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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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COMMISSION FILE NUMBER 0-25732
ATLAS AIR, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 84-1207329
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
538 COMMONS DRIVE, GOLDEN, COLORADO 80401
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (303) 526-5050
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR
VALUE $.01 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of February 29, 2000, there were 34,412,613 shares of common stock
outstanding. The aggregate market value of such shares held by non-affiliates of
the registrant was approximately $807,621,000.
DOCUMENTS INCORPORATED BY REFERENCE
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DESCRIPTION OF DOCUMENT PART OF THE FORM 10-K
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Portions of the Definitive Proxy Statement to be used in
connection with the registrant's 2000 Annual Meeting of
Stockholders.............................................. Part III (Item 10 through Item 13)
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PART I
ITEM 1. BUSINESS
GENERAL
We are the world's largest air cargo outsourcer, with an all Stage 3 FAA
noise regulation compliant fleet of Boeing 747 freighter aircraft. We provide
reliable airport-to-airport cargo transportation services throughout the world
to major international air carriers generally under three- to five-year
fixed-rate U.S. dollar denominated contracts which typically require that we
supply aircraft, crew, maintenance and insurance (the "ACMI Contracts"). Our
customers currently include some of the world's leading air carriers, including,
Alitalia, British Airways, China Airlines Ltd., Korean Airlines and Malaysian
Airlines. We provide efficient, cost effective service to our customers
primarily as a result of our productive work force, the outsourcing of a
significant part of our regular maintenance work on a long-term, fixed-cost
contractual basis and the advantageous cost economies realized in the operation
of our fleet, comprised solely of Boeing 747 aircraft which are configured for
service in long-haul cargo operations.
Our fleet currently includes 22 Boeing 747-200 and 10 Boeing 747-400
freighter aircraft in service. We acquired the 747-400 aircraft in 1998, 1999
and 2000 pursuant to an agreement with The Boeing Company to purchase 10 new
747-400 freighter aircraft powered by engines acquired from General Electric
Company, with options to purchase up to 10 additional 747-400 aircraft (the
"Boeing Purchase Agreement"). In February 1999, we exercised options for two
additional aircraft pursuant to the Boeing Purchase Agreement. We placed five
747-400 aircraft into service in 1998, four 747-400 aircraft into service in
1999, one 747-400 aircraft into service in the first quarter of 2000 and expect
to place the remaining two undelivered 747-400 aircraft into service in 2000
with both existing and prospective customers whom we believe could benefit from
the unique performance capabilities of the 747-400 aircraft.
We believe that our leading market position and our continued opportunities
for growth are directly attributable to the following competitive strengths:
Long-Term Customer Contracts Which Provide Revenue Stability
Our ACMI Contracts, which accounted for approximately 97% of our total
operating revenues in 1999, typically require our customers to guarantee monthly
minimum aircraft utilization levels at fixed hourly rates and are typically in
force for periods of three to five years, subject in certain limited cases to
early termination provisions. These contracts typically require us to supply
aircraft, crew, maintenance and insurance, while our customers generally 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.
Our customers are also responsible under these contracts for utilizing the cargo
capacity of each of the contracted aircraft. As a result, our ACMI Contracts
minimize the load factor, yield risk and fuel cost risk traditionally associated
with the air cargo business and provide a minimum annual revenue base and more
predictable profit margins. We also periodically engage in ad hoc charter or
scheduled air service depending on availability of aircraft for these uses.
Low Cost Structure
We have established ourself as a low cost, efficient and reliable provider
of air cargo transportation. This is primarily due to the outsourcing of many of
our required services, the advantageous economies of scale realized from the
operation of a standardized fleet of long-haul Boeing 747 aircraft, and our
productive work force. The uniformity of the 747 aircraft fleet allows for
standardization in maintenance and crew training, resulting in
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substantial cost savings in these areas. In particular, we have advantageous,
long-term contracts on a fixed cost per flight hour basis with leading
maintenance providers such as GE, KLM Royal Dutch Airlines, Lufthansa Technik
and MTU Maintenance Hanover for a significant portion of our on-going aircraft
and engine maintenance requirements. As a result of these efficiencies, our high
service standards and increased airline industry pressure to reduce costs, our
airline customers have determined that outsourcing portions of their air cargo
business to us can be significantly less costly and offer greater operational
flexibility than expanding their cargo operations by purchasing additional
aircraft and adding other resources such as personnel and systems.
The new 747-400 aircraft have even greater operational capabilities than
the Boeing 747-200 aircraft and allow us to maintain our low cost structure. The
new aircraft's higher level of operational reliability and warranty coverage
will result in lower maintenance costs during the early years of operation,
typically for at least five years. In addition, the acquisition of 12 747-400
freighter aircraft will make Atlas the largest operator of this aircraft type to
date and will enable us to achieve economies of scale from the standardization
in maintenance and crew training.
Expanding Business Base
We expect that the growth in demand for air cargo services, combined with
the lower rate of growth in passenger-airline cargo capacity and the continuing
pressure on the airline industry to reduce operating costs, will provide us with
the opportunity to expand our air cargo outsourcing services. The primary
business focus of most of our customers is on the transportation of passengers,
not air cargo. Nevertheless, most passenger airlines have air cargo customers
that require quick and dependable air cargo service between hubs serviced by
these carriers. To the extent that airlines have cargo capacity on their
scheduled flights, which are generally scheduled for the convenience of
passengers rather than for the needs of air cargo customers, air cargo service
can be provided by them to meet such demand. However, there is a growing trend
in the passenger-airline business toward replacing existing widebody passenger
aircraft and combination passenger/cargo aircraft with smaller, more efficient
(for passenger operations) twin-engine aircraft which have limited cargo space.
Our customers have therefore found that outsourcing to meet their additional
cargo transportation needs rather than allocating significant resources and
expanding their fleet of freighter aircraft to effectively service their air
cargo customers provides a cost-effective alternative for them to maintain and
expand that portion of their business.
Increasing Cargo Market Share
We have successfully increased our customer base from a single customer in
1992 to 11 full-time customers in 1999. In addition, we have in the past
operated under short-term, seasonal ACMI Contracts with Kitty Hawk Air Cargo,
Inc., UPS and Emery Air Freight, and anticipate providing short-term, seasonal
service in the future. The growth in the number of customers is a result of our
ability to provide a cost-effective service which has gained acceptance within
the industry due to our successful market development efforts. The addition of
the 747-400 aircraft provides us with the opportunity to increase our market
share by offering this product to new and existing customers who have a need for
the greater payload, extended range and operational reliability of the 747-400,
but for whom the purchase of a limited number of 747-400 freighter aircraft
would not be cost-effective. In addition, the 747-400 aircraft gives us a
competitive advantage with new customers who choose to utilize only new or
relatively new aircraft or are restricted by local regulations limiting the
operation of older aircraft.
Industry Background
While the air cargo industry is highly competitive, we believe that current
industry trends are favorable to the continued growth of our business. According
to biennial reports prepared by Boeing, the world air cargo market is expected
to more than triple over the next 20 years. Such reports indicate that the world
air cargo market has grown at an average rate of 7.6% per year from 1988 to
1998. The average annual percentage growth through 2018 is expected to average
6.4%, with international air cargo market growth outpacing U.S. domestic growth.
We believe this growth has been generated, in part, by:
- economic growth;
- the relaxation of international trade barriers, as indicated by the
passage of the NAFTA and establishment of the WTO;
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- reductions in the price of shipping by air;
- manufacturers' search for low-cost labor in developing countries; and
- the increasingly time-sensitive nature of product-delivery schedules due
to shorter product life-cycles and "just-in-time" inventory management.
In addition to growth in the global air cargo market, we expect to benefit from
growth in the export-driven economies of the countries in the Pacific Rim, where
we have focused a significant amount of our flight operations. We have not
experienced any adverse impact on our business as a result of economic and
political turmoil in Asia in late 1998 and early 1999, although there can be no
assurances that there will not be any future impact. According to Boeing
reports, eastbound and westbound Trans-Pacific cargo volumes grew at average
annual rates of 7.6% and 10.8%, respectively, between 1987 and 1997, and are
projected to grow at average annual rates of 7.7% and 6.0%, respectively,
between 1997 and 2017. Similarly, northbound and southbound air cargo volumes
between North America and South America increased at average annual rates of
8.7% and 10.2%, respectively, between 1987 and 1997, and are projected to grow
at average annual rates of 6.4% and 6.8%, respectively, from 1997 to 2017.
Additionally, eastbound and westbound North Atlantic air cargo volumes increased
at average annual rates of 6.8% and 6.9%, respectively, between 1987 and 1997
and are projected to grow at average annual rates of 6.7% and 7.3%,
respectively, from 1997 to 2017. We believe that, as a U.S. certificated "flag"
carrier, we are well positioned to benefit from the progressive expansion of
international trade and the consequential growth in global air cargo markets,
particularly in Asia, South America and Europe, where we have concentrated a
significant portion of our resources.
ACMI CONTRACTS
Our ACMI Contracts, which accounted for approximately 97% of our total
operating revenues in 1999, typically require our customers to guarantee monthly
minimum aircraft utilization levels at fixed hourly rates and are typically in
force for periods of three to five years, subject in certain limited cases to
early termination provisions. These contracts typically require us to supply
aircraft, crew, maintenance and insurance, while our customers generally 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, eliminate the load factor and yield risk
traditionally associated with the air cargo business as well as the risks
associated with the fluctuating price of fuel. The ACMI Contracts typically
require minimum air freight capacity to be provided to our customers. All of our
revenues, and most of our costs, are in U.S. dollars, thus avoiding currency
risks normally associated with international business.
At February 29, 2000, we had ACMI Contracts with 11 full-time customers. In
most cases, one aircraft is dedicated under each contract. China Airlines Ltd.
accounted for approximately 26%, and no other customer accounted for 10% or
more, of our total revenues for the year ended December 31, 1999. In addition,
we have also operated short-term, seasonal ACMI Contracts with Kitty Hawk, UPS
and Emery Air Freight among others, and anticipate doing so in the future.
Some of our ACMI Contracts allow customers to cancel up to a maximum of
approximately 5% of the guaranteed hours of aircraft utilization over the course
of a year. Our 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 lower. We have found that such
cancellations provide a timely opportunity for the scheduling of maintenance on
our aircraft, to the extent possible. See "-- Maintenance." We believe that our
relationships with our customers are mutually satisfactory, as evidenced by the
fact that we have renewed
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and, in certain cases, added a significant number of ACMI Contracts with our
existing customers, although there can be no assurance that in the future such
contracts will not be canceled in accordance with their terms.
All of the ACMI Contracts provide that each of our aircraft be deemed to be
at all times under our exclusive operating control, possession and direction.
They also provide that, in order to service the routes designated by the
contract, we obtain the authority from the governments having jurisdiction over
the route. See "-- Governmental Regulation." If we are required to use the
customer's "call sign" in identifying ourselves throughout our route, the
customer must also have obtained underlying authority from the governments
having jurisdiction over the route. Therefore, our route structure is limited to
areas in which we can gain access from the appropriate governments.
Additionally, in many instances ACMI Contracts are subject to prior and/or
periodic approvals of foreign governments.
OTHER FLIGHT OPERATIONS
To the extent we have available excess aircraft capacity at any time, we
will seek to obtain ad hoc charter service contracts, which we believe are
generally readily available. In addition, in the past we have provided service
to Kitty Hawk, UPS and Emery Air Freight, among others, pursuant to short-term,
seasonal ACMI Contracts during periods of excess aircraft capacity.
SALES AND MARKETING
From our primary offices in Golden, CO, New York, NY and Miami, FL, we
service our air cargo customers and solicit ACMI Contract business. See
"-- Facilities." Our 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 which have the need for long-distance capacity to move such cargo
to another distribution point. On occasion, we may utilize independent cargo
brokers to obtain new ACMI Contracts. We market our services by guaranteeing our
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. We have placed the first 10 747-400
aircraft into service and expect to place the remaining two undelivered 747-400
aircraft into service with both existing and prospective customers whom we
believe will benefit 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 our Boeing 747-200 fleet, it is likely that the
aircraft 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 major maintenance
events every five years or 25,000 flight hours, whichever comes later if the
aircraft is over the age of 18 years, or every six years or 25,000 flight hours,
whichever comes later for aircraft with an age of 18 years or less, with a
maximum interval in either case of nine years (a "D Check"). We attempt to
schedule major maintenance on our aircraft in the first quarter of the calendar
year, when the demand for air cargo capacity has historically been lower, taking
advantage of cancellations of flights by our customers that generally occur most
frequently during this period.
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) for our 747-200 freighter aircraft is undertaken by KLM,
primarily at its maintenance base located at Schiphol International Airport in
Amsterdam, The Netherlands. KLM supplies engineering and diagnostic testing for
each aircraft and its components in compliance with the FAA and other applicable
regulations. The Maintenance Contract provides that KLM, subject to certain
terms and conditions, will perform repairs and maintenance of our aircraft on
the same basis and order of priority as repairs to its own fleet. Such service
is provided to us 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. Under
the terms of the Maintenance Contract, in the event that we wish to maintain
more than 12 of our aircraft under such contract, the terms of the contract are
subject to adjustment by KLM. More than 12 of our aircraft are currently subject
to the Maintenance Contract. In December 1999, we completed negotiations with
KLM to terminate the engine portion of this
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maintenance agreement. Concurrently, we entered into a ten-year maintenance
agreement with MTU Maintenance Hanover, a subsidiary of Daimler Chrysler
Aerospace, to provide regular maintenance at a fixed rate per flight hour for 43
engines, the majority of which were previously serviced under the KLM agreement.
In June 1996, we 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, we have an option to add not less than 40 engines to
the program.
During the initial 36 month operating period, the 747-400 aircraft's
airframe will be covered under manufacturer's warranties. As a result, we do not
expect to incur significant maintenance expense in connection with the 747-400
airframe during the warranty period. In addition, the 747-400 airframe limited
maintenance requirements will provide a higher operational reliability with
lower maintenance costs during the early years of operation, typically for at
least five years. We will incur expenses associated with routine daily
maintenance of both the airframe and the engines. In July 1998, we entered into
an agreement with Lufthansa Technik pursuant to which Lufthansa Technik will
provide all required maintenance for our initial order of ten 747-400 aircraft,
plus any additional 747-400 aircraft that we purchase pursuant to our option in
the Boeing Purchase Agreement, on a fixed cost per flight hour basis for ten
years, subject to an annual escalation adjustment. We may terminate the
agreement in June 2003. In connection with the GE engine purchase agreement, we
have also entered into two agreements with GE to provide ongoing maintenance on
the 747-400 aircraft engines at a fixed cost per flight hour, subject to an
annual escalation adjustment.
We believe that fixed cost contracts provide the most efficient means of
ensuring the continued service of our aircraft fleet and the most reliable way
by which to predict our maintenance costs. Certain other low-level routine
maintenance is performed on a time and material basis.
GOVERNMENTAL REGULATION
Under the Federal Aviation Act of 1958, as amended and recodified at 49
U.S.C. Subtitle VII (the "Aviation Act"), the Department of Transportation
("DOT") and the Federal Aviation Administration ("FAA") exercise regulatory
authority over us. The 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 schedule and charter operations;
- tariffs;
- consumer protection;
- unfair methods of competition;
- unjust discrimination; and
- deceptive practices.
The FAA's regulatory authority relates primarily to air safety, including
aircraft certification and operations, crew and maintenance personnel
licensing/training and maintenance standards.
To provide air cargo transportation services under long-term contracts with
major international airlines, we rely primarily on our worldwide authorities.
FAA approval is required for each of our long-term ACMI Contracts and DOT
approval is required for each of our long-term ACMI Contracts with foreign air
carriers. In addition, FAA approval is required for each of our short-term,
seasonal ACMI Contracts.
The DOT has issued the Company a Certificate of Public Convenience and
Necessity (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, we
possess worldwide charter authority and
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scheduled all-cargo rights to more than 150 countries. We also hold limited-term
DOT exemption authority to engage in scheduled air transportation of property
and mail between certain points in the U.S., on the one hand, and Hong Kong,
Colombia and The Netherlands, on the other hand.
In order to engage in the air transportation business, we are required to
maintain a CPCN from the DOT. Prior to issuing a CPCN, the 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. The DOT also
examines 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.
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. These bilateral agreements may be open skies agreements which
contain no restrictions or limitations, or they may specify the city-pair
markets that may be served; restrict the number of carriers that may be
designated; provide for prior approval by one or both governments of the prices
the carriers may charge; limit frequencies or the amount of capacity to be
offered in the market; and, in various other ways, impose limitations on the
operations of air carriers. To obtain authority under a restrictive bilateral
agreement, it is often necessary to compete against other carriers in a DOT
proceeding. At the conclusion of the proceeding, the DOT awards all route
authorizations. The provisions of bilateral agreements pertaining to charter
services vary considerably from country to country. Some agreements limit the
number of charter flights that carriers of each country may operate. We are
subject to various international bilateral air services agreements between the
U.S. and the countries to which we provide service. We also operate 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. We must obtain permission from the applicable foreign governments to
provide service to foreign points.
We have 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. We must obtain
and maintain FAA certificates of airworthiness for all of our aircraft. Our
aircraft, flight personnel and flight and emergency procedures are subject to
periodic inspections and tests by the FAA. All air carriers operating to, from
or within the United States are subject to the strict scrutiny of the FAA to
ensure proper compliance with FAA regulations. We are considered to be a
high-growth carrier by the FAA and, therefore, we receive heightened attention
by the FAA and DOT.
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
our existing fleet of aircraft comply with Stage 3 Standards -- the highest
standard issued by the FAA.
Under the FAA's Directives issued under its "Aging Aircraft" program, we
are subject to extensive aircraft examinations and will be required to undertake
structural modifications to our fleet to address the problem of corrosion and
structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification
Service Bulletins which have been converted into Directives by the FAA. All of
our Boeing 747-200 aircraft have been brought into
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compliance with such Directives. As part of the FAA's overall Aging Aircraft
program, it has issued Directives requiring certain additional aircraft
modifications to be accomplished. We estimate that the modification costs per
aircraft will range between $2 million and $3 million. Fourteen aircraft in our
fleet have already undergone the major portion of such modifications. The
remaining eight aircraft in service will require modification prior to the year
2009. Other Directives have been issued that require inspections and minor
modifications to Boeing 747-200 aircraft. The newly manufactured 747-400
freighter aircraft were delivered in compliance with all existing FAA Directives
at their respective delivery dates. It is possible that additional Directives
applicable to the types of aircraft or engines included in our fleet could be
issued in the future, the cost of which could be substantial.
We are also subject to the regulations of the Environmental Protection
Agency regarding air quality in the U.S. The aircraft that we operate meet 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, including Lufthansa, currently provide services for themselves and for
others similar to our services, and new airlines may be formed that would also
compete with us. Such airlines may have substantially greater financial
resources than we do. In addition, certain retail air freight companies, such as
Evergreen International and Kitty Hawk, compete with us on a limited, indirect
basis, generally outside of the ACMI operating structure. We believe that the
most important elements 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. Our ability to achieve our
strategic plan depends in part upon our 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 upon our ability to continue to obtain
higher ACMI Contract rates in connection with the 747-400 aircraft compared to
those currently obtained with existing Boeing 747-200 aircraft. We believe that
such higher rates have been and will continue to be obtainable 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 Boeing 747-200 aircraft.
FUEL
Although fuel costs are typically the largest operating expense for
airlines, we have limited exposure to the fluctuation of fuel costs and
disruptions in supply as a result of our ACMI Contracts, which require the
customers to provide fuel for the aircraft. However, an increase in fuel costs
could reduce our cost advantages because of our older Boeing 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 we operate scheduled cargo or ad
hoc charter services, or position our aircraft, we are responsible for fuel and
other costs that are normally borne by the customers under the ACMI Contracts.
In 1999, approximately 2% of our block hours represented scheduled cargo, ad hoc
charter services or positioning our aircraft for our own account. We may, at
times, have excess capacity in which case we may deploy such aircraft in
scheduled cargo or ad hoc charter services.
EMPLOYEES
As of December 31, 1999, we had 1,255 employees, 734 of whom were air crew
members. We have hired and expect to hire additional pilots in 2000 associated
with the delivery of additional aircraft, including the 747-400 aircraft. We
maintain a comprehensive training program for our pilots in compliance with FAA
requirements in which each pilot regularly attends recurrent training programs.
We believe that our employees' participation in the growth and
profitability of our business is essential to maintain our productivity and low
cost structure, and we have therefore established programs for that purpose such
as a profit sharing plan, a stock purchase plan, and a matching contribution of
the employees' 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 our success and to augment base salary levels and
retirement income. We consider our relations with our employees to be good.
In April 1999, we received notification from the National Mediation Board
("NMB") that our crew members voted for representation by the Air Line Pilots
Association ("ALPA"). We expect our labor costs to
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decline initially since our profit sharing plan (the "Profit Sharing Plan")
excludes from the category of eligible employees, those employees who have been
certified by the NMB for representation. In response to ALPA's claims that such
an exclusion violates the Railway Labor Act, on May 6, 1999, we filed an action
in the United States District Court for the District of Columbia (the "District
Court") seeking a declaratory judgment confirming, inter alia, the
enforceability of the Profit Sharing Plan's exclusion. On May 10, 1999, ALPA
filed a counterclaim in that action, alleging that the exclusion of its members
from the Profit Sharing Plan violates the Railway Labor Act, and seeking
restoration of profit sharing pay. In October 1999, the District Court entered a
summary judgment in our favor, ruling that we did not violate the Railway Labor
Act when we eliminated crew members' participation in the Profit Sharing Plan
following ALPA's certification as the crew members' collective bargaining agent.
In addition, the District Court dismissed all other claims in the case. ALPA has
subsequently filed an appeal of the District Court's decision.
INSURANCE
We may incur potential losses which could result 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.
We are required by the DOT to carry liability insurance on each of our aircraft,
and each of our aircraft leases and ACMI Contracts also require us to carry such
insurance. While we carry this insurance, any extended interruption of our
operations due to the loss of an aircraft could have a material adverse effect
on our financial position and results of operations. We currently maintain
public 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. We maintain baggage and cargo liability insurance if not
provided by our customers under ACMI Contracts. Although we believe that our
insurance coverage is adequate, there can be no assurance that the amount of
such coverage will not be changed upon renewal or that we will not be forced to
bear substantial losses from accidents. Substantial claims resulting from an
accident could have a material adverse effect on our financial condition and
could affect our ability to obtain insurance in the future. We believe that we
have good relations with our insurance providers.
ITEM 2. PROPERTIES
AIRCRAFT
Our 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 our 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 have greater
operational capabilities than the 747-200 aircraft and will allow us to maintain
our low cost structure despite their higher acquisition cost. The new aircraft's
lower maintenance requirements will provide a higher level of operational
reliability with lower maintenance costs during the early years of operation,
typically for at least five years. In addition, the acquisition of 12 747-400
freighter aircraft will make Atlas one of the largest operators of this aircraft
type to date and will enable us to capitalize on economies of scale from the
standardization in maintenance and crew training.
The following table describes, as of February 29, 2000, our existing fleet
and the 747-400 aircraft subject to the Boeing Purchase Agreement.
FLEET PROFILE
<TABLE>
<CAPTION>
NUMBER AIRCRAFT YEAR OF
OF AIRCRAFT TYPE OWNED/LEASED MANUFACTURE
----------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Existing fleet:................................. 21 747-200 Owned(1) 1974-1986(2)
1 747-200 Leased(3) 1976
4 747-400 Owned 1998-2000
6 747-400 Leased(4) 1998-1999
747-400 aircraft on order(5):................... 2 747-400 2000
</TABLE>
- ---------------
(1) All aircraft are powered by GE engines. See "-- Maintenance."
9
<PAGE> 10
(2) The years of manufacture for these 21 aircraft are as follows: five aircraft
in 1979, four aircraft in 1980, two aircraft each in 1976, 1978 and 1981 and
one aircraft each in 1974, 1975, 1977, 1984, 1985 and 1986.
(3) The aircraft is leased from a third party under a lease expiring in March
2010 and is powered by GE engines.
(4) These aircraft are leased from third parties under three leases expiring in
2019, and three leases expiring in 2020.
(5) We purchased 10 new Boeing 747-400 freighter aircraft under the Boeing
Purchase Agreement and have exercised options for two additional aircraft.
The first five aircraft were delivered in 1998, four were delivered in 1999
and one was delivered in the first quarter of 2000, with the remaining two
aircraft scheduled to be delivered in 2000. See "-- 747-400 Aircraft
Acquisition." These aircraft will be powered by GE engines. The financing
for the 12 aircraft has been secured through the 1998 EETCs, 1999 EETCs,
2000 EETCs (as defined) and lease equity.
We have been successful in obtaining new customers, or establishing
additional arrangements with existing customers, coincident with the delivery of
aircraft into the fleet or soon thereafter. However, from time to time, we
accept 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 of other aircraft, as well as for
ad hoc charter arrangements. Although we intend 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, we engage in discussions with third parties regarding
possible acquisitions of aircraft that could expand our operations. We are in
discussions with third parties for the possible acquisition of additional
aircraft for delivery in 2000 and beyond.
747-400 AIRCRAFT ACQUISITION
In June 1997, we entered into the Boeing Purchase Agreement to purchase 10
new 747-400 freighter aircraft with options for 10 additional aircraft, all to
be powered by GE engines. In February 1999, we exercised options for two
additional aircraft for delivery in 2000. As a result of our being a large
purchaser of 747-400 freighter aircraft to date, we were able to negotiate from
Boeing and GE a significant discount off the aggregate list price of $2.0
billion for the 12 747-400 freighter aircraft, four installed engines per
aircraft and five spare engines. In addition, we obtained certain ancillary
products and services at advantageous prices.
We acquired and placed into service five of the 747-400 aircraft in 1998,
four of the 747-400 aircraft in 1999 and one of the 747-400 aircraft in the
first quarter of 2000. Due to production problems at Boeing, some of the 1998
delivery positions of the 747-400 aircraft were delayed, resulting in
compensation to us from Boeing.
FACILITIES
Our principal executive offices are located in a 6,500 square foot office
building owned by the Company at 538 Commons Drive, Golden, Colorado. We also
rent 8,900 square feet of office space in three additional buildings, all with
relatively short-term lease expirations and renewal options.
We presently occupy 34,100 square feet of office space at JFK International
Airport ("JFK") in New York in two separate buildings. These offices include
both operational and administrative support functions, including flight and crew
operations, maintenance and engineering, material management, human resources
and information technology. We occupy 29,400 square feet of the JFK office space
pursuant to a lease agreement with Japan Airlines Management Corporation ("JMC")
for a five-year period, which expires on May 31, 2000; we have negotiated an
option for a 60-day lease extension. The remaining 4,700 square feet of JFK
office space is leased from Halmar Equities, Inc. ("Halmar"), which lease
expires on June 30, 2000. In addition, we lease 2,000 square feet of warehouse
space at JFK for the storage of aircraft parts, which lease expires April 15,
2002.
In November 1999, we announced our intention to consolidate our corporate
and operational offices to White Plains, New York, concurrent with the
expiration of the leases on the JFK office space, and in that connection we
executed a twelve-year lease for 120,000 square feet. We anticipate completing
the move to the new facility at White Plains, New York by the third quarter of
2000.
10
<PAGE> 11
Due to increased operations at Miami International Airport ("MIA"), we
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 is used to
store aviation equipment and aircraft components used to maintain aircraft
operated by us. In the third quarter of 1998, we entered into a sublease and
ramp use agreement with American Airlines, Inc. for 145,000 square feet of
hangar, office and parking space at MIA in support of our increased operations.
The lease is for a period in excess of four years and commenced July 1, 1998. We
are currently planning to build a wide body maintenance facility at MIA. The
facility, which will be financed through industrial development bonds, is
scheduled to open in mid 2001.
ITEM 3. LEGAL PROCEEDINGS
In April 1999, we received notification from the NMB that our crew members
voted for representation by ALPA. We expect our labor costs to decline initially
since our Profit Sharing Plan excludes from the category of eligible employees,
those employees who have been certified by the NMB for representation. In
response to ALPA's claims that such an exclusion violates the Railway Labor Act,
on May 6, 1999, we filed an action in the District Court seeking a declaratory
judgment confirming, inter alia, the enforceability of the Profit Sharing Plan's
exclusion. On May 10, 1999, ALPA filed a counterclaim in that action, alleging
that the exclusion of its members from the Profit Sharing Plan violates the
Railway Labor Act, and seeking restoration of profit sharing pay. In October
1999, the District Court entered a summary judgment in our favor, ruling that we
did not violate the Railway Labor Act when we eliminated crew members'
participation in the Profit Sharing Plan following ALPA's certification as the
crew members' collective bargaining agent. In addition, the District Court
dismissed all other claims in the case. ALPA has subsequently filed an appeal of
the District Court's decision.
While we are from time to time involved in litigation in the ordinary
course of our business, there are no other material legal proceedings pending
against us or to which any of our property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1999.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK & RELATED SECURITY HOLDER MATTERS
In November 1997, the Company's common stock commenced trading on the New
York Stock Exchange ("NYSE") under the symbol "CGO." Prior to that, the
Company's common stock traded on the Nasdaq National Market ("Nasdaq/NM") under
the trading symbol "ATLS." The approximate number of shareholders of record at
February 29, 2000 was 301.
In January, 1999, the Company declared a 3-for-2 stock split for
shareholders of record as of January 25, 1999 which was effected on February 8,
1999 (the "Stock Split"). The following table sets forth for the periods
indicated the high and low bid quotations, as quoted by the NYSE and Nasdaq/NM.
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. These
amounts are approximate as a result of their restatement to reflect the Stock
Split.
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
QUARTER ENDED
March 31............................................ $34 15/16 $26 1/2 $22 21/32 $14 15/32
June 30............................................. 34 24 3/4 27 9/16 20 7/8
September 30........................................ 36 18 7/8 25 21/32 14 1/16
December 31......................................... 28 1/4 19 1/16 32 5/8 15 15/32
</TABLE>
The Company has not declared any cash dividends and does not plan to do so
in the foreseeable future. The indentures governing the Company's unsecured
10 3/4% Senior Notes Due 2005, 9 3/8% Senior Notes Due 2006 and 9 1/4% Senior
Notes Due 2008 (each as defined) in certain circumstances may restrict the
Company from paying dividends or making other distributions on its common stock.
See Note 3 to the consolidated financial statements of the Company.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below have been derived from the
consolidated financial statements of the Company. This information should be
read in conjunction with the consolidated financial statements and related
notes, and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues...................... $637,081 $422,238 $401,041 $315,659 $171,267
Operating income........................ 187,489 135,849 56,002 88,063 42,674
Income before extraordinary items and
cumulative effect of a change in
accounting principle.................. 61,279 46,217 6,689 37,838 17,831
Net income.............................. 53,270 46,217 23,429 37,838 17,831
Basic EPS:
Income before extraordinary items and
cumulative effect of a change in
accounting principle per common
share.............................. $ 1.79 $ 1.37 $ .20 $ 1.17 $ .71
Net income per common share........... $ 1.56 $ 1.37 $ .70 $ 1.17 $ .71
Weighted average common shares
outstanding during the period(1)... 34,245 33,675 33,675 32,254 25,174
Diluted EPS:
Income before extraordinary items and
cumulative effect of a change in
accounting principle per common
share.............................. $ 1.77 $ 1.37 $ .20 $ 1.16 $ .71
Net income per common share........... $ 1.54 $ 1.37 $ .69 $ 1.16 $ .71
Weighted average common shares
outstanding during the period(1)... 34,500 33,841 33,803 32,523 25,278
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments...... $ 473,160 $ 471,814 $ 152,969 $124,663 $ 96,990
Working capital...................... 330,281 294,511 80,363 98,675 81,022
Total assets......................... 2,142,370 1,988,869 1,297,415 773,707 447,323
Long-term debt, net of current
portion............................ 1,253,084 1,166,460 736,026 462,868 335,902
Other liabilities.................... 228,075 235,308 163,167 -- --
Stockholders' equity................. 357,700 283,890 238,829 215,785 68,715
</TABLE>
- ---------------
(1) As adjusted to reflect the 3-for-2 stock split for shareholders of record as
of January 25, 1999.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The cargo operations of our airline customers are seasonal in nature, with
peak activity typically occurring 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 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
us, and are expected to continue to do so in the future. As a result, our
revenues typically decline in the first quarter of the year as our contractual
aircraft utilization level temporarily decreases. We seek to schedule, to the
extent possible, our major aircraft maintenance activities during this period to
take advantage of any unutilized aircraft time.
The aircraft acquisitions and lease arrangements are described in Note 6 of
our December 31, 1999 consolidated financial statements. The timing of when an
aircraft enters our fleet can affect not only annual performance, but can make
quarterly results vary, thereby affecting the comparability of operations from
period to period. In addition, the number of aircraft utilized from period to
period as spare or maintenance back-up aircraft may also cause quarterly results
to vary.
The tables below set forth selected financial and operating data for the
four quarters of the years ended December 31, 1999, 1998 and 1997 (dollars in
thousands).
<TABLE>
<CAPTION>
1999
------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total operating revenues................ $637,081 $198,778 $161,896 $138,568 $137,839
Operating expenses...................... 449,592 137,272 113,727 97,461 101,132
Operating income........................ 187,489 61,506 48,169 41,107 36,707
Other income (expense).................. (88,654) (22,845) (25,620) (19,875) (20,314)
Net income(1)........................... 53,270 23,670 14,093 13,270 2,237
Block hours............................. 109,608 34,166 27,650 23,861 23,931
Average aircraft operated............... 29.0 30.3 30.0 28.4 27.0
Operating margin........................ 29.4% 30.9% 29.8% 29.7% 26.6%
</TABLE>
- ---------------
(1) Net income is after extraordinary item and cumulative effect of a change in
accounting principle for the 1999 Cumulative and 1st Quarter 1999 columns.
<TABLE>
<CAPTION>
1998
------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total operating revenues................ $422,238 $145,465 $109,189 $ 87,950 $ 79,634
Operating expenses...................... 286,389 98,393 73,473 56,432 58,091
Operating income........................ 135,849 47,072 35,716 31,518 21,543
Other income (expense).................. (62,298) (18,227) (15,478) (15,479) (13,114)
Net income.............................. 46,217 18,057 12,745 10,105 5,310
Block hours............................. 76,276 25,134 18,926 16,828 15,388
Average aircraft operated............... 19.6 23.7 19.9 17.7 17.0
Operating margin........................ 32.2% 32.4% 32.7% 35.8% 27.1%
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total operating revenues................ $401,041 $120,893 $104,197 $ 93,902 $ 82,049
Operating expenses...................... 345,039 93,112 82,464 104,556 64,907
Operating income (loss)................. 56,002 27,781 21,733 (10,654) 17,142
Other income (expense).................. (45,469) (13,383) (11,930) (10,908) (9,248)
Net income(1)........................... 23,429 9,143 6,225 3,048 5,013
Block hours............................. 75,254 22,333 19,937 17,541 15,443
Average aircraft operated............... 19.5 20.9 20.4 19.5 17.2
Operating margin (deficit).............. 14.0% 23.0% 20.9% (11.4)% 20.9%
</TABLE>
- ---------------
(1) Net income is after extraordinary item for the 1997 Cumulative and 2nd
Quarter columns.
14
<PAGE> 15
1999 Compared to 1998
Operating Revenues and Results of Operations. Total operating revenues for
the year ended December 31, 1999 increased to $637.1 million compared to $422.2
million for 1998, an increase of approximately 51%. The average number of
aircraft in our fleet during 1999 was 29.0 compared to 19.6 during 1998. Total
block hours for 1999 were 109,608 compared to 76,276 for 1998, an increase of
approximately 44%, reflecting an increase in the average number of aircraft in
our fleet during 1999, offset by the impact of two aircraft out of service which
were being re-engined for a significant portion of the second and third quarters
of 1999 and the effects of Hurricane Floyd, Typhoon York and the earthquake in
Taiwan at the end of the third quarter of 1999. Revenue per block hour increased
by approximately 5% to $5,812 for 1999 compared to $5,536 for 1998,
substantially due to the increase in the number of 747-400 freighter aircraft in
our fleet and the increase in the volume of charter operations year over year,
for which the rate per block hour is higher in order to offset additional
operating costs borne by us under such arrangements. Charter operations are
performed on an ad hoc basis and are dependent upon surplus availability of our
aircraft and customer demand. Our operating results improved by approximately
38% from a $135.8 million operating profit for 1998 to an operating profit of
$187.5 million for 1999. Results of operations were favorably impacted by the
increase in 747-400 freighter aircraft in our fleet, partially offset by the
increase in leased aircraft compared to owned aircraft. Income before
extraordinary item and cumulative effect of a change in accounting principle was
$61.3 million in 1999, compared to $46.2 million in 1998, an increase of
approximately 33%. In the first quarter of 1999, we recorded an approximate $6.6
million extraordinary loss, net of applicable tax benefit of approximately $3.9
million, from the extinguishment of the $100 million 12 1/4% Equipment Notes due
2002 and a one-time charge of approximately $1.4 million, net of applicable tax
benefit of approximately $0.9 million, associated with the write-off of start-up
costs related to the introduction of new Boeing 747-400 freighter aircraft into
our fleet, as required upon adoption of SOP 98-5 (as defined). Net income of
$46.2 million for 1998 increased to a net income of $53.3 million for 1999, or
approximately 15%.
Operating levels increased during the second and third quarter of 1999 with
the delivery of four additional new 747-400 freighter aircraft. Block hours
increased from 23,931 in the first quarter of 1999 to 34,166 in the fourth
quarter of 1999, reflecting the growth in the average fleet size from 17.0
aircraft to 30.3 aircraft for the two periods. Total operating revenue increased
from $137.8 million in the first quarter to $198.8 million in the fourth
quarter, representing slightly higher block hour rates for the fourth quarter
compared to those of the first quarter of 1999, primarily due to the seasonality
of the business of our customers. We earned $61.5 million operating income and
$23.7 million net income in the fourth quarter of 1999, compared to $36.7
million operating income and $10.2 million net income in the first quarter of
1999, excluding the extraordinary item and cumulative effect of a change in
accounting principle discussed above.
Operating Expenses. Our 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 other expenses.
Flight crew salaries and benefits include all such expenses for our pilot
work force. Flight crew salaries increased to $48.1 million in 1999 compared to
$35.5 million in 1998, or approximately 35%, principally reflecting the increase
in the size of our fleet year over year, partially offset by the termination of
profit sharing costs for our flight crew. In the second quarter of 1999, the
flight crew voted to be represented by ALPA (as defined), which resulted in the
exclusion of the flight crew from eligibility for participation in our profit
sharing plan. On a block hour basis, flight crew salaries and benefits decreased
by approximately 6% to $439 per block hour for 1999 from $466 per block hour for
1998. This decrease in the block hour rate was primarily due to the efficiencies
in operations achieved subsequent to the introduction of the 747-400 freighter
aircraft into our fleet in the second half of 1998 and the cessation of profit
sharing costs discussed above.
Other flight-related expenses include hull and liability insurance, crew
travel and meal expenses, initial and recurrent crew training costs and other
expenses necessary to conduct our flight operations.
Other flight-related expenses increased to $52.5 million in 1999 compared
to $34.7 million in 1998, or approximately 51%. On a block hour basis, other
flight-related expenses increased approximately 5% to $479 per block hour for
1999 compared to $455 per block hour for 1998. This increase was primarily due
to the impact of added training and travel costs associated with the
introduction of the five new 747-400 freighter aircraft into our
15
<PAGE> 16
fleet in the second half of 1998, the four additional new 747-400 freighter
aircraft delivered in 1999 and preparation for the remaining three aircraft to
be delivered in 2000.
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 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 January 1995, we contracted
with KLM for a significant part of our regular maintenance operations and
support on a fixed cost per flight hour basis. Effective October 1996, certain
additional aircraft engines were accepted into the GE engine maintenance
program, also on a fixed cost per flight hour basis, pursuant to a ten-year
maintenance agreement. During 1998, we entered into separate long-term contracts
with Lufthansa Technik for the airframe maintenance and with GE for the engine
maintenance of the 747-400 freighter aircraft, effective with the introduction
of the 747-400 freighter aircraft into our fleet in the second half of 1998.
Maintenance expense increased to $131.2 million in 1999 from $96.6 million
in 1998, or approximately 36%, primarily due to the increased size of our fleet.
On a block hour basis, maintenance expense decreased year over year by
approximately 6%.
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 our aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease costs.
Aircraft and engine rentals were $51.2 million in 1999 compared to $14.6
million in 1998, or an increase of approximately 250%, primarily due to the six
leased 747-400 aircraft, four of which were acquired in the second half of 1998
and one each which were acquired in the second and third quarters of 1999.
Because of the nature of our ACMI Contracts, our airline customers bear all
other operating expenses. As a result, we do not incur fuel and ground handling
expenses except when we operate on our own behalf either in scheduled services,
for ad hoc charters or for ferry flights. Fuel expenses for our non-ACMI
Contract services include both the direct costs 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 our aircraft at the
various airports to which we operate.
Fuel and ground handling costs increased to $19.5 million for 1999 compared
to $8.7 million for 1998, or approximately 124%. This was primarily due to
increased charter activity and slightly higher fuel prices year over year.
Depreciation and amortization expense includes depreciation on aircraft,
spare parts and ground equipment, and the amortization of capitalized major
aircraft maintenance and engine overhauls. Owned aircraft are depreciated over
their estimated useful lives of 20 to 30 years, using the straight-line method
and estimated salvage values of 10% of cost.
Depreciation and amortization expense increased to $78.4 million in 1999
from $59.1 million in 1998, or approximately 33%. This increase primarily
reflected an increase of approximately 26% in owned aircraft from the fourth
quarter of 1998 through the fourth quarter of 1999 and the higher ownership
costs of the 747-400 compared to the 747-200.
Other operating expenses include salaries, wages, benefits, travel and meal
expenses for non-crew members and other miscellaneous operating costs.
Other operating expenses increased to $68.7 million in 1999 from $37.1
million in 1998, or approximately 85%. On a block hour basis, these expenses
increased to $627 per block hour in 1999 from $486 per block hour in 1998, or
approximately 29%. The increase in cost from the prior year was due primarily to
addition of ground personnel and other costs associated with the expansion of
our fleet and operations.
Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income for 1999 was $20.0 million compared to
$12.6 million for 1998, primarily due to increases in the amount of funds
available for investing as well as an overall increase in the rates of return on
investments. Interest expense increased to $108.7 million for 1999 from $74.9
million for 1998, or approximately 45%. This increase reflects the financing
costs associated with the purchase of five additional aircraft in the second
half of 1998; the purchase of three additional aircraft in 1999; and the
issuance of $175 million of 9 1/4% Senior Notes due 2008 in
16
<PAGE> 17
April 1998 and $150 million of 9 3/8% Senior Notes due 2006 in November 1998, of
which a portion was used to extinguish the $100 million of 12 1/4% Equipment
Notes due 2002 in January 1999.
Income Taxes. Pursuant to the provisions of SFAS No. 109, "Accounting for
Income Taxes," we have recorded a tax provision based on tax rates in effect
during the period. Accordingly, we accrued for taxes at the rate of 38.0% during
1999 and 37.2% during 1998. Due to significant capital costs, which are
depreciated at an accelerated rate for tax purposes, a significant portion of
our tax provision in these periods is deferred.
1998 Compared to 1997
Operating Revenues and Results of Operations. Total operating revenues for
the year ended December 31, 1998 increased to $422.2 million compared to $401.0
million for 1997, an increase of approximately 5%. The average number of
aircraft in our fleet during 1998 was 19.6 compared to 19.5 during 1997. Total
block hours for 1998 were 76,276 compared to 75,254 for 1997, an increase of
approximately 1%, reflecting better aircraft utilization. Revenue per block hour
increased by approximately 4% to $5,536 for 1998 compared to $5,329 for 1997.
Our operating results increased from an operating profit of $56.0 million in
1997 to a $135.8 million operating profit in 1998, primarily due to the return
at the end of 1997 of the aircraft subleased from FedEx, for which we
experienced higher maintenance costs compared to the other aircraft in our
fleet. In addition, we recorded a largely non-cash charge to earnings of $27.1
million in the second quarter of 1997, which was comprised of: write-offs of
various leasehold improvements associated with our subleases from FedEx of the
five 747-200 aircraft and reserves for costs necessary to return the aircraft
upon termination of the subleases in January 1998; reserves primarily related to
certain customers and vendors for out-of-period items, which we settled in 1998;
and reserves for litigation costs and other costs not expected to re-occur. Net
income of $23.4 million for 1997 increased to a net income of $46.2 million of
1998, primarily due to lower maintenance costs in 1998. The after-tax effect of
the second quarter charge noted above was substantially offset by the after-tax
effect of an extraordinary gain on early extinguishment of debt in the same
quarter of 1997.
Operating levels increased during the second half of 1998 with the delivery
of the first five new 747-400 freighter aircraft, one each in July, August and
October and two in December, 1998. In addition, we took delivery of three
747-200 freighter aircraft in the fourth quarter of 1998. These 1998 deliveries
more than offset the lost capacity associated with the return at the end of 1997
of five leased 747-200 freighter aircraft to FedEx. In addition, during 1998 we
converted two aircraft from passenger configuration to cargo configuration.
Our operating levels increased in the second half of 1998 as a result of
these aircraft acquisitions. Block hours increased from 15,388 in the first
quarter of 1998 to 25,134 in the fourth quarter of 1998, reflecting the growth
in the average fleet size from 17.0 aircraft to 23.7 aircraft for the two
periods. Total operating revenue increased from $79.6 million in the first
quarter to $145.5 million in the fourth quarter, representing slightly higher
block hour rates for the fourth quarter compared to those of the first quarter
of 1998, primarily due to the seasonality of the business of our customers. We
earned $47.1 million operating income and $18.1 million net income in the fourth
quarter of 1998, compared to $21.5 million operating income and $5.3 million net
income in the first quarter of 1998.
Operating Expenses. Flight crew salaries and benefits include all such
expenses for our pilot work force. Flight crew salaries increased to $35.5
million in 1998 compared to $30.2 million in 1997, due to increases in the
number of aircraft in our fleet and aircraft block hours and in particular to
crew our new 747-400 aircraft. While actual expense increased by approximately
18% during 1998, on a block hour basis this expense increased 16% to $466 per
block hour for 1998 from $401 per block hour for 1997. This increase in the
block hour rate was primarily due to the added costs associated with the
introduction of the 747-400 freighter aircraft into our fleet in the second half
of 1998.
Other flight-related expenses increased to $34.7 million in 1998 compared
to $28.8 million in 1997, or approximately 21%. On a block hour basis, other
flight-related expenses increased approximately 19% to $455 per block hour for
1998 compared to $382 per block hour for 1997. This increase was primarily due
to the impact of the added costs associated with the introduction of the 747-400
freighter aircraft into our fleet in the second half of 1998.
Maintenance expense decreased to $96.6 million in 1998 from $123.8 million
in 1997, or approximately 22%, primarily due to the return at the end of 1997 of
the aircraft subleased from FedEx, for which we
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experienced higher maintenance costs compared to the other aircraft in our
fleet. On a block hour basis, maintenance expense also decreased year over year
by approximately 22%.
Aircraft and engine rentals were $14.6 million in 1998 compared to $31.6
million in 1997, or a decrease of approximately 54%, primarily due to the return
at the end of 1997 of the five leased 747-200 freighter aircraft to FedEx,
partially offset by the four leased 747-400 aircraft acquired in the second half
of 1998.
Fuel and ground handling costs decreased to $8.7 million for 1998 compared
to $10.8 million for 1997, or approximately 19%. This was due to lower fuel
prices in 1998 compared to 1997, partially offset by an increase in scheduled
service, charter and other non-ACMI block hours to 1,924 block hours in 1998
from 1,787 block hours in 1997.
Depreciation and amortization expense increased to $59.1 million in 1998
from $42.9 million in 1997, or approximately 38%. This increase primarily
reflected an increase of approximately 30% in owned aircraft.
Other operating expenses decreased to $37.1 million in 1998 from $49.8
million in 1997, or approximately 26%. On a block hour basis, these expenses
decreased to $486 per block hour in 1998 from $661 per block hour in 1997, or
approximately 27%. The reduced expense in cost from the prior year was due
primarily to certain vendor credits, partially offset by increased staffing and
other resources associated with the expansion of our operations.
Other Income (Expense). Interest income for 1998 was $12.6 million compared
to $7.4 million for 1997, primarily due to the investment of proceeds from our
issuance of the 9 1/4% Senior Notes in April 1998, the 9 3/8% Senior Notes in
November 1998 and the return of deposits and proceeds from financing the 747-400
freighter aircraft deliveries in the third and fourth quarters of 1998. Interest
expense increased to $74.9 million for 1998 from $52.8 million for 1997, or
approximately 42%. This increase resulted from the financing associated with the
acquisition of additional 747-200 aircraft, the cost of freighter conversions
between these periods and the issuance of $175 million of 9 1/4% Senior Notes in
April 1998 and $150 million of 9 3/8% Senior Notes in November 1998.
Income Taxes. Pursuant to the provisions of SFAS No. 109, "Accounting for
Income Taxes," we have recorded a tax provision based on tax rates in effect
during the period. Accordingly, we accrued taxes at the rate of 37.2% during
1998 and 36.5% during 1997. Due to significant capital costs, which are
depreciated at an accelerated rate for tax purposes, a majority of our tax
provision in these periods is deferred.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, we had cash and cash equivalents of approximately
$331.6 million, short-term investments of approximately $141.6 million and
working capital of approximately $330.3 million. During 1999, cash and cash
equivalents decreased approximately $118.0 million, principally reflecting cash
provided from operations of $190.4 million, proceeds from equipment financings
of $470.9 million, proceeds from the issuance of common stock of $15.6 million
and net proceeds from the issuance of treasury stock of $0.3 million, partially
offset by the net sale and purchase of investments in flight and other equipment
of $334.5 million, net purchases of short-term investments of $119.4 million,
principal reductions of indebtedness of $340.0 million and debt issuance costs
of $1.3 million. Our overall borrowing level of $1.3 billion at December 31,
1999 was comparable to our overall borrowing level at December 31, 1998.
At December 31, 1998, we had cash and cash equivalents of approximately
$449.6 million, short-term investments of approximately $22.2 million and
working capital of approximately $294.5 million. During 1998, cash and cash
equivalents increased approximately $408.3 million, principally reflecting cash
provided from operations of $102.7 million, proceeds from equipment financings
of $775.9 million, net proceeds from the maturity and purchase of short-term
investments of $89.4 million and proceeds from the issuance of common stock of
$1.6 million, partially offset by the net sale and purchase of investments in
flight and other equipment of $456.9 million, principal reductions of
indebtedness of $89.9 million, debt issuance costs of $11.4 million and net
treasury stock purchases of $3.1 million. Our overall borrowing level increased
to $1.3 billion at December 31, 1998 from $.08 billion at December 31, 1997.
In June 1997, we entered into the Boeing Purchase Agreement to purchase 10
new 747-400 freighter aircraft to be powered by engines acquired from GE, with
options to purchase up to 10 additional 747-400 aircraft. We
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arranged leveraged lease financing for four 747-400 freighter aircraft and debt
financing for one 747-400 freighter aircraft that were delivered in 1998. In
April 1999, we arranged EETC debt financing for the remaining five aircraft,
four of which were delivered in 1999, and one which was delivered in the first
quarter of 2000. See discussion of the 1999 EETCs below. In February 1999, we
exercised options for two additional 747-400 freighter aircraft, which are
currently scheduled for delivery in 2000. In January 2000, we arranged EETC debt
financing for those two aircraft. See discussion of the 2000 EETCs below. The
Boeing Purchase Agreement requires that we pay pre-delivery deposits to Boeing
prior to the delivery date of each 747-400 freighter aircraft in order to secure
delivery of the 747-400 freighter aircraft and to defray a portion of the
manufacturing costs. Based on the current expected firm aircraft delivery
schedule, we expect the maximum total amount of pre-delivery deposits at any
time outstanding will be approximately $43.8 million for the remaining two firm
aircraft, which was paid as of December 31, 1999 and was included in flight
equipment. Upon each delivery, Boeing refunds us the pre-delivery deposits
associated with the delivered 747-400 freighter aircraft. In addition, the
Boeing Purchase Agreement provides for a deferral of a portion of the
pre-delivery deposits (Deferred Aircraft Obligations) for which we accrue and
pay interest quarterly at 6-month LIBOR, plus 2.0%. As of December 31, 1999,
there was $111.0 million of deferred aircraft obligations included in other
liabilities, and the combined interest rate was approximately 7.96%.
In November 1998, we entered into a contract with Boeing to re-engine the
only two Pratt & Whitney ("P&W") powered aircraft in our fleet from P&W engines
to GE engines, in order to improve the performance of the aircraft and to
improve the standardization of our fleet. We acquired the GE engines and other
parts required for such re-engineing from a third party. These re-engineing
efforts had no material financial impact due to the sale of the removed P&W
engines, coupled with the value derived from the unused parts associated with
the acquisition. The first re-engined aircraft was re-delivered to us in June
1999 and the second re-engined aircraft was re-delivered to us in August 1999.
On a prospective basis, and as a result of these re-engineing efforts, we expect
to incur lower maintenance costs related to these two aircraft compared to the
costs we experienced prior to the re-engineing.
In January 1999, we announced a 3-for-2 stock split in the form of a stock
dividend to stockholders of record at the close of business on January 25, 1999.
The new shares were delivered on February 8, 1999. The share data and earnings
per share data for all periods presented in our December 31, 1999 audited
consolidated financial statements have been restated to reflect the stock split.
In January 1999, we purchased a Boeing Business Jet ("BBJ") from Boeing for
approximately $32.0 million and immediately delivered the BBJ to a third party
for installation of the interior business configuration. Shortly thereafter, we
entered into a sale-leaseback transaction with GE Capital to finance the BBJ. In
October 1999, the BBJ was delivered to us upon completion of the interior
business configuration by a third party for which the costs were financed in
part by GE Capital. This aircraft is used to transport our executives on
business trips throughout the world. Our Chairman, President and CEO has agreed
to share in the interior business configuration and operating costs of the BBJ.
In January 1999, we used a portion of the proceeds from the previous
issuance of $150 million of 9 3/8% Senior Notes due 2006 to redeem at 108% all
$100 million outstanding of our 12 1/4% Equipment Notes due 2002. We recorded an
approximate $6.6 million one-time extraordinary charge from the extinguishment
of debt, net of an applicable tax benefit of approximately $3.9 million, in the
first quarter of 1999. The redemption of the 12 1/4% Equipment Notes due 2002
eliminated liens on three 747-200 freighter aircraft.
In April 1999, we completed an offering of $543.6 million Enhanced
Equipment Trust Certificates (the "1999 EETCs"). The 1999 EETCs are not direct
obligations of, or guaranteed by, us and therefore are not included in our
consolidated financial statements until such time that we draw upon the proceeds
to take delivery and ownership of an aircraft. The cash proceeds from the 1999
EETCs transaction were deposited with an escrow agent and a portion of the
proceeds was used in the second and third quarters of 1999 to finance, through
secured debt financings, the debt portion of the acquisition cost of three new
747-400 freighter aircraft from Boeing. In connection with these secured debt
financings, we executed equipment notes in the aggregate amount of $325.1
million, with a weighted average interest rate of 7.6%. Subsequently, we entered
into a sale-leaseback transaction with respect to one of these aircraft, which
reduced the aggregate amount of equipment notes to $216.6 million. In the third
quarter of 1999, a portion of the proceeds was used to finance through a
leveraged lease an additional new 747-400 freighter aircraft which was delivered
to us by Boeing. The remaining proceeds
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from the 1999 EETCs were used in the first quarter of 2000 to finance an
aircraft delivery (see -- Recent Developments).
In April 1999, we filed a $250 million shelf registration statement (the
"$250 million Shelf Registration") with the Securities and Exchange Commission
(the "SEC"). The $250 million Shelf Registration provides for debt or equity
financing, or a combination of both, the net proceeds from which will be
available for general corporate purposes, including but not limited to,
repayment of indebtedness, capital expenditures, repurchase of common stock and
acquisitions. The $250 million Shelf Registration was declared effective May 10,
1999.
In September 1999, we entered into a sale-leaseback transaction for one of
our 747-400 freighter aircraft. The net book value of this aircraft and the
related debt were removed from the balance sheet.
In November 1999, we sold one of our 747-200 freighter aircraft, which was
financed under our Aircraft Credit Facility.
In December 1999, we secured permanent financing in the amount of $30.0
million from Banc One Leasing Corporation for one of the 747-200 freighter
aircraft originally financed under our Aircraft Credit Facility. The new
financing carries a term of seven years at an annual interest rate of
approximately 8.47% with quarterly debt service payments.
Due to the contractual nature of our business, management does not consider
our 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 our customers, we do not incur significant costs in advance of the
receipt of corresponding revenues. Moreover, ACMI costs, which are our
responsibility, are generally incurred on a regular, periodic basis on either a
flight hour or calendar month basis. These costs are largely matched by revenue
receipts, as our contracts require regular payments from our customers, based
upon current flight activity, generally every two to four weeks. As a result, we
have not had a requirement for a working capital facility.
Under the FAA's Directives issued under its "Aging Aircraft" program, we
are subject to extensive aircraft examinations and will be required to undertake
structural modifications to our fleet to address the problem of corrosion and
structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification
Service Bulletins which have been converted into Directives by the FAA. All of
our Boeing 747-200 aircraft have been brought into compliance with such
Directives. As part of the FAA's overall Aging Aircraft program, it has issued
Directives requiring certain additional aircraft modifications to be
accomplished. We estimate that the modification costs per 747-200 aircraft will
range between $2 million and $3 million. Fourteen aircraft in our 747-200 fleet
have already undergone the major portion of such modifications. The remaining
eight 747-200 aircraft will require modification prior to the year 2009. Other
Directives have been issued that require inspections and minor modifications to
Boeing 747-200 aircraft. The newly manufactured 747-400 freighter aircraft were
delivered to us in compliance with all existing FAA Directives at their
respective delivery dates. It is possible that additional Directives applicable
to the types of aircraft or engines included in our fleet could be issued in the
future, the cost of which could be substantial.
From time to time we engage in discussions with third parties regarding the
possible acquisition or sale of aircraft in our fleet. We are currently in
discussions with third parties for the possible acquisition and sale of
additional aircraft for 2000 and beyond.
We believe that cash on hand and the cash flow generated from our
operations, combined with the proceeds of the $175 million of 9 1/4% Senior
Notes due 2008 and the remaining proceeds from the $150 million of 9 3/8% Senior
Notes due 2006, will be sufficient to meet our normal ongoing liquidity needs
for the next twelve months.
Year 2000
We previously performed a review of our internal information systems for
Year 2000 ("Y2K") automation problems through a company-wide effort, assisted by
Y2K experienced consultants, to address internal Y2K system issues and, jointly
with industry trade groups, issues related to key business partners which were
common to other air carriers. We have not encountered any material Y2K
compliance problems with respect to our internal systems and with respect to the
systems of our key business partners. Costs incurred to become Y2K compliant did
not exceed $300,000.
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RECENT DEVELOPMENTS
In January 2000, we completed an offering of $217.3 million Enhanced
Equipment Trust Certificates (the "2000 EETCs"). The 2000 EETCs are not direct
obligations of, or guaranteed by, us and therefore are not included in our
consolidated financial statements until such time that we draw upon the proceeds
to take delivery and ownership of an aircraft. The cash proceeds from the 2000
EETCs transaction were deposited with an escrow agent and will be used to
finance (either through leveraged leases or secured debt financings) the debt
portion of the acquisition cost of the remaining two firm new 747-400 freighter
aircraft from Boeing scheduled to be delivered to us in 2000.
In the first quarter of 2000, Boeing delivered to us the tenth new 747-400
freighter aircraft, pursuant to the Boeing Purchase Agreement. The remaining
proceeds from the 1999 EETCs were used to finance, through secured debt
financing, the debt portion of the acquisition cost of this aircraft. In
connection with this secured debt financing, we executed equipment notes in the
aggregate amount of $109.9 million, with a weighted average interest rate of
7.64%.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee ("AcSEC") of
the American Institute of Certified Public Accountants ("AICPA") issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998. This
statement was adopted in the first quarter of 1999 and did not have a material
impact on our financial statements.
In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs and requires such costs to be expensed as
incurred. In accordance with SOP 98-5, initial application should be reported as
the cumulative effect of a change in accounting principle. SOP 98-5 is effective
for financial statements for fiscal years beginning after December 15, 1998.
During 1998, we deferred certain start-up costs related to the introduction of
new Boeing 747-400 freighter aircraft into our fleet. This statement was adopted
in the first quarter of 1999 and the net-of-tax effect of its application was a
one-time charge of approximately $1.4 million. In 1999, we continued to incur
costs associated with the introduction of additional new Boeing 747-400
freighter aircraft into our fleet and expensed these costs as incurred.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS No.
137, is effective for all fiscal quarters of fiscal years beginning after June
15, 2000 and earlier application is encouraged. We have not yet quantified the
impact, if any, of adopting SFAS No. 133 on our financial statements and have
not determined the timing of or method of adoption of SFAS No. 133. However,
SFAS No. 133 could increase volatility in earnings and other comprehensive
income.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." SAB No. 101 summarizes the SEC's
views on the application of GAAP to revenue recognition. We have reviewed SAB
No. 101 and believe that we are in compliance with the SEC's interpretation of
revenue recognition.
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RISK FACTORS
Investors and prospective investors should consider the following risk
factors in conjunction with other information provided in this Form 10-K:
Substantial Leverage; Ability to Service Debt
We are highly leveraged. As of December 31, 1999, our total long term debt
outstanding, net of current portion, was approximately $1.3 billion. Our high
degree of leverage could have important consequences to prospective investors,
including the following:
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be
diminished in the future;
- a substantial portion of our cash flow from operations will be required
for the payment of principal and interest on our indebtedness, thereby
reducing the funds available to us for our operations and other purposes;
- we may be substantially more leveraged than some of our competitors,
which may place us at a competitive disadvantage; and
- our substantial degree of leverage may hinder our ability to adjust
rapidly to changing market conditions and could make us more vulnerable
in the event of a downturn in our business or general economic
conditions.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance, our indebtedness and to make scheduled payments
under our lease obligations depends on our future performance, which to a
certain extent is subject to economic, financial, competitive and other factors
beyond our control. There can be no assurance, however, that our business will
continue to generate sufficient cash flow from operations in the future to
service our debt. If unable to do so, we may be required to refinance all or a
portion of our existing debt, 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 reasonably favorable terms.
Possible Delivery Delays
On June 9, 1997, we entered into the Boeing Purchase Agreement to purchase
10 new 747-400 freighter aircraft to be powered by GE engines, with options to
purchase up to 10 additional 747-400 aircraft. In February 1999, we exercised
options for two additional aircraft for delivery in 2000. The first five
aircraft were delivered in 1998, four aircraft were delivered in 1999 and one
aircraft was delivered in the first quarter of 2000, with the remaining two
aircraft scheduled to be delivered in 2000. We do not expect to experience any
delivery delays associated with the engineer strike at Boeing; however, there
can be no assurance in that regard.
Restrictions Imposed by Terms of the Company's Indebtedness
Certain of our debt instruments limit our ability to undertake certain
transactions. These debt instruments restrict our ability to:
- incur additional indebtedness;
- incur liens, pay dividends or make other restricted payments;
- consummate asset sales;
- enter into certain transactions with affiliates;
- impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to us;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets.
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In addition, certain of our other debt instruments contain other more
restrictive financial and operating covenants. Our ability to meet such
financial ratios and tests may be affected by events beyond our control. There
can be no assurance that we will meet such tests. A breach of any of these
covenants could result in a default under certain debt instruments. 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 we are
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 our assets would be
sufficient to repay in full such indebtedness and our other indebtedness.
Our Market is Highly Competitive
The market for air cargo services is highly competitive. A number of
airlines, including Lufthansa Cargo AG, currently provide services for
themselves and for others, similar to the services we offer and new airlines may
be formed that would also compete with us. Such airlines may have substantially
greater financial resources than we do. In addition, certain retail air freight
companies, such as Evergreen International and Kitty Hawk, compete with us on a
limited, indirect basis, generally outside of the ACMI Contract operating
structure. We believe that the most important elements 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. Our ability to achieve our strategic plan depends upon our 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 upon our ability to
continue 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 1999, China Airlines accounted for approximately 26%, and no other
customer accounted for 10% or more, of our total operating revenues. We believe
that our relationships with our customers are mutually satisfactory, as
evidenced by the fact that we have renewed and, in certain cases, added a
significant number of ACMI Contracts with our existing customers. However, there
can be no assurance that any of our ACMI Contracts will be renewed upon their
expiration. The scheduled termination dates for the current long-term ACMI
Contracts range from 2001 to 2004. See "Business -- ACMI Contracts." The failure
to renew any of our ACMI Contracts, or the renewal of any of our ACMI Contracts
on less favorable terms, could have a material adverse effect. Additionally, we
have concentrated a significant percentage of our 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 our ability to
provide service to our Asian and Pacific Rim destinations and could have a
material adverse effect. We did not experience any adverse impact on our
business as a result of economic and political turmoil in Asia in late 1998 and
early 1999; however, there can be no assurance that a recurrence of the economic
and political turmoil in Asia would not have an adverse impact on air cargo
market growth generally, which could adversely affect our ability to obtain new
ACMI Contracts or to renew existing ACMI Contracts.
Operations Dependent Upon Limited Fleet
Each of our aircraft is typically dedicated to the service of one or more
ACMI Contracts. Although we utilize spare aircraft, in the event one or more of
our aircraft were to be lost or out of service for an extended period of time,
we may have difficulty fulfilling our obligations under one or more of our ACMI
Contracts. While we believe that our 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, we could contract for
the services of such an aircraft without undertaking substantial costs. While we
carry aircraft hull physical damage and third party liability insurance, any
extended interruption of our operations due to the loss of an aircraft could
have a material adverse effect.
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Utilization of Future Aircraft
We have not yet finalized long-term ACMI Contracts for the two remaining
747-400 aircraft scheduled to be delivered in 2000. See "-- Possible Delivery
Delays." The failure to generate adequate revenue from new aircraft pending the
commencement of and service under ACMI Contracts, or the failure to secure ACMI
Contracts for such aircraft as well as the aircraft currently in service in our
fleet, could have a material adverse effect. See "Business -- Aircraft."
Aging Aircraft
Our fleet currently includes 22 Boeing 747-200 aircraft in service, all of
which were manufactured between 1974 and 1986. Manufacturer Service Bulletins
and the FAA Airworthiness Directives issued under its "Aging Aircraft" program
cause Boeing 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. All of our Boeing 747-200 aircraft have been brought into
compliance with such Directives. 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 our 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
In April 1999, we received notification from the NMB that our crew members
voted for representation by ALPA. We expect our labor costs to decline initially
since our Profit Sharing Plan excludes from the category of eligible employees,
those employees who have been certified by the NMB for representation. In
response to ALPA's claims that such an exclusion violates the Railway Labor Act,
on May 6, 1999, we filed an action in the District Court seeking a declaratory
judgment confirming, inter alia, the enforceability of the Profit Sharing Plan's
exclusion. On May 10, 1999, ALPA filed a counterclaim in that action, alleging
that the exclusion of its members from the Profit Sharing Plan violates the
Railway Labor Act, and seeking restoration of profit sharing pay. In October
1999, the District Court entered a summary judgment in our favor ruling that we
did not violate the Railway Labor Act when we eliminated crew members'
participation in the Profit Sharing Plan following ALPA's certification as the
crew members' collective bargaining agent. In addition, the District Court
dismissed all other claims in the case. ALPA has subsequently filed an appeal of
the District Court's decision.
Regulatory Matters
Under the Aviation Act, the DOT and the FAA exercise regulatory authority
over us. We have obtained the necessary authority to conduct flight operations,
including a CPCN from the DOT and an Air Carrier Operating Certificate from the
FAA; however, the continuation of such authority is subject to our continued
compliance 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 the strict scrutiny and inspection
by FAA officials and to the imposition of new regulatory requirements that can
negatively affect their operations. We are considered to be a high-growth
carrier by the FAA and, therefore, receive heightened attention by the FAA and
DOT. FAA approval is required for each of our long-term ACMI Contracts and DOT
approval is required for each of our long-term ACMI Contracts with foreign air
carriers. In addition, FAA approval is required for each of our short-term
seasonal ACMI Contracts. In order to provide service to foreign points, we must
also obtain permission for such operations from the applicable foreign
governments and certain airport authorities. See "Business -- Governmental
Regulation." Moreover, in many instances ACMI Contracts are subject to prior
and/or periodic approvals of foreign governments, whose decisions can be
affected by ongoing negotiations and relations with the United States. Failure
to obtain FAA, DOT and/or foreign approvals could have a material adverse
effect. 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 us when their cargo
includes hazardous materials. Although we have never had such an incident, the
transportation of unmanifested hazardous materials could result in fines,
penalties, banning hazardous materials from our aircraft for a period of time,
possible damage to our aircraft or other liability.
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Control by Principal Stockholder
As of December 31, 1999 Michael A. Chowdry, the founder, our Chairman of
the Board of Directors, Chief Executive Officer and President, beneficially
owned approximately 56.5% of our outstanding common stock. As a result, Mr.
Chowdry is able to direct and control our policies, including the election of
directors, mergers, sales of assets and other such transactions.
Dependence Upon Key Management Personnel
We believe that our success in acquiring ACMI Contracts and managing our
operations will depend substantially upon the continued services of many of our
present executive officers. The loss of the services of any of such persons
could have a material adverse effect on our business. We have employment
agreements with such officers, which are generally terminable at any time by
either party.
Seasonality of Customers' Cargo Operations
The cargo operations of our 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, our revenues
typically decline in the first quarter of the year as our minimum contractual
aircraft utilization level temporarily decreases. Our ACMI Contracts typically
allow our customers to cancel a maximum of 5% of the guaranteed hours of
aircraft utilization over the course of a year. Our 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.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Form 10-K
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (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 our actual results,
levels of activity, performance or achievements 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 we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our
expectations are disclosed under "-- Risk Factors" and elsewhere in this Form
10-K.
To the extent that any of the statements contained herein relating to our
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 and complying with FAA policies;
- the continued productivity of our workforce;
- dependence on key personnel; and
- other regulatory requirements.
25
<PAGE> 26
As a result of the foregoing and other factors, no assurance can be given
as to our future results and achievements. Neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk associated with changes in interest rates
relates primarily to our short-term investments in our investment portfolio and
to our debt obligations. We do not use derivative financial instruments in our
investment portfolio. Our policy is to manage interest rate risk through a
combination of fixed and floating rate debt and by selectively entering into
swap agreements, depending upon market conditions.
<TABLE>
<CAPTION>
FAIR
EXPECTED MATURITY DATES: 2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
- ------------------------ -------- -------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash equivalents
Fixed rate............. $224,725 $ -- $ -- $ -- $ -- $ -- $224,725 $224,711
Avg. interest rate..... 6.2% -- % -- % -- % -- % -- % 6.2%
Short-term investments
Fixed rate............. $139,299 $ -- $ -- $ -- $ -- $ -- $139,299 $138,696
Avg. interest rate..... 5.9% -- % -- % -- % -- % -- % 5.9%
Long-term debt
Fixed rate............... $ 32,345 $ 32,066 $ 33,035 $ 43,048 $ 23,033 $743,996 $907,523 $876,068
Avg. interest rate....... 8.1% 8.2% 8.2% 8.6% 7.8% 9.0% 8.9%
Floating rate............ $ 63,566 $114,647 $106,777 $ 45,200 $111,300 $ -- $441,490 $441,490
Avg. interest rate....... (1) (1) (1) (1) (1) (1) (1)
Swap (notional amount)..... $ 25,654 $ 25,654 $ 25,654 $ 25,654 $ 25,654 $ 37,516 $165,786 $ (963)(4)
Avg. interest rate
Floating rate payee.... (2) (2) (2) (2) (2) (2) (2)
Fixed rate payer....... (3) (3) (3) (3) (3) (3) (3)
</TABLE>
- ---------------
(1) Floating rate is a weighted average of the combined LIBOR and Eurodollar all
in rates, which was 8.5% at December 31, 1999.
(2) Floating rate is the 3 month LIBOR rate which was 6.11% at December 31,
1999.
(3) Fixed rate is 6.22% for the calculation period from November 30, 1999 to
November 28, 2000 and 6.47% thereafter.
(4) In 1997, we entered into an interest rate swap with a financial intermediary
for the purpose of hedging our floating rate debt. The fair value of the
interest rate swap is based on published trading prices at December 31,
1999. While it is not our intention to terminate the interest rate swap, it
is estimated that we would have had to pay approximately $963,000 in
settlement at December 31, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and schedules that constitute Item 8
follow the text of this report. An index to the consolidated financial
statements appears in Item 14(a) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE> 27
PART III
Certain information required by Part III is omitted from this report since
the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the year
covered by this report, and certain information included therein is incorporated
herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning the Company's executive officers and directors
required by this Item is incorporated by reference from the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference from the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated by reference from the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference from the
Proxy Statement.
27
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Index to Consolidated Financial Statements.................. F-1
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
(a)(2) FINANCIAL STATEMENT SCHEDULES
None required.
(a)(3) LIST OF EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+3.2 -- Restated Certificate of Incorporation of the Company.
3.3 -- Amended and Restated By-Laws of the Company.
+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 -- Amended 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.
***10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
***/****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.
**10.58 -- 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 Freighter Leasing, Inc., the
Lenders listed therein and Bankers Trust Company, as
agent, dated May 29, 1997.
**10.60 -- Lease Agreement between Atlas Freighter 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 Freighter 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 Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N507MC.
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**10.63 -- Lease Agreement between Atlas Freighter 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 Freighter 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 Freighter 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 Freighter 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 Freighter 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 Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N509MC.
**10.69 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter 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 Freighter 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 Freighter 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)
**10.75 -- 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.
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*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.
**10.85 -- First Amendment to Lease Agreement among Atlas Freighter
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.
++10.90 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-0.
++10.91 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-S.
++10.92 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-0.
++10.93 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-S.
++10.94 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-0.
++10.95 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-S.
++10.96 -- Deposit Agreement (Class A), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.97 -- Deposit Agreement (Class B), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.98 -- Deposit Agreement (Class C), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.99 -- Indemnity Agreement, dated as of February 9, 1998,
between ABN AMRO Bank N.V., acting through its Chicago
Branch, as Depositary, and the Company.
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
++10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.103 -- Revolving Credit Agreement (1998-1A), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and ABN AMRO Bank N.V., acting
through its Chicago Branch as Liquidity Provider.
++10.104 -- Revolving Credit Agreement (1998-1B), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.105 -- Revolving Credit Agreement (1998-1C), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.106 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-B relating to Class B Liquidity
Facility.
++10.107 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-C relating to Class C Liquidity
Facility.
++10.108 -- Intercreditor Agreement, dated as of February 9, 1998,
among Wilmington Trust Company, not in its individual
capacity but solely as Trustee, ABN AMRO Bank N.V.,
acting through its Chicago Branch, as Class A Liquidity
Provider, Morgan Stanley Capital Services, Inc., as Class
B Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company.
++10.109 -- Note Purchase Agreement, dated as of February 9, 1998,
among the Company, Wilmington Trust Company and First
Security Bank, National Association.
*****10.111 -- Form of Indenture, dated April 9, 1998, between the
Company and State Street Bank and Trust company, as
Trustee, relating to the 9 1/4% Senior Notes (with form
of Note attached as exhibit thereto).
****/*****10.114 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.115 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.116 -- General Terms Agreement between the Company and General
Electric Company dated June 6, 1997.
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
******10.117 -- Form of Indenture, dated November 18, 1998, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 9 3/8% Senior Notes (with form
of Note attached as exhibit thereto).
++++++10.118 -- Employment Agreement dated June 22, 1998, between the
Company and Thomas G. Scott.
+++10.119 -- Underwriting Agreement, dated April 5, 1999, among Atlas
Air, Inc., Morgan Stanley & Co. Incorporated, BT Alex.
Brown Incorporated, ING Baring Furman Selz LLC and CIBC
Oppenheimer Corp.
+++10.120 -- Revolving Credit Agreement (1999-1A-1), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider.
+++10.121 -- Revolving Credit Agreement (1999-1A-2), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider.
+++10.122 -- Revolving Credit Agreement (1999-1B), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
+++10.123 -- Revolving Credit Agreement (1999-1C), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
+++10.124 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1B).
+++10.125 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1C).
+++10.126 -- Pass Through Trust Agreement, dated as of April 1, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc.
+++10.127 -- Trust Supplement No. 1999-1A-1, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.128 -- Trust Supplement No. 1999-1A-2, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.129 -- Trust Supplement No. 1999-1B, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.130 -- Trust Supplement No. 1999-1C, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.131 -- Intercreditor Agreement, dated as of April 13, 1999,
among Wilmington Trust Company, as Trustee, ABN AMRO Bank
N.V, Chicago Branch, as Class A-1 Liquidity Provider and
Class A-2 Liquidity Provider, Morgan Stanley Capital
Services, Inc., as Class B Liquidity Provider and Class C
Liquidity Provider, and Wilmington Trust Company, as
Subordination Agent and Trustee.
+++10.132 -- Deposit Agreement (Class A-1), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.133 -- Deposit Agreement (Class A-2), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+++10.134 -- Deposit Agreement (Class B), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.135 -- Deposit Agreement (Class C), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.136 -- Escrow and Paying Agent Agreement (Class A-1), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.137 -- Escrow and Paying Agent Agreement (Class A-2), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.138 -- Escrow and Paying Agent Agreement (Class B), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.139 -- Escrow and Paying Agent Agreement (Class C), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.140 -- Note Purchase Agreement, dated as of April 13, 1999,
among Atlas Air Inc., Wilmington Trust Company, as
Trustee, Wilmington Trust Company, as Subordination
Agent, First Security Bank, National Association, as
Escrow Agent, and Wilmington Trust Company, as Paying
Agent.
+++10.141 -- Form of Leased Aircraft Participation Agreement
(Participation Agreement among Atlas Air, Inc., Lessee,
, Owner Participant, First Security
Bank, National Association, Owner Trustee, and Wilmington
Trust Company, Mortgagee and Loan Participant) (Exhibit
A-1 to Note Purchase Agreement).
+++10.142 -- Form of Lease (Lease Agreement between First Security
Bank, National Association, Lessor, and Atlas Air, Inc.,
Lessee) (Exhibit A-2 to Note Purchase Agreement).
+++10.143 -- Form of Leased Aircraft Indenture (Trust Indenture and
Mortgage between First Security Bank, National
Association, Owner Trustee, and Wilmington Trust Company,
Mortgagee) (Exhibit A-3 to Note Purchase Agreement).
+++10.144 -- Form of Leased Aircraft Trust Agreement (Trust Agreement
between and First Security Bank,
National Association) (Exhibit A-5 to Note Purchase
Agreement).
+++10.145 -- Form of Owned Aircraft Participation Agreement
(Participation Agreement between Atlas Air, Inc., Owner,
and Wilmington Trust Company, as Mortgagee, Subordination
Agent and Trustee) (Exhibit C-1 to Note Purchase
Agreement).
+++10.146 -- Form of Owned Aircraft Indenture (Trust Indenture and
Mortgage between Atlas Air, Inc., Owner, and Wilmington
Trust Company, Mortgagee) (Exhibit C-2 to Note Purchase
Agreement).
+++10.147 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-1.
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+++10.148 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-2.
+++10.149 -- 6.88% Atlas Air Pass Through Certificate 1999-1A-2,
Certificate No. A-2-1.
+++10.150 -- 7.63% Atlas Air Pass Through Certificate 1999-1B-1,
Certificate No. B-1.
+++10.151 -- 8.77% Atlas Air Pass Through Certificate 1999-1C-1,
Certificate No. C-1.
10.152 -- Agreement of Lease between Texaco, Inc., Landlord, and
the Company, Tenant, 2000 Westchester Avenue, White
Plains, New York 10650 dated November 9, 1999.
10.153 -- Atlas Air, Inc. Annual Incentive Compensation Plan.
10.154 -- Atlas Air, Inc. Long-Term Incentive Plan.
10.155 -- Amendments to the Atlas Air, Inc. 1995 Long Term
Incentive and Stock Award Plan. (The Atlas Air, Inc. 1995
Long Term Incentive and Stock Award Plan is filed as
Exhibit 10.15, which is incorporated by reference in this
Report.)
++21.1 -- Subsidiaries of the Registrant.
24 -- Powers of Attorney (set forth on the signature page of
the Report).
27 -- Financial Data Schedule.
</TABLE>
- ---------------
+++ Incorporated by reference to the exhibits to the Company's Current Report
on Form 8-K dated April 13, 1999.
++ Incorporated by reference to the exhibits to the Company's Annual Report
for 1997 on Form 10-K.
+ 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-4 (No. 333-51819).
++++++ Incorporated by reference to the exhibits to the Company's Annual
Report for 1998 on Form 10-K.
* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).
** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-36305).
*** Incorporated by reference to the exhibits to the Company's Annual Report
for 1996 on Form 10-K.
**** 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.
***** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-56391).
****** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-72211)
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 21st day of
March, 2000.
ATLAS AIR, INC.
By: /s/ STANLEY J. GADEK
----------------------------------
Stanley J. Gadek
Acting Chief Financial Officer,
Vice President-Controller
Principal Accounting Officer
POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature appears below hereby constitutes
Stanley J. Gadek and Richard H. Shuyler, and each of them singly, such person's
true and lawful attorneys, each with full power of substitution to sign for such
person and in such person's name and capacity indicated below, and any and all
amendments to this Report, and to file the same with the Securities and Exchange
Commission, hereby ratifying and confirming such person's signature as it may be
signed by said attorneys to any and all amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL A. CHOWDRY Chairman of the Board of March 21, 2000
- ----------------------------------------------------- Directors, Chief Executive
Michael A. Chowdry Officer and President
/s/ RICHARD H. SHUYLER Executive Vice President -- March 21, 2000
- ----------------------------------------------------- Strategic Planning,
Richard H. Shuyler Treasurer and Director
/s/ BERL BERNHARD Director March 21, 2000
- -----------------------------------------------------
Berl Bernhard
/s/ LAWRENCE W. CLARKSON Director March 21, 2000
- -----------------------------------------------------
Lawrence W. Clarkson
/s/ DAVID K.P. LI Director March 21, 2000
- -----------------------------------------------------
David K.P. Li
/s/ DAVID T. MCLAUGHLIN Director March 21, 2000
- -----------------------------------------------------
David T. McLaughlin
/s/ BRIAN ROWE Director March 21, 2000
- -----------------------------------------------------
Brian Rowe
</TABLE>
35
<PAGE> 36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Atlas Air, Inc.:
We have audited the accompanying consolidated balance sheets of Atlas Air,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atlas Air, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 25, 2000.
F-2
<PAGE> 38
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 331,605 $ 449,627
Short-term investments.................................... 141,555 22,187
Accounts receivable and other, net........................ 92,979 86,234
---------- ----------
Total current assets.............................. 566,139 558,048
Property and equipment:
Flight equipment.......................................... 1,732,543 1,527,921
Other..................................................... 19,172 11,584
---------- ----------
1,751,715 1,539,505
Less accumulated depreciation............................. (208,465) (146,311)
---------- ----------
Net property and equipment........................ 1,543,250 1,393,194
Other assets:
Debt issuance costs, net of accumulated amortization of
$14,281 and $10,413.................................... 27,201 32,224
Deposits.................................................. 5,780 5,403
---------- ----------
32,981 37,627
---------- ----------
Total assets...................................... $2,142,370 $1,988,869
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 95,929 $ 155,452
Accounts payable and accrued expenses..................... 139,929 100,051
Income tax payable........................................ -- 8,034
---------- ----------
Total current liabilities......................... 235,858 263,537
Long-term debt, net of current portion...................... 1,253,084 1,166,460
Other liabilities........................................... 228,075 235,308
Deferred income taxes....................................... 67,653 39,674
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred Stock, $1 par value; 10,000,000 shares
authorized; no shares issued........................... -- --
Common Stock, $0.01 par value; 50,000,000 shares
authorized; 34,480,946 and 33,819,882 shares issued.... 345 338
Additional paid-in capital................................ 198,002 178,131
Retained earnings......................................... 162,194 108,892
Deferred Compensation -- Restricted Stock................. (404) --
Treasury Stock, at cost; 115,906 and 164,403 shares....... (2,437) (3,471)
---------- ----------
Total stockholders' equity........................ 357,700 283,890
---------- ----------
Total liabilities and stockholders' equity........ $2,142,370 $1,988,869
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 39
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Revenues:
Contract services......................................... $ 618,866 $400,981 $383,824
Charters, scheduled services and other.................... 18,215 21,257 17,217
--------- -------- --------
Total operating revenues.......................... 637,081 422,238 401,041
Operating expenses:
Flight crew salaries and benefits......................... 48,064 35,549 30,153
Other flight-related expenses............................. 52,521 34,712 28,784
Maintenance............................................... 131,189 96,636 123,820
Aircraft and engine rentals............................... 51,173 14,616 31,644
Fuel and ground handling.................................. 19,545 8,714 10,816
Depreciation and amortization............................. 78,379 59,082 42,945
Other..................................................... 68,721 37,080 49,777
Write-off of capital investment and other................. -- -- 27,100
--------- -------- --------
Total operating expenses.......................... 449,592 286,389 345,039
Operating income............................................ 187,489 135,849 56,002
Other income (expense):
Interest income........................................... 20,006 12,603 7,365
Interest expense.......................................... (108,660) (74,901) (52,834)
--------- -------- --------
(88,654) (62,298) (45,469)
--------- -------- --------
Income before income taxes, extraordinary items and
cumulative effect of a change in accounting principle..... 98,835 73,551 10,533
Provision for income taxes.................................. (37,556) (27,334) (3,844)
--------- -------- --------
Income before extraordinary items and cumulative effect of a
change in accounting principle............................ 61,279 46,217 6,689
Extraordinary items:
(Loss) gain from extinguishment of debt, net of applicable
tax benefit (provision) of $3,872 and $(9,622)......... (6,593) -- 16,740
Cumulative effect of a change in accounting principle, net
of applicable tax benefit of $850......................... (1,416) -- --
--------- -------- --------
Net income........................................ $ 53,270 $ 46,217 $ 23,429
========= ======== ========
Basic earnings per share (Note 13):
Income before extraordinary items and cumulative effect of
a change in accounting principle....................... $ 1.79 $ 1.37 $ .20
Extraordinary items....................................... (0.19) -- .50
Cumulative effect of a change in accounting principle..... (0.04) -- --
--------- -------- --------
Net income................................................ $ 1.56 $ 1.37 $ .70
========= ======== ========
Weighted average common shares............................ 34,245 33,675 33,675
========= ======== ========
Diluted earnings per share (Note 13):
Income before extraordinary items and cumulative effect of
a change in accounting principle....................... $ 1.77 $ 1.37 $ .20
Extraordinary items....................................... (0.19) -- .49
Cumulative effect of a change in accounting principle..... (0.04) -- --
--------- -------- --------
Net income................................................ $ 1.54 $ 1.37 $ .69
========= ======== ========
Weighted average common shares............................ 34,500 33,841 33,803
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 40
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 13)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED TREASURY DEFERRED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK COMPENSATION EQUITY
------ ------ ---------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996.... 33,675 $337 $176,141 $ 39,543 $ (236) $ -- $215,785
Purchase of Treasury
Stock.................... -- -- -- -- (1,051) -- (1,051)
Issuance of Treasury
Stock.................... -- -- -- (169) 835 -- 666
Net income.................. -- -- -- 23,429 -- -- 23,429
------ ---- -------- -------- ------- ----- --------
Balance, December 31, 1997.... 33,675 337 176,141 62,803 (452) -- 238,829
Exercise of stock options,
including income tax
benefits of $431......... 145 1 1,990 -- -- -- 1,991
Purchase of Treasury
Stock.................... -- -- -- -- (4,027) -- (4,027)
Issuance of Treasury
Stock.................... -- -- -- (128) 1,008 -- 880
Net income.................. -- -- -- 46,217 -- -- 46,217
------ ---- -------- -------- ------- ----- --------
Balance, December 31, 1998.... 33,820 338 178,131 108,892 (3,471) -- 283,890
Exercise of stock options,
including income tax
benefits of $4,220....... 661 7 19,871 -- -- -- 19,878
Purchase of Treasury
Stock.................... -- -- -- -- (776) -- (776)
Issuance of Treasury
Stock.................... -- -- -- 32 1,810 -- 1,842
Deferred compensation --
Restricted Stock......... -- -- -- -- -- (404) (404)
Net income.................. -- -- -- 53,270 -- -- 53,270
------ ---- -------- -------- ------- ----- --------
Balance, December 31, 1999.... 34,481 $345 $198,002 $162,194 $(2,437) $(404) $357,700
====== ==== ======== ======== ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 41
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 53,270 $ 46,217 $ 23,429
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 78,379 59,230 44,506
Amortization of debt issuance and lease financing
costs................................................ 1,514 4,465 3,620
Net gain on disposition of property and equipment....... (3,586) -- (1,029)
Write-off of capital investment and other............... -- -- 27,100
Extraordinary loss (gain)............................... 10,465 -- (26,363)
Write-off of start-up costs............................. 2,266 -- --
Deferred income taxes................................... 32,199 9,020 11,622
Changes in operating assets and liabilities:
Accounts receivable and other........................ (6,745) (30,532) (16,052)
Deposits and other................................... (377) (1,574) (1,040)
Accounts payable and accrued expenses................ 31,020 8,033 25,166
Income tax payable................................... (8,034) 7,880 (6,113)
--------- --------- -----------
Net cash provided by operating activities....... 190,371 102,739 84,846
INVESTING ACTIVITIES:
Purchase of property and equipment........................ (370,521) (456,926) (364,961)
Proceeds from sale of property and equipment.............. 36,000 -- 3,750
Purchase of short-term investments........................ (139,368) (150,516) (2,505,530)
Maturity of short-term investments........................ 20,000 239,964 2,508,765
--------- --------- -----------
Net cash used in investing activities........... (453,889) (367,478) (357,976)
FINANCING ACTIVITIES:
Issuance of Common Stock.................................. 15,658 1,560 --
Purchase of Treasury Stock................................ (776) (4,025) (1,051)
Issuance of Treasury Stock................................ 1,034 878 666
Net proceeds from debt issuance and lease financing....... 470,860 775,933 815,767
Principal payments on notes payable....................... (339,955) (89,895) (494,121)
Debt issuance costs and deferred lease costs.............. (1,325) (11,419) (16,590)
--------- --------- -----------
Net cash provided by financing activities....... 145,496 673,032 304,671
--------- --------- -----------
Net (decrease) increase in cash................. (118,022) 408,293 31,541
Cash and cash equivalents at beginning of period.......... 449,627 41,334 9,793
--------- --------- -----------
Cash and cash equivalents at end of period................ $ 331,605 $ 449,627 $ 41,334
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 42
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Atlas Air, Inc. (the "Company") provides airport to airport cargo services
throughout the world to major international airlines pursuant to contractual
arrangements with its customers in which the Company provides the aircraft,
crew, maintenance and insurance ("ACMI"), referred to as "contract services."
The Company also provides charter services and scheduled services on an ad hoc
basis. The principal markets served by the Company are Asia and the Pacific Rim
from the United States and Europe, and between South America and the United
States.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Owned aircraft are stated at cost. Expenditures for major additions,
improvements, flight equipment modifications and certain overhaul and
maintenance costs are capitalized. A significant portion of scheduled and
unscheduled maintenance is contracted with four maintenance providers under
long-term agreements pursuant to which monthly reserve payments are made to the
providers based on flight-hours and such amounts are charged to expense
currently. Other maintenance and repairs are charged to expense as incurred,
except for significant engine overhaul maintenance which is capitalized and
charged to expense on a flight-hour basis and D checks which are capitalized and
amortized over the corresponding life. Owned aircraft are depreciated over their
estimated useful lives of 20 to 30 years, using the straight-line method and
estimated salvage values of 10% of cost. The cost and accumulated depreciation
of property and equipment disposed of are removed from the related accounts and
any gain or loss is reflected in the results of operations. Substantially all
property and equipment is specifically pledged as collateral for indebtedness of
the Company. Whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, management evaluates the
recorded asset balances, net of accumulated depreciation, for impairment based
on the undiscounted future cash flows associated with the asset.
Capitalized Interest
Interest attributable to funds used to finance the acquisition and
modification of aircraft is capitalized as an additional cost of the related
aircraft. Interest is capitalized at the Company's weighted average interest
rate on long-term debt, or where applicable, the interest rate related to
specific borrowings. Capitalization of interest ceases when the aircraft is
placed in service. Capitalized interest was $21,825,000, $34,825,000 and
$16,115,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Debt Issuance Costs
Costs associated with the issuance of debt are capitalized and amortized
over the life of the respective debt obligation, using the effective interest
method. In January 1999, $2,491,000 of unamortized debt issuance costs was
charged to the extraordinary loss recognized upon extinguishment of the 12 1/4%
Equipment Notes due 2002 (see Note 3). In May 1997, $3,647,000 of unamortized
debt issuance costs was charged against the extraordinary
F-7
<PAGE> 43
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
gain recognized upon early extinguishment of certain debt. Amortization of debt
issuance costs was $5,231,000, $5,383,000 and $3,620,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Cash Equivalents
All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents, except certain investments in debt
securities which are classified as short-term investments.
Short-Term Investments
All investments in debt securities, other than money market funds and
certain commercial paper, with a current maturity of less than one year, are
considered to be short-term investments (see Note 2).
Earnings per Share
Basic EPS is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding during the period.
Diluted EPS is computed similar to basic EPS except that the weighted-average
number of common shares outstanding during the period is adjusted for the
incremental shares attributed to outstanding options to purchase common stock.
Options to acquire 561,000, 609,750 and 607,500 shares in 1999, 1998 and 1997,
respectively, and after taking into account a 3-for-2 stock split (see Note 13),
were not included in the computation of diluted EPS because the option price was
greater than the average market price of the Company's common stock.
Income Taxes
The Company provides for income taxes using the asset and liability method.
Under this method deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. The effect on deferred taxes
of a change in tax laws or tax rates is recognized in income in the period that
includes the enactment date.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, certificates of
deposit, short-term investments, short-term trade receivables and payables,
long-term debt and deferred aircraft obligations. The carrying values of cash
and cash equivalents and short-term trade receivables and payables approximate
fair value. The fair value of long-term debt is estimated based on current rates
available for similar debt with similar maturities and security (see Note 3).
The fair value of deferred aircraft obligations is based upon the fair value of
the purchase contracts associated with the obligations.
Hedges
The Company may from time to time enter into swaps to reduce exposure to
interest rate fluctuations in connection with certain debt. Swaps are usually
placed with major financial institutions which the Company believes to be of
minimal credit risk. The cash flows of the swaps mirror those of the underlying
exposures. The Company accounts for its swaps using the hedge (or deferral)
method of accounting. The premiums on the swaps, as measured at inception, are
amortized over their respective lives as components of interest expense. Any
gains or losses realized upon the early termination of these swaps are deferred
and recognized in income over the remaining life of the underlying exposure.
Significant Customers and Concentration of Credit Risk
For the year ended December 31, 1999, China Airlines Ltd. accounted for
approximately 26%, and no other customer accounted for 10% or more, of the
Company's total revenues. For the year ended December 31, 1998, China Airlines
Ltd. and Lineas Aereas Suramericanas, S. A. ("LAS") accounted for approximately
33% and
F-8
<PAGE> 44
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10% of the Company's total revenues, respectively. For the year ended December
31, 1997, China Airlines Ltd. and Fast Air accounted for approximately 34% and
11% of the Company's total revenues, respectively. Accounts receivable from
these principal customers were $14,152,000 and $23,126,000 in the aggregate at
December 31, 1999 and 1998, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to current
year presentation.
Supplemental Cash Flow Information
The aggregate interest payments made by the Company were $115,521,000,
$100,362,000 and $55,097,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
The Company made federal and state income tax payments of approximately
$12,620,000, $10,374,000 and $7,959,000 in the years ended December 31, 1999,
1998 and 1997, respectively.
Recent Pronouncements
In March 1998, the Accounting Standards Executive Committee ("AcSEC") of
the American Institute of Certified Public Accountants ("AICPA") issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998. This
statement was adopted in the first quarter of 1999 and did not have a material
impact on the Company's financial statements.
In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs and requires such costs to be expensed as
incurred. In accordance with SOP 98-5, initial application should be reported as
the cumulative effect of a change in accounting principle. SOP 98-5 is effective
for financial statements for fiscal years beginning after December 15, 1998.
During 1998, the Company deferred certain start-up costs related to the
introduction of new Boeing 747-400 freighter aircraft into its fleet. The
Company adopted this statement in the first quarter of 1999 and the net-of-tax
effect of its application was a one-time charge of approximately $1.4 million.
In 1999, the Company continued to incur costs associated with the introduction
of additional new Boeing 747-400 freighter aircraft into its fleet and expensed
these costs as incurred.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS No.
137, is effective for all fiscal quarters of fiscal years beginning after June
15, 2000 and earlier application is encouraged. The Company has not yet
quantified the impact, if any, of adopting SFAS No. 133 on its financial
statements and has not determined the timing of or method of adoption of SFAS
No. 133. However, SFAS No. 133 could increase volatility in earnings and other
comprehensive income.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP
to revenue recognition. The Company has reviewed SAB No. 101 and believes that
it is in compliance with the SEC's interpretation of revenue recognition.
F-9
<PAGE> 45
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SHORT-TERM INVESTMENTS
The Company invests excess cash in part in various held-to-maturity
securities, as defined in SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires investments in debt securities to be
classified as held-to-maturity and measured at amortized cost only if the
reporting enterprise has the positive intent and ability to hold those
securities to maturity. The following tables sets forth the aggregate fair
value, gross unrealized holding gains, gross unrealized holding losses, and
amortized/accreted cost basis by major security type as of December 31, 1999 and
1998 (in thousands):
<TABLE>
<CAPTION>
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED >(AMORTIZATION)
SECURITY TYPE FAIR VALUE HOLDING GAINS HOLDING LOSSES ACCRETION
------------- ---------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999:
Included in cash and cash
equivalents:
CDs and equivalents............ $ 20,002 $ 1 $ -- $ --
Commercial Paper............... 57,296 2 -- 62
Corporate Bonds................ 42,998 -- 11 51
Market Auction Preferreds...... 98,900 -- 3 --
Other.......................... 1,751 -- 3 --
-------- ---- ---- ----
Totals................. $220,947 $ 3 $ 17 $113
======== ==== ==== ====
Included in short-term
investments:
Corporate Bonds................ $ 29,041 $ -- $199 $(15)
Corporate Notes................ 40,306 -- 255 (20)
Euro Dollar Bonds.............. 15,034 -- 92 (8)
Market Auction Preferreds...... 17,000 -- -- --
U.S. Government Agencies....... 31,953 -- 36 1
Other.......................... 5,362 -- 21 22
-------- ---- ---- ----
Totals................. $138,696 $ -- $603 $(20)
======== ==== ==== ====
DECEMBER 31, 1998:
Included in cash and cash
equivalents:
Commercial Paper............... $ 59,549 $ -- $ 3 $ 91
Corporate Bonds................ 15,000 -- -- --
Corporate Notes................ 10,425 -- 1 (2)
Market Auction Preferreds...... 254,050 -- -- --
-------- ---- ---- ----
Totals................. $339,024 $ -- $ 4 $ 89
======== ==== ==== ====
Included in short-term
investments:
Medium Term Notes.............. $ 4,999 $ -- $ (1) $ 2
Market Auction Preferreds...... 17,000 -- -- --
-------- ---- ---- ----
Totals................. $ 21,999 $ -- $ (1) $ 2
======== ==== ==== ====
</TABLE>
In addition, accrued interest on cash equivalents and short-term investments at
December 31, 1999 was approximately $1.4 million and $2.3 million, respectively.
Accrued interest on cash equivalents and short-term investments at December 31,
1998 was approximately $1.1 million and $0.2 million, respectively. Interest
earned on these investments and related maturities are reinvested in similar
securities. Securities included in short-term investments have maturity dates of
less than one year.
F-10
<PAGE> 46
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT
Long-term debt and current maturities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
------------ ----------
<S> <C> <C>
12 1/4% Equipment Notes due 2002............................ $ -- $ 100,000
Aircraft Credit Facility.................................... 135,904 200,000
AFL Term Loan Facility...................................... 146,050 168,650
AFL II Term Loan Facility................................... 146,050 168,650
10 3/4% Senior Notes due 2005............................... 150,000 150,000
9 1/4% Senior Notes due 2008................................ 174,794 174,778
9 3/8% Senior Notes due 2006................................ 150,000 150,000
1998 EETCs.................................................. 107,889 107,889
1999 EETCs.................................................. 216,624 --
Other....................................................... 121,702 101,945
---------- ----------
1,349,013 1,321,912
Current maturities.......................................... (95,929) (155,452)
---------- ----------
Long-term debt, net......................................... $1,253,084 $1,166,460
========== ==========
</TABLE>
Covenants with respect to the Company's debt instruments require that
certain financial ratios be maintained, such as a consolidated fixed charge
coverage ratio, a maximum leverage ratio and a minimum interest coverage ratio.
12 1/4% Equipment Notes due 2002
In the fourth quarter of 1995 and the first quarter of 1996, the Company
issued 12 1/4% Equipment Notes due 2002 (the "12 1/4% Equipment Notes due 2002")
to finance a portion of the acquisition and conversion cost of three Boeing
747-200 aircraft. The 12 1/4% Equipment Notes due 2002 were redeemable at the
option of the Company, in whole or in part, at any time on or after December 1,
1998 at redemption prices ranging from 108% in 1998 to 100% in 2001 and
thereafter, together with accrued and unpaid interest, if any, to the date of
redemption. In January 1999, the Company used a portion of the proceeds from the
previous issuance of $150 million of 9 3/8% Senior Notes due 2006 (see below) to
redeem at 108% all $100 million outstanding of the 12 1/4% Equipment Notes due
2002. The Company recorded an approximate $6.6 million one-time extraordinary
charge from the extinguishment of debt, net of an applicable tax benefit of
approximately $3.9 million, in the first quarter of 1999. The redemption of the
12 1/4% Equipment Notes due 2002 eliminated liens on three 747-200 freighter
aircraft.
Aircraft Credit Facility
In May 1996, the Company entered into a revolving credit facility (the
"Aircraft Credit Facility") with Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company ("BTCo"), as Administrative Agent,
which provides for the acquisition and conversion of flight equipment. The
Aircraft Credit Facility, as amended, provides for a $200 million revolving
credit facility with a two-year revolving period and a subsequent two-year term
loan period, from October 1, 2000 to September 30, 2002, in the event that
permanent financing has not been obtained for any flight equipment financed
under the facility. At the time of each borrowing, the Company must select
either a Base Rate Loan (prime rate, plus 1.0% through September 30, 2000,
thereafter plus 1.5%) or a Eurodollar Rate Loan (Eurodollar rate, plus 2.0%
through September 30, 2000, thereafter plus 2.5%). The Company selected the
Eurodollar Rate Loan for substantially all borrowings in 1997, 1998 and a
majority of the borrowings in 1999. The weighted average interest rate on
borrowings outstanding under the Aircraft Credit Facility was 9.0% at December
31, 1999. Each borrowing is secured by a first priority security interest in the
collateral flight equipment of that borrowing. Certain tests must be met before
each
F-11
<PAGE> 47
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase of aircraft and related drawdown on the facility. To date, the Company
has met these tests. If, in the future, the Company cannot meet all the tests
because of the difficult sequencing of aircraft acquisition, aircraft conversion
and customer contracts, it believes that other financing sources would be
available or that it would acquire aircraft using its internal cash or seek a
waiver of any necessary conditions. As of December 31, 1999, the Company had
approximately $135.9 million outstanding under the Aircraft Credit Facility.
Covenants with respect to the Aircraft Credit Facility require specific
levels of insurance, as well as contain requirements regarding possession,
maintenance, and lease or transfer of the flight equipment. Certain covenants
applicable to the Company include, among other restrictions: limitations on
indebtedness, liens, investments, contingent obligations, restricted junior
payments, capital expenditures, and leases. The Company is in compliance with
all such covenants as of December 31, 1999.
AFL Term Loan Facility
In May 1997, the Company formed a wholly-owned subsidiary, Atlas Freighter
Leasing, Inc., for the purpose of entering into a $185 million term loan
facility (the "AFL Term Loan Facility") to refinance six Boeing 747-200 aircraft
previously financed through bank debt. Concurrent 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 the bank debt. Interest is
based on the Eurodollar rate, plus 2.5% through May 2000 and 3.0% thereafter,
and is payable quarterly. The interest rate on borrowings outstanding under the
AFL Term Loan Facility was 8.54% at December 31, 1999. Quarterly scheduled
principal payments of $2.5 million commenced in February 1998 and increased to
$5.7 million in August 1998 with a final payment of $50.0 million due in May
2004. The AFL Term Loan Facility is secured by a first priority interest in the
six subject aircraft and is restrictive with respect to limitations on:
indebtedness, liens, investments, contingent obligations, restricted junior
payments, capital expenditures, amendments of material agreements, leases,
transactions with shareholders and affiliates, and the conduct of business. The
Company is in compliance with all such covenants as of December 31, 1999.
AFL II Term Loan Facility
In September 1997, the Company formed another wholly-owned subsidiary,
Atlas Freighter Leasing II, Inc., for the purpose of entering into a $185
million term loan facility (the "AFL II Term Loan Facility") to refinance four
of the aircraft previously financed under the Aircraft Credit Facility, plus
nine spare engines, in order to provide the Company with greater financial
flexibility in anticipation of the financing requirements for the future
acquisition of additional aircraft. Interest is based on the Eurodollar rate,
plus 2.25%, less a pricing reduction, if any, in effect from time to time and is
payable quarterly. The interest rate on borrowings outstanding under the AFL II
Term Loan Facility was 8.04% at December 31, 1999. Quarterly scheduled principal
payments of $2.5 million commenced in February 1998 and increased to $5.7
million in August 1998 with a final payment of $50.0 million due in May 2004.
The AFL II Term Loan Facility is secured by a first priority interest in the
four subject aircraft, plus nine spare engines, and is restrictive with respect
to limitations on: indebtedness, liens, investments, contingent obligations,
restricted junior payments, capital expenditures, amendments of material
agreements, leases, transactions with shareholders and affiliates, and the
conduct of business. The Company is in compliance with all such covenants as of
December 31, 1999.
10 3/4% Senior Notes due 2005
In August 1997, the Company consummated the offering of $150 million of
unsecured 10 3/4% Senior Notes due 2005 (the "10 3/4% Senior Notes due 2005").
The proceeds from the offering of the 10 3/4% Senior Notes due 2005 were used
to, among other things, repay short-term indebtedness incurred to make
pre-delivery deposits to Boeing for the purchase of 10 new freighter aircraft
and for additional pre-delivery deposits as they become due (see Note 6).
Interest on the 10 3/4% Senior Notes due 2005 began to accrue from their
date of original issuance and is payable semi-annually in arrears on February 1
and August 1 of each year. The 10 3/4% Senior Notes due 2005 are redeemable, in
whole or in part, at the Company's option, at any time, on or after August 1,
2001, initially at
F-12
<PAGE> 48
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
105.375% of their principal amount, plus accrued interest, declining ratably to
100% of their principal amount, plus accrued interest, on or after August 1,
2003. 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
10 3/4% Senior Notes due 2005 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 interest to the date of redemption;
provided that at least 65% of the aggregate principal amount of the 10 3/4%
Senior Notes due 2005 originally issued remains outstanding immediately after
any such redemption.
The 10 3/4% Senior Notes due 2005 are general unsecured obligations of the
Company which rank pari passu in right of payment to any of the Company's
existing and future unsecured senior indebtedness. The 10 3/4% Senior Notes due
2005 are effectively subordinated, however, to all of the Company's secured
indebtedness and to all indebtedness of its subsidiaries.
Covenants with respect to the 10 3/4% Senior Notes due 2005 contain certain
limitations on the Company's and its subsidiaries' ability 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 their assets. The Company is in compliance with all such
covenants as of December 31, 1999.
9 1/4% Senior Notes due 2008
In April 1998, the Company consummated the offering of $175 million of
unsecured 9 1/4% Senior Notes at 99.867% due 2008 (the "9 1/4% Senior Notes due
2008"). The proceeds of the offering of 9 1/4% Senior Notes due 2008 were used
for general corporate purposes.
Interest on the 9 1/4% Senior Notes due 2008 is payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1998. The 9 1/4%
Senior Notes due 2008 are redeemable at the Company's option, in whole or in
part, at any time on or after April 15, 2003, initially at 104.625% of their
principal amount, plus accrued interest, declining ratably to 100% of their
principal amount, plus accrued interest, on or after April 15, 2006. In
addition, at any time prior to April 15, 2001, the Company may redeem up to 35%
of the aggregate principal amount of the 9 1/4% Senior Notes due 2008 originally
issued with the net cash proceeds of one or more public equity offerings at
109.25% of their principal amount, plus accrued interest; provided that after
any such redemption at least 65% of the aggregate principal amount of 9 1/4%
Senior Notes due 2008 remains outstanding.
The 9 1/4% Senior Notes 2008 represent unsubordinated indebtedness of the
Company, and rank pari passu in right of payment with all of its existing and
future unsubordinated indebtedness and senior in right of payment to all of its
subordinated indebtedness. The 9 1/4% Senior Notes due 2008 are effectively
subordinated, however, to all of the Company's secured indebtedness and all
existing and future liabilities of its subsidiaries.
Covenants with respect to the 9 1/4% Senior Notes due 2008 contain certain
limitations on the Company's and its subsidiaries' ability 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 their assets. The Company is in compliance with all such
covenants as of December 31, 1999.
9 3/8% Senior Notes due 2006
In November 1998, the Company consummated the offering of $150 million of
unsecured 9 3/8% Senior Notes due 2006 (the "9 3/8% Senior Notes due 2006"). The
proceeds of the offering of 9 3/8% Senior Notes due 2006 were used for general
corporate purposes, which included the redemption of the 12 1/4% Equipment Notes
due 2002.
F-13
<PAGE> 49
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest on the 9 3/8% Senior Notes due 2006 is payable semi-annually on
May 15 and November 15 of each year, commencing May 15, 1999. The 9 3/8% Senior
Notes due 2006 are redeemable at the Company's option, in whole or in part, at
any time on or after November 15, 2002, initially at 104.688% of their principal
amount, plus accrued interest, declining ratably to 100% of their principal
amount, plus accrued interest, on or after November 15, 2005. In addition, at
any time prior to November 15, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the 9 3/8% Senior Notes due 2006 originally issued
with the net cash proceeds of one or more public equity offerings at 109.375% of
their principal amount, plus accrued interest; provided that after any such
redemption at least 65% of the aggregate principal amount of the 9 3/8% Senior
Notes due 2006 originally issued remains outstanding.
The 9 3/8% Senior Notes due 2006 represent unsubordinated indebtedness of
the Company, and rank pari passu in right of payment with all of its existing
and future unsubordinated indebtedness and senior in right of payment to all of
its subordinated indebtedness. The 9 3/8% Senior Notes due 2006 are effectively
subordinated, however, to all of the Company's secured indebtedness and all
existing and future liabilities of its subsidiaries.
Covenants with respect to the 9 3/8% Senior Notes due 2006 contain certain
limitations on the Company's and its subsidiaries' ability 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 their assets. The Company is in compliance with all such
covenants as of December 31, 1999.
1998 EETCs
In February 1998, the Company completed an offering of $538.9 million of
pass-through certificates, also known as Enhanced Equipment Trust Certificates
(the "1998 EETCs"). The 1998 EETCs are not direct obligations of, or guaranteed
by, the Company and are not included in its consolidated financial statements
until such time that it draws upon the proceeds to take delivery and ownership
of an aircraft. The cash proceeds from the transaction were used to finance
(through four leveraged leases and one secured debt financing) the first five
new 747-400 freighter aircraft from Boeing delivered to the Company during the
period July 1998 through December 1998 (see Note 6). In connection with the
secured debt financing, the Company took ownership of the aircraft and executed
equipment notes in the aggregate amount of $107.9 million with a weighted
average interest rate of 7.6%. In November and December 1997, the Company
entered into three Treasury Note hedges, approximating $300 million of
principal, for the purpose of minimizing the risk associated with fluctuations
in the interest rates which are the basis for the pricing of the 1998 EETCs that
were priced in January 1998. The effect of the hedge resulted in a deferred cost
of $6.3 million, which is amortized over the approximate twenty-year life
associated with this financing.
1999 EETCs
In April 1999, the Company completed an offering of $543.6 million Enhanced
Equipment Trust Certificates (the "1999 EETCs"). The 1999 EETCs are not direct
obligations of, or guaranteed by, the Company and therefore are not included in
its consolidated financial statements until such time that it draws upon the
proceeds to take delivery and ownership of an aircraft. The cash proceeds from
the 1999 EETCs transaction were deposited with an escrow agent and a portion of
the proceeds was used in the second and third quarters of 1999 to finance,
through secured debt financings, the debt portion of the acquisition cost of
three new 747-400 freighter aircraft from Boeing. In connection with these
secured debt financings, the Company executed equipment notes in the aggregate
amount of $325.1 million, with a weighted average interest rate of 7.6%.
Subsequently, the Company entered into a sale-leaseback transaction with respect
to one of these aircraft, which reduced the aggregate amount of equipment notes
to $216.6 million. In the third quarter of 1999, a portion of the proceeds was
used to finance, through a leveraged lease, an additional new 747-400 freighter
aircraft which was delivered to the
F-14
<PAGE> 50
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company by Boeing. The remaining proceeds from the 1999 EETCs were used in the
first quarter of 2000 to finance an aircraft delivery (see Note 16).
Other
Other debt primarily consists of separate financings of four of the
Company's 747-200 freighter aircraft and the Challenger aircraft (see Note 7).
The weighted average interest rate at December 31, 1999 for these financings was
8.61%, with terms ranging from seven to ten years.
Hedges
In September 1997, the Company entered into an interest rate swap with BTCo
for the purpose of hedging its floating rate debt. The notional amount of the
interest rate swap at inception was $210 million, decreasing over a term of
eight years. The Company pays a fixed interest rate of 5.72%, increasing .25%
annually, and receives a floating interest rate based on 3-month LIBOR, whereby
the net interest settles quarterly. For the quarterly interest period which
included December 31, 1999, the notional amount was $165.8 million, the fixed
interest rate was 6.22% and the 3-month LIBOR rate was 6.11%. While it is not
the intention of the Company to terminate the interest rate swap, it is
estimated that the Company would have had to pay approximately $963,000, based
on published trading prices, to settle the interest rate swap at December 31,
1999.
Fair Value of Long-Term Debt
Based on current rates available for similar debt with similar maturities
and security, the fair values of the Aircraft Credit Facility, AFL Term Loan
Facility, AFL II Term Loan Facility and other debt at December 31, 1999, are
estimated to be their carrying values. All of the Senior Notes and the EETCs are
publicly traded. Based on published trading prices at December 31, 1999, the
fair values of the Senior Notes and the EETCs are estimated to be as follows (in
thousands):
<TABLE>
<CAPTION>
FAIR VALUE
----------
<S> <C>
10 3/4% Senior Notes due 2005............................ $153,000
9 1/4% Senior Notes due 2008............................. 168,000
9 3/8% Senior Notes due 2006............................. 145,500
1998 EETCs............................................... 100,168
1999 EETCs............................................... 201,183
</TABLE>
Five Year Debt Maturities
At December 31, 1999 principal repayments on long-term debt for the next
five years were as follows (in thousands):
<TABLE>
<S> <C>
2000...................................................... $95,929
2001...................................................... 146,695
2002...................................................... 139,812
2003...................................................... 88,248
2004...................................................... 134,333
Thereafter................................................ 743,996
</TABLE>
4. DEFERRED AIRCRAFT OBLIGATIONS
In June 1997, the Company entered into the Boeing Purchase Agreement (see
Note 6) to purchase 10 new 747-400 freighter aircraft, with options to purchase
up to 10 additional 747-400 aircraft. The Boeing Purchase Agreement requires the
Company to pay pre-delivery deposits in order to secure delivery of the 747-400
freighter aircraft and to defray a portion of the manufacturing costs. In
addition, the Boeing Purchase Agreement provides for a deferral of a portion of
the pre-delivery deposits (Deferred Aircraft Obligations) for which the Company
F-15
<PAGE> 51
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accrues and pays interest quarterly at 6-month LIBOR, plus 2.00%. Included in
other liabilities as of December 31, 1999, was $111.0 million of Deferred
Aircraft Obligations at a combined interest rate of 7.96%. The Company settled
its Deferred Aircraft Obligations upon delivery of each of the first nine of 12
747-400 aircraft (including two exercised options), which were delivered in 1998
and 1999. Financing for the first nine aircraft was secured through the 1998
EETCs and the 1999 EETCs. The Company will be required to settle the balance of
its Deferred Aircraft Obligations upon delivery of the remaining three aircraft,
which are scheduled for delivery in 2000 (see Note 16).
5. INCOME TAXES
The Company had net operating loss carryforwards of approximately
$149,491,000 as of December 31, 1999 which expire between 2007 and 2019. The
Company has generated approximately $29,713,000 of alternative minimum tax
credit carryforwards which are available in subsequent years to reduce its
regular tax liability subject to statutory limitations. All tax years of the
Company that are statutorily open are subject to examination by the Internal
Revenue Service ("IRS"), as well as state and local tax authorities. Currently,
the fiscal year ended March 31, 1994, the short year ended December 31, 1994 and
the calendar year ended December 31, 1995 are under examination by the IRS. The
Company believes that it has adequately provided for all income tax liabilities
and that final resolution of any IRS examination will not have a material effect
on its financial position or results of operations.
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................... $ 4,370 $18,012 $ 1,704
State and local....................................... 987 733 140
Deferred:
Federal............................................... 31,363 8,113 11,622
State and local....................................... 836 476 --
------- ------- -------
Provision for income taxes......................... $37,556 $27,334 $13,466
======= ======= =======
</TABLE>
The provisions for income taxes were at rates different from the U.S.
federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax provision rate............... 35.00% 35.00% 35.00%
State and local income taxes, net of federal tax
benefit................................................. 1.00 1.00 1.04
Nondeductible and other items............................. 2.00 1.16 2.36
Benefit of net operating loss carryforward................ -- -- (1.90)
----- ----- -----
Effective tax provision rate............................ 38.00% 37.16% 36.50%
===== ===== =====
</TABLE>
F-16
<PAGE> 52
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes arise from temporary differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. The net deferred income tax liability components are as follows (in
thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book depreciation........... $200,888 $138,255
Deferred tax assets:
Tax benefit of net operating loss carryforwards........... 55,636 33,367
Alternative minimum tax credits........................... 29,712 27,191
Other..................................................... 47,887 38,023
-------- --------
Total deferred tax assets......................... 133,235 98,581
-------- --------
Net deferred tax liability........................ $ 67,653 $ 39,674
======== ========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Aircraft
Minimum annual rental commitments under noncancelable aircraft operating
leases for years ending December 31, are approximately (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 71,069
2001........................................................ 73,368
2002........................................................ 92,824
2003........................................................ 75,375
2004........................................................ 74,557
Thereafter.................................................. 1,019,820
</TABLE>
The above commitments do not include the potential lease financing (if any)
of Boeing 747-400 freighter aircraft scheduled for delivery or delivered during
2000. In addition to the above commitments, the Company leases engines under
short-term lease agreements on an as needed basis.
Aircraft and engine rentals, including short-term rentals, were
$51,173,000, $14,616,000 and $31,644,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
Boeing Purchase Agreement
In June 1997, the Company entered into an agreement with the Boeing Company
("Boeing") to purchase 10 new 747-400 freighter aircraft to be powered by
engines acquired from the General Electric Company ("GE"), with options to
purchase up to 10 additional 747-400 aircraft for delivery from 2000 through
2002 (the "Boeing Purchase Agreement"). In February 1999, the Company exercised
options for two additional 747-400 freighter aircraft, which are currently
scheduled for delivery in 2000. As a result of the Company being the largest
purchaser of 747-400 freighter aircraft to date, it was able to negotiate from
Boeing and GE a significant discount from the aggregate list price of
approximately $2.0 billion for the 12 747-400 freighter aircraft, four installed
engines per aircraft and five spare engines. In addition, the Company obtained
certain ancillary products and services at advantageous prices. Due to
production problems at Boeing, some of the 1998 delivery positions of the
747-400 aircraft were delayed. The Company was compensated for these delays.
The Boeing Purchase Agreement requires that the Company pay pre-delivery
deposits to Boeing prior to the delivery date of each 747-400 freighter aircraft
in order to secure delivery of the 747-400 freighter aircraft and to defray a
portion of the manufacturing costs. Based on the current expected firm aircraft
delivery schedule, the Company expects the maximum total amount of pre-delivery
deposits at any time outstanding will be approximately $65.6 million for the
remaining three firm aircraft, which was paid as of December 31, 1999 and
F-17
<PAGE> 53
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was included in flight equipment (see Note 16). Upon each delivery, Boeing
refunds the Company the pre-delivery deposits associated with the delivered
747-400 freighter aircraft. In addition, the Boeing Purchase Agreement provides
for a deferral of a portion of the pre-delivery deposits (Deferred Aircraft
Obligations -- see Note 4) for which the Company accrues and pays interest
quarterly at 6-month LIBOR, plus 2.0%.
Maintenance Agreements
In January 1995, the Company entered into a ten-year maintenance agreement
with KLM. This agreement includes a provision which requires the Company to
remit a fixed amount per flight hour each month to KLM, subject to a 3.5% annual
escalation factor for the first five years, for which KLM will perform most
regular maintenance on a substantial portion of the aircraft in the Company's
fleet. Pursuant to its maintenance agreement, engines may be upgraded when
inducted into the maintenance pool in order to improve engine reliability and to
lower Company operating costs. When such costs are incurred and identified, they
are capitalized and amortized over the remaining life of each applicable engine.
In December 1999, the Company completed negotiations with KLM to terminate the
engine portion of this maintenance agreement. Concurrently, the Company entered
into a ten-year maintenance agreement with MTU Maintenance Hanover, a subsidiary
of Daimler Chrysler Aerospace, to provide regular maintenance at a fixed rate
per flight hour for 43 engines, the majority of which were previously serviced
under the KLM agreement.
In June 1996, the Company entered into a ten-year engine maintenance
agreement with GE for the maintenance of engines on 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
quarters of 1996. Pursuant to its maintenance agreement and upon the first time
shop visit, the Company is invoiced for certain one-time charges incurred by GE
to upgrade the Company's engines to meet the standards of GE's maintenance
program, which the Company capitalizes and amortizes over the lesser of the
remaining life of the asset or the remaining life of the maintenance agreement.
Effective in the year 2000, the Company has an option to add not less than 40
engines to the program.
During the initial 36 month operating period, the 747-400 aircraft's
airframe will be covered under manufacturer's warranties. As a result, the
Company does not expect to incur significant maintenance expense in connection
with the 747-400 airframe during the warranty period. In addition, the 747-400
airframe limited maintenance requirements will provide a higher operational
reliability with lower maintenance costs during the early years of operation,
typically for at least five years. The Company will incur expenses associated
with routine daily maintenance of both the airframe and the engines. In July
1998, the Company entered into an agreement with Lufthansa Technik pursuant to
which Lufthansa Technik will provide all required maintenance for the Company's
initial order of ten 747-400 aircraft, plus any additional 747-400 aircraft that
it purchases pursuant to its option in the Boeing Purchase Agreement, on a fixed
cost per flight hour basis for ten years, subject to an annual escalation
adjustment. The Company may terminate the agreement in June 2003. In connection
with the purchase of GE engines through the Boeing Purchase Agreement, the
Company has also entered into two agreements with GE to provide ongoing
maintenance on the 747-400 aircraft engines at a fixed cost per flight hour,
subject to an annual escalation adjustment.
Employment Agreements
The Company has entered into employment agreements with certain key
employees. Such employment agreements provide for, among other things, base
annual salary, certain bonuses, the grant of options to purchase common stock of
the Company under the 1995 Stock Option Plan (see Note 14), and in certain
circumstances relocation and severance benefits.
FAA Airworthiness Directives
Under the FAA's Directives issued under its "Aging Aircraft" program, the
Company is subject to extensive aircraft examinations and will be required to
undertake structural modifications to its fleet to address the problem of
corrosion and structural fatigue. In November 1994, Boeing issued Nacelle Strut
Modification Service
F-18
<PAGE> 54
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Bulletins which have been converted into Directives by the FAA. All of the
Company's Boeing 747-200 aircraft have been brought into compliance with such
Directives. As part of the FAA's overall Aging Aircraft program, it has issued
Directives requiring certain additional aircraft modifications to be
accomplished. The Company estimates that the modification costs per 747-200
aircraft will range between $2 million and $3 million. Fourteen aircraft in the
Company's 747-200 fleet have already undergone the major portion of such
modifications. The remaining eight 747-200 aircraft will require modification
prior to the year 2009. Other Directives have been issued that require
inspections and minor modifications to Boeing 747-200 aircraft. The newly
manufactured 747-400 freighter aircraft were delivered to the Company in
compliance with all existing FAA Directives at their respective delivery dates.
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.
Legal Proceedings
In April 1999, the Company received notification from the National
Mediation Board ("NMB") that Atlas' crew members voted for representation by the
Air Line Pilots Association ("ALPA"). The Company expects its labor costs to
decline initially since its profit sharing plan (the "Profit Sharing Plan")
excludes from the category of eligible employees, those employees who have been
certified by the NMB for representation. In response to ALPA's claims that such
an exclusion violates the Railway Labor Act, on May 6, 1999, the Company filed
an action in the United States District Court for the District of Columbia (the
"District Court") seeking a declaratory judgment confirming, inter alia, the
enforceability of the Profit Sharing Plan's exclusion. On May 10, 1999, ALPA
filed a counterclaim in that action, alleging that the exclusion of its members
from the Profit Sharing Plan violates the Railway Labor Act, and seeking
restoration of profit sharing pay. In October 1999, the District Court entered a
summary judgment in favor of the Company, ruling that the Company did not
violate the Railway Labor Act when it eliminated crew members' participation in
the Profit Sharing Plan following ALPA's certification as the crew members'
collective bargaining agent. In addition, the District Court dismissed all other
claims in the case. ALPA has subsequently filed an appeal of the District
Court's decision.
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.
7. RELATED PARTY TRANSACTIONS
A loan of up to $750,000, bearing interest at 5.87%, was extended in June
1996 to one officer of the Company for the purpose of constructing a residence.
In May 1998, the Company forgave $500,000 of the principal, plus accrued
interest. In February 1998, a loan of $147,000 was extended to an officer of the
Company, for a term of two years, bearing interest at approximately 5.5%. In
June 1998 and March 1999, interest-free loans of $100,000 and $65,500,
respectively, were extended to an officer of the Company, due on demand, subject
to certain conditions and restrictions. In December 1999, the Company extended
two interest-free bridge loans of $150,000 and $25,000 to an officer for the
purpose of relocating that officer's residence from Colorado to New York, due no
later than December 31, 2000. As of December 31, 1999 the outstanding balance of
officer demand loans, including accrued interest, was approximately $772,000.
In October 1997, Atlas Flightlease, Inc., a wholly-owned subsidiary of the
Company, purchased a 1988 Canadair Challenger passenger aircraft (the
"Challenger") for corporate business travel from MAC Flightlease, which is
wholly-owned by the wife of the Company's Chairman, President and CEO.
Currently, the Challenger is financed for approximately 100% of its purchase
price with Nationsbanc under a 5-year LIBOR based loan which was guaranteed by
the Company. The Company paid $15.3 million for the Challenger, which is
considered by the Company to be at fair market value.
In January 1999, the Company purchased a Boeing Business Jet ("BBJ") from
Boeing for approximately $32.0 million and immediately delivered the BBJ to a
third party for installation of the interior business configuration. Shortly
thereafter, the Company entered into a sale-leaseback transaction with GE
Capital to finance the BBJ. In October 1999, the BBJ was delivered to the
Company upon completion of the interior business configuration by a third party
for which the costs were financed in part by GE Capital. This aircraft is
F-19
<PAGE> 55
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
used to transport the Company's executives on business trips throughout the
world. The Company's Chairman, President and CEO has agreed to share in the
interior business configuration and operating costs of the BBJ.
8. ACCOUNTS RECEIVABLE AND OTHER
The components of accounts receivable and other are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- -------
<S> <C> <C>
Accounts receivable -- trade................................ $88,514 $75,684
Insurance and vendor claims................................. 1,463 9,717
Spare parts inventory....................................... 5,954 4,191
Employee receivables........................................ 856 582
Prepaids and other.......................................... 5,728 1,730
Less: Allowance for doubtful accounts....................... (9,536) (5,670)
------- -------
$92,979 $86,234
======= =======
</TABLE>
During 1999 and 1998, the Company recorded additional reserves for doubtful
accounts of approximately $4.4 million and $.7 million, respectively.
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Accounts payable -- trade................................... $ 3,669 $ 1,535
Accrued salaries and wages.................................. 9,453 8,877
Accrued maintenance......................................... 36,917 25,306
Accrued interest............................................ 34,757 18,832
Loss reserves (Note 10)..................................... 1,519 8,741
Deferred rent............................................... 19,562 11,097
Accrued expenses............................................ 25,971 16,612
Other....................................................... 8,081 9,051
-------- --------
$139,929 $100,051
======== ========
</TABLE>
10. WRITE-OFF OF CAPITAL INVESTMENT AND OTHER
In conjunction with the Boeing Purchase Agreement, the Company reassessed
the economic viability of renewing on a longer-term basis its subleases with
FedEx for five 747-200 freighter aircraft. Based on the results of this
assessment in the second quarter of 1997, the Company decided to schedule the
return of these aircraft in the first quarter of 1998. The Company wrote-off its
remaining investment in the five FedEx aircraft and established certain other
reserves.
The impact of the various largely non-recurring charges was $27.1 million,
or $17.2 million on an after-tax basis, which comprised write-offs of various
leasehold improvements associated with the Company's subleases with FedEx of the
five 747-200 aircraft and reserves for costs necessary to return the aircraft
upon the termination of the subleases. In addition, the Company established
reserves primarily related to certain customers and vendors for out-of-period
items, which the Company settled in 1998. In addition, the reserves included
estimates for litigation costs and other costs not expected to re-occur.
F-20
<PAGE> 56
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SAVINGS AND RETIREMENT PLAN
The Company implemented a 401(k) Retirement Plan (the "Plan") in June 1994,
under which eligible employees may contribute up to 15% of their total pay. The
Plan covers substantially all employees. Effective May 1, 1996, the Plan was
amended to provide for Company contributions equal to 50% of the first 10% of
contributions made by employees, for which the Company incurred an expense of
$2,262,000, $1,636,000 and $1,255,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
12. BUSINESS SEGMENTS
The Company operates in one business segment, which is to provide the
common carriage of freight over various worldwide routes.
The assets of the Company, principally flight equipment, support its entire
worldwide transportation system and are not readily identifiable by geographic
area. Property and equipment, other than flight equipment, located in foreign
locations is not significant.
Foreign sales accounted for 99%, 96% and 99% of total revenues for the
years ended December 31, 1999, 1998 and 1997, respectively. All foreign sales
were U.S. dollar denominated.
13. STOCKHOLDERS' EQUITY
Common Stock
In January 1999, the Company announced a 3-for-2 stock split in the form of
a stock dividend to stockholders of record at the close of business on January
25, 1999 (the "Stock Split"). The new shares were delivered on February 8, 1999.
The share data and earnings per share data for all periods presented in these
consolidated financial statements have been restated to reflect the Stock Split.
Preferred Stock
The Board of Directors is authorized under the restated certificate of
incorporation to issue up to 10,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of preferred
stock with voting and conversion rights may adversely affect the voting power of
the holders of common stock, including the loss of voting control to others. At
present, the Company has no plans to issue any shares of preferred stock.
14. STOCK-BASED COMPENSATION PLANS
Employee Stock Purchase Plan
In 1995, the Company established an Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Employees eligible to participate in the Stock Purchase
Plan are those who have completed at least one year of employment with the
Company, but excluding employees whose customary employment is not more than
five months in any calendar year or 20 hours or less per week. The Stock
Purchase Plan is administered by the Compensation Committee of the Board of
Directors of the Company which determines the terms and conditions under which
shares are offered and corresponding options granted under the Stock Purchase
Plan for any Purchase Period, as defined in the Stock Purchase Plan. Employees
may contribute up to 15% of their gross base compensation subject to certain
limitations. The price per share at which the common stock is purchased pursuant
to the Stock Purchase Plan is the lesser of 85% of the fair market value of the
common stock on the first or last day of the applicable Purchase Period. The
maximum number of shares of common stock which may be issued on the exercise of
options purchased under the Stock Purchase Plan is 1,500,000 shares. As of
December 31,
F-21
<PAGE> 57
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999, 160,284 shares were issued at a weighted average cost of $16.76 to 239
employees who have participated in the Stock Purchase Plan.
1995 Stock Option Plan
In 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan"),
whereby employees may be granted options, incentive stock options, share
appreciation rights, and restricted shares. The portion of the 1995 Plan
applicable to employees is administered by the Compensation Committee of the
Board of Directors of the Company which also establishes the terms of the
awards. The 1995 Plan also provides for certain automatic grants of nonqualified
stock options to non-employee directors which become exercisable on the date of
grant and expire on the tenth anniversary of the date of grant. Originally, an
aggregate of 2,700,000 shares were reserved for issuance in connection with
awards and director's options under the 1995 Plan. Following shareholder
approval, an additional 450,000 shares were reserved in 1997 and an additional
750,000 shares were reserved in 1998. In February 2000 and 1999, the Board of
Directors granted a total of 24,050 and 25,950 restricted shares, respectively,
to officers of the Company as a portion of the 1999 and 1998 annual officer
bonuses. These restricted shares are subject to forfeiture upon termination of
employment with the Company prior to their vesting dates of December 31, 2001
and 2000, respectively. Upon grant of the restricted shares, the Company
recorded deferred compensation of $0.6 million and $0.8 million, respectively,
which is being amortized to operations over the vesting periods.
Director Stock Plan
In August 1996, the Company established the Director Stock Plan (the
"Director Plan"), which provides the Company's non-employee directors the option
to receive all or a portion of their quarterly remuneration in common stock
instead of cash. The Director Plan was amended in February 1998 such that the
first 25% of each director's quarterly remuneration must be received in the form
of the Company's common stock. If a non-employee director elects at the
commencement of any quarter to receive his quarterly remuneration, or a portion
thereof, in common stock, the number of shares received is determined by
dividing the average price on the date of the first Board meeting of that
quarter into the amount of compensation earned for the quarter which the non-
employee director chooses not to receive in cash. The effective date of the
Director Plan was January 1, 1997. As of December 31, 1999, 16,336 shares were
issued to five directors who have participated in the Director Plan.
Statement of Financial Accounting Standards No. 123
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value based method of accounting for employee stock options or similar equity
instruments. However, SFAS No. 123 allows the continued measurement of
compensation cost for such plans using the intrinsic value based method
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," provided that pro forma disclosures are made of
net income or loss and net income or loss per share, assuming the fair value
based method of SFAS No. 123 had been applied. The Company has elected to
account for its stock-based compensation plans under APB Opinion No. 25;
accordingly, for purposes of the pro forma disclosures presented below, the
Company has computed the fair value of all options granted during 1999, 1998 and
1997, using the Black-Scholes pricing model and the following weighted average
assumptions:
<TABLE>
<CAPTION>
ASSUMPTIONS -- 1995 PLAN 1999 1998 1997
- ------------------------ ------- ------- -------
<S> <C> <C> <C>
Risk-free interest rates.............................. 5.84% 5.54% 6.51%
Expected dividend yields.............................. -- -- --
Expected lives........................................ 5 years 5 years 5 years
Expected volatility................................... 56.80% 59.79% 65.33%
</TABLE>
F-22
<PAGE> 58
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's pro forma net income and pro forma
net income per common share would have been reported as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C> <C>
Net income (in thousands):................... As Reported $53,270 $46,217 $23,429
Pro Forma 49,804 43,136 17,875
Net income per common share (basic EPS):..... As Reported 1.56 1.37 .70
Pro Forma 1.45 1.28 .53
Net income per common share (diluted EPS):... As Reported 1.54 1.37 .69
Pro Forma 1.44 1.27 .53
</TABLE>
A summary of stock option activity for the years ended December 31, 1999,
1998 and 1997 is presented in the table below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year....................... 2,392,122 $22.07 1,168,662 $19.62 953,943 $20.06
Granted...................... 480,000 26.98 1,368,000 22.97 214,719 17.59
Exercised.................... (661,487) 23.70 (144,540) 10.81 -- --
Forfeited.................... 187,504 24.73 -- -- -- --
--------- --------- ---------
Outstanding at end of year... 2,023,131 22.45 2,392,122 22.07 1,168,662 19.61
========= ========= =========
Exercisable at end of year... 540,131 16.04 943,122 20.55 602,643 15.14
Weighted average fair value
of options granted......... $ 15.01 $ 13.03 $ 10.45
</TABLE>
The following table summarizes information with regard to the options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 6.67 -- $ 6.67................... 68,625 5.5 years $ 6.67 68,625 $ 6.67
10.67 -- 16.00................... 111,422 5.9 years 10.74 111,422 10.74
16.31 -- 24.44................... 1,225,834 7.8 years 22.17 286,584 17.40
24.78 -- 33.83................... 615,750 9.2 years 26.85 72,000 27.29
37.58 -- 37.58................... 1,500 6.4 years 37.58 1,500 37.58
--------- -------
2,023,131 8.0 years 22.45 540,131 16.04
========= =======
</TABLE>
15. PROFIT SHARING PLAN
Employees who have been employed by the Company for at least twelve months
as full-time employees are eligible to participate in the Company's Profit
Sharing Plan, which was adopted in 1994. The Profit Sharing Plan provides for
payments to eligible employees in semiannual distributions based on the
Company's pretax profits. The Company is obligated to make an annual profit
sharing contribution of ten percent of the Company's pretax profits, which is
defined as net income before taxes, but excluding (i) any income or loss related
to charges or credits for unusual or infrequently occurring items or related to
intangible assets, and (ii) extraordinary items. Annual profit sharing
contributions may be in the form of cash or common stock of the Company. The
Profit Sharing Plan excludes from the category of eligible employees, those
employees who have been certified by the
F-23
<PAGE> 59
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMB for representation. In April 1999, the Company received notification from
the NMB that its crew members voted for representation by ALPA. Subsequently,
the Company eliminated crew members' participation in the Profit Sharing Plan
based on ALPA's certification as the crew members' collective bargaining agent.
For the years 1999, 1998 and 1997, beginning with an employee's thirteenth month
of employment, an employee is entitled to receive a guaranteed profit sharing
payment of 10% of salary, except for captains, who received a guarantee of 20%
prior to their ineligibility to participate in the Profit Sharing Plan. The
expense for the Profit Sharing Plan for the years ended December 31, 1999, 1998
and 1997 was $4,488,000, $8,061,000 and $4,004,000, respectively.
16. SUBSEQUENT EVENTS
In January 2000, the Company completed an offering of $217.3 million
Enhanced Equipment Trust Certificates (the "2000 EETCs"). The 2000 EETCs are not
direct obligations of, or guaranteed by, the Company and therefore are not
included in its consolidated financial statements until such time that it draws
upon the proceeds to take delivery and ownership of an aircraft. The cash
proceeds from the 2000 EETCs transaction were deposited with an escrow agent and
will be used to finance (either through leveraged leases or secured debt
financings) the debt portion of the acquisition cost of the remaining two firm
new 747-400 freighter aircraft from Boeing scheduled to be delivered to the
Company in 2000.
In the first quarter of 2000, Boeing delivered to the Company the tenth new
747-400 freighter aircraft, pursuant to the Boeing Purchase Agreement. The
remaining proceeds from the 1999 EETCs were used to finance, through secured
debt financing, the debt portion of the acquisition cost of this aircraft. In
connection with this secured debt financing, the Company executed equipment
notes in the aggregate amount of $109.9 million, with a weighted average
interest rate of 7.64%.
17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
INCOME BEFORE
EXTRAORDINARY INCOME BEFORE
ITEM AND EXTRAORDINARY ITEM
CUMULATIVE AND CUMULATIVE EFFECT
EFFECT OF A OF A CHANGE IN
INCOME CHANGE IN ACCOUNTING PRINCIPLE NET INCOME
OPERATING BEFORE ACCOUNTING NET ----------------------- ---------
REVENUE INCOME INCOME TAXES PRINCIPLE INCOME BASIC EPS DILUTED EPS BASIC EPS
-------- --------- ------------ ------------- ------- --------- ----------- ---------
(1) (1) (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
First Quarter........ $137,839 $36,707 $16,393 $10,246 $ 2,237 $.30 $.30 $.07
Second Quarter....... 138,568 41,107 21,232 13,270 13,270 .39 .38 .39
Third Quarter........ 161,896 48,169 22,549 14,093 14,093 .41 .41 .41
Fourth Quarter....... 198,778 61,506 38,661 23,670 23,670 .69 .69 .69
1998
First Quarter........ $ 79,634 $21,543 $ 8,429 $ 5,310 $ 5,310 $.16 $.16 $.16
Second Quarter....... 87,950 31,518 16,039 10,105 10,105 .30 .30 .30
Third Quarter........ 109,189 35,716 20,238 12,745 12,745 .38 .38 .38
Fourth Quarter....... 145,465 47,072 28,845 18,057 18,057 .54 .53 .54
<CAPTION>
NET INCOME
-----------
DILUTED EPS
-----------
(1)
<S> <C>
1999
First Quarter........ $.07
Second Quarter....... .38
Third Quarter........ .41
Fourth Quarter....... .69
1998
First Quarter........ $.16
Second Quarter....... .30
Third Quarter........ .38
Fourth Quarter....... .53
</TABLE>
- ---------------
(1) As restated to reflect the Stock Split.
F-24
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+3.2 -- Restated Certificate of Incorporation of the Company.
3.3 -- Amended and Restated By-Laws of the Company.
+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 -- Amended 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.
***10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
***/****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.
**10.58 -- 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 Freighter Leasing, Inc., the
Lenders listed therein and Bankers Trust Company, as
agent, dated May 29, 1997.
**10.60 -- Lease Agreement between Atlas Freighter 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 Freighter 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 Freighter 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 Freighter 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 Freighter 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 Freighter 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 Freighter 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 Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N507MC.
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**10.68 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N509MC.
**10.69 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter 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 Freighter 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 Freighter 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)
**10.75 -- 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.
**10.85 -- First Amendment to Lease Agreement among Atlas Freighter
Leasing, Inc. and Bankers Trust Company, as agent, dated
September 5, 1997
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**/****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.
++10.90 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-0.
++10.91 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-S.
++10.92 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-0.
++10.93 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-S.
++10.94 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-0.
++10.95 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-S.
++10.96 -- Deposit Agreement (Class A), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.97 -- Deposit Agreement (Class B), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.98 -- Deposit Agreement (Class C), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.99 -- Indemnity Agreement, dated as of February 9, 1998,
between ABN AMRO Bank N.V., acting through its Chicago
Branch, as Depositary, and the Company.
++10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
++10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.103 -- Revolving Credit Agreement (1998-1A), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and ABN AMRO Bank N.V., acting
through its Chicago Branch as Liquidity Provider.
++10.104 -- Revolving Credit Agreement (1998-1B), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.105 -- Revolving Credit Agreement (1998-1C), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.106 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-B relating to Class B Liquidity
Facility.
++10.107 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-C relating to Class C Liquidity
Facility.
++10.108 -- Intercreditor Agreement, dated as of February 9, 1998,
among Wilmington Trust Company, not in its individual
capacity but solely as Trustee, ABN AMRO Bank N.V.,
acting through its Chicago Branch, as Class A Liquidity
Provider, Morgan Stanley Capital Services, Inc., as Class
B Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company.
++10.109 -- Note Purchase Agreement, dated as of February 9, 1998,
among the Company, Wilmington Trust Company and First
Security Bank, National Association.
*****10.111 -- Form of Indenture, dated April 9, 1998, between the
Company and State Street Bank and Trust company, as
Trustee, relating to the 9 1/4% Senior Notes (with form
of Note attached as exhibit thereto).
****/*****10.114 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.115 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.116 -- General Terms Agreement between the Company and General
Electric Company dated June 6, 1997.
******10.117 -- Form of Indenture, dated November 18, 1998, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 9 3/8% Senior Notes (with form
of Note attached as exhibit thereto).
++++++10.118 -- Employment Agreement dated June 22, 1998, between the
Company and Thomas G. Scott.
+++10.119 -- Underwriting Agreement, dated April 5, 1999, among Atlas
Air, Inc., Morgan Stanley & Co. Incorporated, BT Alex.
Brown Incorporated, ING Baring Furman Selz LLC and CIBC
Oppenheimer Corp.
+++10.120 -- Revolving Credit Agreement (1999-1A-1), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider.
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+++10.121 -- Revolving Credit Agreement (1999-1A-2), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider.
+++10.122 -- Revolving Credit Agreement (1999-1B), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
+++10.123 -- Revolving Credit Agreement (1999-1C), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
+++10.124 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1B).
+++10.125 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1C).
+++10.126 -- Pass Through Trust Agreement, dated as of April 1, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc.
+++10.127 -- Trust Supplement No. 1999-1A-1, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.128 -- Trust Supplement No. 1999-1A-2, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.129 -- Trust Supplement No. 1999-1B, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.130 -- Trust Supplement No. 1999-1C, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999.
+++10.131 -- Intercreditor Agreement, dated as of April 13, 1999,
among Wilmington Trust Company, as Trustee, ABN AMRO Bank
N.V, Chicago Branch, as Class A-1 Liquidity Provider and
Class A-2 Liquidity Provider, Morgan Stanley Capital
Services, Inc., as Class B Liquidity Provider and Class C
Liquidity Provider, and Wilmington Trust Company, as
Subordination Agent and Trustee.
+++10.132 -- Deposit Agreement (Class A-1), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.133 -- Deposit Agreement (Class A-2), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.134 -- Deposit Agreement (Class B), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.135 -- Deposit Agreement (Class C), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary.
+++10.136 -- Escrow and Paying Agent Agreement (Class A-1), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+++10.137 -- Escrow and Paying Agent Agreement (Class A-2), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.138 -- Escrow and Paying Agent Agreement (Class B), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.139 -- Escrow and Paying Agent Agreement (Class C), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent.
+++10.140 -- Note Purchase Agreement, dated as of April 13, 1999,
among Atlas Air Inc., Wilmington Trust Company, as
Trustee, Wilmington Trust Company, as Subordination
Agent, First Security Bank, National Association, as
Escrow Agent, and Wilmington Trust Company, as Paying
Agent.
+++10.141 -- Form of Leased Aircraft Participation Agreement
(Participation Agreement among Atlas Air, Inc., Lessee,
, Owner Participant, First Security
Bank, National Association, Owner Trustee, and Wilmington
Trust Company, Mortgagee and Loan Participant) (Exhibit
A-1 to Note Purchase Agreement).
+++10.142 -- Form of Lease (Lease Agreement between First Security
Bank, National Association, Lessor, and Atlas Air, Inc.,
Lessee) (Exhibit A-2 to Note Purchase Agreement).
+++10.143 -- Form of Leased Aircraft Indenture (Trust Indenture and
Mortgage between First Security Bank, National
Association, Owner Trustee, and Wilmington Trust Company,
Mortgagee) (Exhibit A-3 to Note Purchase Agreement).
+++10.144 -- Form of Leased Aircraft Trust Agreement (Trust Agreement
between and First Security Bank,
National Association) (Exhibit A-5 to Note Purchase
Agreement).
+++10.145 -- Form of Owned Aircraft Participation Agreement
(Participation Agreement between Atlas Air, Inc., Owner,
and Wilmington Trust Company, as Mortgagee, Subordination
Agent and Trustee) (Exhibit C-1 to Note Purchase
Agreement).
+++10.146 -- Form of Owned Aircraft Indenture (Trust Indenture and
Mortgage between Atlas Air, Inc., Owner, and Wilmington
Trust Company, Mortgagee) (Exhibit C-2 to Note Purchase
Agreement).
+++10.147 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-1.
+++10.148 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-2.
+++10.149 -- 6.88% Atlas Air Pass Through Certificate 1999-1A-2,
Certificate No. A-2-1.
+++10.150 -- 7.63% Atlas Air Pass Through Certificate 1999-1B-1,
Certificate No. B-1.
+++10.151 -- 8.77% Atlas Air Pass Through Certificate 1999-1C-1,
Certificate No. C-1.
10.152 -- Agreement of Lease between Texaco, Inc., Landlord, and
the Company, Tenant, 2000 Westchester Avenue, White
Plains, New York 10650 dated November 9, 1999.
10.153 -- Atlas Air, Inc. Annual Incentive Compensation Plan.
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.154 -- Atlas Air, Inc. Long-Term Incentive Plan.
10.155 -- Amendments to the Atlas Air, Inc. 1995 Long Term
Incentive and Stock Award Plan. (The Atlas Air, Inc. 1995
Long Term Incentive and Stock Award Plan is filed as
Exhibit 10.15, which is incorporated by reference in this
Report.)
++21.1 -- Subsidiaries of the Registrant.
24 -- Powers of Attorney (set forth on the signature page of
the Report).
27 -- Financial Data Schedule.
</TABLE>
- ---------------
+++ Incorporated by reference to the exhibits to the Company's Current Report
on Form 8-K dated April 13, 1999.
++ Incorporated by reference to the exhibits to the Company's Annual Report
for 1997 on Form 10-K.
+ 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-4 (No. 333-51819).
++++++ Incorporated by reference to the exhibits to the Company's Annual
Report for 1998 on Form 10-K.
* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).
** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-36305).
*** Incorporated by reference to the exhibits to the Company's Annual Report
for 1996 on Form 10-K.
**** 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.
***** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-56391).
****** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-72211)
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
<PAGE> 1
EXHIBIT 3.3
ATLAS AIR, INC.
RESTATED BY-LAWS
AS AMENDED
FEBRUARY 2000
* * * * * * * * * * * * * * * * * * * * * *
<PAGE> 2
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
Directors shall be held in the City of Denver, State of Colorado, at such place
as may be fixed from time to time by the Board of Directors, or at such other
place either within or without the State of Delaware as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the
year 1996, shall be held on the second Tuesday of June if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 11:00 A.M.,
or at such other date and time as shall be
1
<PAGE> 3
designated from time to time by the Board of Directors and stated in the notice
of the meeting, at which they shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Restated
Certificate of Incorporation, may be called by (i) the Chief Executive Officer
of the Corporation or (ii) the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized Directors.
Section 4. Whenever stockholders are required or permitted to
take any action at a meeting, unless notice is waived in writing by all
stockholders entitled to vote at the meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose for which the meeting is called.
Unless otherwise provided by law, and except as to any
stockholder duly waiving notice, the written notice of any meeting shall be
given personally or by mail, not less than ten nor more than 60 days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, notice shall be deemed given when deposited in the mail, postage
prepaid, directed to the stockholder at his or her address as it appears on the
records of the Corporation.
When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If, however, the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2
<PAGE> 4
Section 5. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to which
stockholders are entitled to examine the stock ledger or the list required by
this Section 5, or to vote in person or by proxy at any meeting of shareholders.
Section 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Restated Certificate of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice, except as
provided in the last paragraph of Section 4 of this Article II, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified,
3
<PAGE> 5
Section 7. Except as otherwise provided by the Restated
Certificate of Incorporation or these By-Laws, whenever Directors are to be
elected at a meeting, they shall be elected by a plurality of the votes cast at
the meeting by the holders of stack entitled to vote. Whenever any corporate
action, other than the election of Directors, is to be taken by vote of
stockholders at a meeting, it shall be authorized by a majority of the votes
cast at the meeting by the holders of stock entitled to vote thereon, except as
otherwise required by law, by the Restated Certificate of Incorporation or by
these By-Laws.
Except as otherwise provided by law, or by the Restated
Certificate of Incorporation or these By-Laws, each holder of record of stock of
the Corporation entitled to vote on any matter at any meeting of stockholders
shall be entitled to one vote for each share at such stock standing in the name
of such holder on the stock ledger of the Corporation on the record date for the
determination of the stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote
for Directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.
Section 8. At every meeting of stockholders the Chairman of the
Board, or any Vice Chairman of the Board, or the Chief Executive Officer, as
designated by the Board of Directors, or, if none be present, or in the absence
of any such designation, the appointee of the meeting, shall preside. The
Secretary, or in his or her absence an Assistant Secretary, or if none be
present, the appointee of the presiding officer of the meeting, shall act as
secretary of the meeting.
Section 9. Each stockholder entitled to vote at a meeting of
stockholders may
4
<PAGE> 6
authorize another person or persons to act for his or her by proxy executed in
writing by the stockholder or as otherwise permitted by law, or by his or her
duly authorized attorney-in-fact, Such proxy must be filed with the Secretary of
the Corporation or his or her representative at or before the time of the
meeting.
Section 10.
(A) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons
for election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 4 of Article II of these By-Laws, (b) by or at the direction
of the Board of Directors or (c) by any stockholder of the Corporation who is
entitled to vote at the meeting, who complied with the notice procedures set
forth in clauses (2) and (3) of paragraph (A) of this Section 10 and who was a
stockholder of record at the time such notice is delivered to the Secretary of
the Corporation.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Section 10, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not less than seventy days nor more than ninety days prior to
the first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days. from such anniversary date,
and in the case of the Corporation's first annual meeting to be held after the
initial adoption of these By-Laws, notice by the stockholder to be timely musty
be so delivered not earlier than the ninetieth day prior to such annual meeting
and
5
<PAGE> 7
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made, Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a Director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of mach stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which arc owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 10 to the contrary, in the event that the
number of Directors to be elected to the Board of Directors is increased and
there is no public announcement naming all of the nominees for Director or
specifying the size of the increased Board of Directors made by the Corporation
at least eighty days prior to the first anniversary of the preceding years
annual meeting, a stockholder's notice required by this Section 10 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the
6
<PAGE> 8
Secretary at the principal executive offices of the Corporation not later than
the close of business on the tenth day following the day on which such public
announcement is first made by the Corporation.
(B) SPECIAL MEETING OF STOCKHOLDERS. Only such business stall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting pursuant to
Section 4 of Article II of these By-Laws. Nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders at which
Directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the Board of Directors or (ii) by any stockholder of
the Corporation who is entitled to vote at the meeting, who complies with the
notice procedures set forth in this Section 10 and who is a stockholder of
record at the time such notice is delivered to the Secretary of the Corporation.
Nominations by stockholders of persons for election to the Board of Directors
may be made at such a special meeting of stockholders if the stockholder's
notice as required by paragraph (A)(2) of this Section 10 shall be delivered to
the Secretary at the principal executive offices of the Corporation not earlier
than the ninetieth day prior to such special meeting and not later than the
close of business on the later of the seventieth day prior to such special
meeting or the tenth day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting.
(C) GENERAL. (1) Only persons who are nominated in accordance
with the procedures set forth in this Section 10 shall be eligible to serve as
Directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 10. Except as otherwise
7
<PAGE> 9
provided by law, the Restated Certificate of Incorporation or these By-Laws, the
Chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 10 and, if any proposed
nomination or business is not in compliance wit this Section 10, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 10, "public announcement"
shall mean disclosures in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
10, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 10. Nothing in this Section 10 shall be deemed
to affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 11. The Board of Directors by resolution shall appoint
one or more inspectors, which inspector or inspectors may include individuals
who serve the Corporation in other capacities, including, without limitation, as
officers, employees, agents or representatives of the Corporation, to act at the
meeting and make a written report thereof. One or more persons may be designated
as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate has been appointed to act, or if all inspectors or
alternates who have been appointed are unable to act, at the meeting of
stockholders, the Chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict
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impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware (the "GCL").
The Chairman of the meeting shall fix and announce at the
meeting the time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
ARTICLE III
DIRECTORS
Section 1. The number of Directors which shall constitute the
whole Board shall be not less than 1 nor more than 8. The first Board shall
consist of one Director. Thereafter, within the limits above specified, the
number of Directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting. The Directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each Director elected shall hold office until his successor is
elected and qualified. Except as otherwise permitted by or consistent with
applicable statutory, regulatory and interpretive restrictions regarding foreign
ownership or control of U.S. air carriers, at no time shall more than one-third
of the Directors in office be Aliens (as defined in the Restated Certificate of
Incorporation). Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of Directors may be filled by a
majority of the Directors then in office, though less than a quorum, or by a
sole remaining Director, and the Directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
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qualify, unless sooner displaced. If there are no Directors in office, then an
election of Directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the Directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such Directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the Directors chosen by
the Directors then in office.
Section 3. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Restated Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware at such place as is indicated in the notice or waiver of notice
thereof.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the
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stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the Directors.
Section 6. Regular meetings of the Board of Directors shall be
held on such date and at such times and places as shall be designated from time
to time by the Board of Directors; provided, that the Board shall bold at least
four (4) regular meetings in each year; provided further that the regular
meetings of the Board of Directors can be waived at the request of the Chief
Executive Officer if at least a majority of the Directors agree in writing to
such waiver at least seven days before the date of the meeting to be so waived
except that in any event the Board shall hold at least four (4) regular meetings
in each year. The Secretary shall forward to each Director, at least five days
before any such regular meeting, a notice of the time and place of the meeting,
together with the reports and recommendations of any committee of the Board of
Directors required to deliver periodic reports and the agenda for the meeting
prepared by the Chief Executive Officer or in lieu thereof a notice of waiver If
the regular meeting has been waived.
Section 7. Special meetings of the Directors may be called by
the Chairman of the Board, any Vice Chairman, the Chief Executive Officer or a
majority of the Directors, at such time and place as shall be specified in the
notice or waiver thereof. Notice of each special meeting, including the time and
place of the meeting and the agenda therefor, shall be given by the Secretary or
by the person calling the meeting to each Director by causing the same to be
delivered personally or by facsimile transmission not later than the close of
business on the second day next preceding the day of the meeting.
Section 8. Members of the Board of Directors, or of any
committee designated by
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the Board, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person
at such meeting.
Section 9. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Restated Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. Unless otherwise restricted by the Restated
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 11. Unless otherwise restricted by the Restated
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment but by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Restated Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the GCL, fix any of
the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
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dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or the Restated
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock or to adopt a certificate of ownership and merger. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 13. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the Restated
Certificate of Incorporation or these By-Laws, the Board of Directors shall have
the authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Director. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 15. Unless otherwise restricted by the Restated
Certificate of incorporation or by law, any Director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of Directors.
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ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the Restated Certificate of Incorporation or of these By-Laws, notice is
required to be given to any Director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such Director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to Directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the Restated Certificate of Incorporation
or of these By-Laws. a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a Chairman of the Board of Directors, a
Chief Executive Officer, a President, a Vice-President, a Secretary and a
Treasurer. The Board of Directors may also choose one or more Vice-Chairman of
the Board, additional Vice-Presidents, and one or more
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Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person, unless the Restated Certificate of Incorporation or
these By-Laws otherwise provide.
Section 2. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a Chairman of the Board of
Directors, a Chief Executive Officer, a President, one or more Vice-Presidents,
a Secretary and a Treasurer.
Section 3. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD OF DIRECTORS
Section 6. The Chairman of the Board of Directors shall be a
Director. He shall preside at all meetings of stockholders and of the Board of
Directors at which he shall be present, and he shall perform such other duties
and enjoy such other powers as shall be delegated to him by the Board of
Directors or which are or may at any time be required by law.
Section 7. Each Vice Chairman of the Board, in the absence of
the Chairman of the Board, shall have all powers herein conferred upon the
Chairman of the Board. In addition, each Vice Chairman shall have such other
powers and duties as may be delegated to him or her by the Board of Directors.
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CHIEF EXECUTIVE OFFICER
Section 8. The Chief Executive Officer shall preside at all
meetings of the stockholders and the Board of Directors, shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
PRESIDENT
Section 10. The President shall perform all the duties and
enjoy all the powers commonly incident to his office or delegated to him or
which are, or may be, authorized or required by law. In the absence of the
Chairman of the Board of Directors, he shall have and perform the duties of that
office.
THE VICE-PRESIDENTS
Section 11. In the absence of the President or in the event of
his inability or refusal to act, the Vice-President (or in the event there be
more than one Vice-President, the Vice-Presidents in the order designated by the
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to ill the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
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THE SECRETARY AND ASSISTANT SECRETARY
Section 12. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or Chief Executive Officer, under whose supervision he shall be. He
shall have custody of the corporate seal of the Corporation and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
Section 13. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 14. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors.
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Section 15. He shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
Section 16. If required by the Board of Directors, he shall
give the Corporation a bond (which shall be renewed every six years) in such sum
and with such surety-or-sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation. in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind In his possession or under his control belonging to the
Corporation.
Section 17. The Assistant Treasurer. or if there shall be more
than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented
by a certificate or
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shall be uncertificated. Certificates shall be signed by, or in the name of the
Corporation by the Chairman or Vice-Chairman of the Board of Directors, the
Chief Executive Officer, or the President or a Vice-President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the GCL or a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stack or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Any of or all the signatures on a certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors or any officer of the
Corporation may direct a new certificate or certificates or uncertificated
shares to be issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates or uncertificated shares, the Board of Directors or
any officer may, in its/his/her discretion and as a
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condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it/he/she shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date.
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
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meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person. whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
OWNERSHIP BY ALIENS
Section 1. FOREIGN STOCK RECORD. There shall be maintained a
separate stock record, designated the "Foreign Stock Record," for the
registration of Voting Stock, as defined in Section 2, that is Beneficially
Owned (as defined in the Restated Certificate of Incorporation) by aliens, as
defined in the Restated Certificate of Incorporation ("Alien Stock"). The
Beneficial Ownership by aliens of Voting Stock shall be determined in conformity
with regulations prescribed by the Board of Directors.
Section 2. MAXIMUM PERCENTAGES. At no time shall ownership of
shares representing more than the Maximum Percentage, as defined below, be
registered in the Foreign Stock Record. As used herein, (a) "Maximum Percentage"
means the maximum percentage of voting power of Voting Stock, as defined below,
which may be voted by, or at the direction of,
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Aliens without violating applicable statutory, regulatory and interpretive
restrictions regarding foreign ownership or control of U.S. air carriers or
adversely affecting the Corporation's operating certificates or authorities, and
(b) "Voting Stock" means all outstanding shares of capital stock of the
Corporation issued from time to time by the Corporation and Beneficially Owned
by Aliens which, but for the provisions of Section (a) of Article 5 of the
Restated Certificate of Incorporation, by their terms may vote (at the time such
determination is made) for the election of Directors of the Corporation, except
shares of Preferred Stock that are entitled to vote for the election of
Directors solely as a result of the failure to pay dividends by the Corporation
or other breach of the terms of such Preferred Stock.
Section 3. RECORDING OF SHARES. If at any time there exist
shares of Voting Stock that are Alien Stock but that are not registered in the
Foreign Stock record, the Beneficial Owner thereof may request, in writing, the
Corporation to register ownership of such shares on the Foreign Stock Record and
the Corporation shall comply with such request, subject to the limitation set
forth in Section 2. The order in which Alien Stock shall be registered on the
Foreign Stock Record shall be chronological, based on the date the Corporation
received a written request to so register such shares of Alien Stock. If at any
time the Corporation shall find that the combined voting power of Voting Stock
then registered in the Foreign Stock Record exceeds the Maximum Percentage,
there shall be removed from the Foreign Stock Record the registration of such
number of shares so registered as is sufficient to reduce the combined voting
power of the shares so registered to an amount not in excess of the Maximum
Percentage. The order in which such shares shall be removed shall be reverse
chronological order based upon the date the Corporation received a written
request to so register such shares of Alien Stock.
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ARTICLE VIII
GENERAL PROVISIONS-DIVIDENDS
Section 1. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Restated
Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Directors shall think conducive to the interest of
the Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual
meeting a full and clear statement of the business and condition of the
Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
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SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE IX
INDEMNIFICATION
Section 1. (a) Any person made a party or threatened to be
made a party to a threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
or suit by or in the right of the Corporation to procure a judgment in its
favor) by reason of the fact that he is or was a Director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan,
shall be indemnified by the Corporation against expenses (including attorneys'
fees), judgment, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding to the
fullest extent authorized by the GCL as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment). The
termination of any action, suit or proceeding by judgment, order, settlement
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably
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believed to be in or not opposed to the best interests of the Corporation, or,
with respect to any criminal action or proceeding, that the person had
reasonable cause to believe that his conduct was unlawful.
(b) Any person made a party or threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director or officer of the Corporation, or is or was serving at the
request of the Corporation as a Director or officer of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, shall be indemnified by the Corporation
against expenses (including attorneys' fees), judgment, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action or suit to the fullest extent authorized by the GCL as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) except that no indemnification shall be made hereunder in
respect of any claim, issue or matter as to which the person shall be adjudged
liable to the Corporation unless and only to the extent that the court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which said Court
of Chancery or such other court shall deem proper.
(g) The indemnification and advancement of expenses, provided
by, or granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified,
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continue as to a person who has ceased to be a Director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 2. INSURANCE. The Board of Directors of the Corporation
may, in its discretion, authorize the Corporation to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise including service with respect to an
employee benefit plan. against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such liability
under the provisions of Section 3. of this Article IX.
ARTICLE X
AMENDMENTS
Section 1. The Board of Directors is expressly authorized to
adopt, repeal, alter or amend these By-Laws by the vote of a majority of the
entire Board of Directors. In addition, the stockholders of the Corporation may
adopt, repeal. alter or amend provisions of these By-Laws upon the affirmative
vote of the holders of 66 2/3% of the combined voting power of the then
outstanding stock of the Corporation entitled to vote generally in the election
of Directors.
27
<PAGE> 1
EXHIBIT 10.17
AMENDMENT NO. 1 TO
ATLAS AIR PROFIT SHARING PLAN
Amendment No. 1 as of April 21, 1999, to the Atlas Air Profit Sharing
Plan of June 30, 1994 (the "Plan').
Article 5.2 of the Plan shall be amended to read in its entirety as
follows;
"5.2 Method of Allocation. When the Annual Profit Sharing Contribution
for the Fiscal Year has been determined, individual profit sharing
amounts will be allocated to each Eligible Employee. All individual
amounts are calculated by multiplying the Company's Annual Pro fit
Sharing Contribution by the ratio of each individual Eligible
Employee's Compensation to the total Compensation of all Eligible
Employees (including for purposes of computing total Compensation, the
Compensation of Employees who, but for the exception in the first
sentence of Article 2.6 of the Plan, would have been Eligible
Employees). Payments may be made in cash, Company stock or some
combination thereof, at the discretion of the Board of Atlas Air, Inc.
The difference, if any, between the amount of Annual Profit Sharing
Contribution for any fiscal Year and the aggregate of the individual
profit sharing amounts actually paid to Eligible Employees for such
Fiscal Year as computed in accordance with this Article 5.2 shall
revert to the Company on the May 15 following such Fiscal Year."
IN WITNESS WHEREOF, this Amendment to the Plan has been executed for
and on behalf of the Company the day and year first above written.
ATLAS AIR, INC.
By: /s/ M.A. CHOWDRY
-----------------------
Michael Chowdry
Chairman, President and
Chief Executive Officer
CONFIRMED BY THE BOARD OF DIRECTORS OF ATLAS AIR, INC. ON JUNE 9, 1999.
<PAGE> 2
ATLAS AIR PROFIT SHARING PLAN
<PAGE> 3
ATLAS AIR PROFIT SHARING PLAN
Preamble
THIS PROFIT SHARING PLAN, amended and restated as of May 15, 1998 by
Atlas Air, Inc. a Delaware corporation (the "Company"), hereby restates the
Atlas Air Profit Sharing Plan (the "Plan") in accordance with the terms and
conditions set forth herein.
WHEREAS, the Company wishes to continue to recognize the vital role
each of its Employees plays in the growth and profitability of the Company, and
seeks to maintain and retain a work force dedicated to achieving those goals;
and
WHEREAS, in recognition of that vital role, the Company wishes to
restate the Plan for payment to Employees of an annual amount specifically based
upon the Company's profits;
NOW, THEREFORE, the Company hereby adopts, establishes and restates
the Plan for the benefit of its Eligible Employees.
Article 1.
Purpose of the Plan
The purpose of the Plan is to share the profits of the Company with
Eligible Employees whose efforts are instrumental in the Company's financial
success by providing, in addition to other compensation, payments to such
Employees based upon pre-tax profits of the Company over the period beginning
June 30, 1994 through December 31, 1994, and annually thereafter on a calendar
basis for each year ended December 31 for so long as the Plan is in effect.
Article 2.
Definitions
Capitalized terms used herein shall have the following meanings,
unless the context clearly requires otherwise.
2.1 Annual Profit Sharing Contribution means the total annual Company
contribution to be distributed in profit sharing payments to Eligible Employees
pursuant to the terms of Article 4 hereof
2.2 Annual Profit Sharing Allocation means the amount paid to an
Eligible Employee in accordance with the terms of Article 5 hereof
2.3 Board of Directors or Board means the Board of Directors of the
Company.
2.4 Company means Atlas Air, Inc., a Delaware corporation, and any of
its subsidiaries whose participation in this Plan is approved by the Board.
2.5 Compensation means gross wages reported for U.S. federal income
tax purposes on a W-2 federal tax form, deducting from such amounts any of the
following: profit sharing (including guaranteed profit sharing payments made
pursuant to Article 5.1(a) hereof), completion bonus, per diem, compensation
paid prior to becoming an Eligible Employee under this Plan, expense
reimbursements, excess life insurance, travel benefits, and other unusual
payments that might occur in the future.
2.6 Eligible Employee means any full-time (more than 20 hours per
week) Employee employed by the Company who has met the requirements for
participation in the Plan, except for those who are subject to a collective
bargaining agreement or who have been certified by the
<PAGE> 4
National Mediation Board or any other such regulatory agency for
representation. To be eligible, an individual must be employed by the Company
on the date the profit sharing distribution is made, unless the individual is a
Retired Employee, subject to the provisions of Article 3 hereof.
2.7 Employee means any individual who is employed by the Company on
either a salaried or hourly basis, and from whom the Company is required to
withhold taxes from remuneration paid by the Company to such individuals for
personal services rendered to the Company. This does not include any individual
who is a "leased employee," as defined in Section 414(n) of the Code, nor any
person retained as an independent contractor.
2.8 Fiscal Year means the Company's financial reporting year.
2.9 Plan means the Atlas Air Profit Sharing Plan.
2.10 Retired Employee means a previous Employee who has reached age 62
(60 for pilots) or greater and has completed four complete years (for 1998
only; five years thereafter) of continuous service as an Eligible Employee with
the Company on or before the date such person elects to retire. An Eligible
Employee who, through no fault of his/her own, is no longer able to work due to
the loss of FAA-required licenses or medical certificates, or due to
disability, will also be eligible to retire.
Article 3.
Requirements for Participation
Eligible Employees (see Article 2.6) will participate in the Plan at
the start of the month following their one year anniversary as a full-time
Employee. An Eligible Employee must be a current Employee (or a Retired
Employee) as of the day on which profit sharing is paid.
Article 4.
Annual Profit Sharing Contribution
The Company will make an annual Profit Sharing Contribution, for each
Fiscal Year, of an amount equal to 10% of pre-tax profits for Fiscal Years
1997, 1998 and 1999. However, the Company will guarantee a minimum payment for
those years, as described in Article 5.1(a).
4.1 Pre-tax profits, for the purposes of calculating the Company's
Annual Profit Sharing Contribution, will be determined by the Company using the
same methods as used in the ordinary course of its business. However, the
following items defined under generally accepted accounting principles or which
are in common use in public financial statement reporting will be excluded from
pre-tax profits for purposes of calculating the company's Annual Profit Sharing
Contribution:
<PAGE> 5
(a) Any income or loss related to charges or credits (whether or
not identified as special credits or charges) for unusual or
infrequently-occurring items (such as business dispositions
or sale of property, plant or equipment not in the ordinary
course of business), or related to intangible assets.
(b) Extraordinary items reported on separate line items in the
Company's income statement.
Article 5.
Annual Profit Sharing Allocation
5.1 Timing and Methodology of Payment. The Annual Profit Sharing
Allocation shall be due and payable as follows:
(a) For years 1997, 1998 and 1999 only, beginning with an Eligible
Employee's 13th month of employment, an Employee will be entitled to receive a
guaranteed profit sharing payment of 10% of Compensation (captains receive a
guarantee of 20%).
(b) If actual profit sharing exceeds 10% of Compensation, or 20% in
the case of captains, Eligible Employees will be entitled to receive the excess
in two installments. An estimate of one-half (1/2) of the excess will be paid
no later than December 15 of the calendar year for which the profit sharing
contribution is being made (based on preliminary, unaudited financial results),
and the remaining balance will be paid no later than May 15 of the following
year (based on finalized, audited results, including any required adjustments
to the prior December 15 payment).
5.2 Method of Allocation. When the Annual Profit Sharing Contribution
for the Fiscal Year has been determined, individual profit sharing amounts will
be allocated to each Eligible Employee. All individual amounts are calculated
by multiplying the Company's Annual Profit Sharing Contribution by the ratio of
each individual Eligible Employee's Compensation to the total Compensation of
all Eligible Employees. Payments may be made in cash, Company stock, or some
combination thereof, at the discretion of the Board of Atlas Air, Inc.
5.3 Retirement Plan Contributions. All profit sharing pay will be
subject to 401(k) and (m) elections on file at the time of payment.
Article 6.
Miscellaneous
6.1 Effect Upon Employment. Nothing contained herein shall be
construed to be a contract of employment of any kind or any period, and this
Plan shall not confer any rights to any Employee to continue in the employ of
the company.
<PAGE> 6
6.2 Assignability. The right to receive payments hereunder shall not
be transferable or assignable, except by Last Will and Testament or in estate
succession, and no rights shall vest until payment is made.
6.3 Governing Law. This Plan shall be construed in accordance with,
and shall be governed by the laws of the State of Delaware.
6.4 Entire Plan. This instrument contains the entire understanding and
undertaking of the Company relating to the subject matter hereof, except as
otherwise referred to herein, and supersedes any and all prior and
contemporaneous undertakings, agreements, understandings, inducements or
conditions, whether express or implied, written or oral, except as herein
contained.
6.5 Number and Gender. Whenever appropriate, as the context may
require, words used herein shall be construed in the singular or the plural,
and words used in one gender shall be construed in the other gender.
6.6 Plan Binding Upon All Parties. This Plan shall be binding upon the
parties hereto, their successors and assigns, and upon all Employees and their
spouses, heirs, executors and administrators.
6.7 Decision of Board of Directors Final and Binding: Amendments and
Termination. The Board of Directors of the Company shall resolve any disputes
or questions arising under the Plan, and its decision shall be final and
binding upon all parties. The Board of Directors may also amend this Plan from
time to time and terminate the Plan.
6.8 No Assignments. No rights or any amounts which might be due
hereunder are assignable to any third party, and shall not vest until actual
payment is made to the recipient.
Article 7.
Effective Date
The Plan, as restated, shall become effective January 1, 1998 upon the
execution of the Plan by the President of the Company.
IN WITNESS WHEREOF, this Plan is executed for and on behalf of the
Company the day and year first above written.
ATLAS AIR, INC., a Delaware corporation
By: /s/ M.A. Chowdry
Name: Michael A. Chowdry
Title: President, Chairman & Chief
Executive Officer
<PAGE> 1
EXHIBIT 10.152
AGREEMENT OF LEASE
TEXACO INC., LANDLORD
AND
ATLAS AIR, INC., TENANT
2000 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10650
NOVEMBER 9, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE DEFINITIONS AND CERTAIN TERMS........................................1
ARTICLE 1 DEMISE AND PREMISES.................................................5
ARTICLE 2 TERM/CONSTRUCTION...................................................6
ARTICLE 3 BASE RENT AND ADDITIONAL RENT......................................13
ARTICLE 4 ESCALATION FOR OPERATING EXPENSES..................................17
ARTICLE 5 ELECTRICITY........................................................20
ARTICLE 6 BUILDING SERVICES..................................................28
ARTICLE 7 HEAT, VENTILATING AND AIR CONDITIONING.............................32
ARTICLE 8 PARKING............................................................34
ARTICLE 9 USE, BUILDING NAME AND TENANT IDENTIFICATION.......................35
ARTICLE 10 CHANGES IN THE BUILDING AND ACCESS................................39
ARTICLE 11 EMINENT DOMAIN....................................................42
ARTICLE 12 REPAIRS AND MAINTENANCE...........................................44
ARTICLE 13 DESTRUCTION, FIRE AND OTHER CASUALTY..............................45
ARTICLE 14 INSURANCE.........................................................47
ARTICLE 15 TENANT ALTERATIONS................................................53
ARTICLE 16 TENANT'S PROPERTY.................................................58
ARTICLE 17 SURRENDER.........................................................59
ARTICLE 18 RECORDING ESTOPPEL CERTIFICATE, AND CONFIDENTIALITY...............60
ARTICLE 19 EVENTS OF DEFAULT AND TERMINATION.................................62
ARTICLE 20 ASSIGNMENT AND SUBLETTING.........................................64
ARTICLE 21 SECURITY DEPOSIT..................................................72
ARTICLE 22 QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND NOTICE TO LESSOR
AND MORTGAGEES....................................................76
ARTICLE 23 BROKERAGE.........................................................80
ARTICLE 24 RE-ENTRY BY LANDLORD ON TENANT'S DEFAULT, CURING TENANT'S
DEFAULTS..........................................................81
ARTICLE 25 NOTICES...........................................................83
ARTICLE 26 REQUIREMENTS OF LAW...............................................84
ARTICLE 27 NON-LIABILITY, INDEMNIFICATION AND NON-RECOURSE...................86
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 28 DAMAGES...........................................................90
ARTICLE 29 WAIVERS, FAILURE TO ENFORCE TERMS, MODIFICATIONS..................92
ARTICLE 30 SHORING...........................................................94
ARTICLE 31 SUCCESSORS AND ASSIGNS, NO OTHER REPRESENTATIONS, CONSTRUCTION....95
ARTICLE 32 MISCELLANEOUS PROVISIONS..........................................96
ARTICLE 33 DISPUTE RESOLUTION................................................99
ARTICLE 34 EXPANSION SPACE...................................................99
ARTICLE 35 SECURITY.........................................................105
ARTICLE 36 CONTINUATION TERM................................................107
ARTICLE 37 SATELLITE ANTENNA................................................109
ARTICLE 38 FURNITURE........................................................112
ARTICLE 39 NEGATIVE COVENANT................................................112
ARTICLE 40 PAINTING.........................................................112
ARTICLE 41 PUBLICITY........................................................113
ARTICLE 42 STORAGE SPACE....................................................113
EXHIBITS....................................................................118
</TABLE>
ii
<PAGE> 4
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT "A" FLOOR PLAN(S)
EXHIBIT "A-1" FLOOR PLAN(S)
EXHIBIT "A-2" FLOOR PLAN(S)
EXHIBIT "B" PRELIMINARY PLAN
EXHIBIT "C" RULES AND REGULATIONS
EXHIBIT "D" CLEANING SPECIFICATIONS
EXHIBIT "E" IRREVOCABLE LETTER OF CREDIT
EXHIBIT "F" FLOOR PLAN(S):
PRELIMINARY EXPANSION SPACE
EXHIBIT "G" FLOOR PLAN(S):
EXPANSION SPACE
EXHIBIT "H" FLOOR PLAN(S):
ADDITIONAL EXPANSION SPACE
EXHIBIT "I" FLOOR PLAN(S): ALTERNATE EXPANSION SPACE
AND ADDITIONAL EXPANSION SPACE
EXHIBIT "J" FURNITURE
EXHIBIT "J-1" FURNITURE II
EXHIBIT "K" TENANT DESIGN GUIDELINES
EXHIBIT "L" STORAGE SPACE
</TABLE>
iii
<PAGE> 5
LEASE AGREEMENT
AGREEMENT OF LEASE (hereinafter referred to as the "Lease" or this
"Lease") made as of the 9th day of November, 1999, by and between TEXACO INC., a
Delaware corporation with offices at 2000 Westchester Avenue, White Plains, New
York 10650 ("Landlord"), and ATLAS AIR, INC. a Delaware corporation, with an
address at 538 Commons Drive, Golden, Colorado 80401 ("Tenant").
PREAMBLE
DEFINITIONS AND CERTAIN TERMS
For purposes of this Lease, the following terms shall have the
following meanings set forth opposite each of them and the capitalized terms
defined elsewhere in this Lease by inclusion in quotation marks and parentheses
have the meanings so ascribed to them:
"AFFILIATE": With respect to any specified entity or person at any
time, an entity or person that, directly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
entity or person. For purposes of this definition, "control" when used with
respect to any specified entity or person means the power to direct the
management and policies of such entity or person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BASE RENT": The amounts set forth in Article 3, Section 1, adjusted in
accordance with Articles 3, 4, 5, 34 and 36 hereof.
"BUILDING": The office building erected at 2000 Westchester Avenue, in
the Town of Harrison, County of Westchester and State of New York with a mailing
address of 2000 Westchester Avenue, White Plains, New York 10650.
"BUILDING STANDARD": The minimal standard of material, manufacture,
quality, utility, design, size, capacity, finish and color specified by Landlord
in the Tenant Design Guidelines, along with such additional standards as may be
reasonably adopted and/or specified by Landlord with respect to standards of
material, manufacture, quality, utility, design, size, capacity, finish
<PAGE> 6
and color not addressed in the Tenant Design Guidelines or which are specified
but require modification when in Landlord's reasonable judgment, Landlord deems
it necessary or desirable for the reputation, safety, character, security, care,
appearance or interest of the Building or the operation or maintenance of the
Building, or the equipment thereof, or the comfort of tenants or others in the
Building.
"COMMENCEMENT DATE": The later to occur of: (i) the date of this Lease;
(ii) the date on which Landlord tenders possession of the Demised Premises,
exclusive of the First Floor Demised Premises, to Tenant free of all leases,
tenants and/or occupants, provided that Landlord shall have removed from the
Demised Premises all of Landlord's (or such prior occupant's) furniture, office
equipment and any other articles of movable personal property provided the same
are not built into or installed in the Demised Premises; and (iii) the date on
which Landlord so tenders possession of the First Floor Demised Premises to
Tenant, if such tender occurs after the expiration of the First Floor Period.
"COMMON BUILDING FACILITIES": The common facilities in or around the
Building designed and intended for use by all tenants in the Building in common
with Landlord and each other, including but not limited to hallways, elevators,
fire stairs, delivery docks, restrooms, lobbies, and grounds, and shall also
include such service establishments as may be available from time to time in the
Building The terms and conditions governing the provision, use and availability
of such common facilities and service establishments are further set forth in
Article 6 hereof.
"COMPLEX": The Building, the land on which the Building stands and any
adjoining land (and improvements thereon) and parking structures used in
connection therewith, including, without limitation, all equipment, sidewalks,
steps, plazas, curbs, parking areas, loading areas and ramps.
"DEMISED PREMISES": That space in the Building constituting: (i) the
space on the second floor of the Building between corridors "C" and "D"
substantially as delineated on the floor plan(s) attached hereto and made a part
hereof as Exhibit "A"; (ii) the space on the third floor of the Building between
Corridors "C" and "D" substantially as delineated on the floor plan(s) attached
hereto and made a part hereof as Exhibit "A-1"; and (iii) the space on the first
-2-
<PAGE> 7
floor of the Building between the Building's main lobby and Corridor "C"
substantially as delineated on the floor plan(s) attached hereto and made a part
hereof as Exhibit "A-2", the total area of which is the Leased Floor Space.
"ELECTRIC ENERGY CHARGE": $1.875 per annum, per square foot, of Storage
Space and Leased Floor Space excluding the Leased Floor Space for the Operations
Center as hereinafter defined, which charge shall be in addition to Base Rent.
"EVENTS OF FORCE MAJEURE": Any delays due to acts of God, governmental
restrictions or guidelines, strikes, labor disturbances, shortages of materials
and supplies and for any other causes or events whatsoever beyond Landlord's
reasonable control.
"EXECUTIVE CENTER": That portion of the Demised Premises on the Third
Floor of the Building, West of Corridor D, currently designated as the West
Conference Center, as altered pursuant to Tenant's Plans.
"EXPIRATION DATE": The last day of the calendar month in which occurs
the end of a twelve (12) year, six (6) month period measured from the
Commencement Date (if the Commencement Date shall occur on a day other than the
first day of a calendar month, such period shall run and be measured from the
first day of the calendar month following the Commencement Date) or an earlier
date on which this Lease may expire or be cancelled or terminated pursuant to
the terms of this Lease or such later date on which this Lease may expire or be
cancelled or terminated during the Continuation Term of this Lease as set forth
in Article 36 hereof.
"FIRST FLOOR DEMISED PREMISES": That portion of the Demised Premises
constituting the space on the first floor of the Building between the Building's
main lobby and Corridor "C" substantially as delineated on the floor plan(s)
attached hereto and made a part hereof as Exhibit "A-2".
"FIRST FLOOR PERIOD": The period commencing with the date of this
Lease, and ending with the later of: (i) 60 days after the date of this Lease
and (ii) such later date as Tenant may agree to, if in Tenant's judgment an
extension to such later date would not interfere with the completion of Tenant's
Work.
-3-
<PAGE> 8
"LANDLORD'S CHARGE": The reasonable costs charged Landlord or
Landlord's contractor by, or paid by Landlord or Landlord's contractor to, its
architects and engineers, subcontractors, suppliers, materialmen, employees and
agents in connection with work Landlord may perform for Tenant under and
pursuant to the terms of this Lease, plus 10% of such costs for general
conditions (such as on-the-job services, supervisory personnel and use of
elevators and hoists), and (b) an additional sum of 10% of such cost for
Landlord's overhead. Notwithstanding the foregoing, there shall be no charge for
freight elevator use and loading dock use by Tenant during Standard Business
Hours in connection with Tenant's initial move of furniture and equipment from
its Queens and Denver facilities.
"LEASED FLOOR SPACE": The total number of rentable square feet of space
in the Demised Premises, which for purposes of this Lease, the parties agree and
stipulate is 119,524 square feet as of the Commencement Date, plus any
additional rentable square feet which the Tenant opts to lease pursuant to
Article 34 hereof.
"LEASING BROKER": The Staubach Company of New York LLC.
"OPERATIONS CENTER": That portion of the Demised Premises designated in
Tenant's Plans as Tenant's self-contained, 24 hour Operations Center.
"RENT YEAR": The period commencing on the first day of the calendar
month immediately following the end of a six (6) month period from the
Commencement Date (if the Commencement Date shall occur on a day other than the
first day of a calendar month such period shall run and be measured from the
first day of the calendar month following the Commencement Date) and each twelve
month period thereafter measured from each anniversary date (except that if the
period between the last such anniversary and the Expiration Date is less than
twelve months, then the last Rent Year shall be such lesser period).
"SECURITY DEPOSIT": $3,000,000.00 deposited pursuant to Article 21
hereof.
"STANDARD BUSINESS HOURS": 8:00 a.m. to 6:00 p.m. every day except
Saturdays, Sundays, the days observed by the Federal or New York State
government as legal holidays and the day after Thanksgiving, the day before or
after each of Christmas, New Years and July 4th, as Landlord shall designate.
-4-
<PAGE> 9
"TENANT DESIGN GUIDELINES": The Tenant Design Guidelines annexed hereto
and made a part hereof as Exhibit "K", as amended from time to time in
accordance with the terms thereof.
"TENANT LEASING EXPENSES": The Base Rent abatement provided in Section
2 of Article 3, the Storage Space rent abatement provided in Section 2 of
Article 42, the Tenant Improvement Allowance provided in Article 2, and all
obligations, expenses and liabilities of Tenant assumed or paid for by Landlord
in consideration of Tenant's entering into this Lease.
ARTICLE 1
DEMISE AND PREMISES
SECTION 1. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord the Demised Premises for the rents hereinafter reserved and upon
and subject to the conditions (including limitations, restrictions and
reservations) and covenants hereinafter provided. Landlord and Tenant agree to
observe and perform all of the conditions and covenants herein contained on its
part to be observed and performed.
SECTION 2. Subject to the restrictions herein, this Lease includes the
right of Tenant to use (i) Common Building Facilities and (ii) Tenant's Parking
Spaces.
SECTION 3. Landlord and Tenant agree that the general location, size
and layout of the Demised Premises as outlined in Exhibits "A", "A-1" and "A-2"
shall not be deemed to be a warranty, representation or agreement on the part of
Landlord that the Demised Premises and the Building will be exactly as indicated
on Exhibits "A", "A-1" and "A-2". Landlord represents that the general location,
size and layout of the Demised Premises is substantially as shown on Exhibits
"A", "A-1" and "A-2".
SECTION 4. Nothing herein contained shall be construed as a grant or
demise by Landlord to Tenant of the roof or exterior walls of the Building, of
the space above and below the Demised Premises, of the parcel of land on which
the Demised Premises are located, and/or of any parking or other areas adjacent
or underneath the Building.
SECTION 5. Landlord represents and warrants that the Building was
constructed during the years 1974 through 1977 and contains no ACM, PCB'S,
lead-based paint, or urea
-5-
<PAGE> 10
formaldehyde foam. Landlord represents that to the best of Landlord's knowledge,
Landlord has received no notice that the Demised Premises are not currently in
compliance with all present laws and requirements of public authorities.
Landlord has not made any further representations or warranties whatsoever with
respect to the Demised Premises. Tenant acknowledges that it is fully familiar
with the Demised Premises and the condition and state of repair thereof on the
date hereof.
ARTICLE 2
TERM/CONSTRUCTION
SECTION 1. The term of this Lease and the estate hereby granted
(hereinafter collectively called either the "Lease Term" or the "Term of this
Lease") (a) shall commence on the Commencement Date and (b) shall end at 11:59
p.m. on the Expiration Date or on such earlier date upon which the term of this
Lease shall expire or be cancelled or terminated pursuant to any of the
conditions or covenants of this Lease or pursuant to law.
SECTION 2. Tenant shall accept the Demised Premises "As Is". "As Is"
shall mean in the same condition and repair in which the prior occupant vacated
such space, and Tenant shall be responsible for any demolition and removal of
any improvements existing in the Demised Premises in connection with the prior
occupancy, and all other work as may be necessary to convert the Demised
Premises in accordance with Tenant's requirements as further set forth in
Section 3 of this Article. Landlord shall not be responsible for performing any
work with respect to readying the Demised Premises for Tenant's occupancy. Any
work, changes or improvements made to such space shall be performed at Tenant's
sole cost and expense unless otherwise provided in Section 3 of this Article.
Notwithstanding the foregoing, Landlord shall deliver the Demised Premises free
of all leases, tenants and occupants and shall have removed from the Demised
Premises all of Landlord's (or such prior occupant's) furniture, office
equipment and any other articles of movable personal property provided the same
are not built into or installed in the Demised Premises. The taking of the
Demised Premises by Tenant for the performance of Tenant's Work (as defined in
Section 3 of Article 2) shall be conclusive evidence that Landlord properly
delivered the Demised Premises to Tenant and that at such time the Demised
Premises was in satisfactory condition and that Landlord had no further
obligations relative to the construction of the Demised Premises, except as
otherwise expressly set forth in this Lease.
-6-
<PAGE> 11
SECTION 3. (A) Based upon a preliminary plan attached hereto as Exhibit
"B", Tenant, at Tenant's sole cost and expense shall furnish to Landlord for
Landlord's approval, complete working plans, specifications and drawings
(collectively referred to as "Tenant's Plans") for all of the work to be
performed in the Demised Premises to fit the Demised Premises for use by Tenant
in the conduct of its business ("Tenant's Work"). Tenant's Plans shall be
prepared and stamped by an architect licensed in New York State and in form and
substance adequate to obtain all necessary permits and to comply with all laws,
rules and regulations (including, without limitation, Title III of The Americans
with Disabilities Act of 1990, as amended) of all public authorities having
jurisdiction with respect to the Building, and shall include each and every item
necessary and appropriate to the performance of Tenant's Work. Tenant agrees
that it shall be solely responsible, at its expense, for the costs of compliance
with the Americans With Disabilities Act of 1990, as amended as it pertains to
Tenant's Work in the Demised Premises. All of Tenant's Plans, including any
revisions thereto ("Revisions"), are subject to Landlord's approval, which
Landlord agrees shall not be unreasonably withheld, but no approval shall be
deemed an agreement by Landlord that the work included therein is in compliance
with any legal requirements or is otherwise feasible. During such period of
review, Tenant agrees to promptly respond to Landlord's questions regarding
Tenant's Plans. Within thirty (30) days after Landlord's receipt of Tenant's
Plans, Landlord shall either approve (if acceptable to Landlord) Tenant's Plans
or advise Tenant specifically that Tenant's Plans are not approved and propose
specifically the changes recommended. Tenant shall respond to Landlord's
objections by resubmitting revised Tenant's Plans to Landlord for approval and
the above procedure shall be repeated, provided, however, that the time period
for Landlord's review of the revised Tenant's Plans shall be reduced from thirty
(30) days to fifteen (15) days. In the event Landlord gives timely notice of
continued objections, the changes shall be made by Tenant's architect in such
manner as to conform with Landlord's requirements. Landlord shall bear its costs
and expenses incurred in Landlord's review of Tenant's Plans. After Landlord's
approval of Tenant's Plans, Tenant shall obtain, at Tenant's cost and with
Landlord's cooperation, a building permit (including, without limitation,
plumbing and electrical permits) for the performance of Tenant's Work.
(B) Landlord shall reimburse Tenant for the cost of Tenant's Work
in an amount not to exceed $25.00 per square foot of Leased Floor Space (the
"Tenant Improvement
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Allowance") in accordance with the terms of this Article. No more than ten (10%)
percent of the Tenant Improvement Allowance may be used to reimburse Tenant for
"soft costs" in connection with Tenant's Work. The term "soft costs" shall
include, but shall not be limited to legal, architectural, engineering,
telecommunication and other such professional service and consulting fees.
(C) As soon as practicable after Tenant's Plans have been
approved by Landlord and building permits have been obtained allowing for the
commencement of Tenant's Work, Tenant agrees, at its sole cost and expense, to
promptly proceed with the construction of Tenant's Work in the Demised Premises
in accordance with the approved Tenant's Plans using Tenant's own contractors
which have been approved by Landlord. With respect to Tenant's selection of
contractors to perform Tenant's Work, the general contractor employed by Tenant
to perform Tenant's Work shall be subject to Landlord's reasonable approval.
Additionally, it is expressly understood and agreed that Landlord shall require
Tenant to use specific mechanical, electrical, plumbing and telecommunications
subcontractors, along with specific subcontractors with respect to work related
to the Building's life safety systems, to be selected by Tenant from a list of
such subcontractors delivered to Tenant upon Landlord's execution of this Lease.
The aforesaid list of subcontractors shall have at least three (3)
subcontractors listed for each category of work. Tenant covenants that it will
use its best efforts to have the alterations, additions or improvements to
effectuate Tenant's Work made with a minimum of delay and in a good and
workmanlike manner and will pay promptly all amounts due in connection with the
construction. With respect to Tenant's performance of Tenant's Work hereunder
all of Tenant's duties and obligations set forth in Article 15 (relating to
Tenant's duties and obligations in making Tenant's Changes) shall be applicable
to and binding upon Tenant with respect to any such work in readying the Demised
Premises for Tenant's initial occupancy. Landlord shall permit Tenant and/or its
agents or contractors to enter the Demised Premises at Tenant's sole risk in
order to perform through its own contractors Tenant's Work. If at any time such
entry shall cause interference or labor disputes, then this license may be
withdrawn by Landlord immediately upon written notice to Tenant specifying the
reasons therefor. In the event Landlord incurs any charges from Landlord's
agents or contractors as a result of Tenant's Work, as provided in this Section
(including, but not limited to, charges for use of construction or hoisting
equipment on the Building site and overtime charges if other than trade working
hours are involved) such
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<PAGE> 13
charges shall be deemed an obligation of Tenant and shall be payable to Landlord
within ten (10) days of being billed therefor. Landlord agrees to reimburse
Tenant monthly upon submission of paid invoices approved by Landlord's architect
up to an amount not exceeding the Tenant Improvement Allowance after Tenant has
presented Landlord with: (i) invoices marked paid with respect to Tenant's Work
and (ii) releases of liens from those contractors and/or subcontractors
performing Tenant's Work.
(D) (i) If Tenant's Plans include an Emergency Generator System,
such system shall be governed by this Subsection 3(D). In this Lease, "Emergency
Generator System" shall mean a new emergency generator, the electrical system to
be associated therewith, a new above-ground fuel oil tank to be associated
therewith, an uninterruptible power supply (UPS System) to be associated
therewith, and any other similar systems, in each case of the kind specified by
Tenant in Tenant's Plans or actually installed, to provide emergency power to
the Operating Center. (ii) The Emergency Generator System shall be purchased for
Landlord's account by Tenant and shall remain the sole and exclusive property of
Landlord. The Emergency Generator System shall be located at a place reasonably
proximate to the Demised Premises specified in Tenant's Plans, as approved by
Landlord. The installation of the Emergency Generator System shall be performed
by Tenant as part of Tenant's Work. Any aspect of the installation that in
Landlord's reasonable judgment affects the electrical feeds to the Building or
requires the shut-down of the Building's electrical system shall be conducted at
such times and with such supervision and inspections by Landlord as Landlord may
require; any additional costs arising from the foregoing, including Landlord's
reasonable costs, shall be Tenant's responsibility. Tenant shall pay such costs
of Landlord within ten (10) days after Tenant's receipt of an invoice therefor.
(iii) The purchase price of the Emergency Generator System and the cost of
installation thereof except those costs that are Tenant's responsibility under
subsection (ii) above ("Emergency Generator Costs") shall be allocated between
Landlord and Tenant, in cash and exclusive of the Tenant Improvement Allowance,
as follows: (x) the purchase price of the new above-ground fuel oil tank and the
cost of installation thereof shall be the responsibility of Landlord; (y) if all
other Emergency Generator Costs are $300,000.00 or less, Landlord and Tenant
shall each be responsible for exactly one-half (1/2) of such Emergency Generator
Costs; and (z) if such Emergency Generator Costs exceed $300,000.00, Landlord
shall be responsible for $150,000.00 of such Emergency Generator Costs, and
Tenant shall be
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responsible for the amount by which such Emergency Generator Costs exceed
$150,000.00. Landlord and Tenant shall provide each other with such supporting
information as each may reasonably request, and shall promptly make such
payments or reimbursements as are necessary, to achieve such allocation. (iv) In
consideration of such allocation, Landlord shall, without further charge to
Tenant, lease the Emergency Generator System to Tenant for the Lease Term.
Pursuant to such lease, Tenant shall be responsible for the repair, maintenance,
operation and insurance of, and shall indemnify Landlord pursuant to Article 27
with respect to, the Emergency Generator System, to the same extent as if the
Emergency Generator System were Tenant's Property located in the Demised
Premises pursuant to this Lease. Any aspect of such repair, maintenance or
operation that in Landlord's reasonable judgment affects the electrical feeds to
the Building or requires the shut-down of the Building's electrical system shall
be conducted at such times and with such supervision and inspections by Landlord
as Landlord may require; any additional costs arising from the foregoing,
including Landlord's reasonable costs, shall be Tenant's responsibility. Tenant
shall pay such costs of Landlord within ten (10) days after Tenant's receipt of
an invoice therefor. At the end of the Lease Term, Tenant shall return the
Emergency Generator System to Landlord in the same condition as it was in when
first installed, ordinary wear and tear excepted.
(E) Tenant shall install as part of Tenant's Work a fire safety
sprinkler system and an ADA strobe system in the Demised Premises of the same
kind installed in the space presently occupied by Texaco Inc. and its Affiliates
and required by governmental authorities having jurisdiction over the Building
("Safety System"). The Safety System shall be purchased for Landlord's account
by Tenant and shall remain the sole and exclusive property of Landlord. The
purchase price of the Safety System and the cost of installation thereof
("Safety Costs") shall be Landlord's responsibility, without regard to the
Tenant Improvement Allowance. The invoices for Safety Costs shall be delivered
by Tenant upon Tenant's receipt of same to Landlord for payment in accordance
with the terms of the invoices. Landlord covenants to leave Safety System where
installed for the duration of the Lease Term.
(F) At the time Landlord approves Tenant's Plans (including
Revisions, if any), Landlord shall notify Tenant what items of Tenant's Work
shall, unless Landlord otherwise elects by giving Tenant notice of not less than
thirty (30) days prior to the expiration or
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<PAGE> 15
termination of this Lease, become the property of the Landlord and shall remain
upon and be surrendered with the Demised Premises as a part thereof at the
expiration or sooner termination of the Term. The foregoing shall not include
Tenant's trade fixtures and furniture. The remainder of Tenant's Work must be
removed by Tenant at the Expiration Date or earlier Termination of this Lease.
If Landlord fails to notify Tenant of such possible removal obligation at the
time of Landlord's approval of Tenant's Plans (including Revisions, if any),
Tenant shall not be required to remove items appearing in such approved plans.
If at the Expiration Date or earlier termination of this Lease, Tenant does not
remove such items of Tenant's Work as Tenant shall be obligated to remove,
Tenant shall be obligated to pay Landlord for the cost of such removal,
including the cost of repairs of damage caused by such removal and restoration.
Tenant shall not be obligated to remove cosmetic non-structural changes not
affecting and not interfering with the Building's building systems or the
certificate of occupancy for the Building or interfere with the use of the
Building by other occupants, or ordinary walls and partitions made to divide
space for use by Tenant's personnel except that Landlord may require the removal
of all or any part of the Operations Center or Executive Center.
(G) It is understood that Tenant shall be solely responsible for
the plans and specifications or other construction documents used by Tenant in
connection herewith and for any liabilities or obligations based upon or in
connection with the construction contracts and for any loss or damage resulting
from the use of any of the foregoing and Tenant hereby releases, discharges,
indemnifies, defends and holds Landlord harmless from and against any and all
liabilities or claims for damages of losses of any kind, whether legal or
equitable, or from any action, and the expenses of defending any action, arising
or alleged to arise out of or in connection with the performance of any work
pursuant thereto, except to the extent caused by any negligent or otherwise
wrongful act or omission of Landlord, its employees and agents. Tenant, at
Landlord's request, shall defend, at Tenant's cost and expense, any claim,
action or proceeding in connection with or based upon any of the foregoing or
the work done in performance thereto.
(H) Upon completion of Tenant's Work, Tenant shall provide
Landlord with two (2) copies of "as built" plans certified by Tenant's general
contractor and architect as correct.
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<PAGE> 16
(I) All materials and workmanship provided or performed hereunder
shall be at least Building Standard.
(J) Tenant shall be responsible for all damage to the Building or
Complex caused by trades employed by Tenant.
(K) Landlord may, prior to the commencement of Tenant's Work or
at any other time thereafter, require Tenant to furnish a bond to Landlord in an
amount satisfactory to Landlord written by a surety company acceptable to
Landlord guaranteeing the completion of Tenant's Work and payment of all
contractors, subcontractors, materialmen, suppliers and the like.
(L) If Tenant fails to timely perform or complete Tenant's Work,
Landlord, in addition to any other right or remedy it may have may give Tenant
at least sixty (60) days' written notice that if a specified failure, omission
or delay is not cured by the date therein stated, this Lease shall be deemed
cancelled and terminated. If such notice shall not be complied with, this Lease
shall, on the date stated in such notice, be cancelled and terminated, without
prejudice to Landlord's rights hereunder. In the event of a cancellation of this
Lease by Landlord by reason of a default by Tenant pursuant to this Section,
Landlord shall be entitled to receive, in addition to any other damages,
Landlord's actual expenses for brokerage commissions and reasonable attorneys,
architectural, engineering or other fees incurred in connection with this Lease.
In exercising any of the foregoing remedies, Landlord shall be entitled to
retain and have recourse to any bond or escrow deposit provided by Tenant under
paragraph "K" of this Section.
SECTION 4. When the Commencement Date shall have been initially
determined, Landlord and Tenant shall, upon the request of either of them,
execute and deliver to each other duplicate originals of a Commencement Date
Statement prepared by Landlord in recordable form, which shall specify the
Commencement and Expiration Dates of the Lease Term, along with the first day of
the first Rent Year. Upon execution and delivery of the Commencement Date
Statement it shall be deemed a part of this Lease. Any failure of Tenant to
execute such statement shall not affect Landlord's determination of the
Commencement Date, and such statement shall be deemed approved and accepted if
not received back by Landlord within fifteen (15) days of submission by
Landlord. After Landlord delivers the First Floor Demised Premises,
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<PAGE> 17
the Landlord and Tenant shall, upon the request of either of them, execute and
deliver to each other duplicate originals of a statement prepared by Landlord in
recordable form that confirms the delivery date of the First Floor Demised
Premises. If the Commencement Date subsequently changes as a result of
Landlord's failure to deliver the First Floor Demised Premises before the
expiration of the First Floor Period, a new Commencement Date Statement
providing the changed date shall be prepared in accordance with the terms of
this Section 4, Article 2.
SECTION 5. If permission is given to Tenant to enter into possession or
occupancy of the Demised Premises or any other premises in the Building prior to
the Commencement Date, Tenant covenants and agrees that such possession and
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this Lease, except as to the covenant to pay rent. Notwithstanding
the occurrence of the Commencement Date, during the First Floor Period the First
Floor Demised Premises shall not be subject to the terms, covenants, conditions
and provisions of this Lease, and shall remain in sole possession of the
Landlord, except that during the First Floor Period, Landlord shall allow Tenant
reasonable access to the First Floor Demised Premises for review and inspection
as necessary with respect to Tenant's Work.
SECTION 6. The parties hereto agree that this Article covers Tenant's
rights with respect to the time possession of the Demised Premises is to be
delivered to it and constitutes an "express provision to the contrary" and
Tenant hereby waives any rights to rescind this Lease and/or recover damages
which Tenant might otherwise have pursuant to Section 223-a of the Real Property
Law of the State of New York.
ARTICLE 3
BASE RENT AND ADDITIONAL RENT
SECTION 1. The Base Rent is to be paid in monthly installments by
Tenant as set forth below, with the amounts below adjusted in accordance with
the terms of this Lease, for the respective periods during the term of the
Lease. All such monthly rental installments are payable on the first day of each
month, in advance, and without abatement, offset or deduction whatsoever (except
as set forth in Section 2 of this Article 3) as follows:
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<PAGE> 18
<TABLE>
<CAPTION>
ANNUAL
RENT YEAR BASE RENT MONTHLY INSTALLMENT
--------- ------------- -------------------
<S> <C> <C>
1 $2,629,528.00 $219,127.33
2 $2,629,528.00 $219,127.33
3 $2,629,528.00 $219,127.33
4 $2,629,528.00 $219,127.33
5 $2,868,576.00 $239,048.00
6 $2,868,576.00 $239,048.00
7 $2,868,576.00 $239,048.00
8 $2,868,576.00 $239,048.00
9 $3,107,624.00 $258,968.67
10 $3,107,624.00 $258,968.67
11 $3,107,624.00 $258,968.67
12 $3,107,624.00 $258,968.67
</TABLE>
SECTION 2. Provided Tenant is otherwise in compliance with the terms of
this Lease, the Base Rent payable by Tenant shall fully abate: (i) for the
period preceding the first day of the first Rent Year; and (ii) for the first,
second, third and fourth months of the third Rent Year.
SECTION 3. Whenever used in this Lease, the terms (insofar as they
pertain to this Lease) "rent" or "rents" shall mean Base Rent and additional
rent.
SECTION
4. Tenant shall pay to Landlord without notice or demand and without abatement,
deduction or set-off, in lawful money of the United States of America, at the
office of Landlord as specified herein or at such other place as Landlord may
designate, the Base Rent reserved under this Lease for each Rent Year of the
Lease Term, payable in equal monthly installments in advance on the first day of
each and every calendar month during the Lease Term, except that Tenant shall
pay the first monthly installment on the execution hereof; and additional rent
consisting of all such other sums of money as shall become due from and payable
by Tenant to Landlord pursuant to this Lease (for default in payment of which
Landlord shall have the same remedies as for a default in payment of Base Rent).
All such payments shall be made by check drawn on a bank or trust company which
is a member of the New York Clearing House Association. If any check tendered by
Tenant, for any payment due, shall be dishonored by the payor bank, Tenant shall
pay Landlord, without prejudice to any of Landlord's rights and remedies, in
compensation for the additional administrative, bookkeeping and collection
expense
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incurred by reason of such dishonored check, the sum of $50.00. If Tenant's
payment of any installment of Base Rent or additional rent shall be received by
Landlord more than ten (10) days after such payment is due from Tenant, Tenant
shall be required to pay a late charge of five (5%) percent of the unpaid
installment of the Base Rent or additional rent. Such late charge is intended to
compensate Landlord for additional expense incurred by Landlord in processing
such late payments. Nothing herein shall be intended to violate any applicable
law, code or regulation, and in all instances all such charges shall be
automatically reduced to any maximum applicable legal rate or charge. Such
charge shall be imposed monthly for each late payment. Tenant agrees that the
late charge imposed is fair and reasonable. Tenant further agrees that the late
charge assessed pursuant to this Lease is not interest and the late charge
assessed does not constitute a lender/borrower relationship between Landlord and
Tenant.
SECTION 5. In the event of a default by Tenant in its obligations under
this Lease, beyond applicable grace periods, if any, and provided that such
default occurs within four (4) years of the Commencement Date, in addition to
Landlord's other rights and remedies and to the damages set forth in Article 28
hereof, there shall be immediately payable by Tenant to Landlord, as additional
rent, an amount equal to: all Tenant Leasing Expenses incurred, granted or
assumed by Landlord in connection with the Lease to the extent not otherwise
recovered by Landlord, multiplied by a fraction, the numerator of which is the
amount of days of the Lease Term which remain as of the date of such default and
the denominator of which is the total days of the entire Lease Term. For
purposes of computing the Tenant Leasing Expenses, for the period preceding the
first Rent Year the sum of the rent abatement for Base Rent plus the abatement
for Storage Space Rent is $1,336,571.50, and for the period of the third Rent
Year the sum of the rent abatement for Base Rent plus the abatement for Storage
Space Rent is $891,047.64.
SECTION 6. If the Base Rent or any additional rent shall be or become
uncollectible, reduced or required to be refunded by virtue of any law,
governmental order or regulation, or direction of any public officer or body
pursuant to law (in the nature of a rent freeze or rent restriction), Tenant
shall enter into such agreement(s) and take such other action (without
additional expense to Tenant) as Landlord may reasonably request, as and may be
legally permissible, to permit Landlord to collect the maximum Base Rent and
additional rent which
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may from time to time during the continuance of such legal rent restriction be
legally permissible, but not in excess of the amount of Base Rent or additional
rent payable under this Lease. Upon the termination of such rent restriction
prior to the Expiration Date, (a) the Base Rent and additional rent shall become
and thereafter be payable under the Lease in the amount of the Base Rent and
additional rent set forth in this Lease for the period following such
termination until the Expiration Date, and (b) Tenant shall pay to Landlord, to
the maximum extent legally permissible, an amount equal to (1) the Base Rent and
additional rent which would have been payable pursuant to this Lease, but for
such legal rent restriction, less (2) the Base Rent and additional rent paid by
Tenant during the period that such legal rent restriction was in effect.
SECTION 7. The receipt or acceptance by Landlord of Base Rent and/or
additional rent with knowledge of breach by Tenant of any term, agreement,
covenant, condition or obligation of this Lease shall not be deemed a waiver of
such breach.
SECTION 8. No payment by Tenant or receipt by Landlord of a lesser
amount than the correct Base Rent or additional rent due hereunder shall be
deemed to be other than a payment on account, nor shall any endorsement or
statement on any check or payment or any letter accompanying any check or
payment be deemed to effect or evidence an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance or pursue any other remedy in this Lease or at law provided.
The payment of Base Rent or additional rent by Tenant shall not be deemed a
waiver of Tenant's right to dispute any specific item or items charged to Tenant
as rent by Landlord.
SECTION 9. In the event (i) that the Expiration Date or earlier
termination date of this Lease shall be a day other than the last day of the
Lease Term or (ii) of any increase or decrease in the area of the Demised
Premises (as may be provided herein), then in each such event Tenant's
obligation to pay Base Rent and/or additional rent shall be recomputed and/or
prorated to account for such change in the Expiration Date or the size of the
Demised Premises, as the case may be.
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<PAGE> 21
ARTICLE 4
ESCALATION FOR OPERATING EXPENSES
Tenant agrees to pay to Landlord, in addition to the Base Rent set
forth in Article 3, additional rent resulting from periodic increases in
operating expenses as determined in accordance with this Article.
SECTION 1. In this Article and elsewhere in this Lease, the following
definitions apply:
(A) "Operating Expenses" shall mean $8.00 per square foot, which
is an agreed upon base amount used to calculate the additional rent to be paid
pursuant to this Article.
(B) "Base Operating Expense Amount" shall mean $987,912.00
(Operating Expenses multiplied by the total of 119,524 square feet [of Leased
Floor Space] plus 3,965 square feet [of Storage Space]).
(C) "Base Month" shall be January, 2000.
(D) "Measuring Month" shall be January, 2001 and each January
thereafter during the Lease Term.
(E) "Price Index" shall mean "Consumer Price Index" published by
the Bureau of Labor Statistics of the U.S. Department of Labor, all Items, New
York, New York - Northeastern, New Jersey, for urban wage earners and clerical
workers or a successor or substitute index appropriately adjusted.
(F) "Operational Expense Escalation Statement" shall mean a
statement in writing signed by Landlord and delivered to Tenant each year
setting forth: (i) the Price Index for the Base Month; (ii) the Price Index for
the Measuring Month; (iii) the amount, if any, by which the Price Index for the
Measuring Month exceeds the Price Index for the Base Month; and (iv) if there is
such an excess, an amount equal to the percentage increase of such excess
multiplied by the Base Operating Expense Amount. Landlord, for Tenant's
convenience, shall deliver to Tenant, along with the Operational Expense
Escalation Statement, a copy of the reference source used by Landlord in
preparing the Operational Expense Escalation Statement.
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<PAGE> 22
(G) "Operating Year" shall mean the first day of the calendar
month immediately following the Base Month and each twelve (12) month period
thereafter measured from each anniversary date of the first day of the calendar
month immediately following the Base Month (except that if the period between
the last such anniversary and the Expiration Date in less than twelve (12)
months, then the last Operating Year shall be such lesser period).
SECTION 2. In the event the Price Index for the Measuring Month
reflects an increase over the Price Index for the Base Month, then the Base
Operating Expense Amount shall be multiplied by the percentage difference
between the Price Index for the Measuring Month and the Price Index for the Base
Month, and the resulting amount shall be paid as additional rent by Tenant to
Landlord to the extent that the Price Index for the then current Measuring Month
is not more than ten (10%) percent greater than the Price Index for the previous
year's Measuring Month. If the Price Index for the Measuring Month is more than
ten (10%) percent greater than the Price Index for the previous year's Measuring
Month, Tenant shall pay in addition to the amount required to be paid under the
previous sentence an amount equal to one-half (1/2) of the resulting amount
which exceeds such ten (10%) percent increase.
(A) The following illustrates the intention of the parties hereto
as to the computation of the additional rent pursuant to this Article:
Assuming that the Price Index for the Base Month was 102.0 and
that the Price Index for the Measuring Month was 105.0, then the
percentage increase thus reflected, i.e., 2.94117% (3.0/102.0)
would be multiplied by $987,912.00 (the Base Operating Expense
Amount), and the additional rent would be $29,056.17.
(B) In the event that the Price Index ceases to use 1982-1984 =
100 as the basis of calculation, or if a substantial change is made in the terms
or number of items contained in the Price Index, then the Price Index shall be
adjusted to a figure that would have been arrived at had the manner of computing
the Price Index in effect at the date of this Lease not been altered. In the
event such Price Index (or a successor or substitute index) is not available, a
reliable governmental or other non-partisan publication evaluating the
information theretofore used in determining the Price Index shall be used. No
adjustments or recomputations, retroactive
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<PAGE> 23
or otherwise shall be made due to any revision that may later be made in the
first published figure of the Price Index for any month.
SECTION 3. The additional rent in this Article 4 shall be paid by
Tenant to Landlord as follows:
(A) The additional rent due and owing hereunder for the Operating
Year immediately following the Base Month shall be payable by Tenant to Landlord
on or before the later of (1) the last day of the month immediately following
the first Measuring Month, or (2) thirty (30) days after Landlord shall furnish
Tenant with an Operational Expense Escalation Statement detailing the manner in
which Tenant's additional rent was computed.
(B) The additional rent owing hereunder for all subsequent
Operating Years shall be paid by Tenant to Landlord as herein set forth. Prior
to the commencement of each subsequent Operating Year, the Landlord shall
reasonably estimate Tenant's share of additional rent to be due and owing
Landlord during such Operating Year and furnish Tenant with written notice of
such estimate. Tenant shall thereafter pay to Landlord, on the first day of each
month during the Operating Year, one-twelfth (1/12) of the Landlord's estimated
amount. Within thirty (30) days after the end of each Operating Year, or as soon
thereafter as practicable, Landlord shall deliver to Tenant an Operational
Expense Escalation Statement for the Operating Year just ended. If such
Operating Expense Escalation Statement evidences that Tenant has underpaid the
amount of additional rent due and owing during the Operating Year, even after
having made the estimated payments outlined herein, then in such event, Tenant
shall pay the amount of such underpayment to Landlord as additional rent within
ten (10) days after Tenant's receipt of the Operating Expense Escalation
Statement. If Tenant has overpaid the amount of additional rent owing pursuant
to this provision, and Tenant is not in default under this Lease, Landlord shall
credit Tenant the amount of such overpayment against the next month's rent owed
by Tenant; provided, that in the case of an overpayment for the final Operating
Year, Landlord shall refund such overpayment to Tenant within ten (10) days
following the delivery of the Operational Expense Escalation Statement for the
final Operating Year.
SECTION 4. Every Operational Expense Escalation Statement given by
Landlord to Tenant as set forth herein shall be conclusive and binding upon
Tenant unless (a) within
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<PAGE> 24
ten (10) days after the receipt of such statement, Tenant shall notify Landlord
that it disputes the correctness thereof, specifying the particular respects in
which such statement is claimed to be incorrect, and (b) if such dispute shall
not have been settled by agreement, the parties shall submit the dispute to
arbitration within thirty (30) days after receipt of such statement. Pending the
determination of such dispute by agreement or arbitration as aforesaid, Tenant
shall, within ten (10) days after receipt of the Operational Expense Escalation
Statement, pay additional rent in accordance with such statement and such
payment shall be without prejudice to Tenant's position. If the dispute shall be
determined in Tenant's favor, Landlord shall forthwith pay Tenant the amount of
Tenant's overpayment of rents resulting from compliance with the Operational
Expense Escalation Statement, with interest thereon from the date of Landlord's
receipt of such overpayment in an amount equal to two hundred (200) basis points
over the prime rate in effect, as reported in The Wall Street Journal, until
paid.
SECTION 5. In no event shall Base Rent originally provided to be paid
under this Lease be reduced by virtue of this Article.
SECTION 6. The computations of additional rent under this Article are
intended to constitute a formula for an agreed rental adjustment and may or may
not constitute an actual reimbursement to Landlord for costs and expenses paid
by Landlord with respect to the Building and Complex (as defined in this Lease).
ARTICLE 5
ELECTRICITY
SECTION 1. As an incident to this Lease, after the Commencement Date, Landlord
shall furnish to Tenant electric current at the Electric Energy Charge to be
used by Tenant in, or in connection with, the lighting fixtures and Tenant's
ordinary office equipment to be installed in the Demised Premises, exclusive of
such instrumentalities for electricity and/or HVAC so located in the Operations
Center and After Hours HVAC so located in the Executive Center which are to be
separately submetered as further referenced in Section 5 of this Article 5 and
Section 1 of Article 7 hereof. The term "ordinary office equipment" as used
throughout this Article shall include, but shall not be limited to, computers
(provided the same does not constitute a mainframe operation), computer
printers, facsimile machines and copiers. The
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Electric Energy Charge does not include heating, ventilating, and
air-conditioning furnished to the Demised Premises through the Building's
heating, ventilating, and air conditioning system(s) during Standard Business
Hours, which is an operating expense of Landlord. The Electric Energy Charge
shall be deemed additional rent and, in the event of any non-payment thereof,
Landlord shall have all rights and remedies provided for herein or by law for
non-payment of rent. Tenant shall pay Landlord the Electric Energy Charge in
equal monthly installments of $19,295.16, or such greater amount if Tenant opts
to lease additional space pursuant to Article 34 hereof, simultaneously with the
payment of Base Rent under this Lease, provided, however, that: (i) Tenant shall
pay Landlord $19,295.16 on the first day of each month prior to the commencement
of the first Rent Year (except that if the Commencement Date is other than on
the first day of a calendar month, the first monthly installment, prorated to
the end of said calendar month, shall be payable on the Commencement Date); (ii)
Tenant shall pay Landlord the Electric Energy Charge in monthly installments of
$19,295.16, or such greater amount if Tenant opts to lease additional space
pursuant to Article 34 hereof, on the first day of each of the four months
during the third Rent Year where there is a Base Rent abatement as provided in
Section 2 of Article 3 and Section 2 of Article 42 of this Lease; and (iii)
until the date Landlord tenders the First Floor Demised Premises to Tenant,
Tenant shall pay Landlord the Electric Energy Charge in monthly installments of
$18,170.16, calculated by reducing the number of square feet attributable to the
First Floor Demised Premises, deemed to be 7,200 square feet (except that if the
Commencement Date is other than on the first day of a calendar month, the first
monthly installment, prorated to the end of said calendar month, shall be
payable on the Commencement Date). Upon the first day of the month following
completion of all Tenant's Work pertaining to the Operations Center, under
Article 2, as well as completion of all submetering of the Operations Center,
under Article 5, Section 5, the amount of square footage used for calculating
the monthly installments of the Electric Energy Charge under this Section 1
shall be reduced by the amount of square footage of the Operations Center.
However, at any time and from time to time during the Lease Term, provided it is
then permissible under the provisions of law and requirements of all applicable
authorities, Landlord shall have the option to have electricity supplied to the
Demised Premises in accordance with either Section 5 or 6, in which event Tenant
shall pay for electricity as provided in accordance with either Section 5 or 6
in lieu of paying the Electric Energy Charge. Landlord may require specific
parts of the
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Demised Premises or items in the Demised Premises including, but not limited to
extraordinary office equipment and separate HVAC systems to be submetered in
which case, Tenant shall pay the submeter charge for such item or items in
accordance with Section 5 in addition to its obligation to pay the Electric
Energy Charge.
SECTION 2. Tenant's use of electric energy in the Demised Premises
shall not at any time exceed the capacity of any of the electrical conductors
and equipment in or otherwise servicing the Demised Premises. Landlord
represents that the present electric capacity available is 6 watts per rentable
square foot connected load.
SECTION 3. For the purposes of this Article 5:
(A) The term "Electric Rate" shall mean the greater of either:
(i) the Service Classification pursuant to which Landlord purchases electricity
from the utility company servicing the Building, or (ii) the Service
Classification pursuant to which Tenant would purchase electricity directly from
the utility company servicing the Building provided, however, at no time shall
the amount payable by Tenant for electricity be less than Landlord's "Cost per
Kilowatt" and "Cost per Kilowatt Hour" (as such terms are hereinafter defined),
and provided further that in any event, the Electric Rate shall include all
applicable surcharges, and demand, energy, fuel adjustment and time of day
charges, taxes and other sums payable in respect thereof.
(B) The term "Cost per Kilowatt Hour" shall mean the total cost
for electricity incurred by Landlord to service the Building during a particular
time period (including all applicable surcharges, and energy, fuel adjustment
and time of day charges (if any), taxes and other sums payable in respect
thereof) divided by the total kilowatt hours purchased by Landlord during such
period.
(C) The term "Cost per Kilowatt" shall mean the total cost for
demand incurred by Landlord to service the Building during a particular time
period (including all applicable surcharges, demand and time of day charges (if
any), taxes and other sums payable in respect to thereof) divided by the total
kilowatts purchased by Landlord during such period.
SECTION 4. With respect to electrical energy consumed by Tenant at the
Electric Energy Charge:
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(A) Landlord shall redistribute or furnish electricity to the
Demised Premises through presently installed electrical facilities in such
reasonable quantities as may be required by Tenant for Tenant's reasonable use
of such ordinary office equipment and lighting to be installed in the Demised
Premises after the Commencement Date. At any time during the Lease Term, but not
to exceed once per Rent Year, Landlord, at Tenant's sole cost and expense, may
cause an independent electrical engineer or electrical consulting firm selected
by Landlord (hereinafter referred to as the "Engineer") to make a survey of
Tenant's electrical equipment located in the Demised Premises, and the use
thereof, to determine if the full value of electricity furnished to the Demised
Premises exceeds the Electric Energy Charge. Such determination shall take into
account, among other things, any special electrical requirements of Tenant and
the use by Tenant of electrical energy After Hours (as defined in this Lease),
except air conditioning use After Hours which is being paid for separately. If
the value of such electricity (applying the Electric Rate to Tenant's usage)
exceeds the Electric Energy Charge, Landlord shall furnish a copy of said survey
to Tenant, and Landlord shall adjust the Electric Energy Charge in accordance
with the survey and the Electric Rate, or Cost per Kilowatt and Cost per
Kilowatt Hour.
(B) If, on the Commencement Date or at any time during the Lease Term,
Tenant desires to install in the Demised Premises equipment which would not be
considered ordinary office equipment, including, but not limited to, items such
as computer installations (other than local or wide area networks and other
servers), supplemental air-conditioning systems, or other heat or cooling
intensive electrically operated equipment (excepting therefrom ordinary office
equipment), Tenant shall submit to Landlord a list indicating the specific type
of additional equipment, and the number, type and model of each item of
equipment to be installed, as well as the manufacturer's electrical rating
associated with same. If Landlord consents to the installation of such
additional equipment, Landlord, at Tenant's cost and expense, subsequent to or
simultaneously with the installation thereof, may either (a) cause the Engineer
to make a survey of such additional equipment in accordance with the provisions
of clause A of this Section 4, and in the event such survey shows that the value
of electricity exceeds the Electric Energy Charge, may increase the Electric
Energy Charge appropriately, or (b) install a submeter to record Tenant's
consumption of and demand for electricity within the Demised Premises and in
that event the provisions of Section 5 of this Article shall apply. The
determinations of the
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Engineer shall be conclusive and binding upon Landlord and Tenant. Any increase
in the Electric Energy Charge resulting from an increase in Tenant's consumption
of electricity or the addition of electrical equipment or appliances shall be
effective as of the date of such increase or addition, retroactive if necessary.
Following the determination of an increase in the Electric Energy Charge
pursuant to any of the provisions of this Article 5, Landlord and Tenant shall,
upon the request of either party, execute, acknowledge and deliver to each other
a supplemental agreement in such form as Landlord shall reasonably require to
reflect such increase, but any such change shall be effective even in the
absence of such confirmatory agreement.
(C) If, at any time or times after the execution of this Lease,
the Electric Rate shall be increased or decreased, then effective immediately,
the Electric Energy Charge shall be increased or decreased, as the case may be,
in an amount which fairly represents the estimated increase or decrease.
Notwithstanding anything herein to the contrary, under no circumstances shall
the Electric Energy Charge be less than the amount set forth in Section 1 of
this Article.
SECTION 5. (A) Landlord agrees to permit Tenant to submeter the
instrumentalities for electricity and HVAC located in the Operations Center as
well as, the instrumentalities for After Hours HVAC located in the Executive
Center (the "Submetered Premises"). The cost for establishing such submetering
shall not constitute part of Tenant's Work as set forth in Article 2 hereof and
Tenant shall pay to Landlord the cost of installing the submeters therefor
(computed at Landlord's Charge as defined in this Lease), and Tenant shall pay
to Landlord, as additional rent, the sum of (i) an amount determined by applying
the Electric Rate or, at Landlord's election, the Cost per Kilowatt Hour and
Cost per Kilowatt, to Tenant's consumption of and demand for electricity within
the Submetered Premises for the uses and at the times set forth in this section
as recorded on the submeter or submeters servicing the Submetered Premises, and
(ii) Landlord's overhead and administrative charge of ten (10%) percent of the
amount referred to in clause (i) above, if and to the extent same is permitted
by laws and requirements of public authorities (such combined sum being
hereinafter called "Electric Submeter Charge"). Landlord shall cause Tenant's
electric submeter(s) to be read at regular intervals. Upon receipt by Landlord
of an invoice from the utility company supplying electricity to the Building,
Landlord shall bill Tenant in accordance with the foregoing. In the event that
the periods covered by the utility company meter reading and Landlord's reading
of Tenant's submeter are not the same and
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any change in the Electric Rate, Cost per Kilowatt Hour or Cost per Kilowatt
(whichever Landlord has elected to use in accordance with this Article 5) should
occur during that time when the periods are not the same, then Landlord shall
make an appropriate adjustment on its bill. Except as set forth in the foregoing
clause (ii), Landlord will not charge Tenant more than the Electric Rate or, at
Landlord's election, the Cost per Kilowatt and Cost per Kilowatt Hour for the
electricity provided pursuant to this Section 5 (A). Landlord and Tenant further
agree that should Landlord consent to Tenant's submetering of additional
portions of the Demised Premises, the costs, terms and conditions applicable to
such additional submetering shall be as set forth in this Section 5 of Article 5
and other applicable sections of this Lease concerning such additional premises.
(B) Where more than one submeter measures the electric service to
Tenant, the electric service rendered through each submeter shall be computed
and billed separately in accordance with the provisions hereinabove set forth.
(C) For any period during which the submeter(s) servicing the
Submetered Premises are inoperative, the Electric Submeter Charge shall be
determined by Landlord, based upon its reasonable estimate of Tenant's actual
consumption of and demand for electricity, and the Electric Rate or Cost per
Kilowatt and Cost per Kilowatt Hour then in effect.
SECTION 6. If at any time during the Lease Term Landlord shall decide
to cease furnishing electricity to Tenant and so notifies Tenant, Tenant shall
make its own arrangements to obtain electricity directly from the utility
company furnishing electricity to the Building. If Landlord decides to cease
furnishing electricity to Tenant, Landlord shall give Tenant at least thirty
(30) days prior notice. Upon the expiration of the aforesaid thirty (30) days
notice, Landlord may discontinue furnishing electricity to Tenant, in which
event, Tenant's liability for the Electric Energy Charge shall terminate as of
said date of discontinuance, but this Lease shall otherwise remain in full force
and effect and Landlord shall have no liability to Tenant by reason of
Landlord's discontinuance of the furnishing of electricity. The cost of such
service shall be paid by Tenant directly to such utility company. Landlord shall
permit its electric feeders,
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risers and wiring serving the Demised Premises to be used by
Tenant, to the extent available, safe and capable of being used for such
purpose. All meters and all additional panel boards, feeders, risers, wiring and
other conductors and equipment which may be required to enable Tenant to obtain
electricity of substantially the same quality and character, shall be installed
by Landlord at Tenant's cost and expense.
SECTION 7. Intentionally omitted.
SECTION 8. (A) Bills for electricity supplied pursuant to Sections 5
and 6 and 7 shall be rendered to Tenant monthly, along with the bill for the
Base Rent. Tenant's payments for such electricity shall be due and payable
within ten (10) days after delivery of a statement therefor by Landlord to
Tenant. If any tax is imposed upon Landlord's receipts from the sale of
electricity to Tenant by laws and requirements of public authorities, Tenant
agrees that, unless prohibited by such laws and requirements of public
authorities, the pro rata share of such taxes allocable to the electrical energy
service received by Tenant shall be included in the bills of, and paid by Tenant
to Landlord, as additional rent.
(B) Landlord's failure during the Lease Term to prepare and
deliver any statements or bills under this Article, or Landlord's failure to
make a demand under this Article, shall not in any way be deemed to be a waiver
of, or cause Landlord to forfeit or surrender, its rights to collect any amount
of additional rent which may become due pursuant to this Article. Tenant's
liability for any amounts due under this Article shall survive the expiration or
sooner termination of the Lease Term, provided that Landlord bills Tenant for
such additional rent amounts within sixty (60) days after the expiration or
sooner termination of the Lease Term. Payment shall not be deemed to be late
until more than ten (10) days after delivery of a statement or bill therefor, by
Landlord to Tenant.
(C) Tenant's failure or refusal, for any reason, to utilize the
electrical energy provided by Landlord, shall not entitle Tenant to any
abatement or diminution of Base Rent or additional rent, or otherwise relieve
Tenant from any of Tenant's obligations under this Lease.
(D) If either the quantity or character of the electrical service
is changed by the utility company supplying electrical service to the Building
or is no longer available or suitable for Tenant's requirements, or if there
shall be a change, interruption or termination of electrical service due to a
failure or defect on the part of the utility company, no such change,
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unavailability, unsuitability, failure or defect shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any payment
from Landlord for any loss, damage or expense, or to abatement or diminution of
Base Rent or additional rent, or otherwise relieve Tenant from any of its
obligations under this Lease, or impose any obligations upon Landlord or its
agents, and Landlord shall not in any way be liable or responsible to Tenant for
any loss or damage or expense which Tenant may sustain or incur by reason of
such change, interruption, or termination. Landlord will use best efforts to
insure that there is no interruption in electrical service to Tenant, but in no
event shall Landlord be responsible for any failures of the utility providing
such service or the negligence or other acts of third parties causing any such
interruption. Nothing herein is intended nor shall it constitute a waiver of any
claim that Tenant may have against the utility company or any other person or
institution.
(E) Tenant shall not make any electrical installations,
alterations, additions or changes to the electrical equipment or appliances in
the Demised Premises without the prior written consent of Landlord in each such
instance, except that Tenant can install, alter, add or change such ordinary
office equipment and lighting as shall not exceed the existing capacity of the
electrical system. Tenant shall comply with the rules and regulations applicable
to the service, equipment, wiring and requirements of Landlord and of the
utility company supplying electricity to the Building. Tenant agrees that its
use of electricity in the Demised Premises will not exceed the capacity of
existing feeders to the Building or the risers or wiring installations therein
and Tenant shall not use any electrical equipment which, in Landlord's
reasonable judgment, will overload such installations and interfere with the use
thereof by other tenants in the Building.
(F) If, (i) Tenant shall request the installation of additional
risers, feeders or other equipment or service to supply its electrical
requirements and Landlord shall determine that the same are necessary and will
not cause damage or injury to the Building or the Demised Premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants or
occupants of the Building, or (ii) Landlord shall determine that the
installation of additional risers, feeders or other equipment or service to
supply Tenant's electrical requirements is necessary, then and in either of such
events, Landlord shall cause such installations to be made,
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at Tenant's sole cost and expense, and Tenant shall pay Landlord for such
installations, as additional rent, within ten (10) days after submission of a
statement therefor.
ARTICLE 6
BUILDING SERVICES
SECTION 1. Landlord shall make the following amenities available at the
Complex to Tenant:
(A) a Self-Service Cafeteria, and a Cardiovascular Fitness Center
(each, a "Basic Service," and collectively, the "Basic Services"); and
(B) the Auditorium, the red brick structure currently designated
as the "Apartments" and located at the entrance driveway to the Complex,
Service/Private Dining Rooms A, B, C, and D, a Library/Information Center in
sub-basement of the Building, Training Rooms "A" and "B" on the Terrace Level of
the Building, Copy Center, Notions Shop, Dry Cleaners, Travel Agency, Barber
Shop, ATM Machine and Credit Union (each an "Optional Service", and
collectively, the "Optional Services").
The Basic Services and Optional Services shall be available to Tenant
at prices and at a standard no less favorable than the Basic Services and the
Optional Services are from time to time available to Texaco Inc. or its
Affiliates occupying space in the Building. If Texaco Inc. or its Affiliates
cease to occupy space in the Building or Texaco Inc. or an Affiliate of Texaco
Inc. ceases to be the Landlord, the Basic Services and the Optional Services
shall be available to Tenant at prices and at a standard no less favorable than
is customary in Westchester County for tenant-occupied first class office
buildings of comparable square footage to the Building, but in no event shall
such prices be in excess of that charged to any other tenant or occupant of the
Building for such services.
SECTION 2. The Basic Services and the Optional Services shall be
available to Tenant for the entire Lease Term, provided that Landlord may at its
option discontinue any Optional Service to Tenant without reduction in rent or
other liability to Tenant if no other tenant or occupant of the Building,
including Texaco Inc. and Affiliates of Texaco Inc., is entitled to receive such
service from Landlord.
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SECTION 3. As long as Landlord makes the Basic Services available to
Tenant, Tenant may not utilize space in the Demised Premises for a cafeteria
(but nothing herein prohibits the kitchenette and vending machines permitted in
Section 3 of Article 9) or for a fitness center or gym.
SECTION 4. Landlord shall furnish reasonably adequate quantities of
domestic water to the floor or floors on which the Demised Premises are located
for drinking, lavatory, toilet, dishwasher and ordinary cleaning purposes. If
Tenant requires, uses or consumes water for any purpose in addition to ordinary
lavatory, drinking and cleaning purposes, Landlord may install a water meter and
thereby measure Tenant's consumption of water for all purposes. Tenant shall pay
to Landlord the cost of any such meter and its installation, and Tenant, at
Tenant's sole cost and expense, shall keep any such meter in good working order
and repair. Tenant agrees to pay for water consumed as shown on such meter, and
sewer charges thereon, as and when bills are rendered. If Tenant uses hot water
for other than lavatory or kitchenette purposes, Tenant shall pay for same at
the rate of four (4) times the metered charges for cold water.
SECTION 5. Landlord shall keep clean, and in good order and repair, the
public areas and the public facilities of the Complex.
SECTION 6. Landlord shall provide public elevator services to the
floor(s) on which the Demised Premises are situated during Standard Business
Hours, and shall have at least one (1) elevator subject to call at all other
times. The elevator(s), or any or all of them, if more than one, may be operated
by automatic control, and/or by manual control, as Landlord shall determine at
any time or from time to time. Landlord shall not be obligated to furnish an
operator for any automatic elevator and shall have no liability to Tenant for
discontinuing the service of any operator theretofore furnished.
SECTION 7. (A) Provided that Tenant shall keep the Demised Premises in
good order, Landlord shall cause the Demised Premises, including the exterior
and the interior of the windows thereof (subject to Tenant maintaining
unrestricted access to such windows), but excluding any portions of the Demised
Premises used for the storage, preparation, service or consumption of food or
beverages, to be cleaned in accordance with and to the extent of the standards
set forth in a certain schedule of Cleaning Specifications annexed hereto and
hereby
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made a part hereof as Exhibit "D". Tenant will not clean, nor require, permit,
suffer or allow any window in the Demised Premises to be cleaned from the
outside. Tenant shall pay to Landlord on demand the reasonable costs incurred by
Landlord for (a) cleaning work in the Demised Premises or the Building or
otherwise on or about the Complex required because of (1) misuse or neglect on
the part of Tenant or its agents, employees, contractors, subcontractors or
visitors, (2) use of portions of the Demised Premises for preparation, serving
or consumption of food or beverages, reproducing operations, data processing or
computer operations which are not incidental to Tenant's primary business,
private lavatories or toilets or other special purposes requiring greater or
more difficult cleaning work other than office area, (3) interior glass surfaces
other than exterior windows, (4) non-Building Standard materials or finishes
installed by Tenant or at its request, (5) increases in frequency or scope in
any of the items set forth in Exhibit "D" as shall have been requested by
Tenant, and (b) removal from the Demised Premises and the Building of (1) so
much of any refuse and rubbish of Tenant as shall exceed that normally
accumulated daily in the routine or ordinary business office occupancy and (2)
all of the refuse and rubbish of Tenant's machines and the refuse and rubbish of
any eating facilities requiring special handling (known as "Wet Garbage").
Landlord and its cleaning contractor and their employees shall during hours
other than Standard Business Hours have access to the Demised Premises and the
use of Tenant's light, power and water in the Demised Premises as may be
reasonably required for the purpose of cleaning the Demised Premises.
Extraordinary waste (such as crates, cartons (other than supply cartons and
other cartons as are usual in normal office use), boxes, etc., and used
furniture or equipment) shall be removed from the Building by Tenant at Tenant's
own cost and expense. At no time shall Tenant place any waste of any kind in any
public areas. If Tenant does so, the parties agree that everything so placed
shall be deemed abandoned and of no value to Tenant and Landlord may have the
same removed and disposed of at Tenant's expense. Such expense shall be deemed
additional rent payable by Tenant within fifteen (15) days after being billed
therefor. This remedy is in addition to any other remedies Landlord may have
under this Lease.
(B) Tenant is permitted hereunder to have separate kitchenette
areas for the storage, preparation, service or consumption of food or beverages
in the Demised Premises and Landlord, at Tenant's expense, shall cause all
portions of the Demised Premises so used to be
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cleaned daily in a manner satisfactory to Landlord, and to be exterminated
against infestation by vermin, roaches or rodents regularly and, whenever there
shall be evidence of any infestation.
SECTION 8. Landlord reserves the right, without any liability to
Tenant, except as otherwise expressly provided in this Lease, and without being
in breach of any covenant of this Lease, to stop, interrupt, or suspend service
of any of the heating, ventilating, air conditioning, electric, sanitary,
elevator or other Building systems serving the Demised Premises, or the
rendition of any other services required of Landlord under this Lease, whenever
and for so long as may be necessary, by reason of accidents, emergencies,
mechanical breakdowns, the making of repairs or changes which Landlord is
required by this Lease or by law to make, or by reason of difficulty in securing
proper supplies of fuel, steam, water, electricity, labor or supplies, or by
reason of Events of Force Majeure. In each instance Landlord shall use best
efforts to eliminate the cause of stoppage and to effect restoration of service
and shall give Tenant reasonable notice, when practicable, of the commencement
and anticipated duration of such stoppage, and if any work is required to be
performed in or about the Demised Premises for such purpose, such work shall be
performed in a manner as, to the extent practicable, will not unreasonably
interfere with Tenant's use and occupancy of the Demised Premises. Landlord
shall have no responsibility or liability to Tenant by reason of any
interruption, stoppage, or suspense of any of the Building systems or services
arising out of the causes set forth in this Section. In the event that the
stoppage, interruption or suspension prevents Tenant from conducting its
business in the ordinary course for thirty (30) consecutive days, Tenant shall
be entitled to an abatement of its rent commencing on the 31st day and
continuing until such Building system is restored, provided, however, that if
such stoppage, interruption or suspension shall continue for one hundred eighty
(180) consecutive days, Tenant shall have the right, upon written notice of not
less than thirty (30) days, to terminate this Lease whereupon the rights and
obligations of both parties shall cease and terminate as of the designated Lease
Termination Date, and neither party shall have any further obligation or
responsibility to the other.
SECTION 9. Landlord shall not be required to furnish any other
services, including but not limited to window or other cleaning services, except
as expressly provided in this Lease, including the exhibits to this Lease which
are made a part hereof.
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ARTICLE 7
HEAT, VENTILATING AND AIR CONDITIONING
SECTION 1. Subject to Section 8 of Article 6 hereof, Landlord shall
furnish to the Demised Premises through the Building heating, ventilating and
air conditioning system(s) heated, outside and conditioned air, during Standard
Business Hours based upon, and meeting the standards of The American Society of
Heating, Refrigeration and Air-Conditioning Engineers for commercial office
buildings. The foregoing performance specifications shall be subject to said
systems being balanced by Landlord at reasonable periods of time. Landlord shall
maintain and operate such systems and shall furnish heat, ventilation and
air-conditioning in the Demised Premises through such systems, subject to
Section 8 of Article 6, in compliance with such performance specifications,
during Standard Business Hours. Upon reasonable advance notice from Tenant, by
Tenant's call to Landlord's employee stationed at the console desk in the
Building, Landlord shall furnish heating, cooling or ventilating service at any
time other than Standard Business Hours (hereinafter called "After Hours").
Tenant shall pay Landlord as additional rent and upon rendition of a bill
therefor, $175.00 per hour for such services ("After Hours HVAC Charge"). The
After Hours HVAC Charge does not apply to that portion of the Submetered
Premises, as defined by Section 5 of Article 5 hereof, for which Tenant is
obligated to pay for electricity used After Hours for heating, ventilating and
air conditioning of the Operations Center and Executive Center in accordance
with Section 5 of Article 5 hereof. The After Hours HVAC Charge shall be subject
to adjustment upward from time to time based on Landlord's reasonable estimate
of the cost of providing such services, provided, however, that such adjustment
shall never exceed the amount arrived at by multiplying the After Hours HVAC
Charge by the percentage difference between the Price Index for the month in
which Landlord is seeking to make such adjustment and the Price Index for the
Base Month.
SECTION 2. Any damage caused to the heating, air conditioning, and
ventilating equipment, or appurtenances as a result of the negligence of, or
careless operation of the same by, Tenant or its agents, servants, employees,
licensees, invitees, or visitors shall be repaired by Landlord, and the cost and
expense thereof shall be paid by Tenant, as additional rent, within ten (10)
days after being billed therefor.
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SECTION 3. Notwithstanding the foregoing provisions of this Section,
Landlord shall not be responsible if the normal operation of the heating, air
conditioning and ventilation systems shall fail to provide heated and outside
air at reasonable temperatures, pressures or degrees of humidity or in
reasonable volumes or velocities in any portion of the Demised Premises (i)
which shall have an electrical load in excess of six (6) watts per rentable
square foot connected load, or which shall have a human occupancy factor in
excess of one (1) person per two hundred fifty (250) square feet of usable area
(the average electrical load and human occupancy factors for which the air
conditioning systems are designed), or (ii) because of any rearrangement of
partitioning or other improvements made or performed by or on behalf of Tenant
or any person claiming through or under Tenant, or because part of the Demised
Premises is used other than for offices (including, without limitation,
conference rooms, computer rooms, equipment rooms and kitchens) where the heat
release, heat variation or personnel occupancy is greater than in normal office
space. If due to use of the Demised Premises in a manner exceeding the
aforementioned occupancy and electrical load criteria, or due to rearrangement
of partitioning after the initial preparation of the Demised Premises,
interference with normal operation of the air conditioning in the Demised
Premises results, necessitating changes in the air conditioning system servicing
the Demised Premises, such changes shall be made by Landlord upon written notice
to Tenant at Tenant's sole cost and expense. Landlord, throughout the Lease
Term, shall have free and unrestricted access to any and all air conditioning
facilities in the Demised Premises, as needed.
SECTION 4. Landlord and Tenant agree to operate the heating, air
conditioning and ventilating equipment in accordance with their design criteria
unless a recognized and applicable energy conservation law, program, guideline,
regulation or recommendation promulgated by any Federal, State, City or other
governmental or quasi-governmental bureau, board, department, agency, office
commission or other subdivision thereof or the American Society of Heating,
Refrigeration and Air Conditioning Engineers, Inc. or any successor thereto or
other organization serving a similar function shall provide for any reduction in
operations below said design criteria, in which case such equipment shall be
operated so as to provide reduced service in accordance with such law, program,
guideline, regulation or recommendation.
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ARTICLE 8
PARKING
SECTION 1. With respect to parking of vehicles:
(A) Landlord represents that throughout the Lease Term there will
be a paved, underground, illuminated parking area for Tenant's use at the
Building. Tenant shall be entitled to use 478 underground parking spaces in the
main underground parking garage adjacent to the Building ("Tenant's Parking
Spaces") which will be available to Tenant on a "first come, first serve" basis.
Tenant's employees shall have access to the underground parking garage 24 hours
a day, 7 days a week and 52 weeks per year. Tenant shall be entitled to such
additional parking spaces, as shall be computed at a rate of 4 parking spaces
per 1000 square feet of Leased Floor Space should Tenant exercise its right to
lease the Expansion Space and/or Additional Expansion Space as further set forth
in Article 34 of this Lease. Landlord shall deliver parking permits to Tenant in
an amount reasonably sufficient for Tenant to properly conduct its business,
which parking permits shall be placed in Tenant's and Tenant's employees'
automobiles. Said parking permits will serve as evidence of Tenant's entitlement
to Tenant's Parking Spaces and access to Tenant's Parking Spaces will be limited
only to those automobiles displaying such parking permits. The location of
Tenant's Parking Spaces shall be determined by Landlord who reserves the right
at all times to redesignate parking areas around the Building, but in all events
such location shall be reasonably proximate to the Demised Premises and shall be
subject to any applicable statute, law, ordinance, rule or regulation with
respect to handicapped access. Tenant's guests, visitors and invitees will be
authorized to park in the circle in front of the Building, or should there be no
availability in said parking circle, then Tenant's guests, visitors and invitees
shall park in the outdoor auxiliary lot on a first come first serve basis.
Tenant's, employees, guests, visitors and invitees shall not at any time park
any trucks or delivery vehicles in any of the parking areas. Tenant shall be
responsible for repairing damage to the parking areas caused by Tenant or its
employees, guests, visitors or invitees.
(B) Monthly Parking in addition to that provided in the preceding
paragraph shall be provided to Tenant upon Tenant's request, subject to
availability as determined by Landlord. In consideration thereof, Tenant shall
pay Landlord additional rent of $75.00 per month for each space. If Tenant or
its employees use more than the specified number of spaces
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set forth above, then after ten (10) days notice from Landlord, Tenant shall, at
the option of Landlord, either (i) pay $75.00 per month for each additional
space used for each month during which such excess use takes place (even if for
less than the full month), or (ii) cease and desist immediately from using said
additional spaces. If Landlord selects the first of such options, Landlord may
revoke such choice on 30 days notice, and Tenant shall cease and desist
immediately from using such additional spaces.
(C) Tenant shall require its employees, guests, visitors and
invitees to park only in areas designated by Landlord and not to obstruct the
parking areas of other tenants. Tenant shall, upon request, furnish to Landlord
the license numbers of the automobiles operated by Tenant, its executives and
other employees. Landlord may use any lawful means to enforce the parking
regulations established pursuant to this Article, including, but not limited to,
the towing away of improperly parked or unauthorized cars and pasting of warning
notices on car windows and windshields. Landlord may temporarily close any
parking area in order to make repairs or changes, to prevent the acquisition of
public rights, or to discourage unauthorized parking. Landlord may do such other
acts in and to such areas as, in its reasonable judgment, may be desirable to
improve same, provided that Tenant's operations are not unreasonably interfered
with.
ARTICLE 9
USE, BUILDING NAME AND TENANT IDENTIFICATION
SECTION 1. Tenant shall use and occupy the Demised Premises only as its
general business offices, including, without limitation, communication
facilities incidental thereto and for no other purpose, commensurate with the
character and dignity of the Building as a first-class office building
("Permitted Use").
SECTION 2. Tenant shall not permit the Demised Premises to be used in
any manner, or anything to be done therein or brought into or kept therein which
would in any way: violate any of the provisions of any grant, lease, or mortgage
to which this Lease is subordinate provided that no such grant, lease or
mortgage shall restrict or restricts the Permitted Use; violate any laws or
requirements of public authorities; make void or voidable any fire or liability
insurance policy then in force with respect to the Building; make unobtainable,
or more expensive, from reputable
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insurance companies authorized to do business in New York State at standard
rates any fire insurance with extended coverage, or liability, elevator or
boiler or other insurance required to be furnished by Landlord under the terms
of any lease or mortgage to which this Lease is subordinate; cause physical
damage to the Building or any part thereof; constitute a public or private
nuisance; impair in the reasonable opinion of Landlord the appearance, character
or reputation of the Building; result in members of the general public loitering
in, on, or about the Building or the Complex; discharge objectionable fumes,
vapors or odors into the air conditioning system or into flues or vents not
designed to receive them or otherwise in such manner as may unreasonably offend
other occupants; impair or interfere with any of the building services or the
proper economic heating, cleaning, air conditioning or other servicing of the
Building or the Demised Premises or impair or interfere with or tend to impair
or interfere with the use of any of the other areas of the Complex by, or
occasion discomfort, annoyance or inconvenience to, Landlord or any of the other
tenants or occupants of the Building. The provisions of this Section, and the
application thereof, shall not be deemed to be limited in any way to or by the
provisions of any of the other Sections of this Article or any of the rules and
regulations referred to in Article 26 or Exhibit "C" attached hereto, except as
may therein be expressly otherwise provided.
SECTION 3. The "Permitted Use" of the Demised Premises for the purposes
specified in Section 1 hereof shall not in any event be deemed to include, and
Tenant shall not use, or permit the use of, the Demised Premises or any part
thereof for: sale of, or traffic in, any spirituous liquors, wines, ales or beer
kept in the Demised Premises; sale at retail of any other products or materials
kept in the Demised Premises, by vending machines or otherwise, or
demonstrations to the public, except as may be specifically agreed to by
Landlord in writing; manufacturing, printing or electronic data processing,
except for the operation of normal business office reproducing and printing
equipment, business machines and electronic data processing equipment incidental
to the conduct of Tenant's business and for Tenant's own requirements at the
Demised Premises; provided that, such use shall not exceed that portion of the
mechanical or electrical capabilities of the Building equipment allocable to the
Demised Premises; the rendition of medical, dental or other diagnostic or
therapeutic services; the conduct of a public auction or assembly of any kind
(except as is incidentally required in the conduct of Tenant's normal business
activity); the conduct of a banking, trust company, savings bank, safe
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deposit, savings and loan association or loan company business; the issuance and
sale of traveler's checks, foreign drafts, letters of credit, foreign exchange
or domestic money orders (except as is incidentally required in the conduct of
Tenant's normal business activity); the receipt of money for transmission
(except as is incidentally required in the conduct of Tenant's normal business
activity); a restaurant, bar, or the sale of confectionery, tobacco, newspapers,
magazines, soda, beverages, sandwiches, ice cream, baked goods or similar items,
or the preparation, dispensing or consumption of food and beverages in any
manner whatsoever except that Landlord authorizes Tenant to maintain
kitchenettes, along with beverage and candy machines on the Demised Premises for
the distribution or sale of soda and other beverages to its employees and except
as may be otherwise specifically agreed to by Landlord in writing; or an
employment agency or recruitment agency, school, college, university or
educational institution, whether or not for profit, or by any government or
subdivision or agency of any government.
SECTION 4. If any governmental license or permit, other than a
certificate of occupancy or other permission to occupy, shall be required for
the proper and lawful conduct of Tenant's business in the Demised Premises, or
any part thereof, and if failure to secure such license or permit would in any
way affect Landlord, Tenant, at its expense, shall duly procure and thereafter
maintain such license or permit, but in no event shall failure to procure and
maintain same by Tenant affect Tenant's obligations hereunder. Tenant shall not
at any time use or occupy, or suffer or permit anyone to use or occupy the
Demised Premises, or do or permit anything to be done in the Demised Premises,
in violation of the certificate of occupancy for the Demised Premises or the
Building, provided that Landlord represents that the certificate of occupancy
for the Building allows for the Demised Premises to be used for office use.
SECTION 5. Landlord reserves the right to select a name for the
Building and to make such a change or changes of name as it may deem appropriate
during Tenant's occupancy, and Tenant agrees that the name of the Building shall
be (a) the name as selected by Landlord, or (b) the postal address approved by
the United States Post Office, which is 2000 Westchester Avenue, White Plains,
New York 10650. Prior to implementing its selection of a name for the Building,
or a change thereto, Landlord shall provide Tenant with advance notice of the
name, and Landlord shall review any reasonable comment Tenant may have as to the
name, although Tenant shall have no right to prevent, or object to, the name
selected by Landlord.
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SECTION 6. Tenant shall not place a load upon any floor of the Demised
Premises exceeding the floor load per square foot which such floor was designed
to carry and which is allowed by certificate, rule, regulation, permit or law.
Landlord reserves the right to prescribe the weight and position of all safes
and vaults which shall be placed by Tenant, at Tenant's expense. Business
machines and mechanical equipment shall be placed and maintained by Tenant, at
Tenant's expense, in such manner as shall be sufficient in Landlord's judgment
to absorb and prevent vibration, noise and annoyance. Tenant shall not move any
safe, heavy machinery or heavy equipment into or out of the Building without
employing persons properly licensed, if required by laws and requirements of
public assistance. Tenant shall not discharge or permit to be discharged any
materials into waste lines, vents, or flues of the Building which might cause
damage thereto. The water and wash closets and other plumbing fixtures in or
serving the Demised Premises shall not be used for any purpose other than those
for which they shall have been designed or constructed, and no sweepings,
rubbish or rags shall be deposited therein.
SECTION 7. (A) Tenant, at its sole cost and expense, may install a sign
in the lobby of the Building identifying Tenant as being located in the
Building. The design of such sign shall be subject to Landlord's reasonable
approval and shall be fabricated and/or installed by a contractor that meets
Landlord's reasonable approval. The placement or location of such sign in the
lobby as well as the size of such sign in the lobby is within Landlord's sole
discretion.
(B) Tenant, at its cost and expense, may furnish and install its
identification on its entrance door or in Tenant's entrance area, should Tenant
so desire such identification. The design of such sign shall be subject to
Landlord's reasonable approval and shall be fabricated and/or installed by a
contractor that meets Landlord's reasonable approval. The placement or location
of such sign on Tenant's entrance door or in Tenant's entrance area, as well as
the size of such sign on Tenant's entrance door or in Tenant's entrance area,
are subject to Landlord's reasonable approval.
SECTION 8. Tenant shall not place, erect or maintain or suffer to be
placed, erected or maintained on any exterior surface (including both the
interior and exterior surfaces of windows and doors) of the Demised Premises,
nor anywhere outside of the Demised Premises, any sign,
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symbol, neon or other light, shade, lettering, decoration, advertising, or any
other object or thing visible to public view outside of the Demised Premises,
without first obtaining Landlord's approval as to whether the same shall be so
installed or placed and, if so, as to the location, number, type and appearance
of each thereof.
SECTION 9. If Tenant requests, Tenant, at Tenant's sole cost and
expense, may list Tenant's name on a monument sign at the entrance to the
Complex on Purchase Street, which monument sign shall be dedicated solely to
Tenant. The design of such monument sign is subject to Landlord's reasonable
approval, provided that such monument sign shall comply with all applicable
zoning requirements for the jurisdiction in which the Building is located and
shall be equal in size to any sign dedicated to Texaco at the entrance to the
Complex. The monument sign shall be fabricated and installed by a contractor
that meets Landlord's reasonable approval. The exact location of such monument
sign at the entrance to the Complex on Purchase Street is within Landlord's sole
discretion.
SECTION 10. Tenant, at its sole cost and expense, may install and
maintain a reception desk in the lobby of the Building which is to be staffed by
no more than two (2) employees of Tenant at any time. The design and size of the
reception desk is subject to Landlord's approval, which approval shall not be
unreasonably withheld, provided that the same would not tend to lower the
first-class character of the Building. The exact location of the reception desk
is within Landlord's sole discretion.
SECTION 11. Landlord will display on one of the three (3) existing
flagpoles at the main north entrance to the Building a flag depicting the Atlas
Air, Inc. logo. Matters pertaining to the time, place and manner of display of
such flag shall be within Landlord's reasonable discretion.
ARTICLE 10
CHANGES IN THE BUILDING AND ACCESS
SECTION 1. All walls, windows, and doors bounding the Demised Premises
(including exterior Building walls, core corridor walls and doors and any core
corridor entrance), except the inside surface thereof, any terraces or roofs
adjacent to the Demised Premises, and space in or adjacent to the Demised
Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or
other utilities, sinks or other Building facilities, and the use thereof, as
well as access
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thereto through the Demised Premises for the purposes of operation, maintenance,
decoration and repair, are reserved to Landlord.
SECTION 2. Tenant shall permit Landlord to install, use and maintain
pipes, ducts and conduits within or through the walls, columns and ceilings of
the Demised Premises, provided that the installation work is performed at such
times and by such methods as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises, or damage the appearance thereof, reduce
the Leased Floor Space by more than one thousand (1,000) square feet (without an
appropriate adjustment in rent) or materially affect Tenant's layout. Where
access doors are required for mechanical trades in or adjacent to the Demised
Premises, Landlord shall furnish and install such access doors and confine their
location wherever practical to closets, coat rooms, toilet rooms, corridors, and
kitchen or pantry rooms. Landlord and Tenant shall cooperate with each other in
the location of Landlord's and Tenant's facilities requiring such access doors.
SECTION 3. Tenant acknowledges that the Building of which the Demised
Premises are a part may undergo substantial renovations from time to time during
the Lease Term. Tenant acknowledges that its quiet enjoyment and access to the
Demised Premises during the Lease Term may be disturbed by the noise, dust,
vibrations, and other effects of renovation of the Building and the Complex.
Further, Tenant acknowledges that during the Lease Term Landlord may enter the
Demised Premises for the purpose of securing, maintaining or replacing Building
signage and operating systems located within the Demised Premises and in order
to comply with any federal, state or local rule, regulation, decision, code,
requirement, order, direction, law, statute or ordinance, of any governmental or
quasi-governmental agency, authority, body, board, commission, department,
bureau or official. Landlord agrees to make such modifications in a workmanlike
fashion and to use due diligence to reduce interference with Tenant's use of the
Demised Premises, however, such work and its effects may inherently disturb
Tenant and its use of the Demised Premises, provided that there shall be no
unreasonably lengthy interference with the use of the Demised Premises or the
services furnished to the Demised Premises and no reduction in Tenant's Leased
Floor Space in excess of one thousand (1,000) square feet without an appropriate
adjustment of rent. In addition, Landlord may, at any time, increase or decrease
the size of the Complex whether by adding or
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reducing the buildings, floors or levels, or otherwise without an adjustment in
rent. Notwithstanding the foregoing, Landlord represents that throughout the
Lease Term, there will be a large indoor loading dock made available for
Tenant's use, which use shall be subject to such reasonable restrictions as
Landlord may promulgate from time to time during the Lease Term.
SECTION 4. Landlord or Landlord's agents or employees shall have the
right upon request made on reasonable advance notice to Tenant, or to an
authorized employee of Tenant at the Demised Premises, to enter and/or pass
through the Demised Premises or any part thereof, at reasonable times during
reasonable hours, (a) to examine the Demised Premises or to show them to lessors
of superior lease(s), holders of mortgages, insurance carriers, or prospective
tenants, lenders or purchasers and (b) for the purpose of making such repairs or
changes in or to the Demised Premises or in or to the Building or its facilities
as may be provided for by this Lease or as Landlord may deem necessary or as
Landlord may be required to make by law or in order to repair and maintain the
Building or its fixtures or facilities. However, Landlord's rights under this
Section shall be exercised in such a manner as will not unreasonably interfere
with Tenant's use and occupancy of the Demised Premises. Landlord, its agents,
or employees, shall also have the right to enter on and/or pass through the
Demised Premises, or any part thereof without notice at such times as such entry
shall be required by circumstances of emergency affecting the Demised Premises
or the Building. Included among the foregoing emergencies shall be a situation
where water has entered the Demised Premises, in which event upon Landlord
learning thereof, Landlord may enter the Demised Premises and remove such water.
Landlord shall be allowed to take all materials into and upon the Demised
Premises that may be required for such repairs, changes, repainting or
maintenance.
SECTION 5. If Tenant is not present to open and permit an entry into
the Demised Premises, Landlord or Landlord's agents may enter the same whenever
such entry may be necessary by master key or forcibly due to emergency, and
provided reasonable care is exercised to safeguard Tenant's property, such entry
shall not render Landlord or its agents liable therefor, nor in any event shall
the obligations of Tenant hereunder be affected.
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SECTION 6. Landlord may limit and restrict, the means of access to the
Demised Premises and grounds and common areas outside of Standard Business
Hours, so long as Tenant's employees and authorized agents have reasonable
access to the Demised Premises, grounds and common areas pursuant to the same
terms and conditions as any other occupant of the Building and in accordance
with the rules and regulations annexed to and made a part of this Lease as
Exhibit C. Tenant, and its agents, employees and visitors shall be entitled to
access from the Demised Premises to, and the right to use, the toilets,
lavatories, and powder rooms only on the floor (or floors) in the corridors of
the Building on which the Demised Premises are located. Landlord shall have the
right to erect any gate, chain or other obstruction or to temporarily close off
any portion of the Complex to the public at any time to the extent necessary to
prevent a dedication thereof for public use.
ARTICLE 11
EMINENT DOMAIN
SECTION 1. In the event that the land, Building or any part thereof, or
the Demised Premises or any part thereof, shall be taken on condemnation
proceedings or by the exercise of any right of eminent domain or by agreement
between any superior lessors and lessees and/or Landlord on the one hand and any
governmental authority authorized to exercise such right on the other hand,
Landlord shall be entitled to collect from any such condemnation the entire
award or awards that may be made in any such proceeding without deduction
therefrom for any estate hereby vested in or owned by Tenant, to be paid out as
in this Article provided. Tenant hereby expressly assigns to Landlord all of its
right, title and interest in or to every such award and also agrees to execute
any and all further documents that may be required in order to facilitate the
collection thereof by Landlord.
SECTION 2. At any time during the Lease Term if title to the whole or
substantially all of the land, Building and/or Demised Premises shall be taken
in condemnation proceedings or by the exercise of any right of eminent domain or
by agreement between any superior lessors and lessees and/or Landlord on the one
hand and any governmental authority authorized to exercise such right on the
other hand, this Lease shall terminate and expire on the date of such taking and
the Base Rent and additional rent provided to be paid by Tenant shall be
apportioned and paid to the date of such taking.
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SECTION 3. However, if substantially all of the land or Building is not
taken and if only a part of the entire Demised Premises shall be so taken, this
Lease nevertheless shall continue in full force and effect, except that either
party may elect to terminate this Lease if that portion of the Demised Premises
then occupied by Tenant shall be reduced by more than twenty-five (25%) percent
by notice of such election to the other party given not later than thirty (30)
days after (a) notice of such taking is given by the condemning authority, or
(b) the date of such taking, whichever occurs later. Upon the giving of such
notice this Lease shall terminate on the date of service of such notice and the
Base Rent and additional rent due and to become due, shall be prorated and
adjusted as of the date of the taking. If both parties fail to give such notice
upon such partial taking, and this Lease continues in force as to any part of
the Demised Premises not taken, the rents apportioned to the part taken shall be
prorated and adjusted as of the date of taking and from such date the Base Rent
and additional rent shall be reduced to the amount apportioned to the remainder
of the Demised Premises, and such proportionate share shall be recomputed to
reflect the number of square feet of leased floor space remaining in the Demised
Premises.
SECTION 4. Notwithstanding the foregoing provisions of this Article and
subject to the interests of any mortgagee or lessor or grantor under any
superior mortgage(s) or superior lease(s), Tenant shall be entitled to claim,
prove and receive in proceedings relating to any taking mentioned in the
preceding Sections of this Article, such portion of each award made therein as
represents the then value of Tenant's Property and moving and relocation
expenses.
SECTION 5. In the event of any such taking of less than the whole of
the Building which does not result in a termination of this Lease, or in the
event of such a taking of all or any part of the Demised Premises which does not
result in a termination of this Lease, Landlord, at its expense, shall proceed
with reasonable diligence to repair, alter and restore the remaining part of the
Building and the Demised Premises to substantially the same condition as it was
immediately prior to such taking to the extent that the same may be feasible, so
as to constitute a tenantable Building and Demised Premises, provided that
Landlord's liability under this Section shall be limited to the amount received
by Landlord as an award arising out of such taking.
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ARTICLE 12
REPAIRS AND MAINTENANCE
SECTION 1. Landlord shall keep and maintain the Building and its
fixtures, appurtenances, systems and related facilities (including the central
heating, ventilating and air conditioning systems and the central or core
elevator and plumbing systems), serving the Demised Premises and the Building,
in good working order, condition and repair (but any auxiliary or supplementary
heating, ventilating or air conditioning units or equipment, plumbing fixtures,
serving only the Demised Premises shall be Tenant's responsibility under Section
2 hereof), and Landlord shall make all repairs to preserve the strength of the
structural components of the Building, interior and exterior, as and when needed
in the Building, except as indicated in the second sentence of Section 2 hereof,
except further for those repairs for which Tenant is responsible pursuant to any
other provisions of this Lease, and subject to all other provisions of this
Lease, including but not limited to the provisions of Article 13.
SECTION 2. Tenant shall take good care of the Demised Premises and the
fixtures and appurtenances therein and thereto (including, without limitation,
windows and doors adjoining, or used exclusively in connection with, the Demised
Premises, and at its sole cost and expense shall pay for all repairs thereto, as
and when needed to preserve them in good working order and condition except as
otherwise provided in Section 1 hereof. In addition, Tenant, at its sole cost
and expense, shall pay for all repairs, ordinary or extraordinary, interior or
exterior, structural or otherwise, in and about the Demised Premises, the
Building and the Complex as shall be required by reason of (a) the performance
or existence of work by Tenant necessary to suit the Demised Premises to
Tenant's initial occupancy (other than work performed by Landlord) or in
connection with Tenant's Changes, (b) the installation, use or operation of
Tenant's Property in the Demised Premises, (c) the moving of Tenant's Property
in or out of the Building, or (d) the misuse, neglect or improper conduct of
Tenant or any of its employees, agents, or contractors. As soon as any such
repair is required, Tenant shall notify Landlord, who shall, in turn, at its
option, either make such repair (at Landlord's Charge), or notify Tenant to make
such repairs. All such repairs shall be of quality and class at least equal to
the original work or construction. The provisions of this Section 2 shall not
apply in the case of fire or other casualty damage covered by Article 13 hereof.
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SECTION 3. Except as expressly otherwise provided in this Lease and in
instances caused by Landlord's negligent or otherwise wrongful act or omission,
Landlord shall have no liability to Tenant by reason of any inconvenience,
annoyance, interruption or injury to Tenant's business arising from Landlord or
any tenant making repairs or changes or performing maintenance services, whether
or not Landlord is required or permitted by this Lease or by law to make such
repairs or changes or to perform such services in or to any portion of the
Building or the Demised Premises, or in or to the fixtures, equipment, or
appurtenances of the Building or the Demised Premises, provided that Landlord
shall be reasonably diligent with respect thereto and shall perform such work,
except in case of emergency, at times reasonably convenient to Tenant and
otherwise in such a manner and to the extent practicable as will not
unreasonably interfere with Tenant's use and occupancy of the Demised Premises.
SECTION 4. When used in this Lease the term "repair" shall be deemed to
include restoration and replacement as may be necessary to achieve and/or
maintain good working order and condition.
ARTICLE 13
DESTRUCTION, FIRE AND OTHER CASUALTY
SECTION 1. If the Demised Premises and/or access thereto shall be
partially or totally damaged or destroyed by fire or other casualty, Tenant
shall give immediate notice thereof to Landlord, and Landlord, subject to its
rights under Section 3 of this Article, substantially shall repair the damage
and restore and rebuild the Demised Premises and/or access thereto as nearly as
may be reasonably practical to its condition and character, to the extent of
Building Standard immediately prior to such damage or destruction, with
reasonable diligence after notice to it of the damage or destruction.
SECTION 2. If the Demised Premises and/or access thereto shall be
partially or totally damaged or destroyed by fire or other casualty not
attributable to the fault, negligence or misuse of the Demised Premises by
Tenant, its agents or employees under the provisions of this Lease, the rents
payable hereunder shall be abated to the extent that the Demised Premises shall
have been rendered untenantable from the date of such damage or destruction to
the date the damage shall be substantially repaired or restored or rebuilt to
the same condition as required under
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Article 2 hereof for the Demised Premises to be ready for occupancy. In the
event of partial damage, if the undamaged portion of the Demised Premises are
not reasonably useable, then for purposes of abatement of rent the damage shall
be deemed total. Should Tenant reoccupy a portion of the Demised Premises during
the period that the repair, restoration or rebuilding is in progress and prior
to the date that all of the Demised Premises are rendered tenantable, rents
allocable to such occupied portion (based upon that proportion which the area of
the part so occupied bears to the Leased Floor Space) shall be payable by Tenant
from the date of such occupancy to the date the Demised Premises are made
tenantable. Any work to be performed by Tenant shall be performed in accordance
with Article 15 hereof applicable to Tenant's Changes.
SECTION 3. In case of substantial damage or destruction of the Demised
Premises, Tenant may terminate this Lease by notice to Landlord, if Landlord has
not completed the making of the required repairs and restored and rebuilt the
Demised Premises and/or access thereto within nine (9) months from the date of
such damage or destruction, and such additional time after such date (but not to
exceed two (2) months) as shall equal the aggregate period Landlord may have
been delayed in doing so by adjustment of insurance or Events of Force Majeure.
In case the Building shall be so damaged by such fire or other casualty that
substantial renovation, reconstruction or demolition of the Building shall, in
Landlord's opinion, be required (whether or not the Demised Premises shall have
been damaged by such fire or other casualty), then Landlord may, at its option,
terminate this Lease and the Lease Term and estate hereby granted, by notifying
Tenant in writing of such termination, within sixty (60) days after the date of
such damage. If at any time prior to Landlord giving Tenant the aforesaid notice
of termination or commencing the repair and restoration pursuant to Section 1,
the holder of a superior mortgage(s) or the lessor of a superior lease(s) or any
person claiming under or through the holder of such superior mortgage(s) or the
lessor of such superior lease(s) takes possession of the Building through the
foreclosure or otherwise, such holder, lessor, or person shall have a further
period of thirty (30) days from the date of so taking possession to terminate
this Lease by appropriate written notice to Tenant. In the event that such a
notice of termination shall be given pursuant to either of the two (2) preceding
sentences, this Lease and the Lease Term and estate hereby granted shall expire
as of the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the Lease Term, and the Base Rent and
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additional rent due and to become due hereunder shall be apportioned as of such
date if not earlier abated pursuant to Section 2. Nothing contained in this
Section 3 shall relieve Tenant from any liability to Landlord or to its insurers
in connection with any damage to the Demised Premises or the Building by fire or
other casualty if Tenant shall be legally liable in such respect.
SECTION 4. Landlord shall not be liable for any injury to the business
of Tenant resulting from any damage to the Demised Premises or the Building by
fire or other casualty unless caused by Landlord's willful or negligent act or
omission. Furthermore, no damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the Building
pursuant to this Article unless caused by Landlord's willful or negligent act or
omission. Landlord shall use due diligence to effect such repair or restoration
promptly and in such manner as not to unreasonably interfere with Tenant's use
and occupancy.
SECTION 5. Landlord will not carry insurance of any kind on Tenant's
Property or Tenant's Work, and, except as provided by law or by reason of its
fault or its breach of any of its obligations hereunder, shall not be obligated
to repair any damage thereto or replace the same.
SECTION 6. The provisions of this Article shall be considered an
express agreement governing any case of damage or destruction of the Demised
Premises by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York, providing for such a contingency in the absence of an
express agreement, and any other law of like import, now or hereafter in force,
shall have no application in such case.
ARTICLE 14
INSURANCE
SECTION 1. Tenant shall not violate, or permit the violation of, any
condition imposed by the standard fire insurance policy then issued for office
buildings in the municipality in which the Building is located and shall not do,
or permit anything to be done, or keep or permit anything to be kept in the
Demised Premises which would increase the fire or other casualty insurance rate
on the Building or the property therein over the rate which would otherwise then
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be in effect or which would result in insurance companies of good standing
refusing to insure the Building or any of such property in amounts and at normal
rates reasonably satisfactory to Landlord. However, Tenant shall not be subject
to liability, obligation or violation under this Section by reason of the proper
use of the Demised Premises for standard executive and administrative offices,
and as an operating center for the management and administration of Tenant's
business.
SECTION 2. Tenant shall, at its sole cost and expense, maintain at all
times commencing with the earlier of the performance of any work in the Demised
Premises by or on behalf of Tenant under Article 2 hereof and the moving of any
property into the Demised Premises and throughout the Lease Term (unless
otherwise in this Section 2 provided) the following types of insurance:
(A) Commercial general liability insurance to afford protection
initially in an amount of not less than $5,000,000 combined single limit of
liability for personal injury, death and property damage arising out of any one
occurrence, under an occurrence-basis policy, against any and all claims for
personal injury, death or property damage occurring in, upon, adjacent, or
connected with the Demised Premises and any part thereof. There shall be added
to or included within said comprehensive general liability insurance products
and completed operations liability, independent contractors liability, broad
form comprehensive general liability endorsements, broad form property damage
liability, liquor law legal liability (if applicable), host liquor liability,
explosion, collapse and underground property damage, environmental
impairment/pollution liability (if applicable) and owners and contractors
protective liability coverage during the course of construction. The policy (or
policies) shall state that it covers, among other risks, the contractual
liability assumed by Tenant under the provisions set forth in this Lease.
(B) Commercial auto liability insurance (with special endorsement
covering mobile equipment and contractual liability) covering owned, non-owned
and hired vehicles providing bodily injury and property damage coverage, all on
a per occurrence basis and under an occurrence-basis policy, at a combined
single limit in such amount as Landlord or Landlord's
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managing agent, if any, may reasonably determine and in no event less than three
million dollars ($3,000,000).
(C) Workers' Compensation Insurance and any other statutory
insurance required by law. Employer's Liability Insurance to protect the Tenant
against common law liability, in the absence of statutory liability, for
employee bodily injury arising out of the master-servant relationship with a
limit of not less than $5,000,000.00 in respect of each occurrence.
(D) New York State disability benefits liability as required by
law.
(E) Intentionally omitted.
(F) "All Risk" property insurance upon Tenant's Property,
including contents and trade fixtures; such coverage is to be written on a
replacement cost basis and in an amount of not less than 100% of the full
replacement value thereof.
Tenant's failure to keep in force the aforementioned insurances shall
be regarded as a material default hereunder entitling Landlord to exercise any
or all of the remedies provided in this Lease for Tenant's default. Landlord
shall have the right from time to time during the Lease Term, but not more than
once in a Rent Year, on not less than thirty (30) days notice, to require that
Tenant increase the amount of coverage required to be maintained under this
Article to the amounts generally required of tenants in first class office
buildings in Westchester County.
SECTION 3. At least ten business days prior to the performance of any
Tenant's Work, Tenant's Changes and all other betterments, improvements and all
other work in, on, attached to or becoming part of the Demised Premises
(sometimes collectively called "betterments and improvements"), Tenant shall
submit to Landlord all information necessary for Landlord to increase, if
necessary under Landlord's policy, (and thereafter throughout the Lease Term
shall submit any updated information necessary and not more than annually (if
requested by Landlord) shall certify replacement costs to Landlord) so Landlord
at all times may maintain its property insurance coverage on the Building so
that the betterments and improvements may be insured, on a replacement value,
subject to terms, conditions, exclusions and deductibles of such coverage.
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SECTION 4. With respect to insurance provided by Tenant or others
performing work for Tenant hereunder, other than Landlord or others employed
directly by Landlord:
(A) Such insurance shall be written by insurance companies
licensed to do business in the State of New York, authorized to issue such
insurance policies and having a rating of no less than "A/12" in the most
current edition of Bests Key Rating Guide. The original insurance policies or
duly executed, appropriate certificates (together with reasonably adequate
evidence of waivers of subrogation required by this Article 14 and of payment of
insurance premiums) shall be deposited with Landlord together with all renewals,
replacements and endorsements. Tenant shall have the right to insure and
maintain such insurance under blanket insurance policies covering other premises
used or operated by Tenant, provided that if such blanket policies are
aggregated there is, at all times when required by this Lease, adequate
insurance attributable to the Demised Premises or to this Lease so as to comply
with the insurance provisions set forth in this Lease.
(B) There shall be maintained deductibles in such amounts as
Tenant shall reasonably determine but in no event in excess of $5,000 with
respect to a property insurance policy and in no event in excess of $10,000 with
respect to a liability insurance policy.
(C) Landlord, Landlord's managing agent (if any) and the holder
of any superior mortgage(s) and of any superior lease(s), to the extent that
Tenant has been notified (collectively called "Landlord and Others in Interest")
shall be included as additional insureds under all insurance required to be
provided by Tenant under this Lease except under Sections 2(C) and (D) of this
Article.
(D) All property insurance policies shall cover the interest of
Tenant and Landlord and Others in Interest, as their interests may appear, and
the policies therefor shall provide that adjustment of any losses thereunder
shall include in the negotiation, not be settled or finalized without, and be
payable to, Landlord and Others in Interest, to the extent applicable. All such
property insurance policies shall contain a provision allowing other insurance
that is provided to or for Landlord. All such property insurance policies shall
be required of Tenant regardless of whether Tenant or others on behalf of Tenant
perform Tenant's Work, Tenant's Changes or any other work in the Demised
Premises.
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(E) At least 10 days prior to commencement of construction of any
work in the Demised Premises, Tenant and Tenant's contractor shall deliver to
Landlord (and Others in Interest, if required by them) certificates of insurance
or policies (as provided in Section 4(A) hereof) evidencing all insurance
coverages provided in this Article 14. Tenant's contractor shall be required to
comply with all of such insurance obligations only through final completion of
all such work.
(F) At its own cost and expense, Tenant or its general contractor
if other than Landlord shall, in accordance with all of the insurance
requirements of this Article 14, obtain professional liability insurance for all
architects, designers and engineers with regard to all of their work in or in
connection with the Demised Premises, in a minimum policy amount of
$3,000,000.00, provided, however, that in lieu of Tenant or its general
contractor obtaining such professional liability insurance Tenant shall deliver
to Landlord satisfactory evidence that such architects, designers and engineers
have procured such insurance in a minimum policy amount of $3,000,000.00 and
satisfying all of the insurance requirements of this Article 14.
(G) The limits of all insurance provided under this Article 14
shall not limit Tenant's liability to Landlord under this Lease, and (ii) shall
be subject to increase to the same extent as provided under Section 2 of this
Article.
(H) All policies of insurance maintained by Tenant under this
Article 14 shall be written as primary policies not contributing with, nor in
excess of, insurance coverage that Landlord and Others in Interest may have.
Tenant shall not carry separate or additional insurance which, in the event of
any loss or damage, is concurrent in form or would contribute with the insurance
required to be maintained by Tenant under this Lease.
(I) Each policy required to be provided hereunder (and each
certificate of insurance issued with respect thereto) shall contain endorsements
by the insurer, without disclaimers, that the policies will not be cancelled,
materially changed, amended, reduced or non-renewed without at least thirty (30)
days prior notice to Landlord and Others in Interest, that the act or omission
of any insured will not invalidate the policy as to any other insured, and that
Tenant (or the general contractor, as the case may be) solely shall be
responsible for payment of
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all premiums under such policies and that neither Landlord nor Others in
Interest shall have any obligations for the payment thereof.
(J) In the event Tenant shall fail to procure and place any
insurance required under this Lease, after notice to Tenant, Landlord may, but
shall not be obligated to, procure and place same, in which event the amount of
the premium paid plus interest thereon at the rate per annum of two hundred
(200) basis points over the prime rate in effect, as reported by The Wall Street
Journal, shall be refunded by Tenant to Landlord within 30 days of notice, as
additional rent.
SECTION 5. With respect to each of (a) Tenant's property insurance
policies and business interruption insurance policies, if any, applicable to the
Demised Premises, and (b) Landlord's property damage insurance policies
applicable to the Building and/or Complex, respectively, each of the parties
agrees to use its best efforts to include a waiver of the insurer's right of
subrogation against the other party, or if such waiver should be unobtainable or
unenforceable (i) an express agreement that such policy shall not be invalidated
if the insured waives the right of recovery against any party responsible for a
casualty covered by the policy before the casualty or (ii) any other form of
permission for the release of the other party. If such waiver, agreement or
permission shall not be, or shall cease to be, obtainable without additional
charge or at all, the insured party shall so notify the other party promptly
after learning thereof. In such case, if the other party shall so elect and
shall pay the insurer's additional charge therefor, such waiver, agreement or
permission shall be included in the policy. To the extent of the waiver,
agreement or permission referred to above, each party shall look to the proceeds
of such policies. The waiver of subrogation or permission for release referred
to above shall extend to the agents of each party and its and their employees
and, in the case of Landlord, shall also extend to Landlord and Others in
Interest, but only if and to the extent that such waiver, agreement or
permission can be obtained without additional charge, unless such party shall,
after notice of such charge, pay such charge within the time specified in such
notice but not less than five (5) days after such notice. The releases above
provided for shall likewise extend to such agents, employees and other persons
and entities, if and to the extent that such waiver or permission is effective
as to them.
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SECTION 6. If Tenant shall decide not to insure for (or to self-insure
or co-insure part of any loss for) business interruption and/or if Tenant shall
at any time fail to maintain property insurance as, and to the extent, required
under this Lease, Tenant hereby releases Landlord and Others in Interest from
all loss or damage which could have been covered by such insurance if Tenant had
chosen to insure for same.
SECTION 7. During the Lease Term, Landlord (i) shall keep the Building
insured against such risks, and (ii) shall maintain in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, and about the Building in such amounts, as
is in each case customary in Westchester County for tenant-occupied office
buildings of comparable square footage to the Building.
ARTICLE 15
TENANT ALTERATIONS
SECTION 1. After completion of the initial preparation of the Demised
Premises as provided for in Article 2, Tenant may not, at any time or from time
to time during the Lease Term, make any alterations, additions, installations,
substitutions and improvements (hereinafter collectively called "changes" and,
as applied to changes provided for in this Article, "Tenant's Changes") in and
to the Demised Premises, except as otherwise provided in this Article 15.
Subject to the provisions of this Article 15, Tenant, at its sole cost and
expense, may, without first obtaining Landlord's consent, but upon at least
thirty (30) days prior notice, make any cosmetic non-structural changes not
affecting the Building's building systems or the certificate of occupancy for
the Building or interfering with the use of the Building by other occupants, the
estimated cost of which, in the aggregate, does not exceed fifty thousand
($50,000.00) dollars, provided that the same (i) may be undertaken without the
filing of any permits or applications with the Town of Harrison, (ii) is at
least in accordance with Building Standard, and (iii) complies with all
applicable laws, rules and regulations of the jurisdiction in which the Building
is located. All other changes shall be subject to Landlord's prior written
approval, which shall not be unreasonably withheld or delayed, and to such other
requirements as are herein set forth and as Landlord may hereafter reasonably
impose. Tenant's Changes shall be performed on the following conditions,
provided that in no event shall such changes result in a violation of or require
a change in the certificate of occupancy applicable to the Demised Premises:
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(A) The outside appearance, character or use of the Building shall
not be affected, and no Tenant's Changes shall weaken or impair the structural
strength, or in the opinion of Landlord, lessen the value of the Building;
(B) No part of the Building outside of the Demised Premises shall
be physically affected;
(C) The proper functioning of any of the mechanical, electrical,
sanitary and other service systems of the Building shall not be adversely
affected;
(D) Tenant's Changes shall be performed at Tenant's sole cost and
expense, and in performing such work, Tenant shall be bound by and observe all
of the conditions and covenants contained in this Article and all rules and
regulations of the City, State and Federal governmental agencies having
jurisdiction, including, but not limited to, those of the Department of
Buildings of the jurisdiction where the Building is located;
(E) At the time Landlord approves Tenant's Changes, Landlord shall
notify Tenant what items of Tenant's Changes shall, unless Landlord otherwise
elects by giving Tenant notice of not less than thirty (30) days prior to the
expiration or termination of this Lease, become the property of the Landlord and
shall remain upon and be surrendered with the Demised Premises as a part thereof
at the expiration or sooner termination of the Term. None of the foregoing shall
be deemed to include Tenant's trade fixtures, furniture or ordinary walls and
partitions made to divide space for use by Tenant's personnel except that
Landlord may require the removal of all or any part of the Operations Center and
Executive Center. If Landlord fails to notify Tenant of such possible removal
obligation at the time of Landlord's approval of Tenant's Changes, Tenant shall
not be required to remove such changes.
(F) With respect to each of Tenant's Changes performed by Tenant,
Tenant shall pay to Landlord, as additional rent, upon demand, Landlord's
reasonable costs incurred for supervision and coordination of the work performed
in connection with such improvement as is reasonably necessary; and
(G) Before proceeding with any change (exclusive of changes in
items constituting "Tenant's Property" as defined in Article 16) Tenant shall
submit to Landlord plans
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and specifications for the work to be done, for Landlord's approval in writing,
and if such change requires approval by or notice to the lessor of a superior
lease(s) or the holder of a superior mortgage(s), Tenant shall not proceed with
the change until such approval has been received, or such notice has been given,
as the case may be, and all applicable conditions and provisions of said
superior lease(s) or superior mortgage(s) with respect to the proposed change or
alteration have been met or complied with at Tenant's expense. Any change for
which approval has been received shall be performed strictly in accordance with
the approved plans and specifications, and no amendments or additions to such
plans and specifications shall be made without the prior written consent of
Landlord. Tenant shall not be permitted to affix and make part of the Demised
Premises any materials, fixtures or articles which are subject to liens,
conditional sales contracts, security agreements or chattel mortgages.
SECTION 2. All Tenant's Changes shall at all times comply with laws,
orders and regulations of governmental authorities having jurisdiction thereof,
and all rules and regulations of Landlord (in addition to those expressly
provided in this Lease) which in Landlord's reasonable opinion, are necessary to
protect its interest, including without limitation, a guaranty of completion,
payment and restoration. Tenant, at its expense, shall obtain all necessary
governmental and Board of Fire Underwriters permits and certificates for the
commencement and prosecution of Tenant's Changes and for final approval thereof
upon completion, shall provide copies of same to Landlord promptly upon request,
and shall cause Tenant's Changes to be performed in compliance therewith and
with all applicable requirements of insurance bodies, and in good and first
class workmanlike manner, using materials and equipment at least equal in
quality and class to the original installations of the Building. Tenant's
Changes shall be performed in such a manner as not to materially or unduly
interfere with the occupancy of any other tenant in the Building nor delay, or
impose any additional expense upon Landlord in the construction, maintenance, or
operation of the Building, and shall be performed by contractors or mechanics
approved by Landlord. Landlord's approval shall not be unreasonably withheld or
delayed. Throughout the performance of Tenant's Changes, Tenant, at its expense,
shall carry and shall cause all contractors, agents and other persons performing
Tenant's Changes to carry such insurance as Landlord may require relative to
such changes. Tenant shall furnish Landlord with reasonably satisfactory
evidence that such insurance is in effect at or before the commencement of
Tenant's Changes and, on request, at reasonable intervals thereafter during
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the continuance of Tenant's Changes. No Tenant's Changes shall involve the
removal of any fixtures, equipment or other property in the Demised Premises
which are not "Tenant's Property" (as defined in Article 16), unless Landlord's
prior written consent is first obtained, which consent shall not be unreasonably
withheld or delayed, and unless such fixtures, equipment or other property shall
be promptly replaced, at Tenant's expense and free of superior title, liens and
claims, with fixtures, equipment or other property (as the case may be) of like
utility and at least equal value (which replaced fixtures, equipment or other
property shall thereupon become the property of Landlord), unless Landlord shall
otherwise expressly consent in writing.
SECTION 3. Tenant, at its expense, and with diligence and dispatch,
shall procure the cancellation or discharge of all notices of violation arising
from or otherwise connected with Tenant's Changes which shall be issued by the
appropriate department of the municipality where the Building is located or any
other public authority having or asserting jurisdiction. Tenant shall defend,
indemnify and save harmless Landlord against any and all mechanics and other
liens in connection with Tenant's Changes, repairs, or installation, including
but not limited to the liens of any conditional sales of, or chattel mortgages
upon, any materials, fixtures, or articles so installed in and constituting part
of the Demised Premises and against all costs, reasonable attorneys' fees,
fines, expenses and liabilities reasonably incurred in connection with any such
lien, conditional sale or chattel mortgage or any action or proceeding brought
thereon. Tenant, at its expense, shall procure the satisfaction or discharge of
all such liens within thirty (30) days of the filing of such lien against the
Demised Premises or the Building. If Tenant shall fail to cause such lien to be
discharged within the period aforesaid, then, in addition to any other right or
remedy, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit or by bonding proceedings, and in any such event Landlord shall
be entitled, if Landlord so elects, to compel the prosecution of an action for
the foreclosure of such lien by the lienor and to pay the amount of the judgment
in favor of the lienor with interest, costs and allowances. Any amount so paid
by Landlord and all reasonable costs and expenses incurred by Landlord in
connection therewith, together with interest thereon at the lesser of the
maximum permitted by law or two (2%) percent per month or portion thereof from
the respective dates of Landlord's making of the payment or incurring of the
cost and expense shall constitute additional rent payable by Tenant under this
Lease and shall be paid by Tenant on demand. If Tenant makes any such payment it
shall not be
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entitled to any set-off against rent due hereunder. Tenant agrees that it will
not at any time prior to or during the Lease Term, either directly or
indirectly, use any contractors, labor or materials which would, in Landlord's
opinion, create any difficulty with other contractors or labor engaged by Tenant
or Landlord or others or would in any way disturb harmonious labor relations in
the construction, maintenance or operation of the Building or any part thereof
or any other building owned or operated by Landlord or any Affiliate of
Landlord. Tenant agrees to comply with, and require all contractors hired by
Tenant to comply with, all federal, state, and local laws and regulations
pertaining to employment, conditions, and hours of employment in connection with
any construction in the Building and except where Landlord specifically permits
otherwise, employ union labor on such construction.
SECTION 4. All of Tenant's Changes, whether performed by Landlord or by
Tenant shall be performed only during Standard Business Hours, except that core
drilling which is required after the Commencement Date shall be done during time
periods which are not Standard Business Hours. If Tenant requires Landlord to
perform work during other hours, or if Tenant desires to perform work through
its contractors, agents or employees, provided Landlord so consents, Tenant
shall pay as additional rent, the actual cost of employing such additional help
as shall be reasonably required, as well as the actual cost of such necessary
supervisory personnel, if any, employed by Landlord in connection with such
work. Payment shall be made by Tenant to Landlord within ten (10) days after
being billed therefor. Tenant's contractors shall comply with the rules of the
Building as to the hours of availability of the Building elevators and the
manner of handling materials, equipment and debris to avoid conflict and
interference with Building operations, and shall furnish Landlord with all
insurance certificates required by Landlord pursuant to Article 14 hereof. In
addition, if Tenant or its contractors require use of the freight elevators
after Standard Business Hours, Tenant shall pay the reasonable costs for the use
thereof within ten (10) days after being billed therefor. The delivery and
handling of materials, equipment and debris shall be arranged to avoid any
inconvenience and annoyance to other tenants. Cleaning shall be controlled to
prevent dirt and dust from infiltrating into adjacent tenant or mechanical
areas.
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ARTICLE 16
TENANT'S PROPERTY
SECTION 1. All fixtures, equipment, improvements and appurtenances
attached to or built into the Demised Premises at the Commencement Date or
during the Lease Term, whether or not by or at the expense of Tenant, shall be
and remain a part of the Demised Premises, shall be deemed the property of
Landlord and shall not be removed by Tenant except as hereinafter in this
Article expressly provided.
SECTION 2. All business and trade fixtures, machinery and equipment,
communications equipment and office equipment, whether or not attached to or
built into the Demised Premises, which are installed in the Demised Premises by
or for the account of Tenant, without expense to Landlord, exclusive of any
electric meter (if any) and any related wiring and parts, and can be removed
without structural damage to or defacement of the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Demised Premises (all of which are herein called "Tenant's
Property"), shall be and shall remain the property of Tenant and may be removed
by it at any time during the Lease Term; provided that if any of Tenant's
Property is removed, Tenant shall restore the Demised Premises to its condition
at the time of the commencement of the Lease Term and repair or pay the cost of
repairing any damage to the Demised Premises or to the Building or the Complex
resulting from such removal. Any fixtures, equipment or other property for which
Landlord shall have granted any allowance to Tenant as a credit or substitution
in kind shall not be deemed to have been installed by or for the account of
Tenant without expense to Landlord, and shall not be considered as Tenant's
Property. Any partitions installed by Landlord, whether movable or not, shall
not be considered Tenant's Property. Landlord shall not be obligated to return
and/or reinstall any partitions supplied to Tenant which are returned by Tenant
to Landlord due to enlargement, reduction or change in the Demised Premises.
SECTION 3. At or before the expiration of this Lease, Tenant shall
remove, at its expense, from the Demised Premises, all of Tenant's Property and
shall repair any damage and make any replacements to the Demised Premises or the
Building resulting from or necessitated by such removal, and shall pay all other
costs of such removal.
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SECTION 4. Any items of Tenant's Property which shall remain in the
Demised Premises after the expiration of this Lease, may, at the option of
Landlord, be deemed to have been abandoned, and in such case either may be
retained by Landlord as its property or may be disposed of, without
accountability, in such manner as Landlord may see fit. Tenant agrees to
reimburse Landlord for the costs of removal and disposal, along with the cost of
repairing any damage to the Demised Premises or the Building arising out of
Tenant's failure to remove Tenant's Property pursuant to the terms of this
Lease.
ARTICLE 17
SURRENDER
SECTION 1. On the last day of the Lease Term, or upon any earlier
termination of this Lease, or upon any re-entry by Landlord upon the Demised
Premises, Tenant shall quit and surrender the Demised Premises to Landlord broom
clean, in good order, condition and repair except for ordinary wear and tear and
damage by fire or other insured casualty, restored as provided in Article 15, if
applicable.
SECTION 2. Prior to such surrender Tenant shall (a) remove Tenant's
Property subject to the provisions of Article 16 hereof, (b) at Landlord's
request remove from the Demised Premises those improvements, alterations,
additions, fixtures and equipment ("Additional Work") which prior to the time of
installation in the Demised Premises (and in connection with the approval of
such Additional Work, including Tenant's Work) Landlord directed Tenant to
possibly remove upon the Expiration Date or upon any earlier termination of this
Lease, and (c) at Landlord's request, repair any damage and make any
replacements to the Complex resulting from or necessitated by such removal, and
restore those parts of the Demised Premises from which the removal referred to
in subparagraphs "a" and "b" above, to a condition which will blend with and be
comparable to and compatible with adjacent areas. Tenant's removal and repair
obligations hereunder with respect to the Demised Premises shall extend to all
parts of the Building where any Additional Work was performed by or on behalf of
Tenant. If Tenant shall fail to perform as provided in this Section 2, Landlord
shall have the right to do so at Tenant's cost and expense, without further
notice or demand upon Tenant, and Tenant shall indemnify Landlord against all
loss or liability resulting therefrom, including, without limitation, any delay
in granting occupancy of the Demised Premises to a future occupant.
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SECTION 3. In the event Tenant remains in possession of the Demised
Premises after the termination of this Lease without the execution by Landlord
and Tenant of a new Lease or the extension of this Lease, Tenant, at the option
of Landlord, shall be deemed to be occupying the Demised Premises as a Tenant
from month to month, at a monthly rental equal to one and one-half (1 1/2)
times the Base Rent and additional rent payable during the last month of the
Lease Term, subject to all of the other terms of this Lease insofar as the same
are applicable to a month to month tenancy.
SECTION 4. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and against any loss, cost, liability, claim, damage, fine,
penalty, and expense, including reasonable attorneys' fees and disbursements,
resulting from delay by Tenant in surrendering the Demised Premises upon the
termination of this Lease as provided in this Article 17, including without
limitation, any claims made by any succeeding tenant or prospective tenant based
upon such delay.
ARTICLE 18
RECORDING ESTOPPEL CERTIFICATE, AND CONFIDENTIALITY
SECTION 1. Tenant agrees not to record this Lease or a copy thereof. At
the request of either party, Landlord and Tenant shall promptly execute,
acknowledge and deliver a memorandum with respect to this Lease sufficient for
recording. The cost of recording such memorandum shall be paid by the party
requesting the recording of such memorandum. Such memorandum shall not in any
circumstances be deemed to change or otherwise affect any of the obligations or
provisions of this Lease. The memorandum shall state the names of the parties to
this Lease, along with the date the Lease was executed and the Lease Term. The
memorandum shall not state any other terms of the Lease without the express
agreement of both parties to this Lease.
SECTION 2. Tenant agrees, at any time and from time to time, as
requested by Landlord, or the holder of any superior lease(s) or superior
mortgage(s), upon not less than ten (10) days prior notice, to execute and
deliver without cost or expense to Landlord a statement certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modification),
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certifying the dates to which the Base Rent and additional rent have been paid,
and stating whether or not, to the best knowledge of Tenant, Landlord is in
default in performance of any of its obligations under this Lease, and, if so,
specifying each such default of which Tenant may have knowledge, and specifying
as to such other matters as may be requested and as are part of the standard
form or request of such holder of any superior lease(s) or superior mortgage(s),
it being intended that any such statement delivered pursuant thereto may be
relied upon by any other person with whom Landlord, or the holder or any
superior lease(s) or superior mortgage(s), may be dealing.
SECTION 3. (A) Each of Landlord and Tenant shall keep the contents of
this Lease confidential and each such party shall not (and shall cause its
Affiliates, and its and their respective directors, officers, employees, agents,
advisors, service providers or consultants ("Representatives") not to) disclose
the terms, covenants, conditions or other facts with respect to this Lease,
including the Base Rent and the Tenant Improvement Allowance ("Information") to
any person, corporation, partnership, association, newspaper, periodical or
other entity, or use the Information for any purpose, except as specifically
contemplated by this Lease or as necessary or appropriate for the conduct of
such party's business.
(B) Each party may disclose the Information to its Representatives
who need access to such Information for, and such Representatives shall use such
Information solely for, the purposes set forth in subsection A, immediately
above. Each party shall be responsible for any breach of the provisions of this
Article 18, Section 3 by any of its Representatives.
(C) If a party or its Representatives receive a request to
disclose all or any part of the Information under the terms of a subpoena or
other order issued by a court of competent jurisdiction or by a government
agency, such party shall: (i) promptly notify the other party of the existence,
terms and circumstances surrounding such request; (ii) consult with the other
party on the advisability of taking steps to resist or narrow that request;
(iii) if disclosure of any Information is required, furnish only such portion of
the Information as such party is advised by counsel is legally required to be
disclosed; and (iv) cooperate with the other party in its efforts to obtain an
order or other reliable assurance that confidential treatment will be accorded
to the portion of the Information that is required to be disclosed.
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(D) Each party acknowledges that if provisions of this Article 18,
Section 3 are breached, the non-breaching party and/or its applicable Affiliates
would be irreparably harmed and would not be made whole by monetary damages. It
is accordingly agreed that, in addition to any other remedy to which it may be
entitled in law or in equity, the non-breaching party and/or its applicable
Affiliates shall be entitled to injunctive or similar relief to prevent such
breaches and/or to compel specific performance.
(E) Any claim, controversy or dispute arising out of, relating to,
or in connection with the Agreement or agreements and transactions contemplated
hereby, shall be resolved solely by binding arbitration.
(F) The provisions of this Article 18, Section 3 shall be binding
upon each party without limitation as to time.
ARTICLE 19
EVENTS OF DEFAULT AND TERMINATION
SECTION 1. This Lease and the term and estate hereby granted are
subject to the limitation that whenever Tenant shall default in the payment of
any installment of Base Rent, or in the payment of any additional rent or any
other charge payable by Tenant to Landlord, on any day upon which the same shall
be due and payable, and such default shall continue for ten (10) days after
Landlord shall have given Tenant a notice specifying such default, then in any
such case Landlord may give to Tenant a notice of intention to end the Term of
this Lease at the expiration of three (3) days from the date of the service of
such notice of intention, and, upon the expiration of said three (3) days, this
Lease and the Lease Term and estate hereby granted, whether or not the Lease
Term shall theretofore have commenced, shall terminate with the same effect as
if that day were the Expiration Date, but Tenant shall remain liable for damages
as provided in Article 28.
SECTION 2. This Lease and the Lease Term and estate hereby granted are
subject to the further limitation that (a) whenever Tenant shall do or permit
anything to be done, whether by action or inaction, contrary to any of Tenant's
obligations hereunder, other than the payment of rent, and if such situation
shall continue and shall not be remedied by Tenant within thirty (30) days after
Landlord shall have given to Tenant a notice specifying the same, or, in the
case of a happening or default which cannot with due diligence be cured within a
period of thirty (30) days
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and the continuance of which for the period required for cure will not subject
Landlord to the risk of criminal liability or termination of any superior
lease(s) or foreclosure of any superior mortgage(s), if Tenant shall not duly
institute within such ten (10) day period and promptly and diligently prosecute
to completion all steps necessary to remedy the same, or, (b) whenever any event
shall occur or any contingency shall arise whereby this Lease or any interest
therein or the estate hereby granted or any portion thereof or the expired
balance of the Lease Term hereof would, by operation of law or otherwise,
devolve upon or pass to any person, firm or corporation other than Tenant,
except as expressly permitted by Article 20, or (c) whenever Tenant shall
abandon the Demised Premises; then in any such event covered by subsections "a",
"b" or "c" of this Section at any time thereafter, Landlord may give to Tenant a
notice of intention to end the Term of this Lease at the expiration of three (3)
days from the date of service of such notice of intention, and upon the
expiration of said three (3) days this Lease and the Lease Term and estate
hereby granted, whether or not the Lease Term shall theretofore have commenced,
shall terminate with the same effect as if that day were the Expiration Date,
but Tenant shall remain liable for damages as provided in Article 28.
SECTION 3. This Lease and the Lease Term and estate hereby granted are
subject to the further limitation that whenever Tenant shall make an assignment
for the benefit of creditors, or shall file a voluntary petition under any
bankruptcy or insolvency law, or an involuntary petition alleging an act of
bankruptcy or insolvency is filed against Tenant, or whenever a petition shall
be filed by or against Tenant seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or any future federal bankruptcy act or any other present or future
applicable federal, state or other statute or law, or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant
or of all or any substantial part of its properties, or whenever a permanent or
temporary receiver of Tenant or of, or for, the property of Tenant shall be
appointed, or if Tenant shall plead bankruptcy or insolvency as a defense in any
action or proceeding, then, Landlord, (i) at any time after receipt of notice of
the occurrence of any such event, or (ii) if such event occurs without the
acquiescence of Tenant, at any time after the event continues for sixty (60)
days, may give Tenant a notice of intention to end the Lease Term at the
expiration of five (5) days from the service of such notice of intention, and
upon the expiration of said five (5) day period this Lease and the Lease Term
and estate hereby granted, whether or not the Lease Term
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shall theretofore have commenced, shall terminate with the same effect as if
that day were the Expiration Date, but Tenant shall remain liable for damages as
provided in Article 28.
SECTION 4. Notwithstanding any cure period provided in this Lease with
regard to a default in the timely performance of any obligation under this
Lease, if any such default shall occur more than six (6) times in any period of
twelve (12) months, then, notwithstanding that such defaults shall have each
been cured within the period after notice, if any, as provided in this Lease,
any further similar default shall be deemed to be deliberate, and Landlord
thereafter may serve the said three (3) days' notice of termination referred to
in Section 1 and 2 of this Article upon Tenant without affording to Tenant an
opportunity to cure such further default.
SECTION 5. Without limiting any of the provisions of Articles 24 and 28
or this Article, if pursuant to the Bankruptcy Code of 1978, as the same may be
amended and subject to the approval of the presiding Bankruptcy Court, Tenant is
permitted to assign this Lease in disregard of the restrictions contained in
Article 20, Tenant agrees that adequate assurance of future performance by the
assignee permitted under such Code shall mean the deposit of cash security with
Landlord in an amount equal to the sum of one year's Base Rent then reserved
hereunder plus an amount equal to all additional rent payable under this Lease
for the calendar year preceding the year in which such assignment is intended to
become effective. Such deposit shall be held by Landlord, for the balance of the
term of this Lease, as security for the full and faithful performance of all of
the obligations under this Lease on the part of Tenant yet to be performed, in
the manner set forth in Article 21. If Tenant receives or is to receive any
valuable consideration for such an assignment of this Lease, such consideration,
after, deducting therefrom (i) the brokerage commissions, if any, and other
expenses reasonably incurred by Tenant for such assignment and (ii) any portion
of such consideration reasonably designated by the assignee as paid for the
purchase of Tenant's property in the Demised Premises, shall be the sole and
exclusive property of Landlord and shall be paid over to Landlord directly by
such assignee.
ARTICLE 20
ASSIGNMENT AND SUBLETTING
SECTION 1. Neither this Lease nor the Lease Term and estate hereby
granted, nor any part hereof or thereof, nor the interest of Tenant in any
sublease or the rentals thereunder, shall
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be assigned, mortgaged, pledged, encumbered or otherwise transferred by Tenant
by operation of law or otherwise, and neither the Demised Premises nor any part
thereof, shall be encumbered in any manner by reason of any act or omission on
the part of Tenant or anyone claiming under or through Tenant, or shall be
sublet or be used or occupied or permitted to be used or occupied, or utilized
for desk space or for mailing privileges, by anyone other than Tenant or for any
purpose other than as permitted by this Lease, without the prior written consent
of Landlord in every case, except as otherwise provided in this Article.
SECTION 2. (A) No assignment of this Lease shall be binding upon
Landlord unless Landlord shall have consented thereto, which consent shall not
be unreasonably withheld or delayed, or unless said assignment is to a successor
entity into which Tenant merges or consolidates as permitted by Section 3 below.
Furthermore, no assignment shall be binding on Landlord unless the assignee
shall execute, acknowledge and deliver to Landlord (a) a duplicate original
instrument of assignment in form and substance satisfactory to Landlord, duly
executed by Tenant, and (b) an agreement, in form and substance satisfactory to
Landlord, duly executed by the assignee, whereby the assignee shall
unconditionally assume observance and performance of, and agree to be personally
bound by all of the terms, covenants and conditions of this Lease on Tenant's
part to be observed or performed, including, without limitation, the provisions
of this Article with respect to all future assignments; but the failure or
refusal of the assignee to execute or deliver such an agreement shall not
release the assignee from its liability for the obligations of Tenant hereunder
assumed by acceptance of the assignment of this Lease.
(B) If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof be sublet or be used or occupied by anybody
other than Tenant, whether or not in violation of this Lease, Landlord may after
termination of this Lease under the provisions of Article 19 collect rent from
the subtenant or occupant. In either event, Landlord may apply the net amount
collected to the rents herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of any of the provisions of
Section 1 of this Article or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to
assignment, mortgaging, subletting or use or occupancy by others shall not in
any
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way be considered to relieve Tenant from obtaining the express written consent
of Landlord to any other or further assignment, mortgaging, or subletting or use
or occupancy by others not expressly permitted in this Article. Notwithstanding
any assignment, subletting, mortgaging or use or occupancy by others, Tenant
shall remain fully responsible and liable to Landlord for all of the terms and
conditions of this Lease, and for all acts and omissions of any assignee,
subtenant, user or occupant of the Demised Premises, or anyone claiming through
or under any of the foregoing, which shall be a violation of any of the
obligations of Tenant hereunder. Tenant agrees to pay to Landlord all costs
incurred by Landlord, including reasonable counsel fees, in connection with any
proposed assignment of Tenant's interest in this Lease or any proposed
subletting of the Demised Premises or any part thereof (including, without
limitation, the exercise by Landlord of any options under Section 4(B) or (C) of
this Article, the costs of making investigations as to the acceptability of a
proposed assignee or subtenant, and the preparation and/or review of any and all
documents in connection with any rights under this Article 20. References in
this Lease to use or occupancy by others, that is anyone other than Tenant,
shall not be construed as limited to subtenants and those claiming under or
through subtenants but as including also licensees and others claiming under or
through Tenant, immediately or remotely.
(C) The listing of any name other than that of Tenant on any door
of the Demised Premises or on any directory or in any elevator in the Building,
or otherwise, shall not operate to vest in the person so named any right or
interest in this Lease or the Demised Premises, or be deemed to constitute, or
serve as a substitute for, any consent of Landlord required under this Article
20. Neither any assignment of this Lease nor any subletting, occupancy or use of
the Demised Premises or any part thereof by any person other than Tenant, nor
any collection of rent by Landlord from any person other than Tenant, nor any
application of any such rent as provided in this Article shall, under any
circumstances except as set forth in Section A above, relieve, impair, release
or discharge Tenant of its obligations fully to perform the terms of this Lease
on Tenant's part to be performed.
SECTION 3. Upon at least thirty (30) days prior notice to Landlord, and
provided that Tenant is not in default under this Lease beyond any applicable
notice and cure period, if Tenant is a corporation, this Lease may be assigned
to a successor entity, into which Tenant merges or
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consolidates in accordance with applicable statutory provisions for the merger
or consolidation of corporations provided that, by operation of law or by
effective provisions contained in the instruments of merger or consolidation the
liability of the entities participating in such merger or consolidation are
assumed by the successor entity surviving such merger or consolidation, or to
any other entity which controls, is controlled by, or is under common control
with Tenant, so long as the Demised Premises continue to be used for the
Permitted Use; the transfer is not principally for the purpose of transferring
the leasehold estate created hereby; the net worth of the assignee is at least
equal to or in excess of the net worth of such tenant immediately prior to such
assignment; the assignee assumes by documents satisfactory to Landlord all of
Tenant's obligations to be performed under this Lease. The acquisition by
Tenant, its corporate successors or assigns, of all of or substantially all the
obligations and liabilities of any corporation, shall be deemed a merger for
purposes of this Article. Moreover, upon at least thirty (30) days prior notice
to Landlord, Tenant shall have the right, without the consent of Landlord, to
sublet all or a portion of the Demised Premises to any other corporation which
controls, is controlled by, or is under common control with Tenant, so long as
the Demised Premises continue to be used for the Permitted Use.
SECTION 4. In the event that at any time or from time to time prior to
or during the Lease Term Tenant desires Landlord's consent to an assignment of
this Lease or to the subletting of all or any portion of the Demised Premises:
(A) Tenant shall submit to Landlord a written notice of Tenant's
desire to assign or sublet, which shall contain or be accompanied by the
following information: (1) a description identifying the space to be assigned or
sublet (which shall include appropriate means of ingress and egress); and (2)
the terms and conditions (including without limitation the proposed commencement
and termination dates) of the proposed assignment or subletting. Landlord shall
have the option to be exercised by notice to Tenant within thirty (30) days
after receipt of such notice to require a surrender of the Demised Premises or
part thereof involved, as the case may be, including Tenant's leasehold
improvements therein, upon the terms and conditions hereinafter set forth. This
option requiring a surrender of the Demised Premises or part thereof involved,
as the case may be, shall not apply to sublets for a sublease term ending more
than three (3) months prior to the Expiration Date.
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(B) If Landlord fails to exercise its option as above provided
and Tenant still desires to assign or sublet all or any part of the Demised
Premises, Tenant shall submit to Landlord a written request for Landlord's
consent to such assignment or subletting, which request shall contain or be
accompanied by the following information: (1) a description identifying the
space to be assigned or sublet (which shall include appropriate means of ingress
and egress); (2) the terms and conditions (including without limitation the
proposed commencement and termination dates) of the proposed assignment or
subletting; (3) the name and address of the proposed assignee or subtenant; (4)
the nature and character of the business of the proposed assignee or subtenant
and of its proposed use of the Demised Premises; and (5) current financial
information, and any other information as Landlord may reasonably request, with
respect to the proposed assignee or subtenant.
(C) If Landlord shall exercise its option to require a surrender
of the Demised Premises as provided in Section 4(A), then upon the proposed
commencement date of the assignment or subletting specified in Tenant's notice
given pursuant to Section 4(A), the Demised Premises or the part thereof
involved, as the case may be, shall be delivered to Landlord in accordance with
the provisions of the Lease relating to surrender of the Demised Premises at the
expiration of the Lease Term, and this Lease shall cease and terminate insofar
as the Demised Premises or part thereof involved, as the case may be, is
concerned with the same force and effect as though such proposed commencement
date were the date set forth in this Lease as the expiration of the Lease Term.
If only part of the Demised Premises is involved, the terms and conditions of
the Lease shall remain in full force and effect as to the remainder of the
Demised Premises, except that the Base Rent and additional rent shall be
proportionately reduced based upon the number of square feet of such part of the
Demised Premises surrendered, and except further to the extent that appropriate
modifications of other terms or provisions of this Lease should be made to
reflect such elimination of such part of the Demised Premises surrendered.
Notwithstanding the foregoing, in the event that less than all of the Demised
Premises is surrendered, (1) Landlord shall cause to be constructed, at Tenant's
sole cost and expense, such alterations and connections as may be required in
order to physically separate such surrendered part of the Demised Premises from
the balance of the Demised Premises, the cost of which construction shall be at
Landlord's Charge, and (2) at least thirty (30) days prior to the proposed
commencement date specified above, Landlord shall have free access to enter the
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Demised Premises in order to complete such construction referred to in clause
"1" above, and to the extent that there are less than thirty (30) days between
Landlord's exercise of its option to require a surrender and such proposed
commencement date, such proposed commencement date shall be extended by a like
number of days.
(D) If Landlord does not exercise its option under Section 4(A),
Tenant shall not assign or sublet without Landlord's prior consent, which
consent shall not be unreasonably withheld provided that with respect to any
assignment or subletting the following further conditions shall be fulfilled:
(i) Tenant may advertise and list the availability of the Demised Premises for
assignment or subletting; provided all advertisements, public communications of
any kind, and listings of, or relating to the availability of the Demised
Premises for assignment or subletting shall be subject to the prior written
consent of Landlord, which shall not be unreasonably withheld; it is
specifically understood that it shall not be unreasonable for Landlord to deny
its consent if any advertisement or public communication shall list the rental
rate in any way or shall adversely reflect on the dignity, character or prestige
of the Building; (ii) no space shall be assigned or sublet to another tenant, or
to a related entity of any other tenant, or to any other occupant of the
Building, if Landlord shall then have available for rent comparable or similar
space in the Building; (iii) no assignment or subletting shall be to a person or
entity which has a financial standing, is of a character, is engaged in
business, is of a reputation, or proposes to use the assigned or sublet premises
in a manner, not in keeping with the standards in such respects of the other
tenancies of the Building; (iv) the assignment or subletting shall be expressly
subject to all of the obligations of Tenant under this Lease, and, without
limiting the generality of the foregoing, if a sublease, the sublease shall
impose at least the same restrictions and conditions with respect to use as are
contained in Article 9 hereof, and shall specifically provide that there shall
be no further subletting of the sublet premises; (v) that part, if any, of the
term of any such sublease or any renewal or extension thereof, which shall
extend beyond a date one (1) day prior to the expiration or earlier termination
of the Lease Term, shall be a nullity; (vi) the assignment or subletting shall
not have the effect, or give the utility serving the Building with electricity
cause to claim, that Landlord will not be permitted to serve the Demised
Premises or the portion thereof so assigned or sublet, or any of the other
leased portions of the Building, with electricity, on the bases as provided for
herein; (vii) no such subletting shall result in there being more than four (4)
occupants in the Demised Premises; (viii) the Base Rent and additional rent
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for any such subletting shall be not less than the greater of (a) that provided
for under this Lease on a per square foot basis for the space as proposed to be
sublet, and (b) the then going market rental rate for comparable space and for a
comparable term in the Building (or if none is or has been currently leased or
subleased, then comparable space and term in a comparable building in White
Plains); (ix) the proposed assignee or subtenant shall not be a person then
negotiating with Landlord for the rental of any space in the Building; (x) the
assigned or subleased premises shall be used for a purpose which will not
violate the certificate of occupancy for the Demised Premises; (xi) the business
of the assignee or subtenant shall not be in violation of any restriction
against competition contained in any other lease in the Building to which
Landlord is a party; (xii) the proposed assignee or subtenant shall not be a
foreign or domestic governmental agency; (xiii) the proposed assignee or
subtenant shall not use the Demised Premises for the preparation and/or sale of
food for, on or off premises consumption; (xiv) the Demised Premises cannot be
assigned or subleased to an individual or entity engaged in a business related
to the oil and gas, power, or energy industries or any other business in which
Texaco Inc. or its Affiliates is substantially engaged at the time of such
assignment or subletting; (xv) Landlord shall be furnished with a copy of the
agreement of assignment or sublease to be executed, at least ten (10) days prior
to its execution, and with a duplicate original of the assignment or sublease,
within ten (10) days after the date of its execution; (xvi)Tenant shall pay to
Landlord, as additional rent, a sum equal to fifty (50%) percent of the amount
of (a) all Base Rent and additional rent and any other consideration paid or
payable to Tenant by any assignee or subtenant which is in excess of the Base
Rent after the payment of all reasonable expenses related to the assignment or
sublet and additional rent then being paid by Tenant to Landlord pursuant to the
terms hereof, and (b) any other net profit or gain realized by Tenant for such
assignment or subletting, in each instance immediately upon receipt thereof by
Tenant; if only a part of the Demised Premises is sublet, then the Base Rent and
additional rent paid therefor by Tenant to Landlord shall be deemed to be that
fraction thereof that the area of said sublet space bears to the entire Demised
Premises; (xvii) Tenant shall have fully and faithfully complied with all the
terms, covenants and conditions of this Lease on the part of Tenant then to have
been performed under this Lease; and (xviii) every sublease shall contain
substantially the following language:
To induce Landlord to consent to this sublease, Sublessee
agrees that if Landlord shall recover or come into possession
of the
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Demised Premises before the expiration of the Overlease,
Landlord shall have the right to take over this sublease and
to have it become a direct lease with Landlord in which case
Landlord shall succeed to all the rights of Sublessor
hereunder. This sublease shall be subject to the condition
that, notwithstanding anything to the contrary in this
sublease, from and after the termination of the Overlease,
Sublessee shall waive any right to surrender possession or to
terminate this sublease, and, at Landlord's election,
Sublessee shall be bound to Landlord for the balance of the
term hereof and shall attorn to and recognize Landlord, as its
Landlord, under all of the then executory terms of this
sublease, except that Landlord shall not (i) be liable for any
previous act, omission or negligence of Sublessor, (ii) be
subject to any counterclaim, defense or offset not expressly
provided for in this sublease, which theretofore accrued to
Sublessee, (iii) be bound by any modification or amendment of
this sublease or by any prepayment of more than one month's
Base Rent and additional rent which shall be payable as
provided in this sublease, unless such modification or
prepayment shall have been approved in writing by Landlord,
(iv) be obligated to perform any repairs or other work in the
Premises beyond Landlord's obligations under the Overlease, or
(v) be obligated or liable with respect to any security
deposit tendered by Sublessee, unless Landlord expressly
agrees to the contrary by written agreement between Landlord
and Sublessee. Sublessee shall execute and deliver to Landlord
any instruments Landlord may reasonably request to evidence
and confirm such attornment. Sublessee shall be deemed to have
given a waiver of subrogation of the type provided for in the
Overlease.
SECTION 5. The provisions of this Article 20 shall apply to each such
proposed subletting and assignment, none of which shall be effective until all
of the foregoing shall have been complied with. Notwithstanding any subletting
or assignment, Tenant shall remain liable
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for the full performance of all the terms and conditions of this Lease on the
part of Tenant to be performed.
ARTICLE 21
SECURITY DEPOSIT
SECTION 1. (A) Tenant shall deposit with Landlord upon the execution
and delivery of this Lease the sum of $3,000,000.00 as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this Lease. Provided that this Lease is in full force and effect, that Tenant
has faithfully kept and performed all of the terms and obligations on its part
then to be performed under the Lease, the Security Deposit shall be reduced to
$2,000,000.00 when there are eight (8) years remaining in the Lease Term and
shall be further reduced to $1,000,000.00 when there are four (4) years
remaining in the Lease Term. It is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this Lease, including,
but not limited to, the payment of Base Rent and additional rent, Landlord may
use, apply or retain the whole or any part of the security so deposited to the
extent required for the payment of any rent and additional rent or any other
sums as to which Tenant is in default or for any sum which Landlord may expend
or may be required to expend by reason of Tenant's default in respect of any of
the terms, covenants and conditions of this Lease, including but not limited to,
any damages or deficiency in the re-letting of the Demised Premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Landlord. If as a result of any application by Landlord of all or
any part of the security deposited by Tenant pursuant to this paragraph "A", the
amount of cash so on deposit with Landlord shall be less than that required
pursuant to this paragraph "A", Tenant shall forthwith deposit with Landlord
cash in an amount equal to the deficiency.
(B) (1) At Tenant's election, in lieu of the cash security
deposit, Tenant may deliver to Landlord an irrevocable letter of credit in
substantially the form annexed hereto and made a part hereof as Exhibit "E" (or
other form acceptable to Landlord in its reasonable discretion), in favor of
Landlord, payable in White Plains, New York, and issued by a bank which is under
the supervision of the Superintendent of Banks of the State of New York or by a
national bank which is a member of the New York Clearing House Association. The
letter of credit (as the same may be renewed from time to time hereinafter
provided) shall be maintained
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for the entire term of this Lease plus a period of thirty (30) days thereafter.
The letter of credit shall be irrevocable, shall be in effect for an initial
period of not less than one (1) year, and shall provide that the same shall be
automatically renewed for successive one (1) year periods ending not earlier
than thirty (30) days after the expiration of the term of this Lease, without
any action whatsoever on the part of Landlord. The issuing bank shall have the
right to elect not to renew such letter of credit only on written notice to
Landlord given not less than sixty (60) days prior to the then current
expiration date thereof. However, the privilege of the issuing bank to elect not
to renew said letter of credit shall not diminish the obligation of Tenant to
maintain such irrevocable letter of credit with Landlord through the date which
is not earlier than thirty (30) days after the expiration of the term hereof;
(2) Each letter of credit shall provide, among other things,
that: (a) Landlord, or its then managing agent (if any), shall have the right to
draw down an amount up to the extent of the face amount of the letter of credit
upon presentation to the issuing bank of Landlord's (or its then managing
agent's) certified statement that Landlord is entitled to draw such amount under
the provisions of this Lease (it being understood that if Landlord or its
managing agent be a corporation, partnership or other entity, then such
statement shall be signed by an officer if a corporation, a general partner, if
a partnership, or any authorized party, if another entity); and (b) the letter
of credit will be honored by the issuing bank upon the delivery of the aforesaid
statement without inquiry as to the accuracy thereof and regardless of whether
Tenant disputes the contents of such statement;
(3) Tenant specifically acknowledges and agrees that
Landlord's acceptance of a letter of credit as herein provided is solely an
accommodation to Tenant, and, if at any time during the term hereof such letter
of credit is to be withdrawn, canceled or modified in any manner, or if Tenant
shall default in, or fail to keep, observe or perform any of the terms,
covenants, conditions, provisions or agreements hereunder, beyond notice (if
required) and the expiration of any applicable grace period, then, in any such
event, Landlord may draw the full amount of such letter of credit and retain the
proceeds thereof as a cash security deposit in accordance with the provisions of
this Article, except that if the amount of the actual damages incurred by
Landlord as a result of Tenant's default, failure to keep, observe or so perform
shall be less than ten (10%) percent of the amount of the letter of credit, as
so determined by Landlord,
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then Landlord shall only draw down a portion of the letter of credit equal to
the amount of such damages. Landlord shall deliver to Tenant a copy of any
statement submitted by Landlord to the issuer of the letter of credit in
connection with a drawing thereunder;
(4) In the event of a transfer of Landlord's interest in the
Building of which the Demised Premises form a part, Landlord shall have the
right, upon written notice to Tenant, which notice shall include the identity of
the transferee, to transfer and deliver the letter of credit to the transferee
and thereupon Landlord shall, without any further agreement between the parties,
be automatically released by Tenant from all liability therefor thereafter
arising, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the said letter of credit to a new landlord.
Tenant covenants and agrees to pay the issuing bank's transfer fee, if any, in
connection with the transfer. Tenant covenants and agrees that it will not
assign or encumber said letter of credit, or any part thereof, and that neither
Landlord nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance;
(5) If the letter of credit expires earlier than thirty (30)
days after the expiration of the term of this Lease or if the issuing bank
notifies Landlord that it will not renew the then current letter of credit,
Landlord will accept a replacement thereof (such renewal to be in effect not
later than thirty (30) days prior to the expiration of the then expiring letter
of credit), upon the terms and conditions required by this Article. If the
letter of credit is not timely renewed or replaced, Landlord may present the
existing letter of credit to the issuing bank prior to its expiration. The
entire sum evidenced thereby shall be paid to Landlord and thereafter held as
cash security in accordance with the provisions of this Article. If Tenant fails
to maintain the letter of credit in the amount and on the terms and conditions
set forth in this Article, and Landlord does not present same prior to
expiration of the letter of credit, Tenant, not later than the date of such
expiration, shall deposit with Landlord cash in the amount of security then
required to be on deposit with Landlord under this Article as cash security to
be held and applied by Landlord as provided in this Article; and
(6) If, as a result of any presentation and subsequent
application of the proceeds of all or any part of the letter of credit, the
amount available to be drawn thereon shall
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be less than the amount of security then required to be on deposit with Landlord
under this Article, Tenant shall forthwith provide Landlord with additional cash
or letter(s) of credit in an amount equal to such deficiency.
SECTION 2. Notwithstanding anything to the contrary contained herein,
Tenant may, from time to time, and at any time during the term hereof, upon
thirty (30) days written notice to Landlord, substitute cash security for any
then-existing letter of credit, or substitute a letter of credit for cash
security, provided such security deposit is in the amount of security then
required to be on deposit under this Lease.
SECTION 3. In the event of a sale of the Complex and Building or
leasing of the Building, of which the Demised Premises form a part, Landlord
shall have the right to transfer the security to the vendee or lessee and
Landlord shall thereupon be released by Tenant from all liability for the return
of such security; and Tenant agrees to look to the new Landlord solely for the
return of said security. It is agreed that the provisions hereof shall apply to
every transfer or assignment made of the security to a new Landlord.
SECTION 4. Tenant further covenants that it will not assign or encumber
or attempt to assign or encumber the monies deposited herein as security and
that neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
SECTION 5. Landlord shall hold Tenant's security deposit in an
interest-bearing account. The account shall be of the type typically arranged by
banking organizations for security deposits for rental of real property, held
and controlled by Landlord "for the benefit of" Tenant, or like form. It is
agreed that any and all interest earned on the security deposit shall be deemed
to be a portion of the security deposit, less the lower of (i) $3,000.00 per
annum or (ii) one (1%) percent of the amount of the interest earned on the
account per annum, which shall be withdrawn annually and retained by Landlord as
an administrative fee. Landlord shall notify Tenant in writing of the name and
address of the banking organization in which the deposit of security is made,
which shall be a banking organization having a place of business within the
State of New York.
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SECTION 6. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this Lease, the
security shall be returned to Tenant within thirty (30) days after the date
fixed as the end of the Lease and after delivery of the entire possession of the
Demised Premises to Landlord.
SECTION 7. In the event that a Letter of Credit is properly replaced,
in accordance with the terms of this Article 21, by cash or by another Letter of
Credit, Landlord shall return to Tenant the Letter of Credit that was replaced.
ARTICLE 22
QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT
AND NOTICE TO LESSOR AND MORTGAGEES
SECTION 1. Landlord covenants that if, and so long as, Tenant pays all
of the Base Rent and additional rent due hereunder, and keeps and performs each
and every covenant, agreement, term, provision and condition herein contained on
the part and on behalf of Tenant to be kept and performed, Tenant shall quietly
enjoy the Demised Premises without hindrance or molestation by Landlord or by
any other person lawfully claiming the same, subject to the covenants,
agreements, terms, provisions and conditions of this Lease and to any superior
lease(s) and/or superior mortgage(s).
SECTION 2. (A) This Lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate in all respects to all present and future
ground leases and overlying and underlying leases and/or grants of term of the
land and/or the Building or the portion thereof in which the Demised Premises
are located in whole or in part now or hereafter existing ("superior lease(s)")
and to all mortgages and building loan agreements, which may now or hereafter
affect the land and/or the Building and/or any superior lease(s) ("superior
mortgage(s)") whether or not the superior lease(s) or superior mortgage(s) shall
also cover other lands and/or buildings, and to each and every advance made or
hereafter to be made under the superior mortgage(s), and to all renewals,
modifications, replacements and extensions of the superior lease(s) and superior
mortgage(s) and spreaders, consolidations and correlations of the superior
mortgage(s). The provisions of this Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver at Tenant's own cost
and expense any instrument, in recordable form, if required, that Landlord, the
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lessor of any superior lease(s) or the holder of any superior mortgage(s) or any
of their respective successors in interest may reasonably request to evidence
such subordination; and if Tenant fails to execute, acknowledge or deliver any
such instrument within ten (10) days after request therefor, Tenant hereby
irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact,
coupled with an interest, to execute, acknowledge and deliver any such
instruments for and on behalf of Tenant. The holder of the superior mortgage(s)
may elect that this Lease shall have priority over its superior mortgage(s) and,
upon notification by said holder of the superior mortgage(s) to Tenant, this
Lease shall be deemed to have priority over such superior mortgage(s), whether
this Lease is dated prior to or subsequent to the date of such superior
mortgage(s). Landlord represents that the Building is currently not subject to
any ground leases, mortgages or building loan agreements and the only underlying
lease that the Building is subject to is an interim sublease agreement with the
County of Westchester Industrial Development Agency. Landlord hereby indemnifies
Tenant and agrees to hold Tenant harmless from any and all losses, costs,
damages, expenses, claims and liabilities, including, without limitation, court
costs and reasonable attorneys' fees and disbursements, arising out of any
hindrance or molestation by the County of Westchester Industrial Development
Agency of Tenant's use or enjoyment of the Demised Premises, any claim that
Landlord violated any agreement between Landlord and the County of Westchester
Industrial Development Agency, or the County of Westchester Industrial
Development Agency's failure to consent to this Lease.
(B) Notwithstanding the foregoing, provided that Tenant is not
then currently assigning or subletting more than a total of fifteen (15%)
percent of the Demised Premises (as from time to time constituted, exclusive of
such assignments and subleases), then this Lease shall not be subject and
subordinate to any future ground or underlying leases or to any future mortgages
which may hereafter affect the real property or the Building of which the
Demised Premises form a part, or to any renewals, modifications, consolidations,
replacements or extensions thereof, unless the holder of each such mortgage
and/or the landlord under each such lease shall agree in writing for the benefit
of Tenant, that as long as Tenant shall not be in default under any of the
covenants, terms or conditions of this Lease on the part of Tenant to be
performed and observed beyond the applicable periods of notice and cure, if any,
such holder or landlord shall not join Tenant as a defendant in any action
brought to foreclose any such mortgage or terminate any such ground or
underlying lease due to a default by the tenant
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thereunder, and shall recognize Tenant's right to possession under this Lease
for the term demised hereunder notwithstanding the foreclosure of any such
mortgage or the termination of any such ground or underlying lease, provided
that Tenant shall agree to attorn to the holder of any such mortgage or the
purchaser at a foreclosure sale or the landlord under any such ground or
underlying lease, if any such party shall become the landlord under this Lease.
Landlord represents that to the best of its knowledge there are no existing
mortgages on the real property or the Building of which the Demised Premises
form a part, and that other than the interim sublease agreement with the County
of Westchester Industrial Development Agency there are no ground or underlying
leases on all or any portion of such real property or Building.
SECTION 3. If, at any time prior to the termination of this Lease, the
holder of any superior mortgage(s) or lease or any other person or the
successors or assigns of the foregoing (collectively referred to as "Successor
Landlord") shall succeed to the rights of Landlord under this Lease, Tenant
agrees, at the election and upon receipt of any such Successor Landlord, to
fully and completely attorn to and recognize any such Successor Landlord, as
Tenant's Landlord under this Lease upon the then executory terms of this Lease;
provided such Successor Landlord shall agree in writing to accept Tenant's
attornment. The foregoing provisions of this Section shall inure to the benefit
of any such Successor Landlord, shall apply notwithstanding that, as a matter of
law, this Lease may terminate upon the termination of the superior lease(s),
shall be self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions. Upon the request of any such
Successor Landlord, Tenant shall execute and deliver, from time to time,
instruments satisfactory to any such Successor Landlord in recordable form if
requested, to evidence and confirm the foregoing provisions of this Section,
acknowledging such attornment and setting forth the terms and conditions of its
tenancy. Tenant hereby constitutes and appoints Landlord attorney-in-fact for
Tenant to execute any such instrument, for twenty (20) days after notice, for
and on behalf of Tenant, such appointment being coupled with an interest. Upon
such attornment this Lease shall continue in full force and effect as a direct
lease between such Successor Landlord and Tenant upon all of the then executory
terms of this Lease except that such Successor Landlord shall not be (a) liable
for any previous act or omission or negligence of Landlord under this Lease; (b)
subject to any counterclaim, defense or offset, not expressly provided for in
this Lease and asserted with reasonable promptness, which theretofore shall have
accrued to Tenant against Landlord; (c)
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bound by any previous modification or amendment of this Lease made after the
granting of such senior interest, or by any previous prepayment of more than one
month's rent, unless such modification or prepayment shall have been approved in
writing by any senior interest holder through or by reason of which the
Successor Landlord shall have succeeded to the rights of Landlord under this
Lease; (d) obligated to repair the Demised Premises or the Building or any part
thereof, in the event of total or substantial total damage beyond such repair as
can reasonably be accomplished from the net proceeds of insurance actually made
available to Successor Landlord provided all insurance to be maintained by
Landlord hereunder is thus maintained; or (e) obligated to repair the Demised
Premises or the Building or any part thereof, in the event of partial
condemnation beyond such repair as can reasonably be accomplished from the net
proceeds of any award actually made available to Successor Landlord, as
consequential damages allocable to the part of the Demised Premises or the
Building not taken. Nothing contained in this Section shall be construed to
impair any right otherwise exercisable by any such owner, holder or lessee.
SECTION 4. (A) If any act or omission by Landlord would give Tenant the
right, immediately or after lapse of time, to cancel or terminate this Lease or
to claim a partial or total eviction, Tenant will not exercise any such right
until (a) it has given written notice of such act or omission to each holder of
a superior mortgage(s) and to each holder of a superior lease(s), whose name and
address shall have previously been furnished to Tenant, by delivering notice of
such act or omission addressed to each such party at its last address so
furnished and (b) a reasonable period for remedying such act or omission shall
have elapsed following such giving of notice and following the time when such
senior interest holder shall have become entitled under such senior interest, as
the case may be, to remedy the same (which shall in no event be less than the
period to which Landlord would be entitled under this Lease to effect such
remedy) provided such senior interest holder shall, with reasonable diligence,
give Tenant notice of its intention to remedy such act or omission and shall
commence and continue to act upon such intention.
(B) Notwithstanding any contrary provision of this Lease, Tenant
shall not under any circumstances, other than an emergency, commence any action
or proceeding or take any action based upon an alleged breach or default in this
Lease by or through Landlord unless
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and until (a) Tenant shall have notified Landlord thereof, specifying in detail
the facts of the alleged breach or default, and (b) Landlord shall not have
cured, or used due diligence to cure, said alleged breach or default within
thirty (30) days after receipt of said notice.
ARTICLE 23
BROKERAGE
Landlord and Tenant represent to each other that, in the negotiation of
this Lease, they dealt with no broker or brokers other than the Leasing Broker,
and based thereupon, Landlord agrees to pay to the Leasing Broker a brokerage
fee per a separate agreement between Landlord and Leasing Broker which either
has been entered into at the time of signing this Lease or which may hereinafter
be entered into. Each party hereby indemnifies the other and agrees to hold the
other harmless from any and all losses, costs, damages, expenses, claims and
liabilities, including, without limitation, court costs and reasonable
attorneys' fees and disbursements, arising out of any inaccuracy or alleged
inaccuracy of the above representation. Landlord shall have no liability for
brokerage commissions arising out of any sublease or assignment by Tenant, and
Tenant shall and does hereby indemnify Landlord and hold Landlord harmless from
any and all liabilities for brokerage commissions arising out of any such
sublease or assignment.. Landlord and Tenant acknowledge that in the negotiation
of this Lease, each party has been represented by different agents of the
Leasing Broker as Landlord has been represented by Mr. Peter Hennessey, a
principal of the Leasing Broker, and Tenant has been represented by Mr. Brian
Higgins, a managing director of the Leasing Broker. Both Landlord and Tenant
acknowledge that the Leasing Broker has a conflict of interest in representing
both parties to this Lease and hereby expressly waive the conflict and agree to
hold each other harmless from any and all losses, costs, damages, expenses,
claims and liabilities, including, without limitation court costs and reasonable
attorney's fees and disbursements with respect to this acknowledged and accepted
conflict of interest. The provisions of this Article shall survive the
expiration or sooner termination of this Lease.
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ARTICLE 24
RE-ENTRY BY LANDLORD ON TENANT'S
DEFAULT, CURING TENANT'S DEFAULTS
SECTION 1. If this Lease shall terminate for any reason whatsoever,
Landlord or Landlord's agents and employees may, without further notice,
immediately or at any time thereafter enter upon and re-enter the Demised
Premises, or any part thereof, and possess or repossess itself thereof either by
summary dispossess proceedings, ejectment or by any suitable action or
proceeding at law, or by agreement, or by force or otherwise, and may dispossess
and remove Tenant and all other persons and property from the Demised Premises
without being liable to indictment, prosecution, or damages therefor, and may
repossess the same, and may remove any persons therefrom, to the end that
Landlord may have, hold and enjoy the Demised Premises and the right to receive
all rental income again as and of its first estate and interest therein. In the
event that Landlord enters or reenters the Demised Premises by force or
otherwise without having first secured a court order permitting same, Landlord
shall do so at its own risk, and shall be responsible to Tenant for any and all
loss or damage to Tenant's property or operations arising therefrom. The words
"enter" or "re-enter", "possess" or "repossess" as herein used, are not
restricted to their technical legal meaning. In the event of any termination of
this Lease under the provisions of Article 19 or re-entry under this Article or
in the event of the termination of this Lease, or of re-entry by or under any
summary dispossess proceedings, ejectment, or by any suitable action or
proceeding at law, or by agreement, or by force or otherwise by reason of
default hereunder on the part of Tenant, Tenant shall thereupon pay to Landlord
the Base Rent and additional rent due up to the time of such termination of this
Lease or of such recovery of possession of the Demised Premises by Landlord, as
the case may be, and shall also pay to Landlord damages as provided in Article
28.
SECTION 2. In the event of any breach or threatened breach by Tenant of
any of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings, and other remedies
were not provided for in this Lease.
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SECTION 3. Each right and remedy of either party to this Lease provided
for in this Lease shall be cumulative and shall be in addition to every other
right or remedy provided for in this Lease or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or beginning of the
exercise by either party to this Lease of any one or more of the rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise shall not preclude the simultaneous or later
exercise by such party to this Lease of any or all other rights or remedies
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise.
SECTION 4. If this Lease shall terminate under the provisions of
Article 19, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article 24, or in the event of the termination of this Lease
or of re-entry, by or under any summary dispossess or other proceeding or action
or any provision of law by reason of default hereunder on the part of Tenant,
Landlord shall be entitled to retain all monies, if any, paid by Tenant to
Landlord, whether as advance rent, security or otherwise, but such monies shall
be credited by Landlord against any Base Rent or additional rent due from Tenant
at the time of such termination or re-entry or, at Landlord's option, against
any damages payable by Tenant under Article 28 or pursuant to law.
SECTION 5. If Tenant shall default in the performance of any covenant,
agreement, term, provision or condition herein contained, beyond any applicable
notice and cure period, Landlord without thereby waiving such default, may
perform the same for the account and at the expense of Tenant without notice in
case of emergency and in any other case if such default continues after fifteen
(15) days from the due date of the giving by Landlord to Tenant of written
notice of intention to do so. Bills for any reasonable and necessary expense
incurred by Landlord in connection with any such performance by Landlord for the
account of Tenant, and reasonable and necessary bills for all costs, expenses
and disbursements, including (without being limited to) reasonable counsel fees,
incurred in collecting or endeavoring to collect the Base Rent or additional
rent or other charge or any part thereof or enforcing or endeavoring to enforce
any rights against Tenant under or in connection with this Lease, or pursuant to
law, whether or not any action or proceeding is instituted, is payable by
Tenant, within fifteen (15) days of notice to Tenant and if not paid when due,
the amounts thereof shall immediately
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become due and payable as additional rent under this Lease together with
interest thereon at the lesser of the maximum rate permitted by law or the rate
of two (2%) percent per month or portion thereof from the date the said bills
should have been paid in accordance with their terms.
ARTICLE 25
NOTICES
SECTION 1. Any notice, statement, demand, request or other
communication required or permitted pursuant to this Lease or otherwise shall be
in writing and shall be deemed to have been properly given if addressed as
follows:
To Landlord: TEXACO INC.
2000 Westchester Avenue
White Plains, New York 10650
Attention: Building Manager
Tel. #: (914) 253-7245
Fax #: (914) 253-4101
To Tenant: ATLAS AIR, INC.
538 Commons Drive
Legal Department, Bldg. 528
Golden, Colorado 80401
Attention: Thomas G. Scott, Sr., Esq.
Senior Vice President and General Counsel
Tel. #: (303) 526-5050
Fax #: (303) 526-3189
With a Copy Morrison Cohen Singer & Weinstein, LLP
(not required 750 Lexington Avenue
for notice) to: New York, New York 10022
Attention: Mary E. Flynn, Esq.
Notwithstanding the foregoing, all notices to Tenant after the Commencement Date
shall be addressed to Tenant at the Building, unless Tenant shall give notice to
the contrary. Each such notice, request or other communication shall be
effective (i) if given by facsimile, at the time such facsimile is transmitted
and the appropriate confirmation is received (or, if such time is not during a
business day, at the beginning of the next such business day), (ii) if given by
mail, five
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business days after such communication is deposited in the United States mail
with first-class postage prepaid, addressed as aforesaid, or (iii) if given by
any other means, when delivered at the address specified pursuant thereto. The
Building Manager's office is presently located at the Terrace Level of the
Building (north side between Corridors "C" and "D") and is open from 9:00 a.m.
to 5:00 p.m. on weekdays, excluding holidays. The phone number of the Building
Manager is provided for convenience only and in no event shall any notice,
request or other communication required to be given to Landlord pursuant to this
Lease be given to the Building Manager by telephone. Either party may change the
persons or addresses above by giving notice as provided above.
SECTION 2. Tenant shall give notice to Landlord promptly after Tenant
learns thereof (a) of any accident in or about the Demised Premises or the
Building, (b) of all fires in the Demised Premises, (c) of all damages to or
defects in the Demised Premises, including the fixtures, equipment and
appurtenances thereof, for the repair of which Landlord might be responsible or
which constitutes Landlord's property, and (d) of all damage to or defects in
any parts or appurtenances of the Building's sanitary, electrical, heating,
ventilating, air-conditioning, elevator and other systems located in or passing
through the Demised Premises.
ARTICLE 26
REQUIREMENTS OF LAW
SECTION 1. Prior to the commencement of the Lease Term, if Tenant is
then in possession, and at all times thereafter, Tenant, at Tenant's sole cost
and expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, Insurance Services Office, or any similar body which shall impose
any violation, order or duty upon Landlord or Tenant with respect to the Demised
Premises, arising out of Tenant's use or manner of use thereof, (including
Tenant's Permitted Use) or, with respect to the Building if arising out of
Tenant's use or manner of use of the Demised Premises or the Building (including
the Permitted Use). Nothing herein shall require Tenant to make structural
repairs or alterations unless Tenant has, by its manner of use of the Demised
Premises or
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method of operation therein, violated any such laws, ordinances, orders, rules,
regulations or requirements with respect thereto. Tenant shall give prompt
notice to Landlord of any written notice it receives of the violation of any law
or requirement of public authority affecting the Demised Premises or the
Building.
SECTION 2. Tenant may, after securing Landlord to Landlord's
satisfaction against all damages, interest, penalties and expenses, including,
but not limited to, reasonable attorneys' fees, by cash deposit or by surety
bond in an amount and in a company satisfactory to Landlord, contest and appeal
any such laws, ordinances, orders, rules, regulations or requirements provided
same is done with all reasonable promptness and provided such appeal shall not
subject Landlord to prosecution for a criminal offense or constitute a default
under any lease or mortgage under which Landlord may be obligated, or cause the
Demised Premises or any part thereof to be condemned or vacated.
SECTION 3. Tenant will not clean nor require, permit, suffer or allow
any window in the Demised Premises to be cleaned from the outside in violation
of Section 202 of the Labor Law or any other applicable law or of the Rules of
the Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
SECTION 4. Tenant, its employees, agents, contractors, licensees,
visitors, invitees, or other parties claiming under, or in the Building by
permission or sufferance of Tenant shall, at their sole cost and expense,
faithfully observe and comply with: (a) the rules and regulations annexed hereto
and made a part hereof as Exhibit "C", and such reasonable changes therein
(whether by modification, elimination or addition) as Landlord at any time or
times hereafter may make and communicate in writing to Tenant, provided that
such modifications are made for the reputation, safety, character, security,
care, appearance or interest of the Building or Complex, or the preservation of
good order therein, or the operation or maintenance of the Building, or the
equipment thereof, or the comfort of tenants or others in the Building, and
further provided that such modifications do not unreasonably affect the conduct
of Tenant's business in the Demised Premises or its use and enjoyment by Tenant,
its employees, agents, contractors, licensees, visitors, invitees, or other
parties claiming under, or in the Building by permission or sufferance of Tenant
and/or materially reduce Tenant's rights under this Lease;
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and (b) all laws, statutes, codes, rules, regulations and requirements referred
to in Section 1 of this Article. In the event of any inconsistency of conflict
between the provisions of this Lease and the rules and regulations attached
hereto and made a part hereof as Exhibit "C", and any rules and regulations
changed subsequent to the date of this Lease, the provisions of the Lease shall
be deemed to control and be binding. Nothing in this Lease contained shall be
construed to impose upon Landlord any duty or obligation to Tenant to enforce
the rules and regulations or the terms, covenants or conditions in any other
lease, as against any other tenant, and Landlord shall not be liable to Tenant
for violation of the same by any other tenant or its employees, agents or
visitors. However, Landlord shall not enforce any of the rules and regulations
in such manner as to discriminate against Tenant or anyone claiming under or
through Tenant, and Landlord agrees to use reasonable efforts to promptly
investigate any violation of a rule or regulation.
ARTICLE 27
NON-LIABILITY, INDEMNIFICATION AND NON-RECOURSE
SECTION 1. Landlord, its agents, employees, officers, directors,
shareholders, partners, and principals (disclosed or undisclosed) and the holder
of any superior mortgage(s) or of any superior lease(s), and such holder's
respective agents, employees, contractors, officers, directors, shareholders,
partners, and principals (disclosed or undisclosed) shall not be liable to
Tenant and Tenant hereby agrees not to sue and to waive all claims against such
individuals and/or entities, arising from any injury to Tenant or its employees,
or invitees and any damage to or loss of any property of Tenant, its employees,
or invitees (by theft, vandalism, or otherwise) occurring on or about the
Demised Premises, the Building, and/or the Complex resulting from any cause
whatsoever in nature, other than the negligence or willful misconduct of
Landlord, its agents, servants, employees, contractors, officers, directors,
shareholders, partners, and principals (disclosed or undisclosed).
SECTION 2. (A) Tenant covenants and agrees to indemnify and save
harmless Landlord, its agents, employees, contractors, officers, directors,
shareholders, partners, and principals (disclosed or undisclosed), licensees and
invitees (collectively the "Indemnified Parties") from and against any and all
liability (statutory or otherwise) claims, suits, demands, damages, judgments,
costs, interests, and expenses, including, but not limited to, counsel fees and
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disbursements incurred in the defense of any action or proceeding whether
incurred in a third-party action or in an action brought by Tenant, to which the
Indemnified Parties may be subject or which they may suffer by reason of, or by
reason of any claim for, any injury to, or death of, any person or persons
(including, without limitation, any of the Indemnified Parties), or damage to
property (including any loss of use thereof) (i) arising from or in connection
with the occupancy or use of, or from any work, installation, or thing
whatsoever done in or about the Demised Premises during the Term of this Lease
caused by Tenant (or prior to or subsequent thereto, if Tenant is then in
possession of or otherwise exercises any control over the Demised Premises or
any part thereof); (ii) arising from any condition of the Demised Premises, the
Building, and/or the Complex caused by Tenant or any of Tenant's officers,
directors, agents, contractors, employees, subtenants, licensees, or invitees;
(iii) resulting from any default by Tenant in the performance of Tenant's
obligations under this Lease, or (iv) resulting from any act, omission, or
negligence of Tenant or of any of Tenant's officers, directors, agents,
contractors, employees, subtenants, licenses, or invitees, provided, that Tenant
shall not be responsible for liabilities resulting directly from the negligence
or willful misconduct of the Indemnified Parties.
(B) Tenant further agrees to indemnify and save harmless the
Indemnified Parties for from and against any and all liability (statutory or
otherwise) claims, suits, demands, damages, judgments, costs, interests, and
expenses, including, but not limited to, reasonable counsel fees and
disbursements incurred in the defense of any action or proceeding whether
incurred in a third-party action or in an action brought by Tenant, to which the
Indemnified Parties may be subject or which they may suffer by reason of, or by
reason of any claim for, any injury to, or death of, or damage to property
(including any loss of use thereof) of any employee, agent, or invitee of Tenant
on any portion of the Demised Premises, the Building, and/or the Complex,
including, but not limited to, recreation facilities, auditorium, and grounds,
resulting from any cause whatsoever in nature, other than the negligence or
willful misconduct of the Indemnified Parties.
(C) In case any action or proceeding is brought against Landlord
by reason of any claim as set forth in subparagraph 2(A), above, Tenant, upon
written notice from Landlord
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shall at Tenant's expense resist or defend such action or proceeding by counsel
approved by Landlord in writing, which approval Landlord shall not unreasonably
withhold.
(D) Landlord covenants and agrees to indemnify and save harmless
Tenant, its agents, employees, contractors, officers, directors, shareholders,
partners, and principals (disclosed or undisclosed) from and against any and all
liability (statutory or otherwise), claims, suits, demands, damages, judgments,
costs, and interests incurred by or adjudicated against Tenant in any action or
proceeding, whether incurred in a third-party action or in an action brought by
Landlord to which Tenant may be subject or which it may suffer by reason of any
injury to, or death of, any person or persons, or damage to property (including
any loss of use thereof), should and to the extent that it be determined that
such injury, death, or loss of property resulted from negligence or willful
misconduct of Landlord, its agents, employees, contractors, officers, directors,
shareholders, partners, or principals (disclosed or undisclosed).
(E) An indemnifying party under this Article 27 agrees to pay to
such other indemnified party or parties under this Article, all sums to be so
paid pursuant to subsection (A) or (C) above, within one hundred twenty (120)
days following notice transmitted in accordance with Article 25 of this Lease,
together with bills, statements, judgments, or other evidence of losses, costs,
liabilities, claims, damages, fines, penalties and expenses referred to in this
Section.
SECTION 3. Except as otherwise provided herein, this Lease and the
obligations of Tenant to pay rent hereunder and perform all of the other
covenants, agreements, terms, provisions and conditions hereunder on the part of
Tenant to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is delayed in supplying any service, express or implied, to
be supplied or is unable to make or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of Events
of Force Majeure; provided that Landlord shall in each instance exercise
reasonable diligence to effect performance when and as soon as possible.
SECTION 4. Notwithstanding any contrary provisions of this Lease
whatsoever, including, without limitation, those pertaining to use and Permitted
Use, Tenant shall not use, or permit the use of the Demised Premises, the
Building or the Complex so as to create or result in,
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directly or indirectly, (a) any sudden or gradual spill, leak, discharge,
escape, seepage, infiltration, abandonment, dumping, disposal or storage of any
hazardous or industrial waste, substance or contamination, effluent, sewage,
pollution or other detrimental or deleterious materials or substances
(including, without limitation, asbestos), or the disposal, storage or
abandonment on the Complex of any material, tank or container holding or
contaminated by any of the foregoing or residues thereof, or the installation of
any material or product containing or composed of any of the foregoing, in, on,
from under or above the Complex (the foregoing occurrences being hereinafter
collectively called "Environmental Hazard"), or (b) any violation, or state of
facts or condition which would result in a violation, of any Federal, State or
local statute, law, code, rule regulation or order applicable to any
Environmental Hazard (the foregoing being hereinafter collectively called "Legal
Violation"). In the event of the violation of the foregoing by Tenant, in
addition to all other rights and remedies of Landlord under this Lease,
regardless of when the existence of the Environmental Hazard or Legal Violation
is determined, and whether during the Lease Term or after the Expiration Date,
(I) Tenant shall, immediately upon notice from Landlord, at Tenant's sole cost
and expense, at Landlord's option, either (x) take all action necessary to test,
identify and monitor the Environmental Hazard and to remove the Environmental
Hazard from the Complex and dispose of the same and restore the Complex to the
condition existing prior to such removal, and/or to remedy any Legal Violation,
all in accordance with applicable Federal, State and local statutes, laws,
codes, rules, regulations or orders or (y) reimburse Landlord for all costs and
expenses incurred by Landlord for engineering or environmental consultant or
laboratory services in testing, investigating, identifying and monitoring the
Environmental Hazard and in removing and disposing of the Environmental Hazard
and in restoring the Complex, and/or in remedying any Legal Violation, and (II)
Tenant shall and hereby does defend with legal counsel acceptable to Landlord,
indemnify and save harmless Landlord and Others in Interest against and from all
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including architects' and attorneys' fees and disbursements which may
be imposed upon or incurred by or asserted against Landlord or Others in
Interest, whether by any governmental authority, Tenant or other third party, by
reason of any violation or alleged violation of any of the foregoing provisions
of this Section.
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SECTION 5. Anything to the contrary in this Lease notwithstanding,
Tenant shall look solely to the estate and interest of Landlord, its successors
and assigns, in the Complex and Building (inclusive of all sale or insurance
proceeds and condemnation awards with respect thereto) for the collection of a
judgment (or other judicial process) requiring the payment of damages or money
by Landlord in the event of any default by Landlord hereunder, and no other
property or assets of Landlord (or if Landlord is a partnership of any partner
of Landlord) shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to either this
Lease, the relationship of Landlord and Tenant hereunder or Tenant's use and
occupancy of the Demised Premises.
SECTION 6. In no event shall Landlord or Tenant be liable under this
Lease for any consequential, incidental, punitive, indirect, or special damages
or any other liabilities not expressly set forth herein, regardless of legal
theory or negligence provided, that consequential, incidental, punitive,
indirect, or special damages shall be deemed to be direct damages in an
indemnification payment otherwise due under Article 27 reimbursing payments for
consequential, incidental, punitive, indirect, or special damages made by an
indemnified party to a third party in a third party action.
SECTION 7. All of the provisions of this Article shall survive
termination of this Lease.
ARTICLE 28
DAMAGES
SECTION 1. If this Lease is terminated under the provisions of Article
19, or if Landlord shall re-enter the Demised Premises under the provisions of
Article 24 or in the event of the termination of this Lease, or of re-entry by
summary dispossess or other proceeding or action or any provision of law by
reason of default hereunder on the part of Tenant, Tenant shall pay to Landlord
as damages , at the election of Landlord, either: (a) on demand, a sum which at
the time of such termination of this Lease or at the time of any such re-entry
by Landlord, as the case may be, represents the then value of the excess, if
any, of: (1) the aggregate of the fixed rent and the additional rent payable
hereunder which would have been payable by Tenant (conclusively presuming the
additional rent to be the same as was payable for the year immediately preceding
such termination) for the period commencing with such earlier
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termination of this Lease or the date of any such re-entry, as the case may be,
and ending with the Expiration Date, had this Lease not so terminated or had
Landlord not so re-entered the Demised Premises; over (2) the aggregate rental
value of the Demised Premises for the same period; or (b) sums equal to the
fixed rent and the additional rent (as above presumed) payable hereunder which
would have been payable by Tenant had this Lease not so terminated, or had
Landlord not so re-entered the Demised Premises, payable upon the due dates
therefor specified herein following such termination or such re-entry and until
the Expiration Date, provided, however that if Landlord shall relet the Demised
Premises during said period, Landlord shall credit Tenant with the net rents
received by Landlord from such reletting, such net rents to be determined by
first deducting from the gross rents as and when received by Landlord from such
reletting the expenses incurred or paid by Landlord in terminating this Lease or
in re-entering the Demised Premises and in securing possession thereof, as well
as the expenses of reletting, including altering and preparing the Demised
Premises for new tenants, brokers' commissions, and all other expenses properly
chargeable against the Demised Premises and the rental therefrom; it being
understood that any such reletting may be for a period shorter or longer than
the remaining term of this Lease; but in no event shall Tenant be entitled to
receive any excess of such net rents over the sums payable by Tenant to Landlord
hereunder, nor shall Tenant be entitled in any suit for the collection of
damages pursuant to this Section to a credit in respect of any net rents from a
reletting, except to the extent that such net rents are actually received by
Landlord. If the Demised Premises or any part thereof should be relet in
combination with other space, then proper apportionment on a square foot basis
(for equivalent space) shall be made of the rent received from such reletting
and the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for
the unexpired portion of the Lease Term, or any part thereof, before
presentation of proof of such damages to any court, commission, or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting. Landlord shall cooperate with Tenant in any
efforts to re-rent the Demised Premises and thereby mitigate damages in the
event of a default, provided that Landlord shall in no event and in no way be
responsible or liable for any failure to relet the Demised Premises or any party
thereof or for failure to collect any rent due upon any such reletting.
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SECTION 2. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Lease Term would have expired if it had
not been so terminated under the provisions of Article 19, or under any
provision of law, or had Landlord not re-entered the Demised Premises. Nothing
herein contained shall be construed to limit or preclude recovery by Landlord
against Tenant of any sums or damages to which, in addition to the damages
particularly provided above, Landlord may lawfully be entitled by reason of any
default hereunder or otherwise on the part of Tenant. Nothing herein contained
shall be construed to limit or prejudice the right of Landlord to prove for and
obtain as liquidated damages by reason of the termination of this Lease or
re-entry on the Demised Premises for the default of Tenant under this Lease, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved whether or not such amount be greater, equal to or less than any of the
sums referred to in this Article.
SECTION 3. If Tenant shall at any time be in default hereunder, whether
or not Landlord shall institute an action or summary proceeding against Tenant
based upon such default and whether or not such default results from non-payment
of Base Rent or additional rent, or if Tenant requests Landlord to review or
execute documents (including, without limitation, any sublease or occupancy
documents) in connection with this Lease or to grant its consent or approval to
the making of Tenant's Changes, or otherwise if it is reasonably prudent for
Landlord to contact legal counsel, architects, engineers or other
representatives or agents as to the form or substance of any of the foregoing,
then Tenant shall reimburse Landlord, as additional rent, for all reasonable
fees, charges and disbursements of such attorneys, architects, engineers or
other representatives or agents, thereby incurred by Landlord.
ARTICLE 29
WAIVERS, FAILURE TO ENFORCE TERMS, MODIFICATIONS
SECTION 1. Tenant, for itself, and on behalf of any and all persons
claiming through or under Tenant, including creditors of all kinds, does hereby
waive and surrender all right and privilege so far as is permitted by law, which
they or any of them might have under or by reason of any present or future law,
of the service of any notice of intention to re-enter and also waives
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any and all right of redemption or re-entry or repossession in case Tenant shall
be dispossessed or ejected by process of law or in case of re-entry or
repossession by Landlord or in case of expiration or termination of this Lease
as herein provided.
SECTION 2. Tenant waives Tenant's rights, if any, to assert a
counterclaim in any summary proceeding brought by Landlord against Tenant, and
Tenant agrees to assert any such claim against Landlord only by way of a
separate action or proceeding.
SECTION 3. No payment by Tenant or receipt by Landlord of a lesser
amount than the correct amount of Base Rent and additional rent due hereunder
shall be deemed to be other than a payment on account; nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed to effect or evidence an accord and satisfaction. Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance or pursue any other remedy provided in this Lease or at law or in
equity. The payment of Base Rent or additional rent by Tenant shall not be
deemed a waiver of Tenant's right to dispute any specific item or items charged
to Tenant as rent by Landlord.
SECTION 4. To the extent not prohibited by applicable law, Landlord and
Tenant hereby waive trial by jury in any action, proceeding or counterclaim
brought by either against the other on any matter whatsoever arising out of or
in any way connected with this Lease, the relationship of Landlord and Tenant,
or Tenant's use or occupancy of the Demised Premises, or any emergency or other
statutory remedy with respect thereto.
SECTION 5. The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the agreements,
terms, covenants, conditions or obligations of this Lease, or to exercise any
right, remedy or election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations of this Lease or of the right to exercise such election, but the
same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission.
SECTION 6. No agreement to accept a surrender of all of any part of the
Demised Premises shall be valid unless in writing and signed by Landlord. The
delivery of keys to an employee of Landlord or of its agent shall not operate as
a termination of this Lease or a
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surrender of the Demised Premises. If Tenant shall at any time request Landlord
to assign or sublet the Demised Premises for Tenant's account, Landlord or its
agent is authorized to receive said keys for such purposes without releasing
Tenant from any of its obligations under this Lease, and Tenant hereby releases
Landlord of any liability for loss or damage to any of Tenant's property in
connection with such subletting.
SECTION 7. (A) No executory agreement hereafter made between Landlord
and Tenant shall be effective to change, modify, waive, release, discharge,
terminate or effect an abandonment of this Lease, in whole or in part, unless
such executory agreement is in writing, refers expressly to this Lease and is
signed by the party against whom enforcement of the change, modification,
waiver, release, discharge or termination or effectuation of the abandonment is
sought.
(B) If, in connection with obtaining, continuing, or renewing
financing for the Building or any part thereof (or a leasehold or any interest
therein) a banking, insurance or other lender shall request modifications of
this Lease as a condition of such financing, Tenant shall give all reasonable
and prompt cooperation to Landlord required to obtain such financing, provided
that such modifications do not materially reduce Tenant's rights under this
Lease.
ARTICLE 30
SHORING
If an excavation or other substructure work shall be undertaken or
authorized upon land adjacent to or below the Building, Tenant, without
liability on the part of Landlord therefore, shall afford to the person causing
or authorized to cause such excavation or other substructure work license to
enter upon the Demised Premises for the purpose of doing such work as such
person shall deem necessary to protect or preserve any of the walls or
structures of the Building or surrounding lands from injury or damage and to
support the same by proper foundations, pinning and/or underpinning, and except
in case of emergency, if so requested by Tenant such entry shall be accomplished
in the presence of a representative of Tenant, who shall be designated by Tenant
promptly upon Landlord's request. The said license to enter shall be afforded by
Tenant without any claim for damages or indemnity against Landlord and Tenant
shall not be entitled to any diminution or abatement of rent on account thereof.
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ARTICLE 31
SUCCESSORS AND ASSIGNS, NO OTHER
REPRESENTATIONS, CONSTRUCTION
SECTION 1. The obligations of this Lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 20 shall operate to vest any rights in any successor
or assignee of Tenant, and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 19.
However, the obligations of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in the event of such
transfer, such obligations shall thereafter be binding upon each transferee of
the interest of landlord herein named as such owner or lessee of the Building,
but only with respect to the period ending with a subsequent transfer within the
meaning of this Article, and such transferee, by accepting such interest, shall
be deemed to have assumed such obligations except only as may be expressly
otherwise provided elsewhere in this Lease. A lease of Landlord's entire
interest in the Building as owner or lessee thereof shall be deemed a transfer
within the meaning of this Article 31.
SECTION 2. This Lease supersedes and revokes all previous negotiations,
arrangements, letters of intent, offers to lease, lease proposals, brochures,
"Representations" (meaning covenants, promises, assurances, agreements,
representations, conditions, warranties, statements and understandings), and
information conveyed, whether oral or in writing, between the parties hereto or
their respective representatives or any other person purporting to represent
Landlord or Tenant. Tenant expressly acknowledges and agrees that Landlord has
not made, and is not making, and Tenant, in executing and delivering this Lease,
is not relying upon, and has not been induced to enter into this Lease by any
Representations, except to the extent that the same are expressly set forth in
this Lease or in any other written agreement which may be made and executed
between the parties concurrently with the execution and delivery of this Lease
and shall expressly refer to this Lease, and no such Representations not so
expressly herein set forth shall be used in the interpretation or construction
of this Lease, and Landlord shall have no liability for any consequences arising
as a result of any such Representations not so expressly herein set forth.
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SECTION 3. If any of the provisions of this Lease, or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
ARTICLE 32
MISCELLANEOUS PROVISIONS
SECTION 1. All work, including but not limited to, waxing or additional
cleaning that Tenant does or shall do in the Demised Premises, shall be done
with materials and contractors approved in writing by Landlord and shall at all
times comply with all laws and/or requirements of public authorities. Tenant, as
additional rent, shall indemnify and hold harmless Landlord, against any loss or
damage Landlord may sustain by reason of, and against any orders, decrees,
judgments, attorneys' fees and expenses resulting from failure of Tenant to
comply with the provisions hereof.
SECTION 2. The Article headings in this Lease and the Table of Contents
prefixed to this Lease are inserted only as a matter of convenience or
reference, and are not to be given any effect whatsoever in construing this
Lease.
SECTION 3. Any provision of this Lease which requires a party not to
unreasonably withhold its consent, (i) shall be read as if the word "withhold"
read "withhold, delay or defer," and (ii) shall never be the basis for any award
of damages (unless exercised in intentional and deliberate bad faith) or give
rise to a right of setoff to the other party, but shall be the basis for a
declaratory judgment or specific injunction with respect to the matter in
question. The prevailing party in such action shall be entitled, in addition to
its court costs, to such reasonable attorney's fees as may be fixed by a court
of competent jurisdiction.
SECTION 4. Wherever in this Lease Landlord or Tenant performs any work
permitted to be performed under this Lease due to default or due to the other's
failure to perform any of the conditions on its part to be performed hereunder,
or wherever the other otherwise performs
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work at Tenant's cost and expense, then such work shall be performed at
Landlord's Charge, if being performed by Landlord, or shall be billed back to
Landlord, if being performed by Tenant.
SECTION 5. This Lease is offered to Tenant for signature with the
express understanding that it shall not be binding upon Landlord unless and
until Landlord shall have executed and delivered a fully executed copy to
Tenant, and until the holder of any and all superior mortgage(s) shall have
approved the same.
SECTION 6. Tenant, as an inducement to Landlord to enter into this
Lease, has and does represent, covenant and agree that Tenant will take all
necessary measures and institute all procedures as may be necessary to insure
that Tenant's clients, invitees, and employees do not loiter in the public areas
of the Building (including but not limited to the corridors, elevators, lobbies,
lavatories, etc.) and that such clients, invitees and employees will at all
times conduct themselves in a proper businesslike manner when passing through
such public areas of the Building for purposes of access and egress to and from
the Demised Premises. Notwithstanding the foregoing, Tenant's employees shall
not be prohibited from using the public areas in and around the Building and the
Complex in a manner consistent with this Lease. Tenant further acknowledges and
agrees that any breach by Tenant of its foregoing agreements and representations
will materially injure Landlord who has intentions to rent space in the Building
to major tenants and who does not wish to have other tenants of the Building
disturbed, annoyed or inconvenienced. Accordingly, it is expressly agreed that
any substantial and continuing violation by Tenant of its agreements,
representations and obligations pursuant to this Article shall constitute a
material default by Tenant under the terms of this Lease entitling Landlord to
exercise any and all rights granted Landlord under this Lease including, without
limitation, the right to terminate this Lease and recover possession of the
Demised Premises by reason of Tenant's default.
SECTION 7. Tenant shall at no time leave any merchandise, supplies,
materials or refuse in the hallways or other common portions of the Buildings or
in any other area of the Building other than the Demised Premises. Tenant
covenants that all wet garbage and similar refuse shall be kept in proper
containers, until removed from the Building so as to prevent the escape of
objectionable fumes and odors and the spread of vermin.
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SECTION 8. The person(s) executing this Lease on behalf of Tenant
hereby represent and warrant that they have been duly authorized to execute this
Lease for and on behalf of Tenant. The person(s) executing this Lease on behalf
of Landlord hereby represent and warrant that they have been duly authorized to
execute this Lease for and on behalf of Landlord.
SECTION 9. Time is of the essence concerning any provisions of this
Lease relating to Tenant's obligation to pay Base Rent, additional rent, and any
other sums to be paid hereunder by Tenant to Landlord.
SECTION 10. This Lease shall be governed in all respects by and
construed under the laws of the State of New York without reference to the
choice of law provisions thereof.
SECTION 11. This Lease shall be construed without any regard to any
presumption or other rule regarding construction against the party causing this
Lease to be drafted.
SECTION 12. Notwithstanding any cancellation or termination of this
Lease, nothing herein shall be construed to release either party to this Lease
from any liability or responsibility (whether then or thereafter accruing) with
respect to any acts, omissions or obligations of either party to this Lease
occurring prior to such cancellation or termination, all of which shall survive
such cancellation or termination.
SECTION 13. Tenant shall pay to Landlord upon demand, as additional
rent, any increase in occupancy rent tax now in effect or any occupancy tax
hereafter enacted, which Landlord is now or hereafter required to pay with
respect to the Demised Premises.
SECTION 14. The words "best efforts" as used in this Lease shall mean
the use of a party's reasonable best efforts conducted in good faith and in a
commercially reasonable manner.
SECTION 15. Landlord's liabilities and obligations under this Lease
shall not in any way be enhanced merely by virtue of the fact that businesses
and Affiliates of Texaco Inc. occupy space in the Building.
SECTION 16. Wherever in this Lease reference is made to the performance
of work or construction by Landlord, it shall mean, unless Landlord otherwise
shall determine to perform
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the work or construction, by a contractor or contractors chosen by Landlord, it
being understood that Landlord itself shall not be required to perform such work
or construction; and to the extent that, pursuant to this Lease, the cost of
such work or construction is payable by Tenant, such cost shall be at Landlord's
Charge applicable to work performed by or on behalf of Landlord.
SECTION 17. During the term of this Lease, Landlord shall not, without
prior written consent of Tenant, employ or otherwise secure the services of,
offer to or solicit to employ, individuals while they are employed by Tenant in
positions having a level of responsibility and status equivalent to or greater
than Tenant's "Manager - Human Resources". During the term of this Lease, Tenant
shall not, without prior written consent of Landlord, employ or otherwise secure
the services of, offer to or solicit to employ, individuals while they are
employed by Landlord in positions equivalent to or greater than Landlord's
Pay-Grade 17.
ARTICLE 33
DISPUTE RESOLUTION
Landlord may at any time request arbitration, and Tenant may at any
time when not in default in the payment of any Base Rent and additional rent,
request arbitration, of any matter in dispute where arbitration is expressly
provided for in this Lease. The party requesting arbitration shall do so by
giving notice to that effect to the other party, specifying in the notice the
nature of the dispute, and the dispute shall be determined in the County of
Westchester, State of New York, by a single arbitrator, in accordance with the
rules then obtaining of the American Arbitration Association (or any
organization which is the successor thereto). The award in such arbitration may
be enforced on the application of either party by the order or judgment of a
court of competent jurisdiction.
ARTICLE 34
EXPANSION SPACE
SECTION 1. If Texaco Inc. and/or an Affiliate of Texaco Inc. is in
ownership of the Building:
(A) Provided that this Lease is in full force and effect, and
that Tenant has faithfully kept and performed all of the terms and obligations
on its part then to be performed
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under the Lease, then Tenant shall have the option provided in this Section to
expand the Demised Premises to include the space as reflected on Exhibit "F"
annexed hereto and made a part hereof (the "Preliminary Expansion Space"). To
exercise such expansion option, Tenant shall give Landlord notice of its
intention to exercise such expansion option on or prior to the three (3) year
anniversary of the Commencement Date (the "Preliminary Expansion Space Notice").
This expansion option shall be deemed waived unless Tenant properly gives the
Preliminary Expansion Space Notice. Tenant and Landlord agree and stipulate that
the total number of rentable square feet of space of the Preliminary Expansion
Space is approximately twenty thousand (20,000) square feet and that upon such
expansion the Leased Floor Space will be increased by the actual amount.
Measurement of the actual amount shall be performed by first using the BOMA
method for measuring useable rentable space and then multiplying the result by
1.1765 (which accounts for a 15% loss factor from gross rentable to usable
rentable space) to achieve the figure for gross rentable space. The base rent to
be charged and the tenant improvement allowances allocable to the Preliminary
Expansion Space shall be determined based upon similar rent charges and tenant
improvement allowances applicable to a lease of comparable space, in terms of
age, quality, size, location, services, amenities, quality of construction,
appearance and length of lease (the "Fair Market Value"). The lease term for the
Preliminary Expansion Space shall commence six (6) months after Tenant properly
gives the Preliminary Expansion Space Notice (but in no event later than the
three (3) year, six (6) month anniversary of the Commencement Date), and shall
be coterminous with the Lease Term ("Preliminary Expansion Space Term"),
provided that Landlord shall have made the Preliminary Expansion Space available
to Tenant on the commencement of the Preliminary Expansion Space Term in
accordance with Section 3 of this Article.
(B) Provided that this Lease is in full force and effect, that
Tenant has faithfully kept and performed all of the terms and obligations on its
part then to be performed under the Lease, and that Tenant is not then currently
assigning or subletting more than a total of fifteen (15%) percent of the
Demised Premises (as from time to time constituted, exclusive of such
assignments and subleases), then Tenant shall have the option provided in this
Section, to further expand the Demised Premises. In the event that Tenant has
properly exercised its option to lease the Preliminary Expansion Space pursuant
to the preceding subparagraph (A) hereof and is currently occupying such space,
then the space subject to Tenant's further option shall be the
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space reflected on Exhibit "G" annexed hereto and made a part hereof; in all
other cases, the space subject to Tenant's further option shall include a
portion of the space reflected on Exhibit "I" annexed hereto and made a part
hereof as designated by Landlord in Landlord's reasonable discretion, provided
there is direct access to such space for Tenant from the Demised Premises. (The
space referenced on Exhibit "G" or, if applicable, the space referenced on
Exhibit "I" and so designated by Landlord, shall hereinafter be referred to as
the "Expansion Space"). To exercise such expansion option, Tenant shall give
Landlord notice of its intention to exercise such expansion option on or prior
to the seven (7) year, three (3) month anniversary of the Commencement Date (the
"Expansion Space Notice"). This expansion option shall be deemed waived unless
Tenant properly gives the Expansion Space Notice. Tenant and Landlord agree and
stipulate that the total number of rentable square feet of space of the
Expansion Space is approximately thirty thousand (30,000) square feet, which
amount may be adjusted upward or downward so that Landlord may reasonably
situate the Expansion Space in the Building, and the Leased Floor Space will be
increased by the actual amount. Measurement of the actual amount shall be
performed by first using the BOMA method for measuring useable rentable space
and then multiplying the result by 1.1765 (which accounts for a 15% loss factor
from gross rentable to usable rentable space) to achieve the figure for gross
rentable space. The base rent to be charged and the tenant improvement allowance
allocable to the Expansion Space shall be determined based upon Fair Market
Value. The lease term for the Expansion Space shall commence on the later of (y)
the four (4) year anniversary of the Commencement Date, and (x) nine (9) months
after Tenant properly gives the Expansion Space Notice (but in no event later
than the day before the eight (8) year anniversary of the Commencement Date),
and shall be coterminous with the Lease Term ("Expansion Space Term"), provided
that Landlord shall have made the Expansion Space available to Tenant on the
commencement of the Expansion Space Term in accordance with Section 3 of this
Article.
(C) Provided that this Lease is in full force and effect, that
Tenant has faithfully kept and performed all of the terms and obligations on its
part then to be performed under the Lease, and that Tenant is not then currently
assigning or subletting more than a total of fifteen (15%) percent of the
Demised Premises (as from time to time constituted, exclusive of such
assignments and subleases), then Tenant shall have the option provided in this
Section, to further expand the Demised Premises. In the event that Tenant has
properly exercised its option
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to lease the Preliminary Expansion Space and the Expansion Space pursuant to the
preceding subparagraphs (A) and (B) hereof and is currently occupying such
space, then the space subject to Tenant's further option shall be the space
reflected on Exhibit "H" annexed hereto and made a part hereof; in all other
cases, the space subject to Tenant's further option shall include a portion of
the space reflected on Exhibit "I" annexed hereto and made a part hereof as
designated by Landlord in Landlord's reasonable discretion, provided there is
direct access to such space for Tenant from the Demised Premises. (The space
referenced on Exhibit "H" or, if applicable, the space referenced on Exhibit "I"
and so designated by Landlord, shall hereinafter be referred to as the
"Additional Expansion Space"). To exercise such expansion option, Tenant shall
give Landlord notice of its intention to exercise such expansion option on or
prior to the eleven (11) year, three (3) month anniversary of the Commencement
Date (the "Additional Expansion Space Notice"). This expansion option shall be
deemed waived unless Tenant properly gives the Additional Expansion Space
Notice. Tenant and Landlord agree and stipulate that the total number of
rentable square feet of space of the Additional Expansion Space is approximately
thirty thousand (30,000) square feet, which amount may be adjusted upward or
downward so that Landlord may reasonably situate the Additional Expansion Space
in the Building, and the Leased Floor Space will be increased by the actual
amount. Measurement of the actual amount shall be performed by first using the
BOMA method for measuring useable rentable space and then multiplying the result
by 1.1765 (which accounts for a 15% loss factor from gross rentable to usable
rentable space) to achieve the figure for gross rentable space. The base rent to
be charged and the tenant improvement allowance allocable to the Additional
Expansion Space shall be determined based upon Fair Market Value. The lease term
for the Additional Expansion Space shall commence on the later of (y) the eight
(8) year anniversary of the Commencement Date, and (x) nine (9) months after
Tenant properly gives the Additional Expansion Space Notice (but in no event
later than the day before the twelve (12) year anniversary of the Commencement
Date), and shall be coterminous with the Lease Term ("Additional Expansion Space
Term"), provided that Landlord shall have made the Additional Expansion Space
available to Tenant on the commencement of the Additional Expansion Space Term
in accordance with Section 3 of this Article.
SECTION 2. If Texaco Inc. and/or an Affiliate of Texaco Inc. is not in
ownership of the Building:
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(A) Tenant shall have the option provided in this Section to
expand the Demised Premises to include the Preliminary Expansion Space on the
same terms and conditions, and subject to the same limitations, as are set forth
in Article 34, Section 1(A).
(B) Tenant shall have the option provided in this Section to
expand the Demised Premises to include the Expansion Space on the same terms and
conditions, and with the same limitations, as are set forth in Article 34,
Section 1(B), subject to the remaining provisions of this Section 2(B). To
exercise such expansion option, Tenant shall give Landlord notice of its
intention to exercise such expansion option on or prior to the three (3) year,
three (3) month anniversary of the Commencement Date (the "Alternate Expansion
Space Notice"). The lease term for the Expansion Space shall commence on the
four (4) year anniversary of the Commencement Date, and shall be coterminous
with the Lease Term ("Alternate Expansion Space Term"), provided that Landlord
shall have made the Expansion Space available to Tenant on the commencement of
the Alternate Expansion Space Term in accordance with Section 3 of this Article.
(C) Tenant shall have the option provided in this Section to
expand the Demised Premises to include the Additional Expansion Space on the
same terms and conditions, and with the same limitations, as are set forth in
Article 34, Section 1(C), subject to the remaining provisions of this Section
2(C). To exercise such expansion option, Tenant shall give Landlord notice of
its intention to exercise such expansion option on or prior to the seven (7)
year, three (3) month anniversary of the Commencement Date (the "Alternate
Additional Expansion Space Notice"). The lease term for the Additional Expansion
Space shall commence on the eight (8) year anniversary of the Commencement Date,
and shall be coterminous with the Lease Term ("Alternate Additional Expansion
Space Term"), provided that Landlord shall have made the Additional Expansion
Space available to Tenant on the commencement of the Alternate Additional
Expansion Space Term in accordance with Section 3 of this Article.
SECTION 3. The Preliminary Expansion Space, Expansion Space and
Additional Expansion Space shall be considered part of the Demised Premises and
shall be subject to all of the terms and conditions of this Lease as applied to
the Demised Premises. Each of the Preliminary Expansion Space, the Expansion
Space and the Additional Expansion Space shall be delivered to Tenant in its
then "as is" condition free of all leases, tenants and/or occupants and provided
further that Landlord shall have removed therefrom all of Landlord's (or such
prior
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occupant's) furniture, office equipment and any other articles of movable
personal property provided the same are not built into or installed. Landlord
shall not be obligated to perform any work to prepare either the Preliminary
Expansion Space, the Expansion Space or the Additional Expansion Space for
Tenant. The construction or build out of the Preliminary Expansion Space,
Expansion Space or Additional Expansion Space shall be Tenant's responsibility
and shall be subject to all of the terms and conditions required for the
construction of the Demised Premises as set forth in Article 2 and other parts
of this Lease, except that the Tenant Improvement Allowance authorized for the
construction of each of these additional spaces shall be based upon Fair Market
Value.
SECTION 4. Promptly following Tenant's delivery to Landlord of notice
that Tenant is exercising its option to take the Preliminary Expansion Space,
Expansion Space and the Additional Expansion Space, Landlord shall notify Tenant
of the amount which, in Landlord's reasonable opinion represents the Fair Market
Value for the base rent and/or tenant improvement allowances relative to such
space. Within twenty (20) days of such notice, if Tenant disagrees with the Fair
Market Value proposed by Landlord, Tenant shall notify Landlord that Tenant so
disagrees that the base rent and/or tenant improvement allowances therein
provided constitutes Fair Market Value, and shall specify what base rent and/or
tenant improvement allowance, in Tenant's opinion, constitutes Fair Market Value
("Tenant's Fair Market Value Notice"). In the event no Tenant's Fair Market
Value Notice is timely given to Landlord as aforesaid, the base rent and/or
tenant improvement allowances set forth in Landlord's aforementioned notice to
Tenant shall be deemed to be Fair Market Value. In the event Tenant's Fair
Market Value Notice is timely given, and Landlord and Tenant still cannot agree
on the Fair Market Value, then the procedure set forth in Section 5 of this
Article 34 shall be used in determining Fair Market Value.
SECTION 5. In the event the parties cannot agree upon the base rent
and/or tenant improvement allowance constituting the Fair Market Value within
seven (7) business days following Tenant's Fair Market Value Notice, then at the
request of either party to the other (called the "Fair Market Value Initial
Request"), Landlord and Tenant shall each nominate one appraiser deemed by them,
respectively, to be fit, reputable and impartial, to appraise and determine the
Fair Market Value. The nomination of each such appraiser shall be in writing and
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shall be given by each party to the other within twenty (20) days following a
party's receipt of the Fair Market Value Initial Request and the two appraisers
shall thereafter make their respective determinations of the Fair Market Value
within thirty (30) days of their both having been appointed. If only one party
shall so nominate an appraiser, then that appraiser shall act alone. If the Fair
Market Value as determined by one appraiser is not more than 110% of the Fair
Market Value as determined by the other appraiser, the Fair Market Value will be
the average of the two Fair Market Value amounts. In all other cases, the
appraisers will jointly select a third appraiser who is a fit, reputable and
impartial person, which appointment shall be made within sixty (60) days after
the second of the first two appraisers has been appointed. The third appraiser
will, within twenty (20) days of its retention, determine its view of the Fair
Market Value, which may be any amount that is between the Fair Market Value
determinations made by the first two appraisers. The determination of the Fair
Market Value in accordance with this Section will be final, binding and
conclusive upon the parties. Tenant agrees to take the Preliminary Expansion
Space, Expansion Space and/or Additional Expansion Space in accordance with such
determination, and to execute confirming agreements with respect thereto within
ten (10) days after Landlord's submission thereof to Tenant. Each party shall
bear the expense of its own appraiser, but the fees of the third appraiser shall
be shared equally.
SECTION 6. No person shall be qualified for appointment as an appraiser
hereunder unless he or she is a licensed real estate broker or agent with at
least five (5) years of experience in leasing office space. Any appraiser may be
removed by the parties or other persons who appointed that appraiser, as the
case may be, for failure to perform his or her duties expeditiously, and a
successor appraiser shall be promptly appointed by such parties or person(s), as
the case may be.
ARTICLE 35
SECURITY
SECTION 1. Landlord has installed in the Building and shall maintain
throughout the Lease Term a security surveillance system consisting of
television monitors, exterior alarm doors and a security control desk, and shall
provide personnel to operate such security surveillance system and staff such
security control desk, on a twenty-four (24) hours basis every day of the year.
Landlord shall also provide security guards in such locations, at such times and
in such
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numbers as Landlord shall determine in Landlord's sole discretion. No
representation, guaranty or warranty is made or assurance given that the
aforesaid security surveillance system or procedures of the Building will be
effective to prevent injury to Tenant or any other person or damage to, or loss
(by theft or otherwise) of, any property of Tenant (including Tenant's Property)
or of any other person.
SECTION 2. Tenant shall require Tenant's employees, agents,
contractors, clients, invitees and licensees to wear identification badges
supplied by Landlord while present in the Building. Identification badges shall
be initially supplied by Landlord to Tenant's present and future employees at
Landlord's expense; all replacement badges shall be supplied by Landlord at
Tenant's expense.
SECTION 3. Tenant, at Tenant's sole cost and expense and with the prior
consent of Landlord, which consent shall not be unreasonably withheld, may
impose such additional security measures as Tenant deems desirable; provided
that such security measures are at all times in compliance with all laws, rules
and regulations of public authorities having jurisdiction with respect to the
Building and shall not interfere with Landlord's obligations to provide services
or perform work under this Lease, or Landlord's access to the Premises as
provided in this Lease.
SECTION 4. In the absence of any negligent or otherwise wrongful act or
omission of Landlord, its employees and agents, Landlord shall not be liable for
injury or damage to the person or property of Tenant, Tenant's agents, servants,
employees, contractors or invitees, caused by or resulting from theft, illegal
entry or trespass, vandalism or any other similar cause. Landlord assumes no
special or other duty to safeguard Tenant's person or property.
SECTION 5. All parking on the Complex by Tenant, its employees and
visitors will be at their own risk, and Landlord shall not be liable for any
injury to person or property, or for loss or damage to any automobile or its
contents, resulting from theft, collision, vandalism, or any other cause
whatsoever, except to the extent caused by any negligent or otherwise wrongful
act or omission of Landlord, its employees and agents. Landlord shall have no
obligation whatsoever to provide a guard or any other personnel or device to
patrol, monitor, guard or secure any parking areas; if Landlord does so provide,
it shall be solely for Landlord's
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convenience, and Landlord shall in no way whatsoever be liable for any acts or
omissions of such personnel or device in failing to prevent any such theft,
vandalism, or loss or damage by other cause.
ARTICLE 36
CONTINUATION TERM
SECTION 1. Following the Lease Term, Tenant is hereby granted the option to
extend the term of this Lease for a first renewal period of five (5) years and a
second renewal period of five (5) years. Each such renewal term shall be
referred to as a "Continuation Term". With respect to each such Continuation
Term and on the date of commencement of each Continuation Term, this option is
expressly conditioned upon determining that on the date of exercise of such
option (as provided in this Section): (a) this Lease is in full force and effect
and has not expired or been terminated; (b) Tenant is not in default under this
Lease beyond any applicable notice and cure period; and (c) Tenant is not then
currently assigning or subletting more than a total of fifteen (15%) percent of
the Demised Premises (as from time to time constituted, exclusive of such
assignments and subleases). Such option shall be exercised by Tenant by notice
(the "Continuation Notice") given to Landlord for each of the first and second
Continuation Terms, not later than twelve (12) full calendar months prior to the
Expiration Date and the expiration of the first Continuation Term, respectively.
The space to be included in the Continuation Term shall be the same space as was
included in the Lease at the moment immediately prior to the commencement of
such Continuation Term; and the following terms shall be applicable to the
Continuation Term: (i) the Demised Premises shall be delivered to Tenant "as is"
in its same condition, and none of Landlord's obligations under Article 2 or
elsewhere in this Lease regarding improvement of any space shall be applicable,
(ii) no rent concession or credit against the cost of, or Landlord's
contribution to the cost of, any improvements, work or property (including,
without limitation, furniture) shall be applicable, (iii) the same "escalators"
or adjustments in rent as are provided in Articles 4 and 5 and elsewhere in this
Lease shall be applicable, (iv) the After Hours Charge for heating, air
conditioning and ventilating shall be that amount which Landlord is charging
therefor to new tenants in the Building (or if no such new tenants, then in
comparable buildings in the area of the Building), (v) the annual Base Rent for
each Rent Year during the Continuation Term shall be the amount determined under
Section 2
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hereof, and (vi) all of the other terms and conditions of this Lease
shall be applicable to the Continuation Term other than rent, any further right
to expand the Demised Premises or renew beyond the second Continuation Term, and
other than as may be reasonably necessary because a renewal term rather than an
original term, and a previously occupied space rather than a new space, is
involved.
SECTION 2. Promptly following Tenant's delivery to Landlord of the
Continuation Notice timely given as provided in Section 1 of this Article,
Landlord shall notify Tenant of the amount which, in Landlord's reasonable
opinion represents the fair market Base Rent during the Continuation Term (the
"Fair Market Rent"). The Fair Market Rent shall be determined based upon the
terms and conditions, including, rent, free rent, tenant improvement allowances,
brokerage commissions, base years, construction time and all other lease
concessions, which renewal tenants are then receiving in connection with the
lease of comparable space, in terms of age, quality, size, location, services,
amenities, quality of construction, appearance and length of lease. Within
twenty (20) days of such notice, if Tenant disagrees with the Fair Market Rent
proposed by Landlord, Tenant shall notify Landlord that Tenant so disagrees that
the Base Rent therein provided constitutes the Fair Market Rent, as hereinafter
provided, and shall specify what Base Rent, in Tenant's opinion, constitutes the
Fair Market Rent ("Tenant's Base Rent Notice"). In the event no Tenant's Base
Rent Notice is timely given to Landlord as aforesaid, the Base Rent set forth in
Landlord's aforementioned notice to Tenant shall be deemed to be the Fair Market
Rent. In the event Tenant's Base Rent Notice is timely given, and Landlord and
Tenant still cannot agree on the Fair Market Rent, then the procedure set forth
in Section 3 of this Article 36 shall be used in determining Fair Market Rent.
SECTION 3. In the event the parties cannot agree upon the Base Rent
constituting the Fair Market Rent within seven (7) business days following
Tenant's Fair Market Rent Notice, then at the request of either party to the
other (called the "Base Rent Initial Request"), Landlord and Tenant shall each
nominate one appraiser deemed by them, respectively, to be fit, reputable and
impartial, to appraise and determine the Fair Market Rent. The nomination of
each such appraiser shall be in writing and shall be given by each party to the
other within twenty (20) days following a party's receipt of the Base Rent
Initial Request and the two appraisers shall thereafter make their respective
determinations of the Fair Market Rent within thirty (30) days of
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their both having been appointed. If only one party shall so nominate an
appraiser, then that appraiser shall act alone. If the Fair Market Rent as
determined by one appraiser is not more than 110% of the Fair Market Rent as
determined by the other appraiser, the Fair Market Rent will be the average of
the two Fair Market Rent amounts. In all other cases, the appraisers will
jointly select a third appraiser who is a fit, reputable and impartial person,
which appointment shall be made within sixty (60) days after the second of the
first two appraisers has been appointed. The third appraiser will, within twenty
(20) days of its retention, determine its view of the Fair Market Rent, which
may be any amount that is between the Fair Market Rent determinations made by
the first two appraisers. The determination of the Fair Market Value in
accordance with this Section will be final, binding and conclusive upon the
parties. Tenant agrees to enter into the Continuation Term in accordance with
such determination, and to execute confirming agreements with respect thereto
within ten (10) days after Landlord's submission thereof to Tenant. Each party
shall bear the expense of its own appraiser, but the fees of the third appraiser
shall be shared equally.
SECTION 4. No person shall be qualified for appointment as an appraiser
hereunder unless he or she is a licensed real estate broker or agent with at
least five (5) years of experience in leasing office space. Any appraiser may be
removed by the parties or other persons who appointed that appraiser, as the
case may be, for failure to perform his or her duties expeditiously, and a
successor appraiser shall be promptly appointed by such parties or person(s), as
the case may be.
ARTICLE 37
SATELLITE ANTENNA
SECTION 1. (A) Subject to the provisions of this Article, Tenant may
install, operate and maintain, in a location on the roof of the Building,
microwave, satellite or other antenna communications systems (herein called the
"Satellite Antenna") that transmits and receives signals to or from other
communications installations located off-site. Such Satellite Antenna shall be
subject to Landlord's prior written approval as to the installation, in addition
to the appearance, size, safety considerations, weight, location and
connections. Tenant's contractors shall be approved by Landlord. Tenant is
permitted, subject to the provisions of this Lease and solely at Tenant's cost
and expense, to install, operate and maintain the Satellite
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Antenna, as well as the conduits and cables necessary for the construction and
operation of the Satellite Antenna from the roof to the Demised Premises through
then available sleeves located in the Building communications closets, provided
that (i) the installation thereof (including all structural reinforcement,
framing and waterproofing) shall be performed subject to these provisions, (ii)
Tenant shall obtain and maintain all operating permits and approvals to
effectuate compliance with all applicable legal requirements (including any
requirements, approvals or permits required by any municipality, board, agency,
commission and the Federal Communications Commission), (iii) Tenant shall comply
with all applicable legal requirements, in connection with such installation,
(iv) Tenant shall promptly repair any damage to Property, including the Building
caused by such installation, operation or maintenance, (v) Tenant shall remove
the Satellite Antenna and any related conduits and cables and repair any
resulting damage (whether caused by installation or removal) to such Property at
or prior to the Expiration Date, and (vi) Tenant shall operate the Satellite
Antenna in compliance with all applicable codes and regulations of any
municipality, board, agency, and/or commission asserting jurisdiction. Tenant
shall have the right, in common with others, of reasonable access to the roof
and Building communications closets for the installation, operation, maintenance
and removal of the Satellite Antenna and related conduits and cables, and for
the partial or complete replacement of the foregoing, subject to the provisions
of this Lease and to such other reasonable conditions imposed by Landlord. Upon
request of Landlord, Tenant shall submit to Landlord a structural analysis
showing that the Satellite Antenna will not compromise the structural stability
of the roof or any roof appurtenance.
(B) Notwithstanding the foregoing provisions of this Article,
Tenant shall not have the right to install at a location, or, if initially
installed, to thereafter operate or maintain at the location, the Satellite
Antenna to the extent that Landlord shall reasonably determine that the same
will interfere with the use or operation (including the reception and
transmission of signals to and from the same) of other existing satellite
antennae, microwave dishes or other communications equipment on the roof.
(C) Landlord, at Landlord's expense, shall have the right, on not
less than five (5) days prior written notice (except in the event of an
emergency, in which event no notice shall be required), to relocate the
Satellite Antenna, which expense shall include the removal of the
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Satellite Antenna and the related conduits and cables, the purchasing of
materials and equipment necessary for the relocation thereof and the
reinstallation of the Satellite Antenna and such conduits and cables at such
other location on the roof as shall be designated by Landlord. In connection
with the foregoing, (i) Landlord shall select an alternative location for the
Satellite Antenna that shall be no less favorable for the reception and
transmission of signals to and from the Satellite Antenna as the previous
location, (ii) except in cases of emergency, Landlord shall perform the
relocation so as to minimize interference with the reception of and/or
transmission of signals to and from the Satellite Antenna during any period that
Tenant shall be using the Satellite Antenna for the reception and transmission
of signals, and (iii) Tenant shall cooperate with Landlord in all reasonable
respects relating to any such relocation.
(D) The rights granted in this Article are granted in connection
with, and as part of the rights created under, this Lease, and are not
separately transferable or assignable other than in connection with an
assignment of Tenant's rights under this Lease as permitted by this Lease.
(E) Nothing contained in this Article shall be deemed to be a
lease by Landlord to Tenant of any portion of the roof.
(F) At the option of Landlord, Tenant shall pay for the electric
submetering of the Satellite Antenna or shall pay to Landlord, as additional
rent, the cost of electricity supplied to the Satellite Antenna.
(G) Tenant acknowledges that the provisions of Article 27 herein
concerning Non-liability, Indemnification and Non-Recourse, including, but not
limited to Tenant's obligation to indemnify and save harmless Landlord and its
agents and to tender a defense for Landlord and its agents applies to any and
all claims arising from Tenant's installation, maintenance and/or operation of a
Satellite Antenna pursuant to this Article, provided further that said
obligations of Tenant to indemnify, save harmless and/or defend Landlord and its
agents shall apply as to all claims for injury of any nature, related to
installation, maintenance and/or operation of the Satellite Antenna caused by
any condition, entity, or person other than the negligence or willful misconduct
of Landlord or its agents.
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ARTICLE 38
FURNITURE
Simultaneous with the execution and delivery of this Lease, Tenant
shall purchase from Landlord the furniture described in Exhibit "J". On the date
Landlord tenders the First Floor Demised Premises to Tenant, Tenant shall
purchase from Landlord the furniture described in Exhibit "J-1". Each purchase
shall be pursuant to a Bill of Sale in form and substance satisfactory to
Landlord and Tenant.
ARTICLE 39
NEGATIVE COVENANT
Provided that this Lease is in full force and effect, that Tenant is
not in default under this Lease beyond any applicable notice and cure period,
and that Tenant has not subleased the Demised Premises or assigned this Lease,
Landlord covenants that it will not lease, rent or permit any space in the
Building to be occupied by a tenant that is an air cargo carrier, without first
obtaining Tenant's consent.
ARTICLE 40
PAINTING
Provided that this Lease is in full force and effect, that Tenant is
not in default under this Lease beyond any applicable notice and cure period,
Landlord shall at Landlord's election either: (a) repaint all walls in the
Demised Premises after the sixth year of the Lease Term and prior to the seventh
year of the Lease Term, which repainting shall consist of one (1) coat of flat
or semi-gloss using both the colors and type of paint used by Tenant to repaint
the walls when readying the Demised Premises for use by Tenant after the
Commencement Date; or (b) reimburse Tenant for the actual cost of repainting the
Demised Premises after the sixth year of the Lease Term and before the seventh
year of the Lease Term using both the colors and type of paint used by Tenant to
repaint the walls when readying the Demised Premises for use by Tenant after the
Commencement Date.
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ARTICLE 41
PUBLICITY
No public release or announcement concerning this Lease shall be issued
by any party or any of its Affiliates without the prior consent of the other
party, except as, in the opinion of counsel of such party, such release or
announcement is required by law or the rules or regulations of any United States
or foreign securities exchange or commission (in which case the party required
to make the release or announcement shall allow the other party reasonable time
to comment on such release or announcement in advance of such issuance);
provided, however, that such party may make internal announcements to its and
its Affiliates' employees that are consistent with the parties' prior public
disclosures regarding this Lease.
ARTICLE 42
STORAGE SPACE
SECTION 1. In addition to the Demised Premises otherwise defined
herein, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
three thousand nine hundred sixty-five feet (3,965) square feet of storage
space, reflected on Exhibit "L" ("Storage Space"). Tenant shall pay Landlord as
rent for the Storage Space, the following amounts, to be paid in monthly
installments by Tenant as set forth below, with the amounts adjusted in
accordance with the terms of this Lease, for the respective periods during the
term of the Lease. All such monthly rental installments shall be additional rent
and shall be payable on the first day of each month, in advance, and without
abatement, offset or deduction whatsoever (except as set forth in Section 2 of
this Article 42) as follows:
<TABLE>
<CAPTION>
ANNUAL MONTHLY
STORAGE SPACE INSTALLMENT
RENT YEAR RENT
--------- ------------- -----------
<S> <C> <C>
1 $43,615.00 $3,634.58
2 $43,615.00 $3,634.58
3 $43,615.00 $3,634.58
4 $43,615.00 $3,634.58
5 $47,580.00 $3,965.00
6 $47,580.00 $3,965.00
7 $47,580.00 $3,965.00
8 $47,580.00 $3,965.00
9 $51,545.00 $4,295.42
10 $51,545.00 $4,295.42
11 $51,545.00 $4,295.42
12 $51,545.00 $4,295.42
</TABLE>
-113-
<PAGE> 118
SECTION 2. Provided Tenant is otherwise in compliance with the terms of
this Lease, the additional rent provided under this Article payable by Tenant
shall fully abate: (i) for the period preceding the first day of the first Rent
Year; and (ii) for the first, second, third and fourth months of the third Rent
Year
SECTION 3. Tenant's rights to use and occupation of the Storage Space
are subject to its rights to possession of the Demised Premises under the terms
of this Lease. The Storage Space shall be considered part of the Demised
Premises and shall be subject to all of the terms and conditions of this Lease
as applied to the Demised Premises. The Storage Space shall be delivered to
Tenant in its then "as is" condition free of all leases, tenants and/or
occupants and provided further that Landlord shall have removed therefrom all of
Landlord's (or such prior occupant's) furniture, office equipment and any other
articles of personal property located therein. Landlord shall not otherwise be
obligated to perform any work to prepare the Storage Space for Tenant.
LANDLORD:
TEXACO INC.
By: /s/ Paul L. Myers
--------------------------
TENANT:
ATLAS AIR, INC.
By: /s/ James T. Matheny
--------------------------
-114-
<PAGE> 119
STATE OF NEW YORK )
)ss:
COUNTY OF WESTCHESTER )
On the 9th day of November, in the year 1999, before me personally came
Paul L. Myers to me known, who, being by me duly sworn, did depose and say that
he resides in 120 Prospect Street, Ridgefield, Connecticut; that he is the
General Manager, Corporate Services, Security and Purchasing of Texaco Inc., the
corporation described in and which executed the above instrument; and that he
signed his name thereto by authority of the board of directors of said
corporation.
/s/ Betty Jean Tighe
-----------------------------
Notary Public
STATE OF NEW YORK )
)ss:
COUNTY OF WESTCHESTER )
On the 9th day of November in the year 1999, before me personally came
James T. Matheny to me known, who, being by me duly sworn, did depose and say
that he resides in 101 Lynbrook Ave., Point Lookout, New York; that he is the
Executive Vice President, Operations Development of Atlas Air, Inc. the
corporation described in and which executed the above instrument; and that he
signed his thereto by authority of the board of directors of said corporation.
/s/ Betty Jean Tighe
-----------------------------
Notary Public
-115-
<PAGE> 1
ATLAS AIR, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
PLAN SUMMARY
AMENDED FEBRUARY 2000
ATLAS AIR, INC.
<PAGE> 2
ANNUAL INCENTIVE COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PURPOSE 1
DEFINITIONS 1
ADMINISTRATION 2
PARTICIPATION/ELIGIBILITY 2
TIMING OF AWARD PAYMENTS 3
AWARD DETERMINATION 3
AWARDS 3
RESTRICTED STOCK/RESTRICTED SHARE UNITS 4
VESTING 4
MISCELLANEOUS PLAN PROVISIONS 4
EFFECTIVE DATE 4
</TABLE>
<PAGE> 3
PURPOSE
The Board of Directors (the "Board") of Atlas Air, Inc. (Atlas) has approved in
principle an Annual Incentive Compensation Plan (the "Plan") to reward employees
for enhancing the value of Atlas. The purpose of this Plan is to motivate
employees to think and act like owners. The Plan is intended to reward the
Participants in the Plan for Atlas' financial performance which exceeds a
threshold level of performance, and the individual's performance.
The Plan is an annual plan which coincides with the Fiscal Year of Atlas. Awards
made under the Plan are in addition to base salary and base salary adjustments
to maintain market competitiveness.
The Plan is administered by the Compensation Committee of the Board which
reserves the right to amend, modify, interpret or revoke the Plan at its
discretion, without prior notice to participants, and its decision shall be
final and binding; provided however, any amendments, modifications or revocation
shall not be retroactive. No contractual right to any benefit shall be created
by this document or any related action of Atlas and none should be inferred from
the descriptions of this Plan.
DEFINITIONS
AWARD - Total cash, restricted stock, and/or Restricted Share Units (RSUs)
awarded to a Plan Participant due to both Atlas' and the individual's
performance.
BASE SALARY - Base salary means gross wages reported for U.S. federal
income tax purposes on a W-2 federal tax form, deducting from such amounts
all of the following: profit sharing under the Company's Profit Sharing
Plan (including guaranteed profit sharing payments), bonus, per diem,
compensation paid prior to becoming an employee, expense reimbursements,
excess life insurance, travel benefits, and other unusual payments that
might occur in the future.
CASH AWARD - The cash portion of the Award.
CHANGE OF CONTROL shall be deemed to have occurred upon the happening of
the following: Any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), (other than Michael A. Chowdry, his
spouse, children, his estate or any trust primarily for the benefit of any
of the above), 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.
COMPENSATION COMMITTEE - The Compensation Subcommittee of the Board,
consisting of two or more directors of the Company, each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange
Act, to the extent applicable.
EARNINGS PER SHARE - The Company's Net Income (as defined below) for the
Plan Year divided by the weighted average number of shares outstanding for
the Plan Year.
NET INCOME will be determined by the Company using the same methods as used
in the ordinary course of its business. However, the following items
defined under generally
Page 1
<PAGE> 4
accepted accounting principles or which are in common use in public
financial statement reporting will be excluded from calculations for
purposes of calculating Net Income (unless previously incorporated in the
EPS targets):
(a) Any income or loss related to charges or credits (whether or not
identified as special credits or charges) for unusual or
infrequently-occurring items (such as business dispositions or sale of
property, plant or equipment not in the ordinary course of business), or
related to intangible assets.
(b) Extraordinary items reported on separate line items in the
Company's income statement.
PLAN - Atlas' Annual Incentive Compensation Plan as summarized in this
document and as amended by the Compensation Committee.
PLAN PARTICIPANT - Individuals who are chosen by the Compensation Committee
to participate in the Plan for a given Plan Year.
PLAN YEAR - Atlas Air, Inc.'s Fiscal Year commencing January 1 and ending
December 31 of each year.
RESTRICTED STOCK - Company stock issued to Participants in the name of the
Participant subject to restrictions on ownership described herein.
RESTRICTED SHARE UNIT(S) (RSUs) - Company issued Restricted Share Unit(s)
as described in the 1995 Long Term Incentive and Share Award Plan.
RESTRICTED STOCK/RESTRICTED SHARE UNIT(S) AWARD - The portion of the Annual
Incentive Pool awarded in Restricted Stock or RSUs.
RETIREMENT - Retirement shall occur when a previous employee who has
reached age 62 or greater and has completed five complete years of
continuous service as an employee with the Company elects to retire.
ADMINISTRATION
The Compensation Committee will be responsible for the following as it relates
to the operation of the Plan:
o Participants to be included in the Plan;
o Target award levels for each participant;
o Percent of incentive awarded in cash and restricted stock for each
participant;
o Target incentive bonus earned schedule; and
o Interpretation of The Plan.
PARTICIPATION/ELIGIBILITY
On an annual basis, the Compensation Committee shall determine the Plan
Participants eligible for participation in the Plan for each Plan Year.
Page 2
<PAGE> 5
TIMING OF AWARD PAYMENTS
After Net Income for a Plan Year has been finalized by Atlas' accountants, the
Annual Incentive Pool will be determined and awards will be allocated to Plan
Participants. Awards for the Plan Year will be paid to Plan Participants as soon
as administratively practicable after the end of the Plan Year for which the
Award was made.
AWARD DETERMINATION
Awards will be generated based on two performance measures. These include
meeting Earnings Per Share targets (EPS Achievement) and individual performance
against established objectives (Individual Objective Achievement). For all Plan
Participants, the target incentive is 50 percent of base salary for the EPS
Achievement and 25 percent of base salary for the Individual Performance
Incentive. The target bonus based on EPS may be lower than 50 percent of Base
Salary or higher than 50 percent (not to exceed 100 percent of Base Salary,
depending on EPS lower/higher than the target). The following table shows the
annual incentive earned based on performance against earnings targets.
<TABLE>
<CAPTION>
Percentage of Target Percentage of Target
EPS Earned by Company Incentive Bonus (50% of Base Salary) Earned
----------------- -------------------------------------------
<S> <C>
Less than 80% 0%
80% 40%
90% 60%
100% 100%
110% 120%
120% 140%
130% 160%
140% 180%
150% and more 200%
</TABLE>
The Individual Performance Incentive is designed with a target incentive of 25
percent of Base Salary for each Plan Participant with a maximum of 37.5 percent.
The incentive is earned based on the evaluation of the participant's performance
against the individual's annual objectives established at the beginning of the
year. Each of the objectives will be weighted. There will be a maximum of three
impactful, simple, and measurable objectives.
AWARDS
Awards will be allocated to Plan Participants and distributed in cash and
restricted stock. The following table depicts the cash and restricted stock/RSU
allocation.
<TABLE>
<CAPTION>
Percentage of Award In :
----------------------
Position Cash Restricted Stock/RSUs
- -------- ---- ---------------------
<S> <C> <C>
President, Chief Executive Officer, 50% 50%
Chief Operating Officer &
Executive Vice Presidents
Senior Vice Presidents 55% 45%
Vice Presidents & 60% 40%
Other Participants
</TABLE>
Page 3
<PAGE> 6
RESTRICTED STOCK/RSUS
The number of shares of restricted stock or RSUs to be issued will be determined
by dividing the portion of the Award to be paid in restricted stock/RSUs by the
mean between the high and low selling prices per share on the date immediately
preceding the day on which Awards are determined by the Compensation Committee
(or, if the Shares were not traded on that day, the next preceding day that the
Shares were traded) on the principal exchange on which the Shares are traded, as
such prices are officially quoted on such exchange.
VESTING
Restricted stock/RSUs will vest on the date that is two years (or earlier upon
Change of Control or at the discretion of the Compensation Committee) from the
end of the Plan Year with respect to which the Plan Participant was awarded the
restricted stock/RSUs provided, that none will vest unless the grantee is an
Employee in good standing on the vesting date (except an employee who dies,
becomes permanently disabled or enters Retirement would vest as to all
shares/RSUs on the date of such event). Therefore, an Plan Participant will not
vest if, prior to the date of vesting, he (a) has resigned for other than "Good
Reason," (b) has been terminated for "Cause" or (c) absent an employment
contract, the employee or the company elects to terminate employment.
MISCELLANEOUS PLAN PROVISIONS
A Plan Participant's Awards under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to claims of
Plan Participants creditors.
Amended as of February 9, 2000
Page 4
<PAGE> 1
EXHIBIT 10.154
ATLAS AIR, INC.
LONG-TERM INCENTIVE PLAN
PLAN SUMMARY
AMENDED FEBRUARY 2000
ATLAS AIR, INC.
<PAGE> 2
LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PURPOSE 1
DEFINITIONS 1
ADMINISTRATION 2
TIMING OF AWARDS 2
STOCK OPTIONS/RESTRICTED SHARE UNITS 2
VESTING AND OTHER TERMS 2
DURATION OF PLAN 2
</TABLE>
<PAGE> 3
PURPOSE
The Board of Directors (the "Board") of Atlas Air, Inc. (Atlas) has approved in
principle a Long-Term Incentive Plan (the "Plan") to reward and/or incentivize
employees for enhancing the value of Atlas by the grant of stock options or
other rights under the Company's Stock Option Plan. The purpose of this Plan is
to align the interests of the executives with those of the shareholders. The
Plan is intended to reward the Participants in the Plan for Atlas' long-term
financial performance.
The Plan has two elements. The Performance Award may be given upon promotion,
upon commencement of employment for new hires or upon other special occasions
determined by the Compensation Committee. The Annual Award coincides with the
Plan Year.
The Board reserves the right to amend, modify, interpret or revoke the Plan at
its discretion, without prior notice to participants and its decision shall be
final and binding provided however, any amendments, modifications or revocation
shall not be retroactive. No contractual right shall be created by this document
or any related action of Atlas and none should be inferred from the descriptions
of this Plan.
DEFINITIONS
ANNUAL AWARD - Annual stock option or Restricted Share Unit (RSU) grants
awarded based on individual performance.
COMPENSATION COMMITTEE - The Compensation Subcommittee of the Board
consisting of two or more directors of the Company, each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange
Act, to the extent applicable.
PERFORMANCE AWARD - Stock option or RSU grants made on the date of new hire,
promotion, or other special occasions determined by the Compensation
Committee.
PLAN - Atlas' Long-Term Incentive Plan as summarized in this document and as
amended by the Compensation Committee.
PLAN PARTICIPANT - Individuals who are chosen by the Compensation Committee
to participate in the Plan.
PLAN YEAR - Atlas Air, Inc.'s Fiscal Year commencing January 1 and ending
December 31 of each year.
RETIREMENT - Retirement shall occur when a previous employee, who has
reached age 62 or greater and has completed five complete years of
continuous service as an employee with the Company, elects to retire.
STOCK OPTION PLAN - The Company's 1995 Long Term Incentive and Share Award
Plan.
Page 1
<PAGE> 4
ADMINISTRATION
The Compensation Committee will be responsible for the following as it relates
to the operation of the Plan:
o Plan Participants to be included in the Plan;
o Establishing benchmark grant amounts for the participants;
o Evaluating individual performance for Annual and Performance Awards; and
o Determination of Annual and Performance Awards.
TIMING OF AWARDS
Performance Awards may be made on the date of employment for new hires, the date
of promotions or the date of special events as determined by the Compensation
Committee. Annual Awards will be determined after the annual financial results
have been finalized for the Plan Year.
STOCK OPTIONS
All stock options or RSU will be granted under the Stock Option Plan pursuant to
Stock Option or other Agreements which shall contain the following provisions
and such others as determined by the Compensation Committee or the President.
VESTING AND OTHER TERMS
Performance Awards vest 100 percent at the end of five years (or earlier at
Compensation Committee's discretion) and Annual Awards vest ratably over four
years (or earlier at Compensation Committee's discretion) and both Performance
and Annual Awards shall vest earlier on date of death provided that:
None will vest unless the optionee is an employee in good standing on
the vesting date (except an employee who retires or becomes permanently
disabled would be vested as scheduled, (to be applied to February 1999
grants and prospectively). Therefore, an Optionee will not vest if,
prior to the date of vesting, he (a) has resigned for other than "Good
Reason," (b) has been terminated for "Cause" or (c) absent an employment
contract, the employee or the company elects to terminate employment.
Exercise. Once vested (and not yet exercised), Options can still be
forfeited if (a) Optionee is terminated for "Cause"; or Optionee
violates the "Iacocca provision" (i.e., within two [2] years of
termination works for another company without ATLAS' consent or before
exercise engages in "conduct adverse to ATLAS' interests").
DURATION OF PLAN
The Plan is an integral part of Atlas' compensation plan. The Board and
Compensation Committee reserve the power and the right at any time, and from
time to time, to modify, amend
Page 2
<PAGE> 5
or terminate (in whole or in part) any or all of the provisions of the Plan;
provided, however, that no such modification or amendment shall be retroactive
to reduce or affect any awards under the provisions of the Plan for any Plan
Year during which the Plan was in effect.
Amended as of February 9, 2000
Page 3
<PAGE> 1
EXHIBIT 10.155
ATLAS AIR, INC.
FIRST AMENDMENT TO
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
This First Amendment to the 1995 Long Term Incentive and Share Award
Plan (this "First Amendment") of Atlas Air, Inc., a Delaware corporation (the
"Company"), is made as of June 4, 1996.
WHEREAS, the stockholders and Board of Directors of the Company adopted
the 1995 Long Term Incentive and Share Award Plan (the "Plan") and the Plan is
in full force and effect on the date hereof; and
WHEREAS, the Board of Directors believes it is desirable to amend the
Plan as set forth in this First Amendment and the stockholders of the Company
approved this First Amendment at the Annual Meeting of Stockholders held on June
4, 1996.
NOW THEREFORE the Plan is hereby amended as follows:
1. General. Capitalized terms used herein and not otherwise
defined have the same meaning ascribed to such terms in the
Plan. The Plan is amended and modified only to the extent set
forth herein.
2. Increase in Number of Shares. The first sentence of paragraph
(a) of Section 4 of the Plan shall be amended in its entirety
as follows:
"Subject to adjustment as provided in Section 4(c)
hereof, the total number of Shares reserved for
issuance in connection with Awards and Director's
Options under the Plan shall be 2,100,000."
3. Section 7a. of the Plan shall be amended by changing the
second sentence to read as follows:
"In addition, (i) on each anniversary of the IPO,
beginning with the anniversary occurring in 1996,
each Director in office on such date shall
automatically be granted a NQSO to purchase 1,000
shares with an exercise price per Share equal to 100
percent of the Market Value of one Share on the date
of grant; and (ii) on and after June 4, 1996, each
newly appointed non-employee Director shall
automatically be granted a NQSO to purchase 1,000
Shares upon his(her) initial election or appointment
to the Board of Directors with an exercise price per
Share equal to 100 percent of the Market Value of one
Share on the date of grant; provided, however, that
in all events such price shall be at least equal to
the par value of a Share."
END OF FIRST AMENDMENT TO PLAN
<PAGE> 2
ATLAS AIR, INC.
SECOND AMENDMENT TO
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
This Second Amendment to Long Term Incentive and Share Award Plan (this
"Second Amendment") of Atlas Air, Inc., a Delaware Corporation (the "Company")
is made as of June 4, 1996.
WHEREAS, the stockholders and Board of Directors of the Company adopted
the 1995 Long Term Incentive and Share Award Plan (the "Plan") and the Plan, as
heretofore amended, is in full force and effect on the date hereof; and
WHEREAS, the Board of Directors believes it is desirable to amend the
Plan as set forth in this Second Amendment; and
WHEREAS, the Board of Directors, at a meeting duly held on June 4,
1996, authorized the implementation of this Second Amendment.
NOW THEREFORE the Plan is hereby amended as follows:
1. General. Capitalized terms used herein and not
otherwise defined have the same meaning ascribed to such terms in the
Plan. The Plan is amended and modified only to the extent set forth
herein.
2. Definitions. For purposes of the Plan, the following
defined terms set forth in Section 2 of the Plan are hereby amended to
the extent set forth below:
(a) "(i) `Director's Option' means a NQSO granted to
a Director under paragraph (a) of Section 7 or Shares
delivered to a Director in payment of Director's fees under
paragraph (g) of Section 7, as amended by the Second
Amendment."
3. Director's Fees. (a) Section 7 of the Plan is hereby
amended to include a new paragraph (g) as follows:
"(g) Director's Fees. Each Director shall have the
option to receive all or a portion of his or her quarterly
compensation (including any fees that may be payable for
attending meetings of the Board) payable to such Director in
such capacity in the form of Shares in lieu of cash. Each
Director shall be entitled to elect whether to receive such
compensation in (i) cash, (ii) Shares, or (iii) a combination
of cash and Shares. A Director who desires to receive a
portion of his or her compensation in Shares shall make an
election to do so by expressing the percentage of compensation
to be paid in the form of Shares. Once an election is made, it
may be
<PAGE> 3
changed only at the beginning of a fiscal quarterly
period. The number of Shares to be transferred to a
Director pursuant to this paragraph (g) shall be
determined by the Company by computing the average
price of the Shares for the 30-day calendar period
immediately preceding the end of the applicable
fiscal quarter (which 30-day period shall include the
last day of such fiscal quarter) and dividing the
dollar amount of fees owed to such Director in the
form of Shares by such average price. Certificates
evidencing such Shares shall bear such legends deemed
to be necessary in the opinion of the Company or its
legal counsel."
(b) The heading and the first sentence of the
existing paragraph (g) of Section 7 of the Plan is hereby
amended to read in its entirely as follows:
"(h) Administration. To the extent the Plan
relates to Director's Options granted under paragraph
(a) of Section 7 of the Plan it is intended to
operate automatically and not require
administration.":
END OF SECOND AMENDMENT TO PLAN
<PAGE> 4
ATLAS AIR, INC.
THIRD AMENDMENT TO
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
This Third Amendment to the 1995 Long Term Incentive and Share Award
Plan (this "Third Amendment") of Atlas Air, Inc., a Delaware Corporation (the
"Company") is made as of October 28, 1997.
WHEREAS, the stockholders and Board of Directors of the Company adopted
the 1995 Long Term Incentive and Share Award Plan (the "Plan") and the Plan, as
heretofore amended, is in full force and effect on the date hereof; and
WHEREAS, the Securities and Exchange Commission promulgated changes to
Rule 16b-3 (the "New Rule") under Section 16 of the Securities Exchange Act of
1934, as amended, which changes became effective on November 1, 1996; and
WHEREAS, the Board of Directors believes it is desirable to amend the
Plan as set forth in this Third Amendment in order to make changes to conform
with the New Rule.
NOW THEREFORE the Plan is hereby amended as follows:
1. General. Capitalized terms used herein and not
otherwise defined have the same meaning ascribed to such terms in the
Plan. The Plan is amended and modified only to the extent set forth
herein.
2. Definitions. For purposes of the Plan, the following
defined term set forth in Section 2 of the Plan is hereby amended to
the extent set forth below:
"(a) `Committee' means the Board, the Compensation
Committee of the Board, or such other Board committee as may
be designated by the Board to administer the Plan; provided,
however, that the Compensation Committee or such other Board
Committee as may be designated by the Board to administer the
Plan shall consist of two or more directors of the Company,
each of whom, to the extent required, is a `Non-Employee
Director' within the meaning of Rule 16b-3 under the Exchange
Act."
END OF THIRD AMENDMENT TO PLAN
<PAGE> 5
ATLAS AIR, INC.
FOURTH AMENDMENT TO
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
This Fourth Amendment to the 1995 Long-Term Incentive and Share Award
Plan (this "Fourth Amendment") of Atlas Air, Inc., a Delaware Corporation (the
"Company") is made pursuant to Resolution of the Board of Directors adopted
February 10, 1998:
1. The Plan shall be amended by adding the following sentence at
the end of Section 7(a):
"Effective January 1, 1998, the option grants to Directors
under 7(a)(i) (anniversary of IPO grant) and (ii) (upon
initial appointment to the Board grant) shall each be 2,000
shares."
2. Effective April 1, 1998, Section 7(g) of the Plan is hereby
amended to read as follows:
"(g) Directors' Fees. Each Director shall have the option to
receive all or a portion of his quarterly compensation
(including any fees that may be payable for attending meetings
of the Board) payable to such Director in such capacity in the
form of Shares in lieu of cash. Each Director shall be
entitled to elect whether to receive such compensation in (i)
cash, (ii) Shares, or (iii) a combination of cash and Shares.
A Director who desires to receive a portion of his
compensation in Shares shall make an election to do so by
expressing the percentage of compensation to be paid in the
form of Shares. Once an election is made, it may be changed
only at the beginning of a fiscal quarterly period. The number
of Shares to be transferred to a Director pursuant to this
paragraph (g) shall be determined by the Company by computing
the mean between the high and low selling prices per Share on
the date immediately preceding the first meeting of Directors
of each Quarter (or if no meeting is held in the quarter, then
the last day of such quarter) (or, if the Shares were not
traded on that day, the next preceding day that the Shares
were traded) on the principal exchange on which the Shares are
traded, as such prices are officially quoted on such exchange,
and dividing the dollar amount of fees owed to such Director
in the form of Shares by such average price. Certificates
evidencing such Shares shall bear such legends deemed to be
necessary in the opinion of the Company or its legal counsel."
END OF FOURTH AMENDMENT TO PLAN
<PAGE> 6
ATLAS AIR, INC.
FIFTH AMENDMENT TO
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
This Fifth Amendment to the 1995 Long-Term Incentive and Share Award
Plan (this "Fifth Amendment") of Atlas Air, Inc., a Delaware Corporation (the
"Company") is made pursuant to amendment adopted by the shareholders of the
company on June 3, 1998:
Increase in Number of Shares. The first sentence of paragraph (a) of
Section 4 of the Plan shall be amended in its entirety as follows:
"Subject to adjustment as provided in Section 4 (c) hereof,
the total number of Shares reserved for issuance in connection
with Awards and Director's Options under the Plan shall be
2,600,000."
END OF FIFTH AMENDMENT TO PLAN
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 331,605
<SECURITIES> 141,555
<RECEIVABLES> 87,025
<ALLOWANCES> 9,536
<INVENTORY> 5,954
<CURRENT-ASSETS> 566,139
<PP&E> 1,543,250
<DEPRECIATION> 208,465
<TOTAL-ASSETS> 2,142,370
<CURRENT-LIABILITIES> 235,858
<BONDS> 1,253,084
0
0
<COMMON> 345
<OTHER-SE> 357,355
<TOTAL-LIABILITY-AND-EQUITY> 2,142,370
<SALES> 637,081
<TOTAL-REVENUES> 637,081
<CGS> 0
<TOTAL-COSTS> 449,592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,654
<INCOME-PRETAX> 98,835
<INCOME-TAX> 37,556
<INCOME-CONTINUING> 61,279
<DISCONTINUED> 0
<EXTRAORDINARY> (6,593)
<CHANGES> (1,416)
<NET-INCOME> 53,270
<EPS-BASIC> 1.56
<EPS-DILUTED> 1.54
</TABLE>
