to the Airframe or such Engine or such Spare Engine issued by any
such authority, and in the event that such laws, rules, regulations or
orders require alteration of the Airframe or any Engine or any Spare
Engine, Company, at its own cost and expense, will conform thereto or
obtain conformance therewith and will maintain the same in proper operating
condition under such laws, rules, regulations and orders; provided,
however, that Company may, in good faith (after having delivered to Agent
an Officer's Certificate stating the facts with respect thereto), contest
the validity or application of any such law, rule, regulation or order in
any reasonable manner which does not, in Agent's opinion, adversely affect
the interests under this Mortgage of Agent or any Lender.
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<PAGE> 11
Company will not operate, use or locate the Airframe or any Engine or
any Spare Engine, (I) in any area in which any insurance required to be
maintained pursuant to Section 4(g) shall not be at the time in full force
and effect, or in any area excluded from coverage by an insurance policy in
effect with respect to the Airframe or such Engine or such Spare Engine,
except in the case of a requisition for use by the United States of
America, and then only if Company obtains indemnity or "war risk" insurance
in lieu of such insurance from the United States of America against the
risks and in the amounts required by said Section covering such area, or
(II) in any recognized or threatened area of hostilities unless fully
covered to Agent's satisfaction by war risk and political risk and allied
perils insurance or unless the Airframe or such Engine or such Spare Engine
is operated or used under contract with the Government of the United States
of America under which contract that Government provides "war risk"
insurance or assumes liabilities for any damages, loss, destruction or
failure to return possession of the Airframe or such Engine or such Spare
Engine at the end of the term of such contract and for injury to persons or
damage to property of others.
Company shall not use the Aircraft or any Spare Engines nor suffer it
to be used in any manner or for any purpose excepted from any of the
insurance on or in respect of the Aircraft or any Spare Engines or for the
purpose of carriage of goods of any description excepted from such
insurance nor do, or permit to be done, anything which, or admit to do
anything the admission of which, may invalidate any of such insurance.
(d) Possession. Company will not, without the prior written consent of
Agent, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or
interest of Company in, the Airframe or any Engine or any Spare Engine
except that Company may enter into and perform all provisions and terms of
the Lease and Lessee or the Company, unless a Potential Event of Default or
Event of Default shall have occurred and be continuing, without the prior
written consent of Agent, may take the following actions so long as the
actions to be taken shall not deprive the Agent of the first priority Lien
of this Mortgage on the assets subject hereto and so long as the actions to
be taken shall not deprive Company as Lessor of the protections of Section
1110 of the Bankruptcy Code with respect to the Aircraft or Spare Engines
nor shall such actions deprive the Agent of the protections of Section 1110
of the Bankruptcy Code with respect to the Aircraft or Spare Engines as
assignee of Company's rights under this Mortgage:
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<PAGE> 12
(i) transfer possession of the Airframe or any Engine or Spare
Engine other than by lease to the United States of America or any
instrumentality thereof pursuant to the Civil Reserve Air Fleet
Program (as administered pursuant to Executive Order 12656, or any
substitute order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine or Spare
Engine to the manufacturer thereof for testing or other similar
purposes or any other organization for service, repairs, maintenance
or overhaul or, to the extent permitted by Section 4(e) hereof, for
alterations or modifications;
(iii) subject any Engine or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Company or Lessee in the
ordinary course of business which do not contemplate or require the
transfer of title to, use for the remainder of its useful life, or
registration of the Airframe or title to, or use for the remainder of
its useful life of such Engine or Spare Engine; provided, however if
Company's title to or use for the remainder of its useful life, of the
Airframe or any Engines or Spare Engines shall be divested under any
such agreement or arrangement, such divesture shall be deemed to be an
Event of Loss with respect to the Airframe or such Engine or Spare
Engine and Company shall comply with Section 4(f) in respect thereof;
(iv) install an Engine or Spare Engine on an airframe which is
owned by Lessee; provided that such airframe is free and clear of all
Liens on property of Lessee except (A) Liens permitted under the
Lease, (B) Liens that apply only to the engines (other than the
Engines or Spare 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), and (C) the rights of any Domestic Air Carrier, under
normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to
such airframe or the engines installed thereon;
(v) install an Engine or Spare Engine on an airframe leased to
Lessee or owned by Lessee subject to a conditional sale or other
security agreement, provided: (A) such airframe is free and clear of
all Liens, except the rights of the parties to the lease or
conditional sale or other security agreement covering such airframe
and except Liens of the
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<PAGE> 13
type permitted by clause (iv) above; and (B) Agent shall have received
from the lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which
may be the lease, conditional sale agreement or mortgage covering such
airframe), whereby such lessor, conditional vendor or secured party
and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire or
claim any right, title or interest in any Engine or Spare Engine by
reason of such Engine or Spare Engine being installed on such airframe
at any time when such Engine or Spare Engine is subject to this
Mortgage;
(vi) install an Engine or Spare Engine on an airframe owned or
leased by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such
Engine or Spare Engine resulting from such installation shall be
deemed to be an Event of Loss with respect to such Engine or Spare
Engine and Company shall comply with Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines and Spare
Engines or engines installed thereon with any third party pursuant to
which Company has operational control of the Airframe and any Engines
and Spare Engines installed thereon such operation to be performed
solely by individuals under the operational control of Company
possessing all current certificates and licenses that would be
required under the applicable laws of the United States for the
performance by such employees of similar functions within the United
States; provided that Company's obligations hereunder shall continue
in full force and effect notwithstanding any such ACMI Contract or wet
lease;
provided, however, that the rights of any transferee who receives
possession of the Airframe or any Engine or Spare Engine permitted by
the terms hereof shall be made subject and subordinate to, and the
Leases shall be made expressly subject and subordinate to, the lien
and security interest of this Mortgage and all of Agent's rights
hereunder and Company shall remain primarily liable hereunder for the
performance of all the terms of this Mortgage to the same extent as if
such transfer had not occurred, and any such instrument of transfer
shall include appropriate provisions for the maintenance and insurance
of the
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<PAGE> 14
Airframe or such Engine or Spare Engine, and any such instrument of
transfer (other than the Lease) shall expressly prohibit any further
transfer of the Airframe or such Engine or Spare Engine or any
assignment of the rights thereunder; and provided, further, that no
such lease, pooling arrangement or other transfer or relinquishment of
the possession of the Airframe or any Engine or Spare Engine shall in
any way discharge or diminish any of Company's obligations to Agent
hereunder or under the Credit Agreement. In the event Agent shall have
received from the lessor, conditional vendor or secured party of any
airframe leased to Lessee or purchased by Lessee subject to a
conditional sale or other security agreement, a written agreement
complying with clause (B) of Section 4(d)(v), and the lease or
conditional sale or other security agreement covering such airframe
also covers an engine, engines or spare engines owned by the lessor
under such lease, conditionally owned by the conditional vendor under
such conditional sale agreement, or subject to such security
agreement, Agent hereby agrees for the benefit of such lessor,
conditional vendor or secured party that Agent will not acquire or
claim, as against such lessor, conditional vendor or secured party,
any right, title or interest in any such engine or spare engine as the
result of such engine or spare engine being installed on the Airframe
at any time while such engine or spare engine is subject to such lease
or conditional sale or other security agreement and owned by such
lessor, conditionally owned by such conditional vendor or subject to
such security agreement.
(e) Replacement and Pooling of Parts: Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), Company, at
its own cost and expense, will promptly replace all Parts, which may
from time to time be incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine and which may from time to time
become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair or testing, Company at its own cost and expense may
remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that, except as otherwise provided in Section
4(e)(iv), Company at its own cost and expense shall replace such Parts
as promptly as practicable. All replacement Parts shall be owned by
Company free and clear of all Liens (except Permitted Encumbrances and
the Lease, and for pooling arrangements to the extent permitted by
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<PAGE> 15
Section 4(e)(ii)), and shall be in as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced
assuming such property were in the condition and repair required to be
maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine or
any Spare Engine shall remain the property of Company and shall remain
subject to the lien and security interest of this Mortgage, no matter
where located until such time as such Parts shall be replaced by parts
which have been incorporated or installed in or attached to the
Airframe or any Engine or Spare Engine and which meet the requirements
for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to
the Airframe or any Engine or Spare Engine as above provided, without
further act, (A) title to such replacement Part shall vest in and such
replacement part shall become the property of Company and shall become
subject to the lien and security interest of this Mortgage and shall
be deemed part of the Airframe or such Engine or Spare Engine for all
purposes hereof to the same extent as the property originally
comprising, or installed on, such Airframe or such Engine or Spare
Engine, and (B) title to the replaced part shall no longer be the
property of Company and shall thereupon become free and clear of all
rights of Agent hereunder and shall no longer be deemed a Part
hereunder.
(ii) Any Part removed from the Airframe or any Engine or Spare
Engine as provided in Section 4(e)(i) may be subjected by Company or
Lessee to a normal pooling arrangement of the type customary in the
airline industry entered into by Lessee in the ordinary course of its
business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe
or such Engine or Spare Engine in accordance with Section 4(e)(i) as
promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or
attached to the Airframe or any Engine or Spare Engine in accordance
with Section 4(e)(i) may be owned subject to such a pooling
arrangement, provided Company, at its expense, as promptly thereafter
as possible, either (A) causes such replacement Part to become subject
to the lien and security interest of this Mortgage in accordance with
Section 4(e)(i) by Company's acquiring title thereto for the benefit
of Agent free and clear
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<PAGE> 16
of all Liens (except Permitted Encumbrances and the Lease) or (B)
replaces such replacement Part by incorporating or installing in or
attaching to the Airframe or such Engine or Spare Engine a further
replacement Part owned by Company free and clear of all Liens (except
Permitted Encumbrances and the Lease).
(iii) Company, at its own cost and expense, shall make or cause
to be made such alterations and modifications in and additions to the
Airframe and the Engines and Spare Engines as may be required from
time to time to meet the standards of the FAA or other governmental
authority having jurisdiction; provided that Company may, in good
faith, contest the validity or application of any such standard in any
reasonable matter that shall not adversely affect the Lien of this
Mortgage or Lenders' interests therein. Company also agrees, at its
own cost and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe and the Engines and
Spare Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer
relating to the Airframe or any Engine or Spare Engine. In addition so
long as no Potential Event of Default or Event of Default shall have
occurred and be continuing, Company, at its own cost and expense, may
from time to time make such alterations and modifications in and
additions to the Airframe and any Engine or Spare Engine as Company
may deem desirable in the proper conduct of its business or to
accommodate the business of Lessee, provided no such alteration,
modification or addition diminishes the value or utility or impairs
the condition or airworthiness of the Airframe or such Engine or Spare
Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition
assuming the Airframe or such Engine or Spare Engine were then in the
condition and airworthiness required to be maintained by the terms of
this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine or Spare Engine as the result of
such alteration, modification or addition shall, without further act,
become the property of, and title to such parts shall vest in Company
and shall be subject to the lien and security interest of this
Mortgage; provided, that, so long as no Potential Event of Default or
Event of Default shall have occurred and be continuing, Company may
remove and not replace any such Part if it (A) is in addition to, and
not in replacement of or in substitution for, any Part incorporated or
installed in or attached to the
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<PAGE> 17
Airframe or such Engine or Spare Engine on the date hereof, on the
date the Engine or Spare Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine or Spare Engine
pursuant to the terms of Section 4(c) hereof or any other provision of
this Mortgage and (C) can be removed from the Airframe, such Engine or
Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would
have had at such time had such alteration, modification or addition
not occurred, assuming the Aircraft Collateral was otherwise in the
condition required by this Mortgage. Upon the removal by Company of
any such Part, as above provided, title thereto shall, without further
act, be free and clear of all rights of the Agent hereunder and such
Part shall no longer be deemed a Part hereunder.
(v) Pursuant to the terms of the Leases, all obligations of
Company pursuant to this Section 4(e) shall be performed by the
Lessee, at the Lessee's own cost and expense, and all Parts and
alterations, improvements or modifications in and additions to the
Aircraft shall become subject to the Lien of this Mortgage and shall
be leased to the Lessee under the applicable Lease. In no event shall
the Lessor bear any liability or cost whatsoever for (i) any
alteration or modification of, or addition to, the Airframe or any
Engine or Spare Engine, (ii) any grounding of the Aircraft, (iii)
suspension of certification of the Aircraft, or (iv) loss of revenue
suffered by the Company for any reason whatsoever.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an Airframe
or an Engine or Spare Engine, Company will promptly notify Agent
thereof in writing (in any event within five (5) days of such
occurrence) and will, not later than 180 days after the receipt of
Proceeds in connection with such Event of Loss, mortgage hereunder, by
complying with all of the terms of subsection (ii) below and otherwise
taking all necessary actions to provide that Company (and the Agent
upon foreclosure of Company's interest in the Lease) will continue to
be entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to the replacement airframe or engine referred to below,
an
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<PAGE> 18
Acceptable Alternate Airframe or Acceptable Alternate Engine free of
all Liens (other than Permitted Encumbrances and the Lease). Upon
compliance with the preceding sentence within such 180-day period,
Agent will execute and deliver to Company a partial release, in
recordable form, releasing the lien of this Mortgage to the extent
that it covers such Airframe or Engine or Spare Engine with respect to
which such Event of Loss has occurred. Such Acceptable Alternate
Airframe or Acceptable Alternate Engine shall thereupon constitute an
"Airframe" or an "Engine" or "Spare Engine", as the case may be, for
all purposes hereof and shall be deemed to constitute part of the
Aircraft.
(ii) Whenever Company shall subject any Airframe or Engine to the
lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), Company will on or prior thereto:
(A) deliver to Agent and duly file for recording under the
Act, a Supplemental Chattel Mortgage substantially in the form of
Exhibit A hereto duly executed by Company appropriately
describing such engine to be subjected to the lien and security
interest of this Mortgage;
(B) deliver to Agent for filing financing statements under
Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of Agent in the
Airframe or Engine or Spare Engine to be subjected to the lien
and security interest of this Mortgage;
(C) deliver to Agent an Officers' Certificate dated the date
of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Airframe or Engine or
Spare Engine and Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
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<PAGE> 19
(III) that all conditions precedent contemplated in
this Section 4(f)(ii) have been complied with.
(D) furnish Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Airframe or Engine or Spare Engine as Agent may reasonably
request;
(E) furnish Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Agent with
respect to such Airframe or Engine or Spare Engine;
(F) furnish Agent with such evidence of title such as the
bill of sale as Agent may reasonably request concerning such
Airframe or Engine or Spare Engine;
(G) cause to be delivered to Agent an appraisal by the
Approved Appraisers relating to the Airframe or Engine or Spare
Engine to be subjected to the lien and the security interest of
this Mortgage stating that it has a value and utility at least
equal to, and in as good operating condition as the Airframe or
Engine or Spare Engine subject to such Event of Loss immediately
prior to such Event of Loss, assuming compliance by Company with
all the terms of this Mortgage with respect to such Airframe or
Engine or Spare Engine; and
(H) cause to be delivered to Agent an opinion or opinions of
counsel dated the date of execution of such Supplemental Chattel
Mortgage, stating:
(I) that the Airframe or Engine or Spare Engine
specifically described in said Supplemental Chattel
Mortgage, is free and clear of all recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Airframe or Engine or Spare Engine
described in said Supplemental Chattel Mortgage, enforceable
against all third parties and securing the payment of all
obligations purported to be
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<PAGE> 20
secured thereby and that all action required to perfect
fully such security interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
and
(IV) that Company (and the Agent upon succeeding to
Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Airframe or Engine or
Spare Engine described in said Supplemental Chattel
Mortgage.
(V) as to such other matters as Agent may reasonably
request.
Promptly upon the recording of each Supplemental Chattel
Mortgage under the Act, Company will cause to be delivered
to Agent an opinion of counsel for Company as to the due
recording of such Supplemental Chattel Mortgage in
accordance with the Act.
(iii) With respect to the Airframe or any Engine or Spare Engine
as between the Agent and Company, any payments on account of an Event
of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 4(g) below and under
the terms of the Credit Agreement) received from any government
authority or other person shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Airframe or Engine or Spare Engine that has been or
is being replaced by Company pursuant to the terms hereof, so
long as there shall exist no Event of Default or Potential Event
of Default, such payment shall be paid over to or retained by
Company or Lessee upon satisfaction of the conditions for
replacement contained in paragraph (ii) above and until such time
shall be held by Agent in accordance with the provisions hereof
as security for the Secured Obligations; and
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<PAGE> 21
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by Company.
(iv) In the event of a requisition for use by the United States
Government of the Airframe or any Engine or Spare Engine, Company
shall promptly notify Agent of such requisition and all of Company's
obligations under this Mortgage shall continue to the same extent as
if such requisition had not occurred. Any payments received by Agent
or Company from the United States Government for the use of the
Airframe or such Engine or Spare Engine, shall be paid over to, or
retained by, Company.
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) which is payable to or retained by Company shall not be
paid to Company or retained by Company, if at the time of such payment
or retention any Event of Default or a Potential Event of Default
shall have occurred and be continuing, but shall be held by or paid
over to Agent as security for the obligations of Company under this
Mortgage and the other Loan Documents, and, if Agent shall declare the
Credit Agreement to be in default, shall be applied against Company's
obligations hereunder and thereunder as and when due. At such time as
there shall not be continuing any such Event of Default or Potential
Event of Default, such amount shall be paid to Company to the extent
not previously applied in accordance with the preceding sentence. In
addition, and whether or not there shall exist an Event of Default or
Potential Event of Default, until such time as Company shall request
to be paid any amount referred to in paragraph (iii) or (iv) in order
to effect the mortgaging hereunder of a replacement Airframe or Engine
or Spare Engine, any amounts referred to in paragraphs (iii) or (iv)
of this Section 4(f) shall be held by the Agent as security for the
obligations of Company under this Mortgage and the other Loan
Documents.
(g) Insurance.
(i) Company will cause Lessee at all times to carry and maintain
on or with respect to the Aircraft and Spare Engines, at Lessee's own
cost and expense, public liability (including without limitation,
contractual liability, cargo
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liability, passenger legal liability, bodily injury and product
liability, but excluding manufacturer's product liability) and
property damage insurance with insurers of recognized responsibility
and reputation in amounts, of the type and covering the risks
customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with
Lessee but in no event in an amount less than $500,000,000 per
occurrence (which shall include war risk, governmental confiscation
and expropriation and allied perils coverage). During any period when
the Aircraft and Spare Engines are on the ground and not in operation,
Lessee may carry or cause to be carried, in lieu of insurance required
by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required
to exceed the amounts of comprehensive airline liability insurance,
and the scope of risk covered and type of insurance shall be the same,
as are customarily carried with respect to similar aircraft on the
ground by corporations engaged in the same or similar business and
similarly situated with Lessee. Any policies of insurance carried in
accordance with this Section 4(g) and any policies taken out in
substitution or replacement of any such policies (A) shall be amended
to name Agent and Lenders as additional named insureds, (B) shall be
primary without right of contribution from any other insurance which
is carried by Lessee, (C) shall expressly provide that all provisions
thereof, except the limits of the liability, shall operate in the same
manner as if there were a separate policy covering each insured, and
(D) shall provide that the insurer shall waive any right of
subrogation against Agent or Lenders.
(ii) Company will cause Lessee at all times to carry and maintain
with insurers of recognized responsibility and reputation on or with
respect to the Aircraft and Spare Engines, at Lessee's own cost and
expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment
while removed from the Airframe or airframe (which shall include war
risk, governmental confiscation and expropriation (other than by the
United States Government) and allied perils including (A) strikes,
riots, civil commotions or labor disturbances, (B) any malicious act
or act of sabotage and (C) hijacking (air piracy) or any unlawful
seizure or wrongful exercise of control of the Aircraft or Spare
Engines or crew in flight (including any attempt at such seizure or
control) made by any person or persons aboard the Aircraft or another
aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by Lessee with respect to similar
aircraft owned or operated by Lessee on the same routes or if the
Aircraft or another aircraft is operated on routes where the custom is
for Domestic Carriers similarly situated with Lessee flying comparable
routes with similar aircraft to carry such insurance, of the type
usually carried by
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<PAGE> 23
corporations engaged in the same or similar business and similarly
situated with Lessee; provided that such insurance (including any
self-insurance to the extent permitted below) shall at all times be
for an amount not less than the greater of the amount required by the
applicable Lease and $50,000,000. During any period when the Aircraft
or Spare Engines, as the case may be, are on the ground and not in
operation Lessee may carry or cause to be carried, in lieu of the
insurance required by this Section, insurance otherwise conforming
hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with
respect to similar aircraft or spare engines by corporations engaged
in the same or similar business and similarly situated with Lessee for
aircraft and spare engines on the ground in an amount at least equal
to the applicable amount provided above. All such insurance shall name
Agent and Lenders as additional insureds and loss payees to the extent
their interest may appear and shall provide that any loss to the
Airframe or an Engine or Spare Engine in excess of $2,000,000 (and, if
a Potential Event of Default or Event of Default has occurred and is
continuing, any such loss) shall be payable to Agent for the benefit
of Lenders; and shall be primary without right of contribution from
any other insurance which is carried by Agent with respect to its
interest therein.
Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts
as are then applicable to other similar aircraft or spare engines in
Lessee's fleet which are of a value comparable to the Aircraft or
Spare Engines, as the case may be, and as are not substantially
greater than amounts self-insured by corporations engaged in the same
or similar business and similarly situated with Lessee; provided,
however, that Company shall not permit Lessee to self-insure in an
amount in excess of $1,000,000 without the prior written consent of
Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
Agent and Lenders as additional named insureds, but without Agent or
Lenders being thereby liable for premiums; (B) provide that in respect
of the interest of Agent or Lenders in such policies the insurance
shall not be invalidated by any action or inaction of Lessee and shall
insure the interests of Agent and Lenders regardless of any breach or
violation by Lessee or any Person (other than Agent) of any warranty,
declaration, condition or exclusion from coverage contained in such
policies; (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage which affects the interest of
Agent or any Lender, or if such insurance is allowed to lapse for
nonpayment of premium, such cancellation,
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<PAGE> 24
change or lapse shall not be effective as to Agent for thirty (30)
days (seven (7) days, or such shorter or longer period as may from
time to time be customarily available in the industry, in the case of
any war risk and allied perils coverage) after receipt by Agent of
written notice from such insurers of such cancellation, change or
lapse; (D) be in full force and effect throughout any geographical
areas at any time traversed by the Aircraft or Spare Engines and shall
be payable in U.S. dollars; (E) waive any right of the insurers to any
setoff or counterclaim or any other deduction, whether by attachment
or otherwise in respect of any liability of Agent; and (F) waive all
rights of subrogation against Agent.
(iv) In the case of a lease or contract with the United States or
any agency or instrumentality thereof in respect of the Airframe or
any Engine or Spare Engine, a valid agreement by the United States or
such agency or instrumentality to indemnify Lessee against the same
risks against which Lessee is required hereunder to insure shall be
considered adequate insurance with respect to the Airframe or such
Engine or Spare Engine to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 31, Company will cause the Lessee to furnish to Agent
(A) a report signed by a firm of independent aircraft insurance
brokers, appointed by Lessee and not objected to by Agent, describing
in reasonable detail acceptable to Agent the insurance then carried
and maintained on or with respect to the Aircraft and the Engines and
Spare Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 4(g) and is adequate
to protect the interests of Lessee, Company and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance
covered by the report. Lessee will cause such brokers to advise Agent
in writing (x) promptly of any default in the payment of any premium
and of any other act or omission on the part of Lessee of which such
firm has knowledge and which might invalidate or render unenforceable,
in whole or in part, any insurance on the Aircraft or any Engine or
Spare Engine and (y) at least thirty (30) days prior to the expiration
or termination date, or date of effectiveness of any material change,
of any insurance carried and maintained on the Aircraft or Spare
Engines hereunder.
(vi) All insurance payments and other payments received by Agent
or Company from insurance referred to in paragraph (ii) above shall
be, if received by Company, immediately paid to Agent and shall be
held by Agent as security
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<PAGE> 25
for the Secured Obligations and all other obligations required to be
paid in accordance with the terms of this Mortgage and the Credit
Agreement and such payments shall be paid to Company upon compliance
by Company with the terms of Subsection 4(f) with respect to the
replacement of an airframe or an engine, as the case may be, provided
that no Potential Event of Default or Event of Default shall have
occurred and be continuing.
All insurance payments and other payments received by Agent or Company
from insurance referred to in paragraph (ii) above and paid other than
as a result of an Event of Loss shall be paid by Agent to or be
retained by Company, and promptly applied by Company to the extent
necessary to repair the damage to the Airframe or the Engine or Spare
Engine for which such insurance was paid, provided that Agent shall
not be required to make any such payment to Company if a Potential
Event of Default or Event of Default has occurred and is continuing,
but shall be held or paid over to Agent as security for the
obligations of Company under this Mortgage and the other Loan
Documents, and, if Agent shall declare the Credit Agreement to be in
default, shall be applied against Company's obligations hereunder and
thereunder as and when due. Retention by Agent of any amounts pursuant
to the preceding sentence shall not relieve Company of its obligations
to make promptly all repairs and replacements required by Sections
4(c) and (e) hereof and to pay for the same with Company's funds or
cause payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit Agent, or any
Lender from obtaining insurance with respect to the Aircraft or Spare
Engines for its own account. Company may, at its own expense, carry
insurance with respect to its interest in the Aircraft or Spare
Engines in amounts in excess of that required to be maintained by this
Section 4(g). No insurance maintained by Agent or any Lender shall
prevent Company from causing Lessee to carry the insurance required or
permitted by this Section or adversely affect such insurance or the
cost thereof. Proceeds of any such insurance carried by Agent or
Lender shall be paid as provided in the insurance policy relating
thereto and Agent shall have no duty to obtain any such insurance.
(h) Inspection. Company will permit, and cause Lessee to permit, any
officers, employees or authorized representatives of Agent to inspect, at
Lessee's cost and expense under the Lease, the Aircraft Collateral and Aircraft
Related Collateral. or any part thereof, and to examine, copy or make extracts
from, any and all books, records and documents in the possession of Company
relating to such Collateral or any part thereof and performance of this
Mortgage, all at such reasonable times and as often
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as may be requested. Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of making
or not making any such inspection or examination.
(i) Insignia. Company shall, at its own cost and expense, or pursuant to
the Lease, cause the Airframe and each Engine and Spare Engine included in the
Aircraft Collateral to be legibly marked (in a reasonably prominent location,
which in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size, and
bearing the legend "Owned by Atlas Freighter Leasing, II Inc. and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the opinion
of Agent be appropriate or desirable to evidence the fact that it is subject to
the lien and security interest created by this Mortgage. Company shall not
remove or deface, or permit to be removed or defaced, any such plate, disk, or
other marking or the identifying manufacturer's serial number, and, in the event
of such removal or defacement, shall promptly cause such plate, disk, or other
marking or serial number to be promptly replaced. Except as provided above,
Company shall not allow the name of any person, association or corporation to be
placed on the Airframe or any Engine or Spare Engine as a designation that might
be interpreted as a claim of ownership or of any security interest therein,
except that any permitted lessee may place its customary colors and insignia or
the insignia of the manufacturer on the Airframe or any Engine or Spare Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then Agent
may, without notice of any kind to Company, exercise in respect of the
Aircraft Collateral and Aircraft Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as
in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii)
any and all remedies under the Leases and all of the rights and remedies of
the Lessor under the Lease, (iii) all the rights and remedies provided for
in this Mortgage, the Credit Agreement and any other Loan Document, and in
any other agreement between Company and Agent, and (iv) such other rights
and remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing, Agent
may, without notice, take possession of the Aircraft Collateral or any part
thereof and may exclude Company and Lessee, and all persons claiming under
Company or Lessee, wholly or partly therefrom. At the request of Agent,
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Company shall promptly deliver or cause Lessee to deliver to Agent or to
whomsoever Agent shall designate, at such time or times and place or places
as Agent may specify, and fly or cause to be flown to such airport or
airports in the United States as Agent may specify, without risk or expense
to Agent, the Aircraft Collateral or any part thereof. In addition, Company
will provide, or cause Lessee to provide, without cost or expense to Agent,
storage facilities for the Aircraft Collateral. If Company or Lessee shall
for any reason fail to deliver the Aircraft Collateral or any part thereof
after demand by Agent, Agent may, without being responsible for loss or
damage, (i) obtain a judgment conferring on Agent the right to immediate
possession or requiring Company and Lessee to deliver immediate possession
of the Aircraft Collateral or any part thereof to Agent, the entry of which
judgment Company hereby specifically consents and the Lessor's consent to
which will be obtained by Company under the Lease, or (ii) with or without
such judgment, pursue the Aircraft Collateral or any part thereof wherever
it may be found and may enter any of the premises of Company and Lessee
where the Aircraft Collateral may be and search for the Aircraft Collateral
and take possession of and remove the same. Company agrees to pay to Agent,
upon demand, all expenses incurred in taking any such action; and all such
expenses shall, until paid, be secured by the lien of this Mortgage. Upon
every such taking of possession, Agent may, from time to time, make all
such reasonable expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the
Aircraft Collateral, as it may deem proper. In each such case, Agent shall
have the right to maintain, use, operate, store, lease, control or manage
the Aircraft Collateral or any part thereof and to carry on the business
and exercise all rights and powers of Company relating to the Aircraft
Collateral, as Agent shall deem best, including the right to enter into any
and all such agreements with respect to the maintenance, use, operation,
storage, leasing, control, management or disposition of the Aircraft
Collateral or any part thereof as Agent may determine. Further, after the
occurrence and during the continuation of an Event of Default, Agent shall
be entitled to collect and receive directly all tolls, rents, revenues,
issues, income, products and profits of the Aircraft Collateral or any part
thereof, including without limitation, all payments under any of the
Leases. Such tolls, rents, revenues, issues, income, products and profits
shall be applied to pay the expenses of the use, operation, storage,
leasing, control, management or disposition of the Aircraft Collateral, and
of all maintenance, insurance, repairs, replacements, alterations,
additions and improvements, and to make all payments which Agent may be
required or may elect to make, if any, for taxes, assessments, or other
proper charges upon the Aircraft Collateral and all other payments which
Agent may be required or authorized to make under any provision of this
Mortgage, as well as just and reasonable compensation for the
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services of Agent and of all persons properly engaged and employed for such
purposes by Agent.
(c) Agent, with or without taking possession of the Aircraft
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as
an entirety or in separate lots or parcels, the Aircraft Collateral or
any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the retention of title by Agent to the
property so sold), as Agent may determine, whether or not the Aircraft
Collateral shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, Company
agrees to the fullest extent that it lawfully may, that it and Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or
claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in
order to prevent or hinder the enforcement of this Mortgage or the absolute
sale of the Aircraft Collateral. Company, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have all
or any portion of the Aircraft Collateral marshalled upon any foreclosure
hereof.
(e) Each and every remedy of Agent shall be cumulative and shall not
be exclusive of any other remedies provided now or hereafter at law, in
equity or otherwise. Company shall reimburse Agent, upon demand, for all
fees and other expenses paid or incurred by Agent in exercising any rights,
powers or remedies granted hereby. All such fees and expenses shall, until
paid, be secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
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exclusion of Company, to declare the Lease in default in accordance with
its terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by Lessee of any
purchase option or Event of Loss) and the proceeds of any sale, lease or other
disposition of all or any of the Aircraft Collateral or Aircraft Related
Collateral under this Mortgage and all other sums realized by Agent pursuant to
this Mortgage or any proceedings hereunder shall be applied in the following
order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest of this Mortgage (except any taxes or Liens to which
the respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of payments
incurred or made by Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by Company under
the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
Company hereby irrevocably appoints Agent the true and lawful attorney of
Company (with full power of substitution) in the name, place and stead of, and
at the expense of, Company at any time after the occurrence and during the
continuation of an Event of Default (i) to ask, demand, collect, sue for,
recover, compound, receive
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and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Aircraft Collateral and Aircraft Related Collateral, (ii)
to make all necessary transfers of all or any part of the Aircraft Collateral
and Aircraft Related Collateral in connection with any sale, lease or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale, lease or other disposition, and (iv) generally to
do, at Agent's option and Company's cost and expense, at any time, or from time
to time, all acts and things that Agent deems necessary to protect, preserve or
realize upon the Aircraft Collateral and Aircraft Related Collateral and Agent's
security interest therein, in order to effect the intent of this Mortgage, all
as fully and effectively as Company might do, Company hereby ratifying and
confirming all that its said attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by Agent to be held and applied under this Section, and
all monies if any, required to be paid to Agent hereunder, which disposition is
not elsewhere herein otherwise specifically provided for, shall be held by Agent
and applied from time to time as provided herein and in the Credit Agreement and
the other Loan Documents and shall be held in an account in the name of Agent
and invested in Cash Equivalents for the benefit and at the risk of Company.
SECTION 9. Agent's Right to Perform.
If Company 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, Agent
may itself make such payment or perform or comply with such agreement
(including, without limitation, the agreement of Company to maintain insurance
pursuant to Section 4(g) hereof), and the amount of such payment and the amount
of the reasonable expenses of Agent 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 rate specified in the Credit Agreement
from time to time, shall be payable by Company to Agent on demand and shall
constitute additional indebtedness secured by the lien and security interest of
this Mortgage.
SECTION 10. Further Assurances.
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Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as Agent may from time to time request, in order to correct any defect, error
or omission which may at any time hereafter be discovered in the contents of
this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Commercial Code financing and continuation statements with
respect to the security interests created hereby, in form and substance
satisfactory to Agent, in such jurisdictions as Agent may reasonably request.
Company hereby authorizes Agent to file any such statements without the
signature of Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Aircraft
Collateral and Aircraft Related Collateral and shall (a) remain in full force
and effect until the indefeasible payment in full of the Secured Obligations,
(b) be binding upon Company, its successors and assigns and (c) inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Agent or any Lender may, subject to any restrictions
contained in the Credit Agreement, assign or otherwise transfer any of its
interests in the Credit Agreement or in any Note to any other person or entity,
and such other benefits in respect thereof granted to Agent or any Lender herein
or otherwise. Upon the indefeasible payment in full of the Secured Obligations,
the security interest granted hereby shall terminate and all rights to the
Aircraft Collateral and Aircraft Related Collateral shall revert to Company.
Upon any such termination. Agent will execute and deliver to Company, at
Company's expense, such instruments of release and termination as Company may
reasonably request to evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage 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. To the extent permitted by
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<PAGE> 32
applicable law, Company hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect. No term or
provision of this Mortgage may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Company and Agent. The
captions and headings in this Mortgage are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Aircraft
Collateral and Aircraft Related Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Mortgage. Company
hereby agrees that service of process in any such proceeding in any such court
may be made by registered or certified mail return receipt requested to Company
at its address provided on the signature pages of the Mortgage, such service
being hereby acknowledged by Company to be effective and binding service in
every respect. A copy of any such process so served shall be mailed by
registered mail to Company, at its address specified in Section 15 hereof,
except that unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of process. If any agent
appointed by Company refuses to accept service, Company hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Agent to bring proceedings against Company in the courts of
any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
AIRCRAFT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Article 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
-32-
<PAGE> 33
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to Company or Agent, as the case may be, addressed to it at the
address of such party specified on the signature page hereof, or as to either
party at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section 15. All such notices and other communications shall, when mailed, be
effective when deposited in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
-33-
<PAGE> 34
IN WITNESS WHEREOF, Company and Agent have caused this Mortgage to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:____________________________
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasury and
Secretary
BANKERS TRUST COMPANY,
as Agent
By:____________________________
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 35
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
Boeing 747-2D7B 22471 N527MC
</TABLE>
<PAGE> 36
SCHEDULE II-A
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 528420
General Electric CF6-50E2 517532
General Electric CF6-50E2 455793
General Electric CF6-50E2 455430
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 37
SCHEDULE II-B
to Security Agreement
and Chattel Mortgage
SPARE ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 517538
General Electric CF6-50E2 517539
General Electric CF6-50E2 455167
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE> 38
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated , 199[ ] between Atlas
Freighter Leasing II, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, "Agent") the financial institutions ("Lenders") party to the Credit
Agreement dated as of September __, 1997 among Company, the Lenders, Goldman
Sachs Credit Partners L.P., as Syndication Agent, and Agent.
Company and Mortgagee have heretofore entered into a Security Agreement and
Chattel Mortgage dated _______________, 1997 (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine and Spare Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine
and Spare Engine to Agent.
The Mortgage relates to the Engine(s) and Spare Engine(s) described below
and a counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on __________, 1997, and has been assigned Conveyance No. ______.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, Company hereby mortgages to Agent,
its successors and assigns, and grants and assigns to Agent, its successors and
assigns, a first priority purchase money security interest in all estate, right,
title and interest of Company in and to the property described in Schedule I
annexed hereto (whether or not such Engine or Spare Engine shall be installed on
or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
<PAGE> 39
EXHIBIT A
Page 2
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE.
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Balance of page intentionally left blank]
<PAGE> 40
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING II, INC.
By:________________________________
Name:
Title:
Notice Address:
Atlas Freighter Leasing II, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Treasurer and Secretary
BANKERS TRUST COMPANY,
as Agent
By:________________________________
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE> 41
SCHEDULE I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 42
SCHEDULE I-B
to Supplemental
Chattel Mortgage
SCHEDULE OF SPARE ENGINES
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof
<PAGE> 1
EXHIBIT 10.85
Exhibit A
FIRST AMENDMENT TO LEASE AGREEMENT
FIRST AMENDMENT TO LEASE AGREEMENT (this "Amendment"), dated as of
September __, 1997, among Atlas Freighter Leasing, Inc., as Lessor (the
"Lessor"), Atlas Air, Inc., as Lessee (the "Lessee") and Bankers Trust Company,
as Agent (the "Agent"). All capitalized terms defined in the Lease Agreement
shall have the same meaning when used herein unless otherwise defined herein.
W I T N E S S E T H:
WHEREAS, the Lessee and Lessor have entered into six Lease Agreements
each dated as of May 29, 1997 for the aircraft described in Schedule I attached
hereto (individually a "Lease Agreement" and collectively, the "Lease
Agreements");
WHEREAS, the Lessee has issued $150 million in aggregate principal
amount of 10-3/4% unsecured Senior Notes due 2005;
WHEREAS, Atlas Freighter Leasing II, Inc. a subsidiary of Lessee
("AFL II") has entered into a Credit Agreement, dated as of September 5, 1997,
among AFL II, Agent, as administrative agent and Goldman Sachs Credit Partners
L.P., as syndication agent (the "AFL II Credit Agreement");
WHEREAS, in connection with the AFL II Credit Agreement, AFL II, as
lessor, has entered into four leases, dated the date hereof, with Atlas Air,
Inc. as lessee (the "AFL II Leases", together with the AFL II Credit Agreement
the "Transaction"); and
WHEREAS, in order to effect the Transaction, the parties hereto wish
to amend the Lease Agreements as set forth below;
NOW, THEREFORE, it is agreed:
1. The Lease Agreements shall be amended by inserting the following
new definitions in alphabetical order:
<PAGE> 2
"AFL II" means Atlas Freighter Leasing II, Inc., a Delaware
corporation.
"AFL II Aircraft" means (i) four Boeing 747-200 aircraft (including
the engines attached thereto) and (ii) nine General Electric CF6-50E2
engines.
"AFL II Credit Agreement" shall mean the Credit Agreement, dated as of
September 5, 1997, by and among AFL II, as Borrower, the Lenders listed
therein from time to time, Goldman Sachs Credit Partners L.P., as
Syndication Agent and Bankers Trust Company, as Administrative Agent as
such agreement may be amended, modified, waived, or supplemented from time
to time.
"AFL II Leases" shall mean the Leases as such term is defined in the
AFL II Credit Agreement.
"AFL II Restructuring" means the following transactions which shall
occur on September 5, 1997: (i) the contribution of the AFL II Aircraft to
AFL II as a capital contribution, (ii) the incurrence of indebtedness
pursuant to the AFL II Credit Agreement and the simultaneous repayment of
amounts outstanding under the Amended Aircraft Credit Facility which are
secured by the AFL II Aircraft and (iii) the entering into of the AFL II
Leases.
"Senior Notes Documents" means the Indenture, dated as of August 13,
1997 between Atlas Air, Inc. and State Street Bank and Trust Company
relating to the 10 3/4% $150 million Senior Notes due 2005 of Lessee (the
"Senior Notes") and any and all related agreements, as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Lease.
2. The Lease Agreements shall be amended by replacing the definition
of "Consolidated Adjusted EBITDA" with the following:
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of
the amounts for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) provisions for taxes based on income,
(iv) total depreciation expense, (v) total amortization expense, (vi) other
non-cash items reducing Consolidated Net Income less other non-cash items
increasing Consolidated Net Income Less (II) all cash expenditures reducing
reserves appearing on the June 30, 1997 balance sheet of Atlas, all of the
foregoing as determined on a consolidated basis for Lessee and its
Subsidiaries in conformity with GAAP.
-2-
<PAGE> 3
3. The definition of "Consolidated Interest Expense" shall be amended
in the Lease Agreements by inserting after the words "Interest Rate Agreements"
and immediately prior to the period the following phrase:
and Currency Agreements, but excluding, however, any amounts referred to in
subsection 2.3 of the Amended Aircraft Credit Facility on or before the
Third Amended and Restated Closing Date (as such term is defined in the
Amended Aircraft Credit Facility)
4. The definition of "Consolidated Rental Payments" shall be amended
in the Lease Agreement by inserting, at the end of the definition, the
following new sentence:
For the avoidance of doubt, all rental payments to AFL II and Lessor
shall not be included in Consolidated Rental Payments.
5. The definition of "Designated Indebtedness" shall be amended in the
Lease Agreements by inserting after the phrase "the Nationsbank Agreement," the
phrase "the AFL II Credit Agreement, the Senior Notes Documents".
6. The definition of "Material Agreement" shall be amended in the
Lease Agreements by inserting after the phrase "the Nationsbank Agreement", the
phrase "the AFL II Credit Agreement, the AFL II Leases, the Senior Notes
Documents".
7. The definition of "Permitted Encumbrances" shall be amended in the
Lease Agreements by: (I) renumbering "(xii)" to "(xiv)" and (II) inserting new
clauses (viii), (xii) and (xiii) as follows:
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages, (II) Sections 4(d) and 4(e) of the aircraft
chattel mortgages entered into in connection with the AFL II Credit
Agreement and (III) Sections 4(d) and 4(e) of the aircraft chattel
mortgages entered into in connection with the Amended Aircraft Credit
Facility;
(xii) Liens arising pursuant to the AFL II Credit Agreement; provided
that such Liens do not encumber any assets other than the AFL II Aircraft
and other assets of AFL II;
-3-
<PAGE> 4
(xiii) Liens securing Indebtedness incurred in accordance with Section
7(a)(8); and
8. The definition of "Permitted Extension Indebtedness" shall be
amended in the Lease Agreements by inserting in clause "(ii)" the word
"reasonably" after the word "Lessee" and immediately prior to the word
"incurred".
9. The definition of "Person" shall be amended in the Lease
Agreements by inserting the words "limited liability companies," after the
words "general partnerships" and immediately prior to the words "joint stock
companies".
10. The Lease Agreements shall be amended by replacing the definition
of "Second Amended and Restated Credit Agreement" with the following in
appropriate alphabetical order:
"Amended Aircraft Credit Facility" means the Third Amended and
Restated Credit Agreement, dated as of September 5, 1997, among Atlas Air,
Inc., as Borrower, the Lenders listed therein, Goldman Sachs Credit
Partners L.P., as Syndication Agent, and Bankers Trust Company, as
Administrative Agent without giving effect to any amendments,
modifications, supplements or waivers thereof.
11. The Lease Agreements shall be amended by replacing the second
sentence of subsection 6(d) with the following sentence:
Lessee will maintain or cause to be maintained, with insurers of
recognized responsibility and reputation, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
against loss or damage (including, without limitation, flood insurance, if
necessary or advisable) of the kinds customarily carried or maintained
under similar circumstances by corporations engaged in similar businesses.
12. The Lease Agreements shall be amended by inserting in the first
sentence of subsection 6(e) the phrase ", with the permission of Lessee which
shall not be unreasonably withheld," immediately prior to the phrase "to make
copies and take extracts therefrom,".
13. The Lease Agreements shall be amended by inserting the following
new subsection 7(a)(6):
-4-
<PAGE> 5
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") plus seven times
Consolidated Rental Payments for the four fiscal quarter period ending on
such Determination Date to Consolidated Adjusted EBITDA plus Consolidated
Rental Payments for the four fiscal quarter period ending on such
Determination Date does not exceed the ratio set forth in subsection
7(f)(ii) for the fiscal quarter in which such Indebtedness is to be
incurred, (ii) the ratio of Consolidated Adjusted EBITDA for such four
fiscal quarter period to Consolidated Interest Expense for such four fiscal
quarter period is not less than the ratio set forth in subsection 7(f)(i)
for the fiscal quarter in which such Indebtedness is to be incurred; and
(iii) Lessee will be in compliance with all covenants set forth in
subsection 7(f) hereof, Lessee and its Subsidiaries may incur Other
Permitted Indebtedness;
14. The Lease Agreements shall be amended by inserting in the
beginning of subsection 7(a)(8) the phrase "and its Subsidiaries" immediately
following the word "Lessee".
15. The Lease Agreements shall be amended by inserting the following
new subsections 7(a)(10) - (12):
(10) Lessee may become and remain liable with respect to Indebtedness
under the Nationsbank Agreement;
(11) AFL II may become and remain liable with respect to all the
obligations under AFL II Credit Agreement and Lessee may become and remain
liable with respect to the AFL II Leases; and
(12) Lessee may become and remain liable with respect to the Senior
Notes.
16. The Lease Agreements shall be amended in subsection 7(B)(b) by:
(I) inserting the phrase "and (iv) pursuant to the AFL II Credit Agreement"
after the words "Special Purpose Subsidiaries" and (II) replacing the word
"and" immediately following the word "hereto" and immediately prior to the
"(iii)" with a comma.
-5-
<PAGE> 6
17. The Lease Agreements shall be amended by replacing subsection
7(c)(vi) with the following new subsection 7(c)(vi):
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed $15 million at any time outstanding.
18. The Lease Agreements shall be amended by inserting the following
new subsection 7(d)(6):
(6) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations to the extent such Contingent Obligations
are permitted pursuant to subsections 7(i) and 7(j).
19. The Lease Agreements shall be amended by inserting the following
amended subsection 7(e)(2) and new subsection 7(e)(4):
(2) Lessee may make Restricted Junior Payments with respect to its
Common Stock in an amount not to exceed in any fiscal year, the lesser of
25% of Consolidated Net Income for such fiscal year and $10 million;
(4) Lessee may repurchase its Common Stock in an amount not to exceed
in any fiscal year $15 million for purposes of establishing or contributing
to an employee benefit plan; provided that any such repurchased Common
Stock resold to employees of Lessee shall, to the extent of the price paid
for such Common Stock by such employee, be excluded from the calculation of
the $15 million limit set forth above.
20. The Lease Agreements shall be amended by inserting the following
new subsection 7(f):
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. Lessee shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four fiscal quarter period ending as of the last day of any fiscal quarter of
Lessee set forth below to be less than the correlative ratio indicated:
-6-
<PAGE> 7
<TABLE>
<CAPTION>
=============================================================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
- -----------------------------------------------------------------------------
<S> <C>
June 30, 1997 1.90:1.00
- -----------------------------------------------------------------------------
September 30, 1997 1.90:1.00
- -----------------------------------------------------------------------------
December 31, 1997 1.90:1.00
- -----------------------------------------------------------------------------
March 31, 1998 1.90:1.00
- -----------------------------------------------------------------------------
June 30, 1998 1.90:1.00
- -----------------------------------------------------------------------------
September 30, 1998 1.90:1.00
- -----------------------------------------------------------------------------
December 31, 1998 1.90:1.00
- -----------------------------------------------------------------------------
March 31, 1999 1.90:1.00
- -----------------------------------------------------------------------------
June 30, 1999 1.90:1.00
- -----------------------------------------------------------------------------
September 30, 1999 2.00:1.00
- -----------------------------------------------------------------------------
December 31, 1999 2.00:1.00
- -----------------------------------------------------------------------------
March 31, 2000 2.10:1.00
- -----------------------------------------------------------------------------
June 30, 2000 2.10:1.00
- -----------------------------------------------------------------------------
September 30, 2000 2.20:1.00
- -----------------------------------------------------------------------------
December 31, 2000 2.20:1.00
- -----------------------------------------------------------------------------
March 31, 2001 2.20:1.00
- -----------------------------------------------------------------------------
June 30, 2001 2.20:1.00
- -----------------------------------------------------------------------------
September 30, 2001 2.30:1.00
- -----------------------------------------------------------------------------
December 31, 2001 2.30:1.00
- -----------------------------------------------------------------------------
March 31, 2002 2.40:1.00
- -----------------------------------------------------------------------------
June 30, 2002 2.40:1.00
- -----------------------------------------------------------------------------
September 30, 2002 2.50:1.00
- -----------------------------------------------------------------------------
December 31, 2002 2.50:1.00
- -----------------------------------------------------------------------------
March 31, 2003 2.60:1.00
- -----------------------------------------------------------------------------
Thereafter 2.70:1.00
=============================================================================
</TABLE>
-7-
<PAGE> 8
(ii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt at the end of any four fiscal quarter period ending
during one of the periods set forth below (less Cash and Cash Equivalents held
by Lessee in excess of $25 million as of such date) plus seven times
Consolidated Rental Payments for such four fiscal quarter period to (ii)
Consolidated Adjusted EBITDA plus Consolidated Rental Payments for such four
fiscal quarter period to exceed the correlative ratio indicated below:
<TABLE>
<CAPTION>
=====================================================================
Fiscal Quarter Maximum
Ending Leverage Ratio
- ---------------------------------------------------------------------
<S> <C>
June 30, 1997 5.75:1.00
- ---------------------------------------------------------------------
September 30, 1997 6.25:1.00
- ---------------------------------------------------------------------
December 31, 1997 6.75:1.00
- ---------------------------------------------------------------------
March 31, 1998 6.75:1.00
- ---------------------------------------------------------------------
June 30, 1998 7.00:1.00
- ---------------------------------------------------------------------
September 30, 1998 7.00:1.00
- ---------------------------------------------------------------------
December 31, 1998 6.75:1.00
- ---------------------------------------------------------------------
March 31, 1999 6.50:1.00
- ---------------------------------------------------------------------
June 30, 1999 6.25:1.00
- ---------------------------------------------------------------------
September 30, 1999 5.75:1.00
- ---------------------------------------------------------------------
December 31, 1999 5.75:1.00
- ---------------------------------------------------------------------
March 31, 2000 5.75:1.00
- ---------------------------------------------------------------------
June 30, 2000 5.50:1.00
- ---------------------------------------------------------------------
September 30, 2000 5.50:1.00
- ---------------------------------------------------------------------
December 31, 2000 5.25:1.00
- ---------------------------------------------------------------------
March 31, 2001 5.25:1.00
- ---------------------------------------------------------------------
June 30, 2001 5.25:1.00
- ---------------------------------------------------------------------
September 30, 2001 5.00:1.00
- ---------------------------------------------------------------------
December 31, 2001 5.00:1.00
- ---------------------------------------------------------------------
</TABLE>
-8-
<PAGE> 9
<TABLE>
- ---------------------------------------------------------------------
<S> <C>
March 31, 2002 4.75:1.00
- ---------------------------------------------------------------------
June 30, 2002 4.75:1.00
- ---------------------------------------------------------------------
September 30, 2002 4.50:1.00
- ---------------------------------------------------------------------
December 31, 2002 4.50:1.00
- ---------------------------------------------------------------------
March 31, 2003 4.50:1.00
- ---------------------------------------------------------------------
Thereafter 4.25:1.00
=====================================================================
</TABLE>
(iii) Minimum Consolidated Net Worth. Lessee shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
=====================================================================
Minimum
Period Consolidated
Net Worth
- ---------------------------------------------------------------------
<S> <C>
fiscal year 1997 $215 million
- ---------------------------------------------------------------------
fiscal year 1998 $225 million
- ---------------------------------------------------------------------
fiscal year 1999 $250 million
- ---------------------------------------------------------------------
fiscal year 2000 $275 million
- ---------------------------------------------------------------------
fiscal year 2001 $300 million
- ---------------------------------------------------------------------
fiscal year 2002 $350 million
- ---------------------------------------------------------------------
fiscal year 2003 $400 million
- ---------------------------------------------------------------------
fiscal year 2004 $450 million
=====================================================================
</TABLE>
21. The Lease Agreements shall be amended in subsection 7(g)(5) by
replacing the initial phrase immediately prior to the proviso with "Lessee may
make acquisitions of the capital stock of another Person or all or substantially
all of the assets of a division or line of business of another Person"
-9-
<PAGE> 10
22. The Lease Agreements shall be amended by inserting the following
new subsection 7(g)(9):
(9) Lessee shall be permitted to dispose of or acquire assets pursuant
to the consolidation and relocation of its offices and operations to
Colorado; provided that the aggregate consideration paid with respect to
the acquisition of assets shall be in an amount not to exceed $20 million.
23. The Lease Agreements shall be amended in subsection 7(i) by
inserting after the phrase "the Consolidated Rental Payments at the time in
effect during the then current fiscal year do not exceed $60 million plus" the
following new phrase:
, the amount of Consolidated Rental Payments made during such fiscal year
in respect of up to four 747-400F aircraft, subject to the agreement dated
June 9, 1997 between Lessee and The Boeing Company regarding the purchase
of 10 new 747-400F aircraft, leased by the Lessee within twelve months
following the September 5, 1997 plus
24. The Lease Agreements shall be amended by adding at the end of
subsection 7(l) the following new paragraph:
Notwithstanding the foregoing, each of the Lessor and AFL II shall be
permitted to issue preferred stock in an amount not to exceed $100,000 each
to a third party.
25. In order to induce the Lenders to enter into this Amendment, the
Borrower hereby represents and warrants that each of the representations and
warranties contained in the Lease Agreements are true and correct in all
material respects on the Amendment Effective Date both before and after giving
effect to this Amendment.
26. This Amendment shall become effective on the date (the "Amendment
Effective Date") on which each of the following shall have occurred:
(a) the Lessee and the Lessor shall have executed a counterpart
hereof and shall have delivered same to the Agent by telecopier; and
(b) the Lessor and the Agent shall have received an executed
opinion of counsel satisfactory to Lessor and Agent stating that in
the opinion of such counsel, such amendment to the Lease Agreements
has been properly recorded or filed for record in all public offices
in which
-10-
<PAGE> 11
such recording or filing is necessary to protect the right, title and
interest of Lessor and Agent.
27. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
28. The Amendment set forth herein is limited precisely as written and
shall not be deemed to be an amendment, consent, waiver or modification of any
other term or condition of the Lease Agreements or any of the instruments or
agreements referred to therein, or prejudice any right or rights which the Agent
may now have or may have in the future under or in connection with the Lease
Agreements, or any of the instruments or agreements referred to therein. Except
as expressly modified hereby, the terms and provisions of the Lease Agreements
shall continue in full force and effect.
29. This Amendment may be executed in two or more counterparts which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
[Remainder of page intentionally left blank.]
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective duly authorized officers as
of the date first above written.
ATLAS AIR, INC.,
as Lessee
By
-------------------------------
Name:
Title:
ATLAS FREIGHTER LEASING, INC.,
as Lessor
By
-------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Agent
By
-------------------------------
Name:
Title:
-12-
<PAGE> 13
SCHEDULE I
to First Amendment
to Lease Agreement
SCHEDULE OF AIRCRAFT
<TABLE>
<CAPTION>
===================================================================================
Aircraft U.S. Lease FAA
Registry No. Agreement Date Recording Date Conveyance No.
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
N507MC May 29, 1997 June 10, 1997 II008487
- -----------------------------------------------------------------------------------
N508MC May 29, 1997 June 10, 1997 II008485
- -----------------------------------------------------------------------------------
N509MC May 29, 1997 June 10, 1997 II008489
- -----------------------------------------------------------------------------------
N516MC May 29, 1997 June 10, 1997 II008491
- -----------------------------------------------------------------------------------
N505MC May 29, 1997 June 10, 1997 II008483
- -----------------------------------------------------------------------------------
N808MC May 29, 1997 June 10, 1997 II008493
===================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.86
PURCHASE AGREEMENT NUMBER 2021
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
Relating to Boeing Model 747-400F Aircraft
P.A. No. 2021
CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED FOR
BRACKETED MATERIAL
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SA
ARTICLES NUMBER
- -------- ------
<S> <C>
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
1. Aircraft Information Table
EXHIBIT
A. Aircraft Configuration
B. Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty and Patent Indemnity
SLP1. Service Life Policy Components
LETTER AGREEMENTS
2021-1 Seller Purchased Equipment
2021-2 Option Aircraft
2021-3 Escalation Sharing
</TABLE>
i
P.A. No. 2021
<PAGE> 3
<TABLE>
<CAPTION>
SA
LETTER AGREEMENTS (CONTINUED) NUMBER
- ---------------------------- ------
<S> <C>
2021-4 Demonstration Flights
2021-5 Spares Initial Provisioning
2021-6 Multiple Aircraft Operating Weights
2021-7 Promotion Support
6-1162-DSF-082 [ ]
6-1162-DSF-083 [ ]
6-1162-DSF-084 [ ]
6-1162-DSF-085 Open Configuration Matters
6-1162-DSF-086 [ ]
6-1162-DSF-098 [ ]
6-1162-DSF-099 [ ]
</TABLE>
ii
P.A. No. 2021
<PAGE> 4
Purchase Agreement No. 2021
between
The Boeing Company
and
Atlas Air, Inc.
------------------------------
This Purchase Agreement No. 2021 dated as of , 1997 between The Boeing
Company (Boeing) and Atlas Air, Inc. (Customer) relating to the purchase and
sale of Model 747-400F aircraft incorporates the terms and conditions of the
Aircraft General Terms Agreement dated as of , 1997 between the parties,
identified as AGTA-TLS (AGTA).
Article 1. Quantity, Model and Description.
The aircraft to be delivered to Customer will be designated as Model
747-400F aircraft (the Aircraft). Boeing will manufacture and sell to Customer
Ten (10) Aircraft to conform to the configuration described in Exhibit A, which
is part of this Purchase Agreement.
Article 2. Delivery Schedule.
The scheduled months of delivery of the Aircraft are listed in the attached
Table 1, which is part of this Purchase Agreement.
Article 3. Price.
3.1. Aircraft Basic Price. The Aircraft Basic Price in
subject to escalation dollars is listed in Table 1.
3.2. Advance Payment Base Prices. The Advance Payment Base
Prices listed in Table 1 were calculated utilizing the latest escalation
factors available to Boeing on the date of this Purchase Agreement projected to
the month of scheduled delivery.
3.3. The components of the Aircraft Basic Price and the
calculation of the Advance Payment Base Prices for the Aircraft are listed in
Table 1.
-1-
P.A. No. 2021
<PAGE> 5
Article 4. Payment.
4.1. Boeing acknowledges receipt of a deposit in the amount shown
in Table 1 for each Aircraft (Deposit).
4.2. The standard advance payment schedule for the Model 747-400F
aircraft requires the purchaser to make certain advance payments, expressed in
a percentage of the Advance Payment Base Price of each aircraft beginning with
a payment of 1%, less the Deposit, on the effective date of the purchase
agreement for the aircraft. Additional advance payments for each aircraft are
due on the first business day of the months listed in the attached Table 1.
4.3. Since the scheduled delivery month of the first four (4)
Aircraft is less than 24 months from the date of the Purchase Agreement,
Customer will make a payment of 20%, less the Deposit, on the first Aircraft, a
payment of 15%, less the Deposit, on each of the next two Aircraft, a payment
of 5%, less the Deposit on the next Aircraft and a payment of 1%, less the
Deposit, on the remaining five (5) Aircraft upon signing the Purchase
Agreement. Customer will make additional advance payments for all the Aircraft
in accordance with the attached Table 1.
4.4. Customer will pay the balance of the Aircraft Price of each
Aircraft at delivery.
Article 5. Miscellaneous.
5.1. Aircraft Information Table. Table 1 consolidates information
contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft,
(ii) applicable Detail Specification, (iii) month and year of scheduled
deliveries, (iv) Aircraft Basic Price, (v) applicable escalation factors and
(vi) Advance Payment Base Prices and advance payments and their schedules.
5.2. Buyer Furnished Equipment Variables. Supplemental Exhibit BFE1
contains vendor selection dates, on dock dates and other variables applicable
to the Aircraft.
5.3. Customer Support Variables. Supplemental Exhibit CS1 contains
the variable information applicable to information, training services and other
things furnished by Boeing in support of the Aircraft.
5.4. Engine Escalation Variables. Supplemental Exhibit EE1 contains
the applicable engine escalation formula, the engine warranty and the engine
patent indemnity for the Aircraft.
-2-
P.A. No. 2021
<PAGE> 6
5.5. Service Life Policy Component Variables. Supplemental Exhibit
SLP1 lists the airframe and landing gear components covered by the Service Life
Policy for the Aircraft.
5.6. Negotiated Agreement; Entire Agreement. This Purchase
Agreement, including the provisions of Article 8.2 of the AGTA relating to
insurance, and Article 11 of Part 2 of Exhibit C of the AGTA relating to
DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has
been the subject of discussion and negotiation and is understood by the
parties; the Aircraft Price and other agreements of the parties stated in this
Purchase Agreement were arrived at in consideration of such provisions. This
Purchase Agreement, including the AGTA, contains the entire agreement between
the parties and supersedes all previous proposals, understandings, commitments
or representations whatsoever, oral or written, and may be changed only in
writing signed by authorized representatives of the parties.
* * * * * * * * * * * * * * * *
DATED AS OF JUNE 6, 1997
ATLAS AIR, INC. THE BOEING COMPANY
By /s/ M.A. Chowdry By /s/ Dawn S. Foster
------------------------- ------------------------
Its CEO Its Attorney-In-Fact
------------------------- ------------------------
-3-
P.A. No. 2021
<PAGE> 7
<TABLE>
<CAPTION>
Table 1GE to Purchase Agreement 2021
Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 747-400F 850,000 Detail Specification: D019U002 (5/7/97)
Engine Model/Thrust Level: CF6-80C2BIF 57,900 Price Base Year: Jul-95
Airframe Base Price: [ ]
Optional Features: [ ] Airframe Escalation Data:
--------- ------------------------
Sub-Total of Airframe and Features: [ ] Base Year Index (ECI): 130.10
Engine Price (Per Aircraft): [ ] Base Year Index (ICI): 123.60
Buyer Furnished Equipment (BFE) Estimate $0
Seller Purchased Equipment (SPE) Estimate: [ ] Engine Escalation Data:
Aircraft Basic Price (Excluding BFE/SPE): [ ] Base Year Index (CPI): 129.660
=========
Refundable Deposit per A/C at Proposal Acceptance: [ ]
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Advance Payment Per Aircraft
- ------------------------------------------------------------------------------------------------------------------------------------
Escalation Escalation Escalation Escalation Estimate (Amts. Due/Mos. Prior to Delivery)
- ------------------------------------------------------------------------------------------------------------------------------------
Delivery Number of Factor Factor Credit Adv Payment Base At Signing 24 Mos. 21/18/15/12/9/6 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Mos.
- ------------------------------------------------------------------------------------------------------------------------------------
Date Aircraft (Airframe) (Engine) Memorandum Price Per A/P 1% 4% 5% 35%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
May-98 1 1.0813 1.05 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
June-98 1 1.0835 1.054 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Aug-98 1 1.0864 1.065 [ ] [ ] [ [ [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Sept-98 1 1.0877 1.068 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Apr-99 1 1.0961 1.067 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Jun-99 1 1.0995 1.074 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Feb-00 1 1.1363 1.09 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Mar-00 1 1.1409 1.093 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Aug-00 1 1.1622 1.105 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Apr-01 1 1.188 1.119 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
AIRCRAFT CONFIGURATION
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
Exhibit A to Purchase Agreement Number 2021
A
P.A. No. 2021
<PAGE> 9
AIRCRAFT CONFIGURATION
Dated
------------
relating to
BOEING MODEL 747-400F AIRCRAFT
The Detail Specification is Detail Specification D019U002TLS44F-1dated as
of TBD. Such Detail Specification will be comprised of Boeing Configuration
Specification D019U002 dated TBD as amended to incorporate the Options to be
listed below when configuration specification is complete, including the effects
on Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW). Such
Options will be set forth in Boeing Document D019UCR1TLS44F-1, dated TBD. As
soon as practicable, Boeing will furnish to Buyer copies of the Detail
Specification, which copies will reflect such Options. The Aircraft Basic Price
will be revised to reflect and include all effects of such Options when
configuration specification is complete, except such Aircraft Basic Price does
not include the price effects of any Buyer Furnished Equipment or Seller
Purchased Equipment.
A-1
<PAGE> 10
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
Exhibit B to Purchase Agreement Number 2021
B
P.A. No. 2021
<PAGE> 11
Exhibit B to
Purchase Agreement No. 2021
Page 1
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
relating to
BOEING MODEL 747-400F AIRCRAFT
Both Boeing and Customer have certain documentation and approval
responsibilities at various times during the construction cycle of Customer's
Aircraft that are critical to making the delivery of each Aircraft a positive
experience for both parties. This Exhibit B documents those responsibilities and
indicates recommended completion deadlines for the actions to be accomplished.
B-1
P.A. No. 2021
<PAGE> 12
Exhibit B to
Purchase Agreement No. 2021
Page 2
1. GOVERNMENT DOCUMENTATION REQUIREMENTS.
Certain actions are required to be taken by Customer in advance of the scheduled
delivery month of each Aircraft with respect to obtaining certain government
issued documentation.
1.1. Airworthiness and Registration Documents.
Not later than 6 months prior to delivery of each Aircraft,
Customer will notify Boeing of the registration number to be painted on the
side of the Aircraft. In addition, and not later than 3 months prior to
delivery of each Aircraft, Customer will, by letter to the regulatory authority
having jurisdiction, authorize the temporary use of such registration numbers
by Boeing during the pre-delivery testing of the Aircraft.
Customer is responsible for furnishing any Temporary or Permanent Registration
Certificates required by any governmental authority having jurisdiction to be
displayed aboard the Aircraft after delivery.
1.2. Certificate of Sanitary Construction.
1.2.1. U.S. Registered Aircraft. Boeing will obtain from the
United States Public Health Service, a United States Certificate of Sanitary
Construction to be displayed aboard each Aircraft after delivery to Customer.
1.2.2. Non-U.S. Registered Aircraft. If Customer requires a
United States Certificate of Sanitary Construction at the time of delivery of
the Aircraft, Customer will give written notice thereof to Boeing at least 3
months prior to delivery. Boeing will then use its reasonable best efforts to
obtain the Certificate from the United States Public Health Service and present
it to Customer at the time of Aircraft delivery.
1.3. Customs Documentation.
1.3.1. Import Documentation. If the Aircraft is intended to be
exported from the United States, Customer must notify Boeing not later than 3
months prior to delivery of each Aircraft of any documentation required by the
customs authorities or by any other agency of the country of import.
1.3.2. General Declaration - U.S. If the Aircraft is intended to
be exported from the United States, Boeing will prepare Customs Form 7507,
General Declaration, for execution by U.S. Customs immediately prior to the
ferry flight of the Aircraft.
B-2
P.A. No. 2021
<PAGE> 13
Exhibit B to
Purchase Agreement No. 2021
Page 3
For this purpose, Customer will furnish to Boeing not later than 20 days prior
to delivery a complete crew and passenger list and a complete ferry flight
itinerary, including point of exit from the United States for the Aircraft.
If Customer intends, during the ferry flight of an Aircraft, to land at a U.S.
airport after clearing Customs at delivery, Customer must notify Boeing not
later than 20 days prior to delivery of such intention. If Boeing receives such
notification, Boeing will provide to Customer the documents constituting a
Customs permit to proceed, allowing such Aircraft to depart after any such
landing. Sufficient copies of completed Form 7507, along with passenger
manifest, will be furnished Customer to cover U.S. stops scheduled for the ferry
flight.
1.3.3. Export Declaration - U.S. If the Aircraft is intended to
be exported from the United States, Boeing will prepare Form 7525V and,
immediately prior to the ferry flight, will submit such Form to U.S. Customs in
Seattle in order to obtain clearance for the departure of the Aircraft,
including any cargo, from the United States. U.S. Customs will deliver the
Export Declaration to the U.S. Department of Commerce after export.
2. INSURANCE CERTIFICATES.
Unless provided earlier, Customer will provide to Boeing not later
than 30 days prior to delivery of the first Aircraft, a copy of the requisite
annual insurance certificate in accordance with the requirements of Article 8
of the AGTA.
3. NOTICE OF FLYAWAY CONFIGURATION.
Not later than 20 days prior to delivery of the Aircraft, Customer
will provide to Boeing a configuration letter stating the requested "flyaway
configuration" of the Aircraft for its ferry flight. This configuration letter
should include:
(i) the name of the company which is to furnish fuel for
the ferry flight and any scheduled post-delivery
flight training, the method of payment for such fuel,
and fuel load for the ferry flight;
B-3
P.A. No. 2021
<PAGE> 14
Exhibit B to
Purchase Agreement No. 2021
Page 4
(ii) the cargo to be loaded and where it is to be stowed on
board the Aircraft and address where cargo is to be shipped
after flyaway;
(iii) any BFE equipment to be removed prior to flyaway and
returned to Boeing BFE stores for installation on
Customer's subsequent Aircraft;
(iv) a complete list of names and citizenship of each crew
member and non-revenue passenger who will be aboard the
ferry flight; and
(v) a complete ferry flight itinerary.
4. DELIVERY ACTIONS BY BOEING.
4.1. Schedule of Inspections. All FAA, Boeing, Customer and, if
required, U.S. Customs Bureau inspections will be scheduled by Boeing for
completion prior to delivery or departure of the Aircraft. Customer will be
informed of such schedules.
4.2. Schedule of Demonstration Flights. All FAA and Customer
demonstration flights will be scheduled by Boeing for completion prior to
delivery of the Aircraft.
4.3. Schedule for Customer's Flight Crew. Boeing will inform
Customer of the date that a flight crew is required for acceptance routines
associated with delivery of the Aircraft.
4.4. Fuel Provided by Boeing. Boeing will provide to Customer,
without charge, the amount of fuel shown in U.S. gallons in the table below for
the model of Aircraft being delivered and full capacity of engine oil at the
time of delivery or prior to the ferry flight of the Aircraft.
<TABLE>
<CAPTION>
Aircraft Model Fuel Provided
-------------- -------------
<S> <C>
737 1,000
747 4,000
757 1,600
767 2,000
777 3,000
</TABLE>
B-4
P.A. No. 2021
<PAGE> 15
Exhibit B to
Purchase Agreement No. 2021
Page 5
4.5. Flight Crew and Passenger Consumables. Boeing will provide food,
coat hangers, towels, toilet tissue, drinking cups and soap for the first
segment of the ferry flight for the Aircraft.
4.6. Delivery Papers, Documents and Data. Boeing will have available
at the time of delivery of the Aircraft all delivery papers, documents and data
for execution and delivery as described below. If title for the Aircraft will
be transferred to Customer through a Boeing sales subsidiary and if the
Aircraft will be registered with the FAA, Boeing will pre-position in Oklahoma
City, Oklahoma, for filing with the FAA at the time of delivery of the Aircraft
an executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of
title to the Aircraft from Boeing's sales subsidiary to Customer.
4.7. Delegation of Authority. If specifically requested in advance by
Customer, Boeing will present a certified copy of a Resolution of Boeing's
Board of Directors, designating and authorizing certain persons to act on its
behalf in connection with delivery of the Aircraft.
5. DELIVERY ACTIONS BY CUSTOMER.
5.1. Aircraft Radio Station License. At delivery Customer will
provide its Aircraft Radio Station License to be placed on board the Aircraft
following delivery.
5.2. Aircraft Flight Log. At delivery Customer will provide the
Aircraft Flight Log for the Aircraft.
5.3. Delegation of Authority. Customer will present to Boeing at
delivery of the Aircraft an original or certified copy of Customer's Delegation
of Authority designating and authorizing certain persons to act on its behalf
in connection with delivery of the specified Aircraft.
B-5
P.A. No. 2021
<PAGE> 16
CUSTOMER SUPPORT VARIABLES
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
Supplemental Exhibit CS1 to Purchase Agreement Number 2021
CS1
P.A. No. 2021
<PAGE> 17
CUSTOMER SUPPORT VARIABLES
relating to
BOEING MODEL 747-400F AIRCRAFT
Customer and Boeing will conduct planning conferences approximately 12 months
before delivery of the first Aircraft, or as otherwise agreed, to develop and
schedule a customized Customer Support Program to be furnished by Boeing in
support of the Aircraft.
The customized Customer Services Program will be based upon and equivalent to
the entitlements summarized below.
Part 1: Maintenance and Flight Training Programs; Operations Engineering
Support
1. Maintenance Training.
1.1. Airplane General Familiarization Course; 1 class of 24
students;
1.2. Mechanical/Power Plant Systems Course; 2 classes of 15
students;
1.3. Electrical Systems Course; 2 classes of 15 students;
1.4. Avionics Systems Course; 2 classes of 15 students;
1.5. Corrosion Prevention & Control Course; 1 class of 10
students;
1.6. Aircraft Rigging Course; 1 class of 6 students;
1.7. Composite Repair for Technicians - Basic; 1 class of 8
students;
1.8. Cargo Loading Course - 1 class of 10 students.
1.9. Training materials will be provided to each student. In
addition, one set of training materials used in Boeing's
training program, including visual aids, Computer Based
Training Courseware, instrument panel wall charts,
text/graphics, video programs, etc. will be provided for use
in Customer's own training program.
CS1-1
P.A. No. 2021
<PAGE> 18
2. Flight Training.
2.1. Transition training for 8 flight crews (16 pilots) in 2 classes;
The training will consist of ground school (utilizing computer based training),
fixed base simulator, full flight simulator and actual aircraft training on
Customer's Aircraft.
2.2. Flight Dispatcher training; 2 classes of 6 students;
2.3. Flight Attendant training; 2 classes of 12 students;
2.4. Performance Engineer training in Boeing's regularly scheduled
courses; schedules are published twice yearly.
2.5. Training materials will be provided to each student. In
addition, one set of training materials as used in Boeing's training program,
including visual aids, Computer Based Training Courseware, instrument panel
wall charts, text/graphics, video programs, etc. will be provided for use in
Customer's own training program.
2.6. Additional Flight Operations Services:
a. Boeing flight crew personnel to assist in ferrying the first
aircraft to Customer's main base;
b. Instructor pilots for 90 calendar days for revenue service
training assistance;
c. An instructor pilot to visit Customer 6 months after revenue
service training to review Customer's flight crew operations for
a 2 week period.
3. Planning Assistance.
3.1. Maintenance and Ground Operations.
Upon request, Boeing will visit Customer's main base to evaluate
aircraft maintenance facilities, develop recommendations and assist in
maintenance planning.
3.2. Spares.
a) Recommended Spares Parts List (RSPL) customized RSPL, data and
documents will be provided to identify spare parts required for
Customer's support program.
CS1-2
P.A. No. 2021
<PAGE> 19
b) Illustrated Parts Catalog (IPC) A customized IPC in accordance
with ATA 100 will be provided.
c) Provisioning Training Provisioning training will be provided for
Customer's personnel at Boeing's facilities, where documentation
and technical expertise are available. Training is focused on the
initial provisioning process and calculations reflected in the
Boeing RSPL.
d) Spares Provisioning Conference A provisioning conference will be
conducted, normally at Boeing's facilities where technical data
and personnel are available.
4. Technical Data and Documents
4.1. Flight Operations.
Airplane Flight Manual
Operations Manual
Quick Reference Handbook
Weight and Balance Manual
Dispatch Deviation Procedures Guide
Flight Crew Training Manual
Baggage/Cargo Loading Manual
Performance Engineer's Manual
Jet Transport Performance Methods
FMC Supplemental Data Document
Operational Performance Software
4.2. Maintenance.
Aircraft Maintenance Manual
Wiring Diagram Manual
Systems Schematics Manual
Connector Part Number Options Document
Structural Repair Manual
Overhaul/Component Maintenance Manual
Standard Overhaul Practices Manual
Standard Wiring Practices Manual
Non-Destructive Test Manual
Service Bulletins and Index
Corrosion Prevention Manual
Fault Isolation Manual
Fuel Measuring Stick Calibration Document
CS1-3
P.A. No. 2021
<PAGE> 20
Power Plant Buildup Manual Built-In Test Equipment
(BITE) Manual Central Maintenance Computer System
Reporting Table In Service Activity Report All
Operator Letters Service Letters Structural Item
Interim Advisory Maintenance Tips Combined Index
4.3. Maintenance Planning.
Maintenance Planning Data Document
Maintenance Planning Data Tasks Masterfile
Maintenance Task Cards and Index
Maintenance Inspection Intervals Report
4.4. Spares.
Illustrated Parts Catalog
Standards Books
4.5. Facilities and Equipment Planning.
Facilities and Equipment Planning Document
Special Tool and Ground Handling Equipment
Drawings and Index
Supplementary Tooling Documentation
System Test Equipment Document
Illustrated Tool and Equipment List/Manual
Aircraft Recovery Document
Airplane Characteristics for Airport Planning
Document
Airplane Rescue and Fire Fighting Document
Engine Handling Document
4.6. Computer Software Index.
4.7. Supplier Technical Data.
Service Bulletins
Ground Support Equipment Data
Provisioning Information
Component Maintenance/Overhaul Manuals and Index
Publications Index
Product Support Supplier Directory
CS1-4
P.A. No. 2021
<PAGE> 21
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
Supplemental Exhibit EE1 to Purchase Agreement Number 2021
EE1
P.A. No. 2021
<PAGE> 22
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
relating to
BOEING MODEL 747-400F AIRCRAFT
1. ENGINE ESCALATION.
(a) The Aircraft Basic Price of each Aircraft set forth in Table 1 of the
Purchase Agreement includes an aggregate price for CF6-80C2 engines and all
accessories, equipment and parts provided by the engine manufacturer. The
adjustment in Engine price applicable to each Aircraft (Engine Price Adjustment)
will be determined at the time of Aircraft delivery in accordance with the
following formula:
P(e) = (P(b) x CPI ) - P(b)
Base Year Index (CPI), as set forth in Table 1
of the Purchase Agreement
(b) The following definitions will apply herein:
P(e) = Engine Price Adjustment
P(b) = Engine Base Price (per Aircraft), as set forth in Table
1 of the Purchase Agreement.
CPI is the Composite Price Index, a value determined using the Bureau
of Labor Statistics, U.S. Department of Labor actual data in
accordance with the formula below. The Index values utilized in the
formula will be the numbers shown in the actual data for the ninth
month prior to the month of scheduled Aircraft delivery or the ninth
month prior to the Base Year Dollars month set forth in Table 1.
CPI = L + C + M + E
L = The Labor Index will be equal to the quotient of the
value associated with the Aircraft Delivery Month
divided by the value associated with the Base Year
Dollar month in "Hourly Earnings of Aircraft Engines and
Engine Parts Production Workers" SIC 3724, multiplied
by 100 and then by 30%.
EE1-1
P.A. No. 2021
<PAGE> 23
C = The Industrial Commodities Index will be equal to 30%
of the Producer Price Index for "all commodities other
than Farm and Foods," Code 3-15 associated with the
scheduled Aircraft delivery month.
M = The Metals and Metal Products Index will be equal to
30% of the Producer Price Index for "Metals and Metal
Products," Code 10 associated with the scheduled
Aircraft delivery month.
E = The Fuel Index will be equal to 10% of the Producer
Price Index for "Fuel and Related Products and Power,"
Code 5 associated with the scheduled Aircraft delivery
month.
The Engine Price Adjustment will not be made if it would result in a decrease in
the Engine Base Price.
(c) The values of the Average Hourly Earnings and Producer Price Indices used
will be those published as of a date 30 days prior to the scheduled Aircraft
delivery to Customer. Such values will be considered final and no Engine Price
Adjustment will be made after Aircraft delivery for any subsequent changes in
published Index values.
(d) In the event the Engine price escalation provisions are made non-enforceable
or otherwise rendered null and void by any agency of the United States
Government, or if the U.S. Department of Labor, Bureau of Labor Statistics (i)
substantially revises the methodology (in contrast to benchmark adjustments or
other corrections of previously published data) or (ii) discontinues publication
of any of the data referred to above, General Electric Company (GE) agrees to
meet jointly with Boeing and Customer, (to the extent such parties may lawfully
do so,) to jointly select a substitute for the revised or discontinued data;
such substitute data to lead in application to the same adjustment result,
insofar as possible, as would have been achieved by continuing the use of the
original data as it may have fluctuated had it not been revised or discontinued.
If such Engine price escalation provisions, methodology or data publication are
subsequently reinstated, Boeing will make adjustments consistent with the
agreements defined in this Supplemental Exhibit EE1.
NOTE: The factor (CPI divided by the base year index) by which the Engine
Base Price is to be multiplied will be expressed as a decimal and
rounded to the nearest thousandth. Any rounding of a number, as
required under this Supplemental Exhibit EE1 with respect to
escalation of the Engine price, will be accomplished as follows: if
the first digit of the portion to be dropped from the number to be
rounded is five or greater, the preceding digit will be raised to
the next higher number.
EE1-2
P.A. No. 2021
<PAGE> 24
2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.
Boeing has obtained from GE the right to extend to Customer the provisions of
GE's Warranty and Product Support Plan; subject, however, to Customer's
acceptance of the conditions set forth herein and in such Warranty and Product
Support Plan. Accordingly, Boeing hereby extends to Customer and Customer hereby
accepts the provisions of GE's Warranty and Product Support Plan hereinafter set
forth, and such Warranty and Product Support Plan shall apply to all CF6
turbofan engines including all Modules and Parts thereof (Engines) installed in
the Aircraft at the time of delivery or purchased from Boeing by Customer for
support of the Aircraft except that, if Customer and GE have executed a General
Terms Agreement, then the terms of that Agreement shall be substituted for and
supersede the below-stated provisions and such provisions shall be of no force
or effect and neither Boeing nor GE shall have any obligation arising therefrom.
In consideration for Boeing's extension of the GE Warranty and Product Support
Plan to Customer, Customer hereby releases and discharges Boeing from any and
all claims, obligations and liabilities whatsoever arising out of the purchase
or use of such CF6 turbofan engines and Customer hereby waives, releases and
renounces all its rights in all such claims, obligations and liabilities.
2.1. Title. GE warrants that at the date of delivery, GE has legal
title to and good and lawful right to sell its CF6 engine products and
furthermore warrants that such title is free and clear of all claims,
liens and encumbrances of any nature whatsoever.
2.2. Patents.
2.2.1. GE will handle all claims and defend any suit or
proceeding brought against Customer insofar as based on a
claim that any product or part furnished under this Agreement
constitutes an infringement of any patent of the United
States, and will pay all damages and costs awarded therein
against Customer. This paragraph will not apply to any product
or any part manufactured to Customer's design or to the
aircraft manufacturer's design. As to such product or part, GE
assumes no liability for patent infringement.
2.2.2. GE's liability hereunder is conditioned upon Customer
promptly notifying GE in writing and giving GE authority,
information and assistance (at GE's expense) for the defense
of any suit. In case said equipment or part is held in such
suit to constitute infringement and the use of said equipment
or part is enjoined, GE shall expeditiously, at its own
expense and at its option, either (1) procure for Customer the
rights to continue using said product or part; (2) replace the
same with satisfactory and noninfringing product or part; or
(3) modify the same so it becomes satisfactory and
noninfringing.
EE1-3
P.A. No. 2021
<PAGE> 25
The foregoing shall constitute the sole remedy of Customer
and the sole liability of GE for patent infringement.
2.2.3. The above provisions also apply to products which are
the same as those covered by this Agreement and are delivered
to Customer as part of the installed equipment on CF6 powered
Aircraft.
2.3. Initial Warranty. GE warrants that CF6 engine products will
conform to GE's applicable specifications and will be free from defects
in material and workmanship prior to Customer's initial use of such
products. The provisions of the GE CF6 Product Support Plan shall
apply.
2.4. Product Support Plan. GE warrants and extends to Customer the
provisions of GE's CF6 Product Support Plan in effect on the date of
the execution of this Purchase Agreement.
2.5. Warranty Pass On. GE will, upon the written request of Customer,
extend Warranty coverage to Engines, Modules and Parts sold by Customer
to another operator to the extent only, however, that such coverage
exists at the time of such sale and subject to the provisions of the
Warranty.
2.6. Limitations. THE PROVISIONS SET FORTH HEREIN ARE EXCLUSIVE AND ARE
IN LIEU OF ALL OTHER WARRANTIES WHETHER WRITTEN, ORAL OR IMPLIED. THERE
ARE NO IMPLIED WARRANTIES OF FITNESS OR MERCHANTABILITY. SAID
PROVISIONS SET FORTH THE MAXIMUM LIABILITY OF GE WITH RESPECT TO CLAIMS
OF ANY KIND, INCLUDING NEGLIGENCE, ARISING OUT OF MANUFACTURE, SALE,
POSSESSION, USE OR HANDLING OF THE PRODUCTS OR PARTS THEREOF OR
THEREFOR, AND IN NO EVENT SHALL GE'S LIABILITY TO CUSTOMER EXCEED THE
PURCHASE PRICE OF THE PRODUCT GIVING RISE TO CUSTOMER'S CLAIM OR
INCLUDE INCIDENTAL OR CONSEQUENTIAL DAMAGES.
EE1-4
P.A. No. 2021
<PAGE> 26
SERVICE LIFE POLICY COMPONENTS
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
Supplemental Exhibit SLP1 to Purchase Agreement Number 2021
SLP1
P.A. No. 2021
<PAGE> 27
COVERED SERVICE LIFE COMPONENTS
relating to
BOEING MODEL 747 AIRCRAFT
This is the listing of Covered Components for the Aircraft which relate to Part
3, Boeing Service Life Policy of Exhibit C, Product Assurance Document to the
AGTA and is a part of Purchase Agreement No. 2021.
1. Wing.
(a) Upper and lower wing skins and stiffeners between the forward and
rear wing spars.
(b) Wing spar webs, chords, and stiffeners.
(c) Inspar wing ribs.
(d) Inspar splice plates and fittings.
(e) Engine strut support fittings attached directly to wing primary
structure.
(f) Wing to body structural attachments.
(g) Wing landing gear support structure.
(h) Wing center section lower beams, spanwise beams and floor beams
but not the seat tracks attached to the beams.
(i) Spoiler support beam.
(j) Support structure in the wing for spoilers and spoiler actuators,
for aileron hinges and reaction links; and for leading edge
devices and trailing edge flaps and winglet support fittings./
(k) Trailing edge flap tracks and carriages.
(l) Aileron, leading edge device and trailing edge flap internal,
fixed attachment and actuator support structure.
SLP1-1
P.A. No. 2021
<PAGE> 28
2. Body.
(a) External surface skins and doublers, longitudinal stiffeners,
longerons and circumferential rings and frames between the
forward pressure bulkhead and the vertical stabilizer rear spar
bulkhead and structural support and enclosure for the APU but
excluding all system components and related installation and
connecting devices, insulation, lining, and decorative panels and
related installation and connecting devices.
(b) Window and windshield structure, but excluding the windows and
windshields.
(c) Fixed attachment structure of the passenger doors, cargo doors
and emergency exits, excluding door mechanisms and movable hinge
components. Sills and frames around the body openings for the
passenger doors, cargo doors and emergency exists, excluding
scuff plates and pressure seals.
(d) Nose wheel well structure including the wheel well walls,
pressure deck, bulkheads, and landing gear beam support
structure.
(e) Wheel well structure for the wing and body gears including the
ceiling, bulkheads and gear support structure.
(f) Floor beams and support posts in the control cab, upper deck
accommodation area and passenger cabin area, but excluding seat
tracks.
(g) Forward and aft pressure bulkheads.
(h) Keel structure between the wing front spar bulkhead and the main
gear wheel well aft bulkhead, including splices.
(i) Tension ties aft of upper deck accommodation area.
(j) Wing front, and rear spar support bulkheads, and vertical and
horizontal stabilizer front and rear spar support bulkheads
including terminal fittings but excluding all system components
and related installation and connecting devices, insulation,
lining, and decorative panels and related installation and
connecting devices.
(k) Support structure in the body for the stabilizer pivot and
stabilizer screw.
SLP1-2
P.A. No. 2021
<PAGE> 29
3. Vertical Tail.
(a) Skins and stiffeners between the auxiliary and rear spars.
(b) Front, rear and auxiliary spar chords, webs and stiffeners and
attachment fittings between vertical stabilizer and body.
(c) Inspar ribs.
(d) Stabilizer to body attachment fittings and auxiliary spar link.
(e) Support structure in the vertical stabilizer for rudder hinges,
reaction links and actuator.
(f) Rudder internal, fixed attachment and actuator support structure.
(g) Rudder hinges and supporting ribs, excluding bearings.
4. Horizontal Stabilizer.
(a) Upper and lower skins and stiffeners between the auxiliary and
rear spars.
(b) Front, rear and auxiliary spar chords, webs and stiffeners.
(c) Inspar ribs.
(d) Stabilizer center section and fittings splicing to outboard
stabilizer including pivot and screw support structure.
(e) Support structure in the horizontal stabilizer for the elevator
hinges, reaction links and actuators.
(f) Elevator internal, fixed attachment and actuator support
structure.
5. Engine Strut.
(a) Strut external surface skin and doublers and stiffeners.
(b) Internal strut chords, frames and bulkheads.
(c) Strut to wing fittings and diagonal brace.
(d) Engine mount support fittings attached directly to strut
structure.
SLP1-3
P.A. No. 2021
<PAGE> 30
(e) For Aircraft equipped with General Electric or Pratt & Whitney
engines only, the engine-mounted support fittings.
6. Main Landing Gear (Wing Mounted).
(a) Outer cylinder.
(b) Inner cylinder.
(c) Truck beam.
(d) Axles.
(e) Walking beam and trunnion fork.
(f) Drag brace.
(g) Upper and lower side struts including spindles and universals.
(h) Orifice support.
7. Main Landing Gear (Body Mounted).
(a) Outer cylinder.
(b) Inner cylinder.
(c) Truck beam.
(d) Axles.
(e) Upper and lower drag struts including spindles and universals.
(f) Side brace.
(g) Orifice support.
8. Nose Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder.
(c) Orifice support tube.
SLP1-4
P.A. No. 2021
<PAGE> 31
(d) Upper and lower drag strut, including lock links.
(e) Side struts.
(f) Upper and lower tripod.
(g) Steering plates and steering collar.
(h) Torsion links.
(i) Axles.
NOTE: The Service Life Policy does not cover any bearings, bolts, bushings,
clamps, brackets, actuating mechanisms or latching mechanisms used in or
on the Covered Components.
SLP1-5
P.A. No. 2021
<PAGE> 32
2021-1
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Seller Purchased Equipment
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between The
Boeing Company (Boeing) and Atlas Air, Inc. (Customer) relating to
Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
Definition of Terms:
Seller Purchased Equipment (SPE): Buyer Furnished Equipment (BFE) that Boeing
purchases for Customer.
Developmental Buyer Furnished Equipment (DBFE): BFE not previously certified for
installation on the same model aircraft.
Developmental Seller Purchased Equipment (DSPE): DBFE which is converted to SPE.
This Letter Agreement does not include developmental avionics. Developmental
avionics are avionics that have not been previously certified for installation
on the same model aircraft.
1. Price.
Advance Payments. An estimated SPE price will be included in the Advance
Payment Base Price for the purpose of establishing the advance payments for the
Aircraft. The estimated price of this SPE for the Aircraft is United States [ ]
expressed in 1995 dollars.
Aircraft Price. The Aircraft Price will be adjusted to reflect (i) the
actual costs charged Boeing by the SPE suppliers, (ii) a handling fee of [ ] of
such costs and (iii)
P.A. No. 2021
Seller Purchased Equipment
<PAGE> 33
2021-1
Page 2
transportation charges. If all DBFE, except for developmental avionics, is
converted to SPE, Boeing will waive the handling fee for all SPE.
2. Responsibilities.
2.1. Customer is responsible for:
(i) selecting the supplier on or before:
N/A (SFE) for galleys
June 6, 1997 for seats;
(ii) selecting a FAA certifiable part; and
(iii) providing to Boeing the SPE part specification/Customer
requirements.
2.2. Boeing is responsible for:
(i) placing and managing the purchase order with the supplier;
(ii) coordinating with the suppliers on technical issues;
(iii) ensuring that the delivered SPE complies with the part
specification;
(iv) obtaining certification of the Aircraft with the SPE installed;
and
(v) obtaining for Customer the supplier's standard warranty for the
SPE. SPE is deemed to be BFE for purposes of Part 2 of Exhibit
C, the Product Assurance Document.
3. Supplier Selection For SPE Galleys and Seats.
In addition to those responsibilities described above, for SPE galleys and
seats the following provisions apply with respect to Customer's selection of
suppliers:
Galley Requirements. Customer will provide Boeing the definitive galley
configuration requirements not later than June 6, 1997.
P.A. No. 2021
Seller Purchased Equipment
<PAGE> 34
2021-1
Page 3
Bidder's List. For information purposes, Boeing will submit to Customer a
bidder's list of existing suppliers of seats and galleys within 120 days of the
supplier selection date shown above.
Request for Quotation (RFQ). Approximately 90 days prior to the supplier
selection date, Boeing will issue its RFQ inviting potential bidders to submit
bids for the galleys and seats within 30 days of the selection date.
Recommended Bidders. Not later than 15 days prior to the supplier selection
date, Boeing will submit to Customer a list of recommended bidders from which to
choose a supplier for the galleys and seats. The recommendation is based on an
evaluation of the bids submitted using price, weight, warranty and schedule as
the criteria.
Supplier Selection. If Customer selects a seat or galley supplier that is
not on the Boeing recommended list, such seat or galley will become BFE and the
provisions of Exhibit A, Buyer Furnished Equipment Provisions Document, of the
AGTA will apply.
4. Changes.
After this Letter Agreement is signed, changes to SPE may only be made by
and between Boeing and the suppliers. Customer's contacts with SPE suppliers
relating to design (including selection of materials and colors), weights,
prices or schedules are for informational purposes only. If Customer wants any
changes made, requests must be made directly to Boeing for coordination with the
supplier.
5. Proprietary Rights.
Boeing's obligation to purchase SPE will not impose upon Boeing any
obligation to compensate Customer or any supplier for any proprietary rights
Customer may have in the design of the SPE.
6. Remedies.
If Customer does not comply with the obligations above, Boeing may:
(i) delay delivery of the Aircraft;
(ii) deliver the Aircraft without installing the SPE;
P.A. No. 2021
Seller Purchased Equipment
<PAGE> 35
2021-1
Page 4
(iii) substitute a comparable part and invoice Customer for the cost;
(iv) increase the Aircraft Price by the amount of Boeing's additional
costs attributable to such noncompliance.
7. Customer's Indemnification of Boeing.
Except as provided in Article 8.1.1 of AGTA-TLS, Customer will indemnify
and hold harmless Boeing from and against all claims and liabilities, including
costs and expenses (including attorneys' fees) incident thereto or incident to
successfully establishing the right to indemnification, for injury to or death
of any person or persons, including employees of Customer but not employees of
Boeing, or for loss of or damage to any property, including Aircraft (but not
the Aircraft before delivery), arising out of or in any way connected with any
nonconformance or defect in any SPE and whether or not arising in tort or
occasioned in whole or in part by the negligence of Boeing. This indemnity will
not apply with respect to any nonconformance or defect caused solely by Boeing's
installation of the SPE.
P.A. No. 2021
Seller Purchased Equipment
<PAGE> 36
2021-1
Page 5
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
----------------------------
Its Attorney-In-Fact
----------------------------
ACCEPTED AND AGREED TO this
Date: June 6 , 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
----------------------------
Its CEO
----------------------------
P.A. No. 2021
Seller Purchased Equipment
<PAGE> 37
2021-2
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Option Aircraft
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends the Purchase Agreement. All terms used but not
defined in this Letter Agreement have the same meaning as in the Purchase
Agreement. Boeing agrees to manufacture and sell to Customer additional Model
747-400F aircraft as Option Aircraft. The delivery months, number of aircraft,
Advance Payment Base Price per aircraft, advance payment schedule, and option
exercise dates are listed in the Attachment to this Letter Agreement.
1. Aircraft Description and Changes
1.1. Aircraft Description: The Option Aircraft are described by the Detail
Specification listed in the Attachment.
1.2. Changes: The Detail Specification will be revised to include:
(i) Changes applicable to the basic Model 747-400F aircraft which
are developed by Boeing between the date of the Detail
Specification and the signing of the definitive agreement to
purchase the Option Aircraft;
(ii) Changes required to obtain required regulatory certificates; and
(iii) Changes mutually agreed upon.
2. Price
2.1. The pricing elements of the Option Aircraft are listed in the
Attachment.
2.2. Price Adjustments.
P.A. No. 2021
Option Aircraft
<PAGE> 38
2021-2
Page 2
2.2.1. Optional Features. The price for Optional Features selected for the
Option Aircraft will be adjusted to Boeing's current prices as of the date of
execution of the definitive agreement for the Option Aircraft.
2.2.2. Escalation Adjustments. The Airframe Price and the price of Optional
Features for Option Aircraft delivering before January, 2003, will be escalated
on the same basis as the Aircraft.
The engine manufacturer's current escalation provisions, listed in Exhibit
Supplement EE1 have been estimated to the months of scheduled delivery using
commercial forecasts to calculate the Advance Payment Base Price listed in the
Attachment to this Letter Agreement. The engine escalation provisions will be
revised if they are changed by the engine manufacturer prior to the signing of a
definitive agreement for the Option Aircraft.
2.2.3. Base Price Adjustments. The Airframe Price and the Engine Price of
the Option Aircraft delivering before [ ], will be adjusted using current
commercial forecasts as of the date of signing of the definitive agreement for
the Option Aircraft.
2.2.4. Prices for Long Lead Time Aircraft. Boeing and the engine
manufacturer have not established prices and escalation provisions for Model
747-400F aircraft and engines for delivery in the year [ ] and after. When
prices and the pricing bases are established for the Model 747-400F aircraft
delivering in the year [ ] and after, the information listed in the Attachment
will be appropriately amended.
3. Payment.
3.1. Customer will pay a deposit to Boeing in the amount shown in the
Attachment for each Option Aircraft (Deposit), on the date of this Letter
Agreement. If Customer exercises an option, the Deposit will be credited against
the first advance payment due. If Customer does not exercise an option, Boeing
will retain the Deposit for that Option Aircraft.
3.2. Following option exercise, advance payments in the amounts and at the
times listed in the Attachment will be payable for the Option Aircraft. The
remainder of the Aircraft Price for the Option Aircraft will be paid at the time
of delivery.
P.A. No. 2021
Option Aircraft
<PAGE> 39
2021-2
Page 3
4. Option Exercise.
4.1. Customer may exercise an option by giving written notice to Boeing on
or before the option exercise dates listed in the Attachment (Option Exercise
Date).
4.2. If Boeing must make production decisions which are dependent on
Customer exercising an option earlier than the Option Exercise Date, Boeing may
accelerate the Option Exercise Date subject to Customer's agreement. If Boeing
and Customer fail to agree to a revised Option Exercise Date, either party may
terminate the option and Boeing will refund to Customer, without interest, any
Deposit and advance payments received by Boeing with respect to the terminated
Aircraft.
P.A. No. 2021
Option Aircraft
<PAGE> 40
2021-2
Page 4
5. Contract Terms.
Boeing and Customer will use their best efforts to reach a definitive agreement
for the purchase of an Option Aircraft, including the terms and conditions
contained in this Letter Agreement, in the Purchase Agreement, and other terms
and conditions as may be agreed upon. In the event the parties have not entered
into a definitive agreement within 30 days following option exercise, either
party may terminate the purchase of such Option Aircraft by giving written
notice to the other within 5 days.
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
-----------------------------
Its Attorney-In-Fact
-----------------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
-----------------------------
Its CEO
-----------------------------
Attachment
P.A. No. 2021
Option Aircraft
<PAGE> 41
<TABLE>
<CAPTION>
Attachment 1GE to
Letter Agreement 2021-2
Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 747-400F 850,000 Detail Specification: D019U002(5/7/97)
Engine Model/Thrust Level: CF6-80C2BIF 57,900 Price Base Year: Jul-95
Airframe Base Price: [ ]
Optional Features: [ ] Airframe Escalation Data:
-------- ------------------------
Sub-Total of Airframe and Features: [ ] Base Year Index (ECI): 130.10
Engine Price (Per Aircraft): [ ] Base Year Index (ICI): 123.60
Buyer Furnished Equipment (BFE) Estimate [ ]
Seller Purchased Equipment (SPE) Estimate: [ ] Engine Escalation Data:
Aircraft Basic Price (Excluding BFE/SPE): [ ] Base Year Index (CPI): 129.660
Refundable Deposit per A/C at Proposal Acceptance: [ ]
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Advamce Payment Per Aircraft
- ------------------------------------------------------------------------------------------------------------------------------------
Escalation Escalation Escalation Escalation Estimate (Amts. Due/Mos. Prior to Delivery):
- ------------------------------------------------------------------------------------------------------------------------------------
Delivery Number of Factor Factor Credit Adv Payment Base At Signing 24 Mos. 21/18/15/12/9/6 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Mos.
- ------------------------------------------------------------------------------------------------------------------------------------
Date Aircraft (Airframe) (Engine) Memorandum Price Per A/P 1% 4% 5% 35%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jul-99 1 1.1029 1.08 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Aug-99 1 1.108 1.084 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Sep-99 1 1.1126 1.087 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
May-00 1 1.1505 1.096 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Jul-00 1 1.1587 1.103 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Mar-01 1 1.1848 1.119 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
May-01 1 1.1912 1.122 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Jul-01 1 1.1954 1.134 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Aug-01 1 1.1956 1.137 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Mar-02 1 1.1986 1.15 [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 42
Attachment 1GE to
Letter Agreement 2021-2
Aircraft Delivery, Description, Price and Advance Payments
<TABLE>
<CAPTION>
Delivery Option Exercise
Date Due on or
Before the
Following Date
- -------------
<S> <C>
July-99 [ ]
- -------------
Aug-99 [ ]
- -------------
Sep-99 [ ]
- -------------
May-00 [ ]
- -------------
Jul-00 [ ]
- -------------
Mar-01 [ ]
- -------------
May-01 [ ]
- -------------
Jul-01 [ ]
- -------------
Aug-01 [ ]
- -------------
Mar-02 [ ]
- -------------
</TABLE>
Page 2
<PAGE> 43
2021-3
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Escalation Sharing
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
1. Commitment.
Boeing agrees to share one-half of the escalation, up to a maximum of 3
percent per year, in each of the years 1997 and 1998 according to the terms in
paragraph 2 below. This applies to any of Customer's aircraft which are
scheduled to deliver after December 31, 1996. For the purpose of this Letter
Agreement such aircraft are referred to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement will be made in
accordance with Exhibit D to the AGTA between Boeing and Customer, using actual
escalation indices published for the applicable period.
2. Escalation Credit Memo.
2.1. Calculation - Eligible Aircraft Delivering in 1997.
At the time of delivery of each Eligible Aircraft delivering in 1997,
Boeing will issue to Customer a credit memorandum (the 1997 Credit Memorandum)
which will be applied to the Aircraft Price of such Eligible Aircraft. The 1997
Credit Memorandum is calculated as follows:
P.A. No. 2021
Escalation Sharing
<PAGE> 44
2021-3
Page 2
One-half of the difference between the airframe and special features
escalation calculated for a December 1996 aircraft delivery position, and
the escalation calculated for the month of delivery of the 1997 Eligible
Aircraft; provided however,
The maximum amount of the 1997 Credit Memorandum does not exceed 3 percent
pursuant to the following calculation:
At the time of the delivery of the 1997 Eligible Aircraft, the Base
Airframe Price and Special Features prices will be escalated to a December
1996 delivery month. The December 1996 escalated price will be referred to
in the following formula as the "December 1996 Index Amount". The 1997
Credit Memorandum for the 1997 Eligible Aircraft will not exceed an amount
equal to:
the December 1996 Index Amount times 0.03
2.2. Calculation - Eligible Aircraft Delivering in 1998.
At the time of delivery of each Eligible Aircraft delivering in 1998,
Boeing will issue to Customer a credit memorandum (the 1998 Credit Memorandum)
which shall be applied to the Aircraft Price of such Eligible Aircraft. The 1998
Credit Memorandum shall be calculated as follows:
(i) One-half of the difference between the airframe and special
features escalation calculated for a December 1997 aircraft delivery position,
and the escalation calculated for the month of delivery of the 1998 Eligible
Aircraft;
provided however,
The maximum amount of the 1998 Credit Memorandum shall not exceed 3 percent
pursuant to the following calculation:
At the time of the delivery of the 1998 Eligible Aircraft, the Base
Airframe Price and Special Features prices will be escalated to a
December 1997 delivery month. The December 1997 escalated price will
be referred to in the following formula as the "December 1997 Index
Amount." The 1998 Credit Memorandum for the 1998 Eligible Aircraft
will not exceed an amount equal to:
the December 1997 Index Amount times 0.03;
P.A. No. 2021
Escalation Sharing
<PAGE> 45
2021-3
Page 3
and,
(ii) The amount calculated above in paragraph 2.1 for the 1997
Credit Memorandum calculated through December, 1997.
2.3. Eligible Aircraft Delivering after 1998.
For Eligible Aircraft delivering after the calendar year 1998, the
amount of the Credit Memorandum will be the amount calculated pursuant to
paragraph 2.2 above through December 1998. This credit memorandum amount will
be escalated from December 1998 to the month of delivery.
2.4. Advance Payment Base Price.
It is agreed that the Advance Payment Base Prices for the Eligible Aircraft
set forth in the Purchase Agreement include an estimate for the escalation
sharing Credit Memorandum pursuant to this Letter Agreement.
3. Escalating Credits (STE).
It is agreed that the credit memoranda specified in Letter Agreement No.
6-1162-DSF-083 which is expressed as a percentage of the escalated Aircraft
Price of the Eligible Aircraft, will be calculated using the same factors used
to develop the adjusted airframe escalation pursuant to this Letter Agreement.
P.A. No. 2021
Escalation Sharing
<PAGE> 46
2021-3
Page 4
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
--------------------------
Its Attorney-In-Fact
--------------------------
ACCEPTED AND AGREED TO this
Date: June 6 , 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
Attachment
P.A. No. 2021
Escalation Sharing
<PAGE> 47
2021-4
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Demonstration Flights
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement shall have the same meaning as in
the Purchase Agreement.
Definition of Terms:
Correction Costs: Customer's direct labor costs and the cost of any material
required to correct a Flight Discrepancy where direct labor costs are equal to
the warranty labor rate in effect between the parties at the time such labor is
expended.
Flight Discrepancy: A failure or malfunction of an Aircraft, or the accessories,
equipment or parts installed on the Aircraft which results from a defect in the
Aircraft, Boeing Product, engine or Supplier Product or a nonconformance to the
Detail Specification for the Aircraft.
The AGTA provides that each aircraft will be test flown prior to delivery for
the purpose of demonstrating the functioning of such Aircraft and its equipment
to Customer; however, Customer may elect to waive this test flight. For each
test flight waived, Boeing agrees to provide Customer an amount of jet fuel at
delivery that, in addition to the standard fuel entitlement, totals the
following amount of fuel:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Aircraft Model Total Fuel Entitlement
(U.S. Gallons)
- -------------------------------------------------------------------------
<S> <C>
737 Full tank
- -------------------------------------------------------------------------
747 22,000
- -------------------------------------------------------------------------
757 8,000
- -------------------------------------------------------------------------
767 9,000
- -------------------------------------------------------------------------
777 14,000
- -------------------------------------------------------------------------
</TABLE>
P.A. No. 2021
Demo Flight Waiver
<PAGE> 48
2021-4
Page 2
Further, Boeing agrees to reimburse Customer for any Correction Costs incurred
as a result of the discovery of a Flight Discrepancy during the first flight of
the aircraft by Customer following delivery to the extent such Correction Costs
are not covered under a warranty provided by Boeing, the engine manufacturer or
any of Boeing's suppliers.
Should a Flight Discrepancy be detected by Customer which requires the return of
the Aircraft to Boeing's facilities at Seattle, Washington, so that Boeing may
correct such Flight Discrepancy, Boeing and Customer agree that title to and
risk of loss of such Aircraft will remain with Customer. In addition, it is
agreed that Boeing will have responsibility for the Aircraft while it is on the
ground at Boeing's facilities in Seattle, Washington, as is chargeable by law to
a bailee for mutual benefit, but Boeing shall not be chargeable for loss of use.
To be reimbursed for Correction Costs, Customer shall submit a written itemized
statement describing any flight discrepancies and indicating the Correction Cost
incurred by Customer for each discrepancy. This request must be submitted to
Boeing's Contracts Regional Director at Renton, Washington, within ninety (90)
days after the first flight by Customer.
P.A. No. 2021
Demo Flight Waiver
<PAGE> 49
2021-4
Page 3
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
-------------------------
Its Attorney-In-Fact
-------------------------
ACCEPTED AND AGREED TO this
Date: June 6 , 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
Attachment
P.A. No. 2021
Demo Flight Waiver
<PAGE> 50
2021-5
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Spares Initial Provisioning
Reference: Purchase Agreement 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends the Purchase Agreement. All terms used but not
defined in this Letter Agreement have the same meaning as in the Purchase
Agreement.
1. Applicability.
This letter will apply to initial provisioning for the Model 747-400F Aircraft
covered by the Purchase Agreement.
2. Initial Provisioning Meeting.
Boeing will conduct an initial provisioning meeting (Initial
Provisioning Meeting) with Customer to establish mutually agreeable procedures
to accomplish Customer's initial provisioning of spare parts for the Aircraft.
The parties will agree, during the Initial Provisioning Meeting on the
operational data to be provided by Customer for Boeing's use in preparing its
quantity recommendations for initial provisioning of spare parts for the
Aircraft, exclusive of special tools, ground support equipment, engines and
engine parts (Provisioning Items). Such operational data to be provided by
Customer will be the data described in Section E of Boeing Manual D6-49090,
entitled "Initial Provisioning Implementation Manual, Boeing Model 757, 767,
777, 747-400 and 737-300, -400 and -500" (Boeing Initial Provisioning
Implementation Manual) which will be furnished to Customer prior to the Initial
Provisioning Meeting. The parties will also agree on the provisioning
documentation to be provided by Boeing. Such data will be essentially in
accordance with the provisions of Chapter 1 of ATA International Specification
2000, Revision 1, dated April 20, 1989, as described in Boeing Initial
Provisioning Implementation Manual
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D6-49090 (Provisioning Data). Boeing will provide instruction in the use of the
initial provisioning documentation. This instruction will be provided in
conjunction with the Initial Provisioning Meeting. In addition, the parties will
discuss spares ordering procedures and other matters related to the provisioning
for the Aircraft. The time and location for such Initial Provisioning Meeting
will be mutually agreed upon between the parties; however, Boeing and Customer
will use their best efforts to convene such meeting within 30 days after
execution of the Purchase Agreement.
3. Initial Provisioning Documentation.
3.1. Provisioning Data. Boeing will furnish Provisioning Data to
Customer on or about July 1, 1997. The Provisioning Data will be as complete as
possible and will cover Provisioning Items selected by Boeing for review by
Customer for initial provisioning for the Aircraft. The Provisioning Data will
set forth the prices for Provisioning Items which are Boeing Spare Parts (spare
parts that are manufactured by Boeing or pursuant to Boeing detailed design with
Boeing authorization) and such prices will be firm and remain in effect until
the date or dates set forth in Paragraph 4.1 below, by which orders must be
placed with Boeing. Boeing will, from time to time, until a date approximately
90 days following delivery of the last Aircraft or until the delivery
configuration of each of the Aircraft is reflected in the Provisioning Data,
whichever is later, furnish to Customer revisions to the Provisioning Data.
3.2. Provisioning IPC. Boeing will, on or about July 1, 1997, furnish
to Buyer a Boeing Illustrated Parts Catalog (IPC), (Provisioning IPC). The
Provisioning IPC will be as complete as possible and will cover Provisioning
Items selected by Boeing for review by Customer for initial provisioning for the
Aircraft. Boeing will, from time to time, until a date approximately 90 days
following delivery of the last Aircraft, or until the delivery configuration of
each of the Aircraft is reflected in the Provisioning IPC, whichever is later,
furnish to Customer revisions to the Provisioning IPC.
3.3. Buyer Furnished Equipment (BFE) Provisioning Data.
3.3.1. Boeing's Responsibility. Boeing will include BFE end
items in the Provisioning Data and Provisioning IPC for BFE installed on the
Aircraft provided such equipment has been installed by Boeing on other Boeing
aircraft of the same model and Boeing has sufficient data on the BFE.
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3.3.2. Customer's Responsibility. Customer will be responsible
for ensuring BFE data is provided to Boeing by the BFE supplier in a format
acceptable to Boeing for BFE not covered by 3.3.1 above. If the data is not
provided to Boeing in a timely manner and in a format acceptable to Boeing, such
BFE equipment will not be included in Boeing's Provisioning Data or IPC.
3.4. Other Data. Boeing will submit to Customer listings of Raw
Materials, Standard Parts and Bulk Materials to be used by Customer in the
maintenance and repair of the Aircraft.
4. Purchase from Boeing of Spare Parts as Initial Provisioning for the
Aircraft.
4.1. Boeing Spare Parts. Customer will place orders for Provisioning
Items by September 1, 1997; provided, however, that in those instances where
Boeing submits any revision to the Provisioning Data, Customer will place orders
for Boeing Spare Parts covered by such revision within 60 days following the
date of such submittal. At Customer's request, Boeing will process "controlled
shipments" by shipping full or partial quantities of an order on a schedule
specified by Customer, provided the final shipment is made no later han 24
months after receipt of the order.
4.2. Vendor Provisioning Items. Customer may place orders with Boeing
for Provisioning Items which are manufactured by vendors or to their detailed
design and are covered by the Provisioning Data as initial provisioning for the
Aircraft. The price to Customer for any such vendor Provisioning Item will be
112% of the vendor's quoted price to Boeing therefor. If Customer elects to
purchase such vendor Provisioning Items from Boeing, Customer will place its
orders therefor in accordance with the provisions of Paragraph 4.1 above.
4.3. Ground Support Equipment and Special Tools. Customer may place
orders with Boeing for ground support equipment (GSE) and special tools
manufactured by vendors which Customer determines it will initially require for
maintenance, overhaul and servicing of the Aircraft and/or engines. The price to
Customer for such GSE or special tools will be one hundred twelve percent (112%)
of the vendor's quoted price to Boeing therefor. If Customer elects to purchase
such GSE and special tools from Boeing, Customer will place its orders therefor
by the date set forth in Paragraph 4.1 above, or such later date as the parties
may mutually agree.
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4.4. Spare Engines and Engine Spare Parts. Customer may place orders
with Boeing for spare engines and/or engine spare parts which Customer
determines it will initially require for support of the Aircraft or for
maintenance and overhaul of the engines. The price to Customer for such spare
engines or such engine spare parts, will be 105% of the engine manufacturer's
quoted price to Boeing for the engine, and 112% of the engine manufacturer's
quoted price to Boeing for the engine spare parts. If Customer elects to
purchase such spare engines or engine spare parts through Boeing, Customer will
place its orders on a date to be mutually agreed upon during the Initial
Provisioning Meeting.
4.5. QEC Kits. Boeing will, on or about May 1, 1997, furnish to
Customer a listing of all components which could be included in the Quick Engine
Change (QEC) kits which may be purchased by Customer from Boeing. Customer
agrees to review such listing and indicate by marking on one copy of such
listing those components that Customer desires included in its QEC kits.
Customer will return such marked copy to Boeing within 30 days after Customer's
receipt of such listing. Within 30 days after Boeing's receipt of such marked
copy, Boeing will republish such listing to reflect only those components
selected by Customer and will provide copies of such republished listing to
Customer. Boeing will from time to time furnish revisions to such republished
listing until a date approximately 90 days after delivery of the last QEC kit
ordered by Customer for the Aircraft. Boeing will furnish to Customer as soon as
practicable a statement setting forth a firm price for the QEC kit configuration
selected by Customer. Customer agrees to place orders with Boeing for the QEC
kits for the Aircraft by July 1, 1997.
4.6. Terms and Conditions. Applicable terms and conditions of the
Customer Services General Terms Agreement between Boeing and Customer, if
executed, or the standard terms and conditions on a Spares Customer Account
Terms and Conditions form will be applicable to Provisioning Items ordered by
Customer from Boeing for the Aircraft.
5. Delivery.
Boeing will, insofar as reasonably possible, deliver to Customer the
Spare Parts ordered by Customer in accordance with the provisions of this letter
on dates reasonably calculated to conform to Customer's anticipated needs in
view of the scheduled deliveries of the Aircraft. Customer and Boeing will agree
upon the date to begin delivery of the Provisioning Spare Parts ordered in
accordance with this letter. Where appropriate, Boeing will arrange for shipment
of such Spare Parts, which are manufactured by vendors, directly to Customer
from the applicable vendor's facility. The routing and method of shipment for
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initial deliveries and all subsequent deliveries of such Spare Parts will be as
mutually agreed between Boeing and Customer.
6. Substitution for Obsolete Spare Parts.
6.1. Obligation to Substitute. In the event that, prior to delivery of
the first Aircraft pursuant to the Purchase Agreement, any Spare Part purchased
by Customer from Boeing in accordance with this letter is rendered obsolete or
unusable due to the redesign of the Aircraft or of any accessory, equipment or
part therefor, (other than a redesign at Customer's request), Boeing will
deliver to Customer new and usable Spare Parts in substitution for such obsolete
or unusable Spare Parts and Customer will return the obsolete or unusable Spare
Parts to Boeing. Boeing will credit Customer's account with Boeing with the
price paid by Customer for any such obsolete or unusable Spare Part and will
invoice Customer for the purchase price of any such substitute Spare Part
delivered to Customer.
6.2. Delivery of Obsolete Spare Parts and Substitutes Therefor.
Obsolete or unusable Spare Parts returned by Customer pursuant to Paragraph 6
will be delivered to Boeing at its Seattle Distribution Center, or such other
destination as Boeing may reasonably designate. Spare Parts substituted for such
returned obsolete or unusable Spare Parts will be delivered to Customer at
Boeing's Seattle Distribution Center, or such other Boeing shipping point as
Boeing may reasonably designate. Boeing will pay the freight charges for
shipment from Customer to Boeing of any such obsolete or unusable Spare Part and
for shipment from Boeing to Customer of any such substitute Spare Part.
7. Repurchase of Provisioning Items.
7.1. Obligation to Repurchase. During a period commencing 1 year after
delivery of the first Aircraft under the Purchase Agreement, and ending 5 years
after such delivery, Boeing will, upon receipt of Customer's written request and
subject to the exceptions in Paragraph 7.2 below, repurchase unused and
undamaged Provisioning Items which (i) were recommended by Boeing in the
Provisioning Data as initial provisioning for the Aircraft, (ii) were purchased
by Customer from Boeing, and (iii) are surplus to Customer's needs.
7.2. Exceptions. Boeing will not be obligated under Paragraph 7.1
above, to repurchase any of the following: (i) quantities of Provisioning Items
in excess of those quantities recommended by Boeing in the Provisioning Data for
the Aircraft, (ii) QEC Kits, Bulk Material Kits, Raw Material Kits, Service
Bulletin Kits, Standards Kits and compo-
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nents thereof (except those components listed separately in the Provisioning
Data), (iii) Provisioning Items for which an Order was received by Boeing more
than 5 months after delivery of the last Aircraft, (iv) Provisioning Items which
have become obsolete or have been replaced by other Provisioning Items as a
result of (a) Customer's modification of the Aircraft or (b) design improvements
by Boeing or the vendor (other than Provisioning Items which have become
obsolete because of a defect in design if such defect has not been remedied by
an offer by Boeing or the vendor to provide no charge retrofit kits or
replacement parts which correct such defect), and (v) Provisioning Items which
become excess as a result of a change in Customer's operating parameters,
provided to Boeing pursuant to the Initial Provisioning meeting in Paragraph 2,
which were the basis of Boeing's initial provisioning recommendations for the
Aircraft.
7.3. Notification and Format. Customer will notify Boeing, in writing,
when Customer desires to return Provisioning Items which Customer's review
indicates are eligible for repurchase by Boeing under the provisions of this
Paragraph 7. Customer's notification will include a detailed summary, in part
number sequence, of the Provisioning Items Customer desires to return. Such
summary will be in the form of listings, tapes, diskettes or other media as may
be mutually agreed between Boeing and Customer, and will include part number,
nomenclature, purchase order number, purchase order date and quantity to be
returned. Within 5 business days after receipt of Customer's notification,
Boeing will advise Customer, in writing, when Boeing's review of such summary
will be completed.
7.4. Review and Acceptance by Boeing. Upon completion of Boeing's
review of any detailed summary submitted by Customer pursuant to Paragraph 7.3,
Boeing will issue to Customer a Material Return Authorization (MRA) for those
Provisioning Items Boeing agrees are eligible for repurchase in accordance with
this Paragraph 7. Boeing will advise Customer of the reason that any Spare Part
included in Customer's detailed summary is not eligible for return. Boeing's MRA
will state the date by which Provisioning Items listed in the MRA must be
redelivered to Boeing and Customer will arrange for shipment of such
Provisioning Items accordingly.
7.5. Price and Payment. The price of each Provisioning Item repurchased
by Boeing pursuant to this Paragraph 7 will be an amount equal to 100% of the
original invoice price thereof. In the case of Provisioning Items manufactured
by a vendor which were purchased pursuant to Paragraph 4, the repurchase price
will not include Boeing's 12% handling charge. Boeing will pay the repurchase
price by issuing a credit memorandum in favor of Customer which may be applied
against amounts due Boeing for the purchase of aircraft, Spare Parts, services
or the licensing of data.
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7.6. Delivery of Provisioning Items. Provisioning Items repurchased by
Boeing pursuant to this Paragraph 7 will be delivered to Boeing F.O.B. its
Seattle Distribution Center, or such other destination as Boeing may reasonably
designate. Customer will pay the freight charges for the shipment from Customer
to Boeing of any such Provisioning Items.
8. Obsolete Spare Parts and Surplus Provisioning Items - Title and Risk
of Loss.
Title to and risk of loss of any obsolete or unusable Spare Parts
returned to Boeing pursuant to Paragraph 6, will pass to Boeing upon delivery
thereof to Boeing. Title to and risk of loss of any Spare Part substituted for
an obsolete or unusable Spare Part pursuant to Paragraph 6, will pass to
Customer upon delivery thereof to Customer. Title to and risk of loss of any
Provisioning Item repurchased by Boeing pursuant to Paragraph 7, will pass to
Boeing upon delivery thereof to Boeing. With respect to the obsolete or unusable
Spare Parts which may be returned to Boeing and the Spare Parts substituted
therefor, pursuant to Paragraph 6, and the Provisioning Items which may be
repurchased by Boeing, pursuant to Paragraph 7, the party which has risk of loss
of any such Spare Part or Provisioning Item will have the responsibility of
providing any insurance coverage for it desired by such party.
9. Termination of Purchase Agreement for Excusable Delay.
In the event of termination of the Purchase Agreement with respect to
any Aircraft pursuant to Article 7.6 of The Aircraft General Terms Agreement
AGTA-TLS (AGTA-TLS) between Boeing and Customer such termination will, if
Customer so requests by written notice received by Boeing within 15 days after
such termination, also discharge and terminate all obligations and liabilities
of the parties as to any Spare Parts which Customer
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had ordered pursuant to the Provisions of this letter as initial provisioning
for such Aircraft and which are undelivered on the date Boeing receives such
written notice.
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
--------------------------
Its Attorney-In-Fact
--------------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
P.A. No. 2021
Spares Initial Provisioning
<PAGE> 58
2021-6
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Multiple Aircraft Operating Weights
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
In this Letter Agreement, the term "Aircraft" means all Model 747-400F aircraft
that Customer legally owns or directly manages, whether purchased by Customer
under the Purchase Agreement or otherwise. It does not include any aircraft
which Customer may have obtained through an operating lease.
1. Operation at Multiple Gross Weights.
Customer has requested and Boeing agrees to provide the required documentation
to allow the operation of the Aircraft at alternate Maximum Take-Off Weights
(MTOW). Boeing will provide an FAA approved Airplane Flight Manual such that
each Aircraft will include a basic MTOW of 850,000 pounds and two alternate MTOW
of 875,000 pounds and 800,000 pounds in appendices to the Airplane Flight
Manual. Customer may operate the Aircraft at the weights provided at Customer's
sole discretion as long as the annual average operational weight of the
Customer's fleet does not exceed 850,000 pounds. It will be the responsibility
of Customer to obtain concurrence of the cognizant aviation authority to use the
Airplane Flight Manual and its appendices.
2. Payment Amounts.
Customer will pay to Boeing the amount of $[ ] ([ ]$ U.S. Subject to Escalation)
per Aircraft for this capability upon the delivery by Boeing of the Airplane
Flight Manual appendices described above. The weights and price shown above were
derived using the methods illustrated in Attachment A.
P.A. No. 2021
<PAGE> 59
Atlas Air, Inc.
Letter Agreement 2021-6
Page 2
3. Annual MTOW Use Report.
One year after the signing date of this Letter Agreement, and thereafter on an
annual basis, Customer will furnish to Boeing a MTOW Use Report signed by an
officer of Customer which reports the actual operating weights of the Aircraft
affected by this Letter Agreement in the previous year. If the actual
operational average gross weight utilization is greater than the average gross
weight purchased under this Letter Agreement, Customer will pay Boeing's then
current price per pound of difference above the average gross weight utilization
projected for the year for each Aircraft. If the actual operational average
gross weight utilization is less than the average gross weight projected under
this Letter Agreement or the MTOW Use Reports, no monetary credit will be given
to Customer for the difference.
4. Sale or Lease of Aircraft by Customer.
Concurrent with Customer's written notification to Boeing of its intent
to sell or lease one or more of its Aircraft (Disposed Aircraft) to a third
party (other than a subsidiary or affiliate of Customer,) Customer will elect
one of the following options with respect to each of the Disposed Aircraft:
4.1. Upon request Boeing will, at no charge to Customer, provide
documentation to limit a Disposed Aircraft's certified MTOW to the one certified
MTOW which will be the average gross weight value applicable as of the date of
Customer's request; or
4.2. If Customer desires to sell or lease a Disposed Aircraft certified
to operate at a higher MTOW than that specified in Paragraph 4.1, then Customer
may purchase, at Boeing's then current price for MTOW, the difference in pounds
between the average gross weight value applicable as of the date of Customer's
request and the MTOW desired, for a Disposed Aircraft; or
P.A. No. 2021
<PAGE> 60
Atlas Air, Inc.
Letter Agreement 2021-6
Page 3
4.3. If Customer desires to sell or lease a Disposed Aircraft certified
to operate at a lower MTOW than that specified in Paragraph 4.1, then Boeing
will, without charge or credit, provide documentation to limit a Disposed
Aircraft's certified MTOW to such lower value.
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
--------------------------
Its Attorney-In-Fact
--------------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
P.A. No. 2021
<PAGE> 61
Atlas Air, Inc.
Attachment A to Letter Agreement 2021-6
Page 1
Calculation Method for Average Gross Weight and Price per Aircraft
Customer has agreed to purchase an average gross weight based on expected use of
each Aircraft within Customer's specific minor model fleet. An average gross
weight utilization will be calculated and charged against every Aircraft in that
minor model fleet. The minimum gross weight for any individual Aircraft in the
average calculation shall be the basic gross weight.
The price per Aircraft for the average gross weight was calculated as follows:
PM = (NT * WA * PW) - (NE * WE * PW)
-----------------------------
NT
The following definitions apply:
PM = Purchase Price of Multiple Operating Weight per aircraft
NT = Total number of aircraft in Customer's fleet including the Aircraft
WA = Weighted Average minus the basic weight (in pounds) per minor model
fleet
PW = Boeing's current price per pound for MTOW increases
NE = Number of previously purchased minor model aircraft in
Customer's fleet
WE = Total gross weight (in pounds) in excess of basic gross weight
previously purchased for NE aircraft
Example Calculation of Average Gross Weight
Customer owns ten 757-200 aircraft currently at 230,000 pounds MTOW, each of
which had a basic gross weight of 220,000 pounds at initial purchase, and is
purchasing five additional 757-200's. Therefore, NT = 15
Step 1. Determine routes to be flown in the upcoming year for all 15 aircraft,
and determine the MTOW needed to support each planned route.
27% of routes require 220,000 pounds or less
50% of routes require 230,000 pounds
23% of routes require 240,000 pounds
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Atlas Air, Inc.
Attachment A to Letter Agreement 2021-6
Page 2
Step 2. Convert percentage of routes into Aircraft.
15 aircraft * 27% = 4.05 aircraft, round to 4
15 aircraft * 50% = 7.50 aircraft, round to 8
15 aircraft * 23% = 3.45 aircraft, round to 3
----- --
15 aircraft 15
Step 3. Calculate weighted average of the entire minor model fleet
4 * 220,000 = 880,000
7 * 230,000 = 1,840,000
3 * 240,000 = 720,000
----------
Total Weight 3,440,000 / 15 aircraft = 229,333 pounds,
or 9,333 pounds above base MTOW per aircraft.
WA = 9,333 pounds
Step 4. Multiply NT times WA times current Boeing price per pound (PW).
15 * 9,333 * $55.22(1995$) = $7,730,524
Step 5. Determine value of weight previously purchased for the existing fleet,
by multiplying 10 Aircraft (NE) times 10,000 pounds (WE) times PW.
10 * 10,000 * $55.22(1995$) = $5,522,000
Step 6. Subtract the results in Step 5 from that of Step 4, and divide the
result by NT to determine Purchase Price of Multiple Operating Weight (PM).
$7,730,524 - $5,522,000 = $2,208,524
PM = $2,208,524/ 15 aircraft
PM = $147,200 per aircraft (Rounded to nearest $100)
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2021-7
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Promotion Support
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
Boeing agrees to make available to Customer [ ] for Customer's marketing and
promotion programs associated with the introduction of the Model 747-400F
Aircraft into service. These programs may include marketing research; tourism
development; corporate identity; direct marketing; video tape, or still
photography; planning, design and production of collateral materials; management
of promotion program and advertising campaigns.
Following the execution of this Letter Agreement, a Boeing Airline Promotion
representative will meet with Customer's designated representative to discuss
the extent, selection, scheduling, and funds disbursement process for the
program.
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
--------------------------
Its Attorney-In-Fact
--------------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
P.A. No. 2021
Promotion Support
<PAGE> 64
6-1162-DSF-082
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
Boeing agrees to provide Customer with the performance guarantees in the
Attachment to this Letter Agreement. These guarantees are exclusive and expire
upon delivery of the Aircraft to Customer.
Customer agrees not to disclose this Letter Agreement, attachments, or any other
information related to this Letter Agreement without prior written consent by
Boeing.
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
--------------------------
Its Attorney-In-Fact
--------------------------
ACCEPTED AND AGREED TO this
Date: June 6 , 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
P.A. No. 2021
Performance Guarantees
<PAGE> 65
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 1
MODEL 747-400 FREIGHTER PERFORMANCE GUARANTEES
SECTION CONTENTS
1 AIRCRAFT MODEL APPLICABILITY
2 FLIGHT PERFORMANCE
3 MANUFACTURER'S EMPTY WEIGHT
4 AIRCRAFT CONFIGURATION
5 GUARANTEE CONDITIONS
6 GUARANTEE COMPLIANCE
7 EXCLUSIVE GUARANTEES
<PAGE> 66
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 2
1. AIRCRAFT MODEL APPLICABILITY
The guarantees contained in this Attachment (the "Performance
Guarantees") are applicable to the 747-400 Freighter Aircraft
with a maximum takeoff weight of 875,000 pounds, a maximum
landing weight of 652,000 pounds, and a maximum zero fuel
weight of 610,000 pounds, and equipped with Boeing furnished
CF6-80C2B1F engines.
2. FLIGHT PERFORMANCE
2.1. Mission
2.1.1. Mission Payload
The payload for a stage length of 5,695 nautical miles in
still air (equivalent to a distance of 5,990 nautical miles
with a 25 knot tailwind, representative of a Taipei to Los
Angeles route) using the conditions and operating rules
defines below, shall not be less than the following guarantee
value:
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
Conditions and operating rules:
Stage Length: The stage length is defined as the sum of the
distances for the climbout maneuver, climb,
cruise, and descent.
Takeoff: The airport altitude is 72 feet.
The airport temperature is 84 degrees F.
The runway length is 12,008 feet.
The clearway is 984 feet.
The stopway is 197 feet.
<PAGE> 67
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 3
The runway slope is 0.08 percent downhill.
An Aircraft center of gravity location at the
most forward center of gravity limit.
Maximum takeoff thrust is used for the
takeoff.
The takeoff gross weight shall conform to FAA
Regulations.
Climbout Following the takeoff to 35 feet, the
Aircraft
Maneuver: accelerates to 250 KCAS while climbing to
1,500 feet above the departure airport
altitude and retracting flaps and landing
gear.
Climb: The Aircraft climbs from 1,500 feet above the
departure airport altitude to 10,000 feet
altitude at 283 KCAS.
The Aircraft then accelerates at a rate of
climb of 500 feet per minute to a climb speed
of 356 KCAS.
The climb continues at 356 KCAS until 0.84
Mach number is reached.
The climb continues at 0.84 Mach number to
the initial cruise altitude.
The temperature is ISA+10 degrees C during
climb.
Maximum climb thrust is used during climb.
Cruise: The Aircraft cruises at 0.84 Mach number.
The initial cruise altitude is 29,000 feet.
A step climb or multiple step climbs of
4,000 feet altitude may be used when
beneficial to minimize fuel burn.
<PAGE> 68
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 4
The temperature is ISA+10 degrees C during
cruise.
The cruise thrust is not to exceed maximum
cruise thrust except during a step climb
when maximum climb thrust may be used.
Descent The Aircraft descends from the final cruise
altitude at 0.84 Mach number until 280 KCAS
is reached.
The descent continues at 280 KCAS to an
altitude of 10,000 feet. At that altitude the
Aircraft decelerates to 250 KCAS.
The descent continues at 250 KCAS to an
altitude of 1,500 feet above the destination
airport altitude.
Throughout the descent, the cabin pressure
will be controlled to a maximum rate of
descent equivalent to 300 feet per minute at
sea level.
The temperature is ISA+10 degrees C during
descent.
Approach and The Aircraft decelerates to the final
Landing approach speed while extending landing gear
Maneuver: and flaps, then descends and lands.
The destination airport altitude is 126 feet.
Fixed For the purpose of this guarantee and for the
Allowances: purpose of establishing compliance with this
guarantee, the following shall be used as
fixed quantities and allowances:
Operational Empty Weight minus Tare,
OEW: 350,000 Pounds
Engine Start and Taxi-out:
Fuel 2,000 Pounds
Time 0.333 Hours
<PAGE> 69
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 5
Takeoff and Climbout Maneuver:
Fuel 3,230 Pounds
Distance 7 Nautical Miles
Approach and Landing Maneuver:
Fuel 800 Pounds
Taxi-in (shall be consumed from the reserve
fuel):
Fuel 1,000 Pounds
Time 0.167 Hours
Usable reserve fuel remaining upon completion
of the approach and landing maneuver: 30,000
Pounds
For information purposes, the reserve fuel is
based either on a minimum 30,000 pounds of fuel
or on a standard day temperature and a) a
contingency fuel allowance equivalent to 10%
percent of the trip time from a point 82 percent
of the stage length from the takeoff through the
completion of the approach and landing maneuver
at the destination airport, starting at the end
of the mission cruise at an LRC Mach number, b)
a missed approach and flight to a 100 nautical
mile alternate airport, c) an approach and
landing maneuver at the alternate airport, and
d) a 30 minute hold at 1,500 feet, whichever is
larger.
2.1.2. Mission Block Fuel
The block fuel for a stage length of 5,695 nautical miles in
still air (equivalent to a distance of 5,990 nautical miles
with a 25 knot tailwind, representative of a Taipei to Los
Angeles route) with a 205,910 pound payload using the
conditions and operating rules defined below, shall not be
more than the following guarantee value:
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
<PAGE> 70
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 6
Conditions and operating rules are the same as Paragraph 2.1.1
except as follows:
Block Fuel: The block fuel is defined as the sum of the
fuel used for taxi-out, takeoff and climbout
maneuver, climb, cruise, descent, approach
and landing maneuver, and taxi-in.
Takeoff: The airport altitude is 72 feet.
The takeoff
gross weight
is not
limited by
the airport
conditions.
Fixed Allowances: For the purpose of this guarantee and for
the purpose of establishing compliance with
this guarantee, the following shall be used
as fixed quantities and allowances:
Operational Empty Weight minus Tare,
OEW: 350,000 Pounds
Takeoff and Climbout Maneuver:
Fuel 3,210 Pounds
Distance 7 Nautical Miles
Usable reserve fuel remaining upon
completion of the approach and landing
maneuver: 30,000 Pounds
2.1.3. Mission Payload
The payload for a stage length of 4,626 nautical miles in
still air (equivalent to a distance of 4,277 nautical miles
with a 38 knot headwind, representative
<PAGE> 71
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 7
of an Anchorage to Taipei route) using the conditions and
operating rules defined below, shall not be less than the
following guarantee value:
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
Conditions and operating rules are the same as Paragraph 2.1.1
except as follows:
Takeoff: The airport altitude is 144
feet. The airport tempera-
ture is 55 degrees F. The
runway length is 10,899 feet.
The runway slope is 0.27
percent downhill.
Cruise: The initial cruise altitude
is 28,000 feet.
Approach and Landing Maneuver: The destination airport
altitude is 72 feet.
Fixed Allowances: For the purpose of this
guarantee and for the purpose
of establishing compliance
with this guarantee, the
following shall be used as
fixed quantities and allow-
ances:
Operational Empty Weight
minus Tare,
OEW: 350,000 Pounds
Takeoff and Climbout
Maneuver:
Fuel 3,250 Pounds
Distance 7 Nautical Miles
<PAGE> 72
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 8
Usable reserve fuel remaining
upon completion of the
approach and landing
maneuver: 30,000 Pounds
2.1.4. Mission Block Fuel
The block fuel for a stage length of 4,626 nautical miles in
still air (equivalent to a distance of 4,277 nautical miles
with a 38 knot headwind, representative of an Anchorage
to,Taipei route) with a 251,220 pound payload using the
conditions and operating rules defined below, shall not be
more than the following guarantee value:
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
Conditions and operating rules are the same as Paragraph 2.1.3
except as follows:
Block Fuel: The block fuel is defined as the sum of the
fuel used for taxi-out, takeoff and climbout
maneuver, climb, cruise, descent, approach
and landing maneuver, and taxi-in.
Takeoff: The airport altitude is 144 feet.
The takeoff gross weight is not
limited by the airport conditions.
Cruise: The initial cruise altitude is 31,000 feet.
Fixed Allowances: For the purpose of this guarantee and for
the purpose of establishing compliance with
this guarantee, the following shall be used
as fixed quantities and allowances:
<PAGE> 73
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 9
Operational Empty Weight minus Tare,
OEW: 350,000 Pounds
Usable reserve fuel remaining upon
completion of the approach and landing
maneuver: 30,000 Pounds
2.1.5. Mission Payload
The payload for a stage length of 4,516 nautical miles in
still air (equivalent to a distance of 3,915 nautical miles
with a 67 knot headwind, representative of a Taipei to Abu
Dhabi route) using the conditions and operating rules defined
below, shall not be less than the following guarantee value:
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
Conditions and operating rules are the same as Paragraph 2.1.1
except as follows:
Cruise: The initial cruise altitude is 28,000 feet.
Fixed Allowances: For the purpose of this guarantee and for
the purpose of establishing compliance with
this guarantee, the following shall be used
as fixed quantities and allowances:
Operational Empty Weight minus Tare, OEW:
350,000 Pounds
Takeoff and Climbout Maneuver:
<PAGE> 74
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 10
Fuel 3,230 Pounds
Distance 7 Nautical Miles
Usable reserve fuel remaining upon
completion of the approach and landing
maneuver: 30,000 Pounds
2.1.6. Mission Block Fuel
The block fuel for a stage length of 4,516 nautical miles in
still air (equivalent to a distance of 3,915 nautical miles
with a 67 knot headwind, representative of a Taipei to Abu
Dhabi route) with a 256,040 pound payload using the conditions
and operating rules defined below, shall not be more than the
following guarantee value:
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
Conditions and operating rules are the same as Paragraph 2.1.5
except as follows:
Block Fuel: The block fuel is defined as the sum of the
fuel used for taxi-out, takeoff and climbout
maneuver, climb, cruise, descent, approach
and landing maneuver, and taxi-in.
Takeoff: The takeoff gross weight is not, limited by
the airport conditions.
Cruise: The initial cruise altitude is 31,000 feet.
Fixed Allowances: For the purpose of this guarantee and for
the purpose of establishing compliance with
this guarantee, the following shall be used
as fixed quantities and allowances:
Operational Empty Weight minus Tare,
<PAGE> 75
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 11
OEW: 350,000 Pounds
Usable reserve fuel remaining upon
completion of the approach and landing
maneuver: 30,000 Pounds
2.1.7. Mission Payload
The payload for a stage length of 4,315 nautical miles in
still air (equivalent to a distance of 3,750 nautical miles
with a 66 knot headwind representative of an Hong Kong to
Bahrain route; using the conditions and operating rules
defined below, shall not be less than the following guarantee
value:
GUARANTEE: [ ]
Conditions and operating rules are the same as Paragraph 2.1.1
except as follows:
Takeoff: The airport altitude is 15 feet.
The airport temperature is 85 degrees F.
The runway length is 10,932 feet.
The clearway is 371 feet.
The following obstacle definition is
based on a straight-out departure
where obstacle height and distance are
specified with reference to
the liftoff end of the runway:
<PAGE> 76
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 12
Distance/Height
1. 10, 509 Feet 223 Feet
Cruise: The initial cruise altitude is 31,000
feet.
Approach and Landing Maneuver The destination airport altitude is and
6 feet.
Fixed Allowances: For the purpose of this guarantee and
for the purpose of establishing com-
pliance with this guarantee, the
following shall be used as fixed
quantities and allowances:
Operational Empty Weight minus Tare,
OEW: 350,000 Pounds
Takeoff and Climbout Maneuver:
Fuel 3,180 Pounds
Distance 7 Nautical Miles
Usable reserve fuel remaining upon
completion of the approach and landing
maneuver: 30,000 Pounds
2.1.8. Mission Block Fuel
The block fuel for a stage length of 4,315 nautical miles in
still air (equivalent to a distance of 3,750 nautical miles
with a 66 knot headwind, representative of an Hong Kong to
Bahrain route) with a 260,000 pound payload using the
conditions and operating rules defined below, shall not be
more than the following guarantee value:
<PAGE> 77
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 13
NOMINAL: [ ]
TOLERANCE: [ ]
GUARANTEE: [ ]
Conditions and operating rules are the same as Paragraph 2.1.7
except as follows:
Block Fuel: The block fuel is defined as the sum of the
fuel used for taxi-out, takeoff and climbout
maneuver, climb, cruise, descent, approach
and landing maneuver, and taxi-in.
Takeoff: The airport altitude is 15 feet.
The takeoff
gross weight
is not
limited by
the airport
conditions.
Fixed Allowances: For the purpose of this guarantee and for
the purpose of establishing compliance with
this guarantee, the following shall be used
as fixed quantities and allowances:
Operational Empty Weight minus Tare, OEW:
350,000 Pounds
Usable reserve fuel remaining upon
completion of the approach and landing
maneuver: 30,000 Pounds
3. MANUFACTURER'S EMPTY WEIGHT
The Manufacturer's Empty Weight (MEW) is guaranteed not to
exceed the value in Section 3-60-00 of Detail Specification
D019U002 plus one percent.
<PAGE> 78
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 14
4. AIRCRAFT CONFIGURATION
4.1. The guarantees contained in this Attachment are based on the
Aircraft configuration as defined in the original release of
Detail Specification D019U002 (hereinafter referred to as the
Detail Specification). Appropriate adjustment shall be made
for changes in such Detail Specification approved by the Buyer
and Boeing or otherwise allowed by the Purchase Agreement
which cause changes to the flight performance and/or weight
and balance of the Aircraft. Such adjustment shall be
accounted for by Boeing in its evidence of compliance with the
guarantees.
The Manufacturer's Empty Weight guarantee of Section 3 will be
adjusted by Boeing for the following in its evidence of
compliance with the guarantees:
(1) Changes to the Detail Specification including Change
Requests, Master Changes, Change Orders or any other changes
mutually agreed upon between the Buyer and Boeing or otherwise
allowed by the Purchase Agreement.
(2) The difference between the component weight allowances
given in Appendix IV of the Detail Specification and the
actual weights.
5. GUARANTEE CONDITIONS
5.1. All guaranteed performance data are based on the ICAO
International Standard Atmosphere (ISA) and specified
variations therefrom; altitudes are pressure
altitudes.
5.2. The FAA Regulations (FAR) referred to in this
Attachment are, unless otherwise specified, the
747-400 Certification Basis regulations specified in
the Type Certificate Data Sheet A20WE, Revision B,
dated June 8, 1989.
5.3. Requirement, or in the interpretation of any such
law, governmental regulation or requirement that
affects the certification basis for the Aircraft as
described in Paragraph 5.2, and as a result thereof,
a change is made to the configuration and/or the
performance of the Aircraft in order to obtain
certification, the guarantees set forth in this
<PAGE> 79
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 15
Attachment shall be appropriately modified to reflect any
such change.
5.4. The takeoff portion of the mission guarantees are based on
hard surface, level and dry runways with no wind or
obstacles, no clearway or stopway, 235 mph tires, with
anti-skid operative, and with the Aircraft center of gravity
at the most forward limit unless otherwise specified. The
takeoff performance is based on no engine bleed for air
conditioning or thermal anti-icing and the Auxiliary Power
Unit (APU) turned off. The improved climb performance
procedure will be used for takeoff as required.
5.5. The climb, cruise and descent portions of the mission
guarantees include allowances for normal power extraction
and engine bleed for normal operation of the air
conditioning system. Normal electrical power extraction
shall be defined as not less than a 100 kilowatts total
electrical load. Normal operation of the air conditioning
system shall be defined as pack switches in the "Normal"
position, the temperature control switches in the "Auto"
position that results in a nominal cabin temperature of
75 degrees F, and all air conditioning systems operating
normally. This operation allows a maximum cabin pressure
differential of 8.9 pounds per square inch, with a nominal
Aircraft cabin ventilation rate of 5,600 cubic feet per
minute including passenger cabin recirculation. The APU is
turned off unless otherwise specified.
5.6. The climb, cruise and descent portions of the mission
guarantees are based on an Aircraft center of gravity
location of 20 percent of the mean a aerodynamic chord.
5.7. Performance, where applicable, is based on a fuel Lower
Heating value (LHV) of 18,580 BTU per pound and a fuel
density of 6.75 pounds per U.S. gallon.
6. GUARANTEE COMPLIANCE
6.1. Compliance with the guarantees of Sections 2 and 3
shall be based on the conditions specified in those
sections, the Aircraft configuration of Section 4 and
the guarantee conditions of Section 5.
<PAGE> 80
Attachment to Letter Agreement
No. 6-1162-DSF-082
CF6-80C2BIF Engines
Page 16
6.2. Compliance with the takeoff portion of the mission
guarantees shall be based on the FAA approved
Airplane Flight Manual for the Model 747-400
Freighter.
6.3. Compliance with the climb, cruise and descent
portions of the mission guarantees shall be
established by calculations based on flight test data
obtained from an aircraft in a configuration 4,
similar to that defined by the Detail specification.
6.4. The OEW used for compliance with the mission
guarantees shall be the actual MEW plus the Standard
and Operational Items Allowance in Paragraph 3-60-0
of the Detail Specification.
6.5. Compliance with the Manufacturer's Empty Weight
guarantee shall be based on information in the
"Weight and Balance Control and Loading Manual
Aircraft Report."
6.6. The data derived from tests shall be adjusted as
required by conventional methods of correction,
interpolation or extrapolation in accordance with
established engineering practices to show compliance
with these guarantees.
6.7. Compliance shall be based on the performance of the
airframe and engines in combination, and shall not be
contingent on the engine meeting its manufacturer's
performance specification.
7. EXCLUSIVE GUARANTEES
The only performance guarantees applicable to the Aircraft are
those set forth in this Attachment.
<PAGE> 81
6-1162-DSF-083
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
1. Basic Credit Memorandum.
In consideration of Customer's purchase of ten (10) firm Model
747-400F aircraft (Firm Aircraft), Boeing will issue a credit memorandum at time
of delivery of each Firm Aircraft to Customer in an amount equal to [ ] of the
Base Airframe Price (excluding special features, engines and BFE/SPE), expressed
in July 1995 dollars and subject to airframe escalation as described in Article
2.1.7 of the AGTA.
2. Customer Support Credit Memorandum.
In further consideration of Customer's purchase of the Firm
Aircraft, Boeing will issue a credit memorandum at delivery of each Firm
Aircraft to Customer in an amount equal to [ ] of the Base Airframe Price
(excluding special features, engines and BFE/SPE), expressed in July 1995
dollars and subject to airframe escalation as described in Article 2.1.7 of the
AGTA, for each of the Firm Aircraft.
3. [ ].
In further consideration of Customer's purchase of the Firm
Aircraft, Boeing will issue a credit memorandum at delivery of each Firm
Aircraft to Customer in an amount sufficient to offset the[ ], the [ ] and the [
] charges expressed in July 1995 dollars and subject to airframe escalation as
described in Article 2.1.7 of the AGTA. The amount of this credit memorandum
will be limited to [ ].
P.A No. 2021
Certain Contractual Matters
<PAGE> 82
6-1162-DSF-083
Page 2
4. [ ].
Notwithstanding the Advance Payment Schedule contained in Article 4.2 of
the Purchase Agreement, [ ]
<TABLE>
<CAPTION>
Due Date of Payment Amount Due per Aircraft
(Percentage times Advance Payment Base Price)
<S> <C> <C>
1998 1999 & later
Deliveries Deliveries
At Definitive Agreement
15 months prior to the first
day of the scheduled delivery
month of the aircraft
12 months prior to the first
day of the scheduled delivery
month of the aircraft
9 months prior to the first day
of the scheduled delivery month
of the aircraft
Total
</TABLE>
For each Aircraft Customer may elect to [ ] Advance Payments in accordance with
this Letter Agreement. Once an Advance Payment on a particular Aircraft has been
[ ], it will be assumed that all further Advance Payments on such Aircraft will
also be paid in accordance with the schedule above until Customer shall notify
Boeing otherwise.
P.A No. 2021
Certain Contractual Matters
<PAGE> 83
6-1162-DSF-083
Page 3
[ ] Amount is for any Aircraft, the amount equal to the
difference between the amount due according to the Advance Payment Schedule
pursuant to Article 4.2 of the Purchase Agreement and the amount due pursuant to
the [ ].
[ ] the sum of [ ]
for all Aircraft, less any [ ] paid.
Business Day is a day in which government offices and
financial institutions generally are open for business in the states of
Washington and New York. Interest on the [ ] will be charged at the fluctuating
rate of interest per annum equal to the six month London Interbank Offered Rate
(LIBOR) as published in the Wall Street Journal on the first business day of
each calendar quarter, plus two percent (2%).
5. Payment of Interest on [ ].
Interest will be paid on the first business day of each
calendar quarter by wire transfer to an account specified by Boeing . All
interest calculations will be computed on the basis of the actual number of days
elapsed and using a year of 360 days.
6. Conditions Precedent.
Paragraphs 4 and 5 of this Letter Agreement 6-1162-DSF-083
will become effective upon execution of said letter and upon execution
[ ] is satisfactory to Boeing.
7. Airframe Maintenance Cost Protection Program.
The standard price Boeing charges for a ten (10) year [ ] as
described in Letter Agreement 6-1162-DSF-084 [ ] (95$ Subject to Escalation) per
Aircraft. In consideration of Customer's purchase of 10 firm Aircraft, Boeing
will issue a credit memorandum at delivery of each of the Firm Aircraft, to
offset the charge.
8. Option Aircraft Matters.
8.1. The provisions of paragraphs 1, 3, 4, 5 and 6 of this
Letter Agreement will apply to up to ten (10) Option Aircraft when such Option
Aircraft are exercised by Customer.
P.A No. 2021
Certain Contractual Matters
<PAGE> 84
6-1162-DSF-083
Page 4
8.2. Notwithstanding Article 3.1 of Letter Agreement 2021-2,
Customer will pay a deposit to Boeing of [ ] for each Option Aircraft.(Deposit),
on the date of this Letter Agreement. If Customer exercises an option, the
Deposit will be credited against the first advance payment due. If Customer does
not exercise an option, Boeing will retain the deposit for that Option Aircraft.
9. Option Aircraft Delivery Flexibility.
Prior to the option exercise date for any option aircraft
contained in Letter Agreement 2021-2 to the Purchase Agreement, [ ]. Boeing
will, subject to available delivery positions and option exercise lead time
requirements, make reasonable efforts to accommodate Customer with a mutually
agreeable [ ].
10. Firm Aircraft Delivery Flexibility.
For Firm Aircraft delivering in 2000 and later, Customer may,
with eighteen (18) months notification,
[ ]. Boeing will, subject to available delivery positions, make reasonable
efforts to accommodate Customer with a mutually agreeable revised delivery
position. Customer may make such a change [ ].
11. Assignment of Credits.
The Credit Memoranda described in paragraphs 1 2, 3 and 4 of
this Letter Agreement are provided as a financial accommodation to Customer in
consideration of Customer becoming the operator of the Aircraft, and cannot be
assigned, in whole or in part, without the prior written consent of The Boeing
Company. [ ].
12. Airframe Maintenance Matters.
Boeing and Customer agree to jointly consider development of
airframe maintenance capability.
13. [ ].
Boeing offers to annually reimburse Atlas Air, Inc. (Customer)
for any increase in price for Boeing Model 747-400F [ ] will be made upon
resolution of the part number data submitted by Customer.
P.A No. 2021
Certain Contractual Matters
<PAGE> 85
6-1162-DSF-083
Page 5
[ ]
14. Application of Credit Memoranda.
Credit Memoranda issued to Customer pursuant to paragraphs 1,
2 and 3 above, may be used by Customer for the purchase from Boeing of Boeing
goods and services, or may be used (in whole or in part) by Customer for the
payment of the balance of the Aircraft Price due at the time of delivery of the
related Aircraft. The Credit Memoranda may not, however, be used to offset
payment of Advance Payments.
15. [ ].
[ ].
16. Performance Matters.
Pursuant to Letter Agreements 6-1162-DSF-082, 6-1162-DSF-084,
6-1162-DSF-086, 6-1162-DSF-095 and 6-1162-DSF-096, [ ].
17. Escalation Sharing.
Letter Agreement 2021-3 documents Boeing's commitment to share
escalation for Aircraft delivering in the years 1997 and 1998.
[ ].
18. Reconfirmation.
(a) Advance Payments. [ ]
[ ]
19. Confidential Treatment.
Customer understands that certain commercial and financial
information contained in this Letter Agreement are considered by Boeing as
confidential. Customer agrees that it will treat this Letter Agreement and the
information contained herein as confidential and will not, without the prior
written consent of Boeing, disclose this Letter Agreement or any information
contained herein to any other person or entity.
P.A No. 2021
Certain Contractual Matters
<PAGE> 86
6-1162-DSF-083
Page 6
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
--------------------------
Its Attorney-In-Fact
--------------------------
ACCEPTED AND AGREED TO this
Date: June 6 , 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
--------------------------
Its CEO
--------------------------
P.A No. 2021
Certain Contractual Matters
<PAGE> 87
Attachment to 6-1162-DSF-083
[Date]
[Letter No.]
ATLAS AIR, INC.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference is made to Purchase Agreement No. 2021 dated as of June 6, 1997 as
amended and supplemented (the Agreement), between The Boeing Company (Boeing)
and Atlas Air, Inc. (Customer). All terms used herein and in the Agreement, and
not defined herein, will have the same meaning as in the Agreement.
Boeing hereby requests that [ ]
__ Block ___ Model 747-444F Aircraft scheduled for delivery in _____________.
Very truly yours,
THE BOEING COMPANY
By
--------------------------
Its
--------------------------
The undersigned, Atlas Air, Inc., hereby [ ]
Date: , 1997
ATLAS AIR, INC.
By
--------------------------
Its
--------------------------
<PAGE> 88
6-1162-DSF-084
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference: Purchase Agreement 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends the Purchase Agreement and Exhibit C of the AGTA.
All terms used but not defined in this Letter Agreement have the same meaning as
in the Purchase Agreement and AGTA.
In consideration of Customer's purchase of the Aircraft and in response to
Customer's request for contractual assurances regarding Aircraft maintenance
costs, Boeing agrees to amend Exhibit C (Product Assurance Document) of the AGTA
to include the [ ] described herein (the Program).
1. Scope.
1.1. Covered Aircraft.
The Program applies to each of the Aircraft while operated by Customer on
Customer's routes during the Program Term, as defined in paragraph 1.2 below,
(the Covered Aircraft).
1.2. Program Term.
The term of the Program will be 10 consecutive years commencing on the
first day of the calendar quarter in which the first Covered Aircraft is
delivered by Boeing to Customer (Program Term).
1.3. Covered Maintenance Work.
The Program applies to materials consumed in the maintenance of the
airframe and component elements of the Covered Aircraft which are included in
aircraft systems 5, 7 through 11, relevant sections of 12 and 20, 21 through 57,
71, and 73 through 80 (as defined in the Air Transport Association of America,
Specification No. 100,
P.A No. 2021
Maint Cost Protection
<PAGE> 89
Atlas Air, Inc.
6-1162-DSF-084
Page 2
"Specification for Manufacturer's Technical Data," dated 1984) when such
maintenance is performed in accordance with Customer's FAA approved maintenance
program and such materials are properly charged to the following work
descriptions:
(i) Scheduled Checks: All routine and required non-routine or corrective
maintenance performed by Customer during scheduled checks.
(ii) Non-scheduled Maintenance: All non-scheduled required maintenance.
(iii) Repair and Overhaul: Any required repair or overhaul of rotable or
repairable systems, accessories, equipment and parts.
(iv) Modifications: Modifications required to make changes recommended by
Boeing or Boeing suppliers pursuant to paragraphs 5.1 and 7.1 herein.
The Program applies only to the maintenance described above (Airframe
Maintenance) and does not apply to materials consumed with respect to Engines,
as defined in Exhibit EE1 to the Purchase Agreement.
2. Basic Definitions.
2.1. "Fleet," for any Reporting Period, means the number of Covered
Aircraft operated by Customer on Customer's routes during such Reporting Period.
2.2. "Fleet Hours," for any Reporting Period, means the total airborne time
(aircraft takeoff to touchdown) accumulated by the Covered Aircraft during such
Reporting Period.
2.3. "Reporting Period" is a 12 month period commencing on either the date
the Program Term commences or on an anniversary thereof.
3. Maintenance Material Cost Program Measures.
3.1. Airframe Maintenance Material Cost.
"Airframe Maintenance Material Cost" is the actual cost paid by Customer
for materials required to perform the Aircraft Maintenance, whether performed
P.A No. 2021
Maint Cost Protection
<PAGE> 90
Atlas Air, Inc.
6-1162-DSF-084
Page 3
by Customer or by others for Customer, exclusive of any surcharges, taxes,
duties, tariffs, interest or other similar charges added to the manufacturer's
standard price.
3.2. Cumulative Average Reported Material Cost.
The "Cumulative Average Reported Material Cost" or "Average Reported Cost,"
for any Reporting Period, is calculated as the aggregate Airframe Maintenance
Material Cost for all then-completed Reporting Periods divided by the Fleet
Hours for all such completed Reporting Periods.
3.3. Target Material Cost.
The "Target Material Cost" for the Covered Aircraft for any Reporting
Period is the projected net cost to Customer for materials set forth in
paragraph 3.1 above where such Target will be expressed as a dollar value per
flight hour.
3.3.1. The Target Material Cost in year 1996 dollars is based on a
projected average airborne time per flight for the fleet of 9.0 hours (Projected
Average Flight Time), as follows:
<TABLE>
<CAPTION>
Reporting Reporting Reporting
Period 1 Period 2 Period 3
-------- -------- --------
<S> <C> <C> <C>
Target Material Cost [ ] [ ] [ ]
Reporting Reporting Reporting
Period 4 Period 5 Period 6
Target Material Cost [ ] [ ] [ ]
Reporting Reporting Reporting
Period 7 Period 8 Period 9
Target Material Cost [ ] [ ] [ ]
Reporting
Period 10
Target Material Cost [ ] [ ] [ ]
</TABLE>
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3.3.2. The Target Material Cost for any Reporting Period will be
adjusted for changes in material costs based on the following:
3.3.2.1 To reflect changes in inflation rates, the Target
Material Cost for such Reporting Period will be calculated by multiplying the
base Target Material Cost by the arithmetic average of the 12 monthly Producer
Price Indexes for "Aircraft parts and auxiliary equipment, n.e.c.," (Standard
Industrial Classification Code 3728) for such Reporting Period and dividing the
result by the arithmetic average of such Indices for the year 199X.
(The index described in this paragraph 3.3.2.1 will be obtained from the
publication "Producer Prices and Price Indexes" published by the U.S. Department
of Labor, Bureau of Labor Statistics or any comparable successor publication
published by the U.S. Department of Labor, Bureau of Labor Statistics or any
comparable successor agency).
3.3.2.2 If the actual average airborne time per flight for
the Fleet (Actual Average Flight Time) for any Reporting Period is different
from the Projected Average Flight Time of 9.0 hours, the Target Material Cost
for such Reporting Period will be adjusted to reflect such Actual Average
Flight Time for such Reporting Period in accordance with Attachment A to this
Program.
3.3.2.3 The Target Material Cost is based on (i) the number
of Covered Aircraft and the delivery schedule for such Covered Aircraft set
forth in the Agreement and (ii) a projected average utilization for the Covered
Aircraft during any Reporting Period of 5,100 flight hours. If the number of
Covered Aircraft or their delivery schedules are revised prior to or during the
Program Term as provided under or by amendment to the Agreement or the average
utilization for the Covered Aircraft during any Reporting Period exceeds 5,400
or is less than 4,800 flight hours, Boeing will have the right to revise the
Target Material Cost to reflect the impact of any such revisions or excess.
3.4. Cumulative Average Target Material Cost.
The "Cumulative Average Target Material Cost" or "Cumulative Average
Target Cost" as of any Reporting Period means (i) the sum of the products of
the Target Material Cost for each completed Reporting Period multiplied by the
Fleet Hours for
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each such completed Reporting Period (ii) divided by the total Fleet Hours for
all completed Reporting Periods.
4. Deficiency.
A "Deficiency" with respect to Airframe Maintenance Material Cost occurs
when the Cumulative Average Reported Cost for a Reporting Period exceeds [ ]% of
the Cumulative Average Target Cost as of such Reporting Period, all as may be
adjusted pursuant to the terms of the Program.
5. [ ]
5.1. If a [ ] exists, and Customer provides its reports to Boeing
pursuant to paragraph 6 herein, then Boeing will:
(i) [ ]
(ii) [ ]
[ ]
6. Administrative Requirements.
6.1. Customer will report to Boeing, within 90 days after the last day of
each Reporting Period, (i) the Cumulative Average Reported Cost broken down by
scheduled maintenance costs, non-scheduled maintenance costs, repair and
overhaul costs and modification costs, (ii) the Actual Average Flight Time for
the Fleet and (iii) the number of Covered Aircraft included in the Fleet.
Failure to file such reports within such 90 day period will constitute an
acknowledgment by Customer that there was no [ ] for that Reporting Period and
Boeing will not be obligated to provide any of the remedies arising under this
Program. However, if [ ] occurs, Customer will, within 90 days after the last
day of the applicable Reporting Period, report to Boeing the data identified
above for all then-completed Reporting Periods of the Program Term.
6.2. Customer's reports will include sufficient data to substantiate any
claimed [ ]. Upon request, Customer will submit to Boeing reasonable proof of
the existence of any Airframe Maintenance Material Cost claimed by Customer as
the basis of a Deficiency under the terms of this Program. Customer will
maintain and submit to Boeing such records, data and reports as may reasonably
be required to (i) determine cost elements
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of the Airframe Maintenance Material Cost, (ii) determine Cumulative Average
Reported Cost (broken down into the "work descriptions" set forth in paragraph
1.3 herein), (iii) identify the Fleet and calculate Fleet Hours, (iv) facilitate
the analysis of the problems causing any claimed Deficiency, (v) verify the
Actual Average Flight Time and (vi) when required, facilitate development of
appropriate remedial action with respect to any claimed Deficiency.
6.3. Customer will, if requested by Boeing, furnish, from time to time,
such additional information as is reasonably necessary to monitor the Program or
investigate any claimed Deficiency.
6.4. All reports submitted to Boeing will be addressed to the attention of:
Director - Warranties
Boeing Commercial Airplanes
P.O. Box 3707
Seattle, Washington 98124-2207
7. Conditions and Limitations.
7.1. If Boeing or any Boeing supplier issues no-charge service bulletins or
service bulletins with no-charge retrofit kits which would reduce Airframe
Maintenance Material Cost, Customer will make any changes recommended by such
service bulletins and install such retrofit kits within 240 days after issuance
of such instructions or receipt of such kits at Customer's facility, or such
longer period as may be mutually agreed by the parties. In the event of
Customer's failure to comply with the time requirements of this paragraph 7.1,
all Airframe Maintenance Material Cost which would have been eliminated if such
service bulletins or retrofit kits had been incorporated, as determined by
Boeing, will be subtracted from Cumulative Average Reported Cost reported after
expiration of such time requirements.
7.2. Customer will promptly notify Boeing in writing of any existing or
contemplated variations in its maintenance cost accounting system or procedures
which affect or would affect the proper reporting of Airframe Maintenance
Material Cost. Boeing will have the right to adjust the Cumulative Average
Target Cost and the definition for Airframe Maintenance Material Cost to reflect
the effect of any such variations.
7.3. Boeing will have the right to audit and investigate all costs charged
by Customer to the "Work Descriptions" listed in paragraph 1.3 herein, as well
as the mainte-
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enance practices and procedures related thereto, at any reasonable time during
the Program Term. Boeing will also have the right to disapprove costs improperly
charged to such Work Descriptions. Boeing will provide Customer with written
notification of its disapproval of any such costs, and if Customer does not
provide proof that such costs are properly chargeable to such Work Descriptions
within 60 days after such notification, Boeing and Customer will determine the
amount to be deducted from the computation of the Average Reported Cost.
7.4. Boeing will have the right at all reasonable times to inspect and
review Customer's maintenance facilities, programs and procedures. If Boeing
recommends in writing reasonable changes in Customer's maintenance programs and
procedures which would reduce the Average Reported Cost and offers reasonable
proof that such changes will reduce such costs and Customer does not effect such
changes or Customer delays effecting such changes beyond the period set forth in
paragraph 7.1 herein, Boeing will have the right to adjust the Cumulative
Average Target Cost to reflect the increased costs which Boeing estimates will
result from Customer's failure or delay in effecting such changes.
7.5. The Airframe Maintenance Material Cost will not include the following:
costs arising from loss of, or damage to, any Covered Aircraft, or any
accessory, equipment or part thereof; any taxes, duties, tariffs, surcharges,
transportation, interest or overhead; the cost of initial or sustaining spare
parts or the depreciation of such spare parts; costs resulting from any
modification to the Covered Aircraft or any equipment, accessory or part thereof
other than modifications described under paragraph 1.3(iv) herein; costs
resulting from the negligent acts or omissions of Customer; costs resulting from
the improper operation, service, maintenance or overhaul of any Covered
Aircraft, or any system, accessory, equipment or part thereof; costs
attributable to loss of use, revenue or profit; costs of consumable fluids,
including fuel; costs due to acts of God, war, warlike operations,
insurrections, riots, fires, floods, explosions, accidents, epidemics or
quarantine restrictions; costs due to Government priorities, allocation
regulations or orders which affect materials or facilities needed for the
maintenance of Covered Aircraft; costs due to strikes or labor troubles causing
cessation, slowdown or interruption of work related to the maintenance of
Covered Aircraft; delay in transportation or inability to procure materials,
accessories, equipment or parts needed for the maintenance of Covered Aircraft;
or any other costs not included in Airframe Maintenance Material Cost as defined
in paragraph 3.1 herein.
7.6. Customer's Cumulative Average Reported Cost as of any Reporting Period
will be reduced by any of the following items to the extent that such items have
been included as part of such Cumulative Average Reported Cost:
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(i) the price for any part provided by Boeing or Boeing's
suppliers to Customer at no charge,
(ii) an amount equal to the difference between the
reported price for any part and the reduced price for such part as provided by
Boeing or Boeing's suppliers to Customer,
(iii) the amount of any credit memorandum or other payment
scheme, established in Customer's favor, related to the materials involved in
any warranty, maintenance material cost guarantee or similar agreement and
issued by Boeing or Boeing suppliers to Customer.
7.7. The Program will be suspended if during any Reporting Period the
average utilization for the Covered Aircraft is below 1,400 flight hours. Once
the average utilization for the Covered Aircraft exceeds the minimum average
utilization set forth above during any subsequent Reporting Period, the Program
will be resumed commencing on the first day of such subsequent Reporting Period.
Customer's report of Cumulative Average Reported Cost as of any Reporting Period
during the Program Term will exclude all Airframe Maintenance Material Cost
incurred and Fleet Hours accumulated by Customer during any Reporting Period in
which the Program was suspended as provided above. The Program will not be
extended to reflect any period wherein it was suspended.
7.8. At Boeing's request, Customer will assign to Boeing, any of Customer's
rights against the manufacturer of any equipment, accessory or part installed in
the Covered Aircraft as Boeing may reasonably require to fulfill its obligations
with respect to any remedy provided by Boeing hereunder.
7.9. THIS LETTER AGREEMENT AND THE RIGHTS AND REMEDIES OF CUSTOMER AND
OBLIGATIONS OF BOEING HEREIN ARE SUBJECT TO THE DISCLAIMER AND RELEASE AND
EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES PROVISIONS OF ARTICLE 12 OF THE
AGREEMENT.
For the purpose of this paragraph, the term "Boeing" means The Boeing Company,
its division, subsidiaries and affiliates, the assignees of each, and their
directors, officers, employees and agents.
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8. Covered Aircraft Configuration.
The target material cost set forth in this Program is based on the
configuration for the Covered Aircraft as set forth in Detail Specification
D-TBD dated TBD (Exhibit A to the Purchase Agreement). Such target material cost
may be equitably adjusted by mutual agreement to appropriately reflect any
changes to the actual configuration of the Covered Aircraft at the time of
delivery thereof to Customer. Equitable adjustments to such target material cost
may also be made by mutual agreement at any time during the Program Term to
reflect any additional changes in the configuration of the Covered Aircraft.
9. Duplicate Product Assurance Remedies.
It is agreed that Boeing will not be obligated to provide to Customer any
remedy under this Program which is a duplicate of any other remedy which has
been provided to Customer under any Part of Exhibit C (Product Assurance
Document) to the AGTA.
10. Confidential Treatment.
Customer understands that certain commercial and financial information
contained in this Letter Agreement and attachment(s) hereto are considered by
Boeing as confidential. Customer agrees that it will treat this Letter Agreement
and the information contained herein as confidential and will not, without the
prior written consent of Boeing, disclose this Letter Agreement or any
information contained herein to any other person or entity.
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If the foregoing correctly sets forth your understanding of our agreement with
respect to the matters treated above, please indicate your acceptance and
approval below.
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
------------------------
Its Attorney-In-Fact
------------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
-----------------------
Its CEO
-----------------------
Attachments
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Attachment A to
Letter Agreement
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Actual Average Flight Time Adjustment
TMC for AAFT = TMC for PAFT x ( .65/AAFT + .35)
(.65 /PAFT + .35)
Where TMC = Target Material Cost
Where AAFT = Actual Average Flight Time
Where PAFT = Projected Average Flight Time
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6-1162-DSF-085
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: Open Configuration Matters
Reference: Purchase Agreement 2021 (the Purchase Agreement) between The Boeing
Company (Boeing) and Atlas Air, Inc. (Customer) relating
to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends the Purchase Agreement. All terms used but not
defined in this Letter Agreement have the same meaning as in the Purchase
Agreement.
1. Aircraft Configuration.
1.1. Initial Configuration. The initial configuration of Customer's Model
747-400F Aircraft has been defined by Boeing Model 747-400 Freighter Airplane
Configuration Specification D019U002 as described in Article 1 and Exhibit A of
the Purchase Agreement (the Aircraft Configuration). Given the long period of
time between the Purchase Agreement signing and delivery of the first Aircraft,
Customer may have the desire to incorporate certain configuration changes
(Options) into the Aircraft Configuration.
1.2. Final Configuration Schedule. No later than 12 months prior to the
first Aircraft's scheduled delivery month, Boeing and Customer will discuss
potential Options. By May 16, 1997, Boeing will provide Customer with Option
proposals for those configuration changes that can be incorporated in Aircraft
production. By June 6, 1997, Customer will accept or reject these Options.
2. Effect on Purchase Agreement.
2.1. Basic Specification. Changes applicable to the basic Model 747-400F
aircraft which are developed by Boeing between the date of signing of the
Purchase Agreement and completion of the final configuration review described in
paragraph 1.2 above will be incorporated into the Aircraft Configuration by
written amendment.
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2.2. Exhibit A. The effects of all Options which are mutually agreed upon
between Boeing and Customer for incorporation into the Aircraft Configuration
will be incorporated into Exhibit A of the Purchase Agreement by written
amendment.
2.3. Performance Guarantees. Within 60 days after Customer's acceptance of
any Options, Boeing will provide to Customer revisions to the Performance
Guarantees to reflect the effects, if any, of the incorporation of such Options
on Aircraft performance. Such revisions will be incorporated by written
amendment.
2.4. Price Adjustments. The Aircraft Basic Price and Advance Payment Base
Price of each Aircraft included the amount of United States [ ] (95$) as an
estimate of the value of the Options which may be accepted and included in the
final Aircraft Configuration. The Aircraft Basic Price and the Advance Payment
Base Price of each Aircraft will be increased or decreased as required to
reflect the difference between such estimate and the actual prices plus any
required Seller Purchased Equipment, of the Options accepted by Customer.
3. Purchase Agreement Amendment.
Within 30 days after reaching agreement as to the final Aircraft
Configuration, Boeing will provide Customer an amendment to the Purchase
Agreement reflecting the effects of the configuration changes agreed to by the
parties.
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Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
----------------------
Its Attorney-In-Fact
----------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
----------------------
Its CEO
----------------------
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Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference: Purchase Agreement No. 2021 (the Purchase Agreement)
between The Boeing Company (Boeing) and Atlas Air Inc.
(Customer) relating to Model 747-400F Aircraft (the
Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
Letter Agreement 6-1162-DSF-082 contains performance guarantees (the Performance
Guarantees) which include tolerances of [ ] from nominal levels for the block
fuel described in Paragraph 2.1.2 of the Performance Guarantees (the Block Fuel
Guarantee). Customer has requested that Boeing [ ].
In response to Customer's request, Boeing [ ] in the event that fuel burn
performance exceeds nominal block fuel performance as specified in paragraph
2.1.2 of the Attachment to Letter Agreement 6-1162-DSF-082 [ ].
1. Demonstration of Compliance.
Article 5.4 of the Aircraft General Terms Agreement AGTA-TLS between Boeing
and Customer (AGTA-TLS) provides a procedure for demonstration of compliance
with all performance guarantees prior to delivery. That same procedure will be
used to demonstrate compliance with [ ] which, if not met, will result in
economic remedies as described below.
2. Rights and Obligations in the Event the Aircraft [ ].
2.1. Aircraft Delivery.
In the event any Model 747-400F Aircraft, at the time of tender by Boeing
for delivery to Customer fails to comply with [ ], Cus-
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tomer shall not refuse to accept delivery of such Aircraft on account of such
noncompliance, subject to the terms and conditions hereinafter set forth.
2.2. Correction of Noncompliance with [ ].
2.2.1. To the extent economically and technically practicable, Boeing
will use its best reasonable efforts to design or cause to be designed, changes
to the Model 747-400F Aircraft which would diminish or correct the failure of
the Model 747-400F Aircraft to comply with [ ]. Such changes
shall hereinafter be called "Changes".
2.2.2. In the event Boeing develops or causes to be developed Changes
which Boeing believes are economically and technically practicable, Boeing will
promptly furnish such Changes at [ ] to Customer for each Model 747-400F
Aircraft. Such Changes shall be in the form of retrofit parts and/or
modification instructions. Boeing will also [ ] any direct labor reasonably
expended by Customer to incorporate such Changes. Such reimbursement shall be on
the basis of Boeing's [ ] then in effect with Customer.
2.2.3. Boeing shall not be obligated to furnish any Changes in
addition to those necessary to cause the Model 747-400F Aircraft to comply with
[ ].
2.3. Remedy for Non-Compliance with [ ].
2.3.1. In the event that Boeing has not, within one year after the
delivery of any Model 747-400 Aircraft which failed at the time of delivery to
comply with the [ ], designed or caused to be designed and
delivered to Customer, Changes as defined in Paragraph 2.2.1 above, [ ]
escalation in accordance with the provisions of Exhibit D to the AGTA as such
provisions are applied to the Airframe for the Aircraft. [ ] for
any portion of the deficiency corrected by Changes for that portion of the
preceding year subsequent to the delivery of such Changes to Customer.
2.3.2. [ ] above shall be [ ] by Boeing. In no
event shall the total, [ ] Customer pursuant to Paragraphs
2.3.1 above exceed [ ] for each Aircraft. Should an examination of
Customer's actual usage of the subject Aircraft indicate that the values used in
calulat-
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ting [ ] were excessive, Customer agrees to an adjustment in
[ ] accordingly.
2.3.3. The amount of performance improvement attributable to any Change
shall be determined by analysis based on data supplied by Boeing and certified
to be correct by Boeing. The amount of such improvement shall be deemed to be
the amount of performance improvement, stated in terms of Block Fuel, as
calculated using reasonable engineering interpretations and calculations based
on the data furnished pursuant to Article 5.4 of the AGTA-TLS and the data
furnished pursuant to this Paragraph 2.3.3.
3. [ ].
[ ] under this Letter Agreement shall be as a result of
operation of the Aircraft by Customer.
4. Confidential Treatment.
Customer understands that certain commercial and financial information
contained in this Letter Agreement, and any attachments hereto, is considered by
Boeing as confidential. Buyer agrees that it will treat this Letter Agreement
and the information contained herein as confidential and will not, without the
prior written consent of Boeing, disclose this Letter Agreement or any
information contained herein to any other person or entity.
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Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
------------------------
Its Attorney-In-Fact
------------------------
ACCEPTED AND AGREED TO this
Date: June 6, 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
------------------------
Its CEO
------------------------
<PAGE> 106
Attachment to
6-1162-DSF-086
Page 1
[ ]
(CALENDAR YEARS 1999 AND ON)
(a) [ ] to be used for calculation of the remedy amount
which is due and payable for the calendar year 1998 and each
subsequent year shall be determined using the following equation:
[ ]
(b) The following definitions shall apply herein:
[ ]
Ca = The index of Commercial Jet fuel, Kerosene Base as
reflected in the Bureau of Labor Statistics, U.S.
Department of Labor "Producer Price Indexes" (Commodity
Code 05720301) for each month of the desired year of
Adjusted Remedy Value and calculated as an average value
for such year.
53.4 = The index of Commercial Jet fuel, Kerosene Base as
reflected in the Bureau of Labor Statistics, U.S.
Department of Labor "Producer Price Indexes" (Commodity
Code 05720301) for the month of July 1995 (1982 = 100).
TR = Customer's effective Corporate tax rate in effect at time
of [ ].
(c) In addition it is understood that at the time of [ ] calculation,
Boeing may be unable to determine the precise amount of such value
because the applicable fuel index used to determine Ca may not be
released by the Bureau of Labor Statistics, or if released, it may be
adjusted at a later date by such Bureau. Accordingly, the parties agree
as follows:
(i) The commercial jet fuel index to be used in calculating the [ ]
will be determined by utilizing the escalation provisions set
forth above. The most current Bureau of Labor Statistics for the
applicable month (including those noted as preliminary by the
Bureau of labor statistics) and available to
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Attachment to
6-1162-DSF-086
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Boeing at the time the escalation calculation is made shall be
used to calculate [ ]. If no value has been released for the
applicable year, the "preliminary" values first available for
the nearest preceding months will be used.
(ii) Subsequent to calculation of the [ ], Boeing may from time
to time make adjustments to the value of the commercial jet
fuel index for such [ ] to reflect any changes in index
previously used to determine such [ ]. If the U.S.
Department of Labor revises any previously released index
value by removing or replacing such index, or by describing
such revision by footnote appendix or by any other method,
the revised value shall be used to revise the value of the
[ ]. Such adjustment(s) by Boeing, if any, shall be made
within 12 months thereafter.
(iii) If the U.S. Department of Labor substantially revises the
methodology (in contrast to benchmark adjustments or other
corrections of previously released data) or discontinues
publishing the commercial jet fuel index, the parties shall
select a substitute for the revised or discontinued
commercial jet fuel index, such substitute to lead in
application to the same adjustment result, insofar as
possible, as would have been achieved by continuing the use
of the original as it may have fluctuated had it not been
revised or discontinued. Appropriate revision of the formula
shall be made to accomplish this result. In the event
escalation provisions are made non enforceable or otherwise
rendered null and void by any agency of the United States
Government, the parties agree, to the extent they may
lawfully do so, to equitably adjust the price of any
affected ARV to reflect an allowance for increases in the
commercial jet fuel price.
NOTE: Any rounding of a number, as required under this Attachment
with respect to escalation of [ ], shall be accomplished as
follows: If the first digit of the portion to be dropped
from the number to be rounded is five or greater, the
preceding digit shall be raised to the next higher number.
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No. 6-1162-DSF-098
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference: Purchase Agreement No. 2021 (the Purchase Agreement)
between The Boeing Company (Boeing) and Atlas Air
Inc.(Customer) relating to Model 747-400F Aircraft
(the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
This letter has been prepared in response to Customer's concern with regard to [
] Boeing has agreed to furnish to Customer [ ] Agreement. The following are
Boeing's opinion and shall not serve as a substitute for the advice of
Customer's legal counsel.
1. Sale in State of Washington.
It is assumed and understood for purposes of this opinion, that the
delivery of the Aircraft is to be made to Customer in the State of Washington,
that title to the Aircraft will be either (i) transferred directly from Boeing
to Customer, and that the Aircraft is to be used by Customer in interstate and
foreign commerce for the transportation of property and persons for hire or (ii)
will be purchased by Customer or Customer's assignee solely for the purpose of
resale or lease, such resale or lease being in the regular course of Customer's
or Customer's assignee's business.
Present Washington law exempts from the Washington State sales tax any:
"Sales of airplanes ... for use in conducting interstate or foreign commerce by
transporting therein or therewith property and persons for hire ...; component
part of such airplanes ... in the course of constructing, repairing, cleaning,
altering, or improving the same ..." RCW 82.08.0262.
Present Washington law also exempts from the Washington State use tax:
"The use of any airplane ... used primarily in conducting interstate or foreign
commerce by trans-
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porting therein or therewith property and persons for hire ... and in respect to
use of tangible personal property which becomes a component part of any such
airplane ..." RCW 82.12.0254.
By its definition, present Washington Law exempts from Washington State
Sales Tax: "Sales to a person who ... purchases for the purpose of resale as
tangible personal property in the regular course of business without intervening
use by such person...." RCW 82.04.050.
[ ]
2. United States Taxes.
As of the date of this [ ].
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
----------------------
Its Attorney-In-Fact
----------------------
P.A. 2021
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6-1162-DSF-099
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Subject: [ ]
Reference: Purchase Agreement No. 2021 (the Purchase Agreement) between
The Boeing Company (Boeing) and Atlas Air, Inc. (Customer)
relating to Model 747-400F aircraft (the Aircraft)
This Letter Agreement amends and supplements the Purchase Agreement. All terms
used but not defined in this Letter Agreement have the same meaning as in the
Purchase Agreement.
1. Special Provisions.
Boeing and Customer agree that the following provisions shall
apply in lieu of the provisions currently contained in the Purchase Agreement:
1.1. Article 8.2.1 to AGTA-TLS, Insurance Requirements is
revised in its entirety to read: "The Customer will purchase and maintain
insurance [ ], and provide a certificate of such insurance that names Boeing as
an additional insured for any and all claims and liabilities for injury to or
death of any person or persons, including employees of Customer but not
employees of Boeing, or for loss of or damage to any property, including any
aircraft, arising out of or in any way relating to Materials, Training, Services
or other things provided under Exhibit B of the AGTA, which will be incorporated
by reference into the applicable purchase agreement whether or not arising in
tort or occasioned by the negligence of Boeing, except with respect to legal
liability to persons or parties other than Customer or Customer's assignees
arising out of an accident caused solely by a product defect in an aircraft.
Customer will provide such certificate of insurance at least thirty (30) days
prior to the scheduled delivery of the first aircraft under a purchase
agreement. The insurance certificate will reference each aircraft delivered to
Customer pursuant to each applicable purchase agreement. Annual renewal
certificates will be submitted to Boeing before the expiration of the policy
periods. The form of the insurance certificate, attached as Appendix I, states
the terms, limits, provisions and coverages required by this Article 8.2.1. The
failure of Boeing to demand compliance with
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this 8.2.1 in any year will not in any way relieve Customer of its obligations
hereunder nor constitutes a waiver by Boeing of these obligations."
1.2. Exhibit A to AGTA-TLS, Buyer Furnished Equipment
Provisions Document, - Customer's configuration currently contains no items of
BFE. Should the configuration change to include any BFE, the Boeing BFE process
in place at that time will be the subject of discussion and negotiation between
Boeing and Customer.
1.3. Exhibit C to AGTA-TLS, Product Assurance Document, part
2, Article 4.5, Maximum Reimbursement is revised in its entirety to read:
"Unless previously agreed, the maximum reimbursement for Direct Labor and Direct
Materials used to Correct a defective Boeing Product will not exceed 65% of
Boeing's then-current sales price for a new replacement Boeing Product plus the
Direct Labor to remove and reinstall such Product."
1.4. Exhibit C to AGTA-TLS, Product Assurance Document, Part
2, Article 8.3.2, is revised in its entirety to read: "If Customer has a
critical parts shortage because Boeing has exceeded a Correction time objective
and Customer has procured spare Boeing Products for the defective Boeing Product
in quantities shown in Boeing's Recommended Spare Parts List (RSPL), [ ], then
Boeing will either expedite the Correction or provide a similar Product on a no
charge loan or lease basis until a Corrected Boeing Product is returned."
1.5. Letter Agreement 2021-1, paragraph 7, Customer's
Indemnification of Boeing, is revised in its entirety to read: "[ ] except as
provided in Article 8.1.1 of AGTA-TLS, Customer will indemnify and hold harmless
Boeing from and against all claims and liabilities, including costs and expense
(including attorneys' fees) incident thereto or incident to successfully
establishing the right to indemnification, for injury to or death of any person
or persons, including employees of Customer but not employees of Boeing, or for
loss of or damage to any property, including Aircraft (but not the Aircraft
before delivery), arising out of or in any way connected with any nonconformance
or defect in any SPE and whether or not arising in tort or occasioned in whole
or in part by the negligence of Boeing. This indemnity will not apply with
respect to any nonconformance or defect caused solely by Boeing's installation
of the SPE."
1.6. Exhibit C to AGTA-TLS, Part 2, Article 4.4, Credit Memo
Reimbursement, is revised in its entirety to read: "Boeing will make
reimbursements by credit
P.A. No. 2021
Special PA Provs
<PAGE> 112
6-1162-DSF-099
Page 3
memoranda which may be applied toward the purchase of Boeing goods and services.
[ ].
[ ]
1.8. Letter Agreement 2021-5, paragraph 7.5, Price and Payment, is revised
in its entirety to read: "The price of each provisioning item repurchased by
Boeing pursuant to this paragraph 7 will be an amount equal to 100% of the
original invoice price thereof. In the case of Provisioning Items manufactured
by a vendor which were purchased pursuant to Paragraph 4, the repurchase price
will not include Boeing's 12% handling charge. Boeing will pay the repurchase
price by issuing a credit memorandum in favor of Customer which may be applied
against amounts due Boeing for the purchase of aircraft, Spare Parts, services
or the licensing of data, [ ].
2. Confidential Treatment.
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity.
P.A. No. 2021
Special PA Provs
<PAGE> 113
6-1162-DSF-099
Page 4
Very truly yours,
THE BOEING COMPANY
By /s/ Dawn S. Foster
----------------------
Its Attorney-In-Fact
----------------------
ACCEPTED AND AGREED TO this
Date: June 6 , 1997
ATLAS AIR, INC.
By /s/ M.A. Chowdry
----------------------
Its CEO
----------------------
Attachment
[ ]
P.A. No. 2021
Special PA Provs
<PAGE> 1
EXHIBIT 10.87
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-TLS
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLES NUMBER
1. Subject Matter of Sale 1
2. Price, Taxes and Payment 1
3. Regulatory Requirements and Certificates 3
4. Detail Specification; Changes 4
5. Representatives, Inspection, Flight Tests, Test Data
and Performance Guarantee Compliance 4
6. Delivery 5
7. Excusable Delay 5
8. Risk Allocation/Insurance 6
9. Assignment, Resale or Lease 7
10. Termination for Certain Events 9
11. Notices 9
12. Miscellaneous 10
EXHIBITS
A Buyer Furnished Equipment Provisions Document
B Customer Support Document
C Product Assurance Document
D Escalation Adjustment
APPENDICES
I Insurance Certificate
II Purchase Agreement Assignment
III Post-Delivery Sale Notice
IV Post-Delivery Lease Notice
V Purchaser's/Lessee's Agreement
VI Owner Appointment of Agent - Warranties
VII Contractor Confidentiality Agreement
i
<PAGE> 3
AIRCRAFT GENERAL TERMS AGREEMENT NUMBER AGTA-TLS
between
The Boeing Company
and
ATLAS AIR, INC.
Relating to
BOEING AIRCRAFT
This Aircraft General Terms Agreement Number AGTA-TLS (AGTA) dated as of ,
1997, between The Boeing Company (Boeing) and Atlas Air, Inc. (Customer) will
apply to all Boeing aircraft contracted for purchase from Boeing by Customer
after this date, unless otherwise mutually agreed by Boeing and Customer.
Article 1. Subject Matter of Sale.
1.1. Aircraft. Boeing will manufacture and sell to Customer and Customer
will purchase from Boeing aircraft under purchase agreements which incorporate
the terms and conditions of this AGTA.
1.2. Buyer Furnished Equipment. Exhibit A, Buyer Furnished Equipment
Provisions Document to the AGTA, contains the obligations of Customer and Boeing
with respect to equipment purchased and provided by Customer, which Boeing will
receive, inspect, store and install in an aircraft before delivery to Customer.
This equipment is defined as Buyer Furnished Equipment (BFE).
1.3. Customer Support. Exhibit B, Customer Support Document to the AGTA,
contains the obligations of Boeing relating to Materials (as defined in Part 3
thereof), training, services and other things in support of aircraft.
1.4. Product Assurance. Exhibit C, Product Assurance Document to the AGTA,
contains the obligations of Boeing and the suppliers of equipment installed in
each aircraft at delivery relating to warranties, patent indemnities, software
copyright indemnities and service life policies.
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<PAGE> 4
Article 2. Price, Taxes and Payment.
2.1. Price.
2.1.1 Airframe Price is defined as the price of the airframe for a
specific model of aircraft described in a purchase agreement. (For Models
737-600, 737-700 and 737-800, the Airframe Price includes Engine Price.)
2.1.2 Optional Features Prices are defined as the prices for optional
features selected by Customer for a specific model of aircraft described in a
purchase agreement.
2.1.3 Engine Price is defined as the price set by the engine
manufacturer for a specific engine to be installed on the model of aircraft
described in a purchase agreement (not applicable to Models 737-600, 737-700
and 737-800).
2.1.4 Aircraft Basic Price is defined as the sum of the Airframe
Price, Optional Features Prices and the Engine Price, if applicable.
2.1.5 Escalation Adjustment is defined as the price adjustment to the
Airframe Price and the Optional Features Prices (and the Engine Price for
Models 737-600, 737-700 and 737-800) resulting from the calculation using the
economic price formula contained in Exhibit D, Escalation Adjustment to the
AGTA. The price adjustment to the Engine Price for all other models of aircraft
will be calculated using the economic price formula in the Engine Escalation
Adjustment to the applicable purchase agreement.
2.1.6 Advance Payment Base Price is defined as the estimated price of
an aircraft as of the date of signing a purchase agreement for the scheduled
month of delivery of such aircraft using commercial forecasts of the Escalation
Adjustment.
2.1.7 Aircraft Price is defined as the total amount Customer is to pay
for an aircraft at the time of delivery, which is the sum of the Aircraft Basic
Price, the Escalation Adjustment and other price adjustments made pursuant to
the purchase agreement.
2.2. Taxes. Taxes are defined as all taxes, fees, charges or duties and any
interest, penalties, fines or other additions to tax, including, but not limited
to sales, use, value added, gross receipts, stamp, excise, transfer and similar
taxes, imposed by any domestic or foreign taxing authority arising out of or in
connection with the performance of the applicable purchase agreement or the
sale, delivery, transfer or storage of any aircraft, BFE, or other things
furnished under the applicable purchase agreement. Except for U.S. federal
income taxes and Washington State business and occupation taxes imposed on
Boeing or Boeing's assignee, Customer will be responsible for filing all tax
returns, reports and declarations and paying all Taxes.
2.3. Payment.
2.3.1 Advance Payment Schedule. Customer will make advance payments to
Boeing for each aircraft in the amounts and on the dates indicated in the
schedule set forth in the applicable purchase agreement.
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<PAGE> 5
2.3.2 Payment at Delivery. Customer will pay any unpaid balance of the
Aircraft Price at the time of delivery of each aircraft.
2.3.3 Form of Payment. Customer will make all payments to Boeing by
unconditional deposit of United States Dollars in a bank account in the United
States designated by Boeing.
2.3.4 Monetary and Government Regulations. Customer is responsible for
complying with all monetary control regulations and for obtaining necessary
governmental authorizations related to payments.
Article 3. Regulatory Requirements and Certificates.
3.1. Certificates. Boeing will manufacture each aircraft to conform to the
appropriate Type Certificate issued by the United States Federal Aviation
Administration (FAA) for the specific model of aircraft and will obtain from the
FAA and furnish to Customer at delivery of each aircraft either a Standard
Airworthiness Certificate or an Export Certificate of Airworthiness issued
pursuant to Part 21 of the Federal Aviation Regulations.
3.2. FAA or Applicable Regulatory Authority Manufacturer Changes.
3.2.1 A Manufacturer Change is defined as any change to an aircraft,
data relating to an aircraft, or testing of an aircraft required by the FAA to
obtain a Standard Airworthiness Certificate or by the country of import and/or
registration to obtain an Export Certificate of Airworthiness.
3.2.2 A Manufacturer Change will be incorporated at no charge to
Customer unless:
(i) the FAA issues the requirement after the date of the
applicable purchase agreement, and the scheduled delivery month of the
affected aircraft is after the date of the Type Certificate for the
model of aircraft, or more than 18 months after the date of the
purchase agreement, whichever is later; or
(ii) the requirement is solely necessary to comply with a
requirement of the country of import and/or registration.
3.2.3 Customer will pay Boeing's charge for validation of an aircraft
required by any governmental agency of the country of import and/or
registration.
3.3. FAA Operator Changes.
3.3.1 An Operator Change is defined as a change in equipment that is
required by Federal Aviation Regulations which (i) is generally applicable to
transport category aircraft to be used in United States certified air carriage
and (ii) the required compliance date is on or before the scheduled delivery
month of the aircraft.
-3-
<PAGE> 6
3.3.2 Boeing will deliver each aircraft with Operator Changes
incorporated or, at Boeing's option, with suitable provisions for the
incorporation of such equipment and Customer will pay Boeing's applicable
charges.
3.3.3 Export License. If an export license is required by United
States law or regulation for any aircraft or any other things delivered under
the purchase agreement, it is Customer's obligation to obtain such license. If
requested, Boeing will assist Customer in applying for any such export license.
Customer will furnish any required supporting documents.
Article 4. Detail Specification; Changes.
4.1. Configuration Changes. The Detail Specification is defined as the
Boeing document that describes the configuration of each aircraft purchased by
Customer. The Detail Specification for each aircraft may be amended by (i)
Boeing to reflect the incorporation of Manufacturer Changes and Operator Changes
or (ii) by the agreement of the parties. In either case the amendment will
describe the particular changes to be made and any effect on design,
performance, weight, balance, scheduled delivery month, Aircraft Basic Price,
Aircraft Price and Advance Payment Base Price.
4.2. Development Changes. Development Changes are defined as changes to
aircraft that do not affect the Aircraft Price or scheduled delivery month, and
do not adversely affect guaranteed weight, guaranteed performance or compliance
with the interchangeability or replaceability requirements set forth in the
applicable Detail Specification. Boeing may, at its option, incorporate
Development Changes into the Detail Specification and into an aircraft prior to
delivery to Customer.
4.3. Notices. Boeing will promptly notify Customer of any amendments to
the Detail Specification.
Article 5. Representatives, Inspection, Demonstration Flights, Test Data and
Performance Guarantee Compliance.
5.1. Office Space. Twelve months before delivery of the first aircraft
purchased, and continuing until the delivery of the last aircraft on firm order,
Boeing will furnish, free of charge, suitable office space and equipment for the
accommodation of up to three representatives of Customer in or conveniently
located near the assembly plant.
5.2. Inspection. Customer's representatives may inspect each aircraft at
any reasonable time provided such inspection does not interfere with Boeing's
performance.
5.3. Demonstration Flights. Prior to delivery, Boeing will fly each
aircraft up to 4 hours to demonstrate to Customer the function of the aircraft
and its equipment following Boeing's production flight test procedures. Customer
may designate up to five representatives to participate as observers.
5.4. Test Data; Performance Guarantee Compliance. Performance Guarantees
are defined as the written guarantees in a purchase agreement regarding the
operational performance of an aircraft. Boeing
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<PAGE> 7
will furnish to Customer flight test data obtained on an aircraft of the same
model to evidence compliance with such Performance Guarantees. Performance
Guarantees will be met if reasonable engineering interpretations and
calculations based on the flight test data establish that the particular
aircraft being delivered under the applicable purchase agreement would, if
actually flown, comply with the guarantees.
5.5. Special Aircraft Test Requirements. Boeing may use an aircraft for
flight and ground tests prior to delivery, without reduction in the Aircraft
Price, if the tests are considered necessary by Boeing (i) to obtain or maintain
the Type Certificate or Certificate of Airworthiness for the aircraft; or (ii)
to evaluate potential improvements that may be offered for production or
retrofit incorporation.
Article 6. Delivery.
6.1. Notices of Delivery Dates. Boeing will notify Customer of the
approximate delivery date of each aircraft at least 30 days before the scheduled
month of delivery and at least 14 days before the scheduled delivery date.
6.2. Place of Delivery. Each aircraft will be delivered at a facility
selected by Boeing in the State of Washington.
6.3. Bill of Sale. At delivery of an aircraft, Boeing will provide Customer
a bill of sale conveying good title, free of encumbrances.
6.4. Delay. If Customer delays acceptance of an aircraft beyond the
scheduled delivery date, Customer will reimburse Boeing for all costs incurred
by Boeing as a result of the delay.
Article 7. Excusable Delay.
7.1. General. Boeing will not be liable for any delay in the scheduled
delivery month of an aircraft or other performance under the applicable purchase
agreement caused by (i) acts of God; (ii) war or armed hostilities; (iii)
government acts or priorities; (iv) fires, floods, or earthquakes; (v) strikes
or labor troubles causing cessation, slowdown, or interruption of work; or (vi)
any other cause to the extent such cause is beyond Boeing's control and not
occasioned by Boeing's fault or negligence. A delay resulting from any such
cause is defined as an Excusable Delay.
7.2. Notice. Boeing will give written notice to Customer (i) of a delay as
soon as it concludes that an aircraft will be delayed beyond the scheduled
delivery month due to an Excusable Delay; and (ii) of a revised delivery month
based on Boeing's appraisal of the facts.
7.3. Delay in Delivery of Twelve Months or Less. If the revised delivery
month in such notice is 12 months or less after the scheduled delivery month,
Customer will accept such aircraft when tendered for delivery, subject to the
following:
7.3.1 The calculation of the Escalation Adjustment will be based on
the previously scheduled delivery month.
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<PAGE> 8
7.3.2 The advance payment schedule will be adjusted to reflect the
revised delivery month.
7.3.3 All other provisions of the applicable purchase agreement,
including the BFE on dock dates for the delayed aircraft, are unaffected by
an Excusable Delay.
7.4. Delay in Delivery of More Than Twelve Months. If the revised delivery
month in such notice is more than 12 months after the scheduled delivery month,
either party may terminate the applicable purchase agreement with respect to
such aircraft within 30 days of the notice. If either party does not terminate
the applicable purchase agreement with respect to such aircraft, all terms and
conditions of the applicable purchase agreement will remain in effect.
7.5. Aircraft Damaged Beyond Repair. If an aircraft is destroyed or damaged
beyond repair for any reason before delivery, Boeing will give written notice to
Customer specifying the earliest month possible, consistent with Boeing's other
contractual commitments and production capabilities, in which Boeing can deliver
a replacement. Customer will have 30 days from receipt of notice to elect to
have Boeing manufacture a replacement aircraft under the same terms and
conditions of purchase, except that the calculation of the Escalation Adjustment
will be based upon the scheduled delivery month, or, failing such election, the
applicable purchase agreement will terminate with respect to such aircraft.
Boeing will not be obligated to manufacture a replacement aircraft if
reactivation of the production line for the specific model of aircraft is
required.
7.6. Termination. Termination under this Article will discharge all
obligations and liabilities of Boeing and Customer with respect to any aircraft
and all related undelivered Materials, training, services and other things
terminated under the applicable purchase agreement, except that Boeing will
return to Customer, without interest, an amount equal to all advance payments
paid by Customer for the aircraft. If Customer terminates the applicable
purchase agreement as to any aircraft, Boeing may elect, by written notice to
Customer within 30 days, to purchase from Customer any BFE related to the
aircraft at the invoice prices paid, or contracted to be paid, by Customer.
7.7. Exclusive Rights. The termination rights in this Article are in
substitution for all other rights of termination or any claim arising by
operation of law due to delays in performance covered by this Article.
Article 8. Risk Allocation/Insurance.
8.1. Title and Risk with Boeing.
8.1.1 Boeing's Indemnification of Customer. Until transfer of title to
an aircraft to Customer, Boeing will indemnify and hold harmless Customer and
Customer's observers from and against all claims and liabilities, including all
expenses and attorneys' fees incident thereto or incident to establishing the
right to indemnification, for injury to or death of any person(s), including
employees of Boeing but not employees of Customer, or for loss of or damage to
any property, including an aircraft, arising out of or in any way related to
the operation of an aircraft during all demonstration and test flights
conducted under the provisions of the applicable purchase agreement, whether or
not arising in tort or occasioned by the negligence of Customer or any of
Customer's observers.
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<PAGE> 9
8.1.2 Definition of Customer. For the purpose of this Article,
"Customer" is defined as Atlas Air, Inc., its divisions, subsidiaries,
affiliates, the assignees of each and their respective directors, officers,
employees and agents.
8.2. Insurance.
8.2.1 Insurance Requirements. The Customer will purchase and maintain
insurance acceptable to Boeing and provide a certificate of such insurance that
names Boeing as an additional insured for any and all claims and liabilities
for injury to or death of any person or persons, including employees of
Customer but not employees of Boeing, or for loss of or damage to any property,
including any aircraft, arising out of or in any way relating to Materials,
Training, Services or other things provided under Exhibit B of the AGTA, which
will be incorporated by reference into the applicable purchase agreement,
whether or not arising in tort or occasioned by the negligence of Boeing,
except with respect to legal liability to persons or parties other than
Customer or Customer's assignees arising out of an accident caused solely by a
product defect in an aircraft. Customer will provide such certificate of
insurance at least thirty (30) days prior to the scheduled delivery of the
first aircraft under a purchase agreement. The insurance certificate will
reference each aircraft delivered to Customer pursuant to each applicable
purchase agreement. Annual renewal certificates will be submitted to Boeing
before the expiration of the policy periods. The form of the insurance
certificate, attached as Appendix I, states the terms, limits, provisions and
coverages required by this Article 8.2.1. The failure of Boeing to demand
compliance with this 8.2.1 in any year will not in any way relieve Customer of
its obligations hereunder nor constitutes a waiver by Boeing of these
obligations.
8.2.2 Noncompliance with Insurance Requirements. If Customer fails to
comply with any of the insurance requirements of Article 8.2.1 or any of the
insurers fails to pay a claim covered by the insurance or otherwise fails to
meet any of insurer's obligations required by Appendix I, Customer will provide
the same protection to Boeing as that required by Article 8.2.1 above.
8.2.3 Definition of Boeing. For purposes of this article, "Boeing" is
defined as The Boeing Company, its divisions, subsidiaries, affiliates,
assignees of each and their respective directors, officers, employees and
agents.
Article 9. Assignment, Resale or Lease.
9.1. Assignment. The applicable purchase agreement is for the benefit of
the parties and their respective successors and assigns. No rights or duties of
either party may be assigned or delegated, or contracted to be assigned or
delegated, without the prior written consent of the other party, except:
9.1.1 Either party may assign its interest to a corporation that (i)
results from any merger or reorganization of such party or (ii) acquires
substantially all the assets of such party;
9.1.2 Boeing may assign its rights to receive money; and
9.1.3 Boeing may assign any of its rights and duties to any
wholly-owned subsidiary of Boeing.
-7-
<PAGE> 10
9.1.4 Boeing may assign any of its rights and duties with respect to
Parts 1 and 3 of Exhibit B, Customer Support Document to the AGTA, to
FlightSafety Boeing Training International L.L.C.
9.2. Transfer by Customer at Delivery. Boeing will take any requested
action reasonably required for the purpose of causing an aircraft, at time of
delivery, to be subject to an equipment trust, conditional sale, lien or other
arrangement for Customer to finance the aircraft. However, no such action will
require Boeing to divest itself of title to or possession of the aircraft until
delivery of and payment for the aircraft. A sample form of assignment acceptable
to Boeing is attached as Appendix II.
9.3. Sale or Lease by Customer After Delivery. If, following delivery of an
aircraft, Customer sells or leases the aircraft (including any sale for
financing purposes), all of Customer's rights with respect to the aircraft under
the applicable purchase agreement will inure to the benefit of the purchaser or
lessee of such aircraft, effective upon Boeing's receipt of the written
agreement of the purchaser or lessee, in a form satisfactory to Boeing, to
comply with all applicable terms and conditions of the applicable purchase
agreement. Sample forms of agreement acceptable to Boeing are attached as
Appendices III and IV.
9.4. Notice of Sale or Lease After Delivery. Customer will give notice to
Boeing as soon as practicable of the sale or lease of an aircraft including in
the notice the name of the entity with title and/or possession of such aircraft.
9.5. Exculpatory Clause in Post-Delivery Sale or Lease. If, following the
delivery of an aircraft, Customer sells or leases such aircraft and obtains from
the transferee any form of exculpatory clause protecting Customer from liability
for loss of or damage to the aircraft, and/or related incidental or
consequential damages, including without limitation loss of use, revenue or
profit, Customer shall obtain for Boeing the purchaser's or lessee's written
agreement to be bound by terms and conditions substantially as set forth in
Appendix V. This Article 9.5 applies only if purchaser or lessee has not
provided to Boeing the written agreement described in Article 9.3 above.
9.6. Appointment of Agent - Warranty Claims. If, following delivery of an
aircraft, Customer appoints an agent to act directly with Boeing for the
administration of claims relating to the warranties under the applicable
purchase agreement, Boeing will deal with the agent for that purpose, effective
upon Boeing's receipt of the agent's written agreement, in a form satisfactory
to Boeing, to comply with all applicable terms and conditions of the applicable
purchase agreement. A sample form of agreement acceptable to Boeing is attached
as Appendix VI.
9.7. No Increase in Boeing Liability. No action taken by Customer or Boeing
relating to the resale or lease of an aircraft or the assignment of Customer's
rights under the applicable purchase agreement will subject Boeing to any
liability beyond that in the applicable purchase agreement or modify in any way
Boeing's obligations under the applicable purchase agreement.
-8-
<PAGE> 11
Article 10. Termination for Certain Events.
10.1. Termination. If either party
(i) ceases doing business as a going concern, suspends all or
substantially all its business operations, makes an assignment for the
benefit of creditors, or generally does not pay its debts, or admits in
writing its inability to pay its debts, or
(ii) petitions for or acquiesces in the appointment of any receiver,
trustee or similar officer to liquidate or conserve its business or any
substantial part of its assets; commences any legal proceeding such as
bankruptcy, reorganization, readjustment of debt, dissolution or
liquidation available for the relief of financially distressed debtors; or
becomes the object of any such proceeding, unless the proceeding is
dismissed or stayed within a reasonable period, not to exceed 60 days,
the other party may terminate any purchase agreement with respect to any
undelivered aircraft, Materials, training, services and other things by giving
written notice of termination.
10.2. Repayment of Advance Payments. If Customer terminates the applicable
purchase agreement under this Article, Boeing will repay to Customer, without
interest, an amount equal to any advance payments received by Boeing from
Customer with respect to undelivered aircraft.
Article 11. Notices.
All notices required by any applicable purchase agreement will be in
English, will be effective on the date of receipt and may be transmitted by any
customary means of written communication addressed as follows:
Customer: Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
U.S.A.
Attention: General Counsel
Boeing: Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
U.S.A.
Attention: Vice President - Contracts
Mail Stop 75-38
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<PAGE> 12
Article 12. Miscellaneous.
12.1. Government Approval. Boeing and Customer will assist each other in
obtaining any governmental consents or approvals required to effect
certification and sale of aircraft under the applicable purchase agreement.
12.2. Headings. Article and paragraph headings used in this AGTA and in any
purchase agreement are for convenient reference only and are not intended to
affect the interpretation of this AGTA or any purchase agreement.
12.3. GOVERNING LAW. THIS AGTA AND ANY PURCHASE AGREEMENT WILL BE GOVERNED
BY THE LAW OF THE STATE OF WASHINGTON, U.S.A., EXCLUSIVE OF WASHINGTON'S
CONFLICTS OF LAWS PRINCIPLES.
12.4. Waiver/Severability. Failure by either party to enforce any provision
of this AGTA or any purchase agreement will not be construed as a waiver. If any
provision of this AGTA or any provision of any purchase agreement are held
unlawful or otherwise ineffective by a court of competent jurisdiction, the
remainder of the AGTA or the applicable purchase agreement will remain in
effect.
12.5. Survival of Obligations. The Articles and Exhibits of this AGTA
including but not limited to those relating to insurance, DISCLAIMER AND RELEASE
and the EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES will survive termination or
cancellation of any purchase agreement or part thereof.
DATED AS OF June 6, 1997
ATLAS AIR, INC. THE BOEING COMPANY
By /s/M.A. Chowdry By Dawn S. Foster
-------------------------- --------------------------
Its CEO Its Attorney-in-Fact
-------------------------- --------------------------
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<PAGE> 13
EXHIBIT A
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-TLS
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
A-i
<PAGE> 14
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
---------------
The parties acknowledge Boeing intends to implement a new Buyer Furnished
Equipment Process for Buyer Furnished Equipment in 1997. New documentation
reflecting the new process will be offered to Customers as soon as practicable.
It is the intention of the parties to replace this Exhibit when the new process
becomes available.
A-ii
<PAGE> 15
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
1. General.
Certain equipment to be installed in the Aircraft is furnished to Boeing by
Customer at Customer's expense. This equipment is designated "Buyer Furnished
Equipment" (BFE) and is listed in the Detail Specification. Boeing will provide
to Customer a BFE Requirements On-Dock/Inventory Document (BFE Document) or an
electronically transmitted BFE Report which may be periodically revised, setting
forth the items, quantities, on-dock dates and shipping instructions relating to
the in sequence installation of BFE as described in the applicable Supplemental
Exhibit to this Exhibit A in a purchase agreement at the time of aircraft
purchase.
2. Supplier Selection.
Customer will:
2.1. Select and notify Boeing of the suppliers of BFE items by those dates
appearing in Supplemental Exhibit BFE1to the applicable purchase agreement at
the time of aircraft purchase.
2.2. Meet with Boeing and such selected BFE suppliers promptly after such
selection to:
2.2.1 complete BFE configuration design requirements for such BFE; and
2.2.2 confirm technical data submittal dates for BFE certification.
3. Customer's Obligations.
Customer will:
3.1. comply with and cause the supplier to comply with the provisions of
the BFE Document or BFE Report;
3.1.1 deliver technical data (in English) to Boeing as required to
support installation and FAA certification in accordance with the schedule
provided by Boeing or as mutually agreed upon during the BFE meeting
referred to above;
3.1.2 deliver BFE including production and/or flight training spares
to Boeing in accordance with the quantities and schedule provided therein;
and
3.1.3 deliver appropriate quality assurance documentation to Boeing as
required with each BFE part (D6-56586, "BFE Product Acceptance
Requirements");
3.2. authorize Boeing to discuss all details of the BFE directly with the
BFE suppliers;
A-1
<PAGE> 16
3.3. authorize Boeing to conduct or delegate to the supplier quality source
inspection and supplier hardware acceptance of BFE at the supplier location;
3.3.1 require supplier's contractual compliance to Boeing defined
source inspection and supplier delegation programs, including availability
of adequate facilities for Boeing resident personnel; and
3.3.2 assure that Boeing identified supplier's quality systems be
approved to Boeing document D1-9000;
3.4. provide necessary field service representation at Boeing's facilities
to support Boeing on all issues related to the installation and certification of
BFE;
3.5. deal directly with all BFE suppliers to obtain overhaul data,
provisioning data, related product support documentation and any warranty
provisions applicable to the BFE;
3.6. work closely with Boeing and the BFE suppliers to resolve any
difficulties, including defective equipment, that arise;
3.7. be responsible for modifying, adjusting and/or calibrating BFE as
required for FAA approval and for all related expenses;
3.8. warrant that the BFE will meet the requirements of the Detail
Specification; and
3.9. be responsible for providing equipment which is FAA certifiable at
time of Aircraft delivery, or for obtaining waivers from the applicable
regulatory agency for non-FAA certifiable equipment.
4. Boeing's Obligations.
Other than as set forth below, Boeing will provide for the installation of
and install the BFE and obtain certification of the Aircraft with the BFE
installed.
5. Nonperformance by Customer.
If Customer's nonperformance of obligations in this Exhibit or in the BFE
Document causes a delay in the delivery of the Aircraft or causes Boeing to
perform out-of-sequence or additional work, Customer will reimburse Boeing for
all resulting expenses and be deemed to have agreed to any such delay in
Aircraft delivery. In addition Boeing will have the right to:
5.1. provide and install specified equipment or suitable alternate
equipment and increase the price of the Aircraft accordingly; and/or
5.2. deliver the Aircraft to Customer without the BFE installed.
A-2
<PAGE> 17
6. Return of Equipment.
BFE not installed in the Aircraft will be returned to Customer in
accordance with Customer's instructions and at Customer's expense.
7. Title and Risk of Loss.
Title to and risk of loss of BFE will at all times remain with Customer or
other owner. Boeing will have only such liability for BFE as a bailee for mutual
benefit would have, but will not be liable for loss of use.
8. Indemnification of Boeing.
Customer hereby indemnifies and holds harmless Boeing from and against all
claims and liabilities, including costs and expenses (including attorneys' fees)
incident thereto or incident to successfully establishing the right to
indemnification, for injury to or death of any person or persons, including
employees of Customer but not employees of Boeing, or for loss of or damage to
any property, including any Aircraft, arising out of or in any way connected
with any nonconformance or defect in any BFE and whether or not arising in tort
or occasioned by the negligence of Boeing. This indemnity will not apply with
respect to any nonconformance or defect caused solely by Boeing's installation
of the BFE.
9. Patent Indemnity.
Customer hereby indemnifies and holds harmless Boeing from and against all
claims, suits, actions, liabilities, damages and costs arising out of any actual
or alleged infringement of any patent or other intellectual property rights by
BFE or arising out of the installation, sale or use of BFE by Boeing.
10. Definitions.
For the purposes of the above indemnities, the term "Boeing" includes The
Boeing Company, its divisions, subsidiaries and affiliates, the assignees of
each, and their directors, officers, employees and agents.
A-3
<PAGE> 18
EXHIBIT B
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-TLS
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
CUSTOMER SUPPORT DOCUMENT
This document contains:
Part 1: Maintenance and Flight Training Programs;
Operations Engineering Support
Part 2: Field Services and Engineering Support Services
Part 3: Technical Information and Materials
Part 4: Alleviation or Cessation of Performance
Part 5: Protection of Proprietary Information and
Proprietary Materials
B-i
<PAGE> 19
CUSTOMER SUPPORT DOCUMENT
PART 1: BOEING MAINTENANCE AND FLIGHT TRAINING
PROGRAMS; OPERATIONS ENGINEERING SUPPORT
1. Boeing Training Programs.
1.1. Boeing will provide maintenance training and flight training programs
to support the introduction of a specific model of aircraft into service. The
training programs will consist of general and specialized courses and will be
described in a Supplemental Exhibit to the applicable purchase agreement.
1.2. Boeing will conduct all training at Boeing's training facility in the
Seattle area unless otherwise agreed.
1.3. All training will be presented in the English language. If translation
is required, Customer will provide interpreters.
1.4. Customer will be responsible for all living expenses of Customer's
personnel. Boeing will transport Customer's personnel between their local
lodging and Boeing's training facility.
2. Training Planning Conferences.
Customer and Boeing will conduct planning conferences approximately 12
months before the scheduled delivery month of the first aircraft of a model to
define and schedule the maintenance and flight training programs.
3. Operations Engineering Support.
3.1. As long as an aircraft purchased by Customer from Boeing is operated
by Customer in scheduled revenue service, Boeing will provide operations
engineering support. Such support will include:
3.1.1 assistance with the analysis and preparation of performance data
to be used in establishing operating practices and policies for Customer's
operation of aircraft;
3.1.2 assistance with interpretation of the minimum equipment list,
the definition of the configuration deviation list and the analysis of
individual aircraft performance;
3.1.3 assistance with solving operational problems associated with
delivery and route-proving flights;
3.1.4 information regarding significant service items relating to
aircraft performance or flight operations; and
B-1-1
<PAGE> 20
3.1.5 if requested by Customer, Boeing will provide operations
engineering support during an aircraft ferry flight.
4. Training at a Facility Other Than Boeing's.
If requested by Customer, Boeing will conduct the classroom portions of the
maintenance and flight training (except for the Performance Engineer training
courses) at a mutually acceptable alternate training site, subject to the
following conditions:
4.1. Customer will provide acceptable classroom space, simulators (as
necessary for flight training) and training equipment required to present the
courses;
4.2. Customer will pay Boeing's then-current per diem charge for each
Boeing instructor for each day, or fraction thereof, that the instructor is away
from the Seattle area, including travel time;
4.3. Customer will reimburse Boeing for the actual costs of round-trip
transportation for Boeing's instructors and the shipping costs of training
Materials between the Seattle area and the alternate training site;
4.4. Customer will be responsible for all taxes, fees, duties, licenses,
permits and similar expenses incurred by Boeing and its employees as a result of
Boeing's providing training at the alternate site or incurred as a result of
Boeing providing revenue service training; and
4.5. Those portions of training that require the use of training devices
not available at the alternate site will be conducted at Boeing's facility or at
the alternate site.
5. General Terms and Conditions.
5.1. Boeing flight instructor personnel will not be required to work more
than 5 days per week, or more than 8 hours in any one 24-hour period, of which
not more than 5 hours per 8-hour workday will be spent in actual flying. These
foregoing restrictions will not apply to ferry assistance or revenue service
training services, which will be governed by FAA rules and regulations.
5.2. Normal Line Maintenance is defined as line maintenance that Boeing
might reasonably be expected to furnish for flight crew training at Boeing's
facility, and will include ground support and aircraft storage in the open, but
will not include provision of spare parts. Boeing will provide Normal Line
Maintenance services for any aircraft while the aircraft is used for flight crew
training at Boeing's facility. Customer will provide such services if flight
crew training is conducted elsewhere. Regardless of the location of such
training, Customer will be responsible for providing all maintenance items
(other than those included in Normal Line Maintenance) required during the
training, including, but not limited to, fuel, oil, landing fees and spare
parts.
5.3. If the training is based at Boeing's facility, and the aircraft is
damaged during such training, Boeing will make all necessary repairs to the
aircraft as promptly as possible. Customer will pay Boeing's reasonable charge,
including the price of parts and materials, for making the repairs. If Boeing's
estimated
B-1-2
<PAGE> 21
labor charge for the repair exceeds $25,000, Boeing and Customer will enter
into an agreement for additional services before beginning the repair work.
5.4. If the flight training is based at Boeing's facility, several airports
in the states of Washington, Montana and Oregon, as well as the services of the
fixed base operator at Grant County Airport at Moses Lake, Washington, may be
used. Unless otherwise agreed in the flight training planning conference, it
will be Customer's responsibility to make arrangements for the use of such
airports.
5.5. If Boeing agrees to make arrangements on behalf of Customer for the
use of airports for flight training, Boeing will pay on Customer's behalf any
landing fees charged by any airport used in conjunction with the flight
training. At least 30 days before flight training, Customer will provide Boeing
an open purchase order against which Boeing will invoice Customer for any
landing fees Boeing paid on Customer's behalf. The invoice will be submitted to
Customer approximately 60 days after flight training is completed, when all
landing fee charges have been received and verified. Customer will pay to Boeing
within 30 days of the date of the invoice.
5.6. If requested by Boeing, in order to provide the flight training or
ferry flight assistance, Customer will make available to Boeing an aircraft
after delivery to familiarize Boeing instructor or ferry flight crew personnel
with such aircraft. If flight of the aircraft is required for any Boeing
instructor or ferry flight crew member to maintain an FAA license for flight
proficiency or landing currency, Boeing will be responsible for the costs of
fuel, oil, landing fees and spare parts attributable to that portion of the
flight.
B-1-3
<PAGE> 22
CUSTOMER SUPPORT DOCUMENT
PART 2: FIELD AND ENGINEERING SUPPORT SERVICES
1. Field Service Representation.
Boeing will furnish field service representation to advise Customer with
respect to the maintenance and operation of an aircraft (Field Service
Representatives).
1.1. Field Service Representatives will be available at a facility
designated by Customer beginning before the scheduled delivery month of the
first aircraft and ending 12 months after delivery of the last aircraft covered
by a specific purchase agreement.
1.2. Customer will provide, at no charge to Boeing, suitable furnished
office space and office equipment at the location where Boeing is providing
Field Service Representatives. As required, Customer will assist each Field
Service Representative with visas, work permits, customs, mail handling,
identification passes and formal introduction to local airport authorities.
1.3. Boeing Field Service Representatives are assigned to various airports
around the world. Whenever Customer's aircraft are operating through any such
airport, the services of Boeing's Field Service Representatives are available to
Customer.
2. Engineering Support Services.
Boeing will, if requested by Customer, provide technical advisory
assistance for any aircraft and Boeing Product (as defined in Part I of Exhibit
C). Technical advisory assistance, provided from the Seattle area or at a base
designated by Customer as appropriate, will include:
2.1. Operational Problem Support. If Customer experiences operational
problems with an aircraft, Boeing will analyze the information provided by
Customer to determine the probable nature and cause of the problem and to
suggest possible solutions.
2.2. Schedule Reliability Support. If Customer is not satisfied with the
schedule reliability of a specific model of aircraft, Boeing will analyze
information provided by Customer to determine the nature and cause of the
problem and to suggest possible solutions.
2.3. Maintenance Cost Reduction Support. If Customer is concerned that
actual maintenance costs of a specific model of aircraft are excessive, Boeing
will analyze information provided by Customer to determine the nature and cause
of the problem and to suggest possible solutions.
2.4. Aircraft Structural Repair Support. If Customer is designing
structural repairs and desires Boeing's support, Boeing will analyze and comment
on Customer's engineering releases relating to structural repairs not covered by
Boeing's Structural Repair Manual.
B-2-1
<PAGE> 23
2.5. Aircraft Modification Support. If Customer is designing aircraft
modifications and requests Boeing's support, Boeing will analyze and comment on
Customer's engineering proposals for changes in, or replacement of, systems,
parts, accessories or equipment manufactured to Boeing's detailed design. Boeing
will not analyze or comment on any major structural change unless Customer's
request for such analysis and comment includes complete detailed drawings,
substantiating information (including any information required by applicable
government agencies), all stress or other appropriate analyses, and a specific
statement from Customer of the substance of the review and the response
requested.
2.6. Facilities, Ground Equipment and Maintenance Planning Support. Boeing
will, at Customer's request, evaluate Customer's technical facilities, tools and
equipment for servicing and maintaining aircraft, to recommend changes where
necessary and to assist in the formulation of an overall maintenance plan.
2.7. Post-Delivery Service Support. Boeing will, at Customer's request,
perform work on an aircraft after delivery but prior to the initial departure
flight or upon the return of the aircraft to Boeing's facility prior to
completion of that flight. In that event the following provisions will apply.
2.7.1 Boeing may rely upon the commitment authority of the Customer's
personnel requesting the work.
2.7.2 As title and risk of loss has passed to Customer, the insurance
provisions of Article 8.2 of the AGTA apply.
2.7.3 The provisions of the Boeing Warranty in Part 2 of Exhibit C of
this AGTA apply.
2.7.4 Customer will pay Boeing for requested work not covered by the
Boeing Warranty, if any.
2.7.5 The DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND
OTHER DAMAGES provisions in Article 11 of Part 2 of Exhibit C of this AGTA
apply.
2.8. Additional Services. Boeing may, at Customer's request, provide
additional services for an aircraft after delivery, which may include retrofit
kit changes (kits and/or information), training, maintenance and repair of
aircraft. Such additional services will be subject to a mutually acceptable
price, schedule and scope of work. The DISCLAIMER AND RELEASE and the EXCLUSION
OF CONSEQUENTIAL AND OTHER DAMAGES provisions in Article 11 of Part 2 of Exhibit
C of this AGTA and the insurance provisions in Article 8.2 of this AGTA will
apply to any such work. Title to and risk of loss of any such aircraft will
always remain with Customer.
B-2-2
<PAGE> 24
CUSTOMER SUPPORT DOCUMENT
PART 3: TECHNICAL INFORMATION AND MATERIALS
1. General.
Materials are defined as any and all items that are created by Boeing or a
third party, which are provided directly or indirectly from Boeing and serve
primarily to contain, convey or embody information. Materials may include either
tangible embodiments (for example, documents or drawings), or intangible
embodiments (for example, software and other electronic forms) of information
but excludes Aircraft Software. Aircraft Software is defined as software that is
installed on and used in the operation of the aircraft.
Boeing will furnish to Customer certain Materials to support the
maintenance and operation of the aircraft at no additional charge to Customer,
except as otherwise provided herein. Such Materials will, if applicable, be
prepared generally in accordance with Air Transport Association of America (ATA)
Specification No. 100, entitled "Specification for Manufacturers' Technical
Data". Materials will be in English and in the units of measure used by Boeing
to manufacture an aircraft.
Digitally-produced Materials will, if applicable, be prepared generally in
accordance with ATA Specification No. 2100, dated January 1994, "Digital Data
Standards for Aircraft Support."
2. Materials Planning Conferences.
Customer and Boeing will conduct planning conferences approximately 12
months before the scheduled delivery month of the first aircraft of a model in
order to mutually determine the proper format and quantity of Materials to be
furnished to Customer in support of the aircraft.
When available, Customer may select Boeing standard digital format as the
delivery medium or, alternatively, Customer may select a reasonable quantity of
printed and 16mm microfilm formats. When Boeing standard digital format is
selected, Customer may also select up to 5 copies of printed or microfilm format
copies, with the exception of the Illustrated Parts Catalog, which will be
provided in one selected format only.
3. Information and Materials - Incremental Increase.
Until one year after the month of delivery of the last aircraft covered by
a specific purchase agreement, Customer may annually request in writing a
reasonable increase in the quantity of Materials with the exception of microfilm
master copies, digital formats, and others for which a specified number of
copies are provided. Boeing will provide the additional quantity at no
additional charge beginning with the next normal revision cycle. Customer may
request a decrease in revision quantities at any time.
B-3-1
<PAGE> 25
4. Advance Representative Copies.
All advance representative copies of Materials will be selected by Boeing
from available sources. Such advance copies will be for advance planning
purposes only.
5. Customized Materials.
All customized Materials will reflect the configuration of each aircraft as
delivered.
6. Revisions.
6.1. Revision Service. Boeing will provide revisions free of charge to
certain Materials to be identified in the planning conference conducted for a
specific model of aircraft, reflecting changes developed by Boeing, as long as
Customer operates an aircraft of that model.
6.2. Revisions Based on Boeing Service Bulletin Incorporation. If Boeing
receives written notice that Customer intends to incorporate, or has
incorporated, any Boeing service bulletin in an aircraft, Boeing will at no
charge issue revisions to Materials with revision service reflecting the effects
of such incorporation into such aircraft.
7. Computer Software Documentation for Boeing Manufactured Airborne Components
and Equipment.
Boeing will provide to Customer a Computer Software Index containing a
listing of (i) all programmed airborne avionics components and equipment
manufactured by Boeing or a Boeing subsidiary, designed and developed in
accordance with Radio Technical Commission for Aeronautics Document No.
RTCA/DO-178 dated January 1982, No. RTCA/DO-178A dated March 1985, or later as
available, and installed by Boeing in aircraft covered by the applicable
purchase agreement and (ii) specific software documents (Software Documentation)
available to Customer from Boeing for the listed components and equipment.
Two copies of the Computer Software Index will be furnished to Customer
with the first aircraft of a model. Revisions to the Computer Software Index
applicable to such model of aircraft will be issued to Customer as revisions are
developed by Boeing for so long as Customer operates the aircraft.
Software Documentation will be provided to Customer upon written request.
The charge to Customer for Software Documentation will be Boeing's price to
reproduce the Software Documentation requested. Software Documentation will be
prepared generally in accordance with ATA Specification No. 102 revised April
20, 1983, "Specification for Computer Software Manual" but Software
Documentation will not include, and Boeing will not be obligated to provide, any
code (including, but not limited to, original source code, assembled source
code, or object code) on computer sensible media.
B-3-2
<PAGE> 26
8. Supplier Technical Data.
8.1. For supplier-manufactured programmed airborne avionics components and
equipment classified as Seller Furnished Equipment (SFE) or Seller Purchased
Equipment (SPE) which contain computer software designed and developed in
accordance with Radio Technical Commission for Aeronautics Document No.
RTCA/DO-178 dated January 1982, No. RTCA/DO-178A dated March 1985, or later as
available, Boeing will request that each supplier of the components and
equipment make software documentation available to Customer in a manner similar
to that described in Article 7 above.
8.2. The provisions of this Article will not be applicable to items of BFE.
8.3. Boeing will furnish to Customer a document identifying the terms and
conditions of the product support agreements between Boeing and its suppliers
requiring the suppliers to fulfill Customer's requirements for information and
services in support of the specific model of aircraft.
9. Buyer Furnished Equipment Data.
Boeing will incorporate BFE information into the customized Materials
providing Customer makes the information available to Boeing at least nine
months prior to the scheduled delivery month of Customer's first aircraft of a
specific model. Customer agrees to furnish the information in Boeing standard
digital format if Materials are to be delivered in Boeing standard digital
format.
10. Materials Shipping Charges.
Boeing will pay the reasonable transportation costs of the Materials.
Customer is responsible for any customs clearance charges, duties, and taxes.
11. Customer's Shipping Address.
The Materials furnished to Customer hereunder are to be sent to a single
address to be specified. Customer will promptly notify Boeing of any change to
the address.
B-3-3
<PAGE> 27
CUSTOMER SUPPORT DOCUMENT
PART 4: ALLEVIATION OR CESSATION OF PERFORMANCE
Boeing will not be required to provide any Materials, services, training or
other things at a facility designated by Customer if any of the following
conditions exist:
1. a labor stoppage or dispute in progress involving Customer;
2. wars or warlike operations, riots or insurrections in the country
where the facility is located;
3. any condition at the facility which, in the opinion of Boeing, is
detrimental to the general health, welfare or safety of its personnel or
their families;
4. the United States Government refuses permission to Boeing personnel
or their families to enter into the country where the facility is located,
or recommends that Boeing personnel or their families leave the country; or
5. the United States Government refuses permission to Boeing to
deliver Materials, services, training or other things to the country where
the facility is located.
After the location of Boeing personnel at the facility, Boeing further
reserves the right, upon the occurrence of any of such events, to immediately
and without prior notice to Customer relocate its personnel and their families.
B-4-1
<PAGE> 28
CUSTOMER SUPPORT DOCUMENT
PART 5: PROTECTION OF PROPRIETARY INFORMATION
AND PROPRIETARY MATERIALS
1. General.
All Materials provided by Boeing to Customer and not covered by a Boeing
CSGTA or other agreement between Boeing and Customer defining Customer's right
to use and disclose the Materials and included information will be covered by,
and subject to the terms of this AGTA. Title to all Materials containing,
conveying or embodying confidential, proprietary or trade secret information
(Proprietary Information) belonging to Boeing or a third party (Proprietary
Materials), will at all times remain with Boeing or such third party. Customer
will treat all Proprietary Materials and all Proprietary Information in
confidence and use and disclose the same only as specifically authorized in this
AGTA.
2. License Grant.
Boeing grants to Customer a worldwide, non-exclusive, non-transferable
license to use and disclose Proprietary Materials in accordance with the terms
and conditions of this AGTA. Customer is authorized to make copies of Materials
(except for Materials bearing the copyright legend of a third party), and all
copies of Proprietary Materials will belong to Boeing and be treated as
Proprietary Materials under this AGTA. Customer will preserve all proprietary
legends, and all copyright notices on all Materials and insure the inclusion of
those legends and notices on all copies.
3. Use of Proprietary Materials and Proprietary Information.
Customer is authorized to use Proprietary Materials and Proprietary
Information for the purpose of: (a) operation, maintenance, repair, or
modification of Customer's aircraft for which the Proprietary Materials and
Proprietary Information have been specified by Boeing and (b) development and
manufacture of training devices for use by Customer.
4. Providing of Proprietary Materials to Contractors.
Customer is authorized to provide Proprietary Materials to Customer's
contractors for the sole purpose of maintenance, repair, or modification of
Customer's aircraft for which the Proprietary Materials have been specified by
Boeing. In addition, Customer may provide Proprietary Materials to Customer's
contractors for the sole purpose of developing and manufacturing training
devices for Customer's use. Before providing Proprietary Materials to its
contractor, Customer will first obtain a written agreement from the contractor
by which the contractor agrees (a) to use the Proprietary Materials only on
behalf of Customer, (b) to be bound by all of the restrictions and limitations
of this Part 5, and (c) that Boeing is a third party beneficiary under the
written agreement. Customer agrees to provide copies of all such written
agreements to Boeing upon request
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<PAGE> 29
and be liable to Boeing for any breach of those agreements by a contractor. A
sample agreement acceptable to Boeing is attached as Appendix VII.
5. Providing of Proprietary Materials and Proprietary Information to
Regulatory Agencies.
When and to the extent required by a government regulatory agency having
jurisdiction over Customer or an aircraft, Customer is authorized to provide
Proprietary Materials and to disclose Proprietary Information to the agency for
use in connection with Customer's operation, maintenance, repair, or
modification of such aircraft. Customer agrees to take all reasonable steps to
prevent the agency from making any distribution, disclosure, or additional use
of the Proprietary Materials and Proprietary Information provided or disclosed.
Customer further agrees to notify Boeing immediately upon learning of any (a)
distribution, disclosure, or additional use by the agency, (b) request to the
agency for distribution, disclosure, or additional use, or (c) intention on the
part of the agency to distribute, disclose, or make additional use of
Proprietary Materials or Proprietary Information.
B-5-2
<PAGE> 30
EXHIBIT C
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-TLS
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
PRODUCT ASSURANCE DOCUMENT
This document contains:
Part 1: Exhibit C Definitions
Part 2: Boeing Warranty
Part 3: Boeing Service Life Policy
Part 4: Supplier Warranty Commitment
Part 5: Boeing Interface Commitment
Part 6: Boeing Indemnities against Patent and Copyright
Infringement
C-i
<PAGE> 31
PRODUCT ASSURANCE DOCUMENT
PART 1: EXHIBIT C DEFINITIONS
Authorized Agent - Agent appointed by Customer to perform corrections and
to administer warranties (see Appendix VI to the AGTA for a form acceptable to
Boeing).
Average Direct Hourly Labor Rate - is the average hourly rate (excluding
all fringe benefits, premium-time allowances, social charges, business taxes and
the like) paid by Customer to its Direct Labor employees.
Boeing Product - any system, accessory, equipment, part or Aircraft
Software that is manufactured by Boeing or manufactured to Boeing's detailed
design with Boeing's authorization.
Correct - to repair, modify, provide modification kits or replace with a
new product.
Correction - a repair, a modification, a modification kit or a new product.
Corrected Boeing Product - a Boeing Product which is free of defect as a
result of a Correction.
Direct Labor - Labor spent by direct labor employees to remove,
disassemble, modify, repair, inspect and bench test a defective Boeing Product,
and to reassemble and reinstall a Corrected Boeing Product.
Direct Materials - Items such as parts, gaskets, grease, sealant and
adhesives, installed or consumed in performing a Correction, excluding
allowances for administration, overhead, taxes, customs duties and the like.
Source Control Drawing (SCD) - a Boeing document defining specifications
for certain Supplier Products.
Supplier - the manufacturer of a Supplier Product.
Supplier Product - any system, accessory, equipment, part or Aircraft
Software that is not manufactured to Boeing's detailed design. This includes but
is not limited to parts manufactured to a SCD, all standards, and other parts
obtained from non-Boeing sources.
Warranty Inspections - inspections of Boeing Products performed during the
warranty period that are recommended by a service bulletin or service letter.
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<PAGE> 32
PRODUCT ASSURANCE DOCUMENT
PART 2: BOEING WARRANTY
1. Warranty Applicability.
This warranty applies to all Boeing Products. Warranties applicable to
Supplier Products are in Part 4. Warranties applicable to engines will be
provided by Supplemental Exhibits to individual purchase agreements.
2. Warranty.
2.1. Coverage. Boeing warrants that at the time of aircraft delivery:
(i) the aircraft will conform to the Detail Specification except for
portions stated to be estimates, approximations or design objectives;
(ii) all Boeing Products in the aircraft will be free from defects in
material and workmanship, including process of manufacture;
(iii) all Boeing Products in the aircraft will be free from defects in
design, including selection of materials and the process of manufacture, in
view of the state of the art at the time of design, and
(iv) the workmanship utilized to install Supplier Products, engines
and BFE will be free from defects.
2.2. Exceptions. The following conditions do not constitute a defect under
this warranty:
(i) conditions resulting from normal wear and tear;
(ii) conditions resulting from acts or omissions of Customer; and
(iii) conditions resulting from failure to properly service and
maintain the aircraft.
3. Warranty Periods.
3.1. Warranty. The warranty period begins on the date of aircraft delivery
and expires 48 months thereafter, except for the models of aircraft listed
below, for which models the warranty period is 36 months.
C-2-1
<PAGE> 33
-------------------
36 months
-------------------
737-300
737-400
737-500
757-200
757-300
767-200
767-300
767-400
747-400
-------------------
3.2. Warranty on Corrected Boeing Products. The warranty period applicable
to a Corrected Boeing Product, including the workmanship to Correct and install,
resulting from a defect in material or workmanship is the remainder of the
warranty period for the defective Boeing Product it replaced. The warranty
period for a Corrected Boeing Product resulting from a defect in design is 18
months or the remainder of the initial warranty period, whichever is longer. The
18 month period begins on the date of delivery of the Corrected Boeing Product
or date of delivery of the kit or kits furnished to Correct the Boeing Product.
3.3. Survival of Warranties. All warranty periods are stated above. The
Performance Guarantees will not survive delivery of the aircraft.
4. Remedies.
4.1. Defect Correction. At Customer's option, Boeing will either Correct or
reimburse Customer to Correct defects in Boeing Products discovered during the
warranty period.
4.2. Warranty Labor Rate. If Customer or its Authorized Agent Corrects a
defective Boeing Product, reimbursement to Customer for Direct Labor Hours will
be provided at Customer's established Warranty Labor Rate. Customer's
established Warranty Labor Rate will be the greater of the standard labor rate
or 150% of Customer's Average Direct Hourly Rate. The standard labor rate paid
by Boeing to its customers is established and published annually. Prior to or
concurrently with submittal of Customer's first claim for Direct Labor
reimbursement, Customer will notify Boeing of Customer's then-current average
direct hourly labor rate, and thereafter notify Boeing of any material change in
such rate. Boeing will require information from Customer to substantiate such
rates.
4.3. Warranty Inspections. In addition to the remedies to Correct defects
in Boeing Products, Boeing will reimburse Customer for cost of Direct Labor to
perform certain inspections of the aircraft to determine whether or not a
covered defect exists in a Boeing Product, provided:
4.3.1 the inspections are recommended by a service bulletin or service
letter issued by Boeing during the warranty period; and
4.3.2 such reimbursement will not apply to any inspections performed
after a Correction is available to Customer.
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<PAGE> 34
4.4. Credit Memorandum Reimbursement. Boeing will make all reimbursements
by credit memoranda which may be applied toward the purchase of Boeing goods and
services.
4.5. Maximum Reimbursement. Unless previously agreed, the maximum
reimbursement for Direct Labor and Direct Materials used to Correct a defective
Boeing Product will not exceed 65% of Boeing's then-current sales price for a
new replacement Boeing Product.
5. Discovery and Notice.
5.1. For a claim to be valid:
(i) the defect must be discovered during the warranty period; and
(ii) Boeing Product Assurance Contracts must receive written notice of
the discovery no later than 90 days after expiration of the warranty
period. The notice must include sufficient information to substantiate the
claim.
5.2. Receipt of Customer's notice of the discovery of a defect secures
Customer's rights to remedies under this Exhibit C, whether or not Customer has
performed the Correction at the time of the notice.
5.3. Once Customer has given valid notice of the discovery of a defect,
claims may be submitted at any time after performance of the Correction.
5.4. Boeing may release service bulletins or service letters advising
Customer of the availability of certain warranty remedies. When such advice is
provided, Customer will be deemed to have fulfilled the requirements for
discovery of the defect and submittal of notice under this Exhibit C as of the
date specified in the service bulletin or service letter.
6. Filing a Claim.
6.1. Authority to File. Claims may be filed by Customer or the Authorized
Agent that Customer appoints to act on Customer's behalf. Such appointment will
only be effective upon Boeing's receipt of the Authorized Agent's express
written agreement, in a form satisfactory to Boeing, to be bound by and to
comply with all applicable terms and conditions of this Aircraft General Terms
Agreement.
6.2. Claim Information.
6.2.1 Claimant is responsible for providing sufficient information
to substantiate Customer's rights to remedies under this Exhibit C. Boeing may
reject a claim for lack of sufficient information. At a minimum, such
information must include:
(i) identity of claimant;
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<PAGE> 35
(ii) serial or block number of the aircraft on which the defective
Boeing Product was delivered;
(iii) part number of defective Boeing Product;
(iv) purchase order number and date of delivery of a spare part
(v) description and substantiation of defect; and
(vi) date the defect was discovered.
6.2.2 Additional information may be required based on the nature of
the defect and the remedies requested.
6.3. Boeing Claim Processing.
6.3.1 All claims must be signed and submitted directly by Customer
or its Authorized Agent to Boeing Product Assurance Contracts.
6.3.2 Boeing will promptly review the claim and will give
notification of claim approval or rejection. If the claim is rejected, Boeing
will provide a written explanation.
7. Limited Warranty for Certain Materials.
7.1. Boeing warrants that, at the time of delivery, all Materials created
by Boeing will be free from errors and defects in media. In the case where such
Materials are provided by on-line electronic access, media is the digital format
transmitted from Boeing.
7.2. Warranty Periods and Claims. The warranty period with respect to an
error or a defect in any Materials created by Boeing begins at delivery of the
Materials in which the error or defect is discovered and ends 48 months after
delivery of the Materials.
The claimed error or defect must become apparent to Customer within the
applicable warranty period, and the Boeing Product Assurance Regional Manager
must receive written notice of such error or defect at the earliest practicable
time after the error or defect becomes apparent to Customer, but in no event
later than 90 days after expiration of the applicable warranty period.
7.3. Remedy. Customer's remedy for an error or a defect in media is
replacement of the erroneous or defective Materials created by Boeing with
Materials free from such error or defect.
8. Corrections Performed by Customer.
8.1. Facilities Requirements. Customer may at its option Correct defective
Boeing Products at its facilities or may subcontract Corrections to a third
party contractor or an Authorized Agent.
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<PAGE> 36
8.2. Technical Requirements. All Corrections done by Customer, a third
party contractor or Customer's Authorized Agent must be performed in accordance
with Boeing's applicable service manuals, bulletins or other written
instructions, using parts and materials furnished or approved by Boeing.
8.3. Reimbursement.
8.3.1 Boeing will reimburse for reasonable costs of Direct Materials
and Direct Labor (excluding time expended for normal overhaul) at Customer's
Warranty Labor Rate to Correct a defective Boeing Product. Claims for
reimbursement must contain sufficient information to substantiate Direct Labor
hours expended and Direct Materials consumed. Customer, the third party
contractor, or Customer's Authorized Agent may be required to produce invoices
for materials.
8.3.2 Reimbursement for Direct Labor hours to perform Corrections
stated in a service bulletin will be based on the labor estimates in the
service bulletin.
8.3.3 Boeing will reimburse Customer for freight charges associated
with Corrections performed by a third party contractor or Customer's Authorized
Agent.
8.4. Disposition of Defective Boeing Products Beyond Economical Repair.
8.4.1 Defective Boeing Products that are found to be beyond
economical repair will be retained for a period of 60 days from the date Boeing
receives Customer's claim. Boeing may request return of such Boeing Products
during the 60 day period for inspection and confirmation of a defect.
8.4.2 After the 60 day period, a defective Boeing Product with a
value of U.S. $2000 or less may be scrapped without notification to Boeing. If
such Product has a value greater than U.S. $2000, Customer must obtain
confirmation of unrepairability by Boeing's on-site Customer Services
Representative prior to scrapping. Confirmation may be in the form of the
Representative's signature on Customer's claim or through direct communication
between the Representative and Boeing Product Assurance Contracts.
9. Corrections Performed by Boeing.
9.1. Freight Charges. Customer will pay shipping charges to return a
defective Boeing Product to Boeing. Boeing will reimburse Customer for the
charge for any item determined to be defective under this Aircraft General Terms
Agreement. Boeing will pay shipping charges to return the Corrected Boeing
Product.
9.2. Customer Instructions. The documentation shipped with the returned
defective Boeing Product may include specific technical instructions for work to
be performed on the Boeing Product. The absence of such instructions will
evidence Customer's authorization for Boeing to proceed to perform all necessary
Corrections and work required to return the Boeing Product to a serviceable
condition.
9.3. Correction Time Objectives.
9.3.1 Boeing's objective for making Corrections is 10 working days
for avionics and electronic Boeing Products, 30 working days for Corrections of
other Boeing Products performed at Boeing's fa-
C-2-5
<PAGE> 37
cilities, and 40 working days for Corrections of other Boeing Products
performed at a Boeing subcontractor's facilities. The objectives are measured
from the date Boeing receives the defective Boeing Product and a valid claim to
the date Boeing ships the Correction.
9.3.2 If Customer has a critical parts shortage because Boeing has
exceeded a Correction time objective and Customer has procured spare Boeing
Products for the defective Boeing Product in quantities shown in Boeing's
Recommended Spare Parts List (RSPL), then Boeing will either expedite the
Correction or provide a similar Product on a no charge loan or lease basis
until a Corrected Boeing Product is returned.
9.4. Title Transfer and Risk of Loss.
9.4.1 Title to and risk of loss of any Boeing Product returned to
Boeing will at all times remain with Customer or any other title holder of such
Boeing Product. While Boeing has possession of the returned Boeing Product,
Boeing will have only such liabilities as a bailee for mutual benefit would
have, but will not be liable for loss of use.
9.4.2 If a Correction requires shipment of a new Boeing Product, then
at the time Boeing ships the new Boeing Product, title to and risk of loss for
the returned Boeing Product will pass to Boeing, and title to and risk of loss
for the new Boeing Product will pass to Customer.
10. Returning an Aircraft.
10.1. Conditions. An aircraft may be returned to Boeing's facilities for
Correction only if:
(i) Boeing and Customer agree a defect exists;
(ii) Customer lacks access to adequate facilities, equipment or
qualified personnel to perform the Correction; and
(iii) it is not practical, in Boeing's estimation, to dispatch Boeing
personnel to perform the Correction at a remote site.
10.2. Correction Costs. Boeing will perform the Correction at no charge to
Customer. Subject to the conditions of Article 9.1, Boeing will reimburse
Customer for the costs of fuel, oil and landing fees incurred in ferrying the
aircraft to Boeing and back to Customer's facilities. Customer will minimize the
length of both flights.
10.3. Separate Agreement. Boeing and Customer will enter into a separate
agreement covering return of the aircraft and performance of the Correction.
Authorization by Customer for Boeing to perform additional work that is not part
of the Correction must be received within 24 hours of Boeing's notification. If
such authorization is not received within 24 hours, Customer may be invoiced for
work performed by Boeing that is not part of the Correction.
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<PAGE> 38
11. Insurance.
The provisions of Article 8.2 "Insurance", of the AGTA, will apply to any work
performed by Boeing in accordance with Customer's specific technical
instructions, to the extent any legal liability of Boeing is based upon the
content of such instructions.
12. Disclaimer and Release; Exclusion of Liabilities.
12.1. DISCLAIMER AND RELEASE. THE WARRANTIES, OBLIGATIONS AND LIABILITIES
OF BOEING AND THE REMEDIES OF CUSTOMER IN THIS EXHIBIT C ARE EXCLUSIVE AND IN
SUBSTITUTION FOR, AND CUSTOMER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL OTHER
WARRANTIES, OBLIGATIONS AND LIABILITIES OF BOEING AND ALL OTHER RIGHTS, CLAIMS
AND REMEDIES OF CUSTOMER AGAINST BOEING, EXPRESS OR IMPLIED, ARISING BY LAW OR
OTHERWISE, WITH RESPECT TO ANY NONCONFORMANCE OR DEFECT IN ANY AIRCRAFT,
MATERIALS, TRAINING, SERVICES OR OTHER THING PROVIDED UNDER THIS AGTA AND THE
APPLICABLE PURCHASE AGREEMENT, INCLUDING, BUT NOT LIMITED TO:
(A) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;
(B) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE;
(C) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR
NOT ARISING FROM THE NEGLIGENCE OF BOEING; AND
(D) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO ANY AIRCRAFT.
12.2. EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES. BOEING WILL HAVE NO
OBLIGATION OR LIABILITY, WHETHER ARISING IN CONTRACT (INCLUDING WARRANTY), TORT,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF BOEING, OR OTHERWISE, FOR LOSS OF
USE, REVENUE OR PROFIT, OR FOR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES
WITH RESPECT TO ANY NONCONFORMANCE OR DEFECT IN ANY AIRCRAFT, MATERIALS,
TRAINING, SERVICES OR OTHER THING PROVIDED UNDER THIS AGTA AND THE APPLICABLE
PURCHASE AGREEMENT.
12.3. Contribution Toward Third-Party Damage. Claims by Customer against
Boeing for contribution for all costs incurred by Customer arising directly or
indirectly from third-party claims, to the extent of Boeing's relative
percentage of the total fault or other legal responsibility of all persons
causing such bodily injuries or property damage, are excepted from the terms of
paragraphs 12.1 and 12.2.
12.4. Definitions. For the purpose of this Article, "BOEING" or "Boeing" is
defined as The Boeing Company, its divisions, subsidiaries, affiliates, the
assignees of each, and their respective directors, officers, employees and
agents.
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<PAGE> 39
PRODUCT ASSURANCE DOCUMENT
PART 3: BOEING SERVICE LIFE POLICY
1. Definitions.
SLP Component - any of the primary structural elements (excluding industry
standard parts) of the landing gear, wing, fuselage, vertical or horizontal
stabilizer listed in the applicable purchase agreement for a specific model of
aircraft that is installed in the aircraft at time of delivery or is purchased
from Boeing by Customer as a spare part. The detailed SLP Component listing will
be in Supplemental Exhibit SLP1 to each Purchase Agreement.
2. Service Life Policy.
2.1. SLP Commitment. If a failure or defect is discovered in a SLP
Component within the time periods specified in Article 2.2 below, Boeing will,
at a price calculated pursuant to Article 3 below, Correct the SLP Component.
2.2. SLP Policy Periods.
2.2.1 The policy period for SLP Components initially installed on an
aircraft is 12 years after the date of delivery of the aircraft.
2.2.2 The policy period for SLP Components purchased from Boeing by
Customer as spare parts is 12 years from delivery of such SLP Component or 12
years from the date of delivery of the last aircraft produced by Boeing of a
specific model, whichever first expires.
2.3. Price.
The price that Customer will pay for the Correction of a defective or
failed SLP Component will be calculated pursuant to the following formula:
P = CT
---
144
where:
P = price to Customer
C = SLP Component sales price at time of Correction
T = total age in months of the defective or
failed SLP Component from the date of
delivery to Customer to the date of
discovery of such condition.
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<PAGE> 40
3. Conditions.
Boeing's obligations under this Policy are conditioned upon the following:
3.1. Customer must notify Boeing in writing of the defect or failure within
three months after it becomes apparent.
3.2. Customer must provide reasonable evidence that the claimed defect or
failure is covered by this Policy and if requested by Boeing, that such defect
or failure was not the result of (i) a defect or failure in a component not
covered by this Policy, (ii) an extrinsic force, (iii) an act or omission of
Customer, or (iv) operation or maintenance contrary to applicable governmental
regulations or Boeing's instructions.
3.3. If return of a defective or failed SLP Component is practicable and
requested by Boeing, Customer will return such SLP Component to Boeing at
Boeing's expense.
3.4. Customer's rights and remedies under this Policy are limited to the
receipt of a Correction at prices calculated pursuant to Article 3 above.
4. Disclaimer and Release; Exclusion of Liabilities.
This Part 3 and the rights and remedies of Customer and the obligations of
Boeing are subject to the DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL
AND OTHER DAMAGES provisions of Article 11 of Part 2 of this Exhibit C.
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<PAGE> 41
PRODUCT ASSURANCE DOCUMENT
PART 4: SUPPLIER WARRANTY COMMITMENT
1. Supplier Warranties and Supplier Patent Indemnities.
Boeing will use diligent efforts to obtain warranties and indemnities
against patent infringement enforceable by Customer from Suppliers of Supplier
Products (except for engines) installed on the aircraft at the time of delivery
that were selected and purchased by Boeing, but not manufactured to Boeing's
detailed design. Boeing will furnish copies of the warranties and patent
indemnities to Customer in Boeing Document D6-56115, Product Support and Product
Assurance Supplier Defined Equipment Information, prior to the scheduled
delivery month of the first aircraft under the initial purchase agreement to the
AGTA.
2. Boeing Assistance in Administration of Supplier Warranties.
Customer will be responsible for submitting warranty claims directly to
Suppliers; however, if Customer experiences problems enforcing any Supplier
warranty obtained by Boeing for Customer, Boeing will conduct an investigation
of the problem and assist Customer in the resolution of those claims.
3. Boeing Support in Event of Supplier Default.
3.1. If the Supplier defaults in the performance of a material obligation
under its warranty, and Customer provides evidence to Boeing that a default has
occurred, then Boeing will furnish the equivalent warranty terms as provided by
the defaulting Supplier.
3.2. At Boeing's request, Customer will assign to Boeing, and Boeing will
be subrogated to, its rights against the Supplier provided by the Supplier
warranty.
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<PAGE> 42
PRODUCT ASSURANCE DOCUMENT
PART 5: BOEING INTERFACE COMMITMENT
1. Interface Problems.
An Interface Problem is defined as a technical problem in the operation of
an aircraft or its systems experienced by Customer, the cause of which is not
readily identifiable by Customer but which Customer believes to be attributable
to the design characteristics of the aircraft or its systems. In the event
Customer experiences an Interface Problem, Boeing will, without additional
charge to Customer, promptly conduct an investigation and analysis to determine
the cause or causes of the Interface Problem. Boeing will promptly advise
Customer at the conclusion of its investigation of Boeing's opinion as to the
causes of the Interface Problem and Boeing's recommendation as to corrective
action.
2. Boeing Responsibility.
If Boeing determines that the Interface Problem is primarily attributable
to the design of any Boeing Product, Boeing will Correct the design to the
extent of any then-existing obligations of Boeing under the provisions of the
applicable Boeing Warranty or Boeing Service Life Policy.
3. Supplier Responsibility.
If Boeing determines that the Interface Problem is primarily attributable
to the design of a Supplier Product, Boeing will assist Customer in processing a
warranty claim against the Supplier.
4. Joint Responsibility.
If Boeing determines that the Interface Problem is partially attributable
to the design of a Boeing Product and partially to the design of a Supplier
Product, Boeing will seek a solution to the Interface Problem through the
cooperative efforts of Boeing and the Supplier and will promptly advise Customer
of the resulting corrective actions and recommendations.
5. General.
Customer will, if requested by Boeing, assign to Boeing any of its rights
against any supplier as Boeing may require to fulfill its obligations hereunder.
C-5-1
<PAGE> 43
6. Disclaimer and Release; Exclusion of Liabilities.
This Part 5 and the rights and remedies of Customer and the obligations of
Boeing herein are subject to the DISCLAIMER AND RELEASE and EXCLUSION OF
CONSEQUENTIAL AND OTHER DAMAGES provisions of Article 11 of Part 2 of this
Exhibit C.
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<PAGE> 44
PRODUCT ASSURANCE DOCUMENT
PART 6: BOEING INDEMNITIES AGAINST PATENT
AND COPYRIGHT INFRINGEMENT
1. Indemnity Against Patent Infringement.
Boeing will defend and indemnify Customer with respect to all claims, suits
and liabilities arising out of any actual or alleged patent infringement through
Customer's use, lease or resale of any aircraft or any Boeing Product installed
on an aircraft at delivery.
2. Indemnity Against Copyright Infringement.
Boeing will defend and indemnify Customer with respect to all claims, suits
and liabilities arising out of any actual or alleged copyright infringement
through Customer's use, lease or resale of any Boeing created Aircraft Software
installed on an aircraft at delivery.
3. Exceptions, Limitations and Conditions.
3.1. Boeing's obligation to indemnify Customer for patent infringement will
extend only to infringements in countries which, at the time of the
infringement, were party to and fully bound by either (a) Article 27 of the
Chicago Convention on International Civil Aviation of December 7, 1944, or (b)
the International Convention for the Protection of Industrial Property (Paris
Convention).
3.2. Boeing's obligation to indemnify Customer for copyright infringement
is limited to infringements in countries which, at the time of the infringement,
are members of The Berne Union and recognize computer software as a "work" under
The Berne Convention.
3.3. The indemnities provided under this Part 6 will not apply to any (i)
BFE, (ii) engines, (iii) Supplier Product (iv) Boeing Product used other than
for its intended purpose, or (v) Aircraft Software not created by Boeing.
3.4. Customer must deliver written notice to Boeing (i) within 10 days
after Customer first receives notice of any suit or other formal action against
Customer and (ii) within 20 days after Customer first receives any other
allegation or written claim of infringement covered by this Part 6.
3.5. At any time, Boeing will have the right at its option and expense to:
(i) negotiate with any party claiming infringement, (ii) assume or control the
defense of any infringement allegation, claim, suit or formal action, (iii)
intervene in any infringement suit or formal action , and/or (iv) attempt to
resolve any claim of infringement by replacing an allegedly infringing Boeing
Product or Aircraft Software with a noninfringing equivalent.
C-6-1
<PAGE> 45
3.6. Customer will promptly furnish to Boeing all information, records and
assistance within Customer's possession or control which Boeing considers
relevant or material to any alleged infringement covered by this Part 6.
3.7. Except as required by a final judgment entered against Customer by a
court of competent jurisdiction from which no appeals can be or have been filed,
Customer will obtain Boeing's written approval prior to paying, committing to
pay, assuming any obligation or making any material concession relative to any
infringement covered by these indemnities.
3.8. BOEING WILL HAVE NO OBLIGATION OR LIABILITY UNDER THIS PART 6 FOR LOSS
OF USE, REVENUE OR PROFIT, OR FOR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES.
THE OBLIGATIONS OF BOEING AND REMEDIES OF CUSTOMER IN THIS PART 6 ARE EXCLUSIVE
AND IN SUBSTITUTION FOR, AND CUSTOMER HEREBY WAIVES, RELEASES AND RENOUNCES ALL
OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF BOEING AND ALL OTHER RIGHTS,
CLAIMS AND REMEDIES OF CUSTOMER AGAINST BOEING, EXPRESS OR IMPLIED, ARISING BY
LAW OR OTHERWISE, WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT, COPYRIGHT OR
OTHER INTELLECTUAL PROPERTY INFRINGEMENT OR THE LIKE BY ANY AIRCRAFT, BOEING
PRODUCT, AIRCRAFT SOFTWARE, MATERIALS, TRAINING, SERVICES OR OTHER THING
PROVIDED UNDER THIS AGTA AND THE APPLICABLE PURCHASE AGREEMENT.
3.9. For the purposes of this Part 6, "BOEING or Boeing" is defined as The
Boeing Company, its divisions, subsidiaries, affiliates, the assignees of each
and their respective directors, officers, employees and agents.
C-6-2
<PAGE> 46
EXHIBIT D
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-TLS
between
THE BOEING COMPANY
and
ATLAS AIR, INC.
ESCALATION ADJUSTMENT
AIRFRAME AND OPTIONAL FEATURES
(For Model 737-600, 737-700 and 737-800, Airframe
Price Includes the Engine Price)
D-i
<PAGE> 47
EXHIBIT D
ESCALATION ADJUSTMENT
1. Formula.
Airframe and Optional Features price adjustments (Airframe Price
Adjustment); are used to allow prices to be stated in current year dollars at
the signing of the applicable purchase agreement and to adjust the amount to be
paid by Customer at delivery for the effects of economic fluctuation. The
Airframe Price Adjustment will be determined at the time of aircraft delivery in
accordance with the following formula:
P(a) = (P)(L + M - 1)
Where:
P(a) = Airframe Price Adjustment. (For Model 737-600,
737-700 and 737-800, the Airframe Price includes the
Engine Price.)
L = .65 x ECI
base year index (as set forth in Table 1 of
the applicable purchase agreement)
M = .35 x ICI base year index
(as set forth in Table 1 of the applicable
purchase agreement)
P = Airframe Price plus Optional Features Price (as set
forth in the applicable purchase agreement).
ECI is a value determined using the U.S. Department of Labor, Bureau of
Labor Statistics "Employment Cost Index for workers in aerospace
manufacturing" (ECI code 3721), calculated by establishing a
three-month arithmetic average value (expressed as a decimal and
rounded to the nearest tenth) using the values for the fifth, sixth and
seventh months prior to the month of scheduled delivery of the
applicable aircraft. As the Employment Cost Index values are only
released on a quarterly basis, the value released for the month of
March will be used for the months of January and February; the value
for June used for April and May; the value for September used for July
and August; and the value for December used for October and November.
ICI is a value determined using the U.S. Department of Labor, Bureau of
Labor Statistics "Producer Prices and Price Index - Industrial
Commodities Index ", calculated as a 3-month arithmetic average of the
released monthly values (expressed as a decimal and rounded to the
nearest tenth) using the values for the 5th, 6th and 7th months prior
to the month of scheduled delivery of the applicable aircraft.
D-1
<PAGE> 48
As an example, for an aircraft scheduled to be delivered in the month
of January, the months June, July and August of the preceding year will
be utilized in determining the value of ECI and ICI.
Note: i. In determining the values of L and M, all calculations and
resulting values will be expressed as a decimal rounded to the
nearest ten-thousandth.
ii. .65 is the numeric ratio attributed to labor in the Airframe Price
Adjustment formula.
iii. .35 is the numeric ratio attributed to materials in the Airframe
Price Adjustment formula.
iv. The denominators (base year indices) are the actual average values
reported by the U.S. Department of Labor, Bureau of Labor
Statistics (base year June 1989 = 100). The applicable base year
and corresponding denominator will be provided by Boeing in the
applicable purchase agreement.
2. Values to be Utilized in the Event of Unavailability.
2.1. If the Bureau of Labor Statistics substantially revises the
methodology used for the determination of the values to be used to determine the
ECI and ICI values (in contrast to benchmark adjustments or other corrections of
previously released values), or for any reason has not released values needed to
determine the applicable Airframe Price Adjustment, the parties will, prior to
the delivery of any such aircraft, select a substitute from other Bureau of
Labor Statistics data or similar data reported by non-governmental
organizations. Such substitute will result in the same adjustment, insofar as
possible, as would have been calculated utilizing the original values adjusted
for fluctuation during the applicable time period. However, if within 24 months
after delivery of the aircraft, the Bureau of Labor Statistics should resume
releasing values for the months needed to determine the Airframe Price
Adjustment, such values will be used to determine any increase or decrease in
the Airframe Price Adjustment for the aircraft from that determined at the time
of delivery of the aircraft.
2.2. Notwithstanding Article 2.1 above, if prior to the scheduled delivery
month of an aircraft the Bureau of Labor Statistics changes the base year for
determination of the ECI and ICI values as defined above, such re-based values
will be incorporated in the Airframe Price Adjustment calculation.
2.3. In the event escalation provisions are made non-enforceable or
otherwise rendered void by any agency of the United States Government, the
parties agree, to the extent they may lawfully do so, to equitably adjust the
Purchase Price of any affected aircraft to reflect an allowance for increases or
decreases in labor compensation and material costs occurring since February,
1995, which is consistent with the applicable provisions of paragraph 1 of this
Exhibit D.
Note: i. The values released by the Bureau of Labor Statistics and available
to Boeing 30 days prior to the scheduled delivery month of an
aircraft will be used to determine the ECI and ICI values for the
applicable months (including those noted as preliminary by the
Bureau of Labor Statistics) to calculate the Airframe Price
Adjustment for the aircraft invoice at the time of delivery. The
values will be considered final and no Aircraft Price Adjustments
will be made after Aircraft delivery for any subsequent changes in
published Index values.
D-2
<PAGE> 49
ii. The maximum number of digits utilized in any part of the Airframe
Price Adjustment equation will be 4, where rounding of the fourth
digit will be increased to the next highest digit when the 5th digit
is equal to 5 or greater.
D-3
<PAGE> 50
SAMPLE
Insurance Certificate
BROKER'S LETTERHEAD
[ date ]
Certificate of Insurance
ISSUED TO: The Boeing Company
Post Office Box 3707
Mail Stop 13-57
Seattle, Washington 98124
Attn: Manager - Aviation Insurance for
Vice President - Employee Benefits,
Insurance and Taxes
CC: Boeing Commercial Airplane Group
P.O. Box 3707
Mail Stop 75-38
Seattle, Washington 98124-2207
U.S.A.
Attn: Vice President - Contracts
NAMED INSURED: #
We hereby certify that in our capacity as Brokers to the Named Insured, the
following described insurance is in force on this date:
Insurer Policy No. Participation
POLICY PERIOD: From [date and time of inception of the Policy(ies)]
to [date and time of expiration].
GEOGRAPHICAL LIMITS: Worldwide (however, as respects "Aircraft Hull War
and Allied Perils" Insurance, as agreed by Boeing).
AIRCRAFT INSURED: All Boeing manufactured aircraft owned or operated by
the Named insured which are the subject of the follow-
ing purchase agreement(s), entered into between The
Boeing Company and _________________ (hereinafter
"Aircraft"):
Purchase Agreement No. ____ dated ______
Purchase Agreement No. ____ dated ______
App. I-1
<PAGE> 51
COVERAGES:
1. Aircraft "all risks" Hull (Ground and Flight)
2. Aircraft Hull War and Allied Perils (as per LSW 555, or its successor
wording)
3. Airline Liability
Including, but not limited to, Bodily Injury, Property Damage, Aircraft
Liability, Liability War Risks, Passenger Legal Liability, Premises/Operations
Liability, Completed Operations/Products Liability, Baggage Legal Liability
(checked and unchecked), Cargo Legal Liability, Contractual Liability and
Personal Injury.
The above-referenced Airline Liability insurance coverage is subject to War and
Other Perils Exclusion Clause (AV48B) but all sections, other than section (b)
are reinstated as per AV52C, or their successor endorsements. LIMITS OF
LIABILITY: To the fullest extent of the Policy limits that the Named Insured
carries from the time of delivery of the first Aircraft under the first Purchase
Agreement listed under "Aircraft Insured" and thereafter at the inception of
each policy period, but in any event no less than the following:
Combined Single Limit Bodily Injury and Property Damage: U.S.$ any one
occurrence each Aircraft (with aggregates as applicable).
(737 500/600) US$350,000,000
(737 300/700) US$400,000,000
(737 400) US$450,000,000
(737 800) US$500,000,000
(757 200) US$450,000,000
(757 300) US$550,000,000
(767 200) US$550,000,000
(767 300) US$700,000,000
(777 200/300) US$800,000,000
(747 400) US$900,000,000
(747 400F) US$600,000,000
(In regard to all other models and/or derivatives, to be specified by Boeing).
(In regard to Personal Injury coverage, limits are US$25,000,000 any one
offense/aggregate.)
DEDUCTIBLES / SELF-INSURANCE:
Any deductible and/or self-insurance amount (other than standard market
deductibles) are to be disclosed and agreed by Boeing.
App-I-2
<PAGE> 52
SAMPLE
Insurance Certificate
SPECIAL PROVISIONS APPLICABLE TO BOEING:
It is certified that Insurers are aware of the terms and conditions of the
Aircraft General Terms Agreement AGTA/(________) and the following purchase
agreements:
PA ______ dated _______
PA ______ dated _______
PA ______ dated _______
Each Aircraft manufactured by Boeing which is delivered to the Insured pursuant
to the applicable purchase agreement during the period of effectivity of the
policies represented by this Certificate will be covered to the extent specified
herein.
Insurers have agreed to the following:
A. In regard to Aircraft "all risks" Hull Insurance and Aircraft Hull
War and Allied Perils Insurance, Insurers agree to waive all rights of
subrogation or recourse against Boeing in accordance with the Aircraft General
Terms Agreement AGTA/(_____) which was incorporated by reference into the
applicable purchase agreement.
B. In regard to Airline Liability Insurance, Insurers agree:
(1) To include Boeing as an additional insured in accordance
with Customer's undertaking in Article 8.2.1 of the AGTA/(____) which
was incorporated by reference into the applicable purchase agreement.
(2) To provide that such insurance will be primary and not
contributory nor excess with respect to any other insurance available
for the protection of Boeing;
(3) To provide that with respect to the interests of Boeing,
such insurance shall not be invalidated or minimized by any action or
inaction, omission or misrepresentation by the Insured or any other
person or party (other than Boeing) regardless of any breach or
violation of any warranty, declaration or condition contained in such
policies;
(4) To provide that all provisions of the insurance coverages
referenced above, except the limits of liability, will operate to give
each i Insured or additional insured the same protection as if there
were a separate Policy issued to each.
C. In regard to all of the above referenced policies:
(1) Boeing will not be responsible for payment, set-off, or
assessment of any kind or any premiums in connection with the policies,
endorsements or coverages described herein;
(2) If a policy is canceled for any reason whatsoever, or any
substantial change is made in the coverage which affects the interests
of Boeing or if a policy is allowed to lapse for nonpayment of premium,
such cancellation, change or lapse shall not be effective as to Boeing
for thirty (30) days
App.I-3
<PAGE> 53
SAMPLE
Insurance Certificate
(in the case of war risk and allied perils coverage seven (7) days
after sending, or such other period as may from time to time be
customarily obtainable in the industry) after receipt by Boeing of
written notice from the Insurers or the authorized representatives or
Broker of such cancellation, change or lapse; and
(3) For the purposes of the Certificate, "Boeing" is defined
as The Boeing Company, its divisions, subsidiaries, affiliates, the
assignees of each and their respective directors, officers, employees
and agents.
Subject to the terms, conditions, limitations and exclusions of the relative
policies.
(signature)
(typed name)
(title)
App I-4
<PAGE> 54
SAMPLE
Purchase Agreement Assignment
THIS PURCHASE AGREEMENT ASSIGNMENT (Assignment) dated as of ________ 19__
between #, a company organized under the laws of ________________ (Assignor) and
________________________, a company organized under the laws of ________________
(Assignee). Capitalized terms used herein without definition will have the same
meaning as in the Boeing Purchase Agreement.
Assignor and The Boeing Company, a Delaware corporation (Boeing), are
parties to the Boeing Purchase Agreement, providing, among other things, for the
sale by Boeing to Assignor of certain aircraft, engines and related equipment,
including the Aircraft.
Assignee wishes to acquire the Aircraft and certain rights and interests
under the Boeing Purchase Agreement and Assignor, on the following terms and
conditions, is willing to assign to Assignee certain of Assignor's rights and
interests under the Boeing Purchase Agreement. Assignee is willing to accept
such assignment.
It is agreed as follows:
1. For all purposes of this Assignment, the following terms will have the
following meanings:
Aircraft -- one Boeing Model ______ aircraft, bearing manufacturer's serial
number _______, together with all engines and parts installed on such aircraft
on the Delivery Date.
Boeing -- Boeing shall include Boeing Sales Corporation (a wholly-owned
subsidiary of Boeing), a Guam corporation, and its successors and assigns.
Boeing Purchase Agreement -- Purchase Agreement No. ________ dated as of
____________ between Boeing and Assignor, as amended, but excluding
______________, providing, among other things, for the sale by Boeing to
Assignor of the Aircraft, as said agreement may be further amended to the extent
permitted by its terms.
Delivery Date -- the date on which the Aircraft is delivered by Boeing to
Assignee pursuant to and subject to the terms and conditions of the Boeing
Purchase Agreement and this Assignment.
2. Assignor does hereby assign to Assignee all of its rights and interests
in and to the Boeing Purchase Agreement, as and to the extent that the same
relate to the Aircraft and the purchase and operation thereof, except as and to
the extent expressly reserved below, including, without limitation, in such
assignment: [TO BE COMPLETED BY THE PARTIES.]
[EXAMPLES
(a) the right upon valid tender to purchase the Aircraft pursuant to the
Boeing Purchase Agreement subject to the terms and conditions thereof
and the right to take title to the Aircraft and to be named the
"Buyer" in the bill of sale for the Aircraft;
(b) the right to accept delivery of the Aircraft;
App. III-1
<PAGE> 55
SAMPLE
Purchase Agreement Assignment
(c) all claims for damages arising as a result of any default under the
Boeing Purchase Agreement in respect of the Aircraft;
(d) all warranty and indemnity provisions contained in the Boeing Purchase
Agreement, and all claims arising thereunder, in respect of the
Aircraft; and
(e) any and all rights of Assignor to compel performance of the terms of
the Boeing Purchase Agreement in respect of the Aircraft.]
Reserving exclusively to Assignor, however:
[EXAMPLES
(i) all Assignor's rights and interests in and to the Boeing Purchase
Agreement as and to the extent the same relates to aircraft other than
the Aircraft, or to any other matters not directly pertaining to the
Aircraft;
(ii) all Assignor's rights and interests in or arising out of any advance
or other payments or deposits made by Assignor in respect of the
Aircraft under the Boeing Purchase Agreement and any amounts credited
or to be credited or paid or to be paid by Boeing in respect of the
Aircraft;
(iii) the right to obtain services, training, information and demonstration
and test flights pursuant to the Boeing Purchase Agreement; and
(iv) the right to maintain plant representatives at Boeing's plant pursuant
to the Boeing Purchase Agreement.]
Assignee hereby accepts such assignment.
3. Notwithstanding the foregoing, so long as no event of default or
termination under [specify document] has occurred and is continuing, Assignee
hereby authorizes Assignor, to the exclusion of Assignee, to exercise in
Assignor's name all rights and powers of Customer under the Boeing Purchase
Agreement in respect of the Aircraft.
4. For all purposes of this Assignment, Boeing will not be deemed to have
knowledge of or need recognize the occurrence, continuance or the discontinuance
of any event of default or termination under [specify document] unless and until
Boeing receives from Assignee written notice thereof, addressed to its Vice
President - Contracts, Boeing Commercial Airplane Group at P.O. Box 3707,
Seattle, Washington 98124, if by mail, or to 32-9430 Answerback BOEINGREN RNTN,
if by telex. Until such notice has been given, Boeing will be entitled to deal
solely and exclusively with Assignor. Thereafter, until Assignee has provided
Boeing written notice that any such events no longer continue, Boeing will be
entitled to deal solely and exclusively with Assignee. Boeing may act with
acquittance and conclusively rely on any such notice.
5. It is expressly agreed that, anything herein contained to the contrary
notwithstanding: (a) prior to the Delivery Date Assignor will perform its
obligations with respect to the Aircraft to be performed by
App. III-2
<PAGE> 56
SAMPLE
Purchase Agreement Assignment
it on or before such delivery, (b) Assignor will at all times remain liable to
Boeing under the Boeing Purchase Agreement to perform all obligations of
Customer thereunder to the same extent as if this Assignment had not been
executed, and (c) the exercise by Assignee of any of the assigned rights will
not release Assignor from any of its obligations to Boeing under the Boeing
Purchase Agreement, except to the extent that such exercise constitutes
performance of such obligations.
6. Notwithstanding anything contained in this Assignment to the contrary
(but without in any way releasing Assignor from any of its obligations under the
Boeing Purchase Agreement), Assignee confirms for the benefit of Boeing that,
insofar as the provisions of the Boeing Purchase Agreement relate to the
Aircraft, in exercising any rights under the Boeing Purchase Agreement, or in
making any claim with respect to the Aircraft or other things (including,
without limitation, Material, training and services) delivered or to be
delivered pursuant to the Boeing Purchase Agreement, the terms and conditions of
the Boeing Purchase Agreement, including, without limitation, the DISCLAIMER AND
RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES in Article 11 of Part 2
of Exhibit C to the Aircraft General Terms Agreement which was incorporated by
reference into the Boeing Purchase Agreement and the insurance provisions in
Article 8.2 of the Aircraft General Terms Agreement which was incorporated by
reference into the Boeing Purchase Agreement therein, will apply to and be
binding on Assignee to the same extent as if Assignee had been the original
"Customer" thereunder. Assignee further agrees, expressly for the benefit of
Boeing, upon the written request of Boeing, Assignee will promptly execute and
deliver such further assurances and documents and take such further action as
Boeing may reasonably request in order to obtain the full benefits of Assignee's
agreements in this paragraph.
7. Nothing contained herein will subject Boeing to any liability to which
it would not otherwise be subject under the Boeing Purchase Agreement or modify
in any respect the contract rights of Boeing thereunder, or require Boeing to
divest itself of title to or possession of the Aircraft or other things until
delivery thereof and payment therefor as provided therein.
8. Notwithstanding anything in this Assignment to the contrary, after
receipt of notice of any event of default or termination under [specify
document], Boeing will continue to owe to Assignor moneys in payment of claims
made or obligations arising before such notice, which moneys may be subject to
rights of set-off available to Boeing under applicable law. Similarly, after
receipt of notice that such event of default or termination no longer continues,
Boeing will continue to owe to Assignee moneys in payment of claims made or
obligations arising before such notice, which moneys may be subject to rights of
set-off available to Boeing under applicable law.
9. Effective at any time after an event of default has occurred, and for so
long as such event of default is continuing, Assignor does hereby constitute
Assignee, Assignor's true and lawful attorney, irrevocably, with full power (in
the name of Assignor or otherwise) to ask, require, demand, receive, and give
acquittance for any and all moneys and claims for moneys due and to become due
under or arising out of the Boeing Purchase Agreement in respect of the
Aircraft, to the extent assigned by this Assignment.
10. Assignee agrees, expressly for the benefit of Boeing and Assignor that
it will not disclose, directly or indirectly, any terms of the Boeing Purchase
Agreement; provided, that Assignee may disclose any such information (a) to its
special counsel and public accountants, (b) as required by applicable law to be
disclosed or to the extent that Assignee may have received a subpoena or other
written demand under color of legal right for such information, but it will
first, as soon as practicable upon receipt of such requirement or
App. III-3
<PAGE> 57
SAMPLE
Purchase Agreement Assignment
demand, furnish an explanation of the basis thereof to Boeing, and will afford
Boeing reasonable opportunity, to obtain a protective order or other reasonably
satisfactory assurance of confidential treatment for the information required
to be disclosed, and (c) to any bona fide potential purchaser or lessee of the
Aircraft. Any disclosure pursuant to (a) and (c) above will be subject to
execution of a confidentiality agreement substantially similar to this
paragraph 10.
11. This Assignment may be executed by the parties in separate
counterparts, each of which when so executed and delivered will be an original,
but all such counterparts will together constitute but one and the same
instrument.
12. This Assignment will be governed by, and construed in accordance with,
the laws of [_____________________].
- ---------------------------------- -------------------------------------
as Assignor as Assignee
By By
-------------------------------- ----------------------------------
Name: Name:
Title: Title:
[If the Assignment is further assigned by Assignee in connection with a
financing, the following language needs to be included.]
Attest:
The undersigned, as [Indenture Trustee/Agent for the benefit of the Loan
Participants/Mortgagee] and as assignee of, and holder of a security interest
in, the estate, right, and interest of the Assignee in and to the foregoing
Purchase Agreement Assignment and the Purchase Agreement pursuant to the terms
of a certain [Trust Indenture/Mortgage] dated as of _____________, agrees to the
terms of the foregoing Purchase Agreement Assignment and agrees that its rights
and remedies under such [Trust Indenture/Mortgage] shall be subject to the terms
and conditions of the foregoing Purchase Agreement Assignment, including,
without limitation, paragraph 6.
[Name of Entity],
as Indenture Trustee/Agent
By:
-------------------------------------
Name:
Title:
App. III-4
<PAGE> 58
SAMPLE
Purchase Agreement Assignment
CONSENT AND AGREEMENT OF
THE BOEING COMPANY
THE BOEING COMPANY, a Delaware corporation (Boeing), hereby acknowledges
notice of and consents to the foregoing Purchase Agreement Assignment
(Assignment). Boeing confirms to Assignee that: all representations, warranties,
indemnities and agreements of Boeing under the Boeing Purchase Agreement with
respect to the Aircraft will, subject to the terms and conditions thereof and of
the Assignment, inure to the benefit of Assignee to the same extent as if
Assignee were originally named "Customer" therein.
This Consent and Agreement will be governed by, and construed in accordance
with, the law of the State of Washington, excluding the conflict of laws
principles thereof.
Dated as of ____________________, 199___.
THE BOEING COMPANY
By
-------------------------------------
Name:
Title: Attorney-in-Fact
Aircraft Manufacturer's Serial Number(s) ____________
App. III-5
<PAGE> 59
SAMPLE
Post-Delivery Sale Notice
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
In connection with the sale by # (Seller) to ________________ (Purchaser) of the
aircraft identified below, reference is made to Purchase Agreement No. _____
dated as of ___________, 19__, between The Boeing Company (Boeing) and Seller
(the Purchase Agreement) under which Seller purchased certain Boeing Model
________ aircraft, including the aircraft bearing Manufacturer's Serial No.(s)
______________________ (the Aircraft). The Purchase Agreement incorporated by
reference Aircraft General Terms Agreement AGTA/# (AGTA).
Capitalized terms used herein without definition will have the same meaning as
in the Purchase Agreement.
Seller has sold the Aircraft, including in that sale the transfer to Purchaser
of all remaining rights related to the Aircraft under the Purchase Agreement. To
accomplish this transfer of rights, as authorized by the provisions of the
Purchase Agreement:
(1) Purchaser acknowledges it has reviewed the Purchase Agreement and agrees to
be bound by and comply with all applicable terms and conditions of the Purchase
Agreement, including, without limitation, the DISCLAIMER AND RELEASE and
EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES in Article 11 of Part 2 of Exhibit
C to the AGTA and the insurance provisions in Article 8.2 of the AGTA. Purchaser
further agrees upon the written request of Boeing, to promptly execute and
deliver such further assurances and documents and take such further action as
Boeing may reasonably request in order to obtain the full benefits of
Purchaser's agreements in this paragraph; and
(2) Seller will remain responsible for any payments due Boeing as a result of
obligations relating to the Aircraft incurred by Seller to Boeing prior to the
effective date of this letter.
App. III-1
<PAGE> 60
SAMPLE
Post-Delivery Sale Notice
We request that Boeing acknowledge receipt of this letter and confirm the
transfer of rights set forth above by signing the acknowledgment and forwarding
one copy of this letter to each of the undersigned.
Very truly yours,
Seller Purchaser
By By
----------------------------- ---------------------------
Its Its
---------------------------- --------------------------
Dated Dated
-------------------------- ------------------------
Receipt of the above letter is acknowledged and transfer of rights under the
Purchase Agreement with respect to the Aircraft is confirmed, effective as of
this date.
THE BOEING COMPANY
By
-----------------------------
Its Attorney-in-Fact
----------------------------
Dated
--------------------------
Aircraft Manufacturer's Serial Number ____________
App. III-2
<PAGE> 61
SAMPLE
Post-Delivery Lease Notice
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
In connection with the lease by # (Lessor) to ___________ (Lessee) of the
aircraft identified below, reference is made to Purchase Agreement No. ____
dated as of ________, 19__, between The Boeing Company (Boeing) and Lessor (the
Purchase Agreement) under which Lessor purchased certain Boeing Model _______
aircraft, including the aircraft bearing Manufacturer's Serial No.(s)
___________________ (the Aircraft). The Purchase Agreement incorporated by
reference Aircraft General Terms Agreement AGTA-@ (AGTA).
Capitalized terms used herein without definition will have the same meaning as
in the Purchase Agreement.
Lessor has leased the Aircraft, including in that lease the transfer to Lessee
of all remaining rights related to the Aircraft under the Purchase Agreement. To
accomplish this transfer of rights, as authorized by the provisions of the
Purchase Agreement:
(1) Lessor authorizes Lessee to exercise, to the exclusion of Lessor, all rights
and powers of Lessor with respect to the remaining rights related to the
Aircraft under the Purchase Agreement. This authorization will continue until
Boeing receives written notice from Lessor to the contrary, addressed to Vice
President - Contracts, Mail Stop 75-38, Boeing Commercial Airplane Group, P.O.
Box 3707, Seattle, Washington 98124-2207. Until Boeing receives such notice,
Boeing is entitled to deal exclusively with Lessee with respect to the Aircraft
under the Purchase Agreement. With respect to the rights and obligations of
Lessor under the Purchase Agreement, all actions taken or agreements entered
into by Lessee during the period prior to Boeing's receipt of this notice are
final and binding on Lessor. Further, any payments made by Boeing as a result of
claims made by Lessee will be made to the credit of Lessee.
(2) Lessee accepts the authorization above, acknowledges it has reviewed the
Purchase Agreement and agrees to be bound by and comply with all applicable
terms and conditions of the Purchase Agreement including, without limitation,
the DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES in
Article 11 of Part 2 of Exhibit C AGTA and the insurance provisions in Article
8.2 of the AGTA. Lessee further agrees, upon the written request of Boeing, to
promptly execute and deliver such further assurances and documents and take such
further action as Boeing may reasonably request in order to obtain the full
benefits of Lessee's agreements in this paragraph.
(3) Lessor will remain responsible for any payments due Boeing as a result of
obligations relating to the Aircraft incurred by Lessor to Boeing prior to the
effective date of this Notice.
App. IV-1
<PAGE> 62
SAMPLE
Post-Delivery Lease Notice
We request that Boeing acknowledges receipt of this letter and confirm the
transfer of rights set forth above by signing the acknowledgment and forwarding
one copy of this letter to each of the undersigned.
Very truly yours,
Lessor Lessee
By By
---------------------------- ---------------------------
Its Its
---------------------------- --------------------------
Dated Dated
-------------------------- ------------------------
Receipt of the above letter is acknowledged and transfer of rights under the
Purchase Agreement with respect to the Aircraft is confirmed, effective as of
this date.
THE BOEING COMPANY
By
----------------------------
Its
----------------------------
Dated
--------------------------
Aircraft Manufacturer's Serial Number ____________
App. IV-2
<PAGE> 63
SAMPLE
Purchaser's/Lessee's Agreement
Boeing Commercial Airplane Group
P. O. Box 3707
Seattle, Washington 98124-2207
Attention Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
In connection with the sale/lease by # (Seller/Lessor) to
_______________________ (Purchaser/Lessee) of the aircraft identified below,
reference is made to the following documents:
(i) Purchase Agreement No. _____ dated as of ___________, 19__,
between The Boeing Company (Boeing) and Seller/Lessor (the Purchase
Agreement) under which Seller/Lessor purchased certain Boeing Model
________ aircraft, including the aircraft bearing Manufacturer's Serial
No.(s) ______________________ (the Aircraft); and
(ii) Aircraft Sale/Lease Agreement dated as of ___________, 19__,
between Seller/Lessor and Purchaser/Lessee (the Aircraft Agreement) under
which Seller/Lessor is selling/leasing the Aircraft.
Capitalized terms used herein without definition will have the same meaning as
in the Aircraft Agreement.
1. Seller/Lessor has sold/leased the Aircraft under the Aircraft Agreement,
including therein a form of exculpatory clause protecting Seller/Lessor from
liability for loss of or damage to the aircraft, and/or related incidental or
consequential damages, including without limitation loss of use, revenue or
profit.
2. Disclaimer and Release; Exclusion of Liabilities
2.1 In accordance with Seller/Lessor's obligation under Article 9.5 of
AGTA-@ which was incorporated by reference into the Purchase Agreement,
Purchaser/Lessee hereby agrees that:
2.2 DISCLAIMER AND RELEASE. IN CONSIDERATION OF THE SALE/LEASE OF THE
AIRCRAFT, PURCHASER/LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES ALL WARRANTIES,
OBLIGATIONS AND LIABILITIES OF BOEING AND ALL OTHER RIGHTS, CLAIMS AND REMEDIES
OF PURCHASER/LESSEE AGAINST BOEING, EXPRESS OR IMPLIED, ARISING BY LAW OR
OTHERWISE, WITH RESPECT TO ANY NONCONFORMANCE OR DEFECT IN ANY AIRCRAFT, BOEING
PRODUCT, MATERIALS, TRAINING, SERVICES OR OTHER THING PROVIDED UNDER THE
AIRCRAFT AGREEMENT, INCLUDING, BUT NOT LIMITED TO:
(A) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;
(B) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE;
(C) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
OR NOT ARISING FROM THE NEGLIGENCE OF BOEING; AND
App-V-1
<PAGE> 64
SAMPLE
Purchaser's/Lessee's Agreement
(D) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO ANY AIRCRAFT.
2.3 EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES. BOEING WILL HAVE NO
OBLIGATION OR LIABILITY, WHETHER ARISING IN CONTRACT (INCLUDING WARRANTY), TORT,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF BOEING, OR OTHERWISE, FOR LOSS OF
USE, REVENUE OR PROFIT, OR FOR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES
WITH RESPECT TO ANY NONCONFORMANCE OR DEFECT IN ANY AIRCRAFT, MATERIALS,
TRAINING, SERVICES OR OTHER THING PROVIDED UNDER THE AIRCRAFT AGREEMENT.
2.4 Definitions. For the purpose of this paragraph 2, "BOEING" or "Boeing"
is defined as The Boeing Company, its divisions, subsidiaries, affiliates, the
assignees of each, and their respective directors, officers, employees and
agents.
Seller/Lessor Purchaser/Lessee
By By
---------------------------- ---------------------------
Its Its
---------------------------- --------------------------
Dated Dated
-------------------------- ------------------------
App. V-2
<PAGE> 65
SAMPLE
Owner Appointment of Agent - Warranties
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
1. Reference is made to Purchase Agreement No. ____ dated as of __________,
19__, between The Boeing Company (Boeing) and # (Customer) (the Purchase
Agreement), under which Customer purchased certain Boeing Model ________
aircraft including the aircraft bearing Manufacturer's Serial No.(s)
_____________ (the Aircraft). The Purchase Agreement incorporated by reference
Aircraft General Terms Agreement AGTA-@ (AGTA).
Capitalized terms used herein without definition will have the same meaning as
in the Purchase Agreement.
To accomplish the appointment of an agent, Customer confirms:
A. Customer has appointed ____________________ as agent (Agent) to act
directly with Boeing with respect to the remaining warranties under the
Purchase Agreement and requests Boeing to treat Agent as Customer for the
administration of claims with respect to such warranties; provided however,
Customer remains liable to Boeing to perform the obligations of Customer
under the Purchase Agreement.
B. Boeing may continue to deal exclusively with Agent concerning the
matters described herein unless and until Boeing receives written notice
from Customer to the contrary, addressed to Vice President - Contracts,
Mail Stop 75-38, Boeing Commercial Airplane Group, P.O. Box 3707, Seattle,
Washington 98124-2207, U.S.A. With respect to the rights and obligations of
Customer under the Purchase Agreement, all actions taken by Agent or
agreements entered into by Agent during the period prior to Boeing's
receipt of such notice are final and binding on Customer. Further, any
payments made by Boeing as a result of claims made by Agent will be made to
the credit of Agent unless otherwise specified when each claim is
submitted.
C. Customer will remain responsible for any payments due Boeing as a
result of obligations relating to the Aircraft incurred by Customer to
Boeing prior to the effective date of this Notice.
We request that Boeing acknowledge receipt of this letter and confirm the
appointment of Agent as stated above by signing the acknowledgment and
forwarding one copy of this letter to each of the undersigned.
Very truly yours,
#
By
----------------------------
App. VI-1
<PAGE> 66
SAMPLE
Owner Appointment of Agent - Warranties
AGENT'S AGREEMENT
Agent accepts the appointment as stated above, acknowledges it has reviewed the
Purchase Agreement and agrees that, in exercising any rights or making any
claims thereunder, Agent will be bound by and comply with all applicable terms
and conditions of the Purchase Agreement including, without limitation, the
DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES in
Article 11 of Part 2 of Exhibit C to the AGTA. Agent further agrees, upon the
written request of Boeing, to promptly execute and deliver such further
assurances and documents and take such further action as Boeing may reasonably
request in order to obtain the full benefits of the warranties under the
Purchase Agreement.
Very truly yours,
Agent
By
----------------------------
Its
----------------------------
Dated
--------------------------
Receipt of the above letter is acknowledged and the appointment of Agent with
respect to the above-described rights under the Purchase Agreement is confirmed,
effective as of this date.
THE BOEING COMPANY
By
----------------------------
Its
----------------------------
Dated
--------------------------
Aircraft Manufacturer's Serial Number __________
App. VI-2
<PAGE> 67
SAMPLE
Contractor Confidentiality Agreement
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
This Agreement is entered into between ____________________ (Contractor) and #
(Customer) and will be effective as of the date stated below.
In connection with Customer's provision to Contractor of certain Materials,
Proprietary Materials and Proprietary Information, reference is made to Purchase
Agreement No. _____ dated as of _______ , 19___ between The Boeing Company
(Boeing) and Customer.
Capitalized terms used herein without definition will have the same meaning as
in the Purchase Agreement.
Boeing has agreed to permit Customer to make certain Materials, Proprietary
Materials and Proprietary Information relating to Customer's Boeing Model
________ aircraft, Manufacturer's Serial Number ______, Registration No.
________ (the Aircraft) available to Contractor in connection with Customer's
contract with Contractor (the Contract) to maintain/repair/modify the Aircraft.
As a condition of receiving the Proprietary Materials and Proprietary
Information, Contractor agrees as follows:
1. For purposes of this Agreement:
"Aircraft Software" means software that is installed and used in the
operation of an Aircraft.
"Materials" are defined as any and all items that are created by Boeing or
a third party, which are provided directly or indirectly from Boeing and serve
primarily to contain, convey or embody information. Materials may include either
tangible embodiments (for example, documents or drawings), or intangible
embodiments (for example, software and other electronic forms) of information
but excludes Aircraft Software.
"Proprietary Information" means any and all proprietary, confidential
and/or trade secret information owned by Boeing or a Third Party which is
contained, conveyed or embodied in Proprietary Materials.
"Proprietary Materials" means Materials that contain, convey, or embody
Proprietary Information.
"Third Party" means anyone other than Boeing, Customer and Contractor.
2. Boeing has authorized Customer to grant to Contractor a worldwide,
non-exclusive, personal and nontransferable license to use Proprietary Materials
and Proprietary Information, owned by Boeing, internally in connection with
performance of the Contract or as may otherwise be authorized by Boeing in
writing. Contractor will keep confidential and protect from disclosure to any
person, entity or government agency, including any person or entity affiliated
with Contractor, all Proprietary Materials and Proprietary Information.
Individual copies of all Materials are provided to Contractor subject to
copyrights therein, and all such copyrights are retained by Boeing or, in some
cases, by Third Parties. Contractor is authorized to make copies of
App. VII-1
<PAGE> 68
SAMPLE
Contractor Confidentiality Agreement
Materials (except for Materials bearing the copyright legend of a Third Party)
provided, however, Contractor preserves the restrictive legends and proprietary
notices on all copies. All copies of Proprietary Materials will belong to
Boeing and be treated as Proprietary Materials under this Agreement.
3. Contractor specifically agrees not to use Proprietary Materials or
Proprietary Information in connection with the manufacture or sale of any part
or design. Unless otherwise agreed with Boeing in writing, Proprietary Materials
and Proprietary Information may be used by Contractor only for work on the
Aircraft for which such Proprietary Materials have been specified by Boeing.
Customer and Contractor recognize and agree that they are responsible for
ascertaining and ensuring that all Materials are appropriate for the use to
which they are put.
4. Contractor will not attempt to gain access to information by reverse
engineering, decompiling, or disassembling any portion of any software provided
to Contractor pursuant to this Agreement.
5. Upon Boeing's request at any time, Contractor will promptly return to Boeing
(or, at Boeing's option, destroy) all Proprietary Materials, together with all
copies thereof and will certify to Boeing that all such Proprietary Materials
and copies have been so returned or destroyed.
6. To the extent required by a government regulatory agency having jurisdiction
over Contractor, Customer or the Aircraft, Contractor is authorized to provide
Proprietary Materials and disclose Proprietary Information to the agency for the
agency's use in connection with Contractor's, authorized use of such Proprietary
Materials and/or Proprietary Information in connection with Contractor's
maintenance, repair, or modification of the Aircraft. Contractor agrees to take
reasonable steps to prevent such agency from making any distribution or
disclosure, or additional use of the Proprietary Materials and Proprietary
Information so provided or disclosed. Contractor further agrees to promptly
notify Boeing upon learning of any (i) distribution, disclosure, or additional
use by such agency, (ii) request to such agency for distribution, disclosure, or
additional use, or (iii) intention on the part of such agency to distribute,
disclose, or make additional use of the Proprietary Materials or Proprietary
Information.
7. Boeing is a third-party beneficiary under to this Agreement, and Boeing may
enforce any and all of the provisions of the Agreement directly against
Contractor. Contractor hereby submits to the jurisdiction of the Washington
state courts and the United States District Court for the Western District of
Washington with regard to any claims Boeing may make under this Agreement. It is
agreed that Washington law (excluding Washington's conflict-of-law principles)
governs this Agreement.
8. No disclosure or physical transfer by Boeing or Customer to Contractor, of
any Proprietary Materials or Proprietary Information covered by this Agreement
will be construed as granting a license, other than as expressly set forth in
this Agreement or any ownership right in any patent, patent application,
copyright or proprietary information.
9. The provisions of this Agreement will apply notwithstanding any markings or
legends, or the absence thereof, on any Proprietary Materials.
10. This Agreement is the entire agreement of the parties regarding the
ownership and treatment of Proprietary Materials and Proprietary Information,
and no modification of this Agreement will be effective as against Boeing unless
in writing signed by authorized representatives of Contractor, Customer and
Boeing.
App. VII-2
<PAGE> 69
SAMPLE
Contractor Confidentiality Agreement
11. Failure by either party to enforce any of the provisions of this Agreement
will not be construed as a waiver of such provisions. If any of the provision of
this Agreement is held unlawful or otherwise ineffective by a court of competent
jurisdiction, the remainder of the Agreement will remain in full force.
ACCEPTED AND AGREED TO this
Date: _____________________, 19___
CONTRACTOR CUSTOMER
By By
---------------------------- ---------------------------
Its Its
--------------------------- --------------------------
App. VII-3
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF ATLAS AIR, INC.
Atlas One, Inc.
Atlas Freighter Leasing, Inc.
Atlas Freighter Leasing II, Inc.
Atlas Air Services Limited
LHC Properties, Inc.
Atlas Freightlease, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 14, 1997
included in Atlas Air, Inc.'s Form 10-K for the year ended December 31, 1996
and to all references to our firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
September 24, 1997
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM T-1
----------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF l939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
( ) CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
STATE STREET BANK AND TRUST COMPANY
- --------------------------------------------------------------------------------
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
- -------------------------- -------------------
(State of incorporation if (I.R.S. Employer
not a national bank Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
John R. Towers, Executive Vice President and General Counsel,
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
- --------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
ATLAS AIR, INC.
- --------------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 84-1207329
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
538 Commons Drive, Golden, Colorado 80401
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
10 3/4% Senior Notes due 2005
- --------------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE> 2
Item l. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
Department of Banking and Insurance of
The Commonwealth of Massachusetts
100 Cambridge Street
Boston, Massachusetts
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee or its parent, State Street
Corporation.
Item l6. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
l. A copy of the Articles of Association of the trustee as
now in effect.
A copy of the Articles of Association of the trustee, as
now in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
2. A copy of the Certificate of Authority of the trustee to
do Business.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities
- 2 -
<PAGE> 3
and Exchange Commission as Exhibit 2 to Amendment No. 1 to
the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
3. A copy of the Certification of Fiduciary Powers of the
Trustee.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
4. A copy of the By-laws of the trustee as now in effect.
A copy of the By-Laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with
Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
5. Consent of the trustee required by Section 32l(b) of the
Act.
6. A copy of the latest Consolidated Reports of Condition of
the trustee, published pursuant to law or the requirements
of its supervising or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 6 and made a part hereof.
- 3 -
<PAGE> 4
NOTES
Inasmuch as this Form T-l is filed prior to the ascertainment
by the trustee of all facts on which to base its answer to Item 2, the answer
to said Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-l.
- 4 -
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
l939, the trustee, State Street Bank and Trust Company, a Massachusetts trust
company, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Hartford, and State of Connecticut, on the 23rd day of September, 1997.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Steven Cimalore
----------------------------
Name: Steven Cimalore
Title: Vice President
- 5 -
<PAGE> 6
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture to be entered into
between Atlat Air, Inc. and State Street Bank and Trust Company, Trustee, does
hereby consent that, pursuant to Section 321(b) of the Trust Indenture Act of
1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Steven Cimalore
----------------------------
Name: Steven Cimalore
Title: Vice President
Dated: September 23, 1997
<PAGE> 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
<TABLE>
<S> <C>
ASSETS THOUSANDS OF DOLLARS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . . 1,665,142
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . 8,193,292
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,238,113
Federal funds sold and securities purchased under agreements to resell
in domestic offices of the bank and of its Edge subsidiary . . . . . . . . . . 5,863,144
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . . 4,936,454
Allowance for loan and lease losses . . . . . . . . . . . . 70,307
Loans and leases, net of unearned income and allowance . . . . . . . . . . . . 4,866,147
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . 957,478
Premises and fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,117
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884
Investments in unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . 26,835
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . 45,548
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,080
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066,957
----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,450,737
==========
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,270,845
Noninterest-bearing . . . . . . . . . . . . . . . . . . 6,318,360
Interest-bearing . . . . . . . . . . . . . . . . . . . . 1,952,485
In foreign offices and Edge subsidiary . . . . . . . . . . . . . . . . . . . 12,760,086
Noninterest-bearing . . . . . . . . . . . . . . . . . . 53,052
Interest-bearing . . . . . . . . . . . . . . . . . . . . 12,707,034
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge subsidiary . . . . 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities . . . . . . . . 926,821
Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671,164
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . 46,137
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745,529
----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,637,223
==========
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,931
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) . . 1,426,881
Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . (4,015)
TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,813,514
-----------
TOTAL LIABILITIES AND EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . 33,450,737
==========
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,568
<SECURITIES> 80,355
<RECEIVABLES> 48,985
<ALLOWANCES> 5,908
<INVENTORY> 0
<CURRENT-ASSETS> 138,908
<PP&E> 743,981
<DEPRECIATION> 74,476
<TOTAL-ASSETS> 901,761
<CURRENT-LIABILITIES> 103,782
<BONDS> 552,570
0
0
<COMMON> 225
<OTHER-SE> 220,168
<TOTAL-LIABILITY-AND-EQUITY> 901,761
<SALES> 93,902
<TOTAL-REVENUES> 93,902
<CGS> 0
<TOTAL-COSTS> 104,556
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,908
<INCOME-PRETAX> (21,562)
<INCOME-TAX> (7,870)
<INCOME-CONTINUING> (13,692)
<DISCONTINUED> 0
<EXTRAORDINARY> 16,740
<CHANGES> 0
<NET-INCOME> 3,048
<EPS-PRIMARY> .14
<EPS-DILUTED> 0
</TABLE>
