SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 15, 1999
Atlas Air, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-25732 84-1207329
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
538 Commons Drive, Golden, CO 80401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(303) 526-5050
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(Former name or former address, if changed since last report)
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Item 7. Financial Statements and Exhibits.
(c) Exhibits. The Exhibit Index is hereby incorporated by reference. The
documents listed on the Exhibit Index are filed as Exhibits with reference to
the Registration Statement on Form S-3 (Registration No. 333-77005) of Atlas
Air, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATLAS AIR, INC.
Dated: May 25, 2000 By: /s/ Richard H. Shuyler
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Richard H. Shuyler
Executive Vice President
-- Strategic Planning,
Treasurer and Director
EXHIBIT INDEX
Exhibit
Reference
Number Document Description
10.1 -- Loan Agreement dated as of January 1, 1999 between the Company and
Michael A. Chowdry
10.2 -- Fourth Amended and Restated Credit Agreement among the Company, the
Lenders listed therein, and Bankers Trust Company, as administrative
agent, dated as of April 25, 2000.
10.3 -- Credit Agreement among Atlas Freighter Leasing III, Inc., the
Lenders listed therein, and Bankers Trust Company, as administrative
agent, dated as of April 25, 2000.
10.4* -- Lease Agreement dated as of April 25, 2000 between Atlas Freighter
Leasing III, Inc., as lessor, and the Company, as lessee, relating to
B747-200 air-
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craft. U.S. Registration No. N527MC.
10.5* -- Lease Agreement dated as of April 25, 2000 between Atlas Freighter
Leasing III, Inc., as lessor, and the Company, as lessee, relating to
B747-200 aircraft. U.S. Registration No. N516MC.
10.6* -- Lease Agreement dated as of April 25, 2000 between Atlas Freighter
Leasing III, Inc., as lessor, and the Company, as lessee, relating to
B747-200 aircraft. U.S. Registration No. N508MC.
10.7* -- Lease Agreement dated as of April 25, 2000 between Atlas Freighter
Leasing III, Inc., as lessor, and the Company, as lessee, relating to
B747-200 aircraft. U.S. Registration No. N507MC.
10.8* -- Lease Agreement dated as of April 25, 2000 between Atlas Freighter
Leasing III, Inc., as lessor, and the Company, as lessee, relating to
B747-200 aircraft. U.S. Registration No. N509MC.
10.9* -- Lease Agreement dated as of April 25, 2000 between Atlas Freighter
Leasing III, Inc., as lessor, and the Company, as lessee, relating to
B747-200 aircraft. U.S. Registration No. N517MC.
10.10* -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to B747-200 aircraft. U.S. Registration No. N505MC.
10.11* -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to B747-200 aircraft. U.S. Registration No. N523MC.
10.12* -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to B747-200 aircraft. U.S. Registration No. N524MC.
10.13* -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to B747-200 aircraft. U.S. Registration No. N526MC.
10.14* -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to B747-200 aircraft. U.S. Registration No. N528MC.
10.15* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III,
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Inc. and Bankers Trust Company, as agent, relating to B747-200
aircraft. U.S. Registration No. N527MC.
10.16* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N517MC.
10.17* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N507MC.
10.18* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N509MC.
10.19* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N505MC.
10.20* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N508MC.
10.21* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N516MC.
10.22* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N523MC.
10.23* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N524MC.
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10.24* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N526MC.
10.25* -- Security Agreement and Chattel Mortgage dated as of April 25,
2000 between Atlas Freighter Leasing III, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S. Registration
No. N528MC.
10.26** -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to three General Electric CF6-80C2 Engines, Manufacturer's
Serial Nos. 704699, 704860 and 704918.
10.27** -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company, as lessee,
relating to nine General Electric CF6-50E2 Engines, Manufacturer's
Serial Nos. 530168, 517530, 517790, 517602, 530255, 517547, 517538,
517539 and 455167.
10.28** -- Spare Engine Chattel Mortgage dated as of April 25, 2000 between
Atlas Freighter Leasing III, Inc. and Bankers Trust Company, as agent,
relating to the CF6-80C2 Spare Engine Pool.
10.29** -- Spare Engine Chattel Mortgage dated as of April 25, 2000 between
Atlas Freighter Leasing III, Inc. and Bankers Trust Company, as agent,
relating to the CF6-50E2 Spare Engine Pool.
* The financing and leasing of each of the identified aircraft pursuant to
the Credit Agreement among Atlas Freighter Leasing III, Inc., the Lenders
listed therein and Bankers Trust Company, as administrative agent, dated as
of April 25, 2000 is documented separately. Pursuant to Instruction 2 in
Item 601 of Regulation S-K, the Registrant has filed the form of the
indicated documents for one of these aircraft only -- specifically the
aircraft with Registration No. N527MC. The documents for the other aircraft
are identical except for the information identifying the aircraft in
question.
** The financing and leasing of each of the identified spare engine pools
pursuant to the Credit Agreement among Atlas
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Freighter Leasing III, Inc., the Lenders listed therein, and Bankers Trust
Company, as administrative agent, dated as of April 25, 2000 is documented
separately. Pursuant to Instruction 2 in Item 601 of Regulation S-K, the
Registrant has filed the form of the indicated documents for one of these
spare engine pools only -- specifically the spare engine pool for the
CF6-80C2 engines. The documents for the other spare engine pool are
identical except for the information identifying the engines in question.
Loan Agreement
Loan Agreement dated as of January 1, 1999 between Atlas Air,
Inc., a Delaware corporation (the "Borrower"), and Michael A. Chowdry, an
individual whose mailing address is 538 Commons Drive, Golden, Colorado 80401
(the "Lender").
WHEREAS, the Borrower has agreed to acquire a new Boeing
Business Jet (737-700) corporate aircraft and all associated equipment and
documentation (the "BBJ"), and
WHEREAS, the Borrower has financed a portion of the
acquisition cost of the BBJ, pursuant to an Aircraft Lease Agreement dated as of
February 26, 1999 between General Electric Capital Corporation ("GECC") and the
Borrower (the "Lease"), and
WHEREAS, the Lender has agreed with the Borrower to make a
loan to Borrower in an amount described in Section 1 hereof.
NOW, THEREFORE, the Borrower and Lender hereby agree as
follows:
Section 1. The Non Recourse Loan.
The Lender, on terms and conditions hereinafter set forth,
hereby agrees to make a non-recourse loan to the Borrower, bearing a floating
rate of interest equal to the London Interbank Offered Rate for one month as
shown in The Wall Street
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Journal (the "LIBOR rate") in an amount equal to 50% of the amount by which the
sum of (a) the Acquisition Cost; (b) the cost of any capital improvements to the
BBJ subject to compliance with Section 5 hereof; and (c) any financing costs,
interest and lease payments with respect to the Lease exceeds the principal
amount of the purchase price received by the Borrower from GECC for sale of the
BBJ to GECC. For purposes of this Agreement, the "Acquisition Cost" shall be an
amount equal to the sum of the purchase price actually paid initially by
Borrower to acquire the BBJ, including all modifications and the installation of
the interior made prior to the time that the BBJ is placed in service, less
$9,164,518.20. The interest rate shall change monthly, with the LIBOR rate as
shown in The Wall Street Journal on the last business day of each month applied
to the next month (or part thereof).
Section 2. Advances.
(a) Upon the terms and subject to the conditions herein set
forth the Lender shall from time to time make advances (the "Advances") to the
Borrower under this Loan Agreement during the period from the date hereof until
the date of the sale by Borrower or disposition of the BBJ (the "Termination
Date") in response to Borrower's Request Notice referred to in paragraph (b) of
this Section 2.
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(b) The Borrower shall give the Lender at least three (3)
Business Days' prior written or telegraphic notice of its request for an
Advance. Each such notice shall specify the date, the amount and the purpose of
the requested Advance and shall be in the form attached hereto as Exhibit B (a
"Request Notice"). The Lender shall make each Advance in immediately available
funds by wire transfer to a deposit account designated by Borrower at its
financial institution, as soon as practicable, but in no event later than 3
Business Days following the receipt by Lender of a Request Notice. The term
"Business Days" means any day other than a Saturday or Sunday and other than a
day which is a Federal legal holiday or a legal holiday for banks in the State
of Colorado.
(c) Each Advance shall be evidenced by a notation of the
amount of Advance set forth on Schedule I to the nonrecourse note in the form of
Exhibit A hereto (the "Note") delivered to the Lender at the time of the initial
Advance payment made hereunder. (The aggregate Advances made hereunder shall
sometimes be referred to herein as the "Loan".)
Section 3. Repayment of Loan.
The Loan shall be non-recourse to the Borrower and shall be
repaid by the Borrower solely out of the Repayment Amount (as defined below).
Unless approved by Lender, Dispositions must be made for cash. Borrower shall
repay the Loan
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promptly upon its receipt of the Repayment Amount, subject to the provisions of
Section 9 hereof. Lender shall have no recourse against the Borrower for
repayment of the Loan, except out of the Repayment Amount. In the event that the
Repayment Amount exceeds the aggregate Advances made by the Lender hereunder,
Lender shall be entitled to receive such excess amount.
"Repayment Amount" shall mean (i) 50% of the Net Proceeds (as
defined below) received by the Borrower with respect to the Disposition (as
defined below) of the BBJ, less (ii) the excess, if any, of $4,582,259.10 over
the present value (computed as of December 1, 1999 at a discount rate of 7.5%)
of 50% of the actual tax benefit realized by Borrower (as computed based on the
same parameters as used on Exhibit C annexed hereto and the same effective tax
rate as used in determining Net Proceeds) plus (iii) the excess, if any, of the
present value (computed as of December 1, 1999 at a discount rate of 7.5%) of
50% of the actual tax benefit realized by Borrower (as computed based on the
same parameters as used on Exhibit C annexed hereto and the same effective tax
rate as used in determining Net Proceeds) over $4,582,259.10 plus (iv) the tax
benefit, if any, realized by Borrower as a result of the payment to Lender of
the Repayment Amount.
"Net Proceeds" shall mean the aggregate cash proceeds received
by Borrower from time to time with respect to the Dispo-
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sition of the BBJ, net of all of the following actually paid or, in the case of
(iv) reserved (i) commissions and other fees and expenses (including fees and
expenses of legal counsel and investment banks) paid to third parties in
connection with such Disposition, (ii) provisions for all taxes payable as a
result of the Disposition, including without limitation income taxes at the then
effective income tax rate for Borrower, (iii) payments made to terminate the
Lease and retire such other indebtedness as may have been approved in writing in
advance by the Lender, and (iv) appropriate amounts to be determined by the
Company as a reserve required in accordance with generally accepted accounting
principles ("GAAP") against liabilities associated with such Disposition;
provided that 50% of any such reserved amounts shall be paid to the Lender at
the earliest time such reserve is no longer required in accordance with GAAP.
"Disposition" shall mean the sale of the BBJ or the actual or
constructive total loss of the BBJ or requisition of title or use of such
property which results in an insurance settlement on the basis of total loss or
the seizure or condemnation of the BBJ.
Section 4. Sale of BBJ.
(a) Borrower shall have the right to sell the BBJ at any time,
subject to giving Lender written notice of its decision to sell the BBJ and
giving Lender the right of first refusal to
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purchase the BBJ. Such right may be exercised by the Lender by written notice to
the Borrower given at any time within 30 days of the Lender's receipt of such
notice and by the Lender closing on such purchase at any time within 60 days of
Lender's receipt of such notice, unless closing is prevented by the action or
inaction of the Borrower. If a proposed sale as to which the right of first
refusal applies specifies: (i) a consideration in other than United States
money, Lender shall have the right to purchase the BBJ for the United States
money equivalent of the specified consideration; and (ii) a manner, time, terms
or conditions that cannot be complied with without unreasonable effect, Lender
shall have the right to purchase the BBJ by complying with the reasonable
equivalent of the specified manner, time, terms or conditions.
(b) Lender shall have the right to cause the Borrower to sell
the BBJ at any time by giving the Borrower written notice of such request,
subject to giving the Borrower the right to retain ownership of the BBJ and to
make payment to the Lender as if such sale had been made at a price determined
as provided in Section 4(c) hereof.
(c) The price to be paid to Lender if the Borrower retains
ownership of the BBJ as stated above in Section 4(b) shall be at fair market
value, as determined by a mutually agreed independent appraiser. If the Borrower
receives a notice from
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the Lender in accordance with paragraph (b) hereof, Borrower shall use
commercially reasonable efforts to sell the BBJ within 270 days of receiving
such notice. Borrower shall keep the Lender reasonably informed of its sale
efforts during this period.
Section 5. Capital Improvements.
The Borrower hereby agrees that no capital improvements will
be made on the BBJ without the prior written consent of the Lender, except for
capital improvements required by (i) the Lease or (ii) FAA directives, rules or
regulations.
Notwithstanding any provisions to the contrary, the term
"capital improvements" as used in Section 1 and Section 10(b) shall: (i) include
the cost of all modifications and the installation of the interior made
subsequent to the time the BBJ is placed in service, but shall exclude (ii)
costs related to the overhaul, replacement, restoration or refurbishment of the
airframe, aircraft engines, landing gears or other parts and components of the
BBJ which overhaul, replacement, restoration, or refurbishment is caused by the
use of the aircraft.
Section 6. Covenants of Borrower.
So long as the Note shall remain outstanding, the Borrower
shall, unless the Lender shall otherwise consent in writing:
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(a) Cause the BBJ to be operated and maintained in compliance
with the FAA rules and regulations and the Lease; provided that the Borrower
shall be solely responsible for the payment of all of the costs of such
operation and maintenance (including, without limitation, salaries, insurance,
fuel, and landing fees, and all other operating expenses).
(b) Not create or allow to exist any lien on the BBJ other
than (i) pursuant to the Lease, or (ii) as may be approved in writing by the
Lender in advance, and not to lease or otherwise transfer the BBJ except in
accordance with Section 4 hereof.
(c) The Borrower shall not amend, modify or grant a waiver
under any terms and conditions of the Lease without the prior consent of the
Lender.
Section 7. Representations and Warranties of Borrower.
The Borrower hereby represents and warrants to the Lender as
follows:
(a) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(b) The execution, delivery and performance by Borrower of the
Loan Agreement and the consummation of the transactions contemplated hereby are
within the corporate power of the Borrower, have been duly authorized by all
necessary actions on
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the part of the Borrower and do not conflict with or breach any agreement or
other instrument by which the Borrower is bound.
(c) This Loan Agreement and the Note have been, or will be,
duly executed and delivered by Borrower and constitute, or will constitute,
legal, valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as limited by bankruptcy,
insolvency, fraudulent conveyance, or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
Section 8. Conditions Precedent.
Lender's obligation to make the initial Advance and each
subsequent Advance is subject to Borrower's prior satisfaction or Lender's
waiver of all the conditions set forth in this Section 8.
(a) Borrower shall have duly executed and delivered to Lender:
(i) the Loan Agreement; and (ii) the Note; and
(b) The representations and warranties made by Borrower in
Section 7 hereof shall be true and correct as of the date on which each Advance
is made and after giving effect to the making of the Advance. The submission by
Borrower to Lender of the Request Notice shall be deemed to be a certification
by the Borrower that as of the date of such Request Notice, the repre-
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sentations and warranties made by Borrower in Section 7 hereof are true and
correct.
(c) Borrower shall not have defaulted with respect to any of
its obligations under the Lease, other than as a result of Lender's failure to
make the Advances required by this Loan Agreement.
Section 9. Right to Cure Defaults.
(a) In the event Borrower defaults under the Lease, other than
as a result of Lender's breach of this Loan Agreement, Lender shall have the
right, subject to the provisions of the Lease, to cure the default. Borrower
shall immediately provide to Lender copies of any default notices under the
Lease or any other information or document which is received by the Borrower and
pertains to any default under the Lease. Lender shall be entitled to repayment
of any payment made by Lender to cure the default pursuant to this paragraph (a)
from that portion of the Net Proceeds of a Disposition of the BBJ to which
Borrower is entitled.
(b) In the event Lender defaults in its obligations under this
Loan Agreement, Lender shall not be entitled to receipt of any portion of the
Net Proceeds from the Disposition of the BBJ until Borrower has been repaid in
full for its Acquisition Cost (and financing costs) and expenditures for capital
improvements of the BBJ (excluding items listed in Section 5 as not
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capital improvements), net of Advances made by the Lender hereunder.
(c) Nothing herein shall prevent Borrower or Lender, as the
case may be, from pursuing legal remedies against the other for any defaults
occurring under this Loan Agreement.
Section 10. Notices.
Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to Lender or Borrower
under this Agreement shall be in writing and telecopied, mailed or delivered to
each party at its telecopier number or address set forth below (or to such other
telecopier number or address for any party as indicated in any notice given by
that party to the other party). All such notices and communications shall be
effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such
service; (b) when mailed by registered or certified mail, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (c) when delivered by hand, upon delivery; and (d) when
telecopied, upon confirmation of receipt; provided, however, that any Request
Notice delivered to Lender under Section 2(b) hereof shall not be effective
until received by Lender.
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LENDER: Michael A. Chowdry
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Fax No.: 303-526-5281
BORROWER: Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attn: Chief Financial Officer
Fax No.: 303-526-5051
Section 11. Waivers; Amendments.
Any term, covenant, agreement or condition of this Loan
Agreement may be amended or waived if such amendment or waiver is in writing and
is signed by Borrower and Lender. No failure or delay by Lender in exercising
any right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right. A waiver or consent given
hereunder shall be effective only if in writing and in the specific instance and
for the specific purpose for which given.
Section 12. Successors and Assigns.
This Loan Agreement shall be binding upon, and inure to the
benefit of, Borrower, Lender and their respective successors and permitted
assigns, except that neither Borrower nor Lender may assign or transfer (and any
such attempted assignment or transfer shall be void) any of their respective
rights or ob-
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ligations under this Loan Agreement without the prior written consent of the
other party, which such consent shall not be unreasonably withheld.
Section 13. Governing Law.
This Loan Agreement and the Note shall be governed by, and
construed in accordance with, the laws of the State of Colorado without
reference to conflicts of law rules.
Section 14. Construction.
This Loan Agreement is the result of negotiations among, and
has been reviewed by, Borrower and Lender. Accordingly, this Loan Agreement
shall be deemed to be the product of all parties hereto, and no ambiguity shall
be construed in favor of or against Borrower or Lender.
Section 15. Entire Agreement.
This Loan Agreement and the Note, taken together, constitute
and contain the entire agreement of Borrower and Lender with respect to the
subject matter hereof and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
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IN WITNESS WHEREOF, the parties have executed this Loan
Agreement as of the date first set forth above.
BORROWER:
ATLAS AIR, INC.
By: /s/ STANLEY J. GADEK
-----------------------------
Name: Stanley J. Gadek
Title: Vice President and
Controller
LENDER:
By: /s/ MICHAEL A. CHOWDRY
-----------------------------
Name: Michael A. Chowdry
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PROMISSORY NOTE
(AND ATLAS AIR OBLIGATION)
Golden, Colorado
October 15, 1999
General
References made to the Loan Agreement dated as of January 1, 1999
between Atlas Air, Inc., a Delaware corporation ("Payee or "Atlas Air"), and
Michael A. Chowdry ("Maker" or "Mr. Chowdry") relating to Atlas Air's
acquisition of a Boeing Business Jet (737-700) ("BBJ") from the Boeing Company
and Mr. Chowdry's agreement to loan Atlas Air, on a non-recourse basis, the
following: An amount (the "BBJ costs") equal to 50% of the amount by which the
sum of (a) the Acquisition Cost, (b) the cost of any capital improvements to the
BBJ (excluding costs related to the overhaul, replacement, restoration or
refurbishment of the BBJ's airframe, aircraft engines, landing gears or other
parts and components of the BBJ which overhaul, replacement, restoration or
refurbishment is caused by the use of the aircraft) and (c) any financing costs,
interest and lease payments with respect to the Aircraft Lease Agreement dated
as of February 26, 1999 between General Electric Credit Corporation ("GECC") and
Atlas Air, exceeds the principal amount of the purchase price received by Atlas
Air from GECC for the sale of the BBJ to GECC. As used above, the term
"Acquisition Cost" means an amount equal to the sum of the purchase price
actually paid initially by Atlas Air to acquire the BBJ, including all
modifications and the installation of the interior made prior to the time that
the BBJ is placed in service less $9,164,518.20.
The amount of the BBJ costs at October 15, 1999 is less than
zero.
Principal and Interest
Maker, whose address is 538 Commons Drive, Golden, Colorado (or
such other address as Maker may designate in writing to Payee), promises to pay
to the order of Payee, at Payee's principal place of business, 538 Commons
Drive, Golden, CO 80401 (or such other address as Payee shall designate in
writing to Maker), the following principal sum, together with interest on the
unpaid principal sum from time to time outstanding at the rate per annum stated
below: The positive amount of BBJ costs (a) which (i) are paid by Payee prior to
the principal amount of this Note becoming due and (ii) have been entered by
Payee on
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Schedule A to this Note and (b) for which Payee has concurrently given written
notice to Maker of entering the additional amount on Schedule A.
The BBJ costs shall be deemed outstanding principal amounts on
the date on which both the amounts have been entered on Schedule A and notice of
entering them on Schedule A have been given to Maker.
The outstanding principal of this Note shall bear a floating rate
of interest equal to the London Interbank Offered Rate for one month as shown in
The Wall Street Journal (the "LIBOR rate"). The initial interest rate shall be
the LIBOR rate as shown in The Wall Street Journal published on October 15,
1999. The interest rate shall change monthly, with the LIBOR rate as shown in
The Wall Street Journal on the last business day of each month applied to the
next month (or part thereof). Interest, based on a 365-day year, shall be
accrued for the number of days the principal sum (or any portion thereof) is
actually outstanding.
The entire outstanding principal balance and all accrued but
unpaid interest shall be due and payable to Payee on the 30th day after Maker
receives written notice from Payee demanding payment of all outstanding
principal and accrued but unpaid interest (the "maturity date").
Prepayment
Principal and interest payments may be paid but are not required
to be paid prior to the maturity date. The privilege to prepay all or any part
of this Note without any penalty is reserved to Maker. However, any principal
prepayment must be accompanied by all interest on that amount then accrued, if
any.
Application of Payment
All payments on this Note shall be applied first to the payment
of accrued interest, and, after all such interest has been paid, any remainder
shall be applied to reduction of the principal balance. All amounts payable
hereunder are payable in lawful money of the United States of America.
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Attorneys' Fees
Maker hereby agrees to pay reasonable attorneys' fees and all
other reasonable costs and expenses incurred, after a default in payment, in the
enforcement of this Note and the collection of amounts due hereunder, whether
such enforcement or collection is by court action or otherwise.
Other
This Note shall be governed as to validity, interpretation,
construction, effect and in all other respects by the laws and decisions of the
State of Colorado. Maker agrees that the federal and state courts located in the
State of Colorado shall have subject matter jurisdiction to entertain any action
brought to enforce or collect upon this Note and, by execution hereof,
voluntarily submits to personal jurisdiction of such courts; provided, however,
such jurisdiction shall not be exclusive and, at its option, Payee may commence
such action in any other court which otherwise has jurisdiction.
No delay or omission in exercising any right or power hereunder,
shall affect the liability of Maker. No delay or omission by Payee in exercising
any power or right hereunder shall impair such right or power or be construed to
be a waiver of any default, nor shall any single or partial exercise of any
power or right hereunder preclude any or full exercise thereof or the exercise
of any other right or power. Each legal holder hereof shall have and may
exercise all the rights and powers given to Payee herein.
This Note has been executed as of October 15, 1999 and actually
on the date indicated below.
/s/ MICHAEL A. CHOWDRY
-----------------------------------
Michael A. Chowdry
Date: 10/15/99
----------------------------
ATLAS AIR OBLIGATION
In consideration of the execution and delivery of this Note and
other good and valuable consideration, Atlas Air, Inc. ("Payee") hereby agrees
that, upon the request of Michael A. Chowdry ("Maker") prior to the Note
becoming due, Payee will
<PAGE>
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make a loan to Maker under the Note of the positive amount of BBJ costs (as
defined above).
ATLAS AIR, INC.
By: /s/ STANLEY J. GADEK
----------------------------
Name: Stanley J. Gadek
Title: Vice President and
Controller
Date: 10/15/99
-----------------------------
FOURTH AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF APRIL 25, 2000
AMONG
ATLAS AIR, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders,
and
BANKERS TRUST COMPANY,
as Administrative Agent
ARRANGED BY:
DEUTSCHE BANK SECURITIES INC.
ATLAS AIR, INC.
FOURTH AMENDED AND RESTATED
CREDIT AGREEMENT
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS............................................... 2
1.1 Certain Defined Terms..................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement.............................. 27
1.3 Other Definitional Provisions............................. 27
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS................ 27
2.1 Commitments; Making of Loans; Notes; Register............. 27
2.2 Interest on the Loans..................................... 31
2.3 Fees...................................................... 35
2.4 Repayments, Prepayments and Reductions in Loans and
Revolving Loan Commitments; General Provisions Regarding
Payments.................................................. 35
2.5 Use of Proceeds........................................... 42
2.6 Special Provisions Governing Eurodollar Rate Loans........ 42
2.7 Increased Costs; Taxes; Capital Adequacy.................. 44
2.8 Obligation of Lenders to Mitigate......................... 48
2.9 Release of Collateral..................................... 49
SECTION 3. CONDITIONS TO LOANS....................................... 49
3.1 Conditions to Effectiveness and the Existing Aircraft
Extended Loans............................................ 49
3.2 Conditions to Loans to Finance Aircraft Acquisition....... 51
3.3 Condition to Loans to Finance Cargo Conversion............ 54
3.4 Conditions to All Loans................................... 55
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES.................. 57
4.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries................................. 57
4.2 Authorization of Borrowing, etc........................... 58
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4.3 Financial Condition....................................... 59
4.4 No Material Adverse Change; No Restricted Junior Payments. 59
4.5 Title to Properties; Liens................................ 59
4.6 Litigation; Adverse Facts................................. 60
4.7 Payment of Taxes.......................................... 60
4.8 Performance of Agreements; Materially Adverse Agreements.. 60
4.9 Governmental Regulation................................... 61
4.10 Securities Activities..................................... 61
4.11 Employee Benefit Plans.................................... 61
4.12 Certain Fees.............................................. 61
4.13 Environmental Protection.................................. 61
4.14 Employee Matters.......................................... 62
4.15 Solvency.................................................. 62
4.16 Disclosure................................................ 62
SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS........................... 62
5.1 Financial Statements and Other Reports.................... 63
5.2 Corporate Existence....................................... 67
5.3 Payment of Taxes and Claims; Tax Consolidation............ 67
5.4 Maintenance of Properties; Insurance...................... 68
5.5 Inspection; Lender Meeting................................ 68
5.6 Compliance with Laws, etc................................. 68
5.7 Environmental Indemnity................................... 69
5.8 Company's Remedial Action Regarding Hazardous Materials... 69
5.9 Further Assurances; New Subsidiaries; Holding Company..... 69
5.10 Appraisals................................................ 70
5.11 Maintenance Contracts..................................... 70
5.12 Employee Benefit Plans.................................... 70
5.13 Registration of Foreign Leased Aircraft with FAA.......... 71
5.14 Corporate Separateness.................................... 71
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SECTION 6. COMPANY'S NEGATIVE COVENANTS.............................. 71
6.1 Indebtedness.............................................. 71
6.2 Liens and Related Matters................................. 73
6.3 Investments; Joint Ventures............................... 73
6.4 Contingent Obligations.................................... 74
6.5 Restricted Junior Payments................................ 75
6.6 Financial Covenants....................................... 76
6.7 Restriction on Fundamental Changes; Asset Sales and
Acquisitions; New Subsidiaries............................ 78
6.8 Amendments of Material Agreements......................... 80
6.9 Restriction on Leases..................................... 81
6.10 Sales and Lease-Backs..................................... 81
6.11 Sale or Discount of Receivables........................... 81
6.12 Transactions with Shareholders and Affiliates............. 82
6.13 Disposal of Subsidiary Stock.............................. 82
6.14 Conduct of Business....................................... 82
SECTION 7. EVENTS OF DEFAULT......................................... 83
7.1 Failure to Make Payments When Due......................... 83
7.2 Default in Other Agreements............................... 83
7.3 Breach of Certain Covenants............................... 83
7.4 Breach of Warranty........................................ 83
7.5 Other Defaults Under Loan Documents....................... 84
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc. .... 84
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc. ...... 84
7.8 Judgments and Attachments................................. 85
7.9 Dissolution............................................... 85
7.10 Change in Control......................................... 85
7.11 Failure of Security....................................... 86
7.12 Certificated as Air Carrier............................... 86
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7.13 Material Agreements....................................... 86
7.14 "Change of Control" Put Payments.......................... 86
SECTION 8. AGENT..................................................... 87
8.1 Appointment............................................... 87
8.2 Powers and Duties; General Immunity....................... 87
8.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness............................. 89
8.4 Right to Indemnity........................................ 89
8.5 Collateral Documents...................................... 89
8.6 Successor Administrative Agent............................ 90
SECTION 9. MISCELLANEOUS............................................. 90
9.1 Assignments and Participations in Loans................... 90
9.2 Expenses.................................................. 92
9.3 Indemnity................................................. 93
9.4 Set-Off................................................... 93
9.5 Ratable Sharing........................................... 94
9.6 Amendments and Waivers.................................... 94
9.7 Independence of Covenants................................. 96
9.8 Notices................................................... 96
9.9 Survival of Representations, Warranties and Agreements.... 96
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative..... 96
9.11 Marshalling; Payments Set Aside........................... 96
9.12 Severability.............................................. 97
9.13 Obligations Several; Independent Nature of Lenders'
Rights.................................................... 97
9.14 Headings.................................................. 97
9.15 Applicable Law............................................ 97
9.16 Successors and Assigns.................................... 97
9.17 Consent to Jurisdiction and Service of Process............ 98
9.18 Waiver of Jury Trial...................................... 98
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9.19 Confidentiality........................................... 99
9.20 Counterparts; Effectiveness; Effect if Agreement Does Not
Become Effective.......................................... 99
9.21 Cooperation in Refinancing, Syndication and Assignment.... 99
Signature pages ............................................................ S-1
</TABLE>
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EXHIBITS
PAGE
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I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
IIIA FORM OF EXISTING AIRCRAFT EXTENSION NOTE
IIIB FORM OF NEW AIRCRAFT NOTE
IV FORM OF COMPLIANCE CERTIFICATE
VA FORM OF OPINION OF CAHILL GORDON & REINDEL
VB FORM OF SECTION 1110 OPINION
VC FORM OF OPINION OF THOMAS G. SCOTT
VI INTENTIONALLY OMITTED
VII FORM OF ASSIGNMENT AGREEMENT
VIII FORM OF CERTIFICATE RE NON-BANK STATUS
IX FORM OF FINANCIAL CONDITION CERTIFICATE
X FORM OF FIRST AIRCRAFT CHATTEL MORTGAGE
XI FORM OF SECOND AIRCRAFT CHATTEL MORTGAGE
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SCHEDULES
PAGE
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1.1 EXISTING AIRCRAFT AND EXISTING AIRCRAFT LOAN EXTENSION AMOUNTS
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
6.1 CERTAIN EXISTING INDEBTEDNESS
6.2 CERTAIN EXISTING LIENS
6.3 CERTAIN EXISTING INVESTMENTS
6.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
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ATLAS AIR, INC.
FOURTH AMENDED AND RESTATED
CREDIT AGREEMENT
This FOURTH AMENDED AND RESTATED CREDIT AGREEMENT is dated as of
April 25, 2000 and entered into by and among ATLAS AIR, INC., a Delaware
corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (each individually referred to herein as a "Lender" and
collectively as "Lenders"), and BANKERS TRUST COMPANY ("Bankers Trust"), as
administrative agent for Lenders (in such capacity, "Administrative Agent").
R E C I T A L S
WHEREAS, pursuant to that certain Third Amended and Restated Credit
Agreement dated as of September 5, 1997 as amended by the First Amendment
thereto dated as of July 8, 1998, as further amended by the Second Amendment
thereto dated as of August 14, 1998 and as further amended by the Third
Amendment thereto dated as of June 14, 1999, by and among Company, as Borrower,
the financial institutions listed on the signature pages thereof, Goldman Sachs
Credit Partners L.P., as Syndication Agent and Administrative Agent (the
"Existing Agreement"), Lenders have made certain credit facilities available to
Company for the purpose of acquisition and modification of certain aircraft to
be used in Company's air cargo business;
WHEREAS, the parties of the Existing Agreement desire to amend and
restate the Existing Agreement in order to (i) extend the maturity of the Loans,
(ii) decrease the Revolving Loan Commitments by $25,000,000 to $175,000,000,
(iii) adjust the financial covenants, and (iv) make certain other amendments to
the Existing Agreement;
WHEREAS, it is the intention of Company, Administrative Agent and
each of the Lenders that such amendment and restatement of the Existing
Agreement shall not constitute a refinancing of the Loans outstanding on the
Fourth Restatement Date and that, with respect to the Loans outstanding as of
the Fourth Restatement Date, the First Aircraft Chattel Mortgages shall continue
to constitute purchase-money security interests subject to Section 1110 of the
Bankruptcy Code; and
WHEREAS, the Lenders identified on the signature pages hereof hold
all of the "Revolving Loans" and "Revolving Commitments" under the Existing
Agreement as identified on Schedule 2.1.
NOW THEREFORE, in consideration of the premises and agreements,
provisions and covenants herein contained, Company, Lenders and Administrative
Agent hereby agree that the Existing Agreement shall be amended and restated in
its entirety as follows:
<PAGE>
SECTION 1.
DEFINITIONS.
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ACMI CONTRACT" means (i) any contract entered into by Company
pursuant to which Company furnishes the aircraft, crew, maintenance and
insurance and customers bear all other operating expenses and (ii) any similar
contract in which the customer provides the flight crew, all in accordance with
Company's historical practices.
"ACMI CONTRACTED AIRCRAFT" means an aircraft acquired by Company or
its Subsidiaries and dedicated to a new ACMI Contract entered into in connection
with the acquisition of such aircraft (which ACMI Contract shall not represent a
renewal or replacement of a prior ACMI Contract unless the aircraft dedicated to
such prior ACMI Contract was operated under an operating lease and returned to
the lessor) which is in effect on the date of calculation and has a remaining
term of one year or more on the date such aircraft was dedicated to such ACMI
Contract (subject to cancellation terms, which may include the right to cancel
on six months notice). When making any calculation on a Pro Forma Basis effect
shall be given to the acquisition of an ACMI Contracted Aircraft by adding to
the appropriate components of Consolidated Adjusted EBITDA (i) the net projected
annualized revenues from the operation of the ACMI Contracted Aircraft under
such ACMI Contract for that portion of the period for which Consolidated
Adjusted EBITDA is being calculated prior to the acquisition of such aircraft,
assuming operation for the minimum guaranteed number of block hours (less any
block hours subject to cancellation) at the minimum guaranteed rate under such
ACMI Contract less (ii) the projected annualized cash operating expenses from
such operation for the same period for which the related projected revenues are
determined in clause (i) above; provided that such projected cash operating
expenses shall not be less on a per block hour basis than the average historical
per block hour operating expenses of Company for the four full fiscal quarters
immediately preceding the date of calculation, and provided, further, that if
such aircraft is of a model other than a Boeing 747 freighter, such projected
cash operating expenses shall include maintenance costs which shall not be less
than the average for such aircraft type disclosed on the most recently available
DOT Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI CONTRACT" shall include contracts pursuant to which Company
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"ADJUSTED CONSOLIDATED WORKING CAPITAL" means, as at any date of
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determination, Consolidated Current Assets (excluding Cash and Cash Equivalents)
less Consolidated Current Liabilities.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date, (x) until such time as Reference Lenders are determined in
accordance with the definition thereof, the rate per annum obtained by dividing
the offered rate (expressed as a rate per annum and rounded upward to the
nearest 1/16 of one percent) appearing on the Dow Jones/Telerate Monitor on
Telerate Access Service Page 3750 (British Bankers Association Settlement Rate)
(or such other page as may, in the opinion of Administrative Agent, replace such
page on that system for the purpose of displaying such rate) at or about 11:00
a.m. (London time) on such Interest Rate Determination Date for U.S. dollar
deposits of amounts in same day funds comparable to the principal amount of the
Eurodollar Rate Loan for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to the Interest Period for which such
Adjusted Eurodollar Rate will apply by (ii) a percentage equal to 100% minus the
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable on
such Interest Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurodollar liabilities" as defined in Regulation D (or any
successor category of liabilities under Regulation D) and (y) thereafter, the
rate per annum obtained by dividing (i) the arithmetic average (rounded upward
to the nearest 1/16 of one percent) of the offered quotation, if any, to first
class banks in the interbank Eurodollar market by each of the Reference Lenders
for U.S. dollar deposits of amounts in same day funds comparable to the
principal amount of the Eurodollar Rate Loan of that Reference Lender for which
the Adjusted Eurodollar Rate is then being determined with maturities comparable
to such Interest Period as of approximately 10:00 A.M. (New York time) on such
Interest Rate Determination Date by (ii) a percentage equal to 100% minus the
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable on
such Interest Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" as defined in Regulation D (or
any successor category of liabilities under Regulation D); provided that if any
Reference Lender fails to provide Administrative Agent with its aforementioned
quotation then the Adjusted Eurodollar Rate shall be determined based on the
quotation(s) provided to Administrative Agent by the other Reference Lender(s).
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 8.6.
"AERONAUTICAL AUTHORITY" means, at any date, the Federal Aviation
Administration or other governmental airworthiness authority having jurisdiction
over any Eligible Aircraft or Airframe or Engine under the laws of the country
in which the Airframe is then registered.
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"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.
"AFFECTED LOANS" has the meaning assigned to that term in subsection
2.6C.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AFL" means Atlas Freighter Leasing, Inc., a Delaware corporation,
whose common stock is wholly owned by Company.
"AFL FINANCING AGREEMENT" means that certain Credit Agreement dated
as of May 29, 1997 by and among AFL, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
"AFL II" means Atlas Freighter Leasing II, Inc., a Delaware
corporation, whose common stock is wholly owned by Company.
"AFL II FINANCING AGREEMENT" means that certain Credit Agreement
dated as of September 5, 1997 by and among AFL II, the lenders party thereto,
Goldman Sachs Credit Partners L.P., as Syndication Agent, and Bankers Trust
Company, as Administrative Agent, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
"AFL III" means Atlas Freighter Leasing III, Inc., a Delaware
corporation, whose common stock is wholly owned by Company, the sole business of
which is the ownership of the AFL III Equipment and the leasing of the AFL III
Equipment to Company pursuant to the AFL III Leases and obtaining financing with
respect thereto.
"AFL III EQUIPMENT" means (i) eleven Boeing 747-200 aircraft
(including the engines attached thereto) with registration numbers N505MC,
N507MC, N508MC, N509MC, N516MC, N517MC, N523MC, N524MC, N526MC, N527MC and
N528MC, (ii) nine General Electric CF6-50E2 engines and (iii) three General
Electric CF6-80C2 engines.
"AFL III FINANCING" means indebtedness in an aggregate principal
amount of $300,000,000 incurred by AFL III as of April 25, 2000 pursuant to the
AFL III Financing Agreement.
"AFL III FINANCING AGREEMENT" means that certain Credit Agreement
dated
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as of April 25, 2000 by and among AFL III, the lenders party thereto and Bankers
Trust Company, as Agent, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
"AFL III LEASES" means one or more triple net leases by and between
Company and AFL III with respect to the AFL III Equipment providing for fair
market rental rates sufficient to provide for principal and interest payments
under the AFL III Financing Agreement and a market rate of return on the equity
interest of AFL III, as lessor thereunder, as such leases may be amended,
modified or supplemented from time to time in accordance with the provisions of
this Agreement.
"AFL III RESTRUCTURING" means the following transactions which
occurred concurrently on the Fourth Restatement Date: (i) the contribution of
the AFL III Equipment to AFL III as a capital contribution, (ii) the incurrence
of indebtedness pursuant to the AFL III Financing Agreement and the simultaneous
repayment of amounts outstanding under the AFL Financing Agreement and the AFL
II Financing Agreement and the release of all Liens arising thereunder and (iii)
the entering into of the AFL III Leases.
"AGREEMENT" means this Fourth Amended and Restated Credit Agreement
dated as of April 25, 2000, as it may be amended, supplemented or otherwise
modified from time to time.
"AIRCRAFT CHATTEL MORTGAGE" means any or all of the First Aircraft
Chattel Mortgages and the Second Aircraft Chattel Mortgages.
"AIRFRAME" means, as the context requires, an Airframe as defined in
a particular Aircraft Chattel Mortgage or all Airframes as defined in all
Aircraft Chattel Mortgages.
"APPLICABLE MARGIN" has the meaning assigned to that term in
subsection 2.2A.
"APPRAISED VALUE" means, with respect to any Financed Aircraft, the
average of the appraised value of such Financed Aircraft by two Approved
Appraisers as most recently determined pursuant to subsection 5.10.
"APPROVED APPRAISER" means any of the following: AvSolutions, Inc.,
BK Associates, Jack B. Feir Associates, Morton Beyer & Agnew, Inc., Airclaims,
Ltd., Aircraft Information Services, Inc., Simat, Helleisen & Eichner, Inc. and
AVITAS, Inc.
"APPROVED LEASE" means, with respect to any Financed Aircraft, any
lease designated as an Approved Lease by Administrative Agent in its sole
discretion; provided that, the term of any such lease shall not exceed 36
months.
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"ASSET SALE" means the sale (including any sale-leaseback
transaction other than sale-leaseback transactions permitted by subsections 6.9
and 6.10 hereof) by Company or any of its Subsidiaries to any other Person of
(i) any of the stock of any of Company's Subsidiaries, (ii) substantially all of
the assets of any division or line of business of Company or any of its
Subsidiaries, or (iii) any other assets (whether tangible or intangible) of
Company or any of its Subsidiaries outside of the ordinary course of business
excluding (A) any such other assets to the extent that the aggregate value of
such assets sold in any single transaction or related series of transactions is
equal to $5,000,000 or less, (B) transactions related to aircraft engines,
components, parts or spare parts pursuant to customary pooling, exchange or
similar arrangements, (C) asset swaps involving aircraft engines, components,
parts or spare parts (other than any engines encumbered pursuant to an Aircraft
Chattel Mortgage); provided that the assets received by the Company or any
Subsidiary have a fair market value at least equal to the assets transferred
(provided that with respect to any asset swap or series of related asset swaps
involving assets of Company or any Subsidiary with a fair market value exceeding
$10,000,000, such determination shall be made by the Board of Directors of
Company)), (D) asset sales involving obsolete, worn-out, excess or redundant
equipment as long as the proceeds therefrom are used to replace or to upgrade
the aircraft or the equipment installed thereon, (E) transactions permitted by
subsection 9.21 of the AFL III Financing Agreement and (F) the sale by AFL III
of a single aircraft pursuant to subsection 6.6(ii) of the AFL III Financing
Agreement.
"ASSIGNEE NOTES" means any promissory notes issued by Company (i) at
the request of a Lender pursuant to subsection 2.1D hereof or (ii) pursuant to
the last sentence of subsection 9.1B(i) in connection with assignments of the
Commitments, Existing Aircraft Extended Loans or New Aircraft Loans of any
Lenders, substantially in the form of Exhibit IIIA or Exhibit IIIB annexed
hereto, as the case may be, as they may be amended, supplemented or otherwise
modified from time to time.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit VII annexed hereto.
"ATLAS ONE" means Atlas One, Inc., a Delaware corporation.
"BANKERS TRUST" has the meaning assigned to that term in the
introduction to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.
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"BFE AGREEMENT" means any agreement entered into by Company,
relating to buyer furnished equipment to be installed on any Financed Aircraft
in form and substance satisfactory to Administrative Agent, as amended,
restated, supplement or otherwise modified from time to time in accordance with
this Agreement.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or Colorado or
is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit
Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"CASH PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially
in the form of Exhibit VIII annexed hereto delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(iii).
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"CERTIFICATED AIR CARRIER" means a United States "air carrier"
within the meaning of the Federal Aviation Act, operating pursuant to a
certificate issued under Section 401 of such Act, or a carrier of comparable
status under any successor law or provision.
"COLLATERAL" means all of the properties and assets in which Liens
are purported to be granted by the Collateral Documents.
"COLLATERAL DOCUMENTS" means each First Aircraft Chattel Mortgage
and each Second Aircraft Chattel Mortgage and any security agreement executed
pursuant to subsection 5.9.
"COMMITMENTS" means the commitments of Lenders to maintain, make and
convert Loans as set forth in subsection 2.1A.
"COMPANY" has the meaning assigned to that term in the introduction
to this Agreement.
"COMPANY COMMON STOCK" means the common stock of Company, par value
$0.01 per share.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of Exhibit IV annexed hereto delivered to Administrative Agent and Lenders
by Company pursuant to subsection 5.1(iv).
"CONDEMNATION PROCEEDS" has the meaning assigned to that term in
subsection 2.4B(iii)(c).
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Company and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum
of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Company and its
Subsidiaries) by Company and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Company and its Subsidiaries plus (ii) to the extent not covered by
clause (i) of this definition, the aggregate of all expenditures by Company and
its Subsidiaries during that period to acquire (by purchase or otherwise) the
business, property or fixed assets of any Person, or the stock or other evidence
of beneficial ownership of any Person that, as a result of such
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acquisition, becomes a Subsidiary of Company.
"CONSOLIDATED CURRENT ASSETS" means, as at any date of
determination, the total assets of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current assets in
conformity with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP but excluding the current portion of any Indebtedness of
the Company which would otherwise be included therein.
"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year, an
amount equal to the sum of Consolidated Adjusted EBITDA for such Fiscal Year and
the Consolidated Working Capital Adjustment for such Fiscal Year, minus the sum
of the amounts for such Fiscal Year of (i) scheduled repayments of principal of
Indebtedness, mandatory prepayments of the principal of Indebtedness (other than
from the proceeds of Asset Sales), voluntary prepayments of the principal of
Indebtedness to the extent that such amount is not simultaneously reborrowed,
and other permanent reductions in the availability of revolving credit
facilities (ii) Consolidated Interest Expense, (iii) permitted Consolidated
Capital Expenditures (net of any proceeds of any related financing with respect
to such Consolidated Capital Expenditures) other than Consolidated Capital
Expenditures made pursuant to the reinvestment provisions of subsection
2.4B(iii)(a), and (iv) the portion of taxes based on income or revenues actually
paid in cash.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total net
interest expense (to be computed by reducing interest expense by the amount of
interest income) (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of Company and its Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of Company
and its Subsidiaries, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3
payable to Syndication Agent, Administrative Agent and/or Lenders on or before
the Fourth Restatement Date.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP; provided
that there shall be excluded (i) the income (or loss) of any Person (other than
a Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
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into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the
sum of the capital stock and additional paid-in capital plus retained earnings
(or minus accumulated deficits) of Company and its Subsidiaries on a
consolidated basis determined in conformity with GAAP.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the aggregate
amount of all rents paid or payable by Company and its Subsidiaries on a
consolidated basis during that period under all Capital Leases and Operating
Leases to which Company or any of its Subsidiaries is a party as lessee (net of
sublease income other than income from ACMI Contracts). For the avoidance of
doubt, all rental payments to AFL III shall not be included in Consolidated
Rental Payments.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination,
the aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any Fiscal Year
on a consolidated basis, the amount (which may be a negative number) by which
the Adjusted Consolidated Working Capital of Company and its Subsidiaries as of
the beginning of the period exceeds (or is less than) the Adjusted Consolidated
Working Capital of Company and its Subsidiaries as of the end of such period.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person (i) with respect
to any Indebtedness, lease, dividend or other obligation of another if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Interest Rate Agreements and Currency Agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course
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of business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTINUING DIRECTORS" shall mean the directors of a Person on the
Fourth Restatement Date and each other director, if such other director's
nomination for election to the Board of Directors of such Person is recommended
by a majority of the then Continuing Directors.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect Company or any of its
Subsidiaries against fluctuations in currency values.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DESIGNATED INDEBTEDNESS" means Indebtedness incurred pursuant to
the Pass Through Trust Documents, the FINOVA Agreement, the Senior Note
Documents, the NationsBanc/Bank of America Agreement, the AFL III Financing
Agreement, any Permitted Extension Indebtedness and any Other Permitted
Indebtedness.
"DETERMINATION DATE" has the meaning assigned to that term in
subsection 6.1(vi).
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
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"ELIGIBLE AIRCRAFT" means a Boeing 747-200, 747-300, 747-400 or
MD-11 aircraft, including any engines installed thereon and any spare engines of
the same type and model, which (i) is in a cargo configuration capable of
immediate operation in the business of Company or is eligible for delivery under
any Modification Agreement with a delivery slot available within a six month
period (or is leased in accordance with the Collateral Documents for a period of
longer than six months until a delivery slot is available), and (ii) has a
maximum gross take-off weight ("MTOW") of at least 800,000 pounds, in the case
of any 747-200, 747-300, or 747-400 aircraft and 630,000 pounds in the case of
any MD-11 aircraft.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, in each case (under clauses (i) through
(iv) above) that is reasonably acceptable to Administrative Agent; and (B) any
Lender and any Affiliate of any Lender; provided that no Affiliate of Company
shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by Company or any of its ERISA Affiliates.
"ENGINE" means, as the context requires, an Engine as defined in a
particular Aircraft Chattel Mortgage, Engines as defined in all Aircraft Chattel
Mortgages, a Replacement Engine, all Replacement Engines or all of any of the
foregoing.
"ENVIRONMENTAL CLAIM" means any investigation, notice, claim, suit
or order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"EQUITY PROCEEDS" means the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) from
the issuance of any equity Securities of Company including, without limitation,
additional issuances of Company
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Common Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, as applied to any Person, (i) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that Person is, or was at any time, a member; (ii) any trade or
business (whether or not incorporated) which is, or was at any time, a member of
a group of trades or businesses under common control within the meaning of
Section 414(c) of the Internal Revenue Code of which that Person is, or was at
any time, a member; and (iii) any member of an affiliated service group within
the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is, or was at any time, a member.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in Section 7.
"EVENT OF LOSS" shall mean any of the following events with respect
to any Financed Aircraft (whether the Airframe or an Engine of such Financed
Aircraft or Spare Engine or both): (A) loss of such Financed Aircraft or Spare
Engine or the use thereof due to theft or disappearance of such Financed
Aircraft or Spare Engine which shall result in the loss of possession thereof
for a period of 120 days (or for a shorter period ending on the date on which
there is an insurance settlement for a total loss on the basis of the theft or
disappearance of such Financed Aircraft or Spare Engine); (B) the destruction,
damage beyond repair or rendition of such Financed Aircraft or Spare Engine
permanently unfit for normal use for any reason whatsoever; (C) the
condemnation, confiscation or seizure of, or requisition of title to, or use or
possession (other than use by the United States Government if Company obtains
adequate compensation from the United States Government) of such Financed
Aircraft or Spare Engine; (D) as a result of any rule, regulation, order or
other action by the FAA or other governmental body having jurisdiction, the use
of such Financed Aircraft or Spare Engine in the normal course of interstate air
transportation of persons or cargo shall have been prohibited for a period of
more than nine consecutive months unless Company, prior to the expiration of
such nine month period, shall have undertaken and shall be diligently carrying
forward all steps which are necessary or desirable to permit the normal use of
such property by Company or, in any event, if such use shall have been
prohibited for a period of twelve consecutive months; (E) the operation or
location of such Financed Aircraft or Spare Engine, while under requisition for
use by the United States or any instrumentality or agency thereof, in any area
excluded from coverage by any insurance policy in effect with respect to such
Financed Aircraft or Spare Engine, if Company shall be unable to obtain
indemnity in lieu
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<PAGE>
thereof from the United States; (F) any damage which results in an insurance
settlement with respect to such Financed Aircraft or Spare Engine on the basis
of an actual or constructive total loss or (G) a divestiture of such Airframe or
Spare Engine as described in Section 4(d)(iii), Section 4(d)(vi), Section
4(d)(vii)(B) or Section 4(d)(viii)(B) of any Aircraft Chattel Mortgage. An Event
of Loss with respect to any Financed Aircraft shall be deemed to have occurred
if an Event of Loss occurs with respect to the Airframe of such Financed
Aircraft.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXISTING AGREEMENT" has the meaning assigned to that term in the
Recitals hereto.
"EXISTING AIRCRAFT" means the aircraft identified on Schedule 1.1
annexed hereto.
"EXISTING AIRCRAFT EXTENDED LOANS" means Loans deemed made by
Lenders to Company pursuant to subsection 2.1A(i).
"EXISTING AIRCRAFT EXTENDED NOTES" means (i) the promissory notes of
Company issued pursuant to subsection 2.1D on the Fourth Restatement Date and
(ii) any promissory notes issued by Company pursuant to the last sentence of
subsection 9.1B(i) in connection with assignments of Existing Aircraft Extended
Loans of any Lenders, in each case substantially in the form of Exhibit IIIA
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"EXISTING AIRCRAFT LOAN EXTENSION AMOUNT" means, for each Existing
Aircraft, the amount shown on Schedule 1.1 annexed hereto.
"EXISTING AIRCRAFT LOAN REPAYMENT AMOUNTS" means, for each Existing
Aircraft Loan Repayment Date for each Existing Aircraft Extended Loan, an amount
equal to 10% of the Existing Aircraft Loan Extension Amount.
"EXISTING AIRCRAFT LOAN REPAYMENT DATE" means, for each Existing
Aircraft Extended Loan, the three-year anniversary date of the Fourth
Restatement Date and each 3-month anniversary date thereafter; provided that,
notwithstanding anything in the foregoing to the contrary, the unpaid amount of
all Existing Aircraft Extended Notes shall be due and payable on the Final
Scheduled Maturity Date.
"FACILITIES" means any and all real property now, hereafter or
heretofore owned, leased, operated or used by Company or any of its
predecessors.
"FEDERAL AVIATION ACT" means the Federal Aviation Act of 1958, as
amended
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and as recodified in Title 49, United States Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration or any successor thereto administering the
functions of the Federal Aviation Administration under the Federal Aviation Act.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day on which is a Business Day, the average of the quotations for such day on
such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"FINAL SCHEDULED MATURITY DATE" means the five-year anniversary date
of the Fourth Restatement Date.
"FINANCED AIRCRAFT" means all Eligible Aircraft, including the
airframes and engines, purchased by Company with proceeds of Existing Aircraft
Extended Loans deemed made and New Aircraft Loans made under this Agreement and
with respect to which a First Aircraft Chattel Mortgage has been executed and
delivered.
"FINOVA AGREEMENT" means that certain Secured Loan Agreement dated
as of April 11, 1996 between FINOVA and Company, as amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Agreement.
"FIRST AIRCRAFT CHATTEL MORTGAGE" means, with respect to each
Eligible Aircraft purchased with the proceeds of Loans, a Security Agreement and
Chattel Mortgage (Aircraft No. ___) substantially in the form of Exhibit X
annexed hereto granting to Administrative Agent for the benefit of Lenders a
purchase money first priority security interest in such Eligible Aircraft, as
such First Aircraft Chattel Mortgage may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"FISCAL YEAR" means Company's fiscal year ending on December 31 of
each year.
"FOREIGN LEASED AIRCRAFT" means a Leased Aircraft that is registered
in a country other than the United States during the term of the applicable
Approved Lease.
"FOURTH RESTATEMENT DATE" means the date on or before April 25, 2000
on
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which the conditions to effectiveness set forth in subsection 3.1 are satisfied
and the Existing Aircraft Extended Loans are deemed made.
"FUNDING AND PAYMENT OFFICE" means the office of Administrative
Agent located at 130 Liberty Street, New York, New York 10006, Attention:
Marguerite Sutton.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Company to Lenders pursuant to clauses (ii) and (iii) of
subsection 5.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 5.1(v)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 4.3.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from any
federal, state or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means any chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any law.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
Facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Company.
"HOLDING COMPANY" has the meaning assigned to such term in the
definition of "Holding Company Reorganization."
"HOLDING COMPANY REORGANIZATION" means the acquisition, in one
transaction or a series of transactions, of all of the outstanding Securities of
Company that are entitled to vote in the election of directors other than
Securities having such power only by reason of the happening of a contingency
(and all other Securities convertible into such Securities) by another
corporation (the "Holding Company"); provided that the Holding Company
Reorganization may involve more than one Holding Company of Company so long as
the ultimate Holding Company directly or indirectly owns 100% of the Company;
provided further, in connection with the Holding Company Reorganization, the
Company and its
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Subsidiaries shall not incur any material obligations or liabilities of any type
other than those permitted to be paid without causing an Event of Default under
subsection 7.14.
"HOLDING COMPANY SUBSIDIARY" means any Subsidiary of a Holding
Company other than the Company and its Subsidiaries.
"INDEBTEDNESS" means, as applied to any Person, (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"INDEMNITEE" has the meaning assigned to that term in subsection
9.3.
"INITIAL CLOSING DATE" means the date on or before May 8, 1996 on
which the initial Loans were made.
"INSURANCE PROCEEDS" has the meaning assigned to that term in
subsection 2.4B(iii)(c).
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate
Loan, each March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Fourth Restatement Date,
and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each Interest
Period of six months "Interest Payment Date" shall also include the date that is
three months after the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Company or any of its Subsidiaries
against fluctuations in interest rates.
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such Interest
Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
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amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement, purchase or other acquisition for value, by any
Subsidiary of Company from any Person other than Company or any of its
Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Company or any of
its Subsidiaries to any other Person (other than a wholly owned Subsidiary of
Company), including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LEASED AIRCRAFT" means a Financed Aircraft subject to an Approved
Lease.
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 9.1.
"LEVERAGE RATIO" means, as of the last day of any fiscal quarter of
the Company, the ratio of (i) Consolidated Total Debt as of such date (less Cash
and Cash Equivalents held by Company in excess of $25 million as of such date)
plus seven times Consolidated Rental Payments (for the four fiscal quarter
period ending as of such date) to (ii) Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending as of
such date.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge, hypothecation, preference, priority, privilege, lease or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Existing Aircraft
Extended Loans or New Aircraft Loans or any combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, any guaranty
entered
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into pursuant to subsection 5.9 and the Collateral Documents.
"LOAN EXPOSURE" means, with respect to any Lender as of any date of
determination the sum of that Lender's Existing Aircraft Extended Loans, that
Lender's New Aircraft Loans and the unfunded portion of that Lender's Revolving
Loan Commitment.
"LOAN PARTIES" means Company and any persons who enter into
guaranties pursuant to subsection 5.9.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon
the business, operations, properties, assets, condition (financial or otherwise)
or prospects of Company or of Company and its Subsidiaries taken as a whole or
(ii) the impairment of the ability of any Loan Party to perform the Obligations,
or the impairment, as a result of actions or inaction by Company, of the ability
of Administrative Agent or Lenders to enforce the Obligations.
"MATERIAL AGREEMENT" means any or all of the Pass Through Trust
Documents, the FINOVA Agreement, the Senior Note Documents, the NationsBanc/Bank
of America Agreement, each Purchase Agreement, any Modification Agreement, any
BFE Agreement, the AFL III Leases, each Approved Lease and agreements in respect
of Permitted Extension Indebtedness and Other Permitted Indebtedness.
"MAXIMUM NOTE AMOUNT" means, with respect to any Eligible Aircraft,
80% of the Appraised Value of such Eligible Aircraft based on appraisals
obtained pursuant to subsection 5.10 of such Eligible Aircraft made within 30
days prior to the purchase thereof and giving effect to the proposed
modifications of such Eligible Aircraft pursuant to a Modification Agreement.
"MODIFICATION AGREEMENT" means any modification agreement entered
into by Company with respect to the modification of any Financed Aircraft in
form and substance satisfactory to Administrative Agent.
"MOODY'S" means Moody's Investors Service, Inc.
"NATIONSBANC/BANK OF AMERICA AGREEMENT" means the Loan Agreement,
dated as of March 28, 1997, between Company, as Borrower and NationsBanc Leasing
Corporation, as Lender, as further amended, supplemented and modified in
accordance with this Agreement.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs of sale including (i)
income taxes reasonably
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estimated to be actually payable as a result of such Asset Sale within two years
of the date of such Asset Sale and (ii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the stock or assets of Company and
that is required to be repaid under the terms thereof as a result of such Asset
Sale.
"NEW AIRCRAFT" means a Financed Aircraft acquired by Company after
the Fourth Restatement Date.
"NEW AIRCRAFT LOAN" means a New Aircraft Revolving Loan or a New
Aircraft Term Loan.
"NEW AIRCRAFT LOAN CONVERSION DATE" means, with respect to New
Aircraft Revolving Loans in respect of a Related Aircraft, the three-year
anniversary of the date on which the initial New Aircraft Revolving Loans were
made with respect to that Related Aircraft.
"NEW AIRCRAFT NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1D on the initial Funding Date of each New
Aircraft Revolving Loan and (ii) any promissory notes issued by Company pursuant
to the last sentence of subsection 9.1B(i) in connection with assignments of the
Revolving Loan Commitments and New Aircraft Loans of any Lenders, in each case
substantially in the form of Exhibit IIIA annexed hereto as they may be amended,
supplemented or otherwise modified from time to time.
"NEW AIRCRAFT REVOLVING LOAN" means a Revolving Loan made after the
Fourth Restatement Date prior to the time such Loan is converted into a New
Aircraft Term Loan on its New Aircraft Loan Conversion Date.
"NEW AIRCRAFT TERM LOAN" means a Loan made after the Fourth
Restatement Date after its conversion on its New Aircraft Loan Conversion Date.
"NEW AIRCRAFT TERM LOAN REPAYMENT AMOUNT" means, for each New
Aircraft Loan Repayment Date for all New Aircraft Term Loans for each Related
Aircraft, an amount equal to 10% of the principal amount of all such New
Aircraft Term Loans outstanding on the New Aircraft Loan Conversion Date with
respect to that Related Aircraft.
"NEW AIRCRAFT TERM LOAN REPAYMENT DATE" means, for New Aircraft Term
Loans made with respect to a New Aircraft, the three-year anniversary of the
date on which the initial New Aircraft Revolving Loans were made with respect to
such New Aircraft and each three-month anniversary date thereafter; provided
that, notwithstanding anything in the foregoing to the contrary, the unpaid
amount of all New Aircraft Term Loans shall be due and payable on the Final
Scheduled Maturity Date.
"9-1/4% SENIOR NOTE DOCUMENTS" means the Indenture, dated as of
April 9,
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1998 between Company and State Street Bank and Trust Company relating to the
9-1/4% Senior Notes and any and all related agreements, as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
"9-1/4% SENIOR NOTES" means the 9-1/4% Senior Notes due April 15,
2008 of Company issued pursuant to the 9-1/4% Senior Note Documents.
"9-3/8% SENIOR NOTE DOCUMENTS" means the Indenture, dated as of
November 18, 1998 between Company and State Street Bank and Trust Company
relating to the 9-3/8% Senior Notes due and any and all related agreements, as
the same may be amended, restated, supplemented or otherwise modified from time
to time in accordance with this Agreement.
"9-3/8% SENIOR NOTES" means the 9-3/8% Senior Notes due November 15,
2006 of Company issued pursuant to the 9-3/8% Senior Note Documents.
"1998 PASS THROUGH TRUST DOCUMENTS" means that certain Pass Through
Trust Agreement dated as of February 9, 1998 between Atlas Air, Inc. and
Wilmington Trust Company, as Trustee (the "1998 PASS THROUGH TRUST AGREEMENT")
and any trust indenture and security agreements including any related trust
indenture and security agreement supplements which related to the equipment
notes to be held in trust pursuant to the 1998 Pass Through Trust Agreement and
all related agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"1999 PASS THROUGH TRUST DOCUMENTS" means that certain Pass Through
Trust Agreement dated as of April 13, 1999 between Atlas Air, Inc. and
Wilmington Trust Company, as Trustee (the "1999 PASS THROUGH TRUST AGREEMENT")
and any trust indenture and security agreements including any related trust
indenture and security agreement supplements which related to the equipment
notes to be held in trust pursuant to the 1999 Pass Through Trust Agreement and
all related agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement."
"NON-US LENDER" has the meaning assigned to that term in subsection
2.7B(iii)(a).
"NOTES" means one or more of the Existing Aircraft Extended Notes,
the New Aircraft Notes or the Assignee Notes, as the context requires.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Administrative Agent pursuant
to subsection 2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Company to Administrative
Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis
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for determining the interest rate with respect to the Loans specified therein.
"OBLIGATIONS" means all obligations of every nature of each Loan
Party from time to time owed to Administrative Agent, Lenders or any of them
under the Loan Documents, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
with respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.
"OTHER PERMITTED INDEBTEDNESS" means Indebtedness incurred for the
purpose of financing the acquisition of aircraft so long as (i) any such
Indebtedness bears interest at a rate which does not exceed 15% per annum, (ii)
such Indebtedness has a final stated maturity later than the Final Scheduled
Maturity Date of the Notes and (iii) the amortization and the other terms,
provisions, conditions, covenants and events of default thereof taken as a whole
shall be no more onerous or restrictive from the perspective of Company and its
Subsidiaries or any less favorable, from the perspective of Lenders, than any
other Designated Indebtedness.
"PART" means, as the context requires, a Part as defined in a
particular Aircraft Chattel Mortgage or Parts as defined in all Aircraft Chattel
Mortgages.
"PASS THROUGH TRUST DOCUMENTS" means the 1998 Pass Through Trust
Agreement, the 1999 Pass Through Trust Agreement and the 2000 Pass Through Trust
Agreement (the "PASS THROUGH TRUST AGREEMENTS") and any trust indenture and
security agreements including any related trust indenture and security agreement
supplements which related to the equipment notes to be held in trust pursuant to
the Pass Through Trust Agreements and all related agreements, as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other
than
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any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by
subsection 5.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith by appropriate
proceedings that do not involve any danger of the sale, forfeiture
or loss of any Collateral, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) any attachment or judgment Lien not constituting an Event
of Default under subsection 7.8;
(v) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the
ordinary conduct of the business of Company or any of its
Subsidiaries;
(vi) any (a) interest or title of a lessor or sublessor under
any lease permitted by subsection 6.9, (b) restriction or
encumbrance that the interest or title of such lessor or sublessor
may be subject to, or (c) subordination of the interest of the
lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b);
(vii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(viii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(ix) the rights of others under agreements or arrangements to
the extent expressly permitted by the terms of Sections 4(d) and
4(e) of the First Aircraft Chattel Mortgages;
(x) Liens described in Schedule 6.2 annexed hereto;
(xi) Liens arising pursuant to the NationsBanc/Bank of America
Agreement; provided that such Liens encumber only assets acquired or
refinanced with the proceeds of Indebtedness incurred pursuant to
the NationsBanc Agreement;
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(xii) Liens arising pursuant to the AFL III Financing
Agreement; provided that such Liens do not encumber any assets other
than the AFL III Equipment and other assets of AFL III;
(xiii) Liens securing Indebtedness incurred in accordance with
subsection 6.1(xii);
(xiv) The rights of others under agreements or arrangements to
the extent expressly permitted by the terms of Sections 4(d) and
4(e) of any aircraft chattel mortgages entered into in connection
with the AFL III Financing Agreement
(xv) Liens granted pursuant to the Collateral Documents.
"PERMITTED EXTENSION INDEBTEDNESS" means renewals, extensions,
substitutions, refinancings or replacements (each an "EXTENSION") by Company of
any Indebtedness of Company, including any such successive transactions by
Company, so long as (i) any such Indebtedness bears interest at a rate which
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of Company reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the Obligations at least to the same extent as the Indebtedness
immediately prior to such extension, (iv) such Permitted Extension Indebtedness
has a final stated maturity later than the Final Stated Maturity Date of the
Notes and (v) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of Company and its Subsidiaries or
any less favorable, from the perspective of Lenders than those contained in the
Indebtedness immediately prior to such extension.
"PERMITTED HOLDERS" means Michael A. Chowdry, his spouse, his
descendant(s) or any entity controlled by any of the foregoing, or any trust
solely for the benefit of any of the foregoing.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or the expiration of any grace period or both, would constitute an Event
of Default.
"PRICING CERTIFICATE" has the meaning assigned to that term in
subsection 5.1(xvi).
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"PRICING REDUCTION" means, if at any time Company's "Senior Secured
Debt Rating" or "Senior Secured Rating" as assigned by Moody's or S&P, as
applicable, are at the levels specified below, a pricing reduction equal to the
per annum percentage corresponding to the applicable rating set forth in the
chart below:
<TABLE>
<CAPTION>
Rating Pricing Reduction
------ -----------------
<S> <C>
Ba1 or higher by Moody's and 0.125%
BB- or higher by S&P
Ba1 or higher by Moody's and 0.250%
BB or higher by S&P
</TABLE>
The Pricing Reduction shall be determined with reference to the most
recent Pricing Certificate delivered by Company to Administrative Agent pursuant
to subsection 5.1(xvi). Any changes to the Pricing Reduction shall become
effective on the day following the delivery of the relevant Pricing Certificate
to Administrative Agent and shall remain in effect through the next date a
Pricing Certificate is required to be delivered. It is understood and agreed
that the Pricing Reduction percentages provided are not cumulative.
Notwithstanding anything to the contrary herein, at any time an Event of Default
shall have occurred and be continuing, the Pricing Reduction shall be zero.
"PRIME RATE" means the rate that Administrative Agent announces from
time to time as its prime lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. Administrative Agent or any other
Lender may make commercial loans or other loans at rates of interest at, above
or below the Prime Rate.
"PRO FORMA BASIS" means, with respect to compliance with any
covenant hereunder, compliance with such covenant after giving effect to any
proposed incurrence of Indebtedness by Company or any of its Subsidiaries and
the application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Company or any of its Subsidiaries or any other related action
which requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Administrative Agent using the consolidated
financial statements of Company and its Subsidiaries which shall be reformulated
as if any such incurrence of Indebtedness and the application of proceeds,
acquisition, disposition or other related action had been consummated at the
beginning of the period specified in the covenant with respect to which Pro
Forma Basis compliance is required.
"PRO RATA SHARE" means, with respect to each Lender, the percentage
obtained by dividing the Loan Exposure of that Lender by the aggregate Loan
Exposure of all Lenders,
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as such percentage may be adjusted by assignments permitted pursuant to
subsection 9.1. The Pro Rata Share of each Lender as of the date hereof is set
forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
"PROCEEDINGS" has the meaning assigned to that term in subsection
5.1(x).
"PURCHASE AGREEMENT" means, with respect to the purchase of any
Eligible Aircraft to be financed with the proceeds of New Aircraft Loans, an
aircraft purchase agreement and any related bill of sale providing, among other
things, for the sale to Company of such Eligible Aircraft in form and substance
satisfactory to Administrative Agent.
"REFERENCE LENDERS" means Bankers Trust and one or more other
Lenders designated by Administrative Agent and reasonably satisfactory to
Company.
"REGISTER" has the meaning assigned to that term in subsection
2.1.E.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"RELATED AIRCRAFT" means an Existing Aircraft or a New Aircraft in
respect of which Existing Aircraft Extended Loans are deemed made or New
Aircraft Loans are made, respectively.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"REPLACEMENT ENGINE" has the meaning assigned to that term in
subsection 9.22A.
"REQUISITE LENDERS" means Lenders having or holding 50.1% or more of
the aggregate Loan Exposure of all Lenders.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and (iv)
any payment or prepayment of principal of,
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premium, if any, or interest on, or redemption, purchase, retirement, defeasance
(including in-substance or legal defeasance), sinking fund or similar payment
with respect to, any Designated Indebtedness.
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
New Aircraft Revolving Loans and New Aircraft Term Loans to Company pursuant to
subsection 2.1A(ii), and "REVOLVING LOAN COMMITMENTS" means such commitments of
all Lenders in the aggregate.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the Final
Scheduled Maturity Date.
"REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(ii).
"S&P" means Standard & Poor's Rating Services.
"SECOND AIRCRAFT CHATTEL MORTGAGE" means with respect to each
Eligible Aircraft purchased with the proceeds of Loans, a Second Security
Agreement and Chattel Mortgage (Aircraft No. _____) and substantially in the
form of Exhibit XI annexed hereto, granting a security interest in such Eligible
Aircraft and Parts securing all Obligations that are not secured by the First
Chattel Mortgage entered into concurrently therewith, as such Second Aircraft
Chattel Mortgage may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof.
"SECURITIES" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SENIOR NOTES" means the 10-3/4% Senior Notes, the 9-1/4% Senior
Notes and the 9-3/8% Senior Notes.
"SENIOR NOTE DOCUMENTS" means the 10-3/4% Senior Note Documents, the
9-1/4% Senior Note Documents and the 9-3/8% Senior Note Documents.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is
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(y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SPARE ENGINE" means, as the context requires, a Spare Engine as
defined in a particular Aircraft Chattel Mortgage or all Spare Engines as
defined in all Aircraft Chattel Mortgages.
"SPECIAL PURPOSE SUBSIDIARY" means (i) a Subsidiary of Company
formed solely for the purpose of refinancing Notes associated with a Financed
Aircraft or acquiring or refinancing other aircraft with Other Permitted
Indebtedness the only assets of which are such Financed Aircraft and
contributions to capital of such Subsidiary, which together with all other
contributions to capital made to other such Subsidiaries, are not in excess of
15% of the consolidated book value of the assets of the Company and its
Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness incurred to refinance such Notes; provided that Company
beneficially owns and controls at least 95% of the issued and outstanding
capital stock of such Subsidiary or (ii) a wholly owned Subsidiary formed
pursuant to subsection 9.21.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"SUPPLEMENTAL TYPE CERTIFICATES" has the meaning assigned to that
term in the First Aircraft Chattel Mortgage.
"SYNDICATION AGENT" means Goldman Sachs Credit Partners L.P. in its
capacity as syndication agent under the Existing Agreement.
"TAX" or "TAXES" means any present or future tax, levy, impost,
duty, charge,
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fee, deduction or withholding of any nature and whatever called, by whomsoever,
on whomsoever and wherever imposed, levied, collected, withheld or assessed;
provided that "TAX ON THE OVERALL NET INCOME" of a Person shall be construed as
a reference to a tax imposed by the jurisdiction in which that Person's
principal office (and/or, in the case of a Lender, its lending office) is
located or in which that Person is deemed to be doing business on all or part of
the net income, profits or gains of that Person (whether worldwide, or only
insofar as such income, profits or gains are considered to arise in or to relate
to a particular jurisdiction, or otherwise).
"10-3/4% SENIOR NOTES" means the 10-3/4% Senior Notes due 2005 of
Company issued pursuant to the 10-3/4% Senior Note Documents.
"10-3/4% SENIOR NOTE DOCUMENTS" means the Indenture, dated as of
August 13, 1997 between Company and State Street Bank and Trust Company relating
to the 10-3/4% Senior Notes and any and all related agreements, as the same may
be amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
"2000 PASS THROUGH TRUST DOCUMENTS" means that certain Pass Through
Trust Agreement dated as of January 28, 2000 between Atlas Air, Inc. and
Wilmington Trust Company, as Trustee (the "2000 PASS THROUGH TRUST AGREEMENT")
and any trust indenture and security agreements including any related trust
indenture and security agreement supplements which related to the equipment
notes to be held in trust pursuant to the 2000 Pass Through Trust Agreement and
all related agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement."
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any jurisdiction.
"UNITED STATES CITIZEN" has the meaning assigned to that term in
subsection 4.1B.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP.
1.3 OTHER DEFINITIONAL PROVISIONS.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
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SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; NOTES; REGISTER.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Company herein set forth,
each Lender hereby severally agrees to make the Loans described in this
subsection 2.1A.
(i) Existing Aircraft Extended Loans. Prior to the date hereof,
Lenders have made "Revolving Loans" under the Existing Agreement in the
aggregate principal amount of $87,916,000, the proceeds of which were used
to purchase and modify the Existing Aircraft. The principal amount of all
"Revolving Loans" anticipated to be outstanding on the Fourth Restatement
Date with respect to each Related Aircraft is set forth on Schedule 1.1
annexed hereto and shown as the "Existing Aircraft Loan Extension Amount"
for such Existing Aircraft and each such "Revolving Loan" shall be deemed
to be an "Existing Aircraft Extended Loan" in such principal amount upon
the satisfaction of the conditions set forth in subsection 3.1 and the
effectiveness of this Agreement. From and after the Fourth Restatement
Date, each Lender severally agrees, subject to the terms and conditions of
this Agreement to maintain and extend its Pro Rata Share of Existing
Aircraft Extended Loans and such Loans shall be repaid as provided in
subsection 2.4A(i).
(ii) New Aircraft Loans. Each Lender severally agrees, subject to
the conditions set forth in Section 3 and subject to the limitations set
forth below, to lend to Company from time to time during the period from
the Fourth Restatement Date to but excluding the Revolving Loan Commitment
Termination Date an aggregate amount, together with its Pro Rata Share of
the aggregate principal amount of all Existing Aircraft Extended Loans
outstanding, not exceeding its Pro Rata Share of the aggregate amount of
the Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The amount of each Lender's Revolving Loan Commitment is
set forth on Schedule 2.1 annexed hereto and the aggregate amount of the
Revolving Loan Commitments is $175,000,000; provided that, in no event
shall the aggregate amount of all Existing Aircraft Extended Loans, New
Aircraft Revolving Loans and New Aircraft Term Loans at any time
outstanding exceed $175,000,000; provided further that the Revolving Loan
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Revolving Loan Commitments pursuant to subsection 9.1B; and
provided, still further that the amount of the Revolving Loan Commitments
shall be reduced from time to time by the amount of any reductions thereto
made pursuant to subsection 2.4B(ii). Each Loan made after the Fourth
Restatement Date shall constitute a New Aircraft Loan and shall be made
with respect to a Related Aircraft. New Aircraft Loans made with respect
to a Related Aircraft may be made through but excluding the third
anniversary of the first
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New Aircraft Loan made with respect to such Related Aircraft; provided,
however, that no New Aircraft Loans may be made on or after the Revolving
Loan Commitment Termination Date. New Aircraft Loans shall be repaid as
provided in subsections 2.4A(ii) and 2.4A(iii).
Anything to the contrary in this Agreement notwithstanding, the New
Aircraft Loans shall be subject to the limitation that in no event shall the
Lenders lend an amount in excess of (x) on the date of acquisition of a New
Aircraft the lesser of (i) an amount equal to the purchase price of such New
Aircraft and (ii) 80% of the Appraised Value of such New Aircraft as of the date
of acquisition (but without giving effect to the contemplated modifications) or
(y) on any date New Aircraft Loans are made to finance the modification of a New
Aircraft, the lesser of (i) 80% of the cost thereof as reflected in invoices
delivered to Administrative Agent pursuant to subsection 3.3A (or 100% of the
costs of modification associated with the final New Aircraft Loan to complete
the modification of such New Aircraft) and (ii) an amount which when added to
all other New Aircraft Loans made with respect to such New Aircraft does not
exceed 80% of the Appraised Value as set forth in appraisals delivered pursuant
to subsection 3.2 after giving effect to completion of modification. Further, in
no event shall the aggregate amount of all Existing Aircraft Extended Loans, New
Aircraft Revolving Loans and New Aircraft Term Loans at any time outstanding
exceed $175,000,000.
B. BORROWING MECHANICS. Revolving Loans made on any Funding Date shall be
in an aggregate minimum amount of $1,500,000. Whenever Company desires that
Lenders make Revolving Loans it shall deliver to Administrative Agent a Notice
of Borrowing no later than 12:00 Noon (New York time) at least three Business
Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate
Loan) or at least one Business Day in advance of the proposed Funding Date (in
the case of a Base Rate Loan). The Notice of Borrowing shall specify (i) the
proposed Funding Date (which shall be a Business Day), (ii) the amount of Loans
requested, (iii) whether such Loans shall be Base Rate Loans or Eurodollar Rate
Loans, (iv) in the case of any Loans requested to be made as Eurodollar Rate
Loans, the initial Interest Period requested therefor, (v) whether such Loans
are for the purpose of the purchase or the modification of an Eligible Aircraft
and (vi) the identification of the Related Aircraft. Revolving Loans and Term
Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate
Loans in the manner provided in subsection 2.2D. In lieu of delivering the
above-described Notice of Borrowing, Company may give Administrative Agent
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1B; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Administrative Agent on or
before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection
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2.1B, and upon funding of Loans by Lenders in accordance with this Agreement
pursuant to any such telephonic notice Company shall have effected Loans
hereunder.
Company shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds of
any Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. DISBURSEMENT OF FUNDS. All Revolving Loans under this Agreement shall
be made by Lenders simultaneously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder nor shall the Commitment of any Lender to make the
particular type of Loan requested be increased or decreased as a result of a
default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder. Promptly after receipt by Administrative Agent of a Notice
of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
Administrative Agent shall notify each Lender of the proposed borrowing. Each
Lender shall make the amount of its Loan available to Administrative Agent not
later than 12:00 Noon (New York time) on the applicable Funding Date, in each
case in same day funds in Dollars, at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior
to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each
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day from such Funding Date until the date such amount is paid to Administrative
Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in
this subsection 2.1C shall be deemed to relieve any Lender from its obligation
to fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
D. NOTES.
(i) Existing Aircraft Extended Notes. Each of the outstanding
"Revolving Notes" under the Existing Agreement shall be deemed amended and
restated on the Fourth Restatement Date to reflect the extension of the
maturity from September 30, 2000 to the Final Scheduled Maturity Date.
Company shall execute and deliver on the Fourth Restatement Date to each
Lender (or to Administrative Agent for that Lender) Existing Aircraft
Extension Notes substantially in the form of Exhibit IIIA annexed hereto
to evidence that Lender's Existing Aircraft Extended Loans in respect of
each Existing Aircraft and the amendment and restatement of such
"Revolving Notes".
(ii) New Aircraft Notes. Following the Fourth Restatement Date, on
each date on which Company delivers a Notice of Borrowing pursuant to
subsection 2.1B for the purpose of financing the purchase of a New
Aircraft, Company shall execute and deliver on such date to each Lender
(or to Administrative Agent for that Lender) with respect to such New
Aircraft a New Aircraft Note substantially in the form of Exhibit IIIB
annexed hereto to evidence that Lender's New Aircraft Revolving Loans and
New Aircraft Term Loans in respect of such New Aircraft in such Lender's
Pro Rata Share of the aggregate principal amount of such New Aircraft's
Maximum Note Amount with other appropriate insertions.
E. THE REGISTER.
(i) Administrative Agent shall maintain, at its address referred to
in subsection 9.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "REGISTER"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the Revolving
Loan Commitment and the Existing Aircraft Extended Loans and New Aircraft
Loans from time to time of each Lender and each repayment or prepayment in
respect of the principal amount of the Existing Aircraft Extended Loans
and New Aircraft Loans of each Lender. Any such recordation shall be
conclusive and binding on Company and each Lender, absent manifest error;
provided that failure to make any such recordation, or any error in such
recordation, shall not affect Company's Obligations in respect of the
applicable Loans.
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(iii) Each Lender shall record on its internal records (including,
without limitation the Notes held by such Lender) the amount of each Loan
made by it and each payment in respect thereof. Any such recordation shall
be conclusive and binding on Company, absent manifest error; provided that
failure to make any such recordation, or any error in such recordation,
shall not affect Company's Obligations in respect of the applicable Loans;
and provided, further, that in the event of any inconsistency between the
Register and any Lender's records, the recordations in the Register shall
govern.
(iv) Company, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in
subsection 9.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Company hereby designates Administrative Agent to serve as
Company's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1E, and Company hereby agrees that, to the
extent Administrative Agent serves in such capacity, Administrative Agent
and its officers, directors, employees, agents and affiliates shall
constitute Indemnities for all purposes under subsection 9.3.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and 2.7,
each Loan shall bear interest on the unpaid principal amount thereof from the
date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate or the Adjusted Eurodollar Rate, as the
case may be. The applicable basis for determining the rate of interest with
respect to any Loan shall be selected by Company initially at the time a Notice
of Borrowing is given with respect to such Loan pursuant to subsection 2.1B. The
basis for determining the interest rate with respect to any Loan may be changed
from time to time pursuant to subsection 2.2D. If on any day a Loan is
outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.
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Subject to the provisions of subsections 2.2E and 2.7, each Loan shall
bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
Applicable Margin per annum; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin per annum.
The "APPLICABLE MARGIN" for each Base Rate Loan and Eurodollar Rate Loan
shall be the percentage set forth below for that type of Loan for the periods
set forth below.
<TABLE>
<CAPTION>
======================================================
APPLICABLE MARGIN
-----------------------
TIME PERIOD BASE RATE EURODOLLAR
LOAN RATE LOAN
======================================================
<S> <C> <C>
From the Second Amendment 1.00% 2.00%
Effective Date through the
Fourth Restatement Date
------------------------------------------------------
From the Fourth Restatement 0.75% 1.75%
Date and Thereafter
======================================================
</TABLE>
Notwithstanding the foregoing, the Applicable Margin shall be reduced in
an amount equal to the applicable Pricing Reduction effective from the date
following the delivery by Company to Administrative Agent of a Pricing
Certificate through the date a subsequent Pricing Certificate is required to be
delivered. If Company fails to deliver a Pricing Certificate or delivers an
incorrect Pricing Certificate, no Pricing Reduction shall be effective until
Company delivers a correct Pricing Certificate.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan, Company
may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified in
the applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period shall
commence on the day
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on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Loans
shall extend beyond the Final Scheduled Maturity Date.
(vi) no Interest Period with respect to any portion of the Loans
shall extend beyond a date on which Company is required to make a
scheduled payment of principal of the Loans unless the sum of (a) the
aggregate principal amount of Loans that are Base Rate Loans plus (b) the
aggregate principal amount of Loans that are Eurodollar Rate Loans with
Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Loans on such date;
(vii) there shall be no more than twelve Interest Periods
outstanding at any time;
(viii) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice
of Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month; and
(ix) prior to the date that is three months from the Fourth
Restatement Date, no Interest Period with respect to any portion of the
Loans shall exceed one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Loans equal to $3,000,000 and integral multiples of $100,000 in
excess of that amount from Loans bearing interest at a rate determined by
reference to one basis to Loans bearing interest at a rate determined by
reference to an alternative basis or (ii) upon the expiration of any
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Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $3,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
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payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans. Payment or acceptance of the increased rates
of interest provided for in this subsection 2.2E is not a permitted alternative
to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Administrative Agent or
any Lender.
F. COMPUTATION OF INTEREST. Interest on each Loan shall be computed on the
basis of a 360-day year, in each case for the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
day on which it is made, one day's interest shall be paid on that Loan.
2.3 FEES.
A. COMMITMENT FEES. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Fourth Restatement Date to
and excluding the Revolving Loan Commitment Termination Date equal to the
average of the daily excess of the Revolving Loan Commitments over the aggregate
principal amount of Loans outstanding multiplied by (y) if a Pricing Reduction
is not then in effect, 0.50% per annum or (z) if a Pricing Reduction is then in
effect, 0.375% per annum, such commitment fees to be calculated on the basis of
a 360-day year and the actual number of days elapsed and to be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Fourth Restatement Date,
and on the Revolving Loan Commitment Termination Date.
B. ADMINISTRATIVE FEE. Company agrees to pay to Administrative Agent, an
Administrative Agent's fee in the amount as from time to time agreed upon by
Company and Administrative Agent.
C. OTHER FEES. Company agrees to pay to Administrative Agent such other
fees
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in the amounts and at the times separately agreed upon between Company and
Administrative Agent.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN LOANS AND REVOLVING LOAN
COMMITMENTS; GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED REPAYMENTS
(i) Scheduled Repayments of Existing Aircraft Extended Loans.
Company shall make principal payments of the Existing Aircraft Extended
Loans in installments on each Existing Aircraft Loan Repayment Date in an
amount equal to the applicable Existing Aircraft Loan Repayment Amount;
provided that such scheduled installments of principal of the Existing
Aircraft Extended Loans shall be reduced in connection with voluntary or
mandatory prepayments of the Existing Aircraft Extended Loans in
accordance with subsection 2.4B; and provided, further that the Existing
Aircraft Extended Loans and all other amounts owed hereunder with respect
to the Existing Aircraft Extended Loans shall be paid in full no later
than the Final Stated Maturity Date, and the final installment payable by
Company in respect of the Existing Aircraft Extended Loans on such date
shall be in an amount sufficient to repay all amounts owing by Company
under this Agreement with respect to the Existing Aircraft Extended Loans.
Any payment pursuant to this subsection 2.4A(i) will be applied ratably
among the Existing Aircraft Extended Notes relating to all Existing
Aircraft; provided that, at Administrative Agent's election, any
prepayment may be deemed first to pay Existing Aircraft Extended Loans
made to finance labor costs associated with conversion of the Financed
Aircraft, if any, second to pay Existing Aircraft Extended Loans made to
finance other costs of such conversion, and thereafter to all other
Existing Aircraft Extended Loans.
(ii) Scheduled Repayments of New Aircraft Term Loans. Company shall
make principal payments of each New Aircraft Term Loan in installments on
each New Aircraft Term Loan Repayment Date in an amount equal to the
applicable New Aircraft Term Loan Repayment Amount for such New Aircraft
Term Loan; provided that such scheduled installments of principal of the
New Aircraft Term Loans shall be reduced in connection with voluntary or
mandatory prepayments of the New Aircraft Term Loans in accordance with
subsection 2.4B; and provided, further, that the New Aircraft Term Loans
and all other amounts owed hereunder with respect to the New Aircraft Term
Loans shall be paid in full no later than the Final Stated Maturity Date,
and the final installment payable by Company in respect of the New
Aircraft Term Loans on such date shall be in an amount sufficient to repay
all amounts owing by Company under this Agreement with respect to the New
Aircraft Term Loans. Any payment pursuant to this subsection 2.4A(ii) will
be applied ratably among the New Aircraft Term Notes relating to the
Related Aircraft; provided that, at Administrative Agent's election, any
prepayment may be deemed first to pay New Aircraft Term
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Loans made to finance labor costs associated with conversion of such
Related Aircraft, if any, second to pay New Aircraft Term Loans made to
finance other costs of such conversion, and thereafter to all other New
Aircraft Term Loans.
(iii) Mandatory Repayments of New Aircraft Revolving Loans. Company
shall make principal payments on the Final Stated Maturity Date of the
full amount of all New Aircraft Revolving Loans. Any repayment pursuant to
this subsection 2.4A(iii) will be applied ratably among the New Aircraft
Notes relating to the Related Aircraft; provided that, at Administrative
Agent's election, any prepayment may be deemed first to pay New Aircraft
Revolving Loans made to finance labor costs associated with conversion of
such Related Aircraft, if any, second to pay New Aircraft Revolving Loans
made to finance other costs of such conversion, and thereafter to all
other New Aircraft Revolving Loans.
B. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN
COMMITMENTS.
(i) Voluntary Prepayments. Company may, upon not less than three
Business Days' prior written or telephonic notice given to Administrative
Agent by 12:00 Noon (New York time) on the date required and, if given by
telephone, promptly confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time and
from time to time prepay, without premium or penalty (other than pursuant
to subsection 2.6D), any Loans on any Business Day in whole or in part in
an aggregate minimum amount of $3,000,000 and integral multiples of
$100,000 in excess of that amount; provided, however, that a Eurodollar
Rate Loan may only be prepaid on the expiration of the Interest Period
applicable thereto. Notice of prepayment having been given as aforesaid,
the principal amount of the Loans specified in such notice shall become
due and payable on the prepayment date specified therein. Any such
voluntary prepayment shall be applied as specified in subsection 2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Company
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit
by telefacsimile or telephone to each Lender), at any time and from time
to time terminate in whole or permanently reduce in part, without premium
or penalty (other than pursuant to subsection 2.6D), the Revolving Loan
Commitments in an amount up to the amount by which the Revolving Loan
Commitments exceed the aggregate amount of all Existing Aircraft Extended
Loans and New Aircraft Loans outstanding at the time of such proposed
termination or reduction; provided that any such partial reduction of the
Revolving Loan Commitments shall be in an aggregate minimum amount of
$3,000,000 and
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integral multiples of $100,000 in excess of that amount. Company's notice
to Administrative Agent shall designate the date (which shall be a
Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Company's notice
and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving
Loan Commitments.
(a) Prepayments and Reductions from Asset Sales. No later than
the second Business Day following the date of receipt by Company or
any of its Subsidiaries of Cash Proceeds of any Asset Sale, Company
shall prepay, without premium or penalty (other than pursuant to
subsection 2.6D), the Loans in an amount equal to the Net Cash
Proceeds of such Asset Sale; provided that, with respect to Asset
Sales which do not include the sale of a Financed Aircraft, so long
as no Potential Event of Default or Event of Default has occurred
and is continuing, (i) Company shall have the option to use the Net
Cash Proceeds within one hundred eighty (180) days of receipt
thereof for the purpose of making Consolidated Capital Expenditures
otherwise permitted by this Agreement and (ii) to the extent such
Net Cash Proceeds are not reinvested pursuant to clause (i), Company
may retain Net Cash Proceeds in respect of such Asset Sales of up to
$10 million in any Fiscal Year and $20 million in the aggregate;
provided further that, with respect to any Asset Sale involving the
sale of a Financed Aircraft, so long as no Potential Event of
Default or Event of Default has occurred and is continuing, the
Company may retain any Net Cash Proceeds in excess of the amount
equal to the sum of (x) the amount required to repay all amounts
outstanding under the Notes relating to such Financed Aircraft and
(y) the amount required to prepay any remaining Loans to the extent
necessary so that the outstanding principal amount of any Loans made
to finance the acquisition or conversion of a Financed Aircraft
shall not exceed 80% of the Appraised Value of such Financed
Aircraft as determined by appraisals to be provided at the time of
such mandatory prepayment by two Approved Appraisers. Concurrently
with any prepayment of the Loans pursuant to this subsection
2.4B(iii)(a), Company shall deliver to Administrative Agent an
Officers' Certificate demonstrating the derivation of the Net Cash
Proceeds of the correlative Asset Sale from the gross sales price
thereof and the amount required to be prepaid pursuant to this
subsection 2.4B(iii)(a). In the event that Company shall, at any
time after receipt of Cash Proceeds of any Asset Sale requiring a
prepayment pursuant to this subsection 2.4B(iii)(a), determine that
the prepayments previously made in respect of such Asset Sale were
in an aggregate amount less than that required by the terms of this
subsection 2.4B(iii)(a), Company shall promptly make an additional
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prepayment of the Loans in the manner described above in an amount
equal to the amount of any such deficit, and Company shall
concurrently therewith deliver to Administrative Agent an Officers'
Certificate demonstrating the derivation of the additional Net Cash
Proceeds resulting in such deficit and the additional amount
required to be prepaid pursuant to this subsection 2.4B(iii)(a). Any
mandatory prepayments pursuant to this subsection 2.4B(iii)(a) shall
be applied as specified in subsection 2.4B(iv). Notwithstanding the
foregoing, so long as the AFL III Financing remains outstanding,
Cash Proceeds from the sale or other disposition of the AFL III
Equipment shall not be subject to the provisions of this subsection
2.4(B)(iii)(a) to the extent that such Cash Proceeds are applied in
accordance with the terms of the AFL III Financing Agreement.
(b) Prepayments and Reductions Due to Issuance of Certain
Indebtedness. On the date of receipt by Company of the cash proceeds
(net of underwriting discounts and commissions and other reasonable
costs associated therewith) from the issuance of Permitted Extension
Indebtedness with respect to a Financed Aircraft, Company shall
prepay, without premium or penalty (other than pursuant to
subsection 2.6D), the Loans in an amount equal to such net cash
proceeds. Any such mandatory prepayments shall be applied as
specified in subsection 2.4B(iv). Notwithstanding the foregoing, any
such cash proceeds received pursuant to the AFL III Financing
Agreement shall not be subject to the provisions of this subsection
2.4(B)(iii)(b).
(c) Prepayments and Reductions Due to Insurance and
Condemnation Proceeds. No later than the second Business Day
following the date of receipt by Company or any of its Subsidiaries
of any cash payments under any of the casualty insurance policies
covering damage to or loss of property maintained pursuant to
subsection 5.4 resulting from damage to or loss of all or any
portion of the Collateral or any other tangible asset (net of actual
and documented reasonable costs incurred by Company in connection
with adjustment and settlement thereof, "INSURANCE PROCEEDS") or any
proceeds resulting from the taking of assets by the power of eminent
domain, condemnation or otherwise (net of actual and documented
reasonable costs incurred by Company in connection with adjustment
and settlement thereof, "CONDEMNATION PROCEEDS") (other than (x) the
portion of such proceeds promptly applied to repair or replace the
property in respect of which such proceeds were paid, (y) the
portion of such proceeds required to be paid to Lien holders on
aircraft other than Financed Aircraft or (z) proceeds applied
pursuant to subsection 2.4B(iii)(d)), Company shall prepay, without
premium or penalty (other than pursuant to subsection 2.6D), the
Loans in an amount equal to such proceeds. Company shall, no later
than 180 days after receipt of any such Insurance Proceeds or
Condemnation Proceeds that have not
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theretofore been applied to the Obligations, make an
additional prepayment of Loans, in the manner described above,
in the full amount of all such proceeds that have not then
been applied to repair or replace the property in respect of
which such proceeds were paid. Any such mandatory prepayments
shall be applied as specified in subsection 2.4B(iv).
Notwithstanding the foregoing so long as (i) the AFL III
Financing remains outstanding, Insurance Proceeds and
Condemnation Proceeds with respect to the AFL III Equipment
shall not be subject to the provisions of this subsection
2.4(B)(iii)(c) to the extent such proceeds are applied in
accordance with the terms of the AFL III Financing Agreement.
(d) Prepayments and Reductions Due to an Event of
Loss. No later than the earlier of (x) the second Business Day
following the date of receipt by Company or any of its
Subsidiaries of any Insurance Proceeds or Condemnation
Proceeds with respect to a Financed Aircraft or (y) 180 days
following an Event of Loss with respect to a Financed
Aircraft, Company shall prepay, without premium or penalty
(other than pursuant to subsection 2.6D), the Loans associated
with such Financed Aircraft; provided that Company and its
Subsidiaries shall not be required to make a prepayment
pursuant to this subsection 2.4B(iii)(d) with respect to any
proceeds applied pursuant to Section 4(f)(vi)(A) or
4(f)(vi)(B) of any Aircraft Chattel Mortgage.
(e) Prepayments and Reductions from Consolidated
Excess Cash Flow. In the event that there shall be
Consolidated Excess Cash Flow for any Fiscal Year, within 100
days after the last day of such Fiscal Year Company shall
prepay, without premium or penalty (other than pursuant to
subsection 2.6D), the Loans in an amount equal to 50% of such
Consolidated Excess Cash Flow; provided that, if as of the
last day of such Fiscal Year, the aggregate principal amount
of all Loans was less than 60% of the aggregate Appraised
Value of all Financed Aircraft, no prepayment will be required
under this subsection 2.4B(iii)(e). Any such mandatory
prepayments shall be applied as specified in subsection
2.4B(iv).
(f) Prepayments Due to Reductions in Appraised Value.
Company shall from time to time prepay, without premium or
penalty (other than pursuant to subsection 2.6D), the Loans to
the extent necessary so that the outstanding principal amount
of any Loans made to finance the acquisition or conversion of
a Financed Aircraft shall not at any time exceed 80% of the
Appraised Value of such Financed Aircraft as most recently
determined pursuant to subsection 5.10; provided that, in lieu
of making a prepayment hereunder, Company may provide
Administrative Agent for the benefit of Lenders with cash
collateral or a letter of credit in the amount of such
prepayment pursuant to arrangements in form and substance
satisfactory to
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Administrative Agent.
(g) Prepayments Due to Failure to Register Aircraft
with the FAA. In the event that, with respect to any Financed
Aircraft, Administrative Agent's security interest in such
Financed Aircraft is not fully perfected within five (5)
Business Days of the funding of Loans with respect to such
Financed Aircraft, Company shall prepay the full amount of
such Loans.
(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of
Loans and Order of Maturity. Any voluntary prepayments
pursuant to subsection 2.4B(i) shall be applied ratably among
the Notes relating to all of the Financed Aircraft; provided
that, Company may elect to apply any such prepayment first to
the Loans made with respect to a specific Financed Aircraft so
long as no Event of Default has occurred and continuing;
provided further that, at Administrative Agent's election, any
prepayment may be deemed first to prepay Loans made to finance
labor costs associated with conversion, if any, second to
prepay Loans made to finance other costs of conversion of a
Financed Aircraft and thereafter to all other Loans. Any
voluntary prepayments of the Existing Aircraft Loans and the
New Aircraft Term Loans pursuant to subsection 2.4B(i) shall
be applied to reduce the scheduled installments of principal
of the Existing Aircraft Loans or the New Aircraft Term Loans,
as the case may be, in inverse order of maturity.
(b) Application of Mandatory Prepayments of Loans.
Any mandatory prepayments of the Loans pursuant to subsection
2.4B(iii) shall be applied ratably among the Notes relating to
all of the Financed Aircraft; provided that in the event a
prepayment pursuant to subsection 2.4B(iii)(a) relates to
Financed Aircraft, such prepayment shall be applied first to
the Notes relating to such Financed Aircraft, second to Notes
relating to the remaining Financed Aircraft as required to
reduce the amount of the Loans financing such Financed
Aircraft to no more that 80% of the Appraised Value of such
Financed Aircraft as determined by the Appraised as required
by subsection 2.4B(iii)(a) and third ratably among the Notes
relating to all remaining Financed Aircraft; provided further
that in the event a prepayment pursuant to subsection
2.4B(iii)(b), (c), (d), (f) or (g) relates to Financed
Aircraft, such prepayment shall be applied first to the Notes
relating to such Financed Aircraft and second ratably among
the Notes relating to all other Financed Aircraft; provided
further that, at Administrative Agent's election, any such
prepayment may be deemed first to prepay Loans made to finance
labor costs associated with conversion, if any, second to
prepay Loans made to finance other costs of conversion of a
Financed Aircraft and thereafter to all other
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Loans. Any mandatory prepayments of the Existing Aircraft
Loans and the New Aircraft Term Loans pursuant to subsection
2.4B(iii) shall be applied to reduce the scheduled
installments of principal of the Existing Aircraft Loans or
the New Aircraft Term Loans, as the case may be, in inverse
order of maturity.
(c) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Any prepayment of Loans shall be
applied first to Base Rate Loans to the full extent thereof
before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to
be made by Company pursuant to subsection 2.6D.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense,
set-off or counterclaim, free of any restriction or condition, and
delivered to Administrative Agent not later than 12:00 Noon (New York
time) on the date due at the Funding and Payment Office for the account
of Lenders; funds received by Administrative Agent after that time on
such due date shall be deemed to have been paid by Company on the next
succeeding Business Day. Company hereby authorizes Administrative Agent
to charge its accounts with Administrative Agent in order to cause
timely payment to be made to Administrative Agent of all principal,
interest, fees and expenses due hereunder (subject to sufficient funds
being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments shall be applied to the payment of
interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and
interest payments in respect of Loans shall be apportioned among all
outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its primary address
set forth below its name on the appropriate signature page hereof or at
such other address as such Lender may request, its Pro Rata Share of
all such payments received by Administrative Agent and the commitment
fees of such Lender when received by Administrative Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this
subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any
Affected Lender or if any Affected Lender makes Base Rate Loans in lieu
of its Pro Rata Share of any Eurodollar Rate Loans, Administrative
Agent shall give effect thereto in apportioning payments received
thereafter.
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(iv) Payments on Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or of the commitment
fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to any Loan or any payments of principal or interest
on such Note.
2.5 USE OF PROCEEDS.
A. EXISTING AIRCRAFT EXTENDED LOANS. The proceeds of the Existing
Aircraft Extended Loans were used to finance the purchase and renovation of the
Existing Aircraft as shown on Schedule 1.1 annexed hereto.
B. NEW AIRCRAFT LOANS. The proceeds of New Aircraft Loans shall be
applied to finance (i) the purchase of an Eligible Aircraft pursuant to a
Purchase Agreement in an amount up to the lesser of the purchase price of such
Eligible Aircraft and 80% of the Appraised Value of such Eligible Aircraft (but
without giving effect to any contemplated modifications) and/or (ii) the cost of
making a Financed Aircraft usable by Company as a cargo aircraft by paying for
those modifications identified in any Modification Agreement and any BFE
Agreement (but not for maintenance costs) in an amount that when added to the
amount financed in (i) does not exceed 80% the Appraised Value of such modified
Eligible Aircraft; provided that the final Revolving Loan to finance the
modification of such Eligible Aircraft may be in an amount equal to the lesser
of (x) 100% of the costs of modification associated with such final Revolving
Loan and (y) an amount which, when added to all other Revolving Loans made with
respect to such Eligible Aircraft, does not exceed 80% of the Appraised Value of
such Eligible Aircraft after giving effect to the completion of modification.
C. MARGIN REGULATIONS. No portion of the proceeds of any borrowing
under this Agreement shall be used by Company or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board or to violate
the Exchange Act, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
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2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice
of Conversion/Continuation given by Company with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the
event that on any date any Lender shall have determined (which determination
shall be final and conclusive and binding upon all parties hereto but shall be
made only after consultation with Company and Administrative Agent) that the
making, maintaining or continuation of its Eurodollar Rate Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful) or (ii) has become impracticable, or would cause such Lender material
hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the interbank Eurodollar market
or the position of such Lender in that market, then, and in any such event, such
Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by
telefacsimile or by telephone confirmed in writing) to Company and
Administrative Agent of such determination (which notice Agent shall promptly
transmit to each other Lender). Thereafter (a) the obligation of the Affected
Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be
suspended until such notice shall be withdrawn by the
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Affected Lender, (b) to the extent such determination by the Affected Lender
relates to a Eurodollar Rate Loan then being requested by Company pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender
shall make such Loan as (or convert such Loan to, as the case may be) a Base
Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier
to occur of the expiration of the Interest Period then in effect with respect to
the Affected Loans or when required by law, and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment or
other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Company, or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall
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be made as though that Lender had actually funded each of its relevant
Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing
interest at the rate obtained pursuant to clause (i) of the definition of
Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B, in the event that any Lender shall determine
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of
such Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending
office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any
office of such
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Lender (other than any such reserve or other requirements with respect
to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder or the interbank Eurodollar
market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall be paid free
and clear of and (except to the extent required by law) without any
deduction or withholding on account of any Tax (other than a Tax on the
overall net income of any Lender) imposed, levied, collected, withheld
or assessed by or within the United States of America or any political
subdivision in or of the United States of America or any other
jurisdiction from or to which a payment is made by or on behalf of
Company or by any federation or organization of which the United States
of America or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person
is required by law to make any deduction or withholding on account of
any such Tax from any sum paid or payable by Company to Administrative
Agent or any Lender under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any
such requirement or any change in any such requirement as soon
as Company becomes aware of it;
(b) Company shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if
the liability to pay is imposed on Company) for its own
account or (if that liability is imposed on
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Administrative Agent or such Lender, as the case may be) on
behalf of and in the name of Administrative Agent or such
Lender;
(c) the sum payable by Company in respect of which
the relevant deduction, withholding or payment is required
shall be increased to the extent necessary to ensure that,
after the making of that deduction, withholding or payment,
Administrative Agent or such Lender, as the case may be,
receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment been
required or made; and
(d) within 30 days after paying any sum from which it
is required by law to make any deduction or withholding, and
within 30 days after the due date of payment of any Tax which
it is required by clause (b) above to pay, Company shall
deliver to Administrative Agent evidence satisfactory to the
other affected parties of such deduction, withholding or
payment and of the remittance thereof to the relevant taxing
or other authority;
provided that no such additional amount shall be required to be paid to
any Lender under clause (c) above except to the extent that any change
after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each
other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate
of such deduction, withholding or payment from that in effect at the
date of this Agreement or at the date of such Assignment Agreement, as
the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of
any jurisdiction other than the United States or any state or
other political subdivision thereof (for purposes of this
subsection 2.7B(iii), a "NON-US LENDER") shall deliver to
Administrative Agent for transmission to Company, on or prior
to the Fourth Restatement Date (in the case of each Lender
listed on the signature pages hereof) or on the date of the
Assignment Agreement pursuant to which it becomes a Lender (in
the case of each other Lender), and at such other times as may
be necessary in the determination of Company or Administrative
Agent (each in the reasonable exercise of its discretion), (1)
two original copies of Internal Revenue Service Form 1001 or
4224 (or any successor forms), properly completed and duly
executed by such Lender, together with any other certificate
or statement of exemption required under the Internal Revenue
Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of
United States federal income tax with respect to any payments
to such Lender of principal, interest, fees or other amounts
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payable under any of the Loan Documents or (2) if such Lender
is not a "bank" or other Person described in Section 881(c)(3)
of the Internal Revenue Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause
(1) above, a Certificate re Non-Bank Status together with two
original copies of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Lender
of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the
initial delivery by such Lender of such forms, certificates or
other evidence, whenever a lapse in time or change in
circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, such
Lender shall (1) deliver to Administrative Agent for
transmission to Company two new original copies of Internal
Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue
Service Form W-8, as the case may be, properly completed and
duly executed by such Lender, together with any other
certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to
deduction or withholding of United States federal income tax
with respect to payments to such Lender under the Loan
Documents or (2) immediately notify Administrative Agent and
Company of its inability to deliver any such forms,
certificates or other evidence.
(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii) if such Lender shall have failed to
satisfy the requirements of subsection 2.7B(iii)(a); provided
that if such Lender shall have satisfied such requirements on
the Fourth Restatement Date (in the case of each Lender listed
on the signature pages hereof) or on the date of the
Assignment Agreement pursuant to which it became a Lender (in
the case of each other Lender), nothing in this subsection
2.7B(iii)(c) shall relieve Company of its obligation to pay
any additional amounts pursuant to clause (c) of subsection
2.7B(ii) in the event that, as a result of any change in any
applicable law, treaty or governmental rule, regulation or
order, or any change in the interpretation, administration or
application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a
subsequent date establishing the fact that such Lender is not
subject to withholding as described in
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subsection 2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or other obligations hereunder to a level
below that which such Lender or such controlling corporation could have achieved
but for such adoption, effectiveness, phase-in, applicability, change or
compliance (taking into consideration the policies of such Lender or such
controlling corporation with regard to capital adequacy), then from time to
time, within five Business Days after receipt by Company from such Lender of the
statement referred to in the next sentence, Company shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
D. SUBSTITUTE LENDERS. In the event Company is required under the
provisions of this subsection 2.7 to make payments in a material amount to any
Lender or in the event any Lender fails to lend to Company in accordance with
this Agreement, Company may, so long as no Event of Default or Potential Event
of Default shall have occurred and be continuing, elect to terminate such Lender
as a party to this Agreement; provided that, concurrently with such termination,
(i) Company shall pay that Lender all principal, interest and fees and other
amounts (including without limitation, amounts, if any, owed under this
subsection 2.7) owed to such Lender through such date of termination, (ii)
another financial institution satisfactory to Company and Administrative Agent
(or if Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of Administrative
Agent (or if Administrative Agent is also the Lender to be terminated, the
successor Administrative Agent) to evidence the substitution of such Lender
shall have been received and approved by Administrative Agent as of such date.
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2.8 OBLIGATION OF LENDERS TO MITIGATE.
Each Lender agrees that, as promptly as practicable after the officer
of such Lender responsible for administering the Loans of such Lender becomes
aware of the occurrence of an event or the existence of a condition that would
cause such Lender to become an Affected Lender or that would entitle such Lender
to receive payments under subsection 2.7, it will, to the extent not
inconsistent with the internal policies of such Lender and any applicable legal
or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or
maintain the Commitments of such Lender or the affected Loans of such Lender
through another lending office of such Lender, or (ii) take such other measures
as such Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender pursuant to subsection 2.7 would be materially reduced and if, as
determined by such Lender in its sole discretion, the making, issuing, funding
or maintaining of such Commitments or Loans through such other lending office or
in accordance with such other measures, as the case may be, would not otherwise
materially adversely affect such Commitments or Loans or the interests of such
Lender; provided that such Lender will not be obligated to utilize such other
lending office pursuant to this subsection 2.8 unless Company agrees to pay all
incremental expenses incurred by such Lender as a result of utilizing such other
lending office as described in clause (i) above. A certificate as to the amount
of any such expenses payable by Company pursuant to this subsection 2.8 (setting
forth in reasonable detail the basis for requesting such amount) submitted by
such Lender to Company (with a copy to Administrative Agent) shall be conclusive
absent manifest error.
2.9 RELEASE OF COLLATERAL.
Upon the prepayment of all Loans made with respect to a specific
Financed Aircraft pursuant to subsection 2.4B(iv)(a) hereof, Administrative
Agent, at the reasonable expense of Company, agrees to execute and deliver to
Company such documents as shall be reasonably satisfactory to Company to
evidence the release of the Liens granted pursuant to the Collateral Documents
with respect to such Financed Aircraft and shall use its best efforts to return
the originals of all Notes representing such Loans to Company, marked "Paid."
SECTION 3.
CONDITIONS TO LOANS
The obligations of Administrative Agent and Lenders to make Loans
hereunder are subject to the satisfaction of the following conditions:
3.1 CONDITIONS TO EFFECTIVENESS AND THE EXISTING AIRCRAFT EXTENDED LOANS.
The effectiveness of this Agreement and the obligation of the Lenders
to maintain the Existing Aircraft Extended Loans are subject to the satisfaction
of all of the following conditions:
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(i) each of the parties hereto shall have executed and
delivered counterparts of this Agreement to Administrative Agent;
(ii) Company shall have delivered to Lenders (or to
Administrative Agent for Lenders) executed originals of the Existing
Aircraft Extended Notes, duly executed in accordance with subsection
2.1D, drawn to the order of each Lender and with appropriate
insertions;
(iii) Company shall have to delivered to Administrative Agent
the following, each, unless otherwise noted, dated the Fourth
Restatement Date:
(a) certified copies of the certificate of
incorporation of Company, together with a good standing
certificate from the Secretary of State of the State of
Delaware and each other state in which Company is qualified as
a foreign corporation to do business and, to the extent
generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar
taxes from the appropriate taxing authority of each of such
states, each dated a recent date prior to the Fourth
Restatement Date;
(b) copies of the bylaws of Company, certified as of
the Fourth Restatement Date by its corporate secretary or an
assistant secretary
(c) resolutions of the Board of Directors of Company
approving and authorizing the execution, delivery and
performance of this Agreement and the other Loan Documents
certified as of the Fourth Restatement Date by Company's
corporate secretary or assistant secretary as being in full
force and effect without modification or amendment;
(d) signature and incumbency certificate of the
officer of Company executing this Agreement and any other Loan
Documents; and
(e) such other document as Administrative Agent may
reasonably request.
(iv) Company shall have delivered to Administrative Agent a
Financial Condition Certificate executed by its Chief Executive
Officer, Chief Financial Officer or Executive Vice President
--Strategic Planning and Treasurer and dated the Fourth Restatement
Date, substantially in the form annexed hereto as Exhibit IX with
appropriate attachments demonstrating that, after giving effect to the
full amounts which will be available under this Agreement, Company and
its Subsidiaries, taken as a whole, are Solvent;
(v) Lenders and their respective counsel shall have received
(A) originally executed copies of one or more favorable written
opinions of Cahill Gordon &
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Reindel, counsel for Company, in form and substance reasonably
satisfactory to Administrative Agent and its counsel, dated as of the
Fourth Restatement Date and setting forth substantially the matters in
the opinions designated in Exhibit VA annexed hereto and as to such
other matters as Administrative Agent acting on behalf of Lenders may
reasonably request, (B) the opinion of Cahill Gordon & Reindel
regarding Section 1110 of the Bankruptcy Code, dated the Fourth
Restatement Date and setting forth substantially the matters in the
opinions designated in Exhibit VB annexed hereto, and (C) evidence
satisfactory to Administrative Agent that Company has requested such
counsel to deliver such opinions to Lenders;
(vi) Lenders and their respective counsel shall have received
executed copies of one or more favorable written opinions of David
Brictson, Assistant General Counsel of Company, in form and substance
reasonably satisfactory to Administrative Agent and its counsel, dated
the Fourth Restatement Date, and setting forth substantially the
matters in the opinions designated in Exhibit VC annexed hereto;
(vii) Company shall have delivered to Administrative Agent
appraisals from two Approved Appraisers, in form and substance
satisfactory to Administrative Agent demonstrating that the outstanding
principal amount of each Existing Aircraft Extended Loan does not
exceed 80% of the Appraised Value of the Related Aircraft as of the
Fourth Restatement Date.
(viii) After giving effect to the transactions contemplated
hereby (including the payment of, or taking reserves for, all
transactions fees and expenses), Company shall not have less than $400
million cash on its consolidated balance sheet;
(ix) Administrative Agent shall be satisfied with the capital,
organization, ownership and management structure of Company and its
Subsidiaries and with the form and substance of the ACMI Contracts, any
Modification Agreements, any BFE Agreements, aircraft lease
arrangements, Purchase Agreements, existing financing agreements and
intercreditor arrangements (including, without limitation, the Senior
Note Documents and the Pass Through Trust Documents);
(x) The AFL III Restructuring shall have been completed or
shall be completed concurrently under terms and conditions reasonably
satisfactory to Administrative Agent and Lenders; and
(xi) Company shall have taken such actions and delivered to
Administrative Agent such documents as Administrative Agent may
reasonably request and all such documents shall be in form and
substance reasonably satisfactory to Administrative Agent.
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3.2 CONDITIONS TO LOANS TO FINANCE AIRCRAFT ACQUISITION.
The obligations of Lenders to make Loans to finance the acquisition of
an aircraft on any Funding Date are subject to the following conditions:
(i) Company shall deliver to Administrative Agent an Officer's
Certificate and such supportive documents as may be requested by
Administrative Agent, certifying that the aircraft to be acquired is an
Eligible Aircraft;
(ii) as of the date of purchase of such Eligible Aircraft,
Administrative Agent shall be reasonably satisfied that Company and its
Subsidiaries have entered into binding ACMI Contracts sufficient to
ensure the continued employment (consistent with past practices) of
substantially all other aircraft owned and operated by Company and its
Subsidiaries other than the new aircraft being acquired;
(iii) on the date of purchase of any such Eligible Aircraft,
Administrative Agent, on behalf of Lenders, shall have been granted a
first priority Lien on such Eligible Aircraft, spare parts and related
assets (including, without limitation, the Purchase Agreement and any
Modification Agreement) and the Purchase Agreement, any Modification
Agreement and any BFE Agreements shall have been assigned to
Administrative Agent and any Persons whose consent is necessary for an
effective assignment of such agreements shall have so consented, in
each case, pursuant to documentation and procedures acceptable to
Administrative Agent;
(iv) Company shall have delivered to Administrative Agent
appraisals from two Approved Appraisers, in form and substance
satisfactory to Administrative Agent, demonstrating that the amount of
the Revolving Loan requested does not exceed 80% of the Appraised Value
of the Eligible Aircraft to be acquired as of the Funding Date and
that, after giving effect to all proposed modifications of such
Eligible Aircraft, the Maximum Note Amount shall not exceed 80% of the
Appraised Value of such Eligible Aircraft as so modified;
(v) a First Aircraft Chattel Mortgage and a Second Aircraft
Chattel Mortgage with respect to the Eligible Aircraft shall have been
filed in such order for recordation with the FAA under the Federal
Aviation Act;
(vi) Uniform Commercial Code Financing Statements naming
Administrative Agent as the secured party covering such Eligible
Aircraft and spare parts shall have been duly executed and delivered
and duly filed in all jurisdictions necessary or desirable to perfect a
security interest in the Collateral;
(vii) the FAA Bill of Sale shall have been delivered for
recordation with the FAA pursuant to the Federal Aviation Act;
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(viii) the Eligible Aircraft shall have been registered with
the FAA in the name of Company or if not previously registered in the
United States, an application for registration shall have been filed;
(ix) Administrative Agent shall have received originally
executed copies of one or more favorable written opinions of counsel to
Company in form and substance satisfactory to Administrative Agent
dated as of the Funding Date and setting forth the matters designated
in the opinions in Exhibits VA, VB and VC and such other matters as
Administrative Agent may reasonably request.
(x) Administrative Agent shall have received originally
executed copies of one or more favorable written opinions of FAA
counsel or other counsel in form and substance satisfactory to
Administrative Agent dated as of the Funding Date or the date such
Eligible Aircraft is registered with the FAA if such registration
occurs after the Funding Date and setting forth such matters related to
the FAA or other Aeronautical Authority having jurisdiction over the
Eligible Aircraft being acquired as Administrative Agent may reasonably
request;
(xi) Administrative Agent shall have received evidence
satisfactory to it to the effect that as of such Funding Date Company
is an air carrier certificated under Sections 401 and 604(b) of the
Federal Aviation Act; with respect to any Eligible Aircraft,
certificates of airworthiness with respect to the Eligible Aircraft
shall have been duly issued by the Aeronautical Authority pursuant to
the Federal Aviation Act or, in the case of a Foreign Leased Aircraft,
its foreign equivalent and shall be in full force and effect; and each
Engine shall be in compliance with all airworthiness standards of such
Aeronautical Authority or shall be maintained in accordance with a
program approved by such Aeronautical Authority;
(xii) Company shall have good and marketable title to and a
valid ownership interest in the Collateral free and clear of all Liens
other than Liens permitted by subsection 6.2;
(xiii) no Event of Loss with respect to the Airframe or any
Engine to be delivered shall have occurred and no event or condition
which with the giving of notice or lapse of time or both, would result
in any such Event of Loss shall have occurred and be continuing;
(xiv) Company shall have delivered to Administrative Agent
certificates of insurance naming Administrative Agent on behalf of
Administrative Agent and Lenders as loss payee under casualty insurance
policies with respect to the Eligible Aircraft to be acquired and a
broker's report evidencing compliance with the requirements of the
First Aircraft Chattel Mortgage with respect to such Eligible Aircraft;
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(xv) Company shall have delivered to Administrative Agent all
documents executed in connection with the Purchase Agreement related to
such aircraft and such documents shall be in form and substance
satisfactory to Administrative Agent;
(xvi) any Revolving Loan made to finance the purchase of a
Financed Aircraft shall be made no later than ten days after the later
of Company's payment of the purchase price with respect to or
acquisition of title to such Financed Aircraft; and
(xvii) Company shall have delivered to Administrative Agent
such other documents as Administrative Agent may reasonably request and
all such documents shall be in form and substance reasonably
satisfactory to Administrative Agent.
(xviii) In addition to the foregoing conditions, with respect
to the Loans made to finance the acquisition of a Leased Aircraft,
Company shall have delivered to Administrative Agent a copy of the
Approved Lease in form and substance satisfactory to Administrative
Agent including, without limitation, provisions permitting the grant to
Administrative Agent on behalf of Lenders of the Liens contemplated by
subdivision (iii) of this subsection 3.2, and satisfaction of the
requirements of subdivision (xiv) of this subsection 3.2. In addition,
the form of Mortgages delivered with respect to a Leased Aircraft will
permit such Approved Lease and include provisions granting security
interests to the Administrative Agent, on behalf of Lenders, in the
Approved Lease and all rights and privileges of Company thereunder and
will require that ground and flight all-risk hull insurance be
maintained on such Leased Aircraft in an amount equal to the greater of
(x) 100% of the Appraised Value of such Leased Aircraft and (y) the
purchase price of such Leased Aircraft. Finally, Company will not be
required to enter into a Modification Agreement with respect to a
Leased Aircraft or to assign such Modification Agreement to
Administrative Agent for the benefit of Lenders; provided that, if such
Leased Aircraft requires Conversion, Company will enter into a
Modification Agreement with respect to such Leased Aircraft and will
assign such Modification Agreement to Administrative Agent for the
benefit of Lenders prior to or concurrently with the termination of
such Approved Lease;
(xix) the aggregate amount of Revolving Loans made in respect
of all Leased Aircraft shall not exceed 50% of the Revolving Loan
Commitments; and
(xx) with respect to any Foreign Leased Aircraft,
Administrative Agent shall have received originally executed copies of
one or more favorable written opinions of counsel located in the
jurisdiction where such Foreign Leased Aircraft is registered and
setting forth such matters related to the Aeronautical Authority having
jurisdiction over such Foreign Leased Aircraft as Administrative Agent
may reasonably request.
Notwithstanding the foregoing, Administrative Agent may (provided that
no Event of Default has occurred or is continuing) in its sole and absolute
discretion waive the conditions
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set forth in clauses (iii), (v), (vii), (viii) and (x) to the extent necessary
by reason of the fact that Company is unable to obtain a deregistration
certificate with respect to the applicable Eligible Aircraft prior to the
purchase of such Eligible Aircraft; provided that, if Administrative Agent's
security interest in such Eligible Aircraft is not fully perfected within five
(5) Business Days of full funding of the Loans with respect to such Eligible
Aircraft, Company shall prepay such Loans in accordance with subsection
2.4B(iii)(g); provided further, that Administrative Agent may not waive such
conditions with respect to more than one Eligible Aircraft at any time; provided
further, that, notwithstanding anything to the contrary contained herein, the
conditions set forth in clauses (v), (vii) and (viii) above shall not apply to a
Foreign Leased Aircraft.
3.3 CONDITION TO LOANS TO FINANCE CARGO CONVERSION.
The obligations of Lenders to make Loans to finance the costs of
conversion of a Financed Aircraft on any Funding Date are subject to the
additional conditions set forth below:
A. CONDITIONS TO EACH LOAN TO FINANCE THE COSTS OF CONVERSION.
(i) Administrative Agent shall have received an invoice and
bill of sale with respect to any Parts delivered in connection with the
modification of Financed Aircraft and with respect to any buyer
furnished equipment, and an invoice for any services or other costs
associated with the modification of such Financed Aircraft and/or such
other information and materials as may be reasonably requested by
Administrative Agent confirming the name of the vendor performing the
service, the Parts or service to be financed by such Revolving Loan,
the amount due from or previously paid by Company, the satisfactory
completion of the services for which such Revolving Loan proceeds shall
be applied and such other information regarding such service as
Administrative Agent may request. To the extent practicable, each
Revolving Loan made shall be allocated only to the costs of conversion
other than labor costs associated with such conversion; and
(ii) with respect to any Revolving Loan to finance the
purchase of a Part, such Revolving Loan shall be made no later than ten
days after the later of Company's payment for or acquisition of title
to such Part.
B. CONDITIONS TO THE FINAL LOAN TO FINANCE THE COST OF
CONVERSION.
(i) If there has been any material deviation from the terms of
the Modification Agreement entered into by Company with respect to a
Financed Aircraft after the date of the appraisals delivered pursuant
to subsection 3.2(iv), Company shall have delivered to Administrative
Agent appraisals demonstrating that the amount of the Revolving Loans
requested when added to all previous Revolving Loans made with respect
to the Financed Aircraft which has been converted as of the Funding
Date
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does not exceed the lesser of (x) 100% of the remaining costs of
conversion and (y) 80% of the Appraised Value of the Financed Aircraft;
(ii) Company shall deliver to Administrative Agent an
Officer's Certificate (x) certifying that the conversion of the
Financed Aircraft has been completed and that all obligations of
Company with respect to the modifications of the Financed Aircraft
under a Modification Agreement and any BFE Agreement have been
satisfied and (y) stating the total cost of the purchase and
modification of such Financed Aircraft, which shall not be less than
all Loans made in respect of such Financed Aircraft.
(iii) Company shall deliver to Administrative Agent (a) a copy
of the Aircraft re-delivery receipt and evidence of transfer of title
to each Part included in the modification, (b) copies of any
Supplemental Types Certificates issued by the FAA, and (c) copies of
any FAA Form 337s to be filed in connection with such modification;
(iv) Administrative Agent shall have received evidence
satisfactory to it to the effect that as of such Funding Date Company
is an air carrier certificated under Sections 401 and 604(b) of the
Federal Aviation Act; certificates of airworthiness with respect to the
Eligible Aircraft shall have been duly issued pursuant to the Federal
Aviation Act and shall be in full force and effect; and each Engine
shall be in compliance with all airworthiness standards of the FAA or
shall be maintained in accordance with an FAA approved program; and
(v) Company shall have delivered to Administrative Agent such
other documents as Administrative Agent may reasonably request and all
such documents shall be in form and substance reasonably satisfactory
to Administrative Agent.
3.4 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding
Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, in each case signed by the
chief executive officer, the chief financial officer or the treasurer
of Company or by any executive officer of Company designated by any of
the above-described officers on behalf of Company in a writing
delivered to Administrative Agent.
B. As of that Funding Date:
(i) the representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as
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of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and
complete in all material respects on and as of such earlier date;
provided that, with respect to any Funding Date referred to in
subsection 3.3, Company's representations and warranties shall be to
its best knowledge;
(ii) no event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) Company shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement
provides shall be performed or satisfied by it on or before that
Funding Date;
(iv) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date;
(v) the making of the Loans requested on such Funding Date
shall not violate any law including, without limitation, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) there shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries that
has not been disclosed by Company in writing pursuant to subsection 4.6
or 5.1(x) prior to the making of the last preceding Loans (or, in the
case of the initial Loans, prior to the execution of this Agreement),
and there shall have occurred no development not so disclosed in any
such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, in the opinion of
Administrative Agent or of Requisite Lenders, would be expected to have
a Material Adverse Effect; and no injunction or other restraining order
shall have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect
to any action, suit or proceeding seeking to enjoin or otherwise
prevent the consummation of, or to recover any damages or obtain relief
as a result of, the transactions contemplated by this Agreement or the
making of Loans hereunder.
C. With respect to any Revolving Loans made on a Funding Date for the
purpose of reborrowing an amount equal to the amount of mandatory prepayments
made pursuant to subsection 2.4B(iii)(e), Administrative Agent shall have
received an opinion of Cahill Gordon & Reindel, or such other counsel as may be
acceptable to Administrative Agent, dated as of such Funding Date confirming the
applicability of Section 1110 of the Bankruptcy Code, to
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such Revolving Loans made on such Funding Date, in form and substance
satisfactory to Administrative Agent.
D. In the case of an initial Revolving Loan with respect to a New
Aircraft, Company shall have delivered to Lenders (or to Administrative Agent
for Lenders) executed originals of the New Aircraft Notes, duly executed in
accordance with subsection 2.1D, drawn to the order of each Lender and with
appropriate insertions.
SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, Company represents and warrants to each Lender, on the date of this
Agreement and on each Funding Date, that the following statements are true,
correct and complete:
4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Company has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and to carry out the transactions
contemplated thereby.
B. QUALIFICATION AND GOOD STANDING; AIR CARRIER CERTIFICATION. Company
is qualified to do business and in good standing in every jurisdiction where its
assets are located and wherever necessary to carry out its business and
operations, except in jurisdictions where the failure to be so qualified or in
good standing has not had and will not have a Material Adverse Effect. Company
is a "citizen of the United States" within the meaning of the Federal Aviation
Act (a "UNITED STATES CITIZEN") and holds an air carrier operating certificate
under the Federal Aviation Act for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo.
C. SUBSIDIARIES. All of the Subsidiaries of Company as of the Fourth
Restatement Date are identified in Schedule 4.1 annexed hereto, as said Schedule
4.1 may be supplemented from time to time pursuant to the provisions of
subsection 5.1(xvii). The capital stock of each of the Subsidiaries of Company
identified in Schedule 4.1 annexed hereto (as so supplemented) is duly
authorized, validly issued, fully paid and nonassessable and none of such
capital stock constitutes Margin Stock. Each of the Subsidiaries of Company
identified in Schedule 4.1 annexed hereto (as so supplemented) is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as proposed to be conducted, and is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and
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operations, in each case except where failure to be so qualified or in good
standing or a lack of such corporate power and authority has not had and will
not have a Material Adverse Effect. Schedule 4.1 annexed hereto (as so
supplemented) correctly sets forth the ownership interest of Company and each of
its Subsidiaries in each of the Subsidiaries of Company identified therein.
D. COLLATERAL DOCUMENTS. The security interests created in favor of
Administrative Agent under the Collateral Documents have at all times from and
after the Initial Closing Date constituted and will continue to constitute, as
security for the obligations purported to be secured thereby, a legal, valid and
enforceable security interest in and Lien on all of the Collateral referred to
therein in favor of Administrative Agent for the benefit of the Lenders,
perfected and prior to the rights of all third persons in accordance with the
requirements of all applicable Collateral Documents. Each Loan Party has good
and marketable title to its respective Collateral, and all such Collateral is
free and clear of all Liens except for Liens permitted by subsection 6.2. No
consents, filings or recordings are required in order to perfect (or maintain
the perfection or priority of) the security interests purported to be created by
any of the Collateral Documents, other than such as have been obtained and which
remain in full force and effect and UCC financing statements to be filed, or
delivered to Administrative Agent for filing, on the Fourth Restatement Date and
periodic UCC continuation filings or as is specifically otherwise permitted by
the terms of any applicable Collateral Document.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary corporate
action on the part of each Loan Party.
B. NO CONFLICT. The execution, delivery and performance by the Loan
Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to Company or any
of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of
Company or any of its Subsidiaries or any order, judgment or decree of any court
or other agency of government binding on Company or any of its Subsidiaries,
(ii) conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any Contractual Obligation of Company or any of its Subsidiaries, (iii) result
in or require the creation or imposition of any Lien upon any of the properties
or assets of Company or any of its Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of its
Subsidiaries, except for such approvals or consents which will be obtained on or
before the Fourth Restatement Date and disclosed in writing to Lenders.
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C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
the Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body which has not
been obtained or made on or prior to the date required to be obtained or made
unless waived by Administrative Agent in accordance with this Agreement.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly
executed and delivered by each of the Loan Parties party thereto and is the
legally valid and binding obligation of each such Loan Party, enforceable
against such Loan Party in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
4.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: the audited consolidated balance
sheets of Company and its Subsidiaries as at December 31, 1999, and the related
consolidated statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the Fiscal Year then ended. All such statements
were prepared in conformity with GAAP and fairly present the financial position
(on a consolidated basis) of the entities described in such financial statements
as at the respective dates thereof and the results of operations and cash flows
(on a consolidated basis) of the entities described therein for each of the
periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments.
Company does not have any Contingent Obligation, contingent liability or
liability for taxes, long-term lease or unusual forward or long-term commitment
that is not reflected in the foregoing financial statements or the notes thereto
and which in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
or of Company and its Subsidiaries taken as a whole.
4.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
Since December 31, 1999, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Since December 31, 1999, neither Company nor any of its Subsidiaries has
directly or indirectly declared, ordered, paid or made, or set apart any sum or
property for, any Restricted Junior Payment or agreed to do so except as
permitted by subsection 6.5.
4.5 TITLE TO PROPERTIES; LIENS.
A. Company and its Subsidiaries have (i) good, sufficient and legal
title to (in the
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case of fee interests in real property), (ii) valid leasehold interests in (in
the case of leasehold interests in real or personal property), or (iii) good
title to (in the case of all other personal property), all of the properties and
assets reflected in the financial statements referred to in subsection 4.3 or in
the most recent financial statements delivered pursuant to subsection 5.1, in
each case except for assets disposed of since the date of such financial
statements in the ordinary course of business or as otherwise permitted under
subsection 6.7. Except as permitted by this Agreement, all such properties and
assets are free and clear of Liens.
B. Each Financed Aircraft operated in the United States has a current
and valid airworthiness certificate issued by the FAA pursuant to the Federal
Aviation Act in effect and is in such condition as may be necessary to enable
the airworthiness certificate to be maintained in good standing. Each Engine has
a rated takeoff horsepower greater than 750 horsepower, or the equivalent of
such horsepower. Each Financed Aircraft operated in the United States is
registered with the FAA in the name of Company, and Company has authority to
operate such Financed Aircraft. Company has good title to such Financed
Aircraft, free and clear of all Liens other than Liens permitted by subsection
6.2.
4.6 LITIGATION; ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Company nor any of its Subsidiaries is (i) in violation of any
applicable laws that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in default
with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
4.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Company and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Company does not know of any proposed tax assessment
against Company or any of its Subsidiaries which is not being actively contested
by Company or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities
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for taxes as shall be required in conformity with GAAP shall have been made or
provided in the financial statements of Company. There are no agreements with
respect to taxes between Company and any tax agency or authority.
4.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
4.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
4.10 SECURITIES ACTIVITIES.
A. Neither Company nor any of its Subsidiaries is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
6.2 or 6.7 or subject to any restriction contained in any agreement or
instrument, between any Loan Party, on the one had, and any Lender or any
Affiliate of any Lender, on the other hand, relating to Indebtedness and within
the scope of subsection 7.2, will be Margin Stock.
4.11 EMPLOYEE BENEFIT PLANS.
Company maintains a qualified retirement plan under Section 401(k) of
the Internal Revenue Code (the "Company 401(k) Plan"). Company's 401(k) Plan has
no unfunded liabilities in excess of $10,000,000, and Company is in compliance
with all applicable provisions and requirements of ERISA and the regulations and
published interpretations
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thereunder with respect to each Employee Benefit Plan and has performed all its
obligations under such Employee Benefit Plan in all material respects. The
Company has no Employee Benefit Plans, other than the Company 401(k) Plan. The
Company has no ERISA Affiliates that sponsor, maintain, contribute to or are
liable with respect to any Employee Benefit Plans.
4.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.13 ENVIRONMENTAL PROTECTION.
A. All Facilities and operations of the Company are, and have been to
the best of Company's knowledge, in compliance in all material respects with all
Environmental Laws.
B. There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity (a) arising at any Facilities or at any other
location or (b) arising in connection with the operations of Company (including
the transportation of Hazardous Materials in accordance with applicable
regulations), which conditions, occurrences or Hazardous Materials Activity
could reasonably be expected to form the basis of an Environmental Claim against
Company and which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
C. To the best of Company's knowledge, there are no pending or
threatened Environmental Claims against Company, and Company has received no
notices, inquiries, or requests for information with respect to any
Environmental Claims.
4.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
4.15 SOLVENCY.
Company and each of its Subsidiaries is and, upon the incurrence of any
Obligations by Company on any date on which this representation is made, will
be, Solvent.
4.16 DISCLOSURE.
No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or in any other document, certificate or written
statement furnished to
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Lenders by or on behalf of Company or any of its Subsidiaries for use in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact (known to
Company, in the case of any document not furnished by Company) necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Company to be reasonable at the time made,
it being recognized by Lenders that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results. There are
no facts known (or which should upon the reasonable exercise of diligence be
known) to Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to maintain,
a system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent and Lenders:
(i) [Intentionally Omitted]
(ii) Quarterly Financials: as soon as available and in any
event within 45 days after the end of each fiscal quarter of each
Fiscal Year, (a) the consolidated balance sheet of Company and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated statement of income, stockholders' equity and cash flows
of Company and its Subsidiaries for such fiscal quarter and for the
period from the beginning of the then current Fiscal Year to the end of
such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
Fiscal Year, all in reasonable detail and certified by the chief
financial officer of Company that they fairly present the financial
condition of Company and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, subject to changes resulting
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from audit and normal year-end adjustments, and (b) a narrative report
describing the operations of Company and its Subsidiaries in the form
prepared for presentation to senior management for such fiscal quarter
and for the period from the beginning of the then current Fiscal Year
to the end of such fiscal quarter; provided that delivery of Company's
Form 10-Q for such fiscal quarter shall be deemed to satisfy the
requirements of this subsection 5.1(ii);
(iii) Year-End Financials: as soon as available and in any
event within 90 days after the end of each Fiscal Year, (a) the
consolidated balance sheet of Company and its Subsidiaries as at the
end of such Fiscal Year and the related consolidated statement of
income, stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal
Year, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present the financial condition of
Company and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated, (b)
a narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management
for such Fiscal Year, and (c) in the case of such consolidated
financial statements, a report thereon of Arthur Andersen LLP or other
independent certified public accountants of recognized national
standing selected by Company and satisfactory to Administrative Agent,
which report shall be unqualified, shall express no doubts about the
ability of Company and its Subsidiaries to continue as a going concern,
and shall state that such consolidated financial statements fairly
present the consolidated financial position of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally
accepted auditing standards; provided that delivery of Company's Form
10-K for such Fiscal Year shall be deemed to satisfy the requirements
of clauses (a) and (b) of this subsection 5.1(iii);
(iv) Officers' and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above after the Fourth
Restatement Date, (a) an Officers' Certificate of Company stating that
the signers have reviewed the terms of this Agreement and have made, or
caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not
have knowledge of the existence as at the date of such Officers'
Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of
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existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable quarterly and annual accounting periods with the
restrictions contained in Section 6;
(v) Reconciliation Statements: if, as a result of any change
in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 4.3, the consolidated financial statements of Company and
its Subsidiaries delivered pursuant to subdivisions (ii) or (iii) of
this subsection 5.1 will differ in any material respect from the
consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (ii) or (iii)
of this subsection 5.1 following such change, consolidated financial
statements of Company and its Subsidiaries for (y) the current Fiscal
Year to the effective date of such change and (z) the two full Fiscal
Years immediately preceding the Fiscal Year in which such change is
made, in each case prepared on a pro forma basis as if such change had
been in effect during such periods, and (b) together with each delivery
of financial statements pursuant to subdivision (ii) or (iii) of this
subsection 5.1 following such change, a written statement of the chief
accounting officer or chief financial officer of Company setting forth
the differences which would have resulted if such financial statements
had been prepared without giving effect to such change;
(vi) Accountants' Certification: together with each delivery
of consolidated financial statements of Company and its Subsidiaries
pursuant to subdivision (iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the terms
of this Agreement and the other Loan Documents as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of
Default or Potential Event of Default has come to their attention and,
if such a condition or event has come to their attention, specifying
the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Event of Default or Potential Event of Default
that would not be disclosed in the course of their audit examination,
and (c) stating that based on their audit examination nothing has come
to their attention that causes them to believe either or both that the
information contained in the certificates delivered therewith pursuant
to subdivision (iv) above is not correct or that the matters set forth
in the Compliance Certificates delivered therewith pursuant to clause
(b) of subdivision (iv) above for the applicable Fiscal Year are not
stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Company by
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independent certified public accountants in connection with each
annual, interim or special audit of the financial statements of Company
and its Subsidiaries made by such accountants, including, without
limitation, any comment letter submitted by such accountants to
management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Company or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made
available generally by Company or any of its Subsidiaries to the public
concerning material developments in the business of Company or any of
its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) that any
Person has given any notice to Company or any of its Subsidiaries or
taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 7.2, (c) of any
condition or event that would be required to be disclosed in a current
report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof), or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of
such claimed Event of Default, Potential Event of Default, default,
event or condition, and what action Company has taken, is taking and
proposes to take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to
Lenders or (Y) any material development in any Proceeding that, in any
case:
(1) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or
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(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each
fiscal quarter of Company, a schedule of all Proceedings involving an
alleged liability of, or claims against or affecting, Company or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Administrative Agent such other information as may be
reasonably requested by Administrative Agent to enable Administrative
Agent and its counsel to evaluate any of such Proceedings;
(xi) 401K Plan Notices: promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any material and adverse
event with respect to Company's 401(k) Plan (as defined in subsection
4.11), a written notice specifying the nature thereof, what action
Company has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto;
(xii) [intentionally omitted]
(xiii) Insurance: as soon as practicable and in any event by
the last day of each Fiscal Year, a report in form and substance
satisfactory to Administrative Agent outlining all material insurance
coverage maintained as of the date of such report by Company and its
Subsidiaries and all material insurance coverage planned to be
maintained by Company and its Subsidiaries in the immediately
succeeding Fiscal Year;
(xiv) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of Company or any of its
Subsidiaries or by independent consultants, with respect to significant
environmental matters at any Facility or which relate to an
Environmental Claim which could result in a Material Adverse Effect;
(xv) Special Purpose Subsidiaries: promptly upon any Special
Purpose Subsidiary becoming a Subsidiary of Company, a written notice
setting forth with respect to such Special Purpose Subsidiary (a) the
date on which such Special Purpose Subsidiary became a Subsidiary of
Company and (b) all of the data required to be set forth in Schedule
4.1 annexed hereto with respect to all Subsidiaries of Company (it
being understood that such written notice shall be deemed to supplement
Schedule 4.1 annexed hereto for all purposes of this Agreement);
(xvi) Pricing Certificates: (a) together with each delivery of
financial statements of Company and its Subsidiaries pursuant to
subdivisions (ii) and (iii)
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above, (b) within one Business Day after any public release by S&P or
Moody's lowering Company's "Senior Secured Debt Rating" or "Senior
Secured Rating," as applicable, and (c) at such additional times as
Company may elect, a certificate setting forth its "Senior Secured Debt
Rating" and "Senior Secured Rating," as assigned by S&P or Moody's, as
applicable (each, a "Pricing Certificate");
(xvii) Holding Company: at least five Business Days prior to
the consummation thereof, the terms of the Holding Company
Reorganization and, on and after the consummation of the Holding
Company Reorganization, in addition to the information requirements of
this subsection 5.1 with respect to the Company, the same information
shall be delivered (and at the same times) with respect to the Holding
Company and Holding Company Subsidiaries; and
(xviii) Other Information: with reasonable promptness, such
other information and data with respect to Company or any of its
Subsidiaries as from time to time may be reasonably requested by
Administrative Agent or any Lender.
5.2 CORPORATE EXISTENCE.
Except as permitted under subsection 6.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such Subsidiary
may be terminated if such termination is in the best interests of Company and
its Subsidiaries and is not materially disadvantageous to any Lender. Company
will, and will cause each of its Subsidiaries to, at all times maintain its
corporate existence as a United States Citizen.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Company.
B. Company will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than any Subsidiary of Company or Company and other than the
Holding Company and Holding Company
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Subsidiaries).
5.4 MAINTENANCE OF PROPERTIES; INSURANCE.
Company will, and will cause its Subsidiaries to, maintain or cause to
be maintained in good repair, working order and condition, ordinary wear and
tear excepted, all material properties used or useful in the business of Company
and its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Company will maintain or
cause to be maintained, with insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage (including,
without limitation, flood insurance, if necessary or advisable) of the kinds
customarily carried or maintained under similar circumstances by corporations
engaged in similar businesses and Company will, with respect to each Financed
Aircraft, maintain the insurance specified in the First Aircraft Chattel
Mortgage with respect to such Financed Aircraft.
Company may self-insure, by way of deductible or equivalent structures
or provisions in insurance policies, the risks required to be insured against
pursuant to this subsection 5.4 in such reasonable amounts as are then
applicable to other similar aircraft or spare engines in Company's fleet, and as
are not substantially greater than amounts self-insured by corporations engaged
in the same or similar business and similarly situated with Company; provided,
however, that Company may not self-insure in an amount in excess of $1,000,000
per Financed Aircraft without the prior written consent of Administrative Agent.
5.5 INSPECTION; LENDER MEETING.
Company will, and will cause its Subsidiaries to, permit any authorized
representatives designated by any Lender to visit and inspect any of the
properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and, with the permission of Company which
shall not be unreasonably withheld, to make copies and take extracts therefrom,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that Company may, if it so
chooses, be present at or participate in any such discussion), all upon
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested; provided that so long as no Event of
Default shall have occurred and be continuing, such inspection shall not be
disruptive to Company's business, as reasonably determined by Company. Within
120 days after the end of each Fiscal Year, senior management of Company shall
participate in a meeting of Lenders during which senior management will review,
among other matters, the financial results of Company and its Subsidiaries for
such Fiscal Year and outline the prospects for Company for the current Fiscal
Year and report on any major changes in the business strategy of Company
anticipated to occur during the term of this Agreement.
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5.6 COMPLIANCE WITH LAWS, ETC.
Company will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Company shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any Facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Company and which could reasonably be expected to have a Material Adverse
Effect.
5.7 ENVIRONMENTAL INDEMNITY.
Company agrees to indemnify, defend, and hold harmless Administrative
Agent and Lenders, and the officers, directors, employees, agents and affiliates
of Administrative Agent and Lenders from and against any and all losses, claims,
liability or expenses arising in connection with Environmental Claims against
Company or with any Hazardous Materials Activity.
5.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
Company will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any Facility in order to comply with all applicable
Environmental Laws and Governmental Authorizations. In the event Company or any
of its Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any Facility, Company or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Company's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Company or such Subsidiary.
5.9 FURTHER ASSURANCES; NEW SUBSIDIARIES; HOLDING COMPANY.
A. At any time or from time to time upon the request of Administrative
Agent, Company will, at its expense, promptly execute, acknowledge and deliver
such further documents and do such other acts and things as Administrative Agent
may reasonably request in order to effect fully the purposes of the Loan
Documents and to provide for payment of the Obligations in accordance with the
terms of this Agreement, the Notes and the other Loan Documents.
B. In furtherance and not in limitation of the foregoing, Company will
cause any Subsidiary whose total assets exceed 15% of the consolidated total
assets of Company, in each case determined in accordance with GAAP (other than a
Special Purpose Subsidiary or
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Atlas One), to take such actions as Administrative Agent may reasonably request
from time to time to ensure that the Obligations are guarantied by any such
Subsidiary. If, after the Fourth Restatement Date, Company or any of its
Subsidiaries (other than a Special Purpose Subsidiary or Atlas One) acquires any
asset, other than an aircraft financed with Loans hereunder or with Other
Permitted Indebtedness, with a fair market value in excess of $5 million, or the
value of spare parts of Company and its Subsidiaries not subject to Liens
securing Designated Indebtedness exceeds $25 million in the aggregate, Company
shall so notify Administrative Agent and take, or cause such Subsidiaries to
take, such actions as Administrative Agent may reasonably request from time to
time (including, without limitation, the execution and delivery of guaranties,
security agreements, mortgages, deeds of trust, financing statements and other
documents, the filing or recording of any of the foregoing, title insurance with
respect to any of the foregoing that relates to an interest in real property,
and the delivery of stock certificates and other collateral with respect to
which perfection is obtained by possession) to ensure that the Obligations are
secured by a first priority security interest in such asset or spare parts
(other than capital stock of a Subsidiary), as the case may be; provided that,
in the case of any engine otherwise subject to such security interest, such Lien
may be released at the request of Company in connection with a refinancing
thereof with Other Permitted Indebtedness. Notwithstanding the foregoing, so
long as the AFL III Financing remains outstanding nothing herein shall cause or
give rise to an obligation on the part of the Company or AFL III to require a
guaranty or grant of security interest in the assets of AFL III. The Lenders
acknowledge that the security interests and Liens created by the Collateral
Documents do not extend to the assets of AFL III now existing or hereafter
acquired.
C. In furtherance and not in limitation of the foregoing, if Company
interposes a Holding Company, Company will cause the Holding Company to take
such actions (including, without limitation, the execution and delivery of a
guaranty, pledge agreement, financing statements and other documents, the filing
or recording of any of the foregoing, and the delivery of stock certificates
properly endorsed for transfer or accompanied by duly executed stock powers) as
Administrative Agent and Lenders may reasonably request to ensure that the
Obligations are guarantied by the Holding Company and that the Obligations are
secured by a first priority security interest in all of the capital stock of
Company. Company agrees that the Holding Company will not incur, directly or
indirectly, any Indebtedness and will not engage in any business or activity or
own any assets other than (1) holding the capital stock of Company or other
Subsidiaries formed by the Holding Company, and performing its obligations
incidental thereto, (2) employing certain management employees and pilots and
performing its obligations incidental thereto, (3) paying general administrative
costs and expenses in the ordinary course of business and (4) such other
activities as may be consented to from time to time by Requisite Lenders.
5.10 APPRAISALS.
At the request of Administrative Agent or Requisite Lenders (but no
more than once
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each calendar year), Company will obtain appraisals of each of the Financed
Aircraft from two Approved Appraisers, in form and substance satisfactory to
Administrative Agent; provided that, upon the occurrence and during the
continuance of an Event of Default, Company will obtain such additional
appraisals with respect to the Financed Aircraft as Administrative Agent or
Requisite Lenders may request.
5.11 MAINTENANCE CONTRACTS.
Company shall maintain contracts with respect to the maintenance of
each Financed Aircraft sufficient to insure compliance with the Federal Aviation
Act, in form and substance reasonably satisfactory to Administrative Agent.
5.12 EMPLOYEE BENEFIT PLANS.
Company will not establish or permit to be established any Employee
Benefit Plans for Company or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
result in a liability for Company, under ERISA, in excess of $10 million.
5.13 REGISTRATION OF FOREIGN LEASED AIRCRAFT WITH FAA.
Upon termination of an Approved Lease to which a Foreign Leased
Aircraft is subject, Company shall cause such Foreign Leased Aircraft to be
deregistered in such country and registered under the Federal Aviation Act and
file for recordation with the FAA following such deregistration a First Aircraft
Chattel Mortgage and Second Aircraft Chattel Mortgage with respect to such
Foreign Leased Aircraft and shall cause FAA counsel to deliver an opinion in
form and substance satisfactory to Administrative Agent.
5.14 CORPORATE SEPARATENESS.
Following the creation of a Holding Company, Company will take all such
action as is necessary to keep its operations separate and apart from those of
Holding Company or any of its Affiliates, including, without limitation,
ensuring that all customary corporate formalities, including the maintenance of
separate corporate records and documents and holding regular meetings are
followed. Any financial statements distributed to any creditors of Company shall
clearly establish the corporate separateness of Company from Holding Company and
each Holding Company Subsidiary. Company shall not take any action or conduct
its affairs in a manner that is likely to result in the corporate existence of
Company on the one hand and of Holding Company or any Holding Company Subsidiary
on the other hand being disregarded, or in the assets and liabilities of Holding
Company or any Holding Company Subsidiary being substantively consolidated with
those of Company in a bankruptcy, reorganization or other insolvency proceeding.
Company shall maintain its principal executive office separate from Holding
Company or any of its Affiliates.
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SECTION 6.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 6.
6.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by subsection 6.4 and,
upon any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so
extinguished;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases;
provided that such Capital Leases are permitted under the terms of
subsection 6.9;
(iv) Company and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 6.1 annexed
hereto;
(v) Company may become and remain liable with respect to
Permitted Extension Indebtedness; provided, that with respect to any
transaction in which Permitted Extension Indebtedness is incurred with
respect to any Financed Aircraft, the cash proceeds from such Permitted
Extension Indebtedness are sufficient to repay in full the Notes
associated with such Financed Aircraft;
(vi) so long as no Event of Default or Potential Event of
Default shall have occurred and be continuing or would result therefrom
and Company delivers an Officers' Certificate to Administrative Agent
and Lenders, in form and substance reasonably satisfactory to
Administrative Agent, confirming that, on a Pro Forma Basis after
giving effect to such incurrence of Indebtedness, (i) the ratio of
Consolidated Total Debt (less Cash and Cash Equivalents held by Company
in excess of $25 million) as of the last day of the most recently ended
fiscal quarter (the "Determination Date") plus seven times Consolidated
Rental Payments to Consolidated Adjusted EBITDA plus Consolidated
Rental Payments for the four fiscal
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quarter period ending on such Determination Date does not exceed the
ratio set forth in subsection 6.6B for the fiscal quarter in which such
Indebtedness is to be incurred, (ii) the ratio of Consolidated Adjusted
EBITDA for such four fiscal quarter period to Consolidated Interest
Expense for such four-fiscal quarter period is not less than the ratio
set forth in subsection 6.6A for the fiscal quarter in which such
Indebtedness is to be incurred;
(vii) Company may become and remain liable with respect to
Indebtedness under the NationsBanc/Bank of America Agreement;
(viii) AFL III may become and remain liable with respect to
all of the obligations under the AFL III Financing documents and
Company may become and remain liable with respect to the AFL III
Leases;
(ix) Company may become and remain liable with respect to the
Senior Notes and the Pass Through Trust Agreements; and
(x) Company and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount not
to exceed, without duplication, when added to the maximum aggregate
liability, contingent or otherwise, of Company and its Subsidiaries
outstanding in accordance with subsection 6.4(vi), $50 million at any
time outstanding;
provided that, notwithstanding the foregoing, Company may not become or remain
liable, directly or indirectly, for any Indebtedness of any Holding Company
Subsidiary.
6.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and
Other Permitted Indebtedness; provided that such Liens encumber only
assets subject to purchase money Liens securing such Indebtedness; and
(iii) other Liens securing Indebtedness in an aggregate amount
not to exceed
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$10 million at any time outstanding.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 6.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 6.2A.
C. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except (i) as provided herein, as (ii) described on Schedule 6.2
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL III Financing Agreement, Company will not, and will not
permit any of its Subsidiaries to, create or otherwise cause or suffer to exist
or become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
6.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company may make and own Investments in Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Fourth Restatement Date in any
Subsidiaries of Company;
(iii) Company may make and own Investments in Special Purpose
Subsidiaries; provided that Company delivers to Administrative Agent an
Officer's Certificate in form and substance satisfactory to
Administrative Agent demonstrating that such Special Purpose Subsidiary
meets the requirements set forth in the definition thereof;
(iv) Company may make Investments in Joint Ventures in an
aggregate amount not to exceed (A) $50 million plus (B) 20% of
Consolidated Net Income for the period commencing January 1, 2000 and
ending on the last day of the Fiscal Year immediately preceding the
date of determination (taken as a single accounting period) less (C)
the sum of (x) the aggregate amount of Restricted Junior Payments with
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respect to Company Common Stock declared or paid during such period
(excluding Restricted Junior Payments made in accordance with
subsection 6.5(iii)) and (y) the aggregate amount contributed to
capital of Special Purpose Subsidiaries during such period; provided
that Company shall not incur liabilities related to any such Joint
Venture in excess of Company's Investment therein;
(v) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 6.3 annexed hereto
and Investments made in compliance with subsection 6.3(iv);
(vi) Company, AFL and AFL II may make the contributions to AFL
III of the AFL III Equipment and cash contemplated pursuant to the AFL
III Restructuring; and
(vii) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed $15 million at any
time outstanding.
Notwithstanding the foregoing, (1) except in connection with the AFL
III Restructuring, neither Company nor its Subsidiaries may make any direct or
indirect loan, advance or capital contribution to AFL III and (2) neither
Company nor its Subsidiaries may make any direct or indirect loan or advance to
a Holding Company.
6.4 CONTINGENT OBLIGATIONS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) any Subsidiary may become and remain liable with respect
to Contingent Obligations arising under their guaranties of the
Obligations;
(ii) Company may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements and Currency
Agreements with a Lender;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets or securities;
(iv) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule 6.4
annexed hereto;
(v) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations to the extent such Contingent
Obligations are
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permitted pursuant to subsections 6.9 and 6.10; and
(vi) Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with subsection 6.1(x) shall at no time
exceed $30 million.
6.5 RESTRICTED JUNIOR PAYMENTS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Company may make scheduled payments of
principal and interest or mandatory prepayments of principal (including through
the exercise of remedies) from time to time on Designated Indebtedness; and
provided, further, that so long as no Event of Default or Potential Event of
Default has occurred and is continuing, or would result therefrom:
(i) Company may prepay Designated Indebtedness from the
proceeds of Permitted Extension Indebtedness or Other Permitted
Indebtedness;
(ii) Company may make Restricted Junior Payments with respect
to Company Common Stock not to exceed in any Fiscal Year, the lesser of
20% of Consolidated Net Income for such Fiscal Year and $15 million;
(iii) Company may repurchase Company Common Stock in an amount
not to exceed in any Fiscal Year $15 million for purposes of
establishing or contributing to an employee compensation plan; provided
that any such repurchased Company Common Stock resold to employees of
Company shall, to the extent of the price paid for such Company Common
Stock by such employee, be excluded from the calculation of the $15
million limit set forth above;
(iv) Company may apply Equity Proceeds to prepay Designated
Indebtedness;
(v) Company and AFL III shall be permitted to consummate the
AFL III Restructuring; and
(vi) Company may repurchase or redeem all or any portion of
the Senior Notes for aggregate cash consideration not to exceed, when
aggregated with any "change of control" put payments arising as a
result of the Holding Company Reorganization, $75,000,000; provided
that, (A) after giving effect to the proposed repurchase or redemption,
Company shall have not less than $150,000,000 in Cash or Cash
Equivalents on its balance sheet and (B) the Leverage Ratio (calculated
on a pro
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forma basis as if the proposed repurchase or redemption had been
consummated on the last day of the most recent four fiscal quarter
period) shall not exceed the lower of 4.25:1.00 or the ratio required
to be met in accordance with subsection 6.6B for the immediately
succeeding fiscal quarter end.
6.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio
of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for
the four fiscal quarter period ending as of the last day of any fiscal quarter
of Company set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
==================================================================
FISCAL QUARTER ENDING MINIMUM INTEREST
COVERAGE RATIO
==================================================================
<S> <C>
March 31, 2000 2.10:1.00
June 30, 2000 2.10:1.00
September 30, 2000 2.20:1.00
December 31, 2000 2.20:1.00
March 31, 2001 2.40:1.00
June 30, 2001 2.40:1.00
September 30, 2001 2.50:1.00
December 31, 2001 2.50:1.00
March 31, 2002 2.50:1.00
June 30, 2002 2.50:1.00
September 30, 2002 2.50:1.00
December 31, 2002 2.50:1.00
March 31, 2003 2.50:1.00
June 30, 2003 2.75:1.00
September 30, 2003 2.75:1.00
December 31, 2003 2.75:1.00
March 31, 2004 2.75:1.00
June 30, 2004 2.75:1.00
September 30, 2004 2.75:1.00
December 31, 2004 2.75:1.00
</TABLE>
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<TABLE>
<CAPTION>
==================================================================
FISCAL QUARTER ENDING MINIMUM INTEREST
COVERAGE RATIO
==================================================================
<S> <C>
March 31, 2005 2.75:1.00
</TABLE>
B. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of (i)
Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Company in excess of $25 million as of such date) plus seven
times Consolidated Rental Payments (for the four fiscal quarter period ending
with the most recently ended fiscal quarter) to (ii) Consolidated Adjusted
EBITDA plus Consolidated Rental Payments for the four fiscal quarter period
ending as of the last day of any fiscal quarter of Company set forth below to
exceed the correlative ratio indicated:
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<TABLE>
<CAPTION>
===========================================================
FISCAL QUARTER ENDING MAXIMUM
LEVERAGE
RATIO
===========================================================
<S> <C>
March 31, 2000 4.75:1.00
June 30, 2000 4.75:1.00
September 30, 2000 4.75:1.00
December 31, 2000 4.75:1.00
March 31, 2001 4.75:1.00
June 30, 2001 4.50:1.00
September 30, 2001 4.50:1.00
December 31, 2001 4.50:1.00
March 31, 2002 4.50:1.00
June 30, 2002 4.50:1.00
September 30, 2002 4.50:1.00
December 31, 2002 4.25:1.00
March 31, 2003 4.25:1.00
June 30, 2003 4.25:1.00
September 30, 2003 4.25:1.00
December 31, 2003 4.00:1.00
March 31, 2004 4.00:1.00
June 30, 2004 4.00:1.00
September 30, 2004 4.00:1.00
December 31, 2004 3.75:1.00
March 31, 2005 3.75:1.00
</TABLE>
C. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit
Consolidated Net Worth at any time during any of the periods set forth below to
be less than the correlative amount indicated:
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<TABLE>
<CAPTION>
=============================================================================
FISCAL QUARTER ENDING MINIMUM CONSOLIDATED
NET WORTH
=============================================================================
<S> <C>
March 31, 2000 $300 million
June 30, 2000 $300 million
September 30, 2000 $325 million
December 31, 2000 $325 million
March 31, 2001 $350 million
June 30, 2001 $350 million
September 30, 2001 $350 million
December 31, 2001 $350 million
March 31, 2002 $400 million
June 30, 2002 $400 million
September 30, 2002 $400 million
December 31, 2002 $400 million
March 31, 2003 $450 million
June 30, 2003 $450 million
September 30, 2003 $450 million
December 31, 2003 $450 million
March 31, 2004 $450 million
June 30, 2004 $450 million
September 30, 2004 $450 million
December 31, 2004 $450 million
March 31, 2005 $450 million
</TABLE>
6.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS; NEW
SUBSIDIARIES.
Company shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of,
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in one transaction or a series of transactions, all or any part of its business,
property or fixed assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or any portion of the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any Person or
any division or line of business of any Person, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly owned Subsidiary of Company that has entered into
a valid and effective guaranty and security agreement to the extent
required by subsection 5.9, or be liquidated, wound up or dissolved, or
all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction
or a series of transactions, to Company or any such wholly owned
Subsidiary of Company; provided that, in the case of such a merger,
Company or such wholly owned Subsidiary shall be the continuing or
surviving corporation;
(ii) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof;
(iii) subject to subsection 6.13, Company and its Subsidiaries
may make Asset Sales of assets having a fair market value not in excess
of $100 million in any Fiscal Year or $500 million in the aggregate;
provided that (w) with respect to the sale of any Financed Aircraft,
the cash proceeds of the sale of such Financed Aircraft are sufficient
to repay in full the Notes associated with such Financed Aircraft; (x)
the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied as required by subsection 2.4B(iii)(a);
(iv) Company may lease or transfer any Financed Aircraft to
the extent expressly permitted by Section 4(d) of the First Aircraft
Chattel Mortgage with respect to such Financed Aircraft or as
contemplated by subsection 9.21;
(v) Company may make acquisitions of the capital stock of
another Person or all or substantially all of the assets of a division
or line of business of another Person provided that, (a) the
acquisition primarily involves the acquisition of assets to be used in
the business of Company, (b) if such acquisition is structured as a
merger or as a stock or other equity acquisition, then either (i) the
Person so acquired becomes a wholly owned Subsidiary of the Company or
(ii) such Person is merged with and into the Company or a wholly owned
Subsidiary of the Company (with the Company or such wholly owned
Subsidiary being the surviving corporation of such merger), (c) if such
acquisition is structured as an asset acquisition, then such assets are
acquired either by the Company directly or by a wholly owned Subsidiary
of Company, (d) to
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the extent required by subsection 5.9, such wholly owned Subsidiary of
Company shall execute a guaranty of the Obligations and Company or such
wholly owned Subsidiary of Company shall grant a security interest in
the assets acquired to Administrative Agent for the benefit of Lenders
which may be subordinate to debt incurred in such acquisition, (e)
immediately before and after giving effect thereto, no Potential Event
of Default or Event of Default shall have occurred and be continuing,
(f) immediately after giving effect to the acquisition, Company shall
be in compliance on a Pro Forma Basis with financial covenants in
subsection 6.6 and such compliance shall be evidenced by an Officer's
Certificate demonstrating such compliance, (g) Administrative Agent
shall have reviewed and be reasonably satisfied with the nature and
amount of all contingent liabilities or other liabilities not on the
balance sheet of Company assumed in connection with such acquisition
and (h) the aggregate amount of cash payments made in connection with
all such acquisitions, other than with the proceeds from sales or
issuances of equity by Company, does not exceed $100,000,000;
(vi) Company and its Subsidiaries may make Consolidated
Capital Expenditures in connection with the purchase of up to twelve
Eligible Aircraft during each Fiscal Year, such number of Eligible
Aircraft permitted during any Fiscal Year to be increased by any number
of Eligible Aircraft permitted to be purchased, but not purchased,
during the previous Fiscal Year (but in no event shall any such number
of Eligible Aircraft once carried forward to the next Fiscal Year be
carried forward to any Fiscal Year thereafter) together with
Consolidated Capital Expenditures with respect to the acquisition, in
the normal course of business, of spare parts and spare engines
associated with such Eligible Aircraft;
(vii) Company and its Subsidiaries may make Consolidated
Capital Expenditures with respect to maintenance of aircraft in the
normal course of business;
(viii) Company and its Subsidiaries may make other
Consolidated Capital Expenditures not in excess of $10 million during
any Fiscal Year; provided that, any amount of such other Consolidated
Capital Expenditures permitted, but not made, in any Fiscal Year may be
carried forward to and made during the immediately succeeding Fiscal
Year (but no amount once carried forward to the next Fiscal Year may be
carried forward to any Fiscal Year thereafter);
(ix) Company and AFL III shall be permitted to consummate the
AFL III Restructuring;
(x) Company shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and
operations to Colorado; provided that the aggregate consideration paid
with respect to the acquisition of assets shall be in an amount not to
exceed $20 million; and
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(xi) the Holding Company Reorganization shall be permitted so
long as in connection therewith Company complies with, and causes
Holding Company to comply with, subsection 5.9 hereof.
6.8 AMENDMENTS OF MATERIAL AGREEMENTS.
Company shall not permit (i) the certificate or articles of
incorporation or bylaws of any Loan Party to be amended or otherwise modified in
any manner which could reasonably be expected to have a Material Adverse Effect
or (ii) any Material Agreement to be amended or otherwise modified in any manner
with respect to any provision providing material representations and warranties
to Company, indemnification rights to Company, or limiting Company's remedies or
rights upon the other party to such agreements failure to perform or which could
otherwise reasonably be expected to have Material Adverse Effect on the value of
any Financed Aircraft.
6.9 RESTRICTION ON LEASES.
Company shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a guarantor or
other surety, for the obligations of the lessee under any lease, whether an
Operating Lease or a Capital Lease (other than intercompany leases between
Company and its wholly owned Subsidiaries); provided however that Company may
become so obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments at the time in effect during the then current
Fiscal Year do not exceed $35 million plus the amount of Consolidated Rental
Payments made during such Fiscal Year in respect of up to six 747-400F aircraft
subject to Operating Leases as of the Fourth Restatement Date plus the amount of
Consolidated Rental Payments in respect of up to two 747-400F aircraft per year,
subject to the agreement dated June 9, 1997 between Company and The Boeing
Company regarding the purchase of twelve new 747-400F aircraft and the option to
purchase eight additional new 747-400F aircraft, plus an amount not to exceed
$15 million during any Fiscal Year, equal to Consolidated Rental Payments
incurred in connection with sale and leaseback transactions described in
subsection 6.10, plus Consolidated Rental Payments assumed pursuant to
acquisitions permitted under subsection 6.7(v). Notwithstanding the foregoing,
the AFL III Leases shall be permitted hereunder and shall not be taken into
account for purposes of determining compliance with the foregoing provisions of
this subsection 6.9.
6.10 SALES AND LEASE-BACKS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than
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Company or any of its Subsidiaries) or (ii) which Company or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Company or any of its
Subsidiaries to any Person (other than Company or any of its Subsidiaries) in
connection with such lease; provided that Company and its Subsidiaries may
become and remain liable as lessee, guarantor or other surety with respect to
any such lease if and to the extent that Company or any of its Subsidiaries
would be permitted to enter into, and remain liable under, such lease under
subsection 6.9. Notwithstanding the foregoing provisions of this subsection
6.10, this subsection 6.10 shall not restrict or prohibit in any manner
consummation of the AFL III Restructuring.
6.11 SALE OR DISCOUNT OF RECEIVABLES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.
6.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate Holding Company; provided that the foregoing
restrictions shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Company and its
Subsidiaries, (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Company or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Company, (iii) transactions contemplated in connection with the AFL
III Restructuring or (iv) the Holding Company Reorganization.
6.13 DISPOSAL OF SUBSIDIARY STOCK.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law or to a wholly owned Subsidiary of Company;
or
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to Company, another wholly owned
Subsidiary of Company, or to qualify directors if required by
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applicable law.
Notwithstanding the foregoing, AFL III shall be permitted to issue preferred
stock in an amount not to exceed $100,000 to a third party.
6.14 CONDUCT OF BUSINESS.
From and after the Fourth Restatement Date, Company shall not, and
shall not permit any of its Subsidiaries to, engage in any business other than
(i) the businesses engaged in by Company and its Subsidiaries on the Fourth
Restatement Date and similar or related businesses and (ii) such other lines of
business as may be consented to by Requisite Lenders.
6.15 CHANGE OF CHIEF EXECUTIVE OFFICE.
Company shall not, and shall not permit any of its Subsidiaries to,
change its chief executive office without giving 30 days' prior written notice
to the Administrative Agent.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; or failure by Company to pay
any interest on any Loan or any fee or any other amount due under this Agreement
within five days after the date due; or
7.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness (other than Indebtedness referred to in subsection 7.1) in an
individual principal amount of $5 million or more or any items of Indebtedness
with an aggregate principal amount of $10 million or more or (b) any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million or
more, in each case beyond the end of any grace period provided therefor; or (ii)
breach or default by Company or any of its Subsidiaries with respect to any
other material term of (a) any evidence of any Indebtedness in an individual
principal amount of $5 million or more or any items of Indebtedness with an
aggregate principal amount of $10 million or more or any Contingent Obligation
in an individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or (b) any
loan agreement, mortgage, indenture or other agreement relating to such
Indebtedness or Contingent Obligation(s), if the effect of such breach or
default is to cause, or to permit the
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holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee
on behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may be
(upon the giving or receiving of notice, lapse of time, both, or otherwise);
provided that the foregoing shall not apply to Indebtedness under the AFL III
Financing Agreement; or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of Company to perform or comply in any material respect with
any term or condition contained in subsection 2.5 or 5.2 or subsection 6.1, 6.2
(as it relates to prohibitions on Liens on Financed Aircraft), 6.5, 6.7 (as it
relates to the sale of any Financed Aircraft or all or substantially all of the
assets of Company or to the merger of Company into any other Person), 6.8, 6.10
and 6.13 of this Agreement or in clauses (i) and (ii) of Section 4(c), Section
4(d) or Section 4(g) of any First Aircraft Chattel Mortgage; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
(i) Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 7,
and such default shall not have been remedied or waived (x) within 15 days after
the earlier of (a) an officer of Company becoming aware of such default or (b)
receipt by Company of notice from Administrative Agent or any Lender of such
default or (y) with respect to a default under subsection 6.6, the earlier of
(a) an officer of Company becoming aware of the default after the applicable
measurement date and (b) the delivery of financial statements pursuant to
subsection 5.1 or (ii) a guaranty, if any, of the Obligations for any reason
ceases to be in full force and effect; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Company or any of its material Subsidiaries under the Bankruptcy Code or
under any other
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applicable bankruptcy, insolvency or similar law now or hereafter in effect; or
a decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Company or any of its Subsidiaries, or over
all or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver, trustee
or other custodian of Company or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Subsidiaries, and any such event described in
this clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Company or any of its material Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due; or the Board of
Directors of Company or any of its Subsidiaries (or any committee thereof) shall
adopt any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $5 million or (ii)
in the aggregate at any time an amount in excess of $10 million (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or
in any event later than five days prior to the date of any proposed sale
thereunder); or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any
of its material Subsidiaries decreeing the dissolution or split up of Company or
that Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 30 days; or
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7.10 CHANGE IN CONTROL.
(i) (a) Permitted Holders shall cease to beneficially own and control
shares of capital stock of Company representing at least 30% of the combined
voting power of all Securities of Company entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons acting
in concert (in any such case, excluding Permitted Holders) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act), directly or indirectly, of
Securities of Company (or other Securities convertible into such Securities)
representing 20% or more of the combined voting power of all Securities of
Company entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency or (c) the
Board of Directors of Company shall not consist of a majority Continuing
Directors or (ii) a "Change of Control" shall occur under any of the Pass
Through Trust Documents, any of the Senior Note Documents or any other Material
Agreement (as in effect on the date of such occurrence); provided that,
following consummation of the Holding Company Reorganization (x) the references
in clause (i) above to Company shall be deemed to be reference to the Holding
Company and (y) it shall also be an Event of Default if at any time Holding
Company ceases to own directly or indirectly 100% of the outstanding Securities
of Company; provided further, that an Event of Default under clause (ii) above
arising as a result of the Holding Company Reorganization shall not constitute
an "Event of Default"; provided further, that in the event that Permitted
Holders cease to own 30% of the combined voting power of all Securities of
Company (or the Holding Company, as the case may be) because of the issuance of
Securities of Company (or the Holding Company, as the case may be) (as opposed
to the Permitted Holders selling Securities) then the failure to maintain the
30% ownership level shall not constitute an Event of Default unless the
Permitted Holders shall cease to own shares of capital stock constituting 25% of
the combined voting power of all Securities of Company (or the Holding Company,
as the case may be); or
7.11 FAILURE OF SECURITY.
Upon execution and delivery thereof, any Collateral Document shall, at
any time, cease to be in full force and effect (other than by reason of a
release of Collateral thereunder in accordance with the terms hereof or thereof,
the satisfaction in full of the Obligations or any other termination of such
Collateral Document in accordance with the terms hereof or thereof) or shall be
declared null and void, or the validity or enforceability thereof shall be
contested in writing by any Loan Party, or Administrative Agent shall not have
or shall cease to have a valid security interest in any Collateral purported to
be covered thereby, perfected and with the priority required by the relevant
Collateral Document, for any reason other than the failure of Administrative
Agent or any Lender to take any action within its control, subject only to Liens
permitted under the applicable Collateral Documents; or
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7.12 CERTIFICATED AS AIR CARRIER.
Company for any reason ceases to be a United States Citizen or to hold
an air carrier operating certificate under the Federal Aviation Act for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo; or
7.13 MATERIAL AGREEMENTS.
Any Material Agreement, other than any Approved Lease, shall at any
time be terminated other than by its terms or cease to be in full force and
effect other than by its terms, or any party to the Modification Agreement or
any Purchase Agreement shall default in the observance or performance of any
material covenants or agreements contained in any such agreement; or
7.14 "CHANGE OF CONTROL" PUT PAYMENTS.
Company becomes obligated to make any "change of control" put payments
in connection with the Holding Company Reorganization that, when aggregated with
all payments made under subsection 6.5(vi), exceed $75,000,000 or, after giving
effect to such "change of control" put payments, (A) Company shall have less
than $150,000,000 in Cash or Cash Equivalents on its balance sheet or (B) its
Leverage Ratio (calculated on a pro forma basis as if the proposed payment had
been consummated on the last day of the most recent four fiscal quarter period)
shall exceed the lower of 4.25:1.00 or the ratio to be met in accordance with
subsection 6.6B for the immediately succeeding fiscal quarter end:
THEN (i) upon the occurrence of any Event of Default described in subsection 7.6
or 7.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans and (b) all other Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Company, and the obligation of
each Lender to make any Loan shall thereupon terminate and (ii) upon the
occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written consent
of Requisite Lenders, by written notice to Company, declare all or any portion
of the amounts described in clauses (a) and (b) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender
to make any Loan shall thereupon terminate.
Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
such paragraph Company shall pay all arrears of interest and all payments on
account of principal which shall have become due otherwise than as a result of
such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Events of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest on the Loans, in each case which is due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to subsection 9.6, then Requisite Lenders,
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by written notice to Company, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to bind
Lenders to a decision which may be made at the election of Requisite Lenders and
are not intended to benefit Company and do not grant Company the right to
require Lenders to rescind or annul any acceleration hereunder, even if the
conditions set forth herein are met.
SECTION 8.
AGENT
8.1 APPOINTMENT.
Bankers Trust is hereby appointed Administrative Agent hereunder and
under the other Loan Documents and each Lender hereby authorizes Administrative
Agent to act as its agent in accordance with the terms of this Agreement and the
other Loan Documents. Administrative Agent agrees to act upon the express
conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 8 are solely for the benefit of
Administrative Agent and Lenders and Company shall have no rights as a third
party beneficiary of any of the provisions thereof. In performing its functions
and duties under this Agreement, Administrative Agent shall act solely as an
agent of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Company or any
of its Subsidiaries.
8.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes
Administrative Agent to take such action on such Lender's behalf and to exercise
such powers, rights and remedies hereunder and under the other Loan Documents as
are specifically delegated or granted to Administrative Agent by the terms
hereof and thereof, together with such powers, rights and remedies as are
reasonably incidental thereto. Administrative Agent shall have only those duties
and responsibilities that are expressly specified in this Agreement and the
other Loan Documents. Administrative Agent may exercise such powers, rights and
remedies and perform such duties by or through its agents or employees.
Administrative Agent shall not have, by reason of this Agreement or any of the
other Loan Documents, a fiduciary relationship in respect of any Lender; and
nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon
Administrative Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Administrative Agent shall
not be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in
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any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by
Administrative Agent to Lenders or by or on behalf of Company to Administrative
Agent or any Lender in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of
Company or any other Person liable for the payment of any Obligations, nor shall
Administrative Agent be required to ascertain or inquire as to the performance
or observance of any of the terms, conditions, provisions, covenants or
agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any Event
of Default or Potential Event of Default. Anything contained in this Agreement
to the contrary notwithstanding, Administrative Agent shall not have any
liability arising from confirmations of the amount of outstanding Loans or the
component amounts thereof.
C. EXCULPATORY PROVISIONS. Neither of Administrative Agent nor any of
its officers, directors, partners, employees or agents shall be liable to
Lenders for any action taken or omitted by Administrative Agent under or in
connection with any of the Loan Documents except to the extent caused by
Administrative Agent's gross negligence or willful misconduct. If Administrative
Agent shall request instructions from Lenders with respect to any act or action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents, Administrative Agent shall be entitled to
refrain from such act or taking such action unless and until Administrative
Agent shall have received instructions from Requisite Lenders. Without prejudice
to the generality of the foregoing, (i) Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any communication,
instrument or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and shall be entitled to rely
and shall be protected in relying on opinions and judgments of attorneys (who
may be attorneys for Company and its Subsidiaries), accountants, experts and
other professional advisors selected by it; and (ii) no Lender shall have any
right of action whatsoever against Administrative Agent as a result of
Administrative Agent acting or (where so instructed) refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders. Administrative Agent shall be entitled to
refrain from exercising any power, discretion or authority vested in it under
this Agreement or any of the other Loan Documents unless and until it has
obtained the instructions of Requisite Lenders.
D. ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, Administrative Agent in its individual
capacity as a Lender hereunder. With respect to its participations in the Loans,
Administrative Agent shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder, and the term "Lender" or
"Lenders" or any similar term shall, unless the context clearly otherwise
indicates, include Administrative Agent in its individual capacity.
Administrative Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust,
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financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company for services in connection with this Agreement
and otherwise without having to account for the same to Lenders.
8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans hereunder and that
it has made and shall continue to make its own appraisal of the creditworthiness
of Company and its Subsidiaries. Administrative Agent shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and Administrative Agent shall not have responsibility with respect
to the accuracy of or the completeness of any information provided to Lenders.
8.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent (and its respective affiliates and partners), to
the extent that Administrative Agent shall not have been reimbursed by Company,
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Loan Documents or otherwise in its
capacity as Administrative Agent, in any way relating to or arising out of this
Agreement or the other Loan Documents; provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Administrative Agent's gross negligence or willful misconduct.
8.5 COLLATERAL DOCUMENTS.
Without limiting the generality of subsection 8.1, each Lender hereby
further authorizes Administrative Agent to enter into the Collateral Documents
as secured party on behalf of and for the benefit of such Lender and agrees to
be bound by the terms of each of the Collateral Documents; provided that, except
as otherwise provided below, Administrative Agent shall not enter into or
consent to any amendment, modification, termination or waiver of any provision
contained in any Collateral Document without prior written consent of Requisite
Lenders. Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to
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realize upon any of the collateral under any Collateral Document, it being
understood and agreed that all powers, rights and remedies under the Collateral
Documents may be exercised solely by Administrative Agent for the benefit of
Lenders in accordance with the terms thereof. Each Lender hereby authorizes
Administrative Agent (i) to release or subordinate Collateral as permitted or
required under this Agreement or the Collateral Documents, and agrees that a
certificate executed by Administrative Agent evidencing such release of
Collateral shall be conclusive evidence of such release as to any third party
and (ii) to enter into any amendments of the Collateral Documents to cure any
ambiguity, defect or inconsistency or to amend provisions relating to
ministerial or administrative matters which do not materially adversely affect
the rights of the Lenders thereunder.
8.6 SUCCESSOR ADMINISTRATIVE AGENT.
Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Company. Upon any such notice of
resignation, Requisite Lenders shall have the right, upon consultation with
Company, to appoint a successor Administrative Agent. Upon the acceptance of any
appointment hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring or removed Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
SECTION 9.
MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
A. GENERAL. Each Lender shall have the right at any time to (i) sell,
assign or transfer to any Eligible Assignee, or (ii) sell participations to any
Person in, all or any part of its Commitments or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall, without the consent
of Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided, further that no
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until (a) an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 9.1B(ii) or (b) the sale,
assignment or transfer is made in accordance with subsection 9.21. Except as
otherwise provided in this subsection 9.1, no Lender shall, as between Company
and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or
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transfer of, or any granting of participations in, all or any part of its
Commitments or the Loans, or the other Obligations owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan or
other Obligation may (a) be assigned in any amount to another Lender,
or to an Affiliate of the assigning Lender or another Lender, with the
giving of notice to Company and Administrative Agent or (b) be assigned
in an aggregate amount of not less than $5,000,000 (or such lesser
amount as shall constitute the aggregate amount of the Commitments,
Loans, and other Obligations of the assigning Lender) to any other
Eligible Assignee with the giving of notice to Company and with the
consent of Administrative Agent and Company (which consent shall not be
unreasonably withheld). Any assignment of Loans hereunder shall effect
a pro rata assignment of the Notes with respect to each Financed
Aircraft. To the extent of any such assignment in accordance with
either clause (a) or (b) above, the assigning Lender shall be relieved
of its obligations with respect to its Commitments, Loans, or other
Obligations or the portion thereof so assigned. The parties to each
such assignment shall execute and deliver to Administrative Agent, for
its acceptance and recording in the Register, an Assignment Agreement,
together with a processing and recordation fee of $3,000 and such
forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under
such Assignment Agreement may be required to deliver to Administrative
Agent pursuant to subsection 2.7B(iii)(a); provided, however that such
processing fee shall not be required where the assignee is an existing
Lender. Upon such execution, delivery and acceptance, from and after
the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to
such Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and (z) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of
an Assignment Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The Commitments hereunder
shall be modified to reflect the Commitment of such assignee and any
remaining Commitment of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee substantially in the form of Exhibit IIIA
annexed hereto or Exhibit IIIB, as the case may be, with appropriate
insertions, to reflect the new Commitments and/or outstanding Loans, as
the case may be, of the assignee and/or the assigning Lender.
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(ii) Acceptance by Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing and recordation fee referred to
in subsection 9.1B(i) and any forms, certificates or other evidence
with respect to United States federal income tax withholding matters
that such assignee may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if
such Assignment Agreement has been completed and is in substantially
the form of Exhibit VII hereto and if Administrative Agent has
consented to the assignment evidenced thereby to the extent such
consent is required pursuant to subsection 9.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided
therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register and (c) give prompt notice thereof to
Company. Administrative Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this
subsection 9.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation, (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation
or (iii) a release of Collateral, and all amounts payable by Company hereunder
(including without limitation amounts payable to such Lender pursuant to
subsections 2.6D and 2.7) shall be determined as if such Lender had not sold
such participation. Company and each Lender hereby acknowledge and agree that,
solely for purposes of subsection 9.5, (a) any participation will give rise to a
direct obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
9.1, any Lender may assign and pledge all or any portion of its Loans, the other
Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 9.19.
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9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents; (ii) all the costs of
furnishing all opinions by counsel for Company (including without limitation any
opinions requested by Lenders as to any legal matters arising hereunder) and of
Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Administrative Agent in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and the Loans and any consents, amendments, waivers or other
modifications hereto or thereto and any other documents or matters requested by
Company; (iv) all the costs and expenses of creating and perfecting the Liens in
favor of Administrative Agent for the benefit of Lenders pursuant to the Loan
Documents, including filing and recording fees and expenses, title insurance,
fees and expenses of counsel for providing such opinions as Lenders may
reasonably request and fees and expenses of legal counsel to Administrative
Agent (including local counsel); (v) all other actual and reasonable costs and
expenses incurred by Administrative Agent in connection with the syndication of
the Commitments and the negotiation, preparation and execution of the Loan
Documents and the transactions contemplated hereby and thereby; provided that
such costs and expenses of syndication shall not exceed $10,000; and (vi) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Administrative Agent and Lenders in enforcing
any Obligations of or in collecting any payments due from Company hereunder or
under the other Loan Documents by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings.
9.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend, indemnify, pay and hold harmless Administrative Agent
and Lenders, and the officers, directors, partners, employees, agents and
affiliates of Administrative Agent and Lenders (collectively called the
"INDEMNITIES") from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for such Indemnities in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
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statutes, rules or regulations (including without limitation securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner relating
to or arising out of this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including without limitation
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds of any of the Loans) or the statements contained in the commitment
letter delivered by any Lender to Company with respect thereto (collectively
called the "INDEMNIFIED LIABILITIES"); provided that Company shall not have any
obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise solely from the
gross negligence or willful misconduct of that Indemnitee as determined by a
final judgment of a court of competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Company shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them.
9.4 SET-OFF.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Company at any time or from
time to time, without notice to Company or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other Indebtedness at any time held or
owing by that Lender to or for the credit or the account of Company against and
on account of the obligations and liabilities of Company to that Lender under
this Agreement, the Notes, and the other Loan Documents, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement, the Notes, or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due hereunder
shall have become due and payable pursuant to Section 7 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.
9.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment, by realization upon security, through the exercise
of any right of set-off or banker's lien, by counterclaim or cross action or by
the enforcement of any right under the Loan Documents or otherwise, or as
adequate protection of a deposit treated as cash collateral under the Bankruptcy
Code, receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to that Lender
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hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. Company expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
9.6 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of any provision
of this Agreement or of the Notes, or consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes any Lender's Pro Rata
Share; changes in any manner the definition of "Requisite Lenders"; changes in
any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the Final
Scheduled Maturity Date (but not the date of any scheduled installment of
principal) of any of the Loans; postpones the date on which any interest or any
fees are payable; decreases the interest rate borne by any of the Loans (other
than any waiver of any increase in the interest rate applicable to any of the
Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder;
increases the maximum duration of Interest Periods permitted hereunder; releases
all or substantially all of the Collateral; or changes in any manner the
provisions contained in subsection 7.1 or this subsection 9.6 shall be effective
only if evidenced by a writing signed by or on behalf of all Lenders to whom are
owed Obligations being directly affected by such amendment, modification,
termination, waiver or consent. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 3 shall be
effective only if evidenced by a writing signed by or on behalf of
Administrative Agent and Requisite Lenders, (ii) no amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the Lender which is the holder of that Note, (iii) no
increase in the Commitments of any Lender over the amount thereof then
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in effect shall be effective without the written concurrence of that Lender, it
being understood and agreed that in no event shall waivers or modifications of
conditions precedent, covenants, Events of Default, Potential Events of Default
or of a mandatory prepayment or a reduction of any or all of the Commitments be
deemed to constitute an increase of the Commitment of any Lender and that an
increase in the available portion of any Commitment of any Lender shall not be
deemed to constitute an increase in the Commitment of such Lender, and (iv) no
amendment, modification, termination or waiver of any provision of Section 7 or
of any other provision of this Agreement which, by its terms, expressly requires
the approval or concurrence of Administrative Agent shall be effective without
the written concurrence of Administrative Agent. Administrative Agent may, but
shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of that Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Company in
any case shall entitle Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 9.6 shall be binding upon
each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company. Notwithstanding anything in this subsection 9.6A to the
contrary, the Notes and Aircraft Chattel Mortgages may be amended in the manner
and for the purposes set forth in subsection 9.21 without the consents required
by this subsection 9.6A.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 9.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other amounts
owed to such Lender through such date of termination, (ii) another financial
institution satisfactory to Company and Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of Administrative
Agent (or if Administrative Agent is also the Lender to be terminated, the
successor Administrative Agent) to evidence the substitution of such Lender
shall have been received and approved by Administrative Agent as of such date.
9.7 INDEPENDENCE OF COVENANTS.
All covenants under this Agreement shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another
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covenant shall not avoid the occurrence of an Event of Default or Potential
Event of Default if such action is taken or condition exists.
9.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Administrative Agent shall not
be effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 9.2, 9.3
and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and 9.5
shall survive the payment of the Loans, and the termination of this Agreement.
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Administrative Agent or any Lender
in the exercise of any power, right or privilege hereunder or under any other
Loan Document shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
9.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of set-off, and
such
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payment or payments or the proceeds of such enforcement or set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, any other state or federal law, common law or any
equitable cause, then, to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be revived and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
set-off had not occurred.
9.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
9.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
9.14 HEADINGS.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.15 APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to
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subsection 9.1). Neither Company's rights or obligations hereunder nor any
interest therein may be assigned or delegated by Company without the prior
written consent of all Lenders.
9.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION (SUBJECT TO ANY RIGHT TO APPEAL TO A COURT IN THE STATE OF NEW YORK).
Company hereby agrees that service of all process in any such proceeding in any
such court may be made by registered or certified mail, return receipt
requested, to Company at its address provided in subsection 9.8, such service
being hereby acknowledged by Company to be sufficient for personal jurisdiction
in any action against Company in any such court and to be otherwise effective
and binding service in every respect. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
any Lender to bring proceedings against Company in the courts of any other
jurisdiction.
9.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
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ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
9.19 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may make disclosures to any Person who
evaluates, approves, structures or administers the Loans on behalf of a Lender
and who is subject to this confidentiality provision, or, reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participation therein or as required or requested by any governmental or
regulatory agency (including, without limitation, the National Association of
Insurance Commissioners) or representative thereof or pursuant to legal process
or in accordance with any applicable law or regulation; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify Company of any request by any governmental or regulatory agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental or
regulatory agency) for disclosure of any such non-public information prior to
disclosure of such information; and provided, further that in no event shall any
Lender be obligated or required to return any materials furnished by Company or
any of its Subsidiaries.
9.20 COUNTERPARTS; EFFECTIVENESS; EFFECT IF AGREEMENT DOES NOT BECOME
EFFECTIVE.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof and the satisfaction (or waiver) of each of
the conditions set forth in subsection 3.1. Until this Agreement becomes
effective, the Existing Agreement remains in full force and effect and, in the
event this Agreement does not become effective on or before April 18, 2000, the
execution and delivery of this Agreement shall be disregarded and this Agreement
shall be deemed null
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and void for all purposes.
9.21 COOPERATION IN REFINANCING, SYNDICATION AND ASSIGNMENT.
Company, Administrative Agent and Lenders agree that, in connection
with the refinancing, syndication or assignment of the Notes, to the extent
deemed reasonably necessary by Company or Administrative Agent, some or all of
the Financed Aircraft may be transferred to a Special Purpose Subsidiary which
will lease such aircraft to Company under arrangements reasonably acceptable to
Company and Administrative Agent all in a manner designed to retain the economic
obligations and benefits of the Company, Administrative Agent and Lenders
hereunder and under the other Loan Documents. Company, Administrative Agent and
Lenders further agree that, in connection with an assignment of Loans and Notes
to a Person who will not become a Lender hereunder, Administrative Agent and
Lenders shall agree to any amendments to the Loans and Notes to be assigned and
the related Aircraft Chattel Mortgages and/or releases of the related First
Aircraft Chattel Mortgage and Second Aircraft Chattel Mortgage, in each case, as
requested by Company; provided that the terms of such amended Notes and Aircraft
Chattel Mortgages do not violate any term of this Agreement and provided,
further, that such amendments shall be effective only upon and simultaneous with
(i) the assignment of such Notes and Aircraft Chattel Mortgages to such Person,
(ii) indefeasible payment in full to Lenders of an amount equal to all amounts
owing under such Notes and (iii) releases from any liability relating to such
Notes and Aircraft Chattel Mortgages of Administrative Agent and Lenders in form
and substance satisfactory to Administrative Agent. Assignments made in
accordance with the foregoing sentence will result in such assigned Loans and
Notes being deemed not "outstanding" hereunder and such assigned Loans and Notes
will not reduce the Revolving Loan Commitments of the Lenders otherwise
available hereunder.
9.22 REPLACEMENT ENGINES.
A. ENGINES. So long as no Event of Default or Potential Event of
Default has occurred and is continuing, Company may, upon not less than five (5)
Business Days prior written notice to Administrative Agent, replace any Engine
which is the subject of an Aircraft Chattel Mortgage with another engine (the
"Replacement Engine") meeting the requirements of the applicable Aircraft
Chattel Mortgage. In addition to the preceding sentence, any Replacement Engine
shall be an engine that is the same or improved make and model as the Engine to
be replaced, and that is suitable for installation and use on any Airframe, and
that has a value, utility and remaining useful life (including with respect to
hours and cycles remaining until overhaul) at least equal to the Engine to be
replaced thereby.
The Lenders agree to release the Lien created by the
applicable Aircraft Chattel Mortgage for any Engine to be replaced by a
Replacement Engine promptly upon (i) presentation by Company of documentation
necessary to create a legal, valid and enforceable first priority security
interest in and to the Replacement Engine, (ii) delivery to Administrative
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Agent of an opinion of Cahill Gordon & Reindel, or such other counsel as may be
acceptable to Administrative Agent, confirming that Administrative Agent will
continue to be entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to such Replacement Engine free of all Liens (other than Permitted
Encumbrances) and (iii) receipt of all other deliveries required by Section
4(f)(iii) of the applicable Aircraft Chattel Mortgage.
B. Further Assurances. Company shall, in addition to the actions
required by the preceding subsection 9.21 A, take all necessary actions to
provide that Administrative Agent will continue to be entitled to the benefits
of Section 1110 of the Bankruptcy Code with respect to each Replacement Engine,
free of all Liens (other than Permitted Encumbrances).
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
ATLAS AIR, INC.
By: ______________________________________
Name:
Title:
Notice Address:
538 Commons Drive
Golden, Colorado 80401
Attention: Thomas G. Scott
Senior Vice President,
General Counsel and Secretary
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY,
as Administrative Agent and Lender
By: ______________________________________
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE>
LENDERS:
CITY NATIONAL BANK
By: ______________________________________
Name:
Title:
Notice Address:
400 North Roxbury Drive
Third Floor
Beverly Hills, California 90210
Attention: James Benko
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<PAGE>
FIRST SECURITY BANK
By: ______________________________________
Name:
Title:
Notice Address:
15 East 100 South St.
Second Floor
Salt Lake City, Utah 84111
Attention: Judy Callister
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<PAGE>
FLEET NATIONAL BANK
By: ______________________________________
Name:
Title:
Notice Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Margot Downing
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<PAGE>
GMAC COMMERCIAL CREDIT LLC
By: ______________________________________
Name:
Title:
Notice Address:
1290 Avenue of the Americas
New York, New York 10104
Attention: Frank Imperato
Senior Vice President
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<PAGE>
IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
By: ______________________________________
Name:
Title:
Notice Address:
9920 South La Cienega Boulevard
14th Floor, Department 2405
Inglewood, California 90301
Attention: Ray Vadalma
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<PAGE>
NORWEST BANK COLORADO NATIONAL ASSOCIATION
By: ______________________________________
Name:
Title:
Notice Address:
1740 Broadway
Denver, Colorado 80274
Attention: Darlene Evans
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<PAGE>
SUMMIT BANK
By: ______________________________________
Name:
Title:
Notice Address:
750 Walnut Avenue
Aircraft Department, Third Floor
Cranford, New Jersey 07016
Attention: Robert Ewing
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<PAGE>
TRANSAMERICA BUSINESS CREDIT CORP.
By: ______________________________________
Name:
Title:
Notice Address:
555 Theodore Fremd Avenue
C301
Rye, New York 10580
Attention: Michael Kerneklian
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<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: ______________________________________
Name:
Title:
Notice Address:
350 California Street
6th Floor
San Francisco, California 94104
Attention: Alison Mason
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<PAGE>
UNION PLANTERS BANK N.A.
By: ______________________________________
Name:
Title:
Notice Address:
2800 Ponce De Leon Boulevard
9th Floor
Coral Gables, Florida 33134
Attention: Carlos Rodriguez
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<PAGE>
U.S. BANK
By: ______________________________________
Name:
Title:
Notice Address:
918 Seventeenth Street
Denver, Colorado 80202
Attention: Melissa Forbes
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[CONFORMED COPY]
===============================================================================
CREDIT AGREEMENT
among
ATLAS FREIGHTER LEASING III, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders
and
BANKERS TRUST COMPANY,
as Administrative Agent.
----------------------
Dated as of April 25, 2000
----------------------
$300,000,000
DEUTSCHE BANK SECURITIES, INC.
Lead Arranger
and
Book Manager
===============================================================================
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TABLE OF CONTENTS
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SECTION 1.
DEFINITIONS
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1.1 Certain Defined Terms..............................................................................1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement................21
1.3 Other Definitional Provisions.....................................................................21
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes; Register.....................................................21
A. COMMITMENTS................................................................................21
B. BORROWING MECHANICS........................................................................22
C. DISBURSEMENT OF FUNDS......................................................................23
D. NOTES......................................................................................23
E. THE REGISTER...............................................................................24
2.2 Interest on the Loans.............................................................................25
A. RATE OF INTEREST...........................................................................25
B. INTEREST PERIODS...........................................................................25
C. INTEREST PAYMENTS..........................................................................26
D. DEFAULT RATE...............................................................................26
E. COMPUTATION OF INTEREST....................................................................26
2.3 Fees..............................................................................................27
2.4 Repayments and Prepayments; General Provisions Regarding Payments.................................27
A. MANDATORY REDUCTION OF COMMITMENTS.........................................................27
B. SCHEDULED REPAYMENTS OF LOANS..............................................................27
C. PREPAYMENTS................................................................................28
D. GENERAL PROVISIONS REGARDING PAYMENTS......................................................32
2.5 Use of Proceeds...................................................................................33
A. APPLICATION OF PROCEEDS....................................................................33
B. MARGIN REGULATIONS.........................................................................33
2.6 Special Provisions Governing Loans................................................................33
A. DETERMINATION OF APPLICABLE INTEREST RATE..................................................33
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE............................................33
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C. ILLEGALITY OR IMPRACTICABILITY OF LOANS....................................................34
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS..........................34
E. BOOKING OF LOANS...........................................................................35
F. ASSUMPTIONS CONCERNING FUNDING OF LOANS....................................................35
G. SUBSTITUTE BASIS...........................................................................35
2.7 Increased Costs, Taxes; Capital Adequacy..........................................................36
A. COMPENSATION FOR INCREASED COSTS AND TAXES.................................................36
B. WITHHOLDING OF TAXES.......................................................................37
C. CAPITAL ADEQUACY ADJUSTMENT................................................................40
D. SUBSTITUTE LENDERS.........................................................................40
2.8 Obligation of Lenders to Mitigate.................................................................41
SECTION 3.
CONDITIONS TO LOANS
3.1 Conditions to Loans...............................................................................41
A. BORROWER AND ATLAS DOCUMENTS...............................................................41
B. AIRCRAFT DOCUMENTS.........................................................................42
C. NOTICES OF BORROWING.......................................................................42
D. NECESSARY CONSENTS.........................................................................43
E. AIRCRAFT CHATTEL MORTGAGES.................................................................43
F. FAIRNESS OPINION...........................................................................43
G. FINANCIAL CONDITION CERTIFICATES...........................................................43
H. OPINIONS OF BORROWER'S COUNSEL.............................................................43
I. ATLAS CREDIT AGREEMENT; LEASES.............................................................44
J. OPINIONS OF FAA COUNSEL....................................................................44
K. FEES.......................................................................................44
L. FINANCIAL STATEMENTS.......................................................................44
M. EVIDENCE OF INSURANCE......................................................................44
N. NO MATERIAL ADVERSE EFFECT.................................................................45
O. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS..................................45
P. COMPLIANCE CERTIFICATE.....................................................................45
Q. TRANSACTION; REFINANCING...................................................................45
R. COMPLETION OF PROCEEDINGS..................................................................46
S. APPRAISALS.................................................................................46
T. FAA CERTIFICATION AND TITLE................................................................46
U. BANKRUPTCY-REMOTE SUBSIDIARY...............................................................46
SECTION 4.
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.....................47
</TABLE>
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A. ORGANIZATION AND POWERS....................................................................47
B. QUALIFICATION AND GOOD STANDING............................................................47
C. SUBSIDIARIES...............................................................................47
D. COLLATERAL DOCUMENTS.......................................................................47
4.2 Authorization of Borrowing, etc...................................................................48
A. AUTHORIZATION OF BORROWING.................................................................48
B. NO CONFLICT................................................................................48
C. GOVERNMENTAL CONSENTS......................................................................48
D. BINDING OBLIGATION.........................................................................48
4.3 Financial Condition...............................................................................48
4.4 No Material Adverse Change; No Restricted Junior Payments.........................................49
4.5 Title to Properties, Liens........................................................................49
4.6 Litigation, Adverse Facts.........................................................................50
4.7 Payment of Taxes..................................................................................50
4.8 Performance of Agreements.........................................................................50
4.9 Governmental Regulation...........................................................................51
4.10 Securities Activities.............................................................................51
4.11 Compliance with ERISA.............................................................................51
4.12 Certain Fees......................................................................................51
4.13 Environmental Protection..........................................................................51
4.14 Employee Matters..................................................................................52
4.15 Solvency..........................................................................................52
4.16 Disclosure........................................................................................52
4.17 Section 1110......................................................................................53
4.18 Special Purpose Corporation.......................................................................53
4.19 Transaction.......................................................................................53
4.20 Representations and Warranties in Documents.......................................................53
4.21 Leases............................................................................................53
SECTION 5.
BORROWER'S AFFIRMATIVE COVENANTS
5.1 Financial Statements and Other Reports............................................................54
5.2 Corporate Existence...............................................................................57
5.3 Payment of Taxes and Claims; Tax Consolidation....................................................57
5.4 Maintenance of Properties; Insurance..............................................................57
5.5 Inspection; Lender Meeting........................................................................58
5.6 Compliance with Laws, etc.........................................................................58
5.7 Environmental Indemnity...........................................................................58
5.8 Borrower's Remedial Action Regarding Hazardous Materials..........................................59
5.9 Maintenance Contracts.............................................................................59
5.10 Employee Benefit Plans............................................................................59
5.11 Further Assurances................................................................................59
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5.12 Performance of Obligations........................................................................59
5.13 Corporate Separateness............................................................................60
SECTION 6.
BORROWER'S NEGATIVE COVENANTS
6.1 Indebtedness......................................................................................61
6.2 Liens and Related Matters.........................................................................61
A. PROHIBITION ON LIENS.......................................................................61
B. NO NEGATIVE PLEDGES........................................................................61
6.3 Investments; Joint Ventures.......................................................................61
6.4 Contingent Obligations............................................................................61
6.5 Restricted Junior Payments........................................................................62
6.6 Restriction on Fundamental Changes, Asset Sales, Acquisitions, New Subsidiaries...................62
6.7 Amendments of Material Agreements.................................................................62
6.8 Restriction on Leases.............................................................................63
6.9 Transaction with Shareholders and Affiliates......................................................63
6.10 Conduct of Business...............................................................................63
SECTION 7.
EVENTS OF DEFAULT
7.1 Failure to Make Payments When Due.................................................................64
7.2 Default Under Lease...............................................................................64
7.3 Breach of Certain Covenants.......................................................................64
7.4 Breach of Warranty................................................................................64
7.5 Other Defaults Under Loan Documents...............................................................64
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc..............................................64
7.7 Voluntary Bankruptcy, Appointment of Receiver, etc................................................65
7.8 Judgments and Attachments.........................................................................65
7.9 Dissolution.......................................................................................65
7.10 Change in Control.................................................................................65
7.11 Failure of Security...............................................................................66
7.12 Loss of United States Citizen Status..............................................................66
SECTION 8.
THE ADMINISTRATIVE AGENT
8.1 Appointment.......................................................................................67
8.2 Powers and Duties; General Immunity...............................................................67
A. POWERS; DUTIES SPECIFIED...................................................................67
B. NO RESPONSIBILITY FOR CERTAIN MATTERS......................................................67
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C. EXCULPATORY PROVISIONS.....................................................................68
D. ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER.............................................68
8.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness...............69
8.4 Right to Indemnity................................................................................69
8.5 Collateral Documents..............................................................................69
8.6 Successor Administrative Agent....................................................................70
SECTION 9.
MISCELLANEOUS
9.1 Assignments and Participations in Loans...........................................................70
A. GENERAL....................................................................................70
B. ASSIGNMENTS................................................................................71
C. PARTICIPATIONS.............................................................................72
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS AND OTHERS............................................72
E. INFORMATION................................................................................73
9.2 Expenses..........................................................................................73
9.3 Indemnity.........................................................................................74
9.4 Set-Off...........................................................................................74
9.5 Ratable Sharing...................................................................................75
9.6 Amendments and Waivers............................................................................75
9.7 Independence of Covenants.........................................................................77
9.8 Notices...........................................................................................77
9.9 Survival of Representations, Warranties and Agreements............................................77
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.............................................78
9.11 Marshalling; Payments Set Aside...................................................................78
9.12 Severability......................................................................................78
9.13 Obligations Several; Independent Nature of Lenders' Rights........................................78
9.14 Headings..........................................................................................79
9.15 Applicable Law....................................................................................79
9.16 Successors and Assigns............................................................................79
9.17 Consent to Jurisdiction and Service of Process....................................................79
9.18 Waiver of Jury Trial..............................................................................80
9.19 Confidentiality...................................................................................80
9.20 Counterparts; Effectiveness.......................................................................81
9.21 Replacement Engines and Airframes.................................................................81
A. ENGINES....................................................................................81
B. AIRFRAMES..................................................................................82
C. FURTHER ASSURANCES.........................................................................82
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SCHEDULES
2.1 LENDER'S COMMITMENTS
2.2 MAXIMUM LOAN AMOUNTS FOR AIRCRAFT AND SPARE ENGINE POOLS
EXHIBITS
I FORM OF NOTICE OF BORROWING
IIA FORM OF TRANCHE A NOTE
IIB FORM OF TRANCHE B NOTE
III FORM OF COMPLIANCE CERTIFICATE
IVA FORM OF OPINION OF CAHILL GORDON & REINDEL
IVB FORM OF SECTION 1110 OPINION
IVC FORM OF OPINION COVERING CERTAIN BANKRUPTCY MATTERS
IVD FORM OF OPINION COVERING CERTAIN TAX MATTERS
IVE FORM OF OPINION OF FAA COUNSEL
V FORM OF ASSIGNMENT AGREEMENT
VI FORM OF CERTIFICATE RE NON-BANK STATUS
VII FORM OF FINANCIAL CONDITION CERTIFICATE - BORROWER
VIIA FORM OF FINANCIAL CONDITION CERTIFICATE - ATLAS
VIIIA FORM OF AIRCRAFT LEASE
VIIIB FORM OF SPARE ENGINE LEASE
IXA FORM OF AIRCRAFT CHATTEL MORTGAGE
IXB FORM OF SPARE ENGINE CHATTEL MORTGAGE
</TABLE>
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<PAGE>
CREDIT AGREEMENT, dated as of April 25, 2000, among ATLAS FREIGHTER
LEASING III, INC., a Delaware corporation ("AFL III" or the "BORROWER"), the
lenders party hereto from time to time (each a "LENDER," and collectively, the
"LENDERS") and BANKERS TRUST COMPANY, as Administrative Agent for the Lenders
(in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the Borrower has been established for the sole purpose of
owning and leasing to Atlas the Aircraft and the Spare Engines;
WHEREAS, the Aircraft and the Spare Engines are currently owned by
Atlas, AFL or AFL II;
WHEREAS, the Aircraft and the Spare Engines are currently encumbered
by certain indebtedness which is to be refinanced;
WHEREAS, in connection with the refinancing of such indebtedness,
Atlas, AFL and AFL II, will contribute or transfer the Aircraft and the Spare
Engines subject to certain indebtedness to AFL III; and
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Lenders are willing to make available to the Borrower the credit
facility provided for herein to refinance the indebtedness relating to the
Aircraft and the Spare Engines;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, do hereby agree as follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ACCEPTABLE ALTERNATE AIRFRAME" means, with respect to any Airframe,
an Acceptable Alternate Airframe as defined in the applicable Aircraft Lease.
"ACCEPTABLE ALTERNATE ENGINE" means, with respect to any Engine, an
Acceptable Alternate Engine as defined in the applicable Lease.
<PAGE>
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date, the rate per annum obtained by dividing (rounded upward to the nearest
1/100 of one percent) (x) the offered quotation, if any, to first class banks
in the interbank Eurodollar market by the Administrative Agent for U.S. dollar
deposits of amounts in same day funds comparable to the principal amount of the
Loans of the Administrative Agent for which the Adjusted Eurodollar Rate is
then being determined with maturities comparable to such Interest Period as of
approximately 10:00 A.M. (New York time) on such Interest Rate Determination
Date by (y) a percentage equal to 100% minus the stated maximum rate of all
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the
preamble to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 8.6.
"AFFECTED LENDER" has the meaning assigned to that term in subsection
2.6C.
"AFFECTED LOANS" has the meaning assigned to that term in subsection
2.6C.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AFL" means Atlas Freighter Leasing, Inc., a Delaware corporation.
"AFL AIRCRAFT" means six Boeing 747-200 aircraft in full freighter
configuration with FAA Registration Nos. N505MC, N507MC, N508MC, N509MC, N516MC
and N517MC, including the 24 General Electric CFC-50E2 engines with
manufacturer's serial numbers 517476, 528318, 530197, 517753, 517284, 530320,
517767, 530288, 517324, 517287, 517269, 530284, 530283, 517207, 530304, 530318,
517551, 517214, 530202, 530247, 517943, 517886, 517675 and 517941, which
aircraft (i) are in cargo configuration capable of immediate operation in the
business of Atlas, when leased to Atlas by the Borrower, (ii) have a maximum
gross take-off weight ("MTOW") of at least 800,000 pounds and (iii) are owned
by AFL (prior to giving effect to the AFL Contribution).
"AFL CONTRIBUTION" has the meaning assigned to that term in subsection
3.1Q.
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"AFL CREDIT FACILITY" means that certain Credit Agreement, dated as of
May 29, 1997, among Atlas Freighter Leasing, Inc., as borrower, the lenders
party thereto from time to time, and Bankers Trust Company, as agent for the
lenders, as amended, restated, supplemented, or otherwise modified prior to the
date hereof.
"AFL EQUIPMENT OBLIGATIONS" means all amounts owing by AFL or any of
its Affiliates pursuant to the AFL Credit Facility and relating to the AFL
Aircraft.
"AFL II" means Atlas Freighter Leasing II, Inc., a Delaware
corporation.
"AFL II AIRCRAFT" means four Boeing 747-200 aircraft in full freighter
configuration with FAA Registration Nos. N523MC, N524MC, N526MC, and N527MC,
including the 16 General Electric CFC-50E2 engines with manufacturer's serial
numbers 528105, 530166, 517353, 517265, 528419, 517343, 517545, 517791, 530169,
517718, 517506, 517569, 528420, 517532, 455793 and 455430, which aircraft (i)
are in cargo configuration capable of immediate operation in the business of
Atlas, when leased to Atlas by the Borrower, (ii) have a maximum gross take-off
weight ("MTOW") of at least 800,000 pounds and (iii) are owned by AFL II (prior
to giving effect to the AFL II Contribution).
"AFL II CONTRIBUTION" has the meaning assigned to that term in
subsection 3.1Q.
"AFL II CREDIT FACILITY" means that certain Credit Agreement, dated as
of September 5, 1997, among AFL II, as a borrower, the lenders party thereto
from time to time, Bankers Trust Company, as administrative agent, and Goldman
Sachs Credit Partners L.P., as syndication agent, as amended, restated,
supplemented, or otherwise modified prior to the date hereof.
"AFL II EQUIPMENT OBLIGATIONS" means all amounts owing by AFL II or
any of its Affiliates pursuant to the AFL II Credit Facility and relating to
the AFL II Aircraft or the AFL II Spare Engines.
"AFL II SPARE ENGINES" means the nine General Electric CF6-50E2
engines with manufacturer's serial numbers 530168, 517790, 517530, 517547,
455167, 517602, 517538, 517539, and 530255, which Spare Engines are owned by
AFL II (prior to giving effect to the AFL II Contribution).
"AFL III" has the meaning assigned to that term in the preamble to
this Agreement.
"AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in
subsection 9.5.
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"AGREEMENT" means this Credit Agreement, dated as of April 25, 2000,
as it may be amended, supplemented or otherwise modified from time to time.
"AIRCRAFT" means, collectively, the Atlas Aircraft, the AFL Aircraft
and the AFL II Aircraft, or any of them, as appropriate.
"AIRCRAFT CHATTEL MORTGAGE" means, with respect to each Aircraft or
Spare Engine Pool, a Security Agreement and Chattel Mortgage substantially in
the form of Exhibit IXA or Exhibit IXB annexed hereto, as appropriate, granting
to the Administrative Agent for the benefit of the Lenders a first priority
security interest in such Aircraft or Spare Engine Pool, as the case may be, as
such Aircraft Chattel Mortgage may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"AIRCRAFT LEASE" or "AIRCRAFT LEASES" means each of the lease
agreements, in the form of Exhibit VIIIA, dated as of April 25, 2000, between
Atlas Freighter Leasing III, Inc., as Lessor and Atlas Air, Inc., as Lessee, as
the same may be amended, modified, or supplemented from time to time in
accordance with the terms hereof, and including any lease supplement entered
into in accordance with the terms of any Aircraft Lease.
"AIRFRAME" means, as the context requires, an Airframe as defined in a
particular Aircraft Chattel Mortgage, all Airframes as defined in all Aircraft
Chattel Mortgages, a Replacement Airframe, all Replacement Airframes or all or
any of the foregoing.
"AMENDED AIRCRAFT CREDIT FACILITY" means the Fourth Amended and
Restated Credit Agreement, dated as of April 25, 2000, among Atlas Air, Inc.,
as borrower, the lenders listed therein and Bankers Trust Company, as
administrative agent, but without giving effect to any amendments,
modifications, supplements or waivers thereof.
"APPLICABLE MARGIN" means, with respect to Tranche A Loans, the
Tranche A Applicable Margin, and with respect to Tranche B Loans, the Tranche B
Applicable Margin.
"APPRAISED VALUE" means, with respect to any Aircraft or Spare Engine,
the average of the appraised value of such Aircraft or Spare Engine by two
Approved Appraisers as determined pursuant to subsection 3.1S.
"APPROVED APPRAISER" means any of AvSolutions, Inc., BK Associates,
Inc., Jack B. Feir Associates, Morton Beyer & Agnew, Inc., Simat, Helliesen &
Eichner, Inc., or AVITAS, Inc., Airclaims, Ltd., Aircraft Information Services,
Inc., or any other nationally recognized firm of aircraft appraisers reasonably
satisfactory to the Administrative Agent.
"ASSET SALE" means the sale (including any sale-leaseback transaction)
or other disposition by the Borrower to any other Person of any assets of the
Borrower (whether tangi-
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ble or intangible) excluding (i) transactions related to aircraft engines,
components, parts or spare parts or other equipment, appliances, instruments,
appurtenances, accessories or furnishings of whatever nature that may from time
to time be removed from any Airframe or Engine in connection with transactions
permitted pursuant to and in accordance with Section 4(d) or Section 4(e) of
the Aircraft Chattel Mortgages and (ii) transactions effected in accordance
with Section 9.21 of this Agreement.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially
the form of Exhibit V annexed hereto.
"ATLAS" means Atlas Air, Inc., a Delaware corporation.
"ATLAS AIRCRAFT" means one Boeing 747-200 aircraft in full freighter
configuration with FAA Registration No. N528MC, including the four General
Electric CF6-50C2 engines with manufacturer's serial number 517600, 530167,
517719 and 517825, which aircraft (i) is in cargo configuration capable of
immediate operation in the business of Atlas, when leased to Atlas by the
Borrower, (ii) has a maximum gross take-off weight ("MTOW") of at least 800,000
pounds and (iii) is owned by Atlas (prior to giving effect to the Atlas
Contribution).
"ATLAS ASSET SALES" means the sale (including any sale-leaseback
transaction) by Atlas or any of its Subsidiaries to any other Person of (i) any
of the stock of any of Atlas's Subsidiaries, (ii) substantially all of the
assets of any division or line of business of Atlas or any of its Subsidiaries,
or (iii) any other assets (whether tangible or intangible) of Atlas or any of
its Subsidiaries outside of the ordinary course of business.
"ATLAS CONTRIBUTION" has the meaning assigned to that term in
subsection 3.1Q.
"ATLAS EQUIPMENT OBLIGATIONS" means all amounts owing by Atlas or any
of its Subsidiaries pursuant to the Amended Aircraft Credit Facility
immediately prior to giving effect to the fourth amendment and restatement
thereof on the date hereof and relating to the Atlas Aircraft or the Atlas
Spare Engines.
"ATLAS SPARE ENGINES" means the three General Electric CF6-80C2
engines with manufacturer's serial numbers 704699, 704860, and 704918, which
Spare Engines are owned by Atlas (prior to giving effect to the Atlas
Contribution).
"BANKRUPTCY CODE" means Title 11 of the United States Code, entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate that is 1/2 of 1% in excess of the Federal Funds Effective Rate.
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"BORROWER" has the meaning assigned to that term in the preamble to
this Agreement.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
that is a legal holiday under the laws of the States of New York or Colorado or
is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date, (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after
such date and having, at the time of the acquisition thereof, the highest
rating obtainable from either S&P or Moody's, (iii) commercial paper maturing
no more than one year from the date of creation thereof and having, at the time
of the acquisition thereof, a rating of at least A-1 from S&P or at least P-I
from Moody's, (iv) certificates of deposit or bankers' acceptances maturing
within one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000, and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of
not less than $500,000,000, and (c) has the highest rating obtainable from
either S&P or Moody's.
"CASH PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in
the form of Exhibit VI annexed hereto delivered by a Lender to the
Administrative Agent pursuant to subsection 2.7B(iii).
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"CF6-50E2 SPARE ENGINE LEASE" means the lease agreement, in the form
of Exhibit VIIIB, dated as of April 25, 2000, between Atlas Freighter Leasing
III, Inc., as Lessor and Atlas Air, Inc., as Lessee, as the same may be
amended, modified or supplemented from time to time in accordance with the
terms hereof, and including any lease supplement entered into in accordance
with the terms of the CF6-50E2 Spare Engine Lease.
"CF6-50E2 SPARE ENGINE POOL" means the set of Spare Engines leased
pursuant to the CF6-50E2 Spare Engine Lease.
"CF6-80C2 SPARE ENGINE LEASE" means the lease agreement, in the form
of Exhibit VIIIB, dated as of April 25, 2000, between Atlas Freighter Leasing
III, Inc., as Lessor and Atlas Air, Inc., as Lessee, as the same may be
amended, modified or supplemented from time to time in accordance with the
terms hereof, and including any lease supplement entered into in accordance
with the terms of the CF6-80C2 Spare Engine Lease.
"CF6-80C2 SPARE ENGINE POOL" means the set of Spare Engines leased
pursuant to the CF6-80C2 Spare Engine Lease.
"COLLATERAL" means all of the properties and assets in which Liens are
purported to be granted by the Collateral Documents.
"COLLATERAL DOCUMENTS" means each Aircraft Chattel Mortgage and any
security agreement executed pursuant to subsection 5.11.
"COMMITMENT" means the sum of the Tranche A Commitment and the Tranche
B Commitment of each Lender as set forth on Schedule 2.1, as the same may be
reduced or terminated pursuant to Section 2.4 and/or Section 7.
"COMPLIANCE CERTIFICATE" means a certificate delivered to the
Administrative Agent and the Lenders by the Borrower pursuant to subsection
3.1P or 5.1(iii).
"CONDEMNATION PROCEEDS" has the meaning assigned to that term in
subsection 2.4C(ii)(b).
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agree-
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ments. Contingent Obligations shall include, without limitation, (a) the direct
or indirect guaranty, endorsement (otherwise than for collection or deposit in
the ordinary course of business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of another, (b) the obligation
to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another
if, in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported or, if less,
the amount to which such Contingent Obligation is specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, deed to secure debt, contract, undertaking, agreement
or other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designated to protect Borrower against
fluctuations in currency values.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"EFFECTIVE DATE" has the meaning assigned to that term in Section
9.20.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof, (ii) a savings and loan
association or savings bank organized under the laws of the United States or
any state thereof, (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof, provided that (x) such bank
is acting through a branch or agency located in the United States or (y) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country, and (iv) any other entity that is an "accredited
investor" (as defined in Regulation D under the Securities Act) that extends
credit or buys loans as one of its businesses (including, but not limited to,
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insurance companies, mutual funds and lease financing companies), (B) any
Lender, and (C) any Related Fund or any Affiliate of any Lender; provided, that
no Affiliate of the Borrower shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined
in Section 3(3) of ERISA that is, or was at any time, maintained or contributed
to by the Borrower or by any of its ERISA Affiliates.
"ENGINE" means, as the context requires, an Engine as defined in a
particular Aircraft Chattel Mortgage, all Engines as defined in all Aircraft
Chattel Mortgages, a Replacement Engine, all Replacement Engines or all or any
of the foregoing.
"ENVIRONMENTAL CLAIM" means any investigation, notice, claim, suit or
order, by any governmental authority or any Person, arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or with any actual or alleged damage or harm to health, safety or the
environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"EQUIPMENT OBLIGATIONS" means, collectively, the Atlas Equipment
Obligations, the AFL Equipment Obligations and the AFL II Equipment
Obligations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation
that is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member, (ii) any trade or business, (whether
or not incorporated) that is, or was at any time, a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member,
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"EVENT OF DEFAULT" means each of the events set forth in Section 7.
"EVENT OF LOSS" means any of the following events with respect to any
Aircraft (whether the Airframe or an Engine of such Aircraft or both) or any
Spare Engine: (A) loss of
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such Aircraft or Spare Engine or the use thereof due to theft or disappearance
of such Aircraft or Spare Engine that results in the loss of possession thereof
for a period of 120 days (or for a shorter period ending on the date on which
there is an insurance settlement for a total loss on the basis of the theft or
disappearance of such Aircraft or Spare Engine), (B) the destruction, damage
beyond repair or rendition of such Aircraft or Spare Engine permanently unfit
for normal use for any reason whatsoever, (C) the condemnation, confiscation or
seizure of, or requisition of title to, or adverse use or possession (other
than use by the United States Government if the Borrower obtains adequate
compensation from the United States Government) of such Aircraft or Spare
Engine, (D) as a result of any rule, regulation, order or any other action by
the FAA or any other governmental body having jurisdiction, the use of such
Aircraft or Spare Engine in the normal course of interstate air transportation
of persons or cargo shall have been prohibited for a period of more than nine
consecutive months unless the Borrower, prior to the expiration of such nine
month period, shall have undertaken and shall be diligently carrying forward
all steps that are necessary or desirable to permit the normal use of such
property by the Borrower or, in any event, if such use shall have been
prohibited for a period of twelve consecutive months, (E) the operation or
location of such Aircraft or Spare Engine, while under requisition for use by
the United States or any instrumentality or agency thereof, in any area
excluded from coverage by any insurance policy in effect with respect to such
Aircraft or Spare Engine, if the Borrower shall be unable to obtain indemnity
or "war risk" insurance in lieu thereof from the United States, (F) any damage
that results in an insurance settlement with respect to such Aircraft or Spare
Engine on the basis of an actual or constructive total loss or (G) a
divestiture of such Airframe or Spare Engine as described in Section 4(d)(iii)
or Section 4(d)(vi) of any Aircraft Chattel Mortgage. An Event of Loss with
respect to any Aircraft shall be deemed to have occurred if an Event of Loss
occurs with respect to the Airframe of such Aircraft.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"FEDERAL AVIATION ACT" means the Federal Aviation Act of 1958, as
amended and as recodified in Title 49, United States Code, or any similar
legislation of the United States enacted to supersede, amend or supplement such
Act and the rules and regulations promulgated thereunder.
"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration or any successor thereto administering the
functions of the Federal Aviation Administration under the Federal Aviation Act.
"FEDERAL FUNDS EFFECTIVE RATE" means for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so
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published for any day that is a Business Day, the average of the quotations for
such day on such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by the Administrative
Agent.
"FINAL MATURITY DATE" means, in the case of Tranche A Loans, April 25,
2005, and, in the case of Tranche B Loans, April 25, 2006.
"FISCAL YEAR" means the fiscal year of the Borrower.
"FUNDING AND PAYMENT OFFICE" means the office of the Administrative
Agent located at 130 Liberty Street, New York, New York 10006, Attention:
Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by the Borrower to the Lenders pursuant to clauses (i) and (ii)
of subsection 5.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation. Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with GAAP as in effect on the date of
this Agreement.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means any chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any law.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property of the Borrower and (ii) caused by, or
undertaken by or on behalf of, the Borrower.
"INDEBTEDNESS" means, as applied to any Person, (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money, (iv) any obligation owed for all or any part of the deferred purchase
price of property or services (excluding any such obligations incurred under
ERISA), which purchase price is (a) due more than six months from the date of
incurrence of the obligation in respect
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thereof or (b) evidenced by a note or similar written instrument, and (v) all
indebtedness secured by any Lien on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and are not Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in
subsection 3.
"INDEMNITEE" has the meaning assigned to that term in subsection 9.3.
"INDEPENDENT DIRECTOR" means a director of the Borrower that satisfies
the criteria for "Independent Director" set forth in the certificate of
incorporation of the Borrower.
"INITIAL BORROWING DATE" shall mean the date occurring on or after the
Effective Date on which the borrowing of the Loans occurs.
"INSURANCE PROCEEDS" has the meaning assigned to that term in
subsection 2.4C(ii)(b).
"INTEREST PAYMENT DATE" means, with respect to any Loan, the last day
of each Interest Period applicable to such Loan.
"INTEREST PERIOD" has the meaning assigned to that term in subsection
2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Borrower against fluctuations
in interest rates.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by the Borrower of, or of a beneficial interest in, any Securities
of any other Person or (ii) any direct or indirect loan, advance (other than
advances to employees for moving, entertainment and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business) or
capital contribution by the Borrower to any other Person, including all
indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, with-
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out any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LEASE" or "LEASES" means the eleven Aircraft Leases, the CF6-50E2
Spare Engine Lease and the CF6-80C2 Spare Engine Lease, or any of them, as the
context implies.
"LENDER" and "LENDERS" means the Tranche A Lenders and the Tranche B
Lenders, or any of them, as the context implies.
"LIEN" means any lien, mortgage, deed of trust, deed to secure debt,
pledge, assignment, security interest, charge, hypothecation, preference,
priority, privilege, lease or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any option, trust
or other preferential arrangement having the practical effect of any of the
foregoing.
"LOAN" or "LOANS" means all the term loans made under this Agreement
on the same day by the Lenders to the Borrower and relating to one Aircraft or
to one Spare Engine Pool, but secured by all Collateral.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Leases and the
Collateral Documents.
"LOAN EXPOSURE" means, with respect to any Lender, as of any date of
determination, the outstanding principal amount of the Loans of that Lender.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Borrower or (ii) the impairment of the ability of the Borrower
to perform the Obligations, or the impairment, as a result of actions or
inaction by the Borrower, of the ability of the Administrative Agent or the
Lenders to enforce the Obligations.
"MAXIMUM LOAN AMOUNT" means, with respect to each Aircraft or Spare
Engine Pool, if any, the amount set forth on Schedule 2.2 opposite the
respective Aircraft or Spare Engine Pool.
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"MAXIMUM TRANCHE A LOAN AMOUNT" means, with respect to each Aircraft
or Spare Engine Pool, the product obtained by multiplying (i) the Maximum Loan
Amount for such Aircraft or Spare Engine Pool by (ii) a fraction, the numerator
of which is one hundred sixty-five (165), and the denominator of which is three
hundred (300).
"MAXIMUM TRANCHE B LOAN AMOUNT" means, with respect to each Aircraft
or Spare Engine Pool, the product obtained by multiplying (i) the Maximum Loan
Amount for such Aircraft or Spare Engine Pool by (ii) a fraction, the numerator
of which is one hundred thirty-five (135), and the denominator of which is
three hundred (300).
"MOODY'S" means Moody's Investors Service, Inc.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs of sale including
income taxes reasonably estimated to be actually payable as a result of such
Asset Sale within two years of the date of such Asset Sale.
"NON-U.S. LENDER" has the meaning assigned to that term in subsection
2.7B(iii)(a).
"NOTES" has the meaning assigned to that term in subsection 2.1D.
"NOTICE OF BORROWING" means a notice delivered by the Borrower to the
Administrative Agent pursuant to subsection 2.1B.
"OBLIGATIONS" means all obligations of every nature of the Borrower
from time to time owed to the Administrative Agent, the Lenders or any of them
under the Loan Documents, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents or its secretary
or by its chief financial officer or its treasurer; provided, that every
Officers' Certificate with respect to the fulfillment of a condition precedent
to the making of any Loans hereunder shall include (i) a statement that the
officer or officers making or giving such Officers' Certificate have read such
condition and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signers, they
have made or have caused to be made such examination or investigation as is
necessary to enable them to express an informed opinion as to whether or not
such condition has been fulfilled, and (iii) a statement as to whether, in the
opinion of the signers, such condition has been fulfilled.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property
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(whether real, personal or mixed) that is not a Capital Lease other than any
such lease under which that Person is the lessor.
"PASS THROUGH TRUST DOCUMENTS" means, collectively, (i) those six
certain Pass Through Trust Agreements, dated as of February 9, 1998, between
Atlas Air, Inc., and Wilmington Trust Company, as trustee (the "1998 Pass
Through Trust Agreements") and any related agreements, notes, guaranties,
indentures, security documents or other documents, including, without
limitation, documents relating to the equipment notes to be held in trust
pursuant to the 1998 Pass Through Trust Agreements and all related documents,
as the same may be amended, restated, supplemented or otherwise modified from
time to time in accordance with this Agreement, (ii) that certain Pass Through
Trust Agreement, dated as of April 1, 1999, between Atlas Air, Inc., and
Wilmington Trust Company, as trustee (the "1999 Pass Through Trust Agreement")
and any related agreements, trust supplements, notes, guaranties, indentures,
security documents or other documents, including, without limitation, documents
relating to the equipment notes to be held in trust pursuant to the 1999 Pass
Through Agreement and all related documents, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Agreement and (iii) that certain Pass Through Trust Agreement, dated
as of January 28, 2000, between Atlas Air, Inc., and Wilmington Trust Company,
as trustee (the "2000 Pass Through Trust Agreement") and any related
agreements, trust supplements, notes, guaranties, indentures, security
documents or other documents, including, without limitation, documents relating
to the equipment notes to be held in trust pursuant to the 2000 Pass Through
Trust Agreement and all related documents, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other
than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims, the payment of which is not, at the time, required by subsection
5.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any Collateral, if
such reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor;
(iii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages; and
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(iv) Liens granted pursuant to the Collateral Documents.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability partnerships, limited
liability companies, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or
other organizations, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or the expiration of any grace period or both, would constitute an Event
of Default.
"PRICING CERTIFICATE" has the meaning assigned to that term in
subsection 5.1(xi).
"PRICING REDUCTION" means, for any Interest Period, a pricing
reduction in the Tranche A Applicable Margin equal to:
(i) 0.250% if, as of 10:00 A.M. (New York time) on the Interest
Rate Determination Date with respect to such Interest Period, Atlas has a
senior secured rating of Ba1 or higher from Moody's and a senior secured
rating of BB or higher from S&P; or
(ii) 0.125% if, as of 10:00 A.M. (New York time) on the Interest
Rate Determination Date with respect to such Interest Period, Atlas has a
senior secured rating of Ba1 or higher from Moody's and a senior secured
rating of BB- from S&P.
Notwithstanding anything to the contrary herein, at any time when an
Event of Default shall have occurred and be continuing, the Pricing Reduction
shall be zero.
"PRIME RATE" means the rate that the Administrative Agent announces
from time to time as its prime lending rate, as in effect from time to time.
The Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Administrative Agent
or any other Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.
"PRO RATA SHARE" means, with respect to each Lender, the percentage
obtained by dividing the Loan Exposure of that Lender by the aggregate Loan
Exposure of all Lenders, in each case as such percentage may be adjusted by
assignments permitted pursuant to subsection 9.1. The initial Pro Rata Share of
each Lender is set forth opposite the name of that Lender in Schedule 2.1
annexed hereto.
"PROCEEDINGS" has the meaning assigned to that term in subsection
5.1(viii).
"PROCEEDS" has the meaning assigned to that term in subsection
2.4C(ii)(b).
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"PROJECTIONS" means the financial projections of Atlas and its
Subsidiaries delivered on or prior to the Initial Borrowing Date covering the
period commencing on or prior to the Initial Borrowing Date and ending on
December 31, 2006.
"REFINANCING" has the meaning assigned to that term in subsection
3.1Q.
"REGISTER" has the meaning assigned to that term in subsection 2.1E.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"RELATED FUND" means, with respect to any Lender that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"REQUISITE LENDERS" means Lenders having or holding 50.1% or more of
the aggregate Loan Exposure of all Lenders.
"REPLACEMENT AIRFRAME" has the meaning assigned to that term in
subsection 9.21B.
"REPLACEMENT ENGINE" has the meaning assigned to that term in
subsection 9.21A.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of the Borrower now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of the Borrower now or hereafter outstanding and (iii) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of the Borrower now or
hereafter outstanding.
"S&P" means Standard & Poor's Ratings Services.
"SECURITIES" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement,
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options, warrants, bonds, debentures, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates
of interest, shares or participations in temporary or interim certificates for
the purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SENIOR NOTE DOCUMENTS" means (i) the Indenture, dated as of August
13, 1997, between Atlas Air, Inc., and State Street Bank and Trust Company,
relating to the 10 3/4% $150 million Senior Notes due 2005 of the Borrower (the
"10 3/4% Senior Notes"), and any and all related agreements, as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, (ii) the Indenture, date as of April 9, 1998,
between Atlas Air, Inc., and State Street Bank and Trust Company, relating to
the 9 1/4% $175 million Senior Notes due 2008 of the Borrower (the "9 1/4%
Senior Notes") and any and all related agreements, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Agreement and (iii) the Indenture, dated as of November 18, 1998,
between Atlas Air, Inc., and State Street Bank and Trust Company relating to
the 9 3/8% $150 million Senior Notes due 2006 of the Borrower (the "9 3/8%
Senior Notes," and together with the 10 3/4% Senior Notes and the 9 1/4% Senior
Notes, the "Senior Notes"), and any and all related agreements, as the same may
be amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
"SERVICE AGREEMENT" means the Service Agreement, dated as of April 25,
2000, between Atlas and the Borrower.
"SOLVENT" means, with respect to any Person, that, as of the date of
determination, both (A) (i) the then fair saleable value of the property of
such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person,
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction, and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due, and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
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"SPARE ENGINE POOL" means, collectively, the CF6-50E2 Spare Engine
Pool and the CF6-80C2 Spare Engine Pool, or either of them, as appropriate.
"SPARE ENGINES" means the nine General Electric CF6-50E2 engines with
manufacturer's serial numbers 530168, 517790, 517530, 517547, 455167, 517602,
517538, 517539, and 517544, and the three General Electric CF6-80C2 engines
with manufacturer's serial numbers 704699, 704860, and 704918.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof.
"SUBSTITUTE BASIS" has the meaning assigned to that term in subsection
2.6G.
"SYNDICATION DATE" means the date on which the Administrative Agent
has completed, in its determination, the primary syndication of Loans.
"TAX" or "TAXES" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided, that "TAX ON THE OVERALL NET INCOME" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its lending office)
is located on all or part of the net income, profits or gains of that Person
(whether worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or
otherwise).
"TOTAL COMMITMENT" means the sum of the Commitments of the Lenders.
"TRANCHE A APPLICABLE MARGIN" has the meaning assigned to that term in
subsection 2.2A.
"TRANCHE A COMMITMENT" means the Tranche A commitment of each Tranche
A Lender as set forth on Schedule 2.1, as the same may be reduced or terminated
pursuant to Section 2.4 and/or Section 7.
"TRANCHE A LENDER" or "TRANCHE A LENDERS" means the persons identified
as "Tranche A Lenders" and listed on the signature pages of this Agreement,
together with their successors and permitted assigns pursuant to subsection
9.1.
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"TRANCHE A LOAN" has the meaning assigned to that term in subsection
2.1A(i).
"TRANCHE A LOAN EXPOSURE" means, with respect to any Tranche A Lender,
as of any date of determination, the outstanding principal amount of the
Tranche A Loans of that Lender.
"TRANCHE A NOTES" has the meaning assigned to that term in subsection
2.1D.
"TRANCHE A PRO RATA SHARE" means, with respect to each Tranche A
Lender, the percentage obtained by dividing the Tranche A Loan Exposure of that
Tranche A Lender by the aggregate Tranche A Loan Exposure of all Tranche A
Lenders, in each case as such percentage may be adjusted by assignments
permitted pursuant to subsection 9.1. The initial Tranche A Pro Rata Share of
each Tranche A Lender is set forth opposite the name of that Tranche A Lender
in Schedule 2.1 annexed hereto.
"TRANCHE B APPLICABLE MARGIN" has the meaning assigned to that term in
subsection 2.2B.
"TRANCHE B COMMITMENT" means the Tranche B commitment of each Tranche
B Lender as set forth on Schedule 2.1, as the same may be reduced or terminated
pursuant to Section 2.4 and/or Section 7.
"TRANCHE B LENDER" or "TRANCHE B LENDERS" means the persons identified
as "Tranche B Lenders" and listed on the signature pages of this Agreement,
together with their successors and permitted assigns pursuant to subsection
9.1.
"TRANCHE B LOAN" has the meaning assigned to that term in subsection
2.1A(ii).
"TRANCHE B LOAN EXPOSURE" means, with respect to any Tranche B Lender,
as of any date of determination, the outstanding principal amount of the
Tranche B Loans of that Lender.
"TRANCHE B NOTES" has the meaning assigned to that term in subsection
2.1D.
"TRANCHE B PRO RATA SHARE" means, with respect to each Tranche B
Lender, the percentage obtained by dividing the Tranche B Loan Exposure of that
Tranche B Lender by the aggregate Tranche B Loan Exposure of all Tranche B
Lenders, in each case as such percentage may be adjusted by assignments
permitted pursuant to subsection 9.1. The initial Tranche B Pro Rata Share of
each Tranche B Lender is set forth opposite the name of that Tranche B Lender
in Schedule 2.1 annexed hereto.
"TRANSACTION" has the meaning assigned that term in subsection 3.1Q.
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"TRANSACTION DOCUMENTS" means this Agreement, the Amended Aircraft
Credit Facility, any bills of sale or certificates of transfer for each
Aircraft and each Spare Engine (including bills of sale on AC Form 8050-2)
delivered in connection with the Transaction, the Leases, all documents
relating to the Refinancing, and all other agreements and documentation
executed and delivered in connection with the Transaction, including, without
limitation, in connection with the Atlas Contribution and the Transfers.
"TRANSFERS" has the meaning assigned to that term in subsection 3.1Q.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code
(or any similar or equivalent legislation) as in effect from time to time in
the applicable jurisdiction.
"UNITED STATES CITIZEN" means a "citizen of the United States" within
the meaning of the Federal Aviation Act.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP.
1.3 OTHER DEFINITIONAL PROVISIONS.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; NOTES; REGISTER.
A. COMMITMENTS. (i) Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, each Tranche A Lender hereby severally agrees to
make, on the Initial Borrowing Date, thirteen term loans (each, a "TRANCHE A
LOAN" and, collectively, the "TRANCHE A LOANS") to the Borrower in an aggregate
amount not to exceed the Tranche A Commitment of such Tranche A Lender. Each
Tranche A Loan of a Tranche A Lender shall relate to one of the
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Aircraft or to one of the Spare Engine Pools and shall be in an amount equal to
such Tranche A Lender's Tranche A Pro Rata Share on the Initial Borrowing Date
of the Maximum Tranche A Loan Amount with respect to such Aircraft or Spare
Engine Pool. The Tranche A Loans of all of the Tranche A Lenders relating to
one Aircraft or Spare Engine Pool shall not exceed the Maximum Tranche A Loan
Amount for such Aircraft or Spare Engine Pool and shall be made on the same day
by the Tranche A Lenders ratably according to their respective Tranche A
Commitments. Once repaid, Tranche A Loans borrowed hereunder may not be
reborrowed.
(ii) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Borrower herein set
forth, each Tranche B Lender hereby severally agrees to make, on the Initial
Borrowing Date, thirteen term loans (each, a "TRANCHE B LOAN" and,
collectively, the "TRANCHE B LOANS") to the Borrower in an aggregate amount not
to exceed the Tranche B Commitment of such Tranche B Lender. Each Tranche B
Loan of a Tranche B Lender shall relate to one of the Aircraft or to one of the
Spare Engine Pools and shall be in an amount equal to such Tranche B Lender's
Tranche B Pro Rata Share on the Initial Borrowing Date of the Maximum Tranche B
Loan Amount with respect to such Aircraft or Spare Engine Pool. The Tranche B
Loans of all of the Tranche B Lenders relating to one Aircraft or Spare Engine
Pool shall not exceed the Maximum Tranche B Loan Amount for such Aircraft or
Spare Engine Pool and shall be made on the same day by the Tranche B Lenders
ratably according to their respective Tranche B Commitments. Once repaid,
Tranche B Loans borrowed hereunder may not be reborrowed.
B. BORROWING MECHANICS. (i) Each borrowing of Loans relating to
a particular Aircraft or Spare Engine Pool shall be made by the delivery of a
Notice of Borrowing by the Borrower to the Administrative Agent not later than
12:00 Noon (New York City time) on the third Business Day prior to the date of
the proposed borrowing. The Administrative Agent shall give to each Lender
prompt notice thereof. Each such Notice of Borrowing shall be irrevocable and
binding on the Borrower. Each such Notice of Borrowing shall be in the form of
Exhibit I. The Notice of Borrowing shall specify (i) the proposed borrowing
date (which shall be a Business Day), (ii) the amount of Loans requested and
(iii) the Aircraft or Spare Engine Pool to which the Loans relate. In lieu of
delivering the above described Notice of Borrowing, the Borrower may give the
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B, provided that such notice is promptly
confirmed in writing.
(ii) Neither the Administrative Agent nor any Lender shall incur
any liability to the Borrower in acting upon any telephonic notice referred to
above that the Administrative Agent believes in good faith to have been given
by a duly authorized officer or other person authorized to borrow on behalf of
the Borrower or for otherwise acting in good faith under this subsection 2.1B,
and upon funding of the Loans by the Lenders in accordance with this Agreement
pursuant to any such telephonic notice the Borrower shall have effected the
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Loans hereunder. The Borrower shall notify the Administrative Agent prior to
the funding of the Loans in the event that any of the matters to which the
Borrower is required to certify in the Notice of Borrowing is no longer true
and correct as of the Initial Borrowing Date and the acceptance by the Borrower
of the proceeds of any Loans shall constitute a recertification by the Borrower
as of the Initial Borrowing Date, as to the matters to which the Borrower is
required to certify in the applicable Notice of Borrowing.
C. DISBURSEMENT OF FUNDS. All Loans under this Agreement shall
be made by the Lenders simultaneously and proportionately to their respective
Pro Rata Shares, it being understood that no Lender shall be responsible for
any default by any other Lender in that other Lender's obligation to make a
Loan requested hereunder nor shall the Commitment of any Lender to make a Loan
requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder.
Promptly after receipt by the Administrative Agent of a Notice of Borrowing
pursuant to subsection 2.1B (or telephonic notice in lieu thereof), the
Administrative Agent shall notify each Lender of the proposed borrowing. Each
Lender shall make the amount of its Loans available to the Administrative Agent
not later than 12:00 Noon (New York time) on the Initial Borrowing Date, in
each case in same day funds in Dollars, at the Funding and Payment Office.
Unless the Administrative Agent shall have been notified by any Lender
prior to the Initial Borrowing Date that such Lender does not intend to make
available to the Administrative Agent the amount of such Lender's Loans so
requested on the Initial Borrowing Date, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent on
the Initial Borrowing Date and the Administrative Agent may, in its sole
discretion, but shall not be obligated to, make available to the Borrower a
corresponding amount on the Initial Borrowing Date. If such corresponding
amount is not in fact made available to the Administrative Agent by such
Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from the Initial Borrowing Date until the date such amount is paid
to the Administrative Agent, at the customary rate set by the Administrative
Agent for the correction of errors among banks for three Business Days. If such
Lender does not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent shall promptly notify the
Borrower and the Borrower shall immediately pay such corresponding amount to
the Administrative Agent together with interest thereon, for each day from the
Initial Borrowing Date until the date such amount is paid to the Administrative
Agent, at the rate payable under this Agreement. Nothing in this subsection
2.1C shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that the Borrower may have
against any Lender as a result of any default by such Lender hereunder.
D. NOTES. (i) The Borrower shall duly execute and deliver on the
Initial Borrowing Date to each Tranche A Lender (or to the Administrative Agent
for that Tranche A
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Lender) the Tranche A Notes, each substantially in the form of Exhibit IIA
annexed hereto, to evidence that Tranche A Lender's Tranche A Loans in respect
of each Aircraft or Spare Engine Pool, in the principal amount of such Tranche
A Lender's Tranche A Pro Rata Share of the Maximum Tranche A Loan Amount
relating to such Aircraft or Spare Engine Pool and with other appropriate
insertions (each a "TRANCHE A NOTE" and collectively, the "TRANCHE A NOTES").
(ii) The Borrower shall duly execute and deliver on the Initial
Borrowing Date to each Tranche B Lender (or to the Administrative Agent for
that Tranche B Lender) the Tranche B Notes, each substantially in the form of
Exhibit IIB annexed hereto, to evidence that Tranche B Lender's Tranche B Loans
in respect of each Aircraft or Spare Engine Pool, in the principal amount of
such Tranche B Lender's Tranche B Pro Rata Share of the Maximum Tranche B Loan
Amount relating to such Aircraft or Spare Engine Pool and with other
appropriate insertions (each a "TRANCHE B NOTE" and collectively, the "TRANCHE
B NOTES" and, together with the Tranche A Notes, the "NOTES").
E. THE REGISTER. (i) The Administrative Agent shall maintain, at
its address referred to in subsection 9.8, a register (the "REGISTER") for the
recordation of the names and addresses of the Lenders and the Commitments and
Loans of each Lender from time to time and the Administrative Agent shall
record in the Register the Commitments and the Loans from time to time of each
Lender and each repayment or prepayment in respect of the principal amount of
the Loans of each Lender. Such recordation shall be conclusive and binding on
the Borrower and each Lender, absent manifest error; provided, that failure to
make any such recordation, or any error in such recordation, shall not affect
the Borrower's Obligations in respect of the applicable Loans. The Register
shall be available for inspection by the Borrower or by any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(ii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each Loan made
by it and each payment in respect thereof. Any such recordation shall be
conclusive and binding on the Borrower, absent manifest error; provided, that
failure to make any such recordation, or any error in such recordation, shall
not affect the Borrower's Obligations in respect of the applicable Loans; and
provided further, that, in the event of any inconsistency between the Register
and any Lender's records, the recordations in the Register shall govern.
(iii) The Borrower, the Administrative Agent and the Lenders shall
deem and treat the Persons listed as Lenders in the Register as the holders and
owners of the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any such Loan or Commitment
shall be effective in any case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by the
Administrative Agent and recorded in the Register as provided in subsection
9.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Loan shall be owed
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to the Lender listed in the Register as the owner thereof, and any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is listed in the Register as a Lender shall
be conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(iv) The Borrower hereby designates the Administrative Agent to
serve as the Borrower's agent solely for purposes of maintaining the Register
as provided in this subsection 2.1E, and the Borrower hereby agrees that, to
the extent that the Administrative Agent serves in such capacity, the
Administrative Agent and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection 9.3.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. (i) Subject to the provisions of Sections
2.6 and 2.7, each Loan shall bear interest on the unpaid principal amount
thereof from the Initial Borrowing Date through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Adjusted
Eurodollar Rate. The applicable Interest Period for determining the rate of
interest with respect to the Loans shall be determined in accordance with
subsection 2.2B.
(ii) Subject to the provisions of subsections 2.2D and 2.7, the
Loans shall bear interest through maturity at a per annum rate equal to the sum
of the Adjusted Eurodollar Rate plus the Applicable Margin.
(iii) The "TRANCHE A APPLICABLE MARGIN" for each Tranche A Loan
shall be 1.75% less the Pricing Reduction, if any, in effect from time to time.
The "TRANCHE B APPLICABLE MARGIN" for each Tranche B Loan shall be 2.00%.
B. INTEREST PERIODS. In connection with each Loan, the interest
period ("Interest Period") to be applicable to such Loan shall be three months;
provided, that:
(i) prior to the earlier of July 25, 2000, and the Syndication
Date, the Interest Period for each Loan shall be one month, and the first
such Interest Period shall commence on the Initial Borrowing Date;
(ii) each successive Interest Period shall be three months and
shall commence on the day on which the next preceding Interest Period
expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
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(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) no Interest Period shall extend beyond the Final Maturity
Date for the applicable tranche of Loans;
(vi) no Interest Period shall extend beyond a date on which the
Borrower is required to make a scheduled payment of principal of the Loans
of the same tranche as such Loan; and
(vii) there shall be no more than one Interest Period at any time.
C. INTEREST PAYMENTS. Subject to the provisions of subsection
2.2D, interest on each Loan shall be payable in arrears on the last day of each
Interest Period applicable to that Loan, upon any prepayment of Loans (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. DEFAULT RATE. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate that is 1% per annum in
excess of the sum of the Base Rate as in effect from time to time and the
Applicable Margin); provided, that, upon the expiration of the Interest Period
in effect at the time any such increase in interest rate is effective, such
Loans shall thereupon bear interest payable upon demand at a rate that is 1%
per annum in excess of the sum of the Base Rate as in effect from time to time
and the Applicable Margin. Payment or acceptance of the increased rates of
interest provided for in this subsection 2.2D is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of the Administrative Agent
or any Lender.
E. COMPUTATION OF INTEREST. Interest on each Loan shall be
computed on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan or the first day of an Interest
Period applicable to such Loan shall be included, and the date of payment of
such Loan or the expiration date of an Interest Period applicable to such Loan
shall be excluded; provided, that if a Loan is repaid on the same day on which
it is made, one day's interest shall be paid on that Loan.
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2.3 FEES.
The Borrower agrees to pay to the Lenders and the Administrative Agent
such fees and in such amounts and at such times as have been separately agreed
upon in writing among the Borrower and the Administrative Agent.
2.4 REPAYMENTS AND PREPAYMENTS; GENERAL PROVISIONS REGARDING PAYMENTS.
A. MANDATORY REDUCTION OF COMMITMENTS. The Total Commitment (and
the Commitment of each Lender) shall terminate on the earlier of (x) the
Initial Borrowing Date, after giving effect to the incurrence of the Loans on
such date and (y) April 30, 2000.
B. SCHEDULED REPAYMENTS OF LOANS. (a) The Borrower shall make
the following scheduled payments on the Tranche A Loans on each three month
anniversary of April 25, 2000, commencing with the three month anniversary
thereof: (i) the first four scheduled principal payments shall be in the amount
of $4,950,000; (ii) the next succeeding four scheduled principal payments shall
be in the amount of $6,600,000 and (iii) the final twelve scheduled principal
payments shall be in the amount $9,900,000; provided, that such scheduled
installments of principal of the Tranche A Loans shall be reduced in connection
with any voluntary or mandatory prepayments of the Tranche A Loans in
accordance with subsection 2.4C; and provided further, that the Tranche A Loans
and all other amounts owed hereunder with respect to the Tranche A Loans shall
be paid in full no later than the Final Maturity Date applicable to Tranche A
Loans, and the final installment payable by the Borrower in respect of the
Tranche A Loans on such date shall be in an amount sufficient to repay all
amounts owing by the Borrower under this Agreement with respect to the Tranche
A Loans. Any payment pursuant to this subsection 2.4B(a) will be applied
ratably among the Tranche A Loans relating to all Aircraft and both Spare
Engine Pools based on the outstanding principal amount of each such Tranche A
Loan as compared to the total outstanding principal amount of all Tranche A
Loans. If the date on which any scheduled payment is due falls on a day that is
not a Business Day, then such scheduled repayment shall be made on the next
succeeding Business Day; provided, that, if any such scheduled repayment would
otherwise become due on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such scheduled
repayment shall be made on the next preceding Business Day.
(b) The Borrower shall make the following scheduled payments on
the Tranche B Loans on each three month anniversary of April 25, 2000,
commencing with the three month anniversary thereof: (i) the first eight
scheduled principal payments shall be in the amount of $1,687,500; (ii) the
next succeeding four scheduled principal payments shall be in the amount of
$3,375,000; (iii) the next succeeding four scheduled principal payments shall
be in the amount of $5,062,500; (iv) the next succeeding seven scheduled
principal payments shall be in the amount of $6,750,000 and (v) the final
scheduled principal payment shall be in
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the amount of $40,500,000; provided, that such scheduled installments of
principal of the Tranche B Loans shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Loans in accordance with
subsection 2.4C; and provided further, that the Tranche B Loans and all other
amounts owed hereunder with respect to the Tranche B Loans shall be paid in
full no later than the Final Maturity Date applicable to Tranche B Loans, and
the final installment payable by the Borrower in respect of the Tranche B Loans
on such date shall be in an amount sufficient to repay all amounts owing by the
Borrower under this Agreement with respect to the Tranche B Loans. Any payment
pursuant to this subsection 2.4B(b) will be applied ratably among the Tranche B
Loans relating to all Aircraft and both Spare Engine Pools based on the
outstanding principal amount of each such Tranche B Loan as compared to the
total outstanding principal amount of all Tranche B Loans. If the date on which
any scheduled payment is due falls on a day that is not a Business Day, then
such scheduled repayment shall be made on the next succeeding Business Day;
provided, that, if any such scheduled repayment would otherwise become due on a
day that is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such scheduled repayment shall be made on
the next preceding Business Day.
C. PREPAYMENTS.
(i) Voluntary Prepayments. The Borrower may, upon not less than
three Business Days' prior written or telephonic notice given to the
Administrative Agent by 12:00 Noon (New York time) on the date required, and,
if given by telephone, promptly confirmed in writing to the Administrative
Agent (which original written or telephonic notice the Administrative Agent
will promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time prepay, without premium or penalty, the Loans on any
Business Day in whole or in part in an aggregate minimum amount of $5,000,000
and integral multiples of $500,000 in excess of that amount; provided, however,
that Loans may only be prepaid on the expiration of the Interest Period
applicable thereto. Notice of prepayment having been given as aforesaid, the
principal amount of the Loans specified in such notice shall become due and
payable on the prepayment date specified therein. Any such voluntary prepayment
shall be applied as specified in subsection 2.4C(iii).
(ii) Mandatory Prepayments.
(a) Prepayments and Reductions from Asset Sales. No later than
the second Business Day following the date of receipt by the Borrower of Cash
Proceeds of any Asset Sale, the Borrower shall prepay, without premium or
penalty (other than pursuant to subsection 2.6D), Loans in an amount equal to
the Net Cash Proceeds of such Asset Sale. Concurrently with any prepayment of
the Loans pursuant to this subsection 2.4C(ii)(a), the Borrower shall deliver
to the Administrative Agent an Officers' Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale from the
gross sales price thereof. In the event that the Borrower shall, at any time
after receipt of Cash Proceeds of any Asset Sale requiring a prepayment
pursuant to this subsection 2.4C(ii)(a), determine that the
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prepayments previously made in respect of such Asset Sale were in an aggregate
amount less than that required by the terms of this subsection 2.4C(ii)(a), the
Borrower shall promptly make an additional prepayment of the Loans, as the case
may be, in the manner described above in an amount equal to the amount of any
such deficit, and the Borrower shall concurrently therewith deliver to the
Administrative Agent an Officers' Certificate demonstrating the derivation of
the additional Net Cash Proceeds resulting in such deficit. Any mandatory
prepayments pursuant to this subsection 2.4C(ii)(a) shall be applied as
specified in subsection 2.4C(iii).
(b) Prepayments and Reductions Due to Insurance and Condemnation
Proceeds. Within 270 days of receipt by the Borrower of any cash payments under
any of the casualty insurance policies covering damage to or loss of property
maintained pursuant to subsection 5.4 or otherwise resulting from damage to or
loss of all or any portion of the Collateral or any other tangible asset (net of
actual and documented reasonable costs incurred by the Borrower in connection
with adjustment and settlement thereof and in connection with the reinvestment
of proceeds permitted hereby, "INSURANCE PROCEEDS") or any proceeds resulting
from the taking of assets by the power of eminent domain, condemnation or
otherwise (net of actual and documented reasonable costs incurred by Borrower in
connection with adjustment and settlement thereof and in connection with the
reinvestment of proceeds permitted hereby, "CONDEMNATION PROCEEDS," and
collectively with Insurance Proceeds, "PROCEEDS") (other than proceeds applied
pursuant to subsection 2.4C(ii)(c)) and so long as at the time of receipt of
such proceeds there shall exist no Potential Event of Default or Event of
Default, the Borrower may reinvest such Proceeds in property substantially
similar to the property so damaged or lost so long as the Administrative Agent
receives a first priority perfected security interest in such property pursuant
to documentation acceptable to the Administrative Agent, the property is duly
leased to Atlas pursuant to the applicable Lease and the Administrative Agent
receives all documents and opinions in connection therewith that it may
reasonably request, including, without limitation, an opinion from counsel that
the Borrower as lessor and the Administrative Agent as the assignee under the
Lease are entitled to the benefits of Section 1110 of the Bankruptcy Code with
respect to such property. If, 270 days after receipt of any such Proceeds, the
Borrower has not reinvested such Proceeds as described above or if at the time
of receipt of such proceeds or at the time of reinvestment there shall exist a
Potential Event of Default or an Event of Default then the Borrower shall
immediately prepay, without premium or penalty (other than pursuant to
subsection 2.6D), those Loans relating to the Aircraft or Spare Engine Pool in
respect of which such Proceeds were received based on the outstanding principal
amount of each Loan as compared to the total outstanding principal amount of all
Loans relating to such Aircraft or Spare Engine Pool. Any amount of the Proceeds
remaining (a) after prepayment of the Loans described in the immediately
preceding sentence and/or (b) after being reinvested in the manner described in
the second preceding sentence shall be applied ratably to the prepayment of
Loans relating to all of the remaining Aircraft and Spare Engine Pools based on
the outstanding principal amount of each such Loan as compared to the total
outstanding principal amount of all Loans relating to all of the remaining
Aircraft and
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Spare Engine Pools. Any such mandatory prepayments shall be applied as
specified in subsection 2.4C(iii). Until such time as such proceeds are
reinvested or applied to repay Loans, all such proceeds shall be held by the
Administrative Agent in a cash collateral account with the Administrative Agent
as security for the Obligations pursuant to a cash collateral agreement in form
and substance satisfactory to the Administrative Agent and providing that such
proceeds may be invested in Cash or Cash Equivalents at the direction of the
Borrower with any earnings thereon being for the account of the Borrower.
(c) Prepayments and Reductions Due to an Event of Loss. Following
an Event of Loss with respect to an Aircraft or a Spare Engine, the Borrower
shall prepay, without premium or penalty (other than pursuant to subsection
2.6(D)), the outstanding principal amount of Loans relating to the Aircraft or
Spare Engine Pool that were the subject of the Event of Loss; provided, that
the Borrower shall not be required to make a prepayment pursuant to this
subsection 2.4C(ii)(c) in the event that the Borrower receives Insurance
Proceeds or Condemnation Proceeds in connection with such Event of Loss so long
as at the time of reinvestment there exists no Potential Event of Default or
Event of Default, in which case such proceeds may, within 270 days of receipt
of any such Proceeds, be reinvested in aircraft or spare engines substantially
similar to the Aircraft or Spare Engines that were the subject of the Event of
Loss so long as such replacement aircraft or spare engines are duly leased to
Atlas pursuant to the applicable Lease or Leases and the Administrative Agent
receives all documents and opinions in connection therewith that it may
reasonably request, including, without limitation, an opinion from counsel of
the Borrower to the extent that the Borrower as lessor and the Administrative
Agent as the assignee under the Lease are entitled to the benefits of Section
1110 of the Bankruptcy Code with respect to such property. To the extent that
Insurance Proceeds or Condemnation Proceeds received upon the occurrence of an
Event of Loss with respect to an Aircraft or Spare Engine are not reinvested in
accordance with the preceding sentence, then the Borrower shall prepay, without
premium or penalty (other than pursuant to subsection 2.6D), those Loans
relating to the Aircraft or Spare Engine Pool in respect of which such
Insurance Proceeds or Condemnation Proceeds were received based on the
outstanding principal amount of each Loan as compared to the total outstanding
principal amount of all Loans relating to such Aircraft or Spare Engine Pool.
Any amount of the Proceeds remaining (a) after prepayment of the Loans
described in the immediately preceding sentence and/or (b) after being
reinvested in the manner described in the second preceding sentence, shall be
applied ratably to the prepayment of Loans relating to all of the remaining
Aircraft and Spare Engine Pools based on the outstanding principal amount of
each such Loan as compared to the total outstanding principal amount of all
Loans relating to all of the remaining Aircraft and Spare Engine Pools. Any
such mandatory prepayments shall be applied as specified in subsection
2.4C(iii). Until such time as such Proceeds are reinvested in replacement
aircraft or spare engines or applied to repay Loans, such proceeds shall be
held by the Administrative Agent in a cash collateral account with the
Administrative Agent as security for the Obligations pursuant to a cash
collateral agreement in form and substance satisfactory to the Administrative
Agent and providing that such proceeds may be invested in Cash or
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Cash Equivalents at the direction of the Borrower with any earnings thereon
being for the account of the Borrower.
(d) Prepayments under Leases. On any date on which the Borrower
receives any prepayments of rent or other amounts pursuant to the terms of any
Lease, the Borrower shall prepay, without premium or penalty (other than
pursuant to subsection 2.6), the outstanding principal amount of Loans relating
to the Aircraft or Spare Engine Pool that is the subject of the Lease pursuant
to which such prepayments were made and, to the extent that such payments are
in excess of the principal amount of Loans relating to such Aircraft or Spare
Engine Pool, such excess proceeds shall be applied to make an additional
prepayment of Loans relating to all of the remaining Aircraft and Spare Engine
Pools based on the outstanding principal amount of each such Loan as compared
to the total outstanding principal amount of all Loans relating to all of the
remaining Aircraft and Spare Engine Pools.
(iii) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of Loans and
Order of Maturity. Any voluntary prepayments pursuant to subsection 2.4C(i)
shall be applied ratably among the Loans relating to all of the Aircraft and
both Spare Engine Pools based on the outstanding principal amount of each such
Loan as compared to the total outstanding principal amount of all Loans. All
voluntary prepayments of the Loans pursuant to subsection 2.4C(i) shall be
applied pro rata to all scheduled amortization payments.
(b) Application of Mandatory Prepayments of Loans. Any mandatory
prepayments of the Loans pursuant to subsection 2.4C(ii) shall be applied
ratably among the Loans relating to all of the Aircraft and both Spare Engine
Pools based on the outstanding principal amount of each such Loan as compared
to the total outstanding principal amount of all Loans; provided, that in the
event of a prepayment pursuant to subsection 2.4C(ii)(a) such prepayment shall
be applied first to the Loans relating to such Aircraft or Spare Engine Pool
that were the subject of the Asset Sale on a pro rata basis based on the
outstanding principal amount of each Loan as compared to the total outstanding
principal amount of all Loans relating to such Aircraft or Spare Engine Pool
and second, ratably among the Loans relating to all other Aircraft and Spare
Engine Pools on a pro rata basis based on the outstanding principal amount of
the Loan being prepaid as compared to the total outstanding principal amount of
all Loans relating to all other Aircraft and Spare Engine Pools. Any mandatory
prepayments of the Loans pursuant to subsection 2.4C(ii)(b) or (c) shall be
applied to the Loans relating to the particular Aircraft or Spare Engine Pool,
retained by the Borrower and/or applied ratably among the Loans relating to all
other Aircraft and Spare Engine Pools in accordance with such sections. All
mandatory prepayments of the Loans pursuant to subsection 2.4C(ii) shall be
applied to scheduled amortization payments in inverse order of maturity.
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D. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by the Borrower of
principal, interest, fees and other Obligations hereunder and under the Notes
shall be made in Dollars in same day funds, without defense, set-off or
counterclaim, free of any restriction or condition, and delivered to the
Administrative Agent not later than 12:00 Noon (New York time) on the date due
at the Funding and Payment Office for the account of the Lenders. Funds
received by the Administrative Agent after that time on such due date shall be
deemed to have been paid by the Borrower on the next succeeding Business Day.
The Borrower hereby authorizes the Administrative Agent to charge its accounts
with the Administrative Agent in order to cause timely payment to be made to
the Administrative Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts for that
purpose).
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Loan shall include payment
of accrued interest on the principal amount being repaid or prepaid, and all
such payments shall be applied to the payment of interest before application to
principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of Tranche A Loans shall be apportioned among all
outstanding Tranche A Loans to which such payments relate, in each case
proportionately to each Tranche A Lender's respective Tranche A Pro Rate Share.
Aggregate principal and interest payments in respect of Tranche B Loans shall
be apportioned among all outstanding Tranche B Loans to which such payments
relate, in each case proportionately to each Tranche B Lender's respective
Tranche B Pro Rata Share. The Administrative Agent shall promptly distribute to
each Lender, at its address set forth below its name on the signature page
hereof or at such other address as such Lender may request, its Tranche A Pro
Rata Share of all such payments received by the Administrative Agent in respect
of Tranche A Loans, and its Tranche B Pro Rate Share of all such payments
received by the Administrative Agent in respect of Tranche B Loans.
(iv) Payments on Business Days. Except as otherwise provided
herein, whenever any payment to be made hereunder shall be stated to be due on
a day that is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder.
(v) Notation of Payment. Each Lender agrees that before disposing
of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments previously made thereon and
of the date to which interest thereon has been paid; provided, that the failure
to make (or any error in the making of) a notation of any Loan made under
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such Note shall not limit or otherwise affect the obligations of the Borrower
hereunder or under such Note with respect to any Loan or any payments of
principal or interest on such Note.
2.5 USE OF PROCEEDS.
A. APPLICATION OF PROCEEDS. The proceeds of the Loans shall be
applied solely (I)(x) to consummate the Refinancing and (y) to pay fees and
expenses related to the Refinancing and the other transactions contemplated
hereby, (II) (x) to finance the Transfers and (y) to pay fees and expenses
related to the Transfers and the other transactions contemplated hereby, (III)
to pay fees and expenses related to the Atlas Contribution and the other
transactions contemplated hereby and (IV) to the extent that there are proceeds
remaining after application pursuant to preceding clauses (I), (II) and (III),
for general corporate purposes, including the payment of dividends to Atlas
permitted hereunder.
B. MARGIN REGULATIONS. No portion of the proceeds of any
borrowing under this Agreement shall be used by the Borrower in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System, or any other regulation of such Board, or to violate
the Exchange Act, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING LOANS.
Notwithstanding any other provisions of this Agreement to the
contrary, the following provisions shall govern with respect to Loans as to the
matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, the Administrative Agent shall determine (which
determination shall, absent manifest error, be final, conclusive and binding
upon all parties) the interest rate that shall apply to the Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to the Borrower and to each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event
that the Administrative Agent shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any Loans, that, by reason of
circumstances affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the interest rate applicable to such Loans
on the basis provided for in the definition of Adjusted Eurodollar Rate, the
Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to the Borrower and to each Lender of such
determination, whereupon (i) no Loans may be incurred until such time as the
Administrative Agent notifies the Borrower and the
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Lenders that the circumstances giving rise to such notice no longer exist, or
until the Borrower, the Administrative Agent and the Lenders agree upon a
Substitute Basis in accordance with Section 2.6G and (ii) the rate of interest
applicable to any Affected Loans then outstanding shall be determined in
accordance with Section 2.6G.
C. ILLEGALITY OR IMPRACTICABILITY OF LOANS. In the event that on
any date any Lender shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto but shall be made only after
consultation with the Borrower and the Administrative Agent) that the making,
maintaining or continuation of its Loans (i) has become unlawful as a result of
compliance by such Lender in good faith with any law, treaty, governmental
rule, regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful) or (ii) has
become impracticable, or would cause such Lender material hardship, as a result
of contingencies occurring after the date of this Agreement that materially and
adversely affect the interbank Eurodollar market or the position of such Lender
in that market, then, and in any such event, such Lender shall be an "AFFECTED
LENDER" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to the Borrower and the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each other Lender). Thereafter, (a) the obligation of the Affected Lender to
make Loans shall be suspended until such notice shall be withdrawn by the
Affected Lender, (b) the Affected Lender's obligation to maintain its
outstanding Loans (the "AFFECTED LOANS") shall be suspended until such notice
shall be withdrawn by the Affected Lender, and (c) the parties shall follow the
procedures set forth in Section 2.6G with respect to the Affected Loans so long
as, if following such procedures, the maintaining of such Loans is lawful.
Notwithstanding the foregoing, to the extent that a determination by an
Affected Lender as described above relates to a borrowing then being requested
by the Borrower subject to the provisions of subsection 2.6D, the Borrower
shall have the option, subject to the provisions of subsection 2.6D, to rescind
such borrowing as to all Lenders by giving notice (by telefacsimile or by
telephone confirmed in writing) to the Administrative Agent of such rescission
on the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission the Administrative Agent shall
promptly transmit to each other Lender). Except as provided in the immediately
preceding sentence, nothing in this subsection 2.6C shall affect the obligation
of any Lender other than an Affected Lender to make or maintain Loans in
accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. The Borrower shall compensate each Lender, upon written request by
such Lender (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including,
without limitation, any interest paid by such Lender to lenders of funds
borrowed by it to make or carry its Loans and any loss, expense or liability
sustained by such Lender in connection with the liquidation or reemployment of
such funds)
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that such Lender may sustain: (i) if for any reason (other than a default by
such Lender) a borrowing of any Loan does not occur on a date specified
therefor in a Notice of Borrowing or a telephonic request for borrowing, (ii)
if any prepayment or other principal payment occurs on a date prior to the last
day of an Interest Period applicable to such Loan, (iii) if any prepayment of
any of its Loans is not made on any date specified in a notice of prepayment
given by the Borrower, or (iv) as a consequence of any other default by the
Borrower in the repayment of its Loans when required by the terms of this
Agreement.
E. BOOKING OF LOANS. Any Lender may make, carry or transfer
Loans at, to, or for the account of any of its branch offices or the office of
an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF LOANS. Calculation of all
amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A
shall be made as though that Lender had actually funded each of its relevant
Loans through the purchase of a Eurodollar deposit bearing interest at the rate
obtained pursuant to the definition of Adjusted Eurodollar Rate in an amount
equal to the amount of such Loan and having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar deposit
from an offshore office of that Lender to a domestic office of that Lender in
the United States of America; provided, however, that each Lender may fund each
of its Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
G. SUBSTITUTE BASIS. During the 30 days following the date of
any notice given to the Borrower pursuant to subsections 2.6B and 2.6C, the
Administrative Agent, the Lenders and the Borrower shall negotiate in good
faith in order to arrive at a mutually acceptable alternative basis for
determining the interest rate from time to time applicable to the affected
Loans (the "SUBSTITUTE BASIS"). If, within the 30 days following the date of
any such notice to the Borrower, the Administrative Agent, the Lenders and the
Borrower shall agree upon a Substitute Basis, such Substitute Basis shall be
retroactive to and effective from the first day of the then current Interest
Period until and including the last day of such Interest Period. If, after 30
days from the date of such notice, the Lenders and the Borrower shall have
failed to agree upon a Substitute Basis, then each Lender shall certify in
writing to the Borrower through the Administrative Agent (such certification to
be conclusive and binding on all of the parties hereto absent manifest error)
the interest rate at which such Lender is prepared to make or maintain its
affected Loan for such Interest Period, it being understood that such Lender's
interest rate shall be at a rate per annum equal to the sum of the Applicable
Margin plus, a rate which adequately and fairly reflects the cost to such
Lender of obtaining the funds necessary to maintain its affected Loan for such
Interest Period, such interest rate to be retroactive to and effective from the
first day of such Interest Period. If no Substitute Basis is established, upon
receipt of notice of the interest rates at which the Lenders are prepared to
make or maintain their respective affected Loans, the Borrower shall have the
right, exercisable upon ten Business Days' prior notice to any Lender through
the Administrative Agent,
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(A) to continue to borrow Loans at the interest rates so advised by the
respective Lenders (as such rates may be modified, from time to time, at the
outset of each subsequent Interest Period) or (B) to prepay in full the
Affected Loans of any Lender, together with accrued interest thereon at the
interest rate certified in writing by such Lender as provided above, whereupon
such Affected Loans shall become due and payable on the date specified by the
Borrower in such notice. In determining the actual interest rate per annum to
be charged on any Loan, the Substitute Basis or the interest rate advised by
the respective Lenders to apply to a Loan in accordance with the provisions of
this subsection 2.6G shall be increased to the rate per annum obtained by
dividing the Substitute Basis or such advised interest rate by a percentage
equal to 100% minus the then stated maximum rate of all required reserve
requirements under applicable law (including any marginal, emergency,
supplemental, special or other reserves) and applicable on the date of
determination of such interest rate to any member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" as defined in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time to
time (or any successor category of liabilities under Regulation D).
2.7 INCREASED COSTS, TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B, in the event that any Lender shall determine
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any change in the rate of Tax on the overall net
income of such Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Loans that are reflected in the
definition of Adjusted Eurodollar Rate); or
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(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or its
obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Loans hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, the Borrower shall promptly pay
to such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to the Borrower (with a copy to the
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by the
Borrower under this Agreement and the other Loan Documents shall be paid free
and clear of and (except to the extent required by law) without any deduction
or withholding on account of any Tax (excluding, except as provided in
subsection 27B(ii)(e), any Tax on the overall net income of any Lender)
imposed, levied, collected, withheld or assessed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein with respect to
such payments.
(ii) Grossing-up of Payments. If the Borrower or any other Person
is required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by the Borrower to the Administrative Agent or
any Lender under any of the Loan Documents:
(a) the Borrower shall notify the Administrative Agent of any
such requirement or any change in any such requirement as soon as the Borrower
becomes aware of it;
(b) the Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to pay is
imposed on the Borrower) for its own account or (if that liability is imposed
on the Administrative Agent or such Lender, as the case may be) on behalf of
and in the name of the Administrative Agent or such Lender;
(c) the sum payable by the Borrower in respect of which the
relevant deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that deduction,
withholding or payment, the Administrative
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Agent or such Lender, as the case may be, receives on the due date a net sum
equal to what it would have received had no such deduction, withholding or
payment been required or made;
(d) within 30 days after paying any sum from which it is required
by law to make any deduction or withholding, and within 30 days after the due
date of payment of any Tax which it is required by clause (b) above to pay, the
Borrower shall deliver to the Administrative Agent evidence satisfactory to the
other affected parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority; and
(e) if any amounts are payable in respect of Taxes pursuant to
subsection 2.7B(ii)(c), the Borrower agrees to reimburse each Lender, upon the
written request of such Lender, for taxes imposed on or measured by the overall
net income of such Lender and for any withholding of taxes as such Lender shall
determine are payable by, or withheld from, such Lender, in respect of such
amounts so paid to or on behalf of such Lender pursuant to subsection
2.7B(ii)(c), and in respect of any amounts paid to or on behalf of such Lender
pursuant to this subsection 2.7B(ii)(e).
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other political
subdivision thereof (for purposes of this subsection 2.7B(iii), a "NON-U.S.
LENDER") shall deliver to the Administrative Agent for transmission to the
Borrower, on or prior to the Effective Date (in the case of each Lender listed
on the signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other Lender that
was not a Lender hereunder immediately prior to such assignment or transfer),
and at such other times as may be necessary in the determination of the
Borrower or the Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue Service Form W-8ECI or
Form W-8BEN (with respect to a complete exemption under an income tax treaty)
(or any successor forms), properly completed and duly executed by such Lender,
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to any payments to such Lender under any of
the Loan Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver
either Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a
complete exemption under an income tax treaty) pursuant to clause (1) above, a
Certificate re Non-Bank Status together with two original copies of Internal
Revenue Service Form W-8BEN (with respect to the portfolio interest exemption)
(or any successor form), properly completed and duly executed by such Lender,
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to any payments to such Lender of interest
payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax withholding
matters pursuant to sub-
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section 2.7B(iii)(a) hereby agrees, from time to time after the initial
delivery by such Lender of such forms, certificates or other evidence, whenever
a lapse in time or change in circumstances renders such forms, certificates or
other evidence obsolete or inaccurate in any material respect, such Lender
shall (1) deliver to the Administrative Agent for transmission to the Borrower
two new original copies of Internal Revenue Service Form W-8ECI or Form W-8BEN
(with respect to the benefits of any income tax treaty), or a Certificate re
Non-Bank Status and two original copies of Internal Revenue Service Form W-8BEN
(with respect to the portfolio interest exemption), as the case may be,
properly completed and duly executed by such Lender, together with any other
certificate or statement of exemption required in order to confirm or establish
the entitlement of such Lender to a continued exemption from or reduction in
United States withholding tax with respect to payments to such Lender under the
Loan Documents or (2) immediately notify the Administrative Agent and the
Borrower of its inability to deliver any such forms, certificates or other
evidence, in which case such Lender shall not be required to deliver any such
forms, certificates or other evidence pursuant to this subsection 2.7B(iii)(b).
(c) The Borrower shall not be required to pay any additional
amount to any Non-U.S. Lender under clause (c) or (e) of subsection 2.7B(ii) if
such Lender shall have failed to satisfy the requirements of subsection
2.7B(iii)(a); provided, that if such Lender shall have satisfied such
requirements on the Initial Borrowing Date (in the case of each Lender listed
on the signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it became a Lender (in the case of each other Lender),
nothing in this subsection 2.7B(iii)(c) shall relieve the Borrower of its
obligation to pay any additional amounts pursuant to clause (c) or (e) of
subsection 2.7B(ii) in the event that, as a result of any change in any
applicable law, treaty or governmental rule, regulation or order, or any change
in the interpretation, administration or application thereof, such Lender is no
longer properly entitled to deliver forms, certificates or other evidence at a
subsequent date establishing the fact that such Lender is not subject to
withholding as described in subsection 2.7B(iii)(a).
(iv) If the Borrower pays any additional amount under this
subsection 2.7B to a Lender and such Lender determines in its sole discretion
that it has actually received or realized in connection therewith any refund or
any reduction of, or credit against, its Tax liabilities in or with respect to
the taxable year in which the additional amount is paid, such Lender shall pay
to the Borrower an amount that such Lender shall, in its sole discretion,
determine is equal to the net benefit, after tax, that was obtained by the
Lender in such year as a consequence of such refund, reduction or credit;
provided, however, that (i) any Lender may determine, in its sole discretion
consistent with the policies of such Lender, whether to seek a Tax Benefit;
(ii) any Taxes that are imposed on a Lender as a result of a disallowance or
reduction (including through the expiration of any tax credit carryover or
carryback of such Lender that otherwise would not have expired) of any Tax
Benefit with respect to which such Lender has made a payment to the Borrower
pursuant to this Section 2.7B(iv) shall be treated as a Tax for which the
Borrower is obligated to indemnify such Lender pursuant to this Sec-
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tion 2.7B(iv) without any exclusions or defenses; and (iii) nothing in this
Section 2.7B(iv) shall require the Lender to disclose any confidential
information to the Borrower (including , without limitation, its tax returns).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after
the date hereof of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its applicable lending office) with any guideline,
request or directive regarding capital adequacy (whether or not having the
force of law) of any such governmental authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Commitments or
other obligations hereunder to a level below that which such Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation with
regard to capital adequacy), then from time to time, within ten Business Days
after receipt by the Borrower from such Lender of the statement referred to in
the next sentence, the Borrower shall pay to such Lender such additional amount
or amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to the Borrower
(with a copy to the Administrative Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such additional amounts,
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.
D. SUBSTITUTE LENDERS. In the event that the Borrower is
required under the provisions of subsection 2.6C or this subsection 2.7 to make
payments in a material amount to any Lender or in the event that any Lender
fails to lend to the Borrower in accordance with this Agreement, the Borrower
may, so long as, no Event of Default or Potential Event of Default shall have
occurred and be continuing, elect to terminate such Lender as a party to this
Agreement, so long as, concurrently with such termination, (i) the Borrower
pays to that Lender all principal, interest and fees and other amounts
(including, without limitation, amounts, if any, owed under subsection 2.6C or
this subsection 2.7) owed to such Lender through such date of termination, (ii)
another financial institution satisfactory to the Borrower and the
Administrative Agent (or if the Administrative Agent is also the Lender to be
terminated, the successor Administrative Agent) agrees, as of such date, to
become a Lender for all purposes under this Agreement (whether by assignment or
amendment) and to assume all obligations of the Lender to be terminated as of
such date, and (iii) all documents and supporting materials necessary, in the
judgment of the Administrative Agent (or if the Administrative Agent is also
the Lender to be terminated, the successor Administrative Agent) to evidence
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the substitution of such Lender have been received and approved by the
Administrative Agent as of such date.
2.8 OBLIGATION OF LENDERS TO MITIGATE.
Each Lender agrees that, as promptly as practicable after the officer
of such Lender responsible for administering the Loans of such Lender becomes
aware of the occurrence of an event or the existence of a condition that would
cause such Lender to become an Affected Lender or that would entitle such
Lender to receive payments under subsection 2.7, it will, to the extent not
inconsistent with the internal policies of such Lender and any applicable legal
or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or
maintain the Commitment of such Lender or the Affected Loan of such Lender
through another lending office of such Lender, or (ii) take such other measures
as such Lender may deem reasonable, if as a result thereof the circumstances
that would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts that would otherwise be required to be paid to such
Lender pursuant to subsection 2.7 would be materially reduced and if, as
determined by such Lender in its sole discretion, the making, issuing, funding
or maintaining of such Commitments or Loans through such other lending office
or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or the
interests of such Lender; provided, that such Lender will not be obligated to
utilize such other lending office pursuant to this subsection 2.8 unless the
Borrower agrees to pay all incremental expenses incurred by such Lender as a
result of utilizing such other lending office as described in clause (i) above.
A certificate as to the amount of any such expenses payable by the Borrower
pursuant to this subsection 2.8 (setting forth in reasonable detail the basis
for requesting such amount) submitted by such Lender to the Borrower (with a
copy to the Administrative Agent) shall be conclusive absent manifest error.
SECTION 3.
CONDITIONS TO LOANS
3.1 CONDITIONS TO LOANS.
The obligations of the Lenders to make the Loans on the Initial
Borrowing Date are subject to prior or concurrent satisfaction of the following
conditions:
A. BORROWER AND ATLAS DOCUMENTS. On or before the Initial Borrowing
Date, the Borrower shall deliver or cause to be delivered to the Lenders (or to
the Administrative Agent for the Lenders with sufficient originally executed
copies, where appropriate, for each Lender and its counsel) the following,
each, unless otherwise noted, dated the Effective Date:
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(i) certified copies of the certificate or articles of
incorporation of the Borrower and Atlas, together with a good standing
certificate from the Secretary of State of the State of Delaware and each other
state in which such corporation is qualified as a foreign corporation to do
business and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or similar
taxes from the appropriate taxing authority of each of such states, each dated
a recent date prior to the Effective Date;
(ii) copies of the bylaws of the Borrower and of Atlas, certified
in each case as of the Effective Date by its corporate secretary or an
assistant secretary;
(iii) resolutions of the Board of Directors of the Borrower and
Atlas approving and authorizing the execution, delivery and performance of this
Agreement, the other Loan Documents and the Transaction Documents (to the
extent that such Person is a party thereto), certified as of the Effective Date
by such Person's corporate secretary or an assistant secretary as being in full
force and effect without modification or amendment;
(iv) signature and incumbency certificates of the officers of the
Borrower and of Atlas executing this Agreement and the other Loan Documents;
(v) executed originals of this Agreement, the Notes (duly
executed in accordance with this Agreement) and the other Loan Documents,
including Aircraft Chattel Mortgages with respect to all of the Aircraft and
both of the Spare Engine Pools; and
(vi) such other documents as the Administrative Agent may
reasonably request.
B. AIRCRAFT DOCUMENTS. With respect to each Aircraft or Spare
Engine, the following documents shall have been duly authorized, executed and
delivered by the respective parties thereto, shall each be reasonably
satisfactory in form and substance to the Lenders and the Administrative Agent
and shall be in full force and effect, and copies shall have been delivered to
the Administrative Agent: all documents, including without limitation, any
bills of sale, certificates of transfer and bills of sale on AC Form 8050-2
evidencing the conveyance of title of the Aircraft and Spare Engines from
Atlas, AFL, or AFL II, as the case may be, to the Borrower and such other
evidence as the Administrative Agent shall request confirming that the Borrower
has good and valid title to each Aircraft and Spare Engine and that all
registrations and recordings necessary to evidence such title have been made,
including, without limitation, all recordings with the FAA to register the
Aircraft in the name of the Borrower.
C. NOTICES OF BORROWING. Prior to the making of the Loans, the
Administrative Agent shall have received such Notices of Borrowing as are
required by sub-section 2.1B.
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D. NECESSARY CONSENTS. The Borrower shall have obtained all
consents necessary or advisable in connection with the transactions
contemplated by the Loan Documents and the continued operation of the business
of the Borrower, and each of the foregoing shall be in full force and effect
and in form and substance satisfactory to the Administrative Agent.
E. AIRCRAFT CHATTEL MORTGAGES. The Administrative Agent shall
have received a copy of a first priority Aircraft Chattel Mortgage relating to
each Aircraft and each Spare Engine, duly executed by the Borrower, which
Aircraft Chattel Mortgages shall provide a first priority security interest in
the Collateral for the benefit of the Lenders, securing all the Obligations,
together with:
(i) executed copies of proper financing statements to be filed
under the UCC in all jurisdictions where the Administrative Agent may deem such
filing necessary or desirable in order to perfect the security interests
created by the Aircraft Chattel Mortgages;
(ii) evidence of the completion of all recordings and filings with
respect to the Collateral that the Administrative Agent may deem necessary or
desirable in order to perfect the security interest created by the Aircraft
Chattel Mortgages including, without limitation, all filings with the FAA; and
(iii) evidence that all other actions necessary or, in the
reasonable opinion of the Administrative Agent, desirable to establish,
preserve and perfect the first priority security interests created by the
Aircraft Chattel Mortgages in all Aircraft and Spare Engines have been taken
(including all FAA filings).
F. FAIRNESS OPINION. On or prior to the Initial Borrowing Date,
the Borrower shall have delivered or shall have caused to be delivered to the
Administrative Agent a fairness opinion from Scott & Stringfellow, Inc.,
stating that the Transaction is on terms no less favorable to Atlas or the
Borrower than those that could have been obtained in an arm's length
transaction with unrelated third parties.
G. FINANCIAL CONDITION CERTIFICATES. Each of the Borrower and
Atlas shall have delivered to the Administrative Agent a Financial Condition
Certificate dated the Initial Borrowing Date, substantially in the form annexed
hereto as Exhibit VIIA and Exhibit VIIB annexed hereto, respectively, with
appropriate attachments demonstrating that, after giving effect to the
consummation of the financing transactions contemplated hereby, each of the
Borrower and Atlas and its Subsidiaries is Solvent.
H. OPINIONS OF BORROWER'S COUNSEL. Lenders and their respective
counsel shall have received (i) one or more favorable written opinions of
Cahill Gordon & Reindel, counsel for the Borrower, in form and substance
reasonably satisfactory to the Administrative Agent and its counsel, dated as
of the Initial Borrowing Date and setting forth substantially
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the matters in the opinions designated in Exhibit IVA annexed hereto and as to
such other matters as the Administrative Agent acting on behalf of the Lenders
may reasonably request, (ii) an opinion of Cahill Gordon & Reindel regarding
Section 1110 of the Bankruptcy Code, dated the Initial Borrowing Date and
setting forth substantially the matters in the opinions designated in Exhibit
IVB annexed hereto, (iii) an opinion of Cahill Gordon & Reindel regarding
certain bankruptcy matters other than those covered in the opinion referred to
in clause (ii) above, dated the Initial Borrowing Date and setting forth
substantially the matters in the opinions designated in Exhibit IVC annexed
hereto and (iv) an opinion of Cahill Gordon & Reindel regarding certain tax
matters, dated the Initial Borrowing Date and setting forth substantially the
matters in the opinions designated in Exhibit IVD annexed hereto.
I. ATLAS CREDIT AGREEMENT; LEASES. The Amended Aircraft Credit
Facility and the Leases shall be effective and shall be in form and substance
satisfactory to the Administrative Agent and the Lenders so as to allow,
according to its terms, the Transaction to be consummated.
J. OPINIONS OF FAA COUNSEL. The Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of FAA counsel in form and substance satisfactory to the
Administrative Agent and its counsel, dated the Initial Borrowing Date, and
setting forth substantially the matters in the opinions designated in Exhibit
IVE annexed hereto.
K. FEES. The Borrower shall have paid to the Administrative
Agent, for distribution (as appropriate) to the Administrative Agent and the
Lenders, the fees payable on the Initial Borrowing Date referred to in
subsection 2.3.
L. FINANCIAL STATEMENTS. On or before the Initial Borrowing
Date, the Administrative Agent shall have received from the Borrower (i) an
audited consolidated and consolidating balance sheet of Atlas and its
Subsidiaries as at December 31, 1999, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Atlas and its Subsidiaries for such fiscal year, accompanied by an opinion of a
nationally recognized firm of independent public accountants and (ii) the
Projections, which financial statements and Projections shall be in form and
substance reasonably satisfactory to the Administrative Agent.
M. EVIDENCE OF INSURANCE. The Borrower shall have delivered to
the Administrative Agent certificates of insurance naming the Administrative
Agent on behalf of the Administrative Agent and the Lenders as loss payee under
the casualty insurance policies and the Administrative Agent and the Lenders as
additional insured under the liability policies of the Borrower and a broker's
report from the Borrower's insurance broker evidencing compliance with the
requirements of each Aircraft Chattel Mortgage, all as required pursuant to
subsection 5.4 hereof or pursuant to the Collateral Documents. All such
certificates of insurance shall contain such endorsements as are reasonably
required by the Administrative Agent.
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N. NO MATERIAL ADVERSE EFFECT. Since December 31, 1999, no
Material Adverse Effect (in the reasonable opinion of the Administrative Agent)
shall have occurred.
O. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. On
the Initial Borrowing Date, (i) there shall exist no Potential Event of Default
or Event of Default and (ii) all representations and warranties in Section 4
hereof are true, correct and complete in all material respects on and as of the
Initial Borrowing Date to the same extent as though made on and as of that date
and the Borrower shall have performed in all material respects all agreements
and satisfied all conditions that this Agreement provides shall be performed or
satisfied by it on or before the Initial Borrowing Date except as otherwise
disclosed to and agreed to in writing by the Administrative Agent and Requisite
Lenders, and the Borrower shall have delivered to the Administrative Agent an
Officer's Certificate, in form and substance satisfactory to the Administrative
Agent, to that effect.
P. COMPLIANCE CERTIFICATE. The Borrower shall have delivered to
the Administrative Agent a Compliance Certificate dated the Initial Borrowing
Date, substantially in the form annexed hereto as Exhibit III.
Q. TRANSACTION; REFINANCING. On or prior to the Initial
Borrowing Date, the following shall have occurred: (i) Atlas shall have
contributed to the Borrower, in exchange for equity interests in the Borrower,
the sum of $12,783,142, together with the Atlas Aircraft and each of the Atlas
Spare Engines, and the Borrower shall, concurrently with such contribution, pay
the sum of $29,705,684 to the holders of the Atlas Equipment Obligations
(collectively, the "ATLAS CONTRIBUTION"); (ii) AFL shall have contributed to
the Borrower, in exchange for equity interests in the Borrower, each of the AFL
Aircraft, subject to the AFL Equipment Obligations (the "AFL CONTRIBUTION");
(iii) AFL II shall have contributed to the Borrower, in exchange for equity
interests in the Borrower, each of the AFL II Aircraft and each of the AFL II
Spare Engines, in each case subject to the AFL II Equipment Obligations (the
"AFL II CONTRIBUTION" and, together with the AFL Contribution, the
"TRANSFERS"); (iv) the Borrower shall have leased each of the Aircraft to Atlas
via the Aircraft Leases; (v) the Borrower shall have leased all of the AFL II
Spare Engines to Atlas via the CF6-50E2 Spare Engine Lease; (vi) the Borrower
shall have leased all of the Atlas Spare Engines to the Borrower via the
CF6-80C2 Spare Engine Lease; (vii) all Equipment Obligations shall have been
indefeasibly repaid in full from, among other sources, the proceeds of the
borrowing hereunder and (viii) all security interests and Liens encumbering the
Aircraft or any part thereof or the Spare Engines or any other assets of the
Borrower shall have been terminated and released (the actions taken in clauses
(vii) and (viii) collectively, the "REFINANCING," and the actions taken in
clauses (i) through (viii) together with the incurrence of Loans hereunder
collectively, the "TRANSACTION"). The Lenders shall have received true and
correct copies of all of the Transaction Documents, including, without
limitation, all documentation entered into in connection with the Atlas
Contribution, the Transfers and the Leases, which Leases shall be substantially
in the form of Exhibit VIIIA or Exhibit VIIIB annexed hereto, as appropriate,
and
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all terms and conditions thereof shall be satisfactory to the Administrative
Agent (including, with respect to the Leases, their terms, rental schedules,
covenants, events of default and remedies). All of the Transaction Documents
shall have been duly executed and delivered by all parties thereto, and shall
be in full force and effect. Each of the conditions precedent to the
consummation of the Transaction set forth in the Transaction Documents shall
have been satisfied or waived, all to the satisfaction of the Administrative
Agent, and on or prior to the Initial Borrowing Date, the Transaction shall
have been consummated in accordance with the Transaction Documents and all
applicable laws, rules and regulations.
R. COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by the Administrative Agent, acting on behalf of the Lenders, and
its counsel shall be satisfactory in form and substance to the Administrative
Agent and such counsel, and the Administrative Agent and such counsel shall
have received all such counterpart originals or certified copies of such
documents as the Administrative Agent may reasonably request.
S. APPRAISALS. The Borrower shall have delivered to the
Administrative Agent appraisals from two Approved Appraisers, in form and
substance satisfactory to the Lenders, which appraisals shall demonstrate to
the Lenders' satisfaction that the ratio of the Total Commitment to the
aggregate Appraised Value of the Aircraft and the Spare Engines does not exceed
65% and that the terms of each of the Leases, including, without limitation,
rental rates, economic life and residual value, are at fair market value.
T. FAA CERTIFICATION AND TITLE. The Administrative Agent shall
have received evidence satisfactory to it to the effect that Atlas is an air
carrier certificated under Sections 401 and 604(b) of the Federal Aviation Act
and with respect to each Aircraft, the Administrative Agent shall have received
evidence that (i) each of the Aircraft has been registered with and duly
certified by the FAA as to type and airworthiness in the name of the Borrower
and the Administrative Agent has received a copy of such certification and
evidence satisfactory to the Lenders that each Engine and each Spare Engine is
being maintained in accordance with an FAA-approved or substantially similar
program and (ii) the Borrower shall have good and marketable title to and a
valid ownership interest in the Collateral, including the Aircraft and each
Spare Engine, free and clear of all Liens other than Liens permitted by
subsection 6.2.
U. BANKRUPTCY-REMOTE SUBSIDIARY. The Administrative Agent and
the Lenders shall be satisfied that the Borrower is a bankruptcy-remote
Subsidiary of Atlas and that the certificate of incorporation contains
provisions under which the Borrower may not commence a voluntary bankruptcy
proceeding without the affirmative vote of all directors.
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SECTION 4.
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to
make the Loans, the Borrower represents and warrants to each Lender, after
giving effect to the Transaction consummated on the Initial Borrowing Date,
that the following statements are true, correct and complete:
4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Borrower has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents and to carry out the
transactions contemplated thereby and by the Transaction Documents.
B. QUALIFICATION AND GOOD STANDING. The Borrower is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and will not have a Material Adverse Effect.
C. SUBSIDIARIES. The Borrower has no Subsidiaries.
D. COLLATERAL DOCUMENTS. The security interests created in favor
of the Administrative Agent under the Collateral Documents will at all times
from and after the Initial Borrowing Date constitute, as security for the
obligations purported to be secured thereby, a legal, valid and enforceable
first priority perfected security interest in and a Lien on all of the
Collateral referred to therein in favor of the Administrative Agent for the
benefit of the Lenders, perfected and prior to the rights of all third persons
in accordance with the requirements of all applicable Collateral Documents. The
Borrower has good and marketable title to its Collateral, and all such
Collateral is free and clear of all Liens except for Liens permitted by
subsection 6.2. No consents, filings or recordings are required in order to
perfect (or maintain the perfection or priority of) the security interests
purported to be created by any of the Collateral Documents, other than such as
have been obtained and which remain in full force and effect and Uniform
Commercial Code financing statements to be filed, or delivered to the
Administrative Agent for filing, on the Initial Borrowing Date and periodic
Uniform Commercial Code continuation filings or as is specifically otherwise
permitted by the terms of any applicable Collateral Document.
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4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of the Loan Documents and the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Borrower.
B. NO CONFLICT. The execution, delivery and performance by the
Borrower of the Loan Documents and the Transaction Documents and the
consummation of the Transaction and the transactions contemplated by the Loan
Documents do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to the Borrower, the certificate or
articles of incorporation or bylaws of the Borrower or any order, judgment or
decree of any court or other agency of government binding on the Borrower, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of the Borrower, including, without
limitation, the Pass Through Trust Documents, the Senior Note Documents and the
Amended Aircraft Credit Facility, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of the Borrower
(other than any Liens created under any of the Loan Documents in favor of the
Administrative Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of the Borrower, except for such approvals or consents as will be
obtained on or before the Initial Borrowing Date, are disclosed in writing to
the Lenders and have terms and conditions that are acceptable to the
Administrative Agent and the Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and
performance by the Borrower of the Loan Documents and the Transaction Documents
and the consummation of the Transaction and the transactions contemplated by
the Transaction Documents do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body that has not
been obtained or made on or prior to the date required to be obtained or made.
D. BINDING OBLIGATION. Each of the Loan Documents and the
Transaction Documents has been duly executed and delivered by the Borrower and
is the legally valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
4.3 FINANCIAL CONDITION.
A. The Borrower has heretofore delivered to the Lenders the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Atlas and its Subsidiaries as at December
31, 1999, and the related consolidated and
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consolidating statements of income, stockholders' equity and cash flows of
Atlas and its Subsidiaries for such fiscal year and (ii) the Projections. All
such statements were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated, and, where applicable, consolidating
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended. Atlas does not have any
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment that is not reflected in the
foregoing financial statements or the notes thereto and which in any such case
is material in relation to the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Atlas or any of its
Subsidiaries.
B. Except as fully disclosed in the financial statements delivered
pursuant to Section 4.3A, there were, as of the Effective Date, no liabilities
or obligations with respect to Atlas and its Subsidiaries or to the Borrower of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) that, either individually or in aggregate, could reasonably
be expected to be material to Atlas and its Subsidiaries taken as a whole but
excluding the Borrower, or to the Borrower on a stand-alone basis. As of the
Effective Date, neither Atlas nor the Borrower knows of any basis for the
assertion against it or, in the case of Atlas, against it or its Subsidiaries,
of any liability or obligation of any nature whatsoever that is not fully
disclosed in the financial statements delivered pursuant to Section 4.3A that,
either individually or in the aggregate, could reasonably be expected to be
material to Atlas and its Subsidiaries taken as a whole but excluding the
Borrower, or to the Borrower on a stand-alone basis.
4.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
(i) Since December 31, 1999, no event or change has
occurred that has caused or evidences, either in any case or in the aggregate,
a Material Adverse Effect.
(ii) Since December 31, 1999, the Borrower has not directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 6.5.
4.5 TITLE TO PROPERTIES, LIENS.
A. The Borrower has good, sufficient and legal title to all of its
properties and assets, including without limitation, all Aircraft and Spare
Engines. Except as permitted by this Agreement, all such properties and assets
are free and clear of Liens.
B. Each Aircraft has a current and valid airworthiness certificate
issued by the FAA pursuant to the Federal Aviation Act in effect and is in such
condition as may be necessary to enable the airworthiness certificate to be
maintained in good standing. Each En-
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gine and Spare Engine has a rated takeoff horsepower greater than 750
horsepower or the equivalent of such horsepower. Each Aircraft is registered
with the FAA in the name of the Borrower and Atlas has authority to operate
such Aircraft.
4.6 LITIGATION, ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of the Borrower) at law or
in equity or in admiralty or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any property of the
Borrower or with respect to the Transaction that could reasonably be expected
to result in a Material Adverse Effect. The Borrower is not (i) in violation of
any applicable laws that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
4.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of the Borrower required to be filed by it have been timely filed, and
all taxes, assessments, fees and other governmental charges upon the Borrower
and upon its respective properties, assets, income, businesses and franchises
that are due and payable have been paid when due and payable. The Borrower does
not know of any proposed tax assessment against it that is not being actively
contested by it in good faith and by appropriate proceedings; provided, that
such reserves or other appropriate provisions, if any, for liabilities for
taxes as shall be required in conformity with GAAP shall have been made or
provided for in the financial statements of the Borrower. There are no
agreements with respect to taxes or waiver extending any statute of limitations
relating to the payment or correction of taxes between the Borrower and any tax
agency or authority.
4.8 PERFORMANCE OF AGREEMENTS.
The Borrower is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
of its Contractual Obligations, and no condition exists that, with the giving
of notice or the lapse of time or both, would constitute such a default, except
where the consequences, direct or indirect, of such default or defaults, if
any, would not have a Material Adverse Effect.
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4.9 GOVERNMENTAL REGULATION.
The Borrower is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act
or the Investment Company Act of 1940 or under any other federal or state
statute or regulation that may limit its ability to incur Indebtedness or that
may otherwise render all or any portion of the Obligations unenforceable.
4.10 SECURITIES ACTIVITIES.
A. The Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.
B. No part of the proceeds of any Loan will be used (or has been
used) to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System.
4.11 COMPLIANCE WITH ERISA.
The Borrower has no qualified retirement plans under Section 401(k) of
the Internal Revenue Code nor medical benefit plans. The Borrower has never
sponsored, maintained, contributed to (or had an obligation to contribute to)
any Employee Benefit Plans.
4.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the transactions contemplated hereby, and the
Borrower hereby indemnifies the Lenders against, and agrees that it will hold
the Lenders harmless from, any claim, demand or liability for any such broker's
or finder's fees alleged to have been incurred in connection herewith or
therewith and any expenses (including reasonable fees, expenses and
disbursements of counsel) arising in connection with any such claim, demand or
liability.
4.13 ENVIRONMENTAL PROTECTION.
A. All facilities and operations of the Borrower are, and have
been to the best of the Borrower's knowledge, in compliance in all material
respects with all applicable Environmental Laws.
B. There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity, (a) arising at any facilities owned or operated
by the Borrower or (b) arising in connection with the operations of the
Borrower (including the transportation of Hazard-
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ous Materials), which conditions, occurrences or Hazardous Materials Activity
could reasonably be expected to form the basis of an Environmental Claim
against the Borrower and that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
C. To the best of the Borrower's knowledge, there are no pending
or threatened Environmental Claims against the Borrower, and the Borrower has
received no written notices, inquiries, or requests for information with
respect to any Environmental Claims.
4.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or, to the Borrower's
knowledge threatened, involving the Borrower that could reasonably be expected
to have a Material Adverse Effect.
4.15 SOLVENCY.
The Borrower is and, upon the incurrence of any Obligations by the
Borrower on any date on which this representation is made, will be, Solvent.
4.16 DISCLOSURE.
No representation or warranty of the Borrower contained in any Loan
Document, any Transaction Document or in any other document, certificate or
written statement furnished to the Lenders by or on behalf of the Borrower for
use in connection with the transactions contemplated by this Agreement contains
any untrue statement of a material fact or omits to state a material fact
(known to the Borrower, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. The
Projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by the Borrower to be
reasonable at the time made, it being recognized by the Lenders that the
Projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by the Projections may differ from
the projected results. There are no facts known (or which should, upon the
reasonable exercise of diligence, be known) to the Borrower (other than matters
of a general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated hereby.
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4.17 SECTION 1110.
(i) The Borrower, as Lessor under the Leases, is entitled to the
protection of Section 1110 of the Bankruptcy Code with respect to each Aircraft
and Spare Engine in the event of a case under Chapter 11 of the Bankruptcy Code
in which the Lessee is a debtor.
(ii) The Administrative Agent will be entitled to the protection
of Section 1110 of the Bankruptcy Code with respect to each Aircraft and Spare
Engine in the event of a case under Chapter 11 of the Bankruptcy Code in which
the Lessee is a debtor upon the exercise of the Administrative Agent's remedies
under each Aircraft Chattel Mortgage.
(iii) All assumptions made by the appraisers with respect to the
Aircraft and Spare Engines in the appraisals delivered to the Administrative
Agent that would affect any Approved Appraiser's determinations as set forth in
such appraisal shall be true and correct as of the Initial Borrowing Date with
respect to each Aircraft and Spare Engine.
4.18 SPECIAL PURPOSE CORPORATION.
The Borrower was formed solely for the purpose of effecting the
Transaction, and except in connection therewith (and as contemplated by this
Agreement) has no assets or liabilities.
4.19 TRANSACTION.
The Transaction has been consummated in accordance with applicable law
and the Transaction Documents.
4.20 REPRESENTATIONS AND WARRANTIES IN DOCUMENTS.
All representations and warranties of the Borrower set forth in the
Loan Documents and the Transaction Documents were true and correct in all
material respects as of the time such representations and warranties were made
and shall be true and correct in all material respects as of the Initial
Borrowing Date as if such representations and warranties were made on and as of
such date, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
4.21 LEASES.
The Leases are in full force and effect and are leases for U.S.
federal income tax purposes of the Lessor and the Lessee thereunder.
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SECTION 5.
BORROWER'S AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all
of the Loans and other Obligations, unless Requisite Lenders shall otherwise
give prior written consent, the Borrower shall perform all covenants in this
Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
The Borrower will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP. The Borrower will deliver to
the Administrative Agent and the Lenders:
(i) Quarterly Financials: as soon as available, and in any event
within 45 days after the end of each fiscal quarter of each Fiscal Year, the
balance sheet of the Borrower as at the end of such fiscal quarter and the
related statements of income, stockholders' equity and cash flows of the
Borrower for such fiscal quarter and for the period from the beginning of the
then current Fiscal Year to the end of such fiscal quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
periods of the previous Fiscal Year, if applicable, in reasonable detail and
certified by the chief financial officer of the Borrower that they fairly
present the financial condition of the Borrower as at the dates indicated and
the results of its operations and its cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments;
(ii) Year-End Financials: as soon as available, and in any event
within 90 days after the end of each Fiscal Year, (a) the balance sheet of the
Borrower as at the end of such Fiscal Year and the related statements of
income, stockholders' equity and cash flows of the Borrower for such Fiscal
Year, setting forth in each case in comparative form the corresponding figures
for the previous Fiscal Year, if applicable, in reasonable detail and certified
by the chief financial officer of the Borrower that they fairly present the
financial condition of the Borrower as at the dates indicated and the results
of its operations and its cash flows for the periods indicated, and (b) in the
case of such financial statements, a report thereon of independent certified
public accountants of recognized national standing selected by the Borrower and
satisfactory to the Administrative Agent, which report shall be unqualified,
shall express no doubts about the ability of the Borrower to continue as a
going concern, and shall state that such financial statements fairly present
the financial position of the Borrower as at the dates indicated and the
results of its operations and its cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the examination by
such accountants in con-
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nection with such financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Officers' and Compliance Certificates: together with each
delivery of financial statements of the Borrower pursuant to subdivisions (i)
and (ii) above after the Effective Date, (a) an Officers' Certificate of the
Borrower stating that the signers have reviewed the terms of this Agreement and
have made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of the Borrower during the accounting
period covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period, and
that the signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action the Borrower has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating, in reasonable detail,
compliance during and at the end of the applicable quarterly and annual
accounting periods with the restrictions contained in Section 6;
(iv) Notices under Leases: within 3 Business Days, all notices and
other information or documents delivered or received under any of the Leases by
the Lessor pursuant to Section 19 of the Leases, including, without limitation,
all additional financial statements and reports delivered pursuant to Section
6(a) of the Leases;
(v) Accountants' Certification: together with each delivery of
financial statements of the Borrower pursuant to subdivision (ii) above, a
written statement by the independent certified public accountants giving the
report thereon (a) stating that their audit examination has included a review
of the terms of this Agreement and the other Loan Documents as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default or
Potential Event of Default has come to their attention and, if such a condition
or event has come to their attention, specifying the nature and period of
existence thereof; provided, that such accountants shall not be liable by
reason of any failure to obtain knowledge of any such Event of Default or
Potential Event of Default that would not be disclosed in the course of their
audit examination, and (c) stating that based on their audit examination
nothing has come to their attention that causes them to believe either or both
that the information contained in the certificates delivered therewith pursuant
to subdivision (iii) above is not correct or that the matters set forth in the
Compliance Certificates delivered therewith pursuant to clause (b) of
subdivision (iii) above for the applicable Fiscal Year are not stated in
accordance with the terms of this Agreement;
(vi) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to the Borrower by independent certified public accountants in
connection with each annual, interim or special audit
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of the financial statements of the Borrower made by such accountants,
including, without limitation, any comment letter submitted by such accountants
to management in connection with their annual audit;
(vii) Events of Default, etc.: promptly upon any officer of the
Borrower obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Lender has given any notice (other than to the Administrative Agent) or taken
any other action with respect to a claimed Event of Default or Potential Event
of Default, (b) that any Person has given any notice to the Borrower or taken
any other action with respect to a claimed default or event or condition of the
type referred to in subsection 7.2, or (c) of the occurrence of any event or
change that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or condition, and
what action the Borrower has taken, is taking and proposes to take with respect
thereto;
(viii) Litigation or Other Proceedings: (a) promptly upon any
officer of the Borrower obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against or
affecting the Borrower or any property of the Borrower (collectively,
"PROCEEDINGS") not previously disclosed in writing by the Borrower to the
Lenders or (Y) any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the transactions
contemplated hereby;
written notice thereof, together with such other information as may be
reasonably available to the Borrower to enable the Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each fiscal
quarter of the Borrower, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, the Borrower equal to or greater
than $1,000,000 and, promptly after request by the Administrative Agent, such
other information as may be reasonably requested by the Administrative Agent to
enable the Administrative Agent and its counsel to evaluate any of such
Proceedings;
(ix) Insurance: as soon as practicable, and in any event by the
last day of each Fiscal Year, a report in form and substance satisfactory to
the Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by the Borrower and all material insurance
coverage planned to be maintained by the Borrower in the immediately succeeding
Fiscal Year;
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(x) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of the Borrower or by independent consultants,
with respect to significant environmental matters or that relate to an
Environmental Claim that could result in a Material Adverse Effect;
(xi) Pricing Certificate: in the event that the Borrower believes
that it is entitled to a Pricing Reduction, copies of the most recent rating
reports pertaining to the Borrower from each of Moody's and S&P, together with
a certificate setting forth the calculations necessary to demonstrate the
Borrower's entitlement to a Pricing Reduction;
(xii) Other Information: with reasonable promptness, such other
information and data with respect to the Borrower or Atlas, as the case may be,
as from time to time may be reasonably requested by any Lender.
5.2 CORPORATE EXISTENCE.
The Borrower will at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business. The Borrower will at all times maintain its corporate existence as a
United States Citizen.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. The Borrower will pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its income, businesses or franchises before any penalty, fine
or interest accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or may become a Lien upon any of its
properties or assets, prior to the time when any penalty, fine or interest
shall be incurred or any Lien created with respect thereto; provided, that no
such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Borrower.
B. The Borrower will not file or consent to the filing of any
consolidated federal income tax return with any Person other than the
affiliated group of which Atlas is the parent corporation.
5.4 MAINTENANCE OF PROPERTIES; INSURANCE.
The Borrower will maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used or useful in
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the business of the Borrower and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof. The Borrower
will maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business against loss or
damage (including, without limitation, flood insurance, if necessary or
advisable) of the kinds customarily carried or maintained under similar
circumstances by corporations of established reputation engaged in similar
businesses, and the Borrower will, with respect to each Aircraft and Spare
Engine, maintain the insurance specified in the Aircraft Chattel Mortgage with
respect to such Aircraft or Spare Engine.
5.5 INSPECTION; LENDER MEETING.
The Borrower will permit any authorized representatives designated by
any Lender to visit and inspect any of the properties of the Borrower,
including its and their financial and accounting records, and to make copies
and take extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided, that the Borrower may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested, provided, so long as no Event of Default has occurred and is
continuing, that such inspection is not disruptive to the Borrower's business,
as reasonably determined by the Borrower. Without in any way limiting the
foregoing, the Borrower will, upon the request of the Administrative Agent or
Requisite Lenders, participate in a meeting of the Administrative Agent and
Lenders once during each Fiscal Year to be held at the Borrower's corporate
offices (or such other location as may be agreed to by the Borrower and the
Administrative Agent) at such time as may be agreed to by the Borrower and the
Administrative Agent.
5.6 COMPLIANCE WITH LAWS, ETC.
The Borrower will comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority (including, without
limitation, Environmental Laws), noncompliance with which could reasonably be
expected to cause a Material Adverse Effect. The Borrower shall not conduct,
and shall not permit the conduct of, any Hazardous Materials Activity at any
location that could reasonably be expected to form the basis of an
Environmental Claim against the Borrower and that could reasonably be expected
to have a Material Adverse Effect.
5.7 ENVIRONMENTAL INDEMNITY.
The Borrower agrees to indemnify, defend, and hold harmless the
Administrative Agent and the Lenders, and the officers, directors, employees,
agents and affiliates of the Administrative Agent and the Lenders from and
against any and all losses, claims, liabilities or expenses arising in
connection with Environmental Claims against the Borrower or with any Hazardous
Materials Activity.
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5.8 BORROWER'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
The Borrower will promptly take any and all necessary remedial action
in connection with the presence, storage, use, disposal, transportation or
Release of any Hazardous Materials on, under or about any facility in order to
comply with all applicable Environmental Laws and Governmental Authorizations.
In the event that the Borrower undertakes any remedial action with respect to
any Hazardous Materials on, under or about any such facility, the Borrower will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, the Borrower's liability for such presence, storage, use,
disposal, transportation or Release of any such Hazardous Materials is being
contested in good faith by the Borrower. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Borrower or Lessee may
engage in the transportation of Hazardous Materials in the ordinary course of
business so long as such is conducted in compliance with all applicable
Environmental Laws and all other applicable laws, policies, orders, regulations
and directives.
5.9 MAINTENANCE CONTRACTS.
The Borrower shall maintain or shall cause to be maintained a
maintenance program with respect to the Aircraft and Spare Engines approved by
the FAA.
5.10 EMPLOYEE BENEFIT PLANS.
The Borrower will not establish, contribute to (or have an obligation
to contribute to) or permit to be established any Employee Benefit Plans for
the Borrower or any of its employees.
5.11 FURTHER ASSURANCES.
At any time or from time to time upon the request of the
Administrative Agent, the Borrower will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and
things as the Administrative Agent may reasonably request in order to effect
fully the purposes of the Loan Documents and to provide for payment of the
Obligations in accordance with the terms of this Agreement, the Notes and the
other Loan Documents.
5.12 PERFORMANCE OF OBLIGATIONS.
The Borrower will perform all of its obligations under the terms of
each Lease, Collateral Document and Loan Document, contract or instrument by
which it is bound.
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5.13 CORPORATE SEPARATENESS.
The Borrower will take all such action as is necessary to keep its
operations separate and apart from those of Atlas or any of its Affiliates,
including, without limitation, ensuring that all customary corporate
formalities, including the maintenance of separate corporate records and
documents and holding regular meetings, are followed. Any financial statements
distributed to any creditors of the Borrower shall clearly establish the
corporate separateness of the Borrower from Atlas and each of Atlas's other
Subsidiaries. The Borrower shall not take any action or conduct its affairs in
a manner that is likely to result in the corporate existence of the Borrower on
the one hand and of Atlas or any Subsidiary of Atlas on the other hand being
disregarded, or in the assets and liabilities of Atlas or any Subsidiary of
Atlas being substantively consolidated with those of the Borrower in a
bankruptcy, reorganization or other insolvency proceeding. The Borrower shall
have at all times at least one Independent Director who shall be satisfactory
to the Administrative Agent. The Borrower shall maintain its principal
executive office separate from Atlas or any of its Affiliates, which may be
subleased from Atlas on an arm's-length basis or maintained as provided in the
Service Agreement.
The Borrower shall pay out of its own funds fees for its directors and
salaries of its officers and employees, and shall promptly reimburse any
Affiliate for any services provided to the Borrower by such Affiliate;
provided, however, that Atlas may advance funds on behalf of the Borrower to
pay for the expenses of its organization and funding. All such advances shall
be duly and properly recorded and promptly repaid as intercompany advances. The
Borrower shall not commingle any of its funds or other assets with the funds or
assets of any other entity or person. The Borrower will maintain separate bank
accounts in its own name.
The assets of the Borrower shall be separately identified and
segregated. All of the Borrower's assets shall at all times be held by or on
behalf of the Borrower, and, if held on behalf of the Borrower by another
entity, shall at all times be kept identifiable (in accordance with customary
usages) as assets owned by the Borrower. In no event shall any of the
Borrower's assets be held by Atlas or by any other Affiliate. The Borrower
shall pay from its assets all obligations and indebtedness of any kind incurred
by the Borrower, and shall not pay from its assets any obligations or
indebtedness of any other entity or person. The liabilities of the Borrower
will be separately managed from those of any Affiliate, and all liabilities,
including all administrative expenses, shall be paid from its own separate
assets; provided, however, that the Borrower will be included, to the extent
permitted by law, in the affiliated group of corporations of which Atlas is the
"common parent" for federal income tax returns filed for such affiliated group
by Atlas.
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SECTION 6.
BORROWER'S NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations, unless Requisite Lenders shall otherwise give
prior written consent, the Borrower shall perform all covenants in this Section
6.
6.1 INDEBTEDNESS.
The Borrower shall not, directly or indirectly, create, incur,
assume or guaranty, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except that the Borrower may become and
remain liable with respect to the Obligations.
6.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. The Borrower shall not, directly or
indirectly, create, incur, assume or permit to exist any Lien on or with respect
to any property or asset of any kind (including any document or instrument in
respect of goods or accounts receivable) of the Borrower, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except for Permitted Encumbrances.
B. NO NEGATIVE PLEDGES. The Borrower shall not enter into
any agreement prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.
6.3 INVESTMENTS; JOINT VENTURES.
The Borrower shall not, directly or indirectly, make or own
any Investment in any Person, including any Joint Venture, except that the
Borrower may make and own Investments in Cash Equivalents.
6.4 CONTINGENT OBLIGATIONS.
The Borrower shall not, directly or indirectly, create or
become or remain liable with respect to any Contingent Obligation.
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6.5 RESTRICTED JUNIOR PAYMENTS.
The Borrower shall not, directly or indirectly, declare,
order, pay, make or set apart any sum for any Restricted Junior Payment;
provided, that the Borrower may make payments pursuant to the Service Agreement
in an aggregate annual amount not to exceed $200,000 per annum; and provided
further, that, so long as no Event of Default or Potential Event of Default has
occurred and is continuing, or would result therefrom, within five Business Days
of any payment made under any of the Leases by Atlas to the Borrower, to the
extent that such payment is in excess of amounts owing to the Lenders under the
Loan Documents, the Borrower may distribute such excess amounts to Atlas as a
dividend, to the extent that the Borrower, after giving effect to such dividend,
has no other liabilities and maintains a reserve of Cash or Cash Equivalents
adequate to fund all expenses of the Borrower (exclusive of payments under the
Loan Documents) to be incurred during the next four quarters following such
dividend.
6.6 RESTRICTION ON FUNDAMENTAL CHANGES, ASSET SALES, ACQUISITIONS, NEW
SUBSIDIARIES.
The Borrower shall not enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
part of its business, property or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or any portion of the
business, property or assets of, or stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person or
establish any Subsidiary, except that the Borrower may (i) effect the
Transaction on or prior to the Initial Borrowing Date, (ii) sell no more than
one Aircraft, provided that (x) the net proceeds of any such sale shall be in an
amount at least equal to the outstanding principal amount of all Loans and other
Obligations relating to such Aircraft and (y) the entire amount of the proceeds
of such asset sale are promptly applied in accordance with Section 2.4C(ii)(a)
of this Agreement and (iii) sell, lease or dispose of assets so long as such
transaction is effected in accordance with Section 4(d) or 4(e) of the Aircraft
Chattel Mortgages or Section 9.21 of this Agreement.
6.7 AMENDMENTS OF MATERIAL AGREEMENTS.
The Borrower shall not permit (i) its certificate of
incorporation or bylaws to be amended or otherwise modified in any manner or
(ii) any Lease to be amended or otherwise modified in any manner (other than any
amendment or modification which may be required to give effect to any
transaction permitted by Section 6.6(ii) or Section 9.21 of this Agreement).
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6.8 RESTRICTION ON LEASES.
The Borrower shall not become liable in any way, whether
directly or by assignment or as a guarantor or other surety, for the obligations
of the lessee under any lease, whether such lease be an Operating Lease or a
Capital Lease.
6.9 TRANSACTION WITH SHAREHOLDERS AND AFFILIATES.
The Borrower shall not, directly or indirectly, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
Atlas or with any other Affiliate of the Borrower; provided, that the foregoing
restriction shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Board of Directors of the Borrower, (ii)
reasonable and customary salaries, bonuses and other compensation paid to and
indemnification of employees of the Borrower, (iii) the Transaction and (iv) the
Service Agreement providing for the rendering of accounting, administration and
office services by Atlas to the Borrower on terms consistent with the terms of
similar agreements between unrelated parties, in an aggregate amount not to
exceed $200,000 per annum.
6.10 CONDUCT OF BUSINESS.
(a) From and after the Initial Borrowing Date, the Borrower
shall not engage in any business other than in connection with owning the
Aircraft and Spare Engines or any replacement aircraft and spare engines and
leasing of the Aircraft and Spare Engines or any replacement aircraft and spare
engines to Atlas, and will have no material assets (other than Cash, Cash
Equivalents, the Aircraft and Spare Engines or any replacement aircraft and
spare engines, and the Leases) or liabilities (other than the Loans and other
liabilities that are expressly permitted hereunder); provided, however, that
replacement aircraft and spare engines may be substituted for Aircraft and Spare
Engines only in accordance with the applicable Aircraft Chattel Mortgage.
(b) The Borrower shall not take any action or enter into any
transaction that requires the approval of the Independent Director without the
consent of the Independent Director.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("EVENTS OF
DEFAULT") shall occur:
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7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by the Borrower to pay any installment of principal of
any Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; or failure by the
Borrower to pay any interest on any Loan or any fee or any other amount due
under this Agreement within five days after the date due; or
7.2 DEFAULT UNDER LEASE.
Any Lease shall at any time be terminated (other than by its
terms) or cease to be in full force and effect (other than by its terms), or
there shall exist a Default or a Lease Event of Default under, and as defined
in, any of the Leases; or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of the Borrower to perform or comply in any material
respect with any term or condition contained in subsections 2.5, 5.1(vii), 5.2,
5.13, 6.1, 6.2, 6.5, 6.6, 6.7 or 6.10 of this Agreement or in clauses (i) and
(ii) of Section 4(c), Section 4(d) or Section 4(g) of any Aircraft Chattel
Mortgage; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement
made by Atlas or the Borrower in any Loan Document or in any Transaction
Document or in any statement or certificate at any time given by Atlas or the
Borrower in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
The Borrower shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 7,
and such default shall not have been remedied or waived within 15 days after the
earlier of (a) an officer of the Borrower becoming aware of such default or (b)
receipt by the Borrower of notice from the Administrative Agent or any Lender of
such default; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower in an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is not stayed;
or any other similar relief shall be granted under any applicable federal or
state law; or (ii) an involuntary case shall be commenced against the Bor-
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rower under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Borrower, or over all or a substantial part of its property,
shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of the Borrower
for all or a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any substantial part
of the property of the Borrower, and any such event described in this clause
(ii) shall continue for 60 days unless dismissed, bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.
(i) The Borrower shall have an order for relief entered with
respect to it or commence a voluntary case under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; or the Borrower shall make any assignment for the benefit of
creditors; or (ii) the Borrower shall be unable, or shall fail generally, or
shall admit in writing its inability, to pay its debts as such debts become due;
or the Board of Directors of the Borrower (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar
process (not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be entered or
filed against the Borrower or any of its assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event later
than five days prior to the date of any proposed sale thereunder); or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against the
Borrower decreeing the dissolution or split up of the Borrower and such order
shall remain undischarged or unstayed for a period in excess of 30 days; or
7.10 CHANGE IN CONTROL.
Atlas shall cease to own beneficially and to control all of
the issued and outstanding shares of capital stock of the Borrower; or
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7.11 FAILURE OF SECURITY.
Any Collateral Document shall, at any time, cease to be in
full force and effect (other than by reason of a release of Collateral
thereunder in accordance with the terms hereof or thereof, the satisfaction in
full of the Obligations or any other termination of such Collateral Document in
accordance with the terms hereof or thereof) or shall be declared null and void,
or the validity or enforceability thereof shall be contested in writing by the
Borrower, or the Administrative Agent shall not have or shall cease to have a
valid security interest in any Collateral purported to be covered thereby,
perfected and with the priority required by the relevant Collateral Document,
for any reason, subject only to Liens permitted under the applicable Collateral
Documents or the Borrower, as lessor under a Lease or the Administrative Agent,
as assignee of the Borrower's rights under such Lease, shall cease to be
entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to
the rights and remedies under such Lease; or
7.12 LOSS OF UNITED STATES CITIZEN STATUS.
The Borrower for any reason ceases to be a United States
Citizen;
THEN (I) (i) upon the occurrence of any Event of Default described in
subsection 7.6 or 7.7, each of (a) the unpaid principal amount of and accrued
interest on the Loans and (b) all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Borrower, and the obligation of each Lender to make any Loan shall thereupon
terminate and (ii) upon the occurrence and during the continuation of any other
Event of Default, the Administrative Agent shall, upon the written request or
with the written consent of Requisite Lenders, by written notice to the
Borrower, declare all or any portion of the amounts described in clauses (a) and
(b) above to be, and the same shall forthwith become, immediately due and
payable, and the obligation of each Lender to make any Loan shall thereupon
terminate and (II) upon the occurrence of any Event of Default, the
Administrative Agent, upon the written request of the Requisite Lenders, shall,
by written notice to the Borrower, enforce all of the Liens and security
interests created pursuant to the Collateral Documents and exercise all other
remedies at law or in equity or in admiralty available under the Loan Documents.
If, at any time within 60 days after an acceleration of the
Loans pursuant to the preceding paragraph, the Borrower shall pay all arrears of
interest and all payments on account of principal which shall have become due
otherwise than as a result of such acceleration (with interest on principal and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case that is due and payable solely by virtue of acceleration) shall be remedied
or waived pursuant to subsection 9.6, then Requisite Lenders, by written notice
to the Borrower, may at their option rescind and annul such acceleration and its
consequences, but such action shall not affect any
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subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to bind
the Lenders to a decision that may be made at the election of Requisite Lenders
and are not intended to benefit the Borrower and do not grant to the Borrower
the right to require the Lenders to rescind or annul any acceleration hereunder,
even if the conditions set forth herein are met.
SECTION 8.
THE ADMINISTRATIVE AGENT
8.1 APPOINTMENT.
Each Lender hereby appoints Bankers Trust Company as
Administrative Agent hereunder and under the other Loan Documents, and each
Lender hereby authorizes the Administrative Agent to act as its agent in
accordance with the terms of this Agreement and the other Loan Documents. The
Administrative Agent agrees to act upon the express conditions contained in this
Agreement and the other Loan Documents, as applicable. The provisions of this
Section 8 are solely for the benefit of the Administrative Agent and the
Lenders, and the Borrower shall have no rights as a third-party beneficiary of
any of the provisions thereof. In performing its functions and duties under this
Agreement, the Administrative Agent shall act solely as an agent of the Lenders
and does not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for the Borrower.
8.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably
authorizes the Administrative Agent to take such action on such Lender's behalf
and to exercise such powers, rights and remedies hereunder and under the other
Loan Documents as are specifically delegated or granted to such Administrative
Agent by the terms hereof and thereof, together with such powers, rights and
remedies as are reasonably incidental thereto. The Administrative Agent shall
have only those duties and responsibilities that are expressly specified in this
Agreement and the other Loan Documents. The Administrative Agent may exercise
such powers, rights and remedies and perform such duties by or through its
agents or employees. The Administrative Agent shall not have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender, and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations in respect of this
Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. The Administrative
Agent shall not be responsible to any Lender for the execution, effectiveness,
genuineness, validity,
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enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by the Administrative Agent to any Lender or by or
on behalf of the Borrower to the Administrative Agent or any Lender in
connection with the Loan Documents and the transactions contemplated thereby or
for the financial condition or business affairs of the Borrower or any other
Person liable for the payment of any Obligations, nor shall the Administrative
Agent be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained in
any of the Loan Documents or as to the use of the proceeds of the Loans or as to
the existence or possible existence of any Event of Default or Potential Event
of Default. Anything contained in this Agreement to the contrary
notwithstanding, the Administrative Agent shall not have any liability arising
from confirmations of the amount of outstanding Loans or the component amounts
thereof.
C. EXCULPATORY PROVISIONS. Neither the Administrative Agent
nor any of its officers, directors, partners, employees or agents shall be
liable to the Lenders for any action taken or omitted by the Administrative
Agent under or in connection with any of the Loan Documents except to the extent
caused by their respective gross negligence or willful misconduct. If the
Administrative Agent shall request instructions from the Lenders with respect to
any act or action (including the failure to take an action) in connection with
this Agreement or any of the other Loan Documents, such Administrative Agent
shall be entitled to refrain from such act or taking such action unless and
until such Administrative Agent shall have received instructions from Requisite
Lenders. Without prejudice to the generality of the foregoing, (i) the
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for the Borrower),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against the Administrative
Agent as a result of the Administrative Agent acting or (where so instructed)
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of Requisite Lenders. The Administrative
Agent shall be entitled to refrain from exercising any power, discretion or
authority vested in it under this Agreement or any of the other Loan Documents
unless and until it has obtained the instructions of Requisite Lenders.
D. ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER. The
agency hereby created shall in no way impair or affect any of the rights and
powers of, or impose any duties or obligations upon, the Administrative Agent in
its individual capacity as a Lender hereunder. With respect to its
participations in the Loans, the Administrative Agent shall have the same rights
and powers hereunder as any other Lender and may exercise the same as though it
were not performing the duties and functions delegated to it hereunder, and the
term "Lender"
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or "Lenders" or any similar term shall, unless the context clearly otherwise
indicates, include the Administrative Agent in its individual capacity. The
Administrative Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower or any of its Affiliates as if it were not performing
the duties specified herein, and may accept fees and other consideration from
the Borrower for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.
8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Atlas and
its Subsidiaries (including the Borrower) and the Aircraft and Spare Engines in
connection with the making of the Loans hereunder and that it has made and shall
continue to make its own appraisal of the creditworthiness of Atlas and its
Subsidiaries (including the Borrower). The Administrative Agent shall not have
any duty or responsibility, either initially or on a continuing basis, to make
any such investigation or any such appraisal on behalf of the Lenders or to
provide any Lender with any credit or other information with respect thereto,
whether coming into their possession before the making of the Loans or at any
time or times thereafter, and the Administrative Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to the Lenders.
8.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify the Administrative Agent (and its affiliates and partners),
to the extent that the Administrative Agent shall not have been reimbursed by
the Borrower, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, counsel fees and disbursements) or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
the Administrative Agent in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Loan Documents or otherwise
in its capacity as Administrative Agent, in any way relating to or arising out
of this Agreement or the other Loan Documents; provided, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Administrative Agent's gross negligence or willful misconduct.
8.5 COLLATERAL DOCUMENTS.
Without limiting the generality of subsection 8.1, each Lender
hereby further authorizes the Administrative Agent to enter into the Collateral
Documents as secured party on behalf of and for the benefit of such Lender and
agrees to be bound by the terms of each of
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the Collateral Documents; provided, that, except as otherwise provided below,
the Administrative Agent shall not enter into or consent to any amendment,
modification, termination or waiver of any provision contained in any Collateral
Document without prior written consent of Requisite Lenders. Anything contained
in any of the Loan Documents to the contrary notwithstanding, each Lender agrees
that no Lender shall have any right individually to realize upon any of the
collateral under any Collateral Document, it being understood and agreed that
all powers, rights and remedies under the Collateral Documents may be exercised
solely by the Administrative Agent for the benefit of the Lenders in accordance
with the terms thereof. Each Lender hereby authorizes the Administrative Agent
(i) to release or subordinate Collateral as permitted or required under this
Agreement or the Collateral Documents, and agrees that a certificate executed by
the Administrative Agent evidencing such release of Collateral shall be
conclusive evidence of such release as to any third party and (ii) to enter into
any amendments of the Collateral Documents to cure any ambiguity, defect or
inconsistency or to amend provisions relating to ministerial or administrative
matters that do not materially adversely affect the rights of the Lenders
thereunder.
8.6 SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign at any time by giving 30
days' prior written notice thereof to the Lenders and the Borrower. Upon any
such notice of resignation, Requisite Lenders shall have the right, upon
consultation with the Borrower, to appoint a successor Administrative Agent.
Upon the acceptance of any appointment hereunder by a successor Administrative
Agent, that successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent and the retiring or removed Administrative Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Section 8 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 9.
MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
A. GENERAL. Each Lender shall have the right at any time (i)
to sell, assign or transfer to any Eligible Assignee, or (ii) to sell
participations to any Person in, all or any part of its Commitment or any Loan
or Loans made by it or any other interest herein or in any other Obligations
owed to it, so long as no such sale, assignment, transfer or participation
shall, without the consent of the Borrower, require the Borrower to file a
registration state-
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ment with the Securities and Exchange Commission or apply to qualify such sale,
assignment, transfer or participation under the securities laws of any state;
provided, that no such sale, assignment or transfer described in clause (i)
above shall be effective unless and until an Assignment Agreement effecting such
sale, assignment or transfer shall have been accepted by the Administrative
Agent and recorded in the Register as provided in subsection 9.1B(ii). Except as
otherwise provided in this subsection 9.1, no Lender shall, as between the
Borrower and such Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment or transfer of, or any granting of participations
in, all or any part of its Commitment or the Loans, or the other Obligations
owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan
or other Obligation may (a) be assigned in any amount to another Lender, or to
an Affiliate or Related Fund of the assigning Lender or another Lender, with the
giving of notice to the Borrower and the Administrative Agent or (b) be assigned
in an aggregate amount of not less than $5,000,000 (or such lesser amount as
shall constitute the aggregate amount of the Commitments, Loans, and other
Obligations of the assigning Lender) to any other Eligible Assignee with the
giving of notice to the Borrower and with the consent of the Administrative
Agent and the Borrower (which consent shall not be unreasonably withheld or
delayed) unless (I) an Event of Default shall have occurred and be occurring or
(II) such assignment is consented to by the Administrative Agent within 15 days
after the Initial Borrowing Date, in each of which cases the consent of the
Borrower to such assignment shall not be required. Any assignment of Loans
hereunder shall effect a pro rata assignment of the Notes with respect to each
Aircraft or Spare Engine Pool. To the extent of any such assignment in
accordance with either clause (a) or (b) above, the assigning Lender shall be
relieved of its obligations with respect to its Commitment, Loans, or other
Obligations or the portion thereof so assigned. The parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment Agreement, together with
a processing and recordation fee of $3,000 and such forms, certificates or other
evidence, if any, with respect to United States federal income tax withholding
matters as the assignee under such Assignment Agreement may be required to
deliver to the Administrative Agent pursuant to subsection 2.7B(iii)(a);
provided, however, that such processing fee shall not be required where the
assignee is an existing Lender. Upon such execution, delivery, acceptance and
recording from and after the effective date specified in such Assignment
Agreement, (y) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering all
or the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto);
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provided further, however, that the assigning Lender shall retain any right to
payment accrued under subsections 2.6C, 2.6D, 2.7, 9.2 or 9.3 unless such rights
are explicitly assigned to the assignee in the Assignment Agreement. The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the assigning
Lender shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its applicable Notes to the Administrative
Agent for cancellation, and thereupon new Notes shall be issued to the assignee
substantially in the form of Exhibit IIA annexed hereto or Exhibit IIB annexed
hereto, as appropriate, with appropriate insertions, to reflect the new
Commitment or outstanding Loans, as the case may be, of the assignee and/or the
assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an assigning
Lender and an assignee representing that it is an Eligible Assignee, together
with the processing and recordation fee referred to in subsection 9.1B(i) and
any forms, certificates or other evidence with respect to United States federal
income tax withholding matters that such assignee may be required to deliver to
the Administrative Agent pursuant to subsection 2.7B(iii)(a), the Administrative
Agent shall, if such Assignment Agreement has been completed and is in
substantially the form of Exhibit V hereto, and if the Administrative Agent and
the Borrower have consented to the assignment evidenced thereby to the extent
that such consent is required pursuant to subsection 9.1B(i), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided therein
(which acceptance shall evidence any required consent of the Administrative
Agent and the Borrower to such assignment), (b) record the information contained
therein in the Register and (c) give prompt notice thereof to the Borrower. The
Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection 9.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other
than an Affiliate of the Lender granting such participation, shall not be
entitled to require such Lender to take or omit to take any action hereunder
except action directly affecting (i) the extension of the Final Maturity Date
of any Loan allocated to such participation, (ii) a reduction of the principal
amount of or the rate of interest payable on any Loan allocated to such
participation or (iii) a release of Collateral, and all amounts payable by the
Borrower hereunder (including, without limitation, amounts payable to such
Lender pursuant to subsections 2.6D and 2.7) shall be determined as if such
Lender had not sold such participation. The Borrower and each Lender hereby
acknowledge and agree that, solely for purposes of subsection 9.5, (a) any
participation will give rise to a direct obligation of the Borrower to the
participant and (b) the participant shall be considered to be a "Lender."
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS AND OTHERS. In
addition to the assignments and participations permitted under the foregoing
provisions of this subsection
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9.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to (i) any Federal Reserve
Bank as collateral security pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any operating circular issued by such Federal
Reserve Bank or (ii) if such Lender is a "fund", to any holders of obligations
owed or securities issued by such fund as security for such obligations or
securities, or to any trustee for, or any representative of, such holders;
provided, that (i) no Lender shall, as between the Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank or lender be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information
concerning the Borrower in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 9.19.
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to pay promptly (i) all the actual and
reasonable costs and expenses of preparation of the Loan Documents; (ii) all the
costs of furnishing all opinions by counsel for the Borrower (including, without
limitation, any opinions requested by the Lenders as to any legal matters
arising hereunder) and of the Borrower's performance of and compliance with all
agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents, including, without limitation, with
respect to confirming compliance with environmental and insurance requirements;
(iii) the reasonable fees, expenses and disbursements of counsel to the
Administrative Agent in connection with the negotiation, preparation, execution
and administration of the Loan Documents and the Loans and any consents,
amendments, waivers or other modifications hereto or thereto and any other
documents or matters requested by the Borrower; (iv) all the costs and expenses
of creating and perfecting the Liens in favor of the Administrative Agent for
the benefit of the Lenders pursuant to the Loan Documents, including filing and
recording fees and expenses, title insurance, fees and expenses of counsel for
providing such opinions as the Lenders may reasonably request and fees and
expenses of legal counsel to the Administrative Agent (including local
counsel); (v) all other actual and reasonable costs and expenses incurred by the
Administrative Agent in connection with the syndication of the Commitments and
the Loans and the negotiation, preparation and execution of the Loan Documents
and the transactions contemplated hereby and thereby, provided that such costs
and expenses of syndication shall not exceed $25,000; and (vi) after the
occurrence of an Event of Default, all costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by the Administrative Agent and the Lenders in enforcing
any Obligations of or in collecting any payments due from the Borrower hereunder
or under the other Loan Documents by reason of such Event of Default or in
connection with any refinancing or re-
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structuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings.
9.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection
9.2, whether or not the transactions contemplated hereby shall be consummated,
the Borrower agrees to defend, indemnify, pay and hold harmless the
Administrative Agent and the Lenders, and the officers, directors, partners,
employees, agents and affiliates of the Administrative Agent and the Lenders
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, commenced or threatened by any Person, whether or not any
such Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including, without
limitation, securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby
(including, without limitation, the Lenders' agreement to make the Loans
hereunder, or the use or intended use of the proceeds of any of the Loans) or
the statements contained in the commitment letter delivered by any Lender to the
Borrower with respect thereto (collectively called the "INDEMNIFIED
LIABILITIES"); provided, that the Borrower shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend, indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by the Indemnitees or any of them.
9.4 SET-OFF.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that
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Lender to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to that Lender under
this Agreement, its Notes, and the other Loan Documents, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement, the Notes, or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due hereunder
shall have become due and payable pursuant to Section 7 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.
9.5 RATABLE SHARING.
The Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment, by realization upon security, through the
exercise of any right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any right under the Loan Documents or otherwise,
or as adequate protection of a deposit treated as cash collateral under the
Bankruptcy Code, receive payment or reduction of a proportion of the aggregate
amount of principal, interest, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) that is greater than the proportion received by any
other Lender in respect of the Aggregate Amounts Due to such other Lender, then
the Lender receiving such proportionately greater payment shall (i) notify the
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided, that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of the Borrower or otherwise,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. The Borrower expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by the Borrower to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
9.6 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of any
provision of this Agreement or any of the other Loan Documents (other than any
amendment, modification, termination or waiver which may be required to effect
the replacement of any Engine or any Airframe in accordance with Section 9.21 of
this Agreement or the sale of a single Aircraft in accordance with Section
6.6(ii) of this Agreement), or consent to and departure by the
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Borrower therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided, that any such amendment,
modification, termination, waiver or consent that: increases the amount of any
of the Commitments or reduces the principal amount of any of the Loans; changes
any Lender's Tranche A Pro Rata Share or Tranche B Pro Rata Share; changes in
any manner the definition of "Requisite Lenders;" changes in any manner any
provision of this Agreement that, by its terms, expressly requires the approval
or concurrence of all Lenders; postpones the Final Maturity Date (but not the
date of any scheduled installment of principal) of any of the Loans; postpones
the date on which any interest or any fees are payable; decreases the interest
rate borne by any of the Loans (other than any waiver of any increase in the
interest rate applicable to any of the Loans pursuant to subsection 2.2D) or the
amount of any fees payable hereunder; releases all or substantially all of the
Collateral; or changes in any manner the provisions contained in this subsection
9.6 shall be effective only if evidenced by a writing signed by or on behalf of
all Lenders to whom are owed Obligations being directly affected by such
amendment, modification, termination, waiver or consent. In addition, (i) no
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the Lender that is the
holder of that Note, (ii) no increase in the Commitment of any Lender over the
amount thereof then in effect shall be effective without the written concurrence
of that Lender, it being understood and agreed that in no event shall waivers or
modifications of conditions precedent, covenants, Events of Default, Potential
Events of Default or of a mandatory prepayment or a reduction of any or all of
the Commitments be deemed to constitute an increase of the Commitment of any
Lender, and that an increase in the available portion of any Commitment of any
Lender shall not be deemed to constitute an increase in the Commitment of such
Lender and (iii) no amendment, modification, termination or waiver of any
provision of Section 8 or of any other provision of this Agreement that, by its
terms, expressly requires the approval or concurrence of the Administrative
Agent shall be effective without the written concurrence of such Administrative
Agent. No change shall be made (x) to Section 2.4B(a) or (b) without the consent
of the holders of a majority of principal of the Tranche A Loans or Tranche B
Loans, respectively, and (y) to Section 2.4C(iii) without the consent of the
holders of a majority of principal of each of the Tranche A Loans and Tranche B
Loans. The Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 9.6 shall be binding upon each Person who was a Lender at
the time of such amendment, modification, termination, waiver or consent, upon
each Person who subsequently becomes a Lender and, if signed by the Borrower,
upon the Borrower.
B. If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by the proviso in the first
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sentence of this subsection 9.6, the consent of Requisite Lenders is obtained
but consent of one or more of such other Lenders whose consent is required is
not obtained, then the Borrower may, so long as all non-consenting Lenders are
so treated, elect to terminate such Lender as a party to this Agreement, so long
as, concurrently with such termination, (i) the Borrower pays to that Lender all
principal, interest and fees and other amounts owed to such Lender through such
date of termination, (ii) another financial institution satisfactory to the
Borrower and the Administrative Agent (or if the Administrative Agent is also
the Lender to be terminated, the successor Administrative Agent) agrees, as of
such date, to become a Lender for all purposes under this Agreement (whether by
assignment or amendment) and to assume all obligations of the Lender to be
terminated as of such date, and (iii) all documents and supporting materials
necessary, in the judgment of the Administrative Agent (or if the Administrative
Agent is also the Lender to be terminated, the successor Administrative Agent)
to evidence the substitution of such Lender have been received and approved by
the Administrative Agent as of such date.
9.7 INDEPENDENCE OF COVENANTS.
All covenants under this Agreement shall be given independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
9.8 NOTICES.
Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided, that notices to the Administrative Agent shall
not be effective until received. For the purposes hereof, the address of each
party hereto shall be as set forth under such party's name on the signature
pages hereof or (i) as to the Borrower and the Administrative Agent, such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto and (ii) as to each other party, such other address as
shall be designated by such party in a written notice delivered to the
Administrative Agent.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made
herein shall survive the execution and delivery of this Agreement and the making
of the Loans hereunder.
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B. Notwithstanding anything in this Agreement or implied by
law to the contrary, the agreements of the Borrower set forth in subsections
2.6D, 2.7, 9.2, 9.3 and 9.4 and the agreements of the Lenders set forth in
subsections 8.2C, 8.4 and 9.5 shall survive the payment of the Loans, and the
termination of this Agreement.
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Administrative Agent or
any Lender in the exercise of any power, right or privilege hereunder or under
any other Loan Document shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement and the other Loan Documents
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
9.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither the Administrative Agent nor any Lender shall be under
any obligation to marshal any assets in favor of the Borrower or any other party
or against or in payment of any or all of the Obligations. To the extent that
the Borrower makes a payment or payments to the Administrative Agent or Lenders
(or to the Administrative Agent for the benefit of the Lenders), or the
Administrative Agent or Lenders enforce any security interests or exercise their
rights of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law, the law of admiralty or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or set-off had
not occurred.
9.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or
the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
9.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of the Lenders hereunder are several and no
Lender shall be responsible for the obligations or Commitments of any other
Lender hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by any Lenders pursuant
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hereto or thereto, shall be deemed to constitute the Lenders as a partnership,
an association, a joint venture or any other kind of entity. The amounts payable
at any time hereunder to each Lender shall be a separate and independent debt,
and each Lender shall be entitled to protect and enforce its rights arising out
of this Agreement, and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
9.14 HEADINGS.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.15 APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
9.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of the Lenders (it being
understood that the Lenders' rights of assignment are subject to subsection
9.1). Neither the Borrower's rights or obligations hereunder nor any interest
therein may be assigned or delegated by the Borrower without the prior written
consent of all Lenders.
9.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION (SUBJECT TO ANY RIGHT TO
APPEAL TO A COURT IN THE STATE OF NEW YORK). The Borrower hereby agrees that
service of all process in any such proceeding in any such court may be made by
registered or certified
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mail, return receipt requested, to the Borrower at its address provided in
subsection 9.8, such service being hereby acknowledged by the Borrower to be
sufficient for personal jurisdiction in any action against the Borrower in any
such court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of any Lender to bring proceedings
against the Borrower in the courts of any other jurisdiction.
9.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR
THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including, without limitation, contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already relied on this waiver in entering into this
Agreement, and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
9.19 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained
pursuant to the requirements of the Transaction Documents that has been
identified as confidential by the Borrower in accordance with such Lender's
customary procedures for handling confidential information of this nature, it
being understood and agreed by the Borrower that in any event a Lender may make
disclosures to any Person who evaluates, approves, structures or administers the
Loans on behalf of a Lender and who is subject to this confidentiality
provision, or, subject to this Section 9.19, reasonably required by any bona
fide assignee, transferee or participant in connection with the contemplated
assignment or transfer by such Lender of any Loans or any participation therein
(at which time, any such assignee, transferee or participant shall be bound by
this Section 9.19) or as required or requested by any governmental or regu-
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latory agency (including, without limitation, the National Association of
Insurance Commissions) or representative thereof or pursuant to legal process or
in accordance with any applicable law or regulation; provided, that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental or regulatory agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental or
regulatory agency) for disclosure of any such non-public information prior to
disclosure of such information; and provided further, that in no event shall any
Lender be obligated or required to return any materials furnished by the
Borrower.
9.20 COUNTERPARTS; EFFECTIVENESS.
A. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
B. This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto and receipt by the
Borrower and the Administrative Agent of written or telephonic notification of
such execution and authorization of delivery thereof (the "EFFECTIVE DATE").
9.21 REPLACEMENT ENGINES AND AIRFRAMES.
A. ENGINES. So long as no Event of Default or Potential
Event of Default has occurred and is continuing, the Borrower may, upon not less
than 5 Business Days' prior written notice to the Administrative Agent, replace
any Engine that is the subject of an Aircraft Chattel Mortgage with another
engine (the "Replacement Engine") meeting the requirements of the applicable
Aircraft Chattel Mortgage and the requirements of an Acceptable Alternate
Engine. In addition to the requirements of the preceding sentence, any
Replacement Engine shall be an engine that is the same or improved make and
model as the Engine to be replaced, and that is suitable for installation and
use on any Airframe (or any Boeing 747-400 aircraft operated by Atlas) and that
has a value, utility and remaining useful life (including with respect to hours
and cycles remaining until overhaul) at least equal to the Engine to be replaced
thereby.
The Lenders agree to release the Lien created by the
applicable Aircraft Chattel Mortgage for any Engine to be replaced by a
Replacement Engine promptly upon (i) presentation by the Borrower of
documentation necessary to create a legal, valid and enforceable first priority
security interest in and to the Replacement Engine, (ii) delivery to the
Adminis-
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trative Agent of an opinion of Cahill Gordon & Reindel, or such other counsel as
may be acceptable to the Administrative Agent, confirming that the Borrower (and
the Administrative Agent upon succeeding to the Borrower's interest in the
applicable Lease) will continue to be entitled to the benefits of Section 1110
of the Bankruptcy Code with respect to such Replacement Engine free of all Liens
(other than Permitted Encumbrances and the applicable Lease) and (iii) receipt
of all other deliveries required by Section 4(f)(ii) of the applicable Aircraft
Chattel Mortgage.
B. AIRFRAMES. So long as no Event of Default or Potential
Event of Default has occurred and is continuing, the Borrower may, upon not less
than 5 Business Days' prior notice to the Administrative Agent, replace any
Airframe that is the subject of an Aircraft Chattel Mortgage with another
airframe (the "Replacement Airframe") meeting the requirements of the applicable
Aircraft Chattel Mortgage and the requirements of an Acceptable Alternate
Airframe; provided that, no more than two Airframes may be replaced by the
Borrower pursuant to this subsection 9.21B. In addition to the requirements of
the preceding sentence, any Replacement Airframe shall be an airframe that is
the same or improved make and model as the Airframe to be replaced and that has
a value, utility and remaining useful life (including with respect to hours and
cycles remaining until overhaul) at least equal to the Airframe to be replaced
thereby.
The Lenders agree to release the Lien created by the
applicable Aircraft Chattel Mortgage for any Airframe to be replaced by a
Replacement Airframe promptly upon (i) presentation by the Borrower of
documentation necessary to create a legal, valid and enforceable first priority
security interest in and to the Replacement Airframe, (ii) delivery to the
Administrative Agent of an opinion of Cahill Gordon & Reindel, or such other
counsel as may be acceptable to the Administrative Agent, confirming that the
Borrower (and the Administrative Agent upon succeeding to the Borrower's
interest in the applicable Lease) will continue to be entitled to the benefits
of Section 1110 of the Bankruptcy Code with respect to such Replacement Airframe
free of all Liens (other than Permitted Encumbrances and the applicable Lease)
and (iii) receipt of all other deliveries required by Section 4(f)(ii) of the
applicable Aircraft Chattel Mortgage.
C. FURTHER ASSURANCES. The Borrower shall, in addition to
the actions required by the preceding subsections 9.21A and 9.21B, take all
necessary actions to provide that the Borrower (and the Administrative Agent
upon succeeding to the Borrower's interest in the applicable Lease) will
continue to be entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to each Replacement Engine and each Replacement Airframe, in each
case free of all Liens (other than Permitted Encumbrances and the applicable
Lease).
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ATLAS FREIGHTER LEASING III, INC.
By: /s/ Fred L. deLeeuw
---------------------------------
Title: Vice President
Notice Address:
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Executive Vice President - Strategic Planning and
Treasurer
BANKERS TRUST COMPANY, as Administrative
Agent and Lender
By: /s/ Marguerite Sutton
----------------------------
Title: Vice President
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE>
LENDERS:
DEUTSCHE VERKEHRSBANK AG
By: /s/ Constance Laudenschlager
--------------------------------------
Title: Senior Vice President
By: /s/ James M. Morton
--------------------------------------
Title: Assistant Vice President
FIRST SECURITY BANK, N.A.
By: /s/ Judy Callister
--------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Gerald P. Hullinger
--------------------------------------
Title: Vice President
GMAC COMMERCIAL CREDIT LLC
By: /s/ Sam Cirelli
--------------------------------------
Title: Executive Vice President
IMPERIAL BANK
By: /s/ Ray Vadalma
--------------------------------------
Title: Senior Managing Director
NORWEST BANK COLORADO NATIONAL ASSOCIATION
By: /s/ Darlene A. Evans
--------------------------------------
Title: Vice President
<PAGE>
SUMMIT BANK
By: /s/ Robert A. Ewing
--------------------------------------
Title: Vice President
UNION PLANTERS BANK
By: /s/ Carlos Rodriguez
--------------------------------------
Title: Senior Vice President
U.S. BANK N.A.
By: /s/ Melissa S. Forbes
--------------------------------------
Title: Vice President
KZH CNC LLC
By: /s/ Susan Lee
--------------------------------------
Title: Authorized Agent
KZH CYPRESSTREE-1 LLC
By: /s/ Susan Lee
--------------------------------------
Title: Authorized Agent
NORTH AMERICAN SENIOR FLOATING RATE FUND
By: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
as Portfolio Manager
By: /s/ Jeffrey W. Heuer
--------------------------------------
Title: Principal
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<PAGE>
CYPRESSTREE INVESTMENT FUND, LLC
By: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
its Managing Member
By: /s/ Jeffrey W. Heuer
--------------------------------------
Title: Principal
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
as Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance Company as
Portfolio Manager
By: /s/ Jeffrey W. Heuer
--------------------------------------
Title: Principal
KZH ING-1 LLC
By: /s/ Susan Lee
--------------------------------------
Title: Authorized Agent
KZH ING-2 LLC
By: /s/ Susan Lee
--------------------------------------
Title: Authorized Agent
KZH ING-3 LLC
By: /s/ Susan Lee
--------------------------------------
Title: Authorized Agent
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LEASE AGREEMENT
(N527MC)
DATED AS OF APRIL 25, 2000
BETWEEN
ATLAS FREIGHTER LEASING III, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
One Boeing B747-2D7B Aircraft
U.S. Registration No. N527MC
Manufacturer's Serial No. 22471
---------------------------
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THE LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN
AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
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SECTION 1. Definitions..............................................................................1
SECTION 2. Acceptance and Lease....................................................................21
SECTION 3. Term and Rent...........................................................................22
(a) Term and Basic Rent............................................................22
(b) Adjustments to Basic Rent......................................................22
(c) Supplemental Rent..............................................................22
(d) Payments in General............................................................23
(e) Minimum Rent...................................................................23
(f) Prepayment of Rent Payments....................................................24
SECTION 4. Certain Representations and Warranties..................................................24
SECTION 5. Lessee's Representations and Warranties.................................................25
SECTION 6. Lessee's Affirmative Covenants..........................................................31
SECTION 7. Lessee's Negative Covenants.............................................................38
SECTION 8. Return of the Aircraft..................................................................50
(a) Condition Upon Return..........................................................50
(b) Overhaul and Repair............................................................51
(c) Repairs........................................................................51
(d) Modifications..................................................................51
(e) Airworthiness Directives.......................................................51
(f) Return of the Engines..........................................................51
(g) Deferred Maintenance...........................................................52
(h) Corrosion Treatment............................................................52
(i) Manuals........................................................................52
(j) Storage Upon Return............................................................52
(k) Severable Parts................................................................52
(l) Survival.......................................................................53
(m) Deregistration and Export......................................................53
SECTION 9. Liens...................................................................................53
</TABLE>
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<S> <C> <C>
SECTION 10. Registration, Maintenance and Operation; Possession and Subleases; Insignia.............54
(a) Maintenance and Operation......................................................54
(b) Possession.....................................................................55
(c) Insignia.......................................................................58
(d) Holding Out....................................................................58
(e) No Pledging of Credit..........................................................58
(f) Title..........................................................................58
(g) Information and Records........................................................59
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and Additions..............60
SECTION 12. Indemnities.............................................................................62
SECTION 13. Event of Loss...........................................................................63
SECTION 14. Insurance...............................................................................65
SECTION 15. Assignment..............................................................................68
SECTION 16. Events of Default.......................................................................68
SECTION 17. Remedies................................................................................72
SECTION 18. Lessee's Cooperation Concerning Certain Matters.........................................75
SECTION 19. Notices.................................................................................76
SECTION 20. Net Lease, True Lease, etc..............................................................76
SECTION 21. Purchase Option.........................................................................77
(a) Purchase Option................................................................77
(b) Notice of Purchase.............................................................78
SECTION 22. Lessor's Right to Perform for Lessee....................................................78
SECTION 23. Miscellaneous...........................................................................78
SECTION 24. Security for Lessor's Obligations.......................................................79
</TABLE>
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SCHEDULES
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SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
--------
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
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<PAGE>
LEASE AGREEMENT
LEASE AGREEMENT dated as of April 25, 2000, between
ATLAS FREIGHTER LEASING III, INC., a Delaware corporation (the "Lessor"),
and ATLAS AIR, INC., a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessee desires to lease from the Lessor and the Lessor is
willing to lease to the Lessee the Aircraft upon the terms and subject to the
conditions of this Lease;
WHEREAS, the Lessor and the Lessee desire that this be a net lease;
WHEREAS, the Lessor has incurred certain Loans under the Credit
Agreement in connection with the Aircraft to be leased pursuant to the terms of
this Lease and other similar aircraft and spare engines to be leased pursuant to
the other Leases:
WHEREAS, the Lessor and the Lessee desire that this Lease be, and be
treated as, a Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the Lessor and the Lessee
hereby agree as follows:
SECTION 1. All capitalized terms used herein shall have the respective
meanings set forth in this section.
"ACCEPTABLE ALTERNATE AIRFRAME" means a Boeing 747-200 that is in a
cargo configuration capable of immediate operation in the business of the Lessee
and has a maximum gross takeoff weight of at least 800,000 pounds and is of the
equivalent or greater residual value, condition, utility, airworthiness, and
remaining useful life and that shall have been maintained, serviced, repaired
and overhauled in substantially the same manner as required under this Lease
without in any way discriminating against such airframe.
"ACCEPTABLE ALTERNATE ENGINE" means a General Electric CF6-50E2 engine
or an engine of the same or another manufacturer of equivalent or greater
residual value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on the Airframe; provided, that such engine
shall be of the same make, model and manufacturer as the other engines installed
on the Airframe, shall be an engine of a type then being utilized by Lessee on
other Boeing 747-200 aircraft operated by Lessee, and shall have been
maintained, serviced, repaired and overhauled in substantially the same manner
as required under this Lease without in any way discriminating against such
engine.
<PAGE>
"ACMI CONTRACT" means (i) any contract entered into by the Lessee
pursuant to which the Lessee furnishes the aircraft, crew, maintenance and
insurance and customers bear all other operating expenses and (ii) any similar
contract in which the customer provides the flight crew, all substantially in
accordance with the Lessee's historical practices.
"ACMI CONTRACTED AIRCRAFT" means an aircraft acquired by the Lessee or
its Subsidiaries and intended to be used in connection with an ACMI Contract
entered into at the time of the acquisition of such aircraft (which ACMI
Contract shall not represent a renewal or replacement of a prior ACMI Contract
unless the aircraft used pursuant to such prior ACMI Contract was operated under
an operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis, effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided, that such projected cash operating expenses shall
not be less on a per block hour basis than the average historical per block hour
operating expenses of the Lessee for the four full fiscal quarters immediately
preceding the date of calculation; and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI CONTRACT" shall include contracts pursuant to which the Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
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and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AGENT" shall mean the Administrative Agent under the Credit Agreement.
"AIRCRAFT" means the Airframe together with the four Engines, whether
or not such Engines are installed on the Airframe or any other airframe.
"AIRCRAFT CHATTEL MORTGAGE" means each Security Agreement and Aircraft
Chattel Mortgage entered into in connection with the Credit Agreement.
"AIRFRAME" means (i) the Boeing aircraft Model 747-200 (excluding
Engines or engines from time to time installed thereon) specified by the United
States Registration Number and manufacturer's serial number in the Lease
Supplement and (ii) any and all Parts that are from time to time incorporated or
installed in or attached thereto or that have been removed therefrom, but where
title to which remains vested in the Lessor in accordance with this Lease.
"AMENDED AIRCRAFT CREDIT FACILITY" means the Fourth Amended and
Restated Credit Agreement dated as of April 25, 2000, among the Lessee, as
borrower, the lenders listed therein, and Bankers Trust Company, as
administrative agent, without giving effect to any amendments, modifications,
supplements or waivers thereof.
"APPROVED APPRAISER" means any of AvSolutions, Inc., BK Associates,
Inc., Simat, Helliesen & Eichner, Inc., Morton Beyer & Agnew, Inc., AVITAS,
Inc., Airclaims, Ltd., Aircraft Information Services, Inc., or any other
nationally recognized firm of aircraft appraisers reasonably satisfactory to the
Agent.
"ASSET SALE" means the sale (including any sale-leaseback transaction
other than sale-leaseback transactions permitted by subsections 7(i) and 7(j) of
this Lease) by the Lessee or any of its Subsidiaries to any other Person of (i)
any of the stock of any of the Lessee's Subsidiaries, (ii) substantially all of
the assets of any division or line of business of the Lessee or any of its
Subsidiaries, or (iii) any other assets (whether tangible or intangible) of the
Lessee or any of its Subsidiaries outside of the ordinary course of business,
excluding (A) any such other assets to the extent that the aggregate value of
such assets sold in any single transaction or related series of transactions is
equal to $5,000,000 or less, (B) transactions related to aircraft engines,
components, parts or spare parts pursuant to customary pooling, exchange or
similar arrangements, (C) asset swaps involving aircraft engines, components,
parts or spare parts, provided that the assets received by the Lessee or any
Subsidiary have a fair market value at least equal to the assets transferred
(provided that with respect to any asset swap or series of related asset swaps
involving assets of the Lessee or any Subsidiary with a fair market value
exceeding $10,000,000, such determination shall be made by the Board of
Directors of the Lessee), (D) asset sales involving obsolete, worn-out, excess
or redundant
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<PAGE>
equipment as long as the proceeds therefrom are used to replace or to upgrade
the aircraft or the equipment installed thereon, (E) transactions permitted by
Section 9.21 of the Credit Agreement and (F) the sale by the Lessor of a single
aircraft pursuant to Section 6.6(ii) of the Credit Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code, entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"BASIC RENT" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"BASIC RENT PAYMENT DATE" means each date set forth on Exhibit B.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
that is a legal holiday under the laws of the States of New York or Colorado or
is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.
"CAPITAL LEASE," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
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<PAGE>
"CERTIFICATED AIR CARRIER" means a United States "air carrier" within
the meaning of the Federal Aviation Act, operating pursuant to a certificate
issued under Section 401 of such Act, or a carrier of comparable status under
any successor law or provision.
"COMPLIANCE CERTIFICATE" means a certificate, substantially in the form
of Exhibit D annexed hereto, delivered to the Lessor, the Agent and the Lenders
by the Lessee pursuant to subsection 6(a)(3) hereunder.
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, (I) the sum of
the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the December 31, 1999, balance sheet of Atlas, all of the foregoing
as determined on a consolidated basis for the Lessee and its Subsidiaries in
conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of
(i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of the Lessee and
its Subsidiaries) by the Lessee and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of the Lessee and its Subsidiaries plus (ii) to the extent not covered by
clause (i) of this definition, the aggregate of all expenditures by the Lessee
and its Subsidiaries during that period to acquire (by purchase or otherwise)
the business, property or fixed assets of any Person, or the stock or other
evidence of beneficial ownership of any Person that, as a result of such
acquisition, becomes a Subsidiary of the Lessee.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total net
interest expense (to be computed by reducing interest expense by the amount of
interest income) (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of the Lessee and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of the Lessee and its Subsidiaries, including, without limitation,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under Interest
Rate Agreements and Currency Agreements, but excluding, however, any amounts
referred to in subsection 2.3 of the Amended Aircraft Credit Facility on or
before the Fourth Restatement Date (as such term is defined in the Amended
Aircraft Credit Facility).
"CONSOLIDATED LEVERAGE RATIO" means, as of the last day of any fiscal
quarter of the Lessee, the ratio of (i) Consolidated Total Debt as of such date
(less Cash and Cash Equivalents held by the Lessee in excess of $25 million as
of such date) plus seven times Consolidated Rental Payments (for the four fiscal
quarter period ending as of such date) to
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<PAGE>
(ii) Consolidated Adjusted EBITDA plus Consolidated Rental Payments for the four
fiscal quarter period ending as of such date.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Lessee and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP;
provided, that there shall be excluded (i) the income (or loss) of any Person
(other than a Subsidiary of the Lessee) in which any other Person (other than
the Lessee or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Lessee or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of the Lessee or is merged into or consolidated with the Lessee or any of its
Subsidiaries or that Person's assets are acquired by the Lessee or any of its
Subsidiaries, (iii) the income of any Subsidiary of the Lessee to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to Asset Sales or returned surplus assets
of any pension plan, and (v) (to the extent not included in clauses (i) through
(iv) above) any net extraordinary gains or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the
sum of the capital stock and additional paid-in capital plus retained earnings
(or minus accumulated deficits) of the Lessee and its Subsidiaries on a
consolidated basis determined in conformity with GAAP.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the aggregate
amount of all rents paid or payable by the Lessee and its Subsidiaries on a
consolidated basis (excluding rent paid pursuant to the Leases) during that
period under all Capital Leases and Operating Leases to which the Lessee or any
of its Subsidiaries is a party as lessee (net of sublease income other than
income from ACMI Contracts). For the avoidance of doubt, all rental payments to
the Lessor shall not be included in Consolidated Rental Payments.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of the Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter
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of credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, or (iii) under Interest Rate
Agreements and Currency Agreements. Contingent Obligations shall include,
without limitation, (a) the direct or indirect guaranty, endorsement (otherwise
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (Y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(X) or (Y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTINUING DIRECTORS" shall mean the directors of a Person on the
Initial Borrowing Date and each other director, if such other director's
nomination for election to the Board of Directors of such Person is recommended
by a majority of the then Continuing Directors.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any provision
of any Security issued by that Person or of any material indenture, mortgage,
deed of trust, deed to secure debt, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
"CONTRIBUTION" means the "Atlas Contribution" as defined in the Credit
Agreement.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of April
25, 2000, by and among the Lessor, as borrower, the Lenders listed therein from
time to time and Bankers Trust Company, as Administrative Agent for the Lenders,
as such agreement may be amended, modified, waived, or supplemented from time to
time.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect the Lessee or any of its
Subsidiaries against fluctuations in currency values.
"DEFAULT" means any event that, with the giving of notice or the lapse
of time or both, would become a Lease Event of Default.
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"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DESIGNATED INDEBTEDNESS" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the NationsBanc/Banc of
America Agreement, the Senior Note Documents, any Permitted Extension
Indebtedness and any Other Permitted Indebtedness.
"DETERMINATION DATE" has the meaning assigned to that term in
subsection 7(a)(6).
"DOMESTIC AIR CARRIER" means any United States "domestic air carrier",
as defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"ELIGIBLE AIRCRAFT" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, that (i) is in a cargo configuration capable of immediate
operation in the business of the Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA that is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"ENGINE" means: (i) each of the four General Electric CF6-50E2 aircraft
engines listed in the initial Lease Supplement, whether or not from time to time
installed on the Airframe or any other airframe; (ii) any Acceptable Alternate
Engine that may from time to time be substituted for any of such four engines
pursuant to the terms of the Lease; and (iii) in any case, any and all Parts
that are from time to time incorporated or installed in or attached to any such
engine and any and all parts removed therefrom so long as title thereto remains
vested in the Lessor in accordance herewith. The term "Engines" means, as of any
date of determination, all Engines then leased under this Lease.
"ENVIRONMENTAL CLAIM" means any investigation, notice, claim, suit or
order, by any governmental authority or any Person, arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage or harm to health, safety or the
environment.
-8-
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"ENVIRONMENTAL LAWS" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"EQUIPMENT OBLIGATIONS" means the "Equipment Obligations" as defined in
the Credit Agreement.
"EQUITY PROCEEDS" means the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) from
the issuance of any equity Securities of the Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation
that is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) that is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"EVENT OF DEFAULT" means an Event of Default under and as defined in
the Credit Agreement.
"EVENT OF LOSS" means any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft that results in the loss of possession thereof for a period of 120 days
(or for a shorter period ending on the date on which there is an insurance
settlement for a total loss on the basis of the theft or disappearance of such
Aircraft, (B) the destruction, damage beyond repair or rendition of such
Aircraft permanently unfit for normal use for any reason whatsoever, (C) the
condemnation, confiscation or seizure of, or requisition of title to, or adverse
use or possession (other than use by the United States Government if the Lessee
obtains adequate compensation from the United States Government) of such
Aircraft, (D) as a result of any rule, regulation, order or any other action by
the FAA or any other governmental body having jurisdiction, the use of such
Aircraft in the normal course of interstate air transportation of persons or
cargo shall have been prohibited for a period of more than nine consecutive
months unless the Lessee, prior to the expiration of such nine month period,
shall have undertaken and shall be diligently carrying forward all steps
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that are necessary or desirable to permit the normal use of such property by the
Lessee or, in any event, if such use shall have been prohibited for a period of
twelve consecutive months, (E) the operation or location of such Aircraft, while
under requisition for use by the United States or any instrumentality or agency
thereof, in any area excluded from coverage by any insurance policy in effect
with respect to such Aircraft, if the Lessee shall be unable to obtain indemnity
or "war-risk" insurance in lieu thereof from the United States, (F) any damage
that results in an insurance settlement with respect to such Aircraft on the
basis of an actual or constructive total loss or (G) a divestiture of such
Airframe as described in Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft
Chattel Mortgage under the Credit Agreement. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe of the Aircraft.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"FAIR MARKET SALES VALUE" of the Airframe or any Engine or Spare Engine
shall mean the value that would be obtained in an arm's-length transaction
between an informed and willing lessee-user or buyer-user (other than a lessee
currently in possession or a used equipment dealer) under no compulsion to lease
or buy, as the case may be, and an informed and willing lessor or seller, as the
case may be, under no compulsion to lease or sell, as the same shall be
specified by agreement between the Lessor and the Lessee or, if not agreed to by
the Lessor and the Lessee within a period of 15 days after either party requests
a determination, then as specified in an appraisal prepared and delivered in New
York City by a recognized independent aircraft appraiser, mutually agreed to by
the Agent and the Lessee, or, if such appraiser cannot be agreed to within 20
days, then either party may apply to the American Arbitration Association (or
any successor organization thereto) in New York City for the appointment of an
appraiser, whose determinations shall be final and binding upon the parties
hereto. In determining Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe or Engine is in the condition,
location and overhaul status in which it is required to be returned to the
Lessor pursuant to Section 8 of this Lease, that all modifications and
improvements shall be taken into account, that the Lessee has removed all Parts
that it is entitled to remove pursuant to Section 11 of this Lease and that the
Aircraft is not encumbered by this Lease. Except as otherwise expressly provided
in the Lease, all appraisal costs will be shared equally by the Lessor and the
Lessee.
"FEDERAL AVIATION ACT" means the Federal Aviation Act of 1958, as
amended and as recodified in Title 49, United States Code, or any similar
legislation of the United States enacted to supersede, amend or supplement such
Act and the rules and regulations promulgated thereunder.
"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration or any successor thereto administering the
functions of the Federal Aviation Administration under the Federal Aviation Act.
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"FINAL MATURITY DATE" means April 25, 2006.
"FINANCED AIRCRAFT" means all "Financed Aircraft" as defined in the
Amended Aircraft Credit Facility.
"FINOVA AGREEMENT" means that certain Secured Loan Agreement dated as
of April 11, 1996, between FINOVA and the Lessee, as amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"FOREIGN AIR CARRIER" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"FUNDING AND PAYMENT OFFICE" means the office of the Agent located at
130 Liberty Street, New York, New York 10006, Attention: Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by the Lessee to the Lessor, the Agent and the Lenders pursuant
to clauses (1), (2), (3) and (12) of subsection 6(a) hereunder shall be prepared
in accordance with GAAP as in effect as of the date of such preparation.
Calculations in connection with the definitions, covenants and other provisions
of this Lease shall utilize accounting principles and policies in conformity
GAAP as in effect as of the date of this Lease.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means any chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any law.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, the Lessee.
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"HOLDING COMPANY" has the meaning assigned to that term in the
definition of "Holding Company Reorganization."
"HOLDING COMPANY REORGANIZATION" means the acquisition, in one
transaction or a series of related transactions, of all of the outstanding
Securities of the Lessee that are entitled to vote in the election of directors,
other than Securities having such power only by reason of the happening of a
contingency, (and all other Securities convertible into such Securities) by
another corporation (the "Holding Company"); provided, that the Holding Company
Reorganization may involve more than one holding company of the Lessee, so long
as the ultimate Holding Company directly or indirectly owns 100% of the Lessee;
and provided further, that in connection with the Holding Company Reorganization
the Lessee and its Subsidiaries shall not incur any material obligations or
liabilities of any type other than those permitted to be paid without causing a
Lease Event of Default under Section 16(v).
"HOLDING COMPANY SUBSIDIARY" means any Subsidiary of a Holding Company
other than the Lessee and its Subsidiaries.
"INDEBTEDNESS" means, as applied to any Person, (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in
subsection 12(b) hereunder.
"INDEMNITEE" has the meaning assigned to that term in subsection 12(b)
hereunder.
"INITIAL BORROWING DATE" means the date on which the Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Lessee or any of its
Subsidiaries against fluctuations in interest rates.
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"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by the Lessee or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement, purchase or other acquisition for value, by any
Subsidiary of the Lessee from any Person other than the Lessee or any of its
Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by the Lessee or any of
its Subsidiaries to any other Person (other than a wholly-owned Subsidiary of
the Lessee), including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LEASE EVENT OF DEFAULT" has the meaning specified in Section 16 of
this Lease.
"LEASE SUPPLEMENT" means a Lease Supplement, substantially in the form
of Exhibit A to this Lease, to be entered into between the Lessor and the Lessee
for the purpose of leasing the Aircraft under and pursuant to the terms of the
Lease, and any subsequent Lease Supplement entered into in accordance with the
terms of the Lease.
"LEASES" means the Lease Agreements, dated as of April 25, 2000,
between the Lessor and the Lessee, as the same may be amended, modified or
supplemented from time to time (including this Lease). The term "Lease" shall
include any Lease Supplement entered into pursuant to the respective Lease.
"LENDER" or "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of the Credit Agreement, together with their
successors and permitted assigns.
"LESSEE" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
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"LESSOR" means Atlas Freighter Leasing III, Inc., as Lessor under the
Lease, and its permitted successors and assigns.
"LESSOR TAX" means (where the Lessor is the indemnitee) any Tax that
is:
(a) imposed solely as the result of activities of the Lessor
in the jurisdiction imposing the Tax that is unrelated to
the Lessor's dealings with the Lessee or the transactions
contemplated by this Lease or the operation of the
Aircraft by the Lessee; or
(b) imposed on the net income, profits or gains of the Lessor
by the United States of America or the state or political
subdivision thereof, but excluding any Tax imposed by any
such government or taxing authority of any jurisdiction if
and to the extent that such Tax results from (i) the use,
operation, presence or registration of the Aircraft, the
Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organization, any
place of business or any activity of the Lessee or any
other Person having use, possession or custody of the
Aircraft, the Airframe, any Engine or any Part in the
jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after
the expiration or other termination of this Lease and that
is unrelated to the Lessor's dealings with the Lessee or
to the transactions contemplated by this Lease.
"LESSOR'S LIEN" means any Lien over the Aircraft (i) arising as a
result of any act or omission of the Lessor that constitutes a breach of any of
the terms of this Lease, (ii) arising as a result of any indebtedness, liability
or other obligation arising by through or under the Lessor, including, without
limitation, any Tax, that is not indemnified against by the Lessee or (iii)
resulting from the Credit Agreement or any other Lien from time to time created
by or through the Lessor in connection with the financing of the Aircraft.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"LOAN" or "LOANS" means the term loans made under the Credit Agreement.
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"LOAN DOCUMENTS" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Lessee and its Subsidiaries on a consolidated basis.
"MATERIAL AGREEMENT" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc/Banc of America Agreement, the Senior Note Documents and agreements
in respect of Permitted Extension Indebtedness and Other Permitted Indebtedness.
"MOODY'S" means Moody's Investors Service, Inc.
"NATIONSBANC/BANC OF AMERICA AGREEMENT" means the Loan Agreement, dated
as of March 28, 1997, between Atlas Air, Inc., as borrower, and NationsBanc
Leasing Corporation/Banc of America Leasing & Capital LLC, as lender, and as
further amended, supplemented and modified in accordance with this Lease and all
other related documents.
"OBLIGATIONS" means all obligations of the Lessor to pay all amounts
due from time to time under the Credit Agreement and the other Loan Documents to
the Agent, the Lenders or any of them, whether for principal, interest, fees,
expenses, indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.
"OTHER PERMITTED INDEBTEDNESS" means Indebtedness incurred for the
purpose of financing the acquisition of aircraft so long as (i) any such
Indebtedness bears interest at a rate that does not exceed 15% per annum, (ii)
such Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous
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or restrictive from the perspective of the Lessee and its Subsidiaries or any
less favorable, from the perspective of the Lessor or the Lenders, than any
other Designated Indebtedness.
"PART" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines, Spare Engines or engines, that are from time to time
incorporated or installed in or attached to the Airframe or any Engine, and all
such items that are subsequently removed therefrom so long as title thereto
shall vest in the Lessor in accordance with this Lease.
"PASS THROUGH TRUST DOCUMENTS" means, collectively, (i) those six
certain Pass Through Trust Agreements, dated as of February 9, 1998, between
Atlas Air, Inc., and Wilmington Trust Company, as trustee (the "1998 Pass
Through Trust Agreements") and any related agreements, notes, guaranties,
indentures, security documents or other documents, including, without
limitation, documents relating to the equipment notes to be held in trust
pursuant to the 1998 Pass Through Trust Agreements and all related documents, as
the same may be amended, restated, supplemented or otherwise modified from time
to time in accordance with this Lease, (ii) that certain Pass Through Trust
Agreement, dated as of April 1, 1999, between Atlas Air, Inc., and Wilmington
Trust Company, as trustee (the "1999 Pass Through Trust Agreement") and any
related agreements, trust supplements, notes, guaranties, indentures, security
documents or other documents, including, without limitation, documents relating
to the equipment notes to be held in trust pursuant to the 1999 Pass Through
Trust Agreement and all related documents, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease and (iii) that certain Pass Through Trust Agreement dated as of January
28, 2000, between Atlas Air, Inc., and Wilmington Trust Company, as trustee (the
"2000 Pass Through Trust Agreement") and any related agreements, trust
supplements, notes, guaranties, indentures, security documents or other
documents, including, without limitation, documents relating to the equipment
notes to be held in trust pursuant to the 2000 Pass Through Trust Agreement and
all related documents, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"PAST DUE RATE" shall mean the default rate of interest as determined
from time to time in accordance with subsection 2.2D of the Credit Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good
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faith by appropriate proceedings that do not involve any danger of the
sale, forfeiture or loss of any assets, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating solely
to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages and (II) Sections 4(d) and 4(e) of the
aircraft chattel mortgages entered into in connection with the Amended
Aircraft Credit Facility;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xi) Liens granted pursuant to the Transaction Documents;
(xii) Liens arising pursuant to the Amended Aircraft Credit Facility;
and
(xiii) extensions, modifications, replacements and refinancings of any
of the foregoing.
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<PAGE>
"PERMITTED EXTENSION INDEBTEDNESS" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by the Lessee
of any Indebtedness of the Lessee, including any such successive transactions by
the Lessee, so long as (i) any such Indebtedness bears interest at a rate that
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of the Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of the Lessee hereunder at least to the same
extent as the Indebtedness immediately prior to such extension, (iv) such
Permitted Extension Indebtedness has a final stated maturity later than the end
of the stated maturity of the Indebtedness being extended immediately prior to
such extension and (v) the amortization and the other terms, provisions,
conditions, covenants and events of default thereof taken as a whole shall be no
more onerous or restrictive from the perspective of the Lessee and its
Subsidiaries or any less favorable, from the perspective of the Lessor and the
Lenders than those contained in the Indebtedness immediately prior to such
extension.
"PERMITTED HOLDERS" means Michael A. Chowdry, his spouse, his
descendant(s) or any entity controlled by any of the foregoing, or any trust
solely for the benefit of any of the foregoing.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability partnerships, limited
liability companies, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or the expiration of any grace period or both, would constitute an Event
of Default under the Credit Agreement.
"PRICING CERTIFICATE" shall have the meaning assigned to that term in
Section 6(a)(13).
"PRO FORMA BASIS" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by the Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by the Lessee or any of its Subsidiaries or any other related action
that requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation
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with the Lessor and the Agent using the consolidated financial statements of the
Lessee and its Subsidiaries, which shall be reformulated as if any such
incurrence of Indebtedness and the application of proceeds, acquisition,
disposition or other related action had been consummated at the beginning of the
period specified in the covenant with respect to which Pro Forma Basis
compliance is required.
"PROCEEDINGS" has the meaning assigned to that term in subsection
6(a)(10).
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"RENT" means Basic Rent and Supplemental Rent, collectively.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of the Lessee now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of the Lessee now
or hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of the Lessee now or hereafter outstanding, and
(iv) any payment or prepayment of principal of, premium, if any, or interest on,
or redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Designated
Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"SECURITIES" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SENIOR NOTE DOCUMENTS" means (i) the Indenture, dated as of August 13,
1997, between Atlas Air, Inc., and State Street Bank and Trust Company, relating
to the 10 3/4% $150 million Senior Notes due 2005 of the Lessee (the "10 3/4%
Senior Notes"), and any and all related agreements, as the same may be amended,
restated, supplemented or oth
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erwise modified from time to time in accordance with this Lease, (ii) the
Indenture, dated as of April 9, 1998, between Atlas Air, Inc., and State Street
Bank and Trust Company, relating to the 9 1/4% $175 million Senior Notes due
2008 of the Lessee (the "9 1/4% Senior Notes"), and any and all related
agreements, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with this Lease and (iii) the
Indenture, dated as of November 18, 1998, between Atlas Air, Inc., and State
Street Bank and Trust Company, relating to the 9 3/8% $150 million Senior Notes
due 2006 of the Lessee (the "9 3/8% Senior Notes," and together with the 10 3/4%
Senior Notes and the 9 1/4% Senior Notes, the "Senior Notes"), and any and all
related agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"SERVICES AGREEMENT" means a Services Agreement between the Lessor and
the Lessee dated as of April 25, 2000.
"SOLVENT" means, with respect to any Person, that, as of the date of
determination, both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person, (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction, and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due, and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SPARE ENGINES" means each "Spare Engine" as defined in the Credit
Agreement.
"SPECIAL PURPOSE SUBSIDIARY" means a Subsidiary of the Lessee formed
solely for the purpose of refinancing Indebtedness associated with a Financed
Aircraft or acquiring or refinancing other aircraft with Permitted Extension
Indebtedness or Other Permitted Indebtedness the only assets of which are such
financed aircraft, leases of such aircraft and contracts related to the
modification of such aircraft and contributions to capital of such Subsidiary,
which together with all other contributions to capital made to other such
Subsidiaries, are not in excess of 15% of the consolidated book value of the
assets of the Lessee and its Subsidiaries, and the only liability of which is
the Permitted Extension Indebtedness or Other Permitted Indebtedness incurred to
refinance such Indebtedness; provided, that the Lessee beneficially owns and
controls at least 95% of the issued and outstanding capital stock of such
Subsidiary.
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"STIPULATED LOSS DETERMINATION DATE" means each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"STIPULATED LOSS VALUE" with respect to the Aircraft shall mean, as of
any date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f), plus all accrued and unpaid interest on the
Loans relating to the Aircraft on the date of determination.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Lease other than the financial covenants set forth in subsection 7(f) and
the definitions related thereto, the Lessor shall not be considered a Subsidiary
of the Lessee.
"SUPPLEMENTAL RENT" means all amounts, liabilities and obligations
(other than Basic Rent) that the Lessee assumes or agrees to pay to the Lessor
or others under any of the Transaction Documents, including payments of
Stipulated Loss Value and other amounts referred to in Section 3(c) of this
Lease.
"TAX" or "TAXES" shall have the meaning assigned to that term in
Section 12(a) hereunder.
"TECHNICAL RECORDS" shall have the meaning assigned to that term in
Section 8(i).
"TERM" means the term for which the Aircraft is leased hereunder
pursuant to Section 3(a) of this Lease, beginning on the Initial Borrowing Date
and ending on the Final Maturity Date, or such earlier date as this Lease may be
terminated in accordance with the terms hereof.
"TRANSACTION" means, collectively, (i) the Contribution, (ii) the
Transfers, (iii) the leasing by the Lessor to the Lessee of the Aircraft and
certain other aircraft and spare engines pursuant to the Leases, (iv) the
repayment of the Equipment Obligations and (v) the release and termination of
all security interests and Liens encumbering the Aircraft and any part thereof
and any other assets of the Lessor.
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"TRANSACTION DOCUMENTS" means the Amended Aircraft Credit Facility, any
bills of sale or certificates of transfer for each Aircraft and each Spare
Engine leased pursuant to the Leases (including bills of sale on AC Form 8050-2)
delivered in connection with the Transaction, the Leases, all documents relating
to the repayment of the Equipment Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Atlas
Contribution and the Transfers.
"TRANSFERS" mean the "Transfers" as defined in the Credit Agreement.
"UNITED STATES CITIZEN" means a "citizen of the United States" within
the meaning of the Federal Aviation Act.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver
of the conditions precedent contained in the Credit Agreement and the occurrence
of the Initial Borrowing Date, the Lessor hereby agrees to lease to the Lessee
hereunder, and the Lessee hereby agrees to accept on the Initial Borrowing Date
from the Lessor hereunder, the Aircraft as evidenced by the execution by the
Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. The
Lessee agrees to appoint in writing one or more of its employees as its
authorized representative to accept delivery of the Aircraft pursuant to the
terms hereof. The Lessee hereby agrees that acceptance of delivery by such
employee or employees shall, without further act, irrevocably constitute
acceptance by the Lessee of the Aircraft for all purposes of this Lease
Agreement.
SECTION 3. Term and Rent
(a) Term and Basic Rent. The Term shall commence on the Initial
Borrowing Date and end on the Final Maturity Date or such earlier date as this
Lease may be terminated in accordance with the provisions hereof. Basic Rent
shall accrue during the Term in accordance with Exhibit B hereto. The Lessee
shall pay to the Lessor on each Basic Rent Payment Date an amount of Basic Rent
specified opposite each Basic Rent Payment Date on Exhibit B hereto as such
amounts may be adjusted pursuant to Section 3 plus accrued interest on Basic
Rent previously accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards
on each Basic Rent Payment Date by an amount, determined by the Agent and
notified to the Lessor and the Lessee prior to the Basic Rent Payment Date, that
represents the amount of interest due and payable on the Loans relating to the
Aircraft on such Basic Rent Payment Date and determined in accordance with the
Credit Agreement.
(c) Supplemental Rent. The Lessee shall pay (or cause to be paid) to
the Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent constituting Stipulated Loss Value as the same shall become due and owing
and all other amounts of Sup-
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plemental Rent within 10 days after demand, and in the event of any failure on
the part of the Lessee to pay any Supplemental Rent when due, the Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. The Lessee also will pay to
the Lessor, or to whomsoever shall be entitled thereto, as assignee of the
Lessor, on demand, as Supplemental Rent, (i) all amounts of interest payable by
the Lessor pursuant to subsection 2.2(C) of the Credit Agreement that (I) are
payable on the Loans relating to the Aircraft and (II) fall due on any day which
is not a Basic Rent Payment Date, (ii) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent that such accrued interest was not paid when due until the same shall be
paid and on any other amounts payable hereunder that are not paid when due and
(iii) all amounts payable by the Lessor pursuant to subsections 2.6D, 2.7, 9.2
and 9.3 of the Credit Agreement; provided, however, that, to the extent that any
Supplemental Rent required to be paid pursuant to clause (iii) of this
subsection 2(c) has been paid by the Lessee pursuant to the terms of another
Lease, then the Lessee's obligations hereunder shall be deemed to be satisfied
by the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
the Lessee prior to 12:00 p.m. (New York time), to the Lessor at its office at
538 Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such
other office of the Lessor in the continental United States or such other
account as the Lessor shall direct in a notice to the Lessee at least 10
Business Days prior to the date when such payment of Rent is due); provided,
that, so long as any Obligations remain outstanding, all Rent shall be paid
directly to the Agent at the Funding and Payment Office; and provided further,
that to the extent the amount of Rent paid directly to the Agent is in excess of
the amount of principal and interest on the Loans relating to the Aircraft and
other unpaid Obligations (other than principal and interest on other Loans
relating to other aircraft or spare engines leased pursuant to the other Leases
and after taking into account all other payments of rent pursuant to the other
Leases on such date), then such excess amounts shall be paid by the Agent to the
Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date
on which a payment of Rent becomes due and payable is not a Business Day, then
such payment shall be made on the next succeeding Business Day; provided,
however, that if any date on which a payment of Rent becomes due is not a
Business Day and is a day of the month after which no further Business Day
occurs in such month, then the payment of Rent shall be made on the next
preceding Business Day. No interest shall accrue on the amount of any payment
made on the Business Day next succeeding the regularly scheduled Basic Rent
Payment Date, if such payment is made on such next succeeding Business Day
because the original date of
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<PAGE>
payment was not a Business Day (it being understood that the amount of
Basic Rent includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment has
been adjusted pursuant to Section 3(b), together with all prior Basic Rent
due and payable on such date and all accrued interest thereon shall be,
under all circumstances and in any event, in an amount at least sufficient
for the Lessor to pay in full principal and interest on the Loans relating
to the Aircraft required to be paid by the Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount that (when taken together with
any other Basic Rent due and payable in connection therewith) is at least
equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Aircraft and
all other unpaid Obligations of the Lessor (other than principal and
interest on Loans relating to other aircraft or spare engines and after
taking into account all other payments of Stipulated Loss Value pursuant to
the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that the Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, the Lessor shall notify the Lessee of such required prepayment
and the Lessee shall immediately prepay an amount of Basic Rent equal to
the amount of such required prepayment less any required payments of the
Loans relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to prepay Basic Rent
voluntarily at any time and from time to time, without premium or penalty,
upon not less than three Business Days' prior written or telephonic notice
to the Lessor and the Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f), the
schedules of Basic Rent and Stipulated Loss Value shall be adjusted so as
to preserve the after tax yield and after tax cash flows of the Lessor and,
to the extent consistent therewith, to minimize the net present value of
Basic Rent payments. All such computations shall be made on the basis of
the same assumptions and the method of computations employed in the
original calculations of Basic Rent and Stipulated Loss Values (except to
the extent that such assumptions have been changed as a result of such
prepayment or any prior such adjustment). At the Lessee's written request,
independ-
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ent public accountants mutually selected by the Lessor and the
Lessee shall confirm the required adjustments. The final determination of
any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, costs and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing adjustments, the revised Basic Rent and
Stipulated Loss Values shall permit the Lessee to comply with Section 3(e)
hereof.
SECTION 4. Certain Representations and Warranties. THE LESSEE
ACKNOWLEDGES AND AGREES THAT, AS BETWEEN THE LESSOR AND THE LESSEE (A) THE
AIRFRAME AND EACH ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO THE LESSEE AND THE LESSEE TAKES THE SAME "AS IS,"
(B) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE ARE SUITABLE FOR
ITS PURPOSES, (C) THE LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF
SUCH KIND, AND (D) NEITHER THE LESSOR NOR THE AGENT NOR ANY LENDER MAKES, HAS
MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER
PROPRIETARY RIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that the Lessor
covenants that it will not, through its own actions or inactions, in such
capacity, interfere in the Lessee's quiet enjoyment of the Aircraft unless this
Lease shall have been declared or deemed to have been declared in default
pursuant to Section 17 hereof. None of the provisions of this Section 4 or any
other provision of this Lease shall be deemed to amend, modify or otherwise
affect the representations, warranties or other obligations (express or implied)
of any manufacturer, any affiliate thereof, any subcontractor or supplier of any
manufacturer or any affiliate thereof, with respect to the Airframe, Engines or
any Parts, or to release the manufacturer, any affiliate thereof, or any such
subcontractor or supplier from any such representation, warranty or obligation.
Unless a Default or Lease Event of Default shall have occurred and be
continuing, the Lessor agrees to make available to the Lessee such rights as the
Lessor may have under any warranty with respect to the Aircraft made by the
manufacturer or any affiliate thereof or any of its subcontractors or suppliers
and any other claims against the manufacturer or any affiliate thereof, or
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any such subcontractor or supplier with respect to the Aircraft, all pursuant to
and in accordance with the terms of any applicable purchase agreements or
warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
the Lessor to enter into this Lease and the Agent and the Lenders to make the
Loans under the Credit Agreement, the Lessee represents and warrants to the
Lessor, the Agent and each Lender on the date of this Lease that the following
statements are true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. The Lessee is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Lessee has all requisite corporate power and
authority to own and operate its properties, to carry on its business as
now conducted and as proposed to be conducted, to enter into this Lease and
the other Transaction Documents and to carry out the transactions
contemplated hereby and thereby.
(ii) Qualification and Good Standing. The Lessee is qualified to do
business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations,
except in jurisdictions where the failure to be so qualified or in good
standing has not had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of the Lessee as of the
Initial Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto.
The capital stock of each of the Subsidiaries of the Lessee identified in
Schedule 5(a)(iii) annexed hereto (as so supplemented) is duly authorized,
validly issued, fully paid and nonassessable and none of such capital stock
constitutes Margin Stock. Each of the Subsidiaries of the Lessee identified
in Schedule 5(a)(iii) annexed hereto is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted, and
is qualified to do business and in good standing in every jurisdiction
where its assets are located and wherever necessary to carry out its
business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and
authority has not had and will not have a Material Adverse Effect. Schedule
5(a)(iii) annexed hereto correctly sets forth the ownership interest of the
Lessee and each of its Subsidiaries in each of the Subsidiaries of the
Lessee identified therein.
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<PAGE>
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been
duly authorized by all necessary corporate action on the part of the Lessee
or its Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by the Lessee
or its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated
by the Transaction Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to the Lessee
or any of its Subsidiaries, the certificate or articles of incorporation or
bylaws of the Lessee or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on the Lessee or
any of its Subsidiaries, (ii) conflict with in any material respect, result
in a material breach of or constitute (with due notice or lapse of time or
both) a material default under any material Contractual Obligation of the
Lessee or any of its Subsidiaries, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of the
Lessee or any of its Subsidiaries (other than any Liens created under this
Lease or any of the other Transaction Documents in favor of the Agent on
behalf of the Lenders), or (iv) require any approval of stockholders or any
approval or consent of any Person under any Contractual Obligation of the
Lessee or any of its Subsidiaries, except for such approvals or consents as
will be obtained on or before the Initial Borrowing Date and disclosed in
writing to the Lessor and the Lenders.
(iii) Governmental Consents. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and
will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body that has not been obtained or
made on or prior to the date required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by the Lessee and its
Subsidiaries, as the case may be, to the extent that it is a party thereto,
and is the legally valid and binding obligation of each such Person,
enforceable against each such Person in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
(c) Financial Condition.
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<PAGE>
(A) The Lessee has heretofore delivered to the Lessor, the Agent and
the Lenders, the following financial statements and information: the
audited consolidated and consolidating balance sheets of the Lessee and its
Subsidiaries as at December 31, 1999, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
the Lessee and its Subsidiaries for the fiscal year then ended. All such
statements were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated and, where applicable, consolidating
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case
of any such unaudited financial statements, to changes resulting from audit
and normal year-end adjustments. Neither the Lessee nor any of its
Subsidiaries has (and will not, following the Initial Borrowing Date, have)
any Contingent Obligation, contingent liability or liability for taxes,
long-term lease or unusual forward or long-term commitment that is not
reflected in the foregoing financial statements or the notes thereto and
which in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to the Lessee and its Subsidiaries
of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in
aggregate, could reasonably be expected to be material to the Lessee and
its Subsidiaries taken as a whole. As of the Initial Borrowing Date, the
Lessee does not know of any basis for the assertion against it of any
liability or obligation of any nature whatsoever that is not fully
disclosed in the financial statements delivered pursuant to Section 5(c)(A)
which, either individually or in the aggregate, could reasonably be
expected to be material to the Lessee and its Subsidiaries taken as a
whole.
(d) No Material Adverse Change; No Restricted Junior Payments. Since
December 31, 1999, no event or change has occurred that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect. Since
December 31, 1999, neither the Lessee nor any of its Subsidiaries has directly
or indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) Title to Properties, Liens. The Lessee and its Subsidiaries have
(i) good, sufficient and legal title to (in the case of fee interests in real
property), (ii) valid leasehold interests in (in the case of leasehold interests
in real or personal property), or (iii) good title to (in the case of all other
personal property), all of the properties and assets reflected in the financial
statements referred to in subsection 5(c) or in the most recent financial
state-
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ments delivered pursuant to subsection 6(a), in each case except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under subsection 7(g). Except as permitted
by this Lease, all such properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts. There are no actions, suits,
proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of the Lessee or any of its Subsidiaries) at law or in
equity or in admiralty or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of the Lessee, threatened
against or affecting the Lessee or any of its Subsidiaries or any property of
the Lessee or any of its Subsidiaries that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. Neither the
Lessee nor any of its Subsidiaries is (i) in violation of any applicable laws
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect or (ii) subject to or in default with respect to
any final judgments, writs, injunctions, decrees, rules or regulations of any
court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(g) Payment of Taxes. Except to the extent permitted by subsection
6(c), all tax returns and reports of the Lessee and its Subsidiaries required to
be filed by any of them have been timely filed, and all taxes, assessments, fees
and other governmental charges upon the Lessee and its Subsidiaries and upon
their respective properties, assets, income, businesses and franchises that are
due and payable have been paid when due and payable. The Lessee does not know of
any proposed tax assessment against the Lessee or any of its Subsidiaries that
is not being actively contested by the Lessee or such Subsidiary in good faith
and by appropriate proceedings; provided, that such reserves or other
appropriate provisions, if any, for liabilities for taxes as shall be required
in conformity with GAAP shall have been made or provided in the financial
statements of the Lessee. There are no agreements with respect to taxes between
the Lessee and any tax agency or authority.
(h) Performance of Agreements. Neither the Lessee nor any of its
Subsidiaries is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any of its Contractual
Obligations, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, would not
have a Material Adverse Effect.
(i) Governmental Regulation. Neither the Lessee nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation that may limit its ability to incur Indebted-
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<PAGE>
ness or that may otherwise render all or any portion of its obligations under
the Transaction Documents unenforceable.
(j) Employee Benefit Plans. The Lessee maintains a qualified retirement
plan under Section 401(k) of the Internal Revenue Code and a medical benefit
plan. The Lessee's 401(k) Plan has no unfunded liabilities in excess of
$10,000,000, and the Lessee is in compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan and has performed all of
its obligations under such Employee Benefit Plan in all material respects. The
Lessee has no Employee Benefit Plans, other than its 401(k) Plan and the medical
benefit plan. The Lessee has no ERISA Affiliates that sponsor, maintain,
contribute to or are liable with respect to any Employee Benefit Plans.
(k) Certain Fees. No broker's or finder's fee or commission will be
payable with respect to this Lease or any other Transaction Documents or any of
the transactions contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries
are, and have been to the best of the Lessee's knowledge, in compliance in
all material respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity, (a) arising at any facilities owned or
operated by the Lessee or (b) arising in connection with the operations of
the Lessee or any of its Subsidiaries (including the transportation of
Hazardous Materials), which conditions, occurrences or Hazardous Materials
Activity could reasonably be expected to form the basis of an Environmental
Claim against the Lessee and which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(iii) To the best of the Lessee's knowledge, there are no pending or
threatened Environmental Claims against the Lessee or any of its
Subsidiaries, and neither the Lessee nor any of its Subsidiaries has
received any written notices, inquiries, or requests for information with
respect to any Environmental Claims.
(m) Employee Matters. There is no strike or work stoppage in existence
or threatened involving the Lessee or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
(n) Solvency. The Lessee and each of its Subsidiaries is and, upon the
incurrence of any obligations by the Lessee under the Leases, will be, after
giving effect to the transactions contemplated hereby, Solvent.
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(o) Disclosure. No representation or warranty of the Lessee or any of
its Subsidiaries contained in this Lease or any other Transaction Document or in
any other document, certificate or written statement furnished to the Lessor,
the Agent or the Lenders by or on behalf of the Lessee or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Lease and the other Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact (known to the Lessee, in the
case of any document not furnished by it) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by the Lessee to be reasonable at the time
made, it being recognized by the Lessor, the Agent and the Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There are no facts known (or which should upon the
reasonable exercise of diligence be known) to the Lessee (other than matters of
a general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to the Lessor, the Agent and the Lenders for use in connection with
the transactions contemplated hereby.
(p) Registration and Filing; Chief Executive Office.
(1) Except for the registration of this Lease and the Lease Supplement
with the FAA and the filing of a financing statement under the Uniform
Commercial Code in Colorado, it is not necessary or advisable under
Colorado law or the law of the State of New York in order to ensure the
validity, effectiveness or enforceability of this Lease or to protect the
rights of the Lessor in the Aircraft or any part thereof that any other
instrument be filed, registered or recorded or that any action be taken,
and, under Colorado law or the law of the State of New York, the rights of
the Lessor in the Aircraft will have priority in all respects over the
claims of all creditors of the Lessee other than certain claims by
landlords of hangars, materialmen, mechanics and warehousemen in respect of
the Aircraft that have priority under Colorado law.
(2) The Lessee's chief executive office (as that term is defined in
Article 9 of the Uniform Commercial Code as in effect in Colorado) is
located at 538 Commons Drive, Golden, Colorado 80401, and the records of
the Lessee concerning the Aircraft are maintained at such chief executive
office or at the operations center at JFK International Airport, Building
151, Jamaica, New York 11430, where the Lessee normally maintains aircraft
records.
SECTION 6. Lessee's Affrimative Covenants. The Lessee covenants and
agrees that, so long as any amounts under this Lease remain unpaid, the Lessee
shall perform, and will cause each of its Subsidiaries to perform, all covenants
in this Section 6.
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(a) Financial Statements and Other Reports. The Lessee will maintain,
and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP. The Lessee
will deliver to the Lessor, the Agent and the Lenders:
(1) Quarterly Financials: as soon as available and in any event within
45 days after the end of each fiscal quarter of each fiscal year, (a) the
consolidated and consolidating balance sheets of the Lessee and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows of the Lessee and its Subsidiaries for such fiscal quarter
and for the period from the beginning of the then current fiscal year to
the end of such fiscal quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding periods of the
previous fiscal year, all in reasonable detail and certified by the chief
financial officer of the Lessee that they fairly present the financial
condition of the Lessee and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the operations of the
Lessee and its Subsidiaries in the form prepared for presentation to senior
management for such fiscal quarter and for the period from the beginning of
the then current fiscal year to the end of such fiscal quarter; provided,
that delivery of the Lessee's Form 10-Q for such fiscal quarter shall be
deemed to satisfy the requirements of this subsection 6(a)(1);
(2) Year-End Financials: as soon as available and in any event within
90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of the Lessee and its Subsidiaries as at the
end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of the Lessee and
its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year,
all in reasonable detail and certified by the chief financial officer of
the Lessee that they fairly present the financial condition of the Lessee
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a narrative
report describing the operations of the Lessee and its Subsidiaries in the
form prepared for presentation to senior management for such fiscal year,
and (c) in the case of such consolidated financial statements, a report
thereon of Arthur Andersen LLP or other independent certified public
accountants of recognized national standing selected by the Lessee and
satisfactory to the Lessor and the Agent, which report shall be
unqualified, shall express no doubts about the ability of the Lessee and
its Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of the Lessee and its Subsidiaries as at the dates indicated and
the results of their operations
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and their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by
such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards; provided, that delivery of the Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a)
and (b) of this subsection 6(a)(2);
(3) Officers' and Compliance Certificates: together with each
delivery of financial statements of the Lessee and its Subsidiaries
pursuant to subdivisions (1) and (2) above after the Initial Borrowing
Date, (a) an Officers' Certificate of the Lessee stating that the
signers have reviewed the terms of this Lease and have made, or caused
to be made under their supervision, a review in reasonable detail of
the transactions and condition of the Lessee and its Subsidiaries
during the accounting period covered by such financial statements and
that such review has not disclosed the existence during or at the end
of such accounting period, and that the signers do not have knowledge
of the existence as at the date of such Officers' Certificate, of any
condition or event that constitutes a Default or Lease Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
the Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section 7;
(4) Reconciliation Statements: if, as a result of any change
in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 5(c), the consolidated financial statements of the Lessee
and its Subsidiaries delivered pursuant to subdivision (1) or (2) of
this subsection 6(a) will differ in any material respect from the
consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (1) or (2) of
this subsection 6(a) following such change, consolidated financial
statements of the Lessee and its Subsidiaries for (y) the current
fiscal year to the effective date of such change and (z) the two full
fiscal years immediately preceding the fiscal year in which such change
is made, in each case prepared on a pro forma basis as if such change
had been in effect during such periods, and (b) together with each
delivery of financial statements pursuant to subdivision (1) or (2) of
this subsection 6(a) following such change, a written statement of the
chief accounting officer or chief financial officer of the Lessee
setting forth the differences that would have resulted if such
financial statements had been prepared without giving effect to such
change;
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(5) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of the Lessee or any of its
Subsidiaries or by independent consultants, with respect to significant
environmental matters at any facility or that relate to an
Environmental Claim that could result in a Material Adverse Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of the Lessee and its Subsidiaries
pursuant to subdivision (2) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the terms
of this Lease and the other Transaction Documents as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes a Default or Lease
Event of Default has come to their attention and, if such a condition
or event has come to their attention, specifying the nature and period
of existence thereof; provided, that such accountants shall not be
liable by reason of any failure to obtain knowledge of any such Default
or Lease Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to
believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (3) above is
not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision
(3) above for the applicable fiscal year are not stated in accordance
with the terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to the Lessee by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of the Lessee and its Subsidiaries made by
such accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(8) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by the
Lessee to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by the Lessee or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made
available generally by the Lessee or any of its Subsidiaries to the
public concerning material developments in the business of the Lessee
or any of its Subsidiaries;
(9) Lease Events of Default, etc.: promptly upon any officer
of the Lessee obtaining knowledge (a) of any condition or event that
constitutes a Default or Lease
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Event of Default, (b) that any Person has given any notice to the
Lessee or any of its Subsidiaries or taken any other action with
respect to a claimed default or event or condition of the type
referred to in subsection 16(1), (c) of any condition or event
that would be required to be disclosed in a current report filed
by the Lessee with the Securities and Exchange Commission on Form
8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if the Lessee were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that
has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the
nature and period of existence of such condition, event or change,
or specifying the notice given or action taken by any such Person
and the nature of such claimed Lease Event of Default, Default,
default, event or condition, and what action the Lessee has taken,
is taking and proposes to take with respect thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any
officer of the Lessee obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting the Lessee or any of its Subsidiaries
or any property of the Lessee or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by the Lessee to the
Lessor and the Lenders or (Y) any material development in any
Proceeding that, in any case:
(I) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby and under
the other Transaction Documents;
written notice thereof together with such other information as may be
reasonably available to the Lessee to enable the Lessor and the Lenders
and their counsel to evaluate such matters; and (b) within twenty days
after the end of each fiscal quarter of the Lessee, a schedule of all
Proceedings involving an alleged liability of, or claims against or
affecting, the Lessee or any of its Subsidiaries equal to or greater
than $1,000,000 and promptly after request by the Lessor and the Agent
such other information as may be reasonably requested by the Lessor and
the Agent to enable the Agent and its counsel to evaluate any of such
Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a)
each annual report (Form 5500 Series) filed by the Lessee or any of its
ERISA Affiliates with the Internal Revenue Service with respect to each
Employee Benefit Plan, (b) any notices received by the Lessee or any of
its ERISA Affiliates with respect to a "multiemployer plan," within the
meaning of Section 4001(a)(3) of ERISA, (c) such other documents or
governmental reports or filings relating to any Employee Benefit Plan
as the Lessor
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or the Agent shall reasonably request and (d) promptly upon becoming
aware of the occurrence of or forthcoming occurrence of any material
and adverse event with respect to any of the Lessee's Employee Benefit
Plans, a written notice specifying the nature thereof, what action the
Lessee has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty
Corporation;
(12) Insurance: as soon as practicable and in any event by the
last day of each fiscal year, a report in form and substance
satisfactory to the Lessor and the Agent outlining all material
insurance coverage maintained as of the date of such report by the
Lessee and its Subsidiaries and all material insurance coverage planned
to be maintained by the Lessee and its Subsidiaries in the immediately
succeeding fiscal year;
(13) Pricing Certificates: (a) together with each delivery of
financial statements of the Lessee and its Subsidiaries pursuant to
subdivisions (1) and (2) above, (b) within one Business Day after any
public release by S&P or Moody's lowering the Lessee's "Senior Secured
Debt Rating" or "Senior Secured Rating," as applicable, and (c) at such
additional times as the Lessee may elect, a certificate setting forth
its "Senior Secured Debt Rating" and "Senior Secured Rating," as
assigned by S&P or Moody's, as applicable (each, a "Pricing
Certificate");
(14) Holding Company: at least 5 Business Days prior to the
consummation thereof, the terms of the Holding Company Reorganization,
and, on and after the consummation of the Holding Company
Reorganization, in addition to the information requirements in this
Section 6(a) with respect to the Lessee, the same information shall be
delivered (and at the same times) with respect to the Holding Company
and its Subsidiaries; and
(15) Other Information: with reasonable promptness, such other
information and data with respect to the Lessee or any of its
Subsidiaries as from time to time may be reasonably requested by the
Lessor or the Agent or any Lender.
(b) Corporate Existence. Except as permitted under subsection
7(g) hereunder, the Lessee will, and will cause each of its Subsidiaries to, at
all times preserve and keep in full force and effect its corporate existence and
all rights and franchises material to its business; provided, however, that the
corporate existence of any such Subsidiary may be terminated if such termination
is in the interests of the Lessee and its Subsidiaries and is not materially
disadvantageous to the Lessor or to any assignee of the Lease. The Lessee will
at all times maintain its corporate existence as a United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
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(i) The Lessee will, and will cause its Subsidiaries to, pay
all taxes, assessments and other governmental charges imposed upon it
or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty, fine or interest accrues
thereon, and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums that have become due
and payable and that by law have or may become a Lien upon any of its
properties or assets, prior to the time when any penalty fine or
interest shall be incurred with respect thereto; provided, that no such
charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted
and if such reserve or other appropriate provision, if any, with
respect to any liability for taxes, as shall be required in conformity
with GAAP shall have been made therefor in the financial statements of
the Lessee.
(ii) The Lessee will not, and will not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than any Subsidiary of the
Lessor or the Lessee and other than the Holding Company and its
Subsidiaries).
(d) Maintenance of Properties; Insurance. The Lessee will, and
will cause its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition, ordinary wear and tear excepted, all
material properties used or useful in the business of the Lessee and its
Subsidiaries and from time to time will make or cause to be made all appropriate
repairs, renewals and replacements thereof. The Lessee will maintain or cause to
be maintained, with insurers of recognized responsibility and reputation,
insurance with respect to its properties and business and the properties and
businesses of its Subsidiaries against loss or damage (including, without
limitation, flood insurance, if necessary or advisable) of the kinds customarily
carried or maintained under similar circumstances by corporations engaged in
similar businesses.
(e) Inspection; Lender Meeting. The Lessee will, and will
cause its Subsidiaries to, permit any authorized representatives designated by
the Lessor, the Agent or any Lender to visit and inspect any of the properties
of the Lessee or any of its Subsidiaries, including the Aircraft or any part
thereof and any Engine, and its and their financial and accounting records, and,
with the permission of the Lessee, which shall not be unreasonably withheld, to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants (provided, that the Lessee may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested, provided, so long as no Lease Event of Default shall have occurred
and be continuing, that such inspection is not disruptive to the Lessee's
business, as reasonably determined by the Lessee. The cost of any such
inspection shall be borne by the Lessee if an Event of Default has occurred and
is continuing or if the Lessee is thereby shown
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to be in material breach of any of its obligations hereunder, and otherwise by
the party making the inspection. Neither the Lessor, the Agent nor any Lender
shall have any obligation to make any inspection. Without limiting the
foregoing, the Lessor (or its authorized representative) may attend any Airframe
maintenance visit, APU shop visit, landing gear shop visit or Engine shop visit.
The Lessee shall provide the Lessor not less than twenty days' prior written
notice of any such scheduled visit; provided, that if a scheduled visit is to
occur less than twenty days after the scheduling thereof, the Lessee shall
provide written notice of such scheduled visit promptly upon the scheduling
thereof. Without in any way limiting the foregoing, the Lessee will, upon the
request of the Lessor or the Agent, participate in a meeting of the Agent and
the Lenders once during each fiscal year to be held at the Lessee's corporate
offices (or such other location as may be agreed to by the Lessee, the Lessor
and the Agent) at such time as may be agreed to by the Lessee, the Lessor and
the Agent.
(f) Compliance with Laws, etc. The Lessee will, and will cause
its Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority (including, without
limitation, Environmental Laws), noncompliance with which could reasonably be
expected to cause a Material Adverse Effect or prevent the Lessee from
performing its obligations hereunder. The Lessee shall not conduct, and shall
not permit the conduct of, any Hazardous Materials Activity at any facility or
at any other location that could reasonably be expected to form the basis of an
Environmental Claim against the Lessee and that could reasonably be expected to
have a Material Adverse Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
The Lessee will promptly take, and will cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any facility in order to comply with all applicable Environmental
Laws and Governmental Authorizations. In the event that the Lessee or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any facility, the Lessee or such Subsidiary will
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, the Lessee's or such Subsidiary's liability for such
presence, storage, use, disposal, transportation or discharge of any Hazardous
Materials is being contested in good faith by the Lessee or such Subsidiary.
Notwithstanding anything to the contrary contained in this Lease, the Lessee and
its Subsidiaries may engage in the transportation of Hazardous Materials in the
ordinary course of business so long as such is conducted in compliance with all
applicable Environmental Laws, and all other applicable laws, policies, orders,
directives and regulations.
(h) Employee Benefit Plans. The Lessee will not establish or
permit to be established any Employee Benefit Plans for the Lessee or any of its
employees and will not permit any ERISA Affiliate to establish any Employee
Benefit Plan that, in either case, could
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reasonably be expected to result in a liability for the Lessee, under Title IV
of ERISA or the minimum funding standards of Part 3 of Subtitle B of Title I of
ERISA, in excess of $20 million.
(i) Corporate Separateness. The Lessee will take all such
action as is necessary to keep its operations separate and apart from those of
the Holding Company or any of its Affiliates, including, without limitation,
ensuring that all customary corporate formalities, including the maintenance of
separate corporate records and documents and holding regular meetings, are
followed. Any financial statements distributed to any creditors of the Lessee
shall clearly establish the corporate separateness of the Lessee from the
Holding Company and each of the Holding Company's other Subsidiaries. The Lessee
shall not take any action or conduct its affairs in a manner that is likely to
result in the corporate existence of the Lessee on the one hand and of the
Holding Company or any Subsidiary of the Holding Company on the other hand being
disregarded, or in the assets and liabilities of the Holding Company or any
Subsidiary of the Holding Company being substantively consolidated with those of
the Lessee in a bankruptcy, reorganization or other insolvency proceeding.
SECTION 7. Lessee's Negative Covenants. The Lessee covenants
and agrees that, so long as any amounts remain owing under this Lease, the
Lessee shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
(a) Indebtedness. The Lessee shall not, and shall not permit
any of its Subsidiaries, directly or indirectly, to create, incur, assume or
guaranty, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except that:
(1) the Lessee may become and remain liable with respect to
the obligations under the Amended Aircraft Credit Facility;
(2) the Lessee and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
7(d) and, upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations
so extinguished;
(3) the Lessee and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases;
provided, that such Capital Leases are permitted under the terms of
subsection 7(i);
(4) the Lessee and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 7(a) (4)
annexed hereto;
(5) the Lessee may become and remain liable with respect to
transaction in which Permitted Extension Indebtedness is incurred with
respect to any Financed Aircraft, the
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cash proceeds from such Permitted Extension Indebtedness are sufficient
to repay in full the Indebtedness associated with such Financed
Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and the Lessee
delivers an Officers' Certificate to the Lessor, the Agent and the
Lenders, in form and substance reasonably satisfactory to the Lessor
and the Agent, confirming that, on a Pro Forma Basis after giving
effect to such incurrence of Indebtedness, (i) the ratio of
Consolidated Total Debt (less Cash and Cash Equivalents held by the
Lessee in excess of $25 million) as of the last day of the most
recently ended fiscal quarter (the "Determination Date") plus seven
times Consolidated Rental Payments for the four fiscal quarter period
ending on such Determination Date to Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending
on such Determination Date does not exceed the ratio set forth in
subsection 7(f)(ii) for the fiscal quarter in which such Indebtedness
is to be incurred, (ii) the ratio of Consolidated Adjusted EBITDA for
such four fiscal quarter period to Consolidated Interest Expense for
such four fiscal quarter period is not less than the ratio set forth in
subsection 7(f)(i) for the fiscal quarter in which such Indebtedness is
to be incurred, and (iii) the Lessee will be in compliance with all
covenants set forth in subsection 7(f) hereof, the Lessee and its
Subsidiaries may incur Other Permitted Indebtedness;
(7) the Lessee may become and remain liable with respect to
Indebtedness under the NationsBanc/Banc of America Agreement;
(8) the Lessee may become and remain liable with respect to
the Senior Notes;
(9) the Lessee and its Subsidiaries may become and remain
liable with respect to other Indebtedness in an aggregate principal
amount not to exceed, without duplication, when added to the maximum
aggregate liability, contingent or otherwise, of the Lessee and its
Subsidiaries outstanding in accordance with Section 7(d)(6), $50
million at any time outstanding; and
(10) the Lessee may become and remain liable with respect to
Indebtedness in respect of the Leases; provided that, notwithstanding
the foregoing, the Lessee may not become or remain liable, directly or
indirectly, for any Indebtedness of any Holding Company Subsidiary.
(b) Liens and Related Matters.
A. Prohibition on Liens. The Lessee shall not, and shall not
permit any of its Subsidiaries, directly or indirectly, to create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of any
kind (including any document or instrument in
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respect of goods or accounts receivable) of the Lessee or any of its
Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
state or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and
Other Permitted Indebtedness, provided that such Liens encumber only
assets subject to purchase money Liens securing such Indebtedness and
do not encumber any assets subject to the Aircraft Chattel Mortgages;
and
(iii) other Liens, securing Indebtedness in an aggregate amount
not to exceed $10 million at any time outstanding, that do not encumber
any assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in
no event shall the Lessee create, incur, assume or permit to exist Liens on or
with respect to any assets subject to the Aircraft Chattel Mortgages except for
Permitted Encumbrances of the type described in clauses (i), (ii) or (viii) of
the definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or
Other Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7(b) annexed hereto and (iii) with respect to Special Purpose Subsidiaries, the
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock (i) to pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by the Lessee or any other Subsidiary of
the Lessee, (ii) to repay or prepay any Indebtedness owed by such Subsidiary to
the Lessee or any other Subsidiary of the Lessee, (iii) to make loans or
advances to the Lessee or any other Subsidiary of the Lessee, or (iv) to
transfer any of its property or assets to the Lessee or any other Subsidiary of
the Lessee.
(c) Investments; Joint Ventures. The Lessee shall not, and
shall not permit any of its Subsidiaries, directly or indirectly, to
make or own any Investment in any Person, including any Joint Venture,
except:
(i) the Lessee may make and own Investments in Cash
Equivalents;
(ii) the Lessee and its Subsidiaries may continue to own the
Investments owned by them as of the Initial Borrowing Date in any
Subsidiaries of the Lessee;
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(iii) the Lessee may make and own Investments in Special Purpose
Subsidiaries, provided that the Lessee delivers to the Lessor and the
Agent an Officer's Certificate in form and substance satisfactory to
the Lessor and the Agent demonstrating that such Special Purpose
Subsidiary meets the requirements set forth in the definition thereof;
(iv) the Lessee may make Investments in Joint Ventures in an
aggregate amount not to exceed (A) $50 million plus (B) 20% of
cumulative Consolidated Net Income for each fiscal year commencing with
fiscal year 2000 and ending before the date of determination less (C)
the sum of (x) the aggregate amount of Restricted Junior Payments with
respect to the Common Stock of the Lessee declared or paid in each such
fiscal year (excluding Restricted Junior Payments made in accordance
with Section 7(e)(4)) and (y) the aggregate amount contributed to
capital of Special Purpose Subsidiaries in each such fiscal year;
provided, that the Lessee shall not incur liabilities related to any
such Joint Venture in excess of the Lessee's Investment therein;
(v) the Lessee and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7(c)(v) annexed
hereto and Investments made in compliance with subsection 7(c)(iv); and
(vi) the Lessee and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed $15 million at any
time outstanding.
(d) Contingent Obligations. The Lessee shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create
or become or remain liable with respect to any Contingent Obligation,
except:
(1) any Subsidiary may become and remain liable with respect
to Contingent Obligations arising under their guaranties of the
obligations under any Material Agreement;
(2) the Lessee may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements and Currency
Agreements arising under any Material Agreement;
(3) the Lessee and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets or securities;
(4) the Lessee and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule
7(d)(4) annexed hereto;
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(5) the Lessee and its Subsidiaries may become and remain
liable with respect to Contingent Obligations to the extent that such
Contingent Obligations are permitted pursuant to subsections 7(i) and
7(j); and
(6) the Lessee and its Subsidiaries may become and remain
liable with respect to other Contingent Obligations; provided, that the
maximum aggregate liability, contingent or otherwise, of the Lessee and
its Subsidiaries in respect of all such Contingent Obligations when
added, without duplication, to the aggregate principal amount of
Indebtedness outstanding in accordance with Section 7(a)(9) shall at no
time exceed $50 million.
(e) Restricted Junior Payments. The Lessee shall not, and
shall not permit any of its Subsidiaries, directly or indirectly, to declare,
order, pay, make or set apart any sum for any Restricted Junior Payment;
provided, that the Lessee may make scheduled payments of principal, mandatory
prepayments of principal (including through the exercise of remedies) and
payment of interest from time to time on Designated Indebtedness; and provided
further, that, so long as no Default or Lease Event of Default has occurred and
is continuing, or would result therefrom:
(1) the Lessee may prepay Designated Indebtedness from the
proceeds of Permitted Extension Indebtedness or Other Permitted
Indebtedness;
(2) the Lessee may make Restricted Junior Payments with
respect to its Common Stock in an amount not to exceed, in any fiscal
year, the lesser of 20% of Consolidated Net Income for such fiscal year
and $15 million;
(3) the Lessee may apply Equity Proceeds to prepay Designated
Indebtedness;
(4) the Lessee may repurchase its Common Stock in an amount
not to exceed in any fiscal year $15 million for purposes of
establishing or contributing to an employee benefit plan; provided,
that any such repurchased Common Stock resold to employees of the
Lessee shall, to the extent of the price paid for such Common Stock by
such employee, be excluded from the calculation of the $15 million
limit set forth above;
(5) the Lessee shall be permitted to consummate the
Transaction; and
(6) the Lessee may repurchase or redeem all or any portion of
the Senior Notes for aggregate cash consideration, when aggregated with
any "change of control" put payments arising as a result of the Holding
Company Reorganization, not to exceed $75,000,000, provided that (A)
after giving effect to the proposed repurchase or redemption, the
Lessee shall have not less than $150,000,000 in Cash or Cash
-43-
<PAGE>
Equivalents on its balance sheet and (B) its Consolidated Leverage
Ratio (calculated on a pro forma basis as if the proposed repurchase or
redemption had been consummated on the last day of the most recent four
fiscal quarter period) shall not exceed the lower of 4.25:1.00 or the
ratio required to be met in accordance with Section 7(f)(ii) for the
immediately succeeding fiscal quarter end.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. The Lessee shall not
permit the ratio of (i) Consolidated Adjusted EBITDA to (ii)
Consolidated Interest Expense for the four fiscal quarter period ending
as of the last day of any fiscal quarter of the Lessee set forth below
to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
=========================================================
FISCAL QUARTER MINIMUM INTEREST
ENDING COVERAGE RATIO
- ----------------------------- ---------------------------
<S> <C>
March 31, 2000 2.10:1.00
- ----------------------------- ---------------------------
June 30, 2000 2.10:1.00
- ----------------------------- ---------------------------
September 30, 2000 2.20:1.00
- ----------------------------- ---------------------------
December 31, 2000 2.20:1.00
- ----------------------------- ---------------------------
March 31, 2001 2.40:1.00
- ----------------------------- ---------------------------
June 30, 2001 2.40:1.00
- ----------------------------- ---------------------------
September 30, 2001 2.50:1.00
- ----------------------------- ---------------------------
December 31, 2001 2.50:1.00
- ----------------------------- ---------------------------
March 31, 2002 2.50:1.00
- ----------------------------- ---------------------------
June 30, 2002 2.50:1.00
- ----------------------------- ---------------------------
September 30, 2002 2.50:1.00
- ----------------------------- ---------------------------
December 31, 2002 2.50:1.00
- ----------------------------- ---------------------------
March 31, 2003 2.50:1.00
- ----------------------------- ---------------------------
June 30, 2003 2.75:1.00
- ----------------------------- ---------------------------
December 31, 2003 2.75:1.00
- ----------------------------- ---------------------------
March 31, 2004 2.75:1.00
- ----------------------------- ---------------------------
June 30, 2004 2.75:1.00
- ----------------------------- ---------------------------
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
=========================================================
FISCAL QUARTER MINIMUM INTEREST
ENDING COVERAGE RATIO
September 30, 2004 2.75:1.00
- ----------------------------- ---------------------------
<S> <C>
December 31, 2004 2.75:1.00
- ----------------------------- ---------------------------
March 31, 2005 2.75:1.00
- ----------------------------- ---------------------------
June 30, 2005 2.75:1.00
- ----------------------------- ---------------------------
September 30, 2005 2.75:1.00
- ----------------------------- ---------------------------
December 31, 2005 2.75:1.00
- ----------------------------- ---------------------------
March 31, 2006 2.75:1.00
- ----------------------------- ---------------------------
June 30, 2006 2.75:1.00
- ----------------------------- ---------------------------
September 30, 2006 2.75:1.00
- ----------------------------- ---------------------------
December 31, 2006 2.75:1.00
- ----------------------------- ---------------------------
</TABLE>
(ii) Maximum Leverage Ratio. The Lessee shall not permit the
ratio of (i) Consolidated Total Debt at the end of any four fiscal
quarter period ending during one of the periods set forth below (less
Cash and Cash Equivalents held by the Lessee in excess of $25 million
as of such date) plus seven times Consolidated Rental Payments for such
four fiscal quarter period to (ii) Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for such four fiscal quarter period to
exceed the correlative ratio indicated below:
<TABLE>
<CAPTION>
==========================================================
FISCAL QUARTER MAXIMUM
ENDING LEVERAGE RATIO
============================== ===========================
<S> <C>
March 31, 2000 4.75:1.00
- ------------------------------ ---------------------------
June 30, 2000 4.75:1.00
- ------------------------------ ---------------------------
September 30, 2000 4.75:1.00
- ------------------------------ ---------------------------
December 31, 2000 4.75:1.00
- ------------------------------ ---------------------------
March 31, 2001 4.75:1.00
- ------------------------------ ---------------------------
June 30, 2001 4.50:1.00
- ------------------------------ ---------------------------
September 30, 2001 4.50:1.00
- ------------------------------ ---------------------------
December 31, 2001 4.50:1.00
- ------------------------------ ---------------------------
March 31, 2002 4.50:1.00
- ------------------------------ ---------------------------
</TABLE>
-45-
<PAGE>
<TABLE>
<CAPTION>
==========================================================
FISCAL QUARTER MAXIMUM
ENDING LEVERAGE RATIO
============================== ===========================
<S> <C>
June 30, 2002 4.50:1.00
- ------------------------------ ---------------------------
September 30, 2002 4.50:1.00
- ------------------------------ ---------------------------
December 31, 2002 4.25:1.00
- ------------------------------ ---------------------------
March 31, 2003 4.25:1.00
- ------------------------------ ---------------------------
June 30, 2003 4.25:1.00
- ------------------------------ ---------------------------
September 30, 2003 4.25:1.00
- ------------------------------ ---------------------------
December 31, 2003 4.00:1.00
- ------------------------------ ---------------------------
March 31, 2004 4.00:1.00
- ------------------------------ ---------------------------
June 30, 2004 4.00:1.00
- ------------------------------ ---------------------------
September 30, 2004 4.00:1.00
- ------------------------------ ---------------------------
December 31, 2004 3.75:1.00
- ------------------------------ ---------------------------
March 31, 2005 3.75:1.00
- ------------------------------ ---------------------------
June 30, 2005 3.75:1.00
- ------------------------------ ---------------------------
September 30, 2005 3.75:1.00
- ------------------------------ ---------------------------
December 31, 2005 3.50:1.00
============================== ===========================
March 31, 2006 3.50:1.00
- ------------------------------ ---------------------------
June 30, 2006 3.50:1.00
- ------------------------------ ---------------------------
September 30, 2006 3.50:1.00
- ------------------------------ ---------------------------
December 31, 2006 3.50:1.00
============================== ===========================
</TABLE>
(iii) Minimum Consolidated Net Worth. The Lessee shall not
permit Consolidated Net Worth at any time during any of the periods set
forth below to be less than the correlative amount indicated:
<TABLE>
<CAPTION>
=============================== ================================
MINIMUM CONSOLIDATED
PERIOD NET WORTH
=============================== ================================
<S> <C>
March 31, 2000 $300 million
- ------------------------------- --------------------------------
June 30, 2000 $300 million
- ------------------------------- --------------------------------
</TABLE>
-46-
<PAGE>
<TABLE>
<CAPTION>
=============================== ================================
MINIMUM CONSOLIDATED
PERIOD NET WORTH
=============================== ================================
<S> <C>
September 30, 2000 $325 million
- ------------------------------- --------------------------------
December 31, 2000 $325 million
- ------------------------------- --------------------------------
March 31, 2001 $350 million
- ------------------------------- --------------------------------
June 30, 2001 $350 million
- ------------------------------- --------------------------------
September 30, 2001 $350 million
- ------------------------------- --------------------------------
December 31, 2001 $350 million
- ------------------------------- --------------------------------
March 31, 2002 $400 million
- ------------------------------- --------------------------------
June 30, 2002 $400 million
- ------------------------------- --------------------------------
September 30, 2002 $400 million
- ------------------------------- --------------------------------
December 31, 2002 $400 million
=============================== ================================
March 31, 2003 $450 million
- ------------------------------- --------------------------------
June 30, 2003 $450 million
- ------------------------------- --------------------------------
September 30, 2003 $450 million
- ------------------------------- --------------------------------
December 31, 2003 $450 million
- ------------------------------- --------------------------------
March 31, 2004 $450 million
- ------------------------------- --------------------------------
June 30, 2004 $450 million
- ------------------------------- --------------------------------
September 30, 2004 $450 million
- ------------------------------- --------------------------------
December 31, 2004 $450 million
- ------------------------------- --------------------------------
March 31, 2005 $450 million
- ------------------------------- --------------------------------
June 30, 2005 $450 million
- ------------------------------- --------------------------------
September 30, 2005 $450 million
- ------------------------------- --------------------------------
December 31, 2005 $450 million
- ------------------------------- --------------------------------
March 31, 2006 $450 million
- ------------------------------- --------------------------------
June 30, 2006 $450 million
- ------------------------------- --------------------------------
September 30, 2006 $450 million
- ------------------------------- --------------------------------
December 31, 2006 $450 million
=============================== ================================
</TABLE>
-47-
<PAGE>
(g) Restriction on Fundamental Changes; Asset Sales and
Acquisitions; New Subsidiaries. The Lessee shall not, and shall not permit any
of its Subsidiaries to, enter into any transaction of merger or consolidation,
or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, sub-lease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any part of its
business, property or fixed assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or any portion of the business, property or
fixed assets of, or stock or other evidence of beneficial ownership of, any
Person or any division or line of business of any Person, except that:
(1) any Subsidiary of the Lessee may be merged with or into
the Lessee or any wholly-owned Subsidiary of the Lessee, or be
liquidated, wound up or dissolved, or all or any part of its business,
property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or a series of transactions,
to the Lessee or any such wholly-owned Subsidiary of the Lessee;
provided, that, in the case of such a merger, the Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving
corporation;
(2) the Lessee and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided, that the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof;
(3) subject to subsection 7(m), the Lessee and its
Subsidiaries may make Asset Sales of assets having a fair market value
not in excess of $100 million in any fiscal year or $500 million in the
aggregate; provided, that (x) the consideration received for such
assets shall be in an amount at least equal to the fair market value
thereof, (y) the consideration received shall be at least 75% cash, and
(z) the proceeds of such Asset Sales shall be applied to repay
permanently senior bank debt or prepay Basic Rent;
(4) the Lessee may lease or transfer any Financed Aircraft to
the extent expressly permitted by the mortgages encumbering such
Financed Aircraft as in effect on the date of this Lease;
(5) the Lessee may make acquisitions of the capital stock of
another Person or all or substantially all of the assets of a division
or line of business of another Person, provided that (a) the
acquisition primarily involves the acquisition of assets to be used in
the business of the Lessee, (b) if such acquisition is structured as a
merger or a stock or other equity acquisition, then either (i) the
Person so acquired becomes a wholly-owned Subsidiary of the Lessee or
(ii) such Person is merged with and into the Lessee or a wholly-owned
Subsidiary of the Lessee (with the Lessee or such wholly-owned
Subsidiary being the surviving corporation of such merger), (c) if such
acquisi-
-48-
<PAGE>
tion is structured as an asset acquisition, then such assets are
acquired either by the Lessee directly or by a wholly-owned Subsidiary
of the Lessee, (d) immediately before and after giving effect thereto,
no Default or Lease Event of Default shall have occurred and be
continuing, (e) immediately after giving effect to the acquisition, the
Lessee shall be in compliance on a Pro Forma Basis with the financial
covenants in subsection 7(f) and such compliance shall be evidenced by
an Officer's Certificate demonstrating such compliance, (f) the Lessor
and the Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other liabilities
not on the balance sheet of the Lessee assumed in connection with such
acquisition and (g) the aggregate amount of cash payments made in
connection with all such acquisitions other than with the proceeds from
sales or issuances of equity by the Lessee does not exceed
$100,000,000;
(6) the Lessee and its Subsidiaries may make Consolidated
Capital Expenditures in connection with the purchase of up to twelve
Eligible Aircraft during each fiscal year, such number of Eligible
Aircraft permitted during any fiscal year to be increased by any number
of Eligible Aircraft permitted to be purchased, but not purchased,
during the previous fiscal year (but in no event shall any such number
of Eligible Aircraft once carried forward to the next fiscal year be
carried forward to any fiscal year thereafter) together with
Consolidated Capital Expenditures with respect to the acquisition, in
the normal course of business, of spare parts and spare engines
associated with such Eligible Aircraft;
(7) the Lessee and its Subsidiaries may make Consolidated
Capital Expenditures with respect to maintenance of aircraft in the
normal course of business;
(8) the Lessee and its Subsidiaries may make other
Consolidated Capital Expenditures not in excess of $10 million during
any fiscal year; provided, that any amount of such other Consolidated
Capital Expenditures permitted, but not made, in any fiscal year may be
carried forward to and made during the immediately succeeding fiscal
year (but no amount once carried forward to the next fiscal year may be
carried forward to any fiscal year thereafter);
(9) the Lessee shall be permitted to dispose of or acquire
assets pursuant to the consolidation and relocation of its offices and
operations to Colorado; provided, that the aggregate consideration paid
with respect to the acquisition of assets shall be in an amount not to
exceed $20 million; and
(10) the Holding Company Reorganization and any transaction
effected in accordance with subsection 10(b) of this Lease or Section
6.6(ii) or Section 9.21 of the Credit Agreement shall be permitted.
-49-
<PAGE>
(h) Amendments of Material Agreements. The Lessee shall not
permit (i) its certificate or articles of incorporation or bylaws to be amended
or otherwise modified in any manner that could reasonably be expected to have a
Material Adverse Effect or (ii) any Material Agreement to be amended or
otherwise modified in any manner with respect to any provision providing
material representations and warranties to the Lessee, indemnification rights to
the Lessee, or limiting the Lessee's remedies or rights upon the other party to
such agreements failing to perform.
(i) Restriction on Leases. The Lessee shall not, and shall not
permit any of its Subsidiaries to, become liable in any way, whether directly or
by assignment or as a guarantor or other surety, for the obligations of the
lessee under any lease, whether an Operating Lease or a Capital Lease (other
than intercompany leases between the Lessee and its wholly-owned Subsidiaries,
including the Lessor); provided, however, that the Lessee may become so
obligated to the extent that, and only to the extent that, immediately after
giving effect to the incurrence of liability with respect to such lease, the
Consolidated Rental Payments at the time in effect during the then current
fiscal year do not exceed $35 million plus the amount of Consolidated Rental
Payments made during such fiscal year in respect of up to eight 747-400F
aircraft subject to Operating Leases as of the Initial Borrowing Date plus the
amount of Consolidated Rental Payments in respect of up to two 747-400F aircraft
per year, subject to the agreement dated June 9, 1997, between the Lessee and
The Boeing Company regarding the purchase of twelve new 747-400F aircraft and
the option to purchase eight additional new 747-400F aircraft, plus an amount,
not to exceed $15 million during any fiscal year, equal to Consolidated Rental
Payments incurred in connection with sale and leaseback transactions described
in subsection 7(j), plus Consolidated Rental Payments assumed pursuant to
acquisitions permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs. The Lessee shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, become or remain
liable as lessee or as a guarantor or other surety with respect to any lease,
whether an Operating Lease or a Capital Lease, of any property (whether real,
personal or mixed), whether now owned or hereafter acquired, (i) that the Lessee
or any of its Subsidiaries has sold or transferred or is to sell or transfer to
any other Person (other than the Lessee or any of its Subsidiaries) or (ii) that
the Lessee or any of its Subsidiaries intends to use for substantially the same
purpose as any other property that has been or is to be sold or transferred by
the Lessee or any of its Subsidiaries to any Person (other than the Lessee or
any of its Subsidiaries) in connection with such lease; provided, that the
Lessee and its Subsidiaries may become and remain liable as lessee, guarantor or
other surety with respect to any such lease if and to the extent that the Lessee
or any of its Subsidiaries would be permitted to enter into, and remain liable
under, such lease under subsection 7(i).
(k) Transactions with Shareholders and Affiliates. The Lessee
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to
-50-
<PAGE>
exist any transaction (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with any holder of
10% or more of any class of equity Securities of the Lessee or with any
Affiliate of the Lessee or of any such holder, on terms that are less favorable
to the Lessee or that Subsidiary, as the case may be, than those that might be
obtained at the time from Persons who are not such holders or Affiliates;
provided, that the foregoing restriction shall not apply to (i) reasonable and
customary fees paid to and indemnification of members of the Boards of Directors
of the Lessee and its Subsidiaries, (ii) reasonable and customary salaries,
bonuses and other compensation paid to and indemnification of employees of the
Lessee or any of its Subsidiaries in accordance with past practice or approved
by the compensation committee of the Lessee, (iii) performance by the Lessee of
its obligations under and in accordance with the Services Agreement or (iv) the
Holding Company Reorganization.
(l) Disposal of Subsidiary Stock. The Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law or to a wholly-owned Subsidiary of the
Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to the Lessee, another wholly-owned
Subsidiary of the Lessee, or to qualify directors if required by
applicable law.
Notwithstanding the foregoing, the Lessor shall be permitted
to issue preferred stock in an amount not to exceed $100,000 to a third party.
(m) Conduct of Business. From and after the Initial Borrowing
Date, the Lessee shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than the businesses engaged in by the Lessee and
its Subsidiaries on the Initial Borrowing Date and similar or related
businesses.
(n) Change of Chief Executive Office. The Lessee shall not,
and shall not permit any of its Subsidiaries to, change its chief executive
office without giving 30 days' prior written notice to the Lessor and the Agent.
SECTION 8. Return of the Aircraft.
(a) Condition Upon Return. Unless the Aircraft has been sold
pursuant to Section 21, if at any time the Lessee shall return the Aircraft to
the Lessor hereunder, the Lessee, at its own expense, will return the Aircraft
to the Lessor at a location specified by the
-51-
<PAGE>
Lessor to the Lessee in writing. At the time of such return, (i) the Lessee will
cause the Aircraft to be in compliance with the maintenance covenants contained
in this Lease and (ii) the Airframe will be fully equipped with the Engines
installed thereon.
At the time of such return, such Airframe and Engines (A)
shall have an airworthiness certificate from the Federal Aviation Administration
and shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 121 (or successor regulation), and shall be in material
compliance with all applicable FAA noise, corrosion, environmental and aging
aircraft requirements, (B) shall be free and clear of all Liens and (C) in the
case of the Aircraft, shall be in a full freighter configuration and in as good
condition as when originally delivered to the Lessee, ordinary wear and tear
excepted, and otherwise in the condition required to be maintained under the
Lessee's FAA-approved maintenance plan; and in all such cases the Aircraft shall
not have been discriminated against as compared to other aircraft owned or
leased by the Lessee whether by reason of its leased status or otherwise in
maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines and all Parts
shall have been, and shall be properly documented to have been, repaired or
overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. The Lessee shall ensure that all repairs
performed since the Initial Borrowing Date on the Aircraft are eligible to
receive approval by the FAA (or its designee), if so required. All such repairs
shall be accompanied by all data and documentation necessary to substantiate
their certification, approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the
Initial Borrowing Date that deviate from the certified configuration and that
are still in existence on the Aircraft shall have approval or certification by
the FAA (or its designee) or certification if required. All such modifications
shall be accompanied by complete data and documentation necessary to
substantiate their certification and approval and methods of compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives
and amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be, taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable
Alternate Engine shall be delivered with the returned Airframe, the Lessee,
concurrently with such delivery, will, at no cost to the Lessor, furnish, or
cause to be furnished, to the Lessor a full warranty (as to title) bill of sale
with respect to each such Acceptable Alternate Engine, in form
-52-
<PAGE>
and substance reasonably satisfactory to the Lessor (together with an opinion of
counsel to the effect that such full warranty bill of sale has been duly
authorized and delivered and is enforceable in accordance with its terms and
that such Acceptable Alternate Engines are free and clear of all Liens) against
receipt from the Lessor of a bill of sale evidencing the transfer, without
recourse or warranty by the Lessor to the Lessee or its designee of all of the
Lessor's right, title and interest in and to any Engine not installed on the
Airframe at the time of the return of the Airframe.
(g) Deferred Maintenance. There shall be no open, outstanding
or deferred maintenance items, scheduled or unscheduled, against the Aircraft
including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft
shall have been maintained by cleaning and treating all mild and moderate
corrosion and correcting of all severe or exfoliate corrosion in accordance with
the Lessee's approved maintenance program or manufacturer's structural repair
manual.
(i) Manuals. Upon the return of the Aircraft upon any
termination of this Lease, the Lessee shall deliver or cause to be delivered to
the Lessor all logs, manuals and data and maintenance, inspection, modification
and overhaul records and similar records required to be maintained with respect
to the Aircraft and Parts under FAA rules and the Aircraft maintenance program
(the "Technical Records"). If any such logs, manuals, records or other data are
missing, incomplete or otherwise not in accordance with FAA standards applicable
to the Lessee, the Lessee shall re-accomplish the maintenance tasks necessary to
produce such records in accordance with its approved maintenance program prior
to delivery of the Aircraft or otherwise perform all necessary acts (without
regard to any applicable waivers or deferrals) to obtain such records in a
manner satisfactory to the FAA and the Lessor.
(j) Storage Upon Return. If, at least 15 days prior to
termination of this Lease at the end of the Term or pursuant to Section 17, the
Lessee receives from the Lessor a written request for storage of the Aircraft
upon its return hereunder, the Lessee will provide the Lessor, or cause the
Lessor to be provided, with storage facilities for the Aircraft at the Lessee's
risk and at the Lessee's expense for a period not exceeding 30 days, and
thereafter at the Lessor's risk and at the Lessor's cost for insurance,
maintenance and the Lessee's out-of-pocket expenses for such storage for a
period not exceeding 90 days (provided, that if such termination occurs as a
result of a Lease Event of Default hereunder, such storage shall be at the cost
of the Lessee), commencing on the date when the Aircraft is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by the Lessee and used by the Lessee as a
location for the long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be
returned to the Lessor, the Lessee shall, at the Lessor's request, advise the
Lessor of the nature and condition
-53-
<PAGE>
of all severable nonproprietary Parts (other than Parts otherwise required by
Sections 10 or 11 to be maintained on the Aircraft) owned by the Lessee have
been used by the Lessee during the prior six months and that the Lessee has or
intends to remove from the Aircraft in accordance with Section 11 hereof. The
Lessor may, at its option, upon 30 days notice to the Lessee, purchase any or
all of such nonproprietary Parts from the Lessee upon the expiration of the Term
at their fair market value.
(l) Survival. The obligations of the Lessee to comply with the
terms of this Section 8 shall survive the expiration or other termination of
this Lease.
(m) Deregistration and Export. At such time as the Lessee is
obligated to redeliver the Aircraft to the Lessor pursuant to this Lease, the
Lessee shall at its expense upon the request of the Lessor:
(i) promptly take all such steps (not including procuring the
discharge of any Lessor's Liens) as may be necessary to cancel the
existing registration of the Aircraft (subject to the Lessor giving, or
procuring that any mortgagee of the Aircraft gives, such notices and/or
required consents to the cancellation of such registration) and obtain
and deliver to the Lessor all certificates relating to the Aircraft
required by applicable law on any transfer of or alteration to the
registration thereof;
(ii) provide to the Lessor all assistance as the Lessor may
reasonably request so as to enable the Lessor to obtain any documents
(including, without limitation, any export certificate of
airworthiness) required by applicable law in relation to the export of
the Aircraft from the state of registration or such other country in
which the Aircraft is for the time being located and shall re-assign or
otherwise confirm to the Lessor the benefit of any indemnities or
warranties available to the Lessee from the manufacturer or any other
supplier or manufacturer of the Airframe, Engines or any Part; and
(iii) provide to the Lessor such assistance with respect to
information and documentation as the Lessor may reasonably require so
as to enable the Aircraft to be registered and certified as to
airworthiness under any applicable laws and/or regulations of any
country other than the state of registration; provided, that the Lessor
shall reimburse, the Lessee for its reasonable out-of-pocket expenses
incurred in providing such assistance.
SECTION 9. Liens. The Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien, on or with respect to the
Aircraft, title thereto or any interest therein, except the lien of the Aircraft
Chattel Mortgage and Permitted Encumbrances. The Lessee will promptly, at its
own expense, take such action as may be necessary to duly discharge any such
Lien not excepted above if the same shall arise at any time.
-54-
<PAGE>
SECTION 10. Registration, Maintenance and Operation;
Possession and Subleases; Insignia.
(a) Maintenance and Operation. The Lessee, at its own cost and
expense, until the expiration or earlier termination of this Lease, (i) will be
a "citizen of the United States" as defined in Section 40102(15) of Title 49 of
the United States Code and will be an air carrier certificated under Sections
401 and 609 of the Federal Aviation Act and hold all necessary air carrier
operating certificates; (ii) will cause ownership of the Aircraft to be duly
registered and remain duly registered with the FAA in the name of the Lessor in
accordance with the Federal Aviation Act and otherwise registered under all
applicable laws of the United States so as to be eligible to operate in
commercial air service under the Federal Aviation Act; and (iii) will service,
repair, inspect, test, maintain and overhaul the Airframe and each Engine,
install replacement equipment and parts on the Airframe and each Engine and
maintain the Technical Records (A) so as to keep the Airframe and each Engine in
such operating condition as may be required to permit the Airframe and each
Engine to be utilized in commercial operations in the United States, (B) so as
to enable the airworthiness certification of the Airframe to be maintained in
good standing at all times under the Federal Aviation Act, except when aircraft
of the same type, model or series as the Airframe (powered by engines of the
same type as those with which the Airframe shall be equipped at the time of
grounding) registered in the United States have been grounded by the FAA;
provided, however, that if, following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then, subject to
the provisions of Section 13 hereof, so long as the Lessee is diligently taking
or causing to be taken all necessary action promptly to correct the condition
that caused such withdrawal, no Lease Event of Default shall arise from such
withdrawal, (C) in accordance with the Lessee's FAA-approved maintenance,
inspection and maintenance control programs, and in the same manner and with the
same care used by the Lessee with respect to the same or similar aircraft and
engines owned or operated by the Lessee so as to keep the same in as good
operating condition as when originally leased hereunder, ordinary wear and tear
excepted, which practices shall at all times be at or above the standard of the
industry in the United States for prudent maintenance of similar equipment, (D)
in such manner as may be necessary to maintain in full force all warranties of
the manufacturers thereof, and (E) to enable the Lessee to deliver the Aircraft
to the Lessor in accordance with Section 8. The Lessee shall maintain all
records, logs and other materials that may be required to permit the Airframe
and each Engine to be so utilized.
The Lessee will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the manufacturer or
supplier) in such condition so as to comply with this Lease and the rules and
regulations of the FAA from time to time in force and applicable to the Aircraft
and Engines. Neither the Airframe nor any Engine will be maintained, used or
operated in violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or foreign),
or in violation of any airworthi-
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ness certificate, license or registration relating to the Airframe or such
Engine issued by any such authority, and in the event that such laws, rules,
regulations or orders require alteration of the Airframe or any Engine, the
Lessee, at its own cost and expense, will conform thereto or obtain conformance
therewith and will maintain the same in proper operating condition under such
laws, rules, regulations and orders, provided, however, that the Lessee may, in
good faith (after having delivered to the Lessor and the Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
that does not, in the Lessor's and the Agent's opinion (in their sole
discretion), adversely affect the interests of the Lessor, the Agent or any
Lender.
The Lessee covenants and agrees with the Lessor that, the
better to ensure the availability of the benefits of Section 1110 of the
Bankruptcy Code, the Lessee shall not object to any motion, petition or
application filed by the Lessor with any bankruptcy court having jurisdiction
over the Lessee, solely as to the portion thereof that seeks, and to the extent
that such motion, petition or application seeks, a determination that such
Section 1110 of the Bankruptcy Code applies to the lease of the Aircraft
hereunder. In the event that Section 1110 is amended, or if it is repealed and
another statute is enacted in lieu thereof, the Lessor and the Lessee (at the
Lessee's expense) agree to amend this Lease and take such other action not
inconsistent with this Lease as the Lessor reasonably deems necessary so as to
afford to the Lessor the rights and benefits as such amended or substituted
statute confers upon owners, lessors and conditional vendors of aircraft
similarly situated to the Lessor.
The Lessee will not operate, use or locate the Airframe or any
Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 14 shall not be at the time in full force and effect, or in
any area excluded from coverage by an insurance policy in effect with respect to
the Airframe or such Engine, except in the case of a requisition for use by the
United States of America, and then only if the Lessee obtains indemnity in lieu
of such insurance from the United States of America against the risks and in the
amounts required by said Section covering such area, or (II) in any recognized
or threatened area of hostilities unless the Airframe or such Engine is operated
or used under contract with the Government of the United States of America under
which contract that Government assumes liabilities for any damages, loss,
destruction or failure to return possession of the Airframe or such Engine at
the end of the term of such contract and for injury to persons or damage to
property of others.
The Lessee shall not use the Aircraft nor suffer it to be used
in any manner or for any purpose excepted from any of the insurance on or in
respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done, anything
which, or omit to do anything the omission of which, may invalidate any of such
insurance.
(b) Possession. The Lessee will not, without the prior written
consent of the Agent and the Lessor, sell, assign, lease or otherwise in any
manner deliver, transfer or
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relinquish possession or control of, or transfer the right, title or interest of
the Lessee in, the Airframe or any Engine except that, unless a Default or Lease
Event of Default shall have occurred and be continuing, the Lessee may, without
the prior written consent of the Agent and the Lessor, take the following
actions so long as the actions to be taken shall not deprive the Agent of the
first priority Lien under the Aircraft Chattel Mortgage in the assets subject
thereto and so long as the actions to be taken shall not deprive the Lessor of
the protections of Section 1110 of the Bankruptcy Code with respect to the
Aircraft and shall not deprive the Agent of the protections of Section 1110 of
the Bankruptcy Code with respect to the Aircraft as assignee of the Lessee's
rights under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other
than by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by the Lessee in the ordinary course
of business that do not contemplate or require the transfer of title
to, use for the remainder of its useful life, or registration of the
Airframe or title to or use for the remainder of its useful life of
such Engine; provided, however, that if the Lessee's title to or use
for the remainder of its useful life of the Airframe or any Engine
shall be divested under any such agreement or arrangement, such
divesture shall be deemed to be an Event of Loss with respect to the
Airframe or such Engine and the Lessee shall comply with Section 13 in
respect thereof;
(iv) install an Engine on an airframe that is owned by the
Lessee free and clear of all Liens except (A) those permitted under
clauses (i) or (ii) of the definition of Permitted Encumbrances in the
Credit Agreement, (B) those that apply only to the engines (other than
the Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety),
and (C) the rights of any Domestic Air Carrier, under normal
interchange agreements that are customary in the airline industry and
do not contemplate or require the transfer of title to such airframe or
the engines installed thereon;
(v) install an Engine on an airframe leased to the Lessee or
owned by the Lessee subject to a conditional sale or other security
agreement, provided that: (A) such airframe is free and clear of all
Liens, except for the rights of the parties to the
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lease or conditional sale or other security agreement covering such
airframe and except for Liens of the type permitted by clause (iv)
above; and (B) the Agent and the Lessor shall have received from the
lessor, conditional vendor or secured party and each of the purchasers,
mortgagees and encumbrancers of such lessor, conditional vendor or
secured party of such airframe a written agreement (which may be the
lease, conditional sale agreement or mortgage covering such airframe),
whereby such lessor, conditional vendor or secured party and each of
the purchasers, mortgagees and encumbrancers of such lessor,
conditional vendor or secured party expressly and effectively
agrees that neither it nor its successors and assigns will acquire
or claim any right, title or interest in any Engine by reason of
such Engine being installed on such airframe at any time when such
Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by the Lessee,
leased by the Lessee or owned by the Lessee subject to a conditional
sale or other security agreement under circumstances where neither
clause (iv) nor clause (v) above is applicable; provided, that any
divesture of title to such Engine resulting from such installation
shall be deemed to be an Event of Loss with respect to such Engine and
the Lessee shall comply with Section 13 in respect thereof;
(vii) enter into an ACMI Contract or wet lease for the Airframe
and the Engines or engines installed thereon with any third party
pursuant to which the Lessee has operational control of the Airframe
and any Engines installed thereon, such operation to be performed
solely by individuals under the operational control of the Lessee
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by
such employees of similar functions within the United States; provided,
that the Lessee's obligations hereunder shall continue in full force
and effect notwithstanding any such ACMI Contract or wet lease; and
(viii) sell the Aircraft in accordance with Section 6.6(ii) of
the Credit Agreement or replace the Airframe or any Engine in
accordance with Section 9.21 of the Credit Agreement;
provided, however, that the rights of any transferee (other than with respect to
any transactions referred to in paragraph (viii) above) who receives possession
of the Airframe or any Engine permitted by the terms hereof shall be made
subject and subordinate to, and any lease permitted by this Section 10(b) shall
be made expressly subject and subordinate to, the Lease and the lien and
security interest of the Aircraft Chattel Mortgage and all of the Agent's rights
thereunder and the Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such transfer
had not occurred, and any such instrument of transfer shall include appropriate
provisions for the maintenance and insurance of the Airframe or such Engine, and
any such instrument of transfer shall expressly prohibit any further transfer of
the Airframe or such Engine or any assignment of the rights thereunder;
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and provided further, that no such lease, pooling arrangement or other transfer
or relinquishment of the possession of the Airframe or any Engine shall in any
way discharge or diminish any of the Lessee's obligations to the Lessor
hereunder.
(c) Insignia. The Lessee shall, at its own cost and expense,
cause the Airframe and each Engine to be legibly marked (in a reasonably
prominent location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing III,
Inc., and Mortgaged to Bankers Trust Company, as the Agent" or such other
legend, as shall in the opinion of the Lessor and the Agent be appropriate or
desirable to evidence the fact that it is subject to the ownership of the Lessor
and the lien and security interest created by the Aircraft Chattel Mortgage. The
Lessee shall not remove or deface, or permit to be removed or defaced, any such
plate, disk, or other marking or the identifying manufacturer's serial number,
and, in the event of such removal or defacement, shall promptly cause such
plate, disk, or other marking or serial number to be promptly replaced. Except
as provided above, the Lessee shall not allow the name of any person,
association or corporation to be placed on the Airframe or any Engine as a
designation that might be interpreted as a claim of ownership or of any security
interest therein, except that the Lessee or any permitted lessee may place its
customary colors and insignia or the insignia of the manufacturer on the
Airframe or any Engine.
(d) Holding Out. The Lessee agrees that it will not at any
time represent or hold out the Lessor, the Agent, any Lender or any Affiliate of
any of them (and will use its best efforts to ensure that none of the Lessor,
the Agent, any Lender or any Affiliate of any of them is not at any time
represented or held out) as being in any way connected or associated with any
operation of the Airframe, any Engine or any Part or any other operations or
carriage undertaken by the Lessee.
(e) No Pledging of Credit. The Lessee is not authorized to,
and agrees that it will not purport to, pledge the credit of the Lessor, any
Lender or the Agent for any maintenance, service, repairs, or overhauls of,
modifications to, or changes or alterations in, the Airframe, any Engine or any
Part, or for any other purpose whatsoever.
(f) Title. Title to the Aircraft shall remain vested in the
Lessor subject to the Aircraft Chattel Mortgage and any assignments, charges or
other disposals that the Lessor may make in accordance with this Lease. The
Lessee shall not do or knowingly permit to be done anything that would
jeopardize the rights of the Lessor as owner of, or the rights of any Lender in,
the Aircraft and shall cause to be taken all actions necessary or reasonably
requested by the Lessor to prevent the rights of the Lessor and the Lenders in
the Aircraft from being jeopardized. The Lessee shall not hold itself out to any
third party as the owner of the Aircraft or any part of it, and when any third
party inquires as to ownership of the Aircraft or any Engine or any part
thereof, it will make clear to such third party that title to the same is held
by the Lessor and that the Aircraft is mortgaged to the Lenders. Without
limiting the
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foregoing, if at any time subsequent to the initial registration of the
Aircraft, any filing, recording or act is necessary or reasonably requested by
the Lessor to perfect, protect and preserve the rights and interests of the
Lessor in the Aircraft and the rights and interests of any Lender under the
Aircraft Chattel Mortgage, the Lessee, at its own cost and expense, will procure
that such filings, recordings and acts are done pursuant to applicable laws. At
the reasonable request of the Lessor, the Lessee shall furnish to the Lessor an
opinion of counsel or other evidence satisfactory to the Lessor of each such
filing, recordation and act. The Lessor will reimburse the Lessee for its
reasonable out-of-pocket expenses incurred in complying with its obligations
under this Section 10(f) insofar as they relate to any Lender; provided, that,
to the extent that such expenses relate to (i) any reregistration of the
Aircraft under Section 8 or any sublease of the Aircraft, (ii) any Event of
Default or (iii) any substitution of Parts or Engines pursuant to the terms
hereof, the Lessor shall not be obligated to reimburse the Lessee for such
increase in expense.
(g) Information and Records. The Lessee shall:
(i) promptly furnish to the Lessor all such information as the
Lessor may from time to time reasonably request regarding the Aircraft,
any Engine or any part thereof, its use, location and condition;
(ii) keep, or procure that there are kept, the Technical
Records and shall keep as part thereof accurate, complete and current
records of all flights made by the Aircraft, of all Flight Hours and
Cycles of the Airframe, each Engine, the APU, the landing gear and the
Parts, and of all maintenance and repairs carried out on the Aircraft
and each Engine and every Part;
(iii) procure that the Technical Records shall be kept and
maintained in English and in such manner, form and location as the FAA
and any applicable law may from time to time require and shall disclose
the location of all Engines and Parts not installed on the Aircraft,
which Technical Records, unless otherwise required by applicable law,
shall be the property of the Lessor;
(iv) make the Technical Records available to the Lessor (or any
authorized representative of the Lessor) for examination during normal
business hours (or at such other time as the Lessee and the Lessor
shall mutually agree) upon giving reasonable written notice, provided
that, so long as no Event of Default shall have occurred and be
continuing, such examination does not impede the normal commercial
operation of the Aircraft, and provided further that the cost of any
such inspection shall be borne by the Lessee if the Lessee is thereby
shown to be in breach of its material obligations hereunder, and
otherwise by the party making the inspection; and
(v) promptly on, but in no event later than three Business
Days after, becoming aware of the same, notify the Lessor of: (I) any
Total Loss with respect to the
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Aircraft or any Engine, (II) any loss, theft, damage or destruction to
the Aircraft or any Engine or any part thereof if the potential cost of
repairs or replacement may exceed $5,000,000, (III) any loss, arrest,
hijacking, confiscation, seizure, requisitioning, impounding, taking in
execution, detention or forfeiture of the Aircraft or any part thereof
and (IV) any event in respect of the Aircraft that might reasonably be
expected to involve the Lessor, the Lessee, the Agent or any Lender in
any loss or liability.
SECTION 11. Replacement and Pooling of Parts; Alterations,
Modifications and Additions. (a) Except as otherwise provided in Section 11(d),
the Lessee, at its own cost and expense, will promptly replace all Parts, which
may from time to time be incorporated or installed in or attached to the
Airframe or any Engine and which may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. In addition, in the ordinary
course of maintenance, service, repair or testing, the Lessee at its own cost
and expense may remove any Parts, whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use; provided, that, except as otherwise provided in Section 11(d),
the Lessee at its own cost and expense shall replace such Parts as promptly as
practicable. All replacement Parts shall be owned by the Lessor free and clear
of all Liens (except Permitted Encumbrances and for pooling arrangements to the
extent permitted by Section 11(b)), and shall be in as good operating condition
as, and shall have a value and utility at least equal to, the Parts replaced,
assuming that such parts were in the condition and repair required to be
maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of the Lessor and shall remain subject to the lien and
security interest of the Aircraft Chattel Mortgage, no matter where located,
until such time as such Parts shall be replaced by parts that have been
incorporated or installed in or attached to the Airframe or any Engine and that
meet the requirements for replacement parts specified above. Immediately upon
any replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become the
property of the Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of the Lessor
and shall thereupon become free and clear of all rights of the Lessor hereunder
and all rights derivative of the Lessor's and shall no longer be deemed a Part
hereunder.
(b) Any Part removed from the Airframe or any Engine as
provided in Section 11(a) may be subjected by the Lessee to a normal pooling
arrangement of the type customary in the airline industry entered into by the
Lessee in the ordinary course of its business and entered into with Domestic Air
Carriers that are not the subject of any bankruptcy,
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insolvency, or similar proceeding, voluntary or involuntary; provided, that the
Part replacing such removed Part shall be incorporated or installed in or
attached to the Airframe or such Engine in accordance with Section 11(a) as
promptly as possible after the removal of such removed part. In addition, any
replacement Part when incorporated or installed in or attached to the Airframe
or any Engine in accordance with Section 11(a) may be owned by any third party
subject to such a pooling arrangement, provided that the Lessee, at its expense,
as promptly thereafter as possible, either (A) causes such replacement Part to
become property of the Lessor and subject to the lien and security interest of
the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear of
all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or such Engine a further
replacement Part owned by the Lessee which shall become the property of the
Lessor subject to the lien and security interest of the mortgage free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft).
(c) The Lessee, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards of the FAA or other governmental authority having jurisdiction;
provided, that the Lessee may, in good faith, contest the validity or
application of any such standard in any reasonable manner that shall not
adversely affect the Lessor's or the Agent's respective interests. The Lessee
also agrees, at its own cost and expense, to make or cause to be made such
alterations and modifications in and additions to the Airframe and the Engines
as may be required from time to time to meet the standards or requirements of
any directive issued by a manufacturer relating to the Airframe or any Engine.
In addition, so long as no Default or Lease Event of Default shall have occurred
and be continuing, the Lessee, at its own cost and expense, may from time to
time make such alterations and modifications in and additions to the Airframe
and any Engine as the Lessee may deem desirable in the proper conduct of its
business, provided that no such alteration, modification or addition diminishes
the value or utility or impairs the condition or airworthiness of the Airframe
or such Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition, assuming that
the Airframe or such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the property of, and
title to such parts shall vest in the Lessor and shall be subject to the lien
and security interest of the Aircraft Chattel Mortgage; provided, that, so long
as no Default or Lease Event of Default shall have occurred and be continuing,
the Lessee may remove and not replace any such Part if it (A) is in addition to,
and not in replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date hereof, or
any Part in replacement of or substitution for any such
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Part, (B) is not required to be incorporated or installed in or attached or
added to the Airframe or such Engine pursuant to the terms of Section 10(a)
hereof or any other provision of this Lease or the Aircraft Chattel Mortgage and
(C) can be removed from the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness that the Airframe or such Engine
would have had at such time had such alteration, modification or addition not
occurred, assuming that the Airframe or such Engine was otherwise in the
condition required by this Lease and the Aircraft Chattel Mortgage. Upon the
removal by the Lessee of any such Part, as above provided, title thereto shall,
without further act, be free and clear of the interests of the Lessor and all
rights derivative of the Lessor's and such Part shall no longer be deemed a Part
hereunder.
(e) In no event shall the Lessor bear any liability or cost
whatsoever for (i) any alteration or modification of, or addition to, the
Airframe or any Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, or (iv) loss of revenue suffered by the Lessee
for any reason whatsoever.
SECTION 12. Indemnities. (a) The Lessee will pay, and hereby
indemnifies, on an after-tax basis, the Lessor and its assignees, if any, from
and against, any and all fees and taxes, levies, imposts, duties, charges or
withholdings, together with any penalties, fines or interest thereon (any of the
foregoing for the purposes of this Section 12 being called a "TAX"), that may
from time to time be imposed on or asserted against the Lessor and its
assignees, if any, or the Airframe or any Engine or any part thereof or interest
therein by any federal, state or local government or other taxing authority in
the United States or by any foreign government or subdivision thereof or by any
foreign taxing authority in connection with, relating to or resulting from: (i)
the Airframe or any Engine or any part thereof or interest therein, (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of the Airframe or any Engine, (iii) any
rentals or other earnings therefor or arising therefrom or the income or other
proceeds received with respect thereto, or (iv) this Lease or the Aircraft
Chattel Mortgage; provided, however, that there shall be excluded from any
indemnification under this Section 12(a) any Lessor Tax unless the payment of
any such Tax shall be a condition to the enforceability of the Aircraft Chattel
Mortgage or the perfection of the lien thereof or unless proceedings shall have
been commenced to foreclose any lien that may have attached as security for such
Tax, nothing in this Section shall require the payment of any Tax so long as and
to the extent that the validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
the Lessee shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
(b) The Lessee agrees to defend, indemnify, pay and hold
harmless the Lessor, the Agent and each Lender, and the officers, directors,
partners, employees, agents and affiliates of the Lessor, the Agent and each
Lender, (collectively called the "INDEMNITEES") from and against any and all
liabilities, obligations, losses, damages, penal-
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ties, actions, judgments, suits, claims, costs, expenses and disbursements of
any kind or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including, without limitation, securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable or other cause or on contract or otherwise, that may be imposed on,
incurred by, or asserted against any such Indemnitee, in any manner relating to
or arising out of this Lease or the other Transaction Documents or the
transactions contemplated hereby or thereby (including, without limitation, the
Lenders' agreement to make the Loans to the Lessor or the use or intended use of
the proceeds of any of the Loans) (collectively called the "INDEMNIFIED
LIABILITIES"); provided, that the Lessee shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
that such Indemnified Liabilities arise solely from the gross negligence or
willful misconduct of that Indemnitee as determined by a final judgment of a
court of competent jurisdiction. To the extent that the undertaking to defend,
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Lessee
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur
with respect to an Airframe or an Engine, the Lessee will promptly notify the
Lessor and the Agent thereof in writing (in any event within five (5) days of
such occurrence) and will, not later than 180 days after the occurrence of such
Event of Loss, convey or cause to be conveyed to the Lessor, free of all Liens
(other than Permitted Encumbrances) title to an Acceptable Alternate Airframe or
Acceptable Alternate Engine, as the case may be. Prior to or at the time of any
such conveyance, the Lessee, at its own expense, will, as conditions to such
transfer, (i) furnish the Lessor with a warranty (as to title) bill of sale,
from a person and in form and substance reasonably satisfactory to the Lessor,
with respect to such Acceptable Alternate Airframe or Acceptable Alternate
Engine, (ii) cause a Lease Supplement to be filed for recording pursuant to
Title 49 of the United States Code, as amended, (iii) furnish the Lessor with
such evidence of the Lessee's title to such Acceptable Alternate Airframe or
Acceptable Alternate Engine and of compliance with the insurance provisions of
Section 14 hereof with respect to such Acceptable Alternate Airframe or
Acceptable Alternate Engine as the Lessor may reasonably request, (iv) furnish
the Lessor with an opinion of the Lessee's counsel to the effect that title to
such Acceptable Alternate Airframe or Acceptable Alternate Engine has been duly
conveyed to the Lessor free and clear of all Liens except Permitted Encumbrances
and the Lessor and the Agent continue to have 1110 protection with respect to
such Aircraft. Upon satisfaction of the foregoing conditions, the Lessor shall
transfer to or at the direction of the Lessee without recourse or warranty all
of the Lessor's right, title and interest, if any, in and to
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(A) the Airframe or Engine with respect to which such Event of Loss occurred and
furnish to or at the direction of the Lessee, at the Lessee's expense, a bill of
sale without warranty other than to the absence of a Lessor Lien in form and
substance reasonably satisfactory to the Lessee, evidencing such transfer and
(B) all claims, if any, against third parties, for damage to or loss of the
Airframe or Engine subject to such Event of Loss, and such Airframe or Engine
shall thereupon cease to be an Airframe or Engine leased hereunder. The Lessee
shall cooperate with the Lessor and take all such actions as shall be requested
by the Lessor so that the Lessor complies with Section 4(f) of the Aircraft
Chattel Mortgage. For all purposes hereof, each such Acceptable Alternate
Airframe or Acceptable Alternate Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an "Airframe" or
"Engine," as the case may be. No Event of Loss under the circumstance
contemplated by the terms of this paragraph (a) shall result in any reduction in
Basic Rent or any other obligation of the Lessee hereunder.
(b) With respect to the Airframe or any Engine, as between the
Lessor and the Lessee, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for in
Section 14 below) received from any governmental authority or other person shall
be applied as follows:
(A) if such payments are received with respect to an Event of
Loss to an Airframe or Engine that has been or is being replaced by the
Lessee pursuant to the terms hereof, so long as there shall exist no
Default or Lease Event of Default, such payment shall be paid over to
or retained by the Lessee upon satisfaction of the conditions for
replacement contained in paragraph (a) above and until such time shall
be held by the Lessor as security for the obligations of the Lessee
under the Lease; and
(B) if such payments are received with respect to an Event of
Loss with respect to which no replacement is being effected, so much of
such payments as shall not exceed (A) the Stipulated Loss Value as of
the date of payment plus (B) all unpaid Supplemental Rent due through
the date of payment, plus (C) all unpaid Basic Rent for the period
ending on the date of payment shall be paid by the Lessee to the Lessor
and following the foregoing application, the balance, if any, of such
payments shall be distributed between the Lessee and the Lessor as
their respective interests may appear;
(c) In the event of a requisition for use by the United States
Government of the Airframe or any Engine, the Lessee shall promptly notify the
Lessor and the Agent of such requisition and all of the Lessee's obligations
under the Lease shall continue to the same extent as if such requisition had not
occurred. Any payments received by the Lessor or the Lessee from the United
States Government for the use of the Airframe or such Engine, to the extent
allocable to the Term, shall be paid over to, or retained by, the Lessee.
(d) Any amount referred to in this Section 13 that is payable
to or retained by the Lessee shall not be paid to the Lessee or retained by the
Lessee, if at the time of such
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payment or retention any Default or Lease Event of Default shall have occurred
and be continuing, but shall be held by or paid over to the Lessor as security
for the obligations of the Lessee under the Lease and shall be applied against
the Lessee's obligations hereunder as and when due. At such time as there shall
not be continuing any such Default or Lease Event of Default, such amount shall
be paid to the Lessee to the extent not previously applied in accordance with
the preceding sentence.
SECTION 14. Insurance. (a) The Lessee will at all times carry
and maintain on or with respect to the Aircraft, at its own cost and expense,
public liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar aircraft by
corporations engaged in the same or similar business and similarly situated with
the Lessee but in no event in an amount less than $500,000,000 per occurrence
(which shall include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when the Aircraft is on the ground
and not in operation, the Lessee may carry or cause to be carried, in lieu of
insurance required by this Section, insurance otherwise conforming with the
provisions of this Section except that the amounts of coverage shall not be
required to exceed the amounts of comprehensive airline liability insurance, and
the scope of risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly situated with
the Lessee. Any policies of insurance carried in accordance with this Section 14
and any policies taken out in substitution or replacement of any such policies
(A) shall be amended to name the Agent, the Lenders and the Lessor and their
respective shareholders, directors, officers, members, partners, servants,
employees and agents as additional named insureds, (B) shall be primary without
right of contribution from any other insurance that is carried by the Lessee,
(C) shall expressly provide that all provisions thereof, except the limits of
the liability, shall operate in the same manner as if there were a separate
policy covering each insured, and (D) shall provide that the insurer shall waive
any right of subrogation against the Agent, the Lenders and the Lessor.
(b) The Lessee will at all times carry and maintain with
insurers of recognized responsibility and reputation on or with respect to the
Aircraft, at its own cost and expense, aircraft ground and flight all-risk hull
insurance as well as fire and extended coverage insurance on the Engines and
other equipment while removed from the Airframe, which shall include war risk,
governmental confiscation and expropriation (other than by the United States
Government) and allied perils (if and to the extent that the same shall be
maintained by the Lessee with respect to similar aircraft owned or operated by
the Lessee on the same routes or if the Aircraft or another aircraft is operated
on routes where the custom is for Domestic Air Carriers similarly situated with
the Lessee flying comparable routes with similar aircraft to carry such
insurance, of the type usually carried by corporations engaged in the same or
simi-
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lar business and similarly situated with the Lessee) including (A) strikes,
riots, civil commotions or labor disturbances, (B) any malicious act or act of
sabotage and (C) hijacking (air piracy) or any unlawful seizure or wrongful
exercise of control of the Aircraft or crew in flight (including any attempt at
such seizure or control) made by any person or persons aboard the Aircraft or
another aircraft acting without the consent of the insured; provided, that such
insurance (including any self-insurance to the extent permitted below) shall at
all times be for an agreed value not less than the greater of the Stipulated
Loss Value as of the closest Stipulated Loss Determinate Date and $50,000,000.
During any period when the Aircraft is on the ground and not in operation, the
Lessee may carry or cause to be carried, in lieu of the insurance required by
this Section, insurance otherwise conforming hereto except that the scope of
risk covered and type of insurance shall be the same as are from time to time
customarily carried with respect to similar aircraft by corporations engaged in
the same or similar business and similarly situated with the Lessee for aircraft
on the ground in an amount at least equal to the applicable amount provided
above. All such insurance shall name the Agent, the Lenders and the Lessor as
additional insureds and loss payees to the extent that their interest may appear
and shall provide that any loss to the Airframe or an Engine in excess of
$2,000,000 (and, if a Default or Lease Event of Default has occurred and is
continuing, any such loss) shall be payable to the Lessor and to the Agent for
the benefit of the Lenders; and shall be primary without right of contribution
from any other insurance that is carried by the Lessor or the Agent with respect
to its interest therein. In the event that the Lessee arranges separate
insurances to cover the all-risk hull insurance and the war and perils hull
insurance, the Lessee shall ensure that the insurers subscribing to such
insurances shall agree to a 50/50 claims funding arrangement in the event of any
dispute as to which insurance is applicable.
The Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured against
pursuant to this Section 14(b) in such reasonable amounts as are then applicable
to other similar aircraft or spare engines in the Lessee's fleet that are of a
value comparable to the Aircraft, and as are not substantially greater than
amounts self-insured by corporations engaged in the same or similar business and
similarly situated with the Lessee; provided, however, that the Lessee may not
self-insure in an amount in excess of $1,000,000 without the prior written
consent of the Lessor and the Agent.
(c) Any policies of insurance required pursuant to either
paragraph (a) or paragraph (b) above shall: (A) be amended to name the Lessor,
the Agent and the Lenders as additional named insureds, but without the Lessor,
the Agent or the Lenders being thereby liable for premiums (and the insurance
companies waiving their right with respect thereto), (B) provide that in respect
of the interest of (x) the Lessor or (y) the Agent or the Lenders in such
policies the insurance shall not be invalidated by any action or inaction of (x)
the Lessee or (y) the Lessee or the Lessor, respectively, and shall insure the
interests of the Agent and the Lenders regardless of any breach or violation by
the Lessee, the Lessor or any Person (other than the Agent) of any warranty,
declaration, condition or exclusion from coverage contained
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in such policies, (C) provide that if such insurance is cancelled, or if any
material change is made in the coverage that affects the interest of the Lessor,
the Agent or any Lender, or if such insurance is allowed to lapse for nonpayment
of premium, such cancellation, change or lapse shall not be effective as to the
Lessor, the Agent or any Lender for thirty (30) days (seven (7) days, or such
shorter or longer period as may from time to time be customarily available in
the industry, in the case of any war risk and allied perils coverage) after
receipt by the Agent and the Lessor of written notice from such insurers of such
cancellation, change or lapse, (D) be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft and shall be payable in
U.S. dollars, (E) waive any right of the insurers to any setoff or counterclaim
or any other deduction, whether by attachment or otherwise in respect of any
liability of the Lessee, the Lessor or the Agent except in respect of
outstanding premium due for the Aircraft, (F) waive all rights of subrogation
against the Lessor and the Agent and (G) include a year 2000 date recognition
writeback.
(d) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe or any
Engine, a valid agreement by the United States or such agency or instrumentality
to indemnify the Lessee against the same risks against which the Lessee is
required hereunder to insure shall be considered adequate insurance with respect
to the Airframe or such Engine to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on
or prior to January 31, the Lessee will furnish to the Lessor and the Agent (A)
a report signed by a firm of independent aircraft insurance brokers, appointed
by the Lessee and not objected to by the Lessor or the Agent, describing in
reasonable detail acceptable to the Lessor and the Agent the insurance then
carried and maintained on or with respect to the Aircraft and the Engines and
stating that in the opinion of such firm such insurance complies with the terms
of this Section 14 and is adequate to protect the interests of the Lessee, the
Lessor and the Agent, and (B) certificates of the insurer or insurers evidencing
the insurance covered by the report. The Lessee will cause such brokers to
advise the Agent in writing (x) promptly of any default in the payment of any
premium and of any other act or omission on the part of the Lessee of which such
firm has knowledge and that might invalidate or render unenforceable, in whole
or in part, any insurance on the Aircraft or any Engine and (y) at least thirty
(30) days prior to the expiration or termination date, or date of effectiveness
of any material change, of any insurance carried and maintained on the Aircraft
hereunder.
(f) All insurance payments and other payments received by the
Agent, the Lessor or the Lessee from insurance referred to in paragraph (b)
above shall be, if received by the Lessor or the Lessee, immediately paid to the
Agent, as agent for itself and the Lessor and shall be paid to the Lessee upon
compliance by the Lessee with the terms of Section 13, provided that no Default
or Lease Event of Default shall have occurred and be continuing.
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(g) The Lessee shall not create or permit to exist any Lien
over the insurances required by this Lease, or its interest therein, save as
constituted by this Lease and the Credit Agreement.
(h) If at any time the Lessee fails to maintain in full force
and effect insurances in compliance with any provision of this Article 14, the
Lessor shall be entitled but not bound (without prejudice to any other rights
that it may have or acquire under this Lease by reason of such failure) (i) to
pay any premiums due or to effect or maintain insurances satisfactory to the
Lessor or otherwise remedy such failure in such manner as the Lessor considers
appropriate, and the Lessee shall immediately reimburse the Lessor in full for
any amount so expended by the Lessor and/or (ii) at any time while such failure
is continuing, to require the Aircraft to remain at any airport, or to proceed
to and remain at any airport designated by the Lessor, the Agent or the Lenders,
until such failure is remedied.
(i) Nothing in this Section 14 shall prohibit the Agent, or
any Lender or the Lessor from obtaining insurance with respect to the Aircraft
for its own account. The Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft in amounts in excess of that required to
be maintained by this Section 14. No insurance maintained by the Agent, the
Lessor or any Lender shall prevent the Lessee from carrying the insurance
required or permitted by this Section. Proceeds of any such insurance carried by
the Lessee, the Agent or any Lender shall be paid as provided in the insurance
policy relating thereto and no such Person shall have any duty to obtain any
such insurance.
SECTION 15. Assignment. Except as permitted in accordance with
Section 10, the Lessee will not, without the prior written consent of the
Lessor, assign any of its rights hereunder or in the Aircraft. The Lessor agrees
that it will not assign or convey its right, title or interest in or to this
Lease or the Aircraft except in accordance with the Credit Agreement. Subject to
the foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of the Lessor and the Lessee and their respective
successors and permitted assigns and shall inure to the direct benefit of, and
shall also be enforceable by, the Agent and the Lenders, and their respective
successors, as assignees of the Lessor.
SECTION 16. Events of Default. Each of the following events
shall constitute a Lease Event of Default (whether any such event shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) and
each such Lease Event of Default shall continue so long as, but only as long as,
it shall not have been remedied:
(a) the Lessee shall fail to pay any installment of Rent,
Stipulated Loss Value or any other amounts owing pursuant to this Lease
within 5 days after the due date thereof;
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(b) the Lessee shall fail (i) to comply in any material
respect with the maintenance standards or (ii) to procure insurance
coverage as prescribed herein or (iii) to operate the Aircraft or any
Engine at a time or in a place where insurance described in Article 14
shall not be in effect;
(c) there shall exist a Lease Event of Default under, and as
defined in, any other Lease or the Lessee shall fail to perform or
observe any other covenant or condition set forth in this Lease or any
other Transaction Document, which failure shall remain unremedied for a
period of 10 Business Days after written notice from the Lessor or the
Agent, unless action has been taken within 15 Business Days to remedy
such breach and such action is being diligently pursued, provided such
breach is capable of being remedied;
(d) any representation or warranty of the Lessee in any
Transaction Document or in any certificate furnished pursuant to any
Transaction Document is found to be incorrect in any material respect
at the time it was made and such breach shall remain unremedied for a
period of 15 Business Days after written notice thereof;
(e) (i) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Lessee or any of
its Subsidiaries in an involuntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other
similar relief shall be granted under any applicable federal or state
law, or (ii) an involuntary case shall be commenced against the Lessee
or any of its Subsidiaries under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the
Lessee or any of its Subsidiaries, or over all or a substantial part of
its property, shall have been entered; or there shall have occurred the
appointment of an interim receiver, trustee or other custodian of the
Lessee or any of its Subsidiaries; or a warrant of attachment,
execution or similar process shall have been issued against any
substantial part of the property of the Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) the Lessee or any of its Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary
case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case,
under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or the Lessee or any of its
Subsidiaries shall make any assignment for the benefit of creditors; or
(ii) the Lessee or any of
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its Subsidiaries shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become
due; or the Board of Directors of the Lessee or any of its Subsidiaries
(or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii);
(g) any order, judgment or decree shall be entered against the
Lessee or any of its Subsidiaries decreeing the dissolution or split up
of the Lessee or any of its Subsidiaries and such order shall remain
undischarged or unstayed for a period in excess of 30 days;
(h) registration of the Aircraft is canceled and is not cured
within 15 Business Days;
(i) the Aircraft is arrested or detained in exercise of any
lien and the Lessee does not procure the release of the Aircraft within
15 business days;
(j) there shall have occurred an Event of Default or Potential
Event of Default under the Amended Aircraft Credit Facility (whether or
not such Event of Default or Potential Event of Default is thereafter
waived by the requisite lenders);
(k) the Lessee shall not be a Certificated Air Carrier within
the meaning of Title 49 of the United States Code, as amended;
(l) the Lessee or any of its Subsidiaries shall fail to pay
when due following applicable grace periods (a) any principal of or
interest on any Indebtedness in an individual principal amount of $5
million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or (b) any Contingent
Obligation in an individual principal amount of $5 million or more or
any Contingent Obligations with an aggregate principal amount of $10
million or more, in each case beyond the end of any grace period
provided therefor; or (ii) there shall exist a breach by the Lessee or
any of its Subsidiaries with respect to any other material term of (a)
any evidence of any Indebtedness in an individual principal amount of
$5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in
an individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more
or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), if the
effect of such breach or default is to cause, or to permit the holder
or holders of that Indebtedness or Contingent Obligation(s) (or a
trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due
and payable prior to its stated maturity or the stated maturity of any
underlying obligations, as the case may be (upon the giving or
receiving of notice, lapse of time, both, or otherwise);
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(m) any money judgment, writ or warrant of attachment or
similar process involving (i) in any individual case an amount in
excess of $5 million or (ii) in the aggregate at any time an amount in
excess of $10 million (in either case not adequately covered by
insurance as to which a solvent and unaffiliated insurance company has
acknowledged coverage) shall be entered or filed against the Lessee or
any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60
days (or in any event later than five days prior to the date of any
proposed sale thereunder);
(n) (i) (a) Permitted Holders shall cease to own beneficially
and control shares of capital stock of the Lessee representing at least
30% of the combined voting power of all Securities of the Lessee
entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency, or
(b) any Person or any two or more Persons acting in concert (in any
such case, excluding Permitted Holders) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act), directly or indirectly, of
Securities of the Lessee (or other Securities convertible into such
Securities) representing 20% or more of the combined voting power of
all Securities of the Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of
the happening of a contingency, or (c) the Board of Directors of the
Lessee shall not consist of a majority of Continuing Directors or (ii)
a "Change of Control" shall occur under any of the Pass Through Trust
Documents, any of the Senior Note Documents or any other Material
Agreement (as in effect on the date of such occurrence); provided,
however, that, following the consummation of the Holding Company
Reorganization, references in clause (i) above to the Lessee shall be
deemed to be references to the Holding Company, and, after the
consummation of the Holding Company Reorganization, it shall also be a
Lease Event of Default if, at any time, the Holding Company ceases to
own directly or indirectly 100% of the outstanding Securities of the
Lessee; provided further, however, that a "Lease Event of Default"
under clause (ii) above arising as a result of the Holding Company
Reorganization shall not constitute a "Lease Event of Default;"
provided further, however, that, in the event that Permitted Holders
cease to own 30% of the combined voting power of all Securities of the
Lessee (or the Holding Company, as the case may be) because of the
issuance of Securities of the Lessee, or the Holding Company, as the
case may be, (as opposed to the Permitted Holders selling Securities),
then the failure to maintain the 30% ownership level shall not
constitute a Lease Event of Default unless the Permitted Holders shall
cease to own shares of capital stock constituting 25% of the combined
voting power of all Securities of the Lessee (or the Holding Company,
as the case may be);
(o) if any consent, authorization, license or approval of, or
registration with or declaration to any governmental entity required by
the Lessee to authorize, or re-
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quired by the Lessee in connection with, the execution, delivery,
validity, enforceability or admissibility in evidence of this Lease or
any other Transaction Document or the performance by the Lessee of its
obligations hereunder or thereunder is modified in a manner unaccept-
able to the Lessor or is withheld, or is revoked, suspended, canceled,
withdrawn or terminated or expires and is not renewed, or otherwise
ceases to be in full force and effect and the Lessor reasonably
determines that such modification, withholding revocation, suspension,
cancellation, withdrawal, termination or non-renewal or cessation may
significantly prejudice its rights under or in connection with this
Lease, may have a material adverse effect on the Lessee's ability to
perform its obligations hereunder or jeopardize the respective
interests of the Lessor or any Lender in the Aircraft or may give rise
to criminaliability of or the Lessor;
(p) if any event occurs, circumstance arises or proceeding is
taken with respect to the Lessee in any jurisdiction to which the
Lessee is subject that has an effect equivalent or similar to any of
the events mentioned in Sections 16(e) or (f);
(q) if the Lessee suspends or ceases or threatens to suspend
or cease to carry on its business;
(r) if the Lessee disposes, threatens to dispose or takes any
action to dispose of all or a material part of its assets, whether by
one or a series of transactions, related or not, and such disposal or
action will have a material adverse effect on its ability to perform
its obligations under this Lease or any other Transaction Document;
(s) if the existence, validity, enforceability or priority of
the rights of the Lessor in respect of the Aircraft hereunder, or the
rights of any Lender, as mortgagee, of the Aircraft or the Lender as
assignee of the insurances are challenged by the Lessee or any other
person claiming through the Lessee;
(t) if the Lessee sells or executes any bill of sale affecting
the Aircraft or any interest therein or agrees or purposes to do any of
the same, or contests in any legal proceedings the Lessor's ownership
of the Aircraft;
(u) if any governmental authority shall have condemned, seized
or appropriated all or substantially all of the property of the Lessee;
or
(v) if the Lessee becomes obligated to make any "change of
control" put payments in connection with the Holding Company
Reorganization that, when aggregated with all payments made under
Section 7(e)(6), exceed $75,000,000 or if, after giving effect to such
"change of control" put payments, (A) the Lessee shall have less than
$150,000,000 in Cash or Cash Equivalents on its balance sheet or (B)
its Consolidated Leverage Ratio (calculated on a pro forma basis as if
the proposed payment had been consummated on the last day of the most
recent four fiscal quarter period)
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shall exceed the lower of 4.25:1.00 or the ratio to be met in
accordance with Section 7(f)(ii) for the immediately succeeding fiscal
quarter end.
SECTION 17. Remedies. Upon the occurrence of any Lease Event
of Default and at any time thereafter so long as the same shall be continuing,
the Lessor may, at its option, declare, by written notice to the Lessee, this
Lease to be in default, except that upon the occurrence of a Lease Event of
Default referred to in clauses (e), (f) or (g) of Section 16, this Lease shall
be deemed declared in default without any further act or notice, and at any time
thereafter, the Lessor may do one or more of the following with respect to all
or any part of the Aircraft, Airframe and any or all of the Engines as the
Lessor in its sole discretion shall elect:
(a) upon the written demand of the Lessor and at the Lessee's
expense, promptly return the Aircraft, Airframe or any Engine as the
Lessor may so demand to the Lessor or its order in the manner and
condition required by, and otherwise in accordance with all the
provisions of, Section 8 hereof as if such Airframe or Engine were
being returned at the end of the Term, or the Lessor, at its option,
may enter upon the premises where all or any part of the Aircraft,
Airframe or any Engine is located and take immediate possession of and
remove the same by summary proceedings or otherwise, all without
liability accruing to the Lessor for or by reason of such entry or
taking of possession or removal, whether for the restoration of damage
to property caused by such action or otherwise; provided, that if the
Lessee shall for any reason fail to execute and deliver instruments
deemed necessary or advisable by the Lessor to obtain possession of the
Aircraft, Airframe and Engines, the Lessor shall be entitled, in a
proceeding (which proceeding may be done on an ex parte basis without
notice to the Lessee), to a preliminary injunction granting the Lessor
the right to possess the Aircraft without having to post a bond or
provide any other type of security and to a final judgment for specific
performance, conferring the right to immediate possession upon the
Lessor and requiring the Lessee to execute and deliver such instruments
to the Lessor;
(b) sell the Aircraft, Airframe or any Engine at public or
private sale, as the Lessor may determine, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the Aircraft, Airframe
or any Engine as the Lessor, in its sole discretion, may determine, all
free and clear of any rights of the Lessee, except as hereinafter set
forth in this Section 17, and without any duty to account to the Lessee
with respect to such action or inaction;
(c) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a)
or (b) above with respect to the Aircraft, the Lessor, by written
notice to the Lessee specifying a payment date, may demand that the
Lessee pay to the Lessor, and the Lessee shall pay the Lessor, on the
payment date so specified, any Basic Rent due on or before the payment
date so speci-
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fied plus, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the installments of Basic Rent for the Aircraft due
after the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft computed as of the immediately
preceding Stipulated Loss Determination Date, together with interest,
if any, at the Past Due Rate on the amount of such Basic Rent and
Stipulated Loss Value from the Stipulated Loss Determination Date as of
which Stipulated Loss Value is computed until the date of actual
payment; and upon such payment of liquidated damages and all
Supplemental Rent then due and payable by the Lessee hereunder, the
Lessor shall transfer (without any representation, recourse or warranty
whatsoever) the Aircraft to the Lessee and the Lessor shall execute and
deliver such documents evidencing such transfer and take such further
action as the Lessee shall reasonably request to effect such transfer;
(d) in the event that the Lessor, pursuant to paragraph (b)
above, shall have sold the Aircraft, the Lessor, in lieu of exercising
its rights under paragraph (c) above with respect to such Aircraft,
may, if it shall so elect, demand that the Lessee pay the Lessor, and
the Lessee shall pay to the Lessor, on the date of such sale, any
accrued rent with respect to the Aircraft due on or prior to such date
plus, as liquidated damages for loss of a bargain and not as a penalty,
the amount of any deficiency between the net proceeds of such sale
(after deduction of all reasonable costs of sale) and the Stipulated
Loss Value of such Aircraft, computed as of the date of such sale
together with interest, if any, on the amount of such deficiency, at
the Past Due Rate, from the date of such sale to the date of actual
payment of such amount;
(e) the Lessor may terminate or cancel this Lease or proceed
by appropriate court action to enforce the terms hereof or to recover
damages for breach hereof; and
(f) the Lessor may exercise any other right or remedy which
may be available to it under applicable law.
In addition, the Lessee shall be liable, except as otherwise
provided above, without duplication of amounts payable hereunder, for any and
all unpaid Rent due hereunder before, after or during the exercise of any of the
foregoing remedies and for all reasonable legal fees and other costs and
expenses incurred by the Lessor and the Agent and any Lender (including
reasonable allocated time charges of internal counsel for the Lender) in
connection with the Lease Event of Default, the exercise of remedies and the
return of the Airframe or any Engine in accordance with the terms of Section 8
hereof or in placing such Airframe or Engine (which for purposes hereof, shall
include, without limitation, all logs, manuals and data and inspection,
maintenance, modification and overhaul and similar records with respect thereto)
in the condition and airworthiness required by such Section. The Lessee hereby
acknowledges that it shall be directly liable for such costs and expenses to any
Person designated by the Lessor, the Agent or any Lender (as the case may be) to
provide services in connection with or to effect the return of the Airframe or
any Engine in accordance with the terms
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<PAGE>
of Section 8 hereof or in placing such Airframe or Engine (which for purposes
hereof shall include, without limitation, such logs, manuals and records) in the
condition and airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to
this Section 17, the Lessor or the Agent or any Lender may bid for and purchase
such property. The Lessor agrees to give the Lessee at least 10 days' written
notice of the date fixed for any public sale of any Airframe or Engine or of the
date on or after which will occur the execution of any contract providing for
any private sale. Except as otherwise expressly provided above, no remedy
referred to in this Section 17 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to the Lessor at law or in equity or otherwise; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies. No waiver by the Lessor of any Lease Event of Default shall
in any way be, or be construed to be, a waiver of any future or subsequent Lease
Event of Default. To the extent permitted by applicable law, the Lessee hereby
waives any rights now or hereafter conferred by statute or otherwise that may
require the Lessor to sell, lease, or otherwise use the Aircraft, Airframe or
any Engine or any part thereof in mitigation of the Lessor's damages as set
forth in this Section 17 or that may otherwise limit or modify any of the
Lessor's rights and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this
Section 17, so long as any Loan relating to the Aircraft or other Obligations
(other than principal and interest on Loans relating to other aircraft or spare
engines) are outstanding under the Credit Agreement, all rights of the Lessor
under this Section 17 shall be exercised only by the Agent as assignee of the
Lessor's rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters.
(a) Forthwith upon the execution and delivery of each Lease Supplement from time
to time required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, the Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, the Lessee at its
expense will promptly and duly execute and deliver to the Lessor and the Agent
such further documents and take such further action as the Lessor and the Agent
may from time to time reasonably request in order more effectively to carry out
the intent and purpose of this Lease and the other Transaction Documents and to
establish and protect the rights and remedies created or intended to be created
in favor of the Lessor and the Agent hereunder and under the other Transaction
Documents, including, without limitation, if requested by the Lessor and the
Agent, the execution and delivery of supplements or amendments hereto, at the
expense of the
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<PAGE>
Lessee, each in recordable form, and all financing statements and
continuation statements, and all similar notices required by applicable law at
all times to be kept recorded and filed in such manner and such places as the
Lessor and the Agent may reasonably request.
(b) The Lessee agrees at its own expense to furnish to the
Lessor and the Agent promptly after execution and delivery of any supplement and
amendment hereto, an opinion of counsel satisfactory to the Lessor and the Agent
(which may include the Lessee's general counsel) stating that, in the opinion of
such counsel, such supplement or amendment to the Lease (or a financing
statement, continuation statement or similar notice thereof if and to the extent
permitted or required by applicable law) has been properly recorded or filed for
record in all public offices in which such recording or filing is necessary to
protect the right, title and interest of the Lessor hereunder and the Agent
under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and
provisions hereof shall be in writing (including telex, facsimile or similar
writing) and shall be effective (a) if given by facsimile device, when
transmitted and the appropriate confirmation received, (b) if given by certified
mail, three Business Days after being deposited in the United States mail, with
appropriate postage prepaid, (c) if given by telex, upon receipt by the party
transmitting the telex of such party's answerback code at the end of such telex
(receipt of confirmation in writing not being necessary to the effectiveness of
any telex) and (d) if given by overnight service or other means, when received
or personally delivered, addressed:
(i) if to the Lessee, at 538 Commons Drive, Golden, Colorado
80401, Attention: Counsel, or to such other address as the Lessee shall
from time to time designate in writing to the Lessor; and
(ii) if to the Lessor, at 538 Commons Drive, Golden, Colorado
80401, Attention: Mr. Richard H. Shuyler, or to such other address as
the Lessor shall from time to time designate in writing to the Lessee,
with a copy to the Agent at 130 Liberty Street, New York, New York
10006, Attention: Marguerite Sutton.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's
obligations to pay Rent and all other amounts payable hereunder shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right that the Lessee may have against the Lessor,
the Agent, the Lenders, any manufacturer, any supplier or any other Person for
any reason whatsoever, (ii) any defect in the title, airworthiness, eligibility
for registration under Title 49 of the United States Code, as amended, or other
applicable law, condition, design, compliance with specifications, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft, or
any theft, interference, interruption or cessation in or prohibition of the use
or possession thereof by the Lessee or any sublessee for any reason whatsoever,
including, without limitation, any such interference, interruption, cessation or
prohibition resulting from the act of any governmental authority or any other
Person, (iii) any Liens, en-
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<PAGE>
cumbrances or rights of any other Person with respect to the Aircraft, (iv) the
invalidity or unenforceability or lack of due authorization or other infirmity
of this Lease or any other Transaction Document or document or instrument
executed pursuant hereto or thereto, or any lack of right, power or authority of
the Lessor or the Lessee or any other party to any other Transaction Document to
enter into this Lease or any other Transaction Document or any such document or
instrument, (v) any loss of or damage to the Aircraft, Airframe, any Engine or
any Part, (vi) any insolvency, bankruptcy, reorganization or similar proceedings
by or against the Lessee or any other Person, or (vii) any failure, breach or
delay by the Lessor or any other Person in performing or complying with any term
of this Lease or any other cause whether similar or dissimilar to the foregoing,
any present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to any
setoff or any reduction for any reason whatsoever, including any present or
future claims of the Lessee against the Lessor or any other Person under this
Lease or otherwise. The Lessee hereby waives, and hereby agrees to waive at any
future time at the request of the Lessor, to the full extent now or then
permitted by applicable law, any and all rights that it may now have or that at
any time hereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease except in accordance with the
express terms hereof. Each payment of Rent made by the Lessee to the Lessor
shall be final as to the Lessor and the Lessee. The Lessee will not seek to
recover all or any part of any such payment of Rent from the Lessor for any
reason whatsoever.
(b) It is the intention of the parties that the Lessor and the
Agent, as assignee of the Lessor's right under this Lease pursuant to the
Aircraft Chattel Mortgage, shall be entitled to the benefits of 11 U.S.C.
Section 1110 or any analogous section of the Federal bankruptcy laws, as amended
from time to time with respect to the right to repossess the Airframe, Engines
and Parts as provided herein, and in any circumstances where more than one
construction of the terms and conditions of this Lease is possible, a
construction that would preserve such benefits shall control over any
construction that would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. Section 1110
or any analogous section of the federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft in compliance with the provisions
of this Lease shall not be affected by the provisions of 11 U.S.C. Section 362
or Section 363, as amended from time to time, or any analogous provisions of any
superseding statute or any power of the bankruptcy court to enjoin such taking
of possession.
(c) The Lessor and the Lessee hereby agree that this Lease,
including any modifications, supplements and amendments thereto, is intended to
be treated as a lease for purposes of the Internal Revenue Code, and neither the
Lessor nor the Lessee shall file any tax
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<PAGE>
returns in a manner or take any other action or position inconsistent with the
foregoing or with the Lessor's ownership of the Aircraft. Nothing contained in
this Lease shall be construed as conveying to the Lessee any right, title or
interest in the Aircraft except as a Lessee only. The Aircraft shall at all
times during the term of this Lease be the sole and exclusive property of the
Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has
occurred and is continuing, the Lessee shall have the option to purchase the
Aircraft at the end of the Term for a purchase price equal to the higher of the
Fair Market Sales Value (assuming that the Aircraft are in the condition
required by the Lease) as of such date and Stipulated Loss Value plus all
accrued Rent and all Supplemental Rent then due. Upon the payment by the Lessee
of the full of such amounts, the Lessor shall convey to the Lessee all right,
title and interest of the Lessor in and to the Aircraft on an "as-is, where is"
basis, without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase
option under Section 21, the Lessee shall be required to give not less than 90
days (but not more than 360 days) irrevocable prior written notice to the
Lessor. The Lessee will give the Lessor prior written irrevocable notice not
less than 90 days (but not more than 360 days) before the expiration of the Term
of its determination to return the Aircraft and not exercise any purchase option
under this Section 21. If the Lessee fails to give notice as required herein,
the Lessee will be deemed to have elected to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If the
Lessee fails to make any payment of Rent required to be made by it hereunder or
fails to perform or comply with any of its agreements contained herein, then the
Lessor may itself make such payment or perform or comply with such agreement but
shall not be obligated hereunder to do so, and the amount of such payment and
the amount of the reasonable expenses of the Lessor incurred in connection with
such payment or the performance of or compliance with such agreement, as the
case may be, together with interest thereon at the Past Due Rate, shall be
deemed Supplemental Rent, payable by the Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No term or
provision of this Lease may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the Lessor, the Lessee and the
Agent. This Lease shall constitute an agreement of lease, and nothing contained
herein shall be construed as conveying to the Lessee any right, title or
interest in the Aircraft except as a lessee only. Neither the Lessee nor any
Affili-
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<PAGE>
ate of the Lessee will file any tax returns in a manner inconsistent with the
foregoing fact or with the Lessor's ownership of the Aircraft or with the
parties' agreement that this Lease be treated as a tax lease for purposes of the
Internal Revenue Code. The section and paragraph headings in this Lease and the
table of contents are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof and all reference
herein to numbered sections, unless otherwise indicated, are to sections of this
Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. EACH OF
THE LESSEE AND THE LESSOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER ARISING OR ASSERTED
BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR
PERFORMANCE OF THE LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY
OTHER TRANSACTION DOCUMENT. This Lease may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(b) This Lease, together with the agreements, instruments and
other documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
(c) The time stipulated in this Lease for all payments and
notices by the Lessee to the Lessor and for the performance of the Lessee's
other obligations under this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to
secure the obligations, the Lessor has agreed in the Aircraft Chattel Mortgage,
among other things, to assign to the Agent this Lease and the Lease Supplements
and to mortgage in favor of the Agent the Aircraft, subject to the reservations
and conditions therein set forth. All rights of the Lessor hereunder are subject
to the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so
long as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments, (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. The
Les-
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<PAGE>
see hereby acknowledges due notice of, and consents to, such assignment and
to the creation of such mortgage and security interest. To the extent, if any,
that this Lease and any Lease Supplement constitutes chattel paper (as such term
is in effect in any applicable jurisdiction), no security interest in this Lease
or any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
(Remainder of page intentionally left blank)
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<PAGE>
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused
this Lease to be duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING III, INC.,
Lessor
By
---------------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
---------------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of April, 2000.
BANKERS TRUST COMPANY,
as Agent
By
---------------------------------------
Name:
Title:
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AIRCRAFT CHATTEL MORTGAGE
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(AIRCRAFT NO. N527MC)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of April
25, 2000 (this "MORTGAGE"), and entered into by and between ATLAS FREIGHTER
LEASING III, INC., a Delaware corporation (the "COMPANY" OR "LESSOR"), and
BANKERS TRUST COMPANY, as administrative agent for and representative of (in
such capacity, the "AGENT") the financial institutions (the "LENDERS") party to
the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
The Company has entered into a credit agreement dated as of April
25, 2000, (said credit agreement, as it may be amended, restated, supplemented
or otherwise modified from time to time, being the "CREDIT AGREEMENT") with the
Lenders and the Agent, pursuant to which the Lenders have agreed, on the terms
and conditions set forth in the Credit Agreement, to make term loans to the
Company in the principal amount of up to $300 million (the "LOANS") to enable
the Company to refinance certain indebtedness currently encumbering the Aircraft
Collateral (as defined below). The indebtedness with respect to the Loans made
by the Lenders is to be evidenced by certain promissory notes of the Company to
the order of the Lenders of even date herewith issued under and pursuant to the
Credit Agreement (such promissory notes, as they may be amended, modified,
supplemented, renewed, converted or extended from time to time, being the
"NOTES"). It is a condition precedent to the making by the Lenders of the Loans
under the Credit Agreement that this Mortgage be executed, delivered and filed
for recordation.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to make the Loans, the Company hereby agrees with the Agent
as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together
with accrued interest thereon, and all other amounts from time to time payable
by the Company under the Credit Agreement, this Mortgage and the other Loan
Documents (as defined below) (including payment of amounts that would become due
but for the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code), and to secure performance of all obligations and
covenants of the Company under the Credit Agreement, this Mortgage and the other
Loan Documents (all such payment and performance obligations of the Com-
<PAGE>
-2-
pany, the "SECURED OBLIGATIONS"), the Company hereby mortgages to the Agent, for
the benefit of the Lenders, and their respective successors and assigns, and
hereby grants and assigns to the Agent, for the benefit of the Lenders, and
their respective successors and assigns, a first priority security interest in
the Aircraft (the "AIRCRAFT COLLATERAL") and a first priority security interest
in all estate, right, title and interest of the Company in, to and under, the
other below described property wherever the same may be located (the "AIRCRAFT
RELATED COLLATERAL"):
(a) Aircraft Collateral. All of the Company's right, title and interest
in and to:
(i) the airframe (the Aircraft except for the Engines or engines from
time to time installed thereon) that is described on Schedule I hereto and
any replacement airframe that may be substituted for such airframe in
accordance with the provisions of Section 4(f) hereof or Section 9.21B of
the Credit Agreement, together with any and all Parts (as hereinafter
defined) incorporated or installed in or attached to such airframe and all
Parts removed from such airframe until such Parts are replaced in
accordance with Section 4(e) hereof (such airframe, together with any
replacement airframe and all such Parts, hereinafter referred to as the
"AIRFRAME");
(ii) each of the engines that are listed in Schedule II hereto or which
are described in a Supplemental Chattel Mortgage (a "SUPPLEMENTAL CHATTEL
MORTGAGE") substantially in the form of Exhibit A attached hereto,
supplementing this Mortgage, and listed by manufacturer's serial numbers
in such Schedule or in such Supplemental Chattel Mortgage, whether or not
from time to time installed on the Airframe or on any other airframe or
aircraft, and any replacement engine that may be substituted for such
engine in accordance with the provisions of Section 4(f) hereof or Section
9.21A of the Credit Agreement, together, in each case, with any and all
Parts incorporated or installed in or attached thereto and any and all
Parts removed therefrom, until such Parts are replaced in accordance with
Section 4(e) hereof (each such engine, and replacement engine, together
with any and all such Parts, hereinafter referred to as an "ENGINE" and
collectively, the "Engines");
(iii) all appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (other than complete
Engines or engines), that may from time to time be incorporated or
installed in or attached to the Airframe or any Engine, including all such
appliances, parts, instruments, appurtenances, accessories, furnishings
and other equipment purchased by the Company for incorporation or
installation in or attachment to the Airframe or any Engine pursuant to
the terms of any agreement whether or not identified in a Supplemental
Chattel Mortgage (collectively referred to herein as "PARTS"); and
<PAGE>
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(iv) all records, logs and other materials required by applicable law
or regulation to be maintained and all other records, logs and materials
maintained in the ordinary course of business with respect to the
properties described in paragraphs (i), (ii) and (iii) above (together
with such Airframe and Engines, the "AIRCRAFT").
(b) Aircraft Related Collateral. All of the Company's right, title and
interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other income of
the property subject or required to be subject to the lien of this
Mortgage including, without limitation, all payments or proceeds payable
to the Company after termination of the Lease with respect to the Aircraft
as the result of the sale, lease or other disposition thereof, and all
estate, right, title and interest of every nature whatsoever of the
Company in and to the same and every part thereof;
(ii) all monies and securities deposited or required to be deposited
with the Agent pursuant to any term of this Mortgage and held or required
to be held by the Agent hereunder or paid to the Agent in accordance with
the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of the
Company (including such indemnities, rights of assignment, rights and
remedies for breach of any warranty and/or claims for damages, rights to
receive title to parts and materials to the extent same relates to the
Aircraft including any agreement assigned therewith;
(iv) all amounts payable to the Company by any manufacturer, supplier
or vendor of any of the Aircraft Collateral or any component thereof
pursuant to any warranty or indemnity covering any such Aircraft
Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any loss, confiscation, condemnation,
requisition or other taking of any Aircraft Collateral to the extent
payable to the Company under the Lease or to the Agent hereunder;
(vi) the Lease, including without limitation all Basic Rent (as defined
in the Lease), Supplemental Rent (as defined in the Lease), insurance
proceeds, requisition, indemnity and other payments of any kind
thereunder, and including all rights of the Company, as lessor, to execute
any election or option or to give any notice, consent, waiver or approval
under or in respect of the Lease or to accept any surrender of any of the
Aircraft or any part thereof, as well as any rights, powers or remedies on
the part of
<PAGE>
-4-
the Lessor, whether arising under the Lease or by statute or at law or in
equity, or otherwise, arising out of any Lease Event of Default (as
defined in the Lease), including, without limitation, all rights under
Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described above,
including, without limitation, all payments under insurance proceeds or
payment under any indemnity, payable by reason of any loss or damage to
the Aircraft or any Engine.
The Company shall deliver to the Agent an executed chattel paper
original counterpart of each Lease and the Lease Supplements covering the
Aircraft. All property referred to in this granting clause, whenever acquired by
the Lessor under the Lease, shall secure all Secured Obligations. The Company
does hereby warrant and represent that it has not assigned or pledged, and
hereby covenants that it will not assign or pledge, so long as the assignment
hereunder shall remain in effect, any of its right, title or interest hereby
assigned to anyone other than the Agent, and that it will not, except as
provided herein or in the Credit Agreement, enter into any agreement amending or
supplementing any purchase agreement, modification agreement to the extent such
agreement relates to the Aircraft, or execute any waiver or modification of, or
consent under, any such agreement, or settle or compromise any claim arising
under any such agreement or submit or consent to the submission of any dispute,
difference or other matter arising under or in any respect of any such agreement
to arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall
have the following meanings for all purposes of this Mortgage and shall be
equally applicable to both the singular and the plural forms of such terms.
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
"ACCEPTABLE ALTERNATE AIRFRAME" means a Boeing 747-200 which is
in cargo configuration capable of immediate operation in the business of the
Lessee and has a maximum gross takeoff weight of at least 800,000 pounds and is
of the equivalent or greater residual value, condition, utility, airworthiness,
and remaining useful life and which shall have been maintained, serviced,
repaired and overhauled in substantially the same manner as required under the
Lease without in any way discriminating against such airframe.
"ACCEPTABLE ALTERNATE ENGINE" means a General Electric CF6-50E2
aircraft engine or an engine of the same or another manufacturer of equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and suitable for installation and use on the Airframe; provided,
that such engine shall be of the same make, model and manufacturer as the other
engines installed on the Airframe, shall be an engine of a type then
<PAGE>
-5-
being utilized by the Lessee on other Boeing 747-200 aircraft operated by the
Lessee, and shall have been maintained, serviced, repaired and overhauled in
substantially the same manner as required under the Lease without in any way
discriminating against such engine.
"ACMI CONTRACT" means (i) any contract entered into by the Lessee
pursuant to which the Lessee furnishes the aircraft, crew, maintenance and
insurance and customers bear all other operating expenses and (ii) any similar
contract in which the customer provides the flight crew, all in accordance with
the Lessee's historical practices.
"ACT" means the Federal Aviation Act of 1958, as amended and
recodified in Title 49, United States Code, or any similar legislation of the
United States enacted to supersede, amend or supplement such Act and the rules
and regulations promulgated thereunder.
"AGENT" has the meaning specified in the first paragraph of this
instrument.
"AIRCRAFT" has the meaning specified in Section 1 hereof.
"AIRCRAFT COLLATERAL" has the meaning specified in Section 1
hereof.
"AIRCRAFT RELATED COLLATERAL" has the meaning specified in
Section 1 hereof.
"AIRFRAME" has the meaning specified in Section 1 hereof.
"COMPANY" has the meaning specified in the first paragraph of
this instrument. "CREDIT AGREEMENT" has the meaning specified in the Preliminary
Statements.
"DOMESTIC AIR CARRIER" means any United States "domestic air
carrier," as defined in Part 121 of the Federal Aviation Regulations, that is
operating in accordance with the operating certificate and appropriate
operations specifications issued under Part 121 or any successor regulations.
"ENGINE" has the meaning specified in Section 1 hereof.
"EVENT OF DEFAULT" means any Event of Default as defined in the
Credit Agreement.
"LEASE" means that certain Lease Agreement, dated as of April 25,
2000, by and between Atlas Freighter Leasing III, Inc., as Lessor, and Atlas
Air, Inc., as Lessee, for the lease of the Aircraft, together with any
amendments, modifications, supplements or additions thereto.
<PAGE>
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"LESSEE" means Atlas Air, Inc., a Delaware corporation.
"LESSOR" has the meaning specified in the first paragraph of this
Mortgage.
"LOANS" has the meaning specified in the Preliminary Statements.
"MORTGAGE" has the meaning specified in the first paragraph of
this instrument.
"NOTES" has the meaning specified in the Preliminary Statements.
"PARTS" has the meaning specified in Section 1 hereof.
"SECURED OBLIGATIONS" has the meaning specified in Section 1
hereof.
"SUPPLEMENTAL CHATTEL MORTGAGE" has the meaning specified in
Section 1 hereof.
SECTION 3. Representations and Warranties.
The Company hereby represents and warrants that, in the case of
the Airframe or each Engine initially or subsequently mortgaged hereunder on the
date the Airframe or such Engine is mortgaged hereunder as follows:
(a) The Company has good and marketable title to the Aircraft
Collateral free and clear of all Liens except for the lien of this Mortgage and
Permitted Encumbrances and the Lease and has full power and authority to
mortgage and grant the lien and security interest in the Aircraft Collateral and
Aircraft Related Collateral intended by the terms hereof and in the manner
aforesaid and has not assigned or pledged any of its right, title or interest
hereby assigned to anyone other than the Agent.
(b) The Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of the Airframe is duly registered in the name of
the Company in accordance with the Act; and the Airframe is not registered under
the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case
may be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against the Aircraft or such
Engine(s) as the case may be.
<PAGE>
-7-
(e) An airworthiness certificate has been duly issued under the
Act for the Aircraft (evidence of which has been supplied to the Agent), and the
airworthiness certificate for the Aircraft is in full force and effect.
(f) The Aircraft and Engines are in such condition so as to
comply with the requirements of Section 4(c) hereof; and the insurance required
by Section 4(g) hereof is in full force and effect.
(g) This Mortgage or this Mortgage as supplemented by a
Supplemental Chattel Mortgage constitutes the legally valid and binding
obligation of the Company enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first priority
mortgage on and security interest in the Aircraft Collateral, securing the
payment and performance of the Secured Obligations.
(h) The Company has delivered to the Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York and such other states as may be required with respect to
that portion of the Aircraft Collateral not covered by the filing system
established under the Act and with respect to the Aircraft Related Collateral;
and except for the filings described in this paragraph and in paragraph (d)
above of this Section 3, no filing or recording of any instrument shall be
required to establish and perfect a first priority security interest in the
Aircraft Collateral and Aircraft Related Collateral under the laws of the United
States or any State thereof.
(i) The chief place of business and the chief executive office of
the Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
The Company hereby covenants that so long as this Mortgage is in
effect:
(a) Liens. The Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien, on or with respect to any of the
Aircraft Collateral, or Aircraft Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted Encumbrances,
including the Lease. The Company will promptly, at its own expense, take such
action as may be necessary to duly discharge any such Lien not excepted above if
the same shall arise at any time.
(b) Taxes. The Company will pay, and hereby indemnifies the Agent
from and against, any and all fees and taxes, levies, imposts, duties, charges
or withholdings, to-
<PAGE>
-8-
gether with any penalties, fines or interest thereon (any of the foregoing for
the purposes of this Section 4(b) being called a "TAX"), which may from time to
time be imposed on or asserted against the Agent or any Lender or the Airframe
or any Engine or any part thereof or interest therein by any Federal, state or
local government or other taxing authority in the United States or by any
foreign government or subdivision thereof or by any foreign taxing authority in
connection with, relating to or resulting from: (i) the Airframe or any Engine
or any part thereof of interest therein; (ii) the manufacture, purchase,
ownership, mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Mortgage; provided, however, that there shall be
excluded from any indemnification any Lessor Tax (as defined in the Lease) and
unless the payment of any such Tax shall be a condition to the enforceability of
this Mortgage or the perfection of the lien hereof or unless proceedings shall
have been commenced to foreclose any lien which may have attached as security
for such Tax, nothing in this Section shall require the payment of any Tax so
long as and to extent that validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
the Company shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. The Company, at its
own cost and expense, (i) will be a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Aircraft to be duly registered and remain duly registered in
the United States of America in the name of the Company in accordance with the
Act; and (iii) will cause the Lessee to service, repair, inspect, test,
maintain, overhaul the Airframe and each Engine and install replacement
equipment and parts on the Aircraft and each Engine (A) so as to keep the
Airframe and each Engine in such operating condition as may be required to
permit the Airframe and each Engine to be utilized in commercial operations, (B)
so as to enable the airworthiness certification of the Airframe to be maintained
in good standing at all times under the Act, except when aircraft of the same
type, model or series as the Airframe (powered by engines of the same type as
those with which the Airframe shall be equipped at the time of grounding)
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA airworthiness
certificate of the Aircraft shall be withdrawn, then subject to the provisions
of Section 4(f) hereof, so long as the Company is diligently taking or causing
to be taken all necessary action to promptly correct the condition which caused
such withdrawal, no Event of Default shall arise from such withdrawal, (C) in
accordance with the Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care used
by the Lessee with respect to the same or similar aircraft and engines owned or
operated by the Lessee so as to keep the same in as good operating condition as
when originally mortgaged hereunder, ordinary wear and tear excepted, which
practices
<PAGE>
-9-
shall at all times be at or above the standard of the industry in the United
States for prudent maintenance of similar equipment, and (D) in such manner as
may be necessary to maintain in full force all warranties of the manufacturers
thereof. The Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit the Airframe
and each Engine to be so utilized.
The Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the manufacturer or
supplier) in such condition so as to comply with the provisions of this Mortgage
and the rules and regulations of the FAA from time to time in force and
applicable to the Aircraft and Engines. Neither the Airframe nor any Engine will
be maintained, used or operated in violation of any law or any rule, regulation
or order of any government or governmental authority having jurisdiction
(domestic or foreign), or in violation of any airworthiness certificate, license
or registration relating to the Airframe or such Engine issued by any such
authority, and in the event that such laws, rules, regulations or orders require
alteration of the Airframe or any Engine, the Company, at its own cost and
expense, will conform thereto or obtain conformance therewith and will maintain
the same in proper operating condition under such laws, rules, regulations and
orders; provided, however, that the Company may, in good faith (after having
delivered to the Agent an Officer's Certificate stating the facts with respect
thereto), contest the validity or application of any such law, rule, regulation
or order in any reasonable manner which does not, in the Agent's opinion,
adversely affect the interests under this Mortgage of the Agent or any Lender.
The Company will not operate, use or locate the Airframe or
any Engine, (I) in any area in which any insurance required to be maintained
pursuant to Section 4(g) shall not be at the time in full force and effect, or
in any area excluded from coverage by an insurance policy in effect with respect
to the Airframe or such Engine, except in the case of a requisition for use by
the United States of America, and then only if Company obtains indemnity or "war
risk" insurance in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless fully
covered to the Agent's satisfaction by war risk and political risk and allied
perils insurance or unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government provides "war risk" insurance or assumes liabilities
for any damages, loss, destruction or failure to return possession of the
Airframe or such Engine at the end of the term of such contract and for injury
to persons or damage to property of others.
The Company shall not use the Aircraft nor suffer it to be
used in any manner or for any purpose excepted from any of the insurance on or
in respect of the Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or
<PAGE>
-10-
permit to be done, anything which, or admit to do anything the admission of
which, may invalidate any of such insurance.
(d) Possession. The Company will not, without the prior
written consent of the Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer the right,
title or interest of the Company in, the Airframe or any Engine except that the
Company may enter into and perform all provisions and terms of the Lease and the
Lessee or the Company, unless a Potential Event of Default or Event of Default
shall have occurred and be continuing, without the prior written consent of the
Agent, may take the following actions so long as the actions to be taken shall
not deprive the Agent of the first priority Lien of this Mortgage on the assets
subject hereto and so long as the actions to be taken shall not deprive the
Company as Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft nor shall such actions deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
as assignee of the Company's rights under this Mortgage:
(i) transfer possession of the Airframe or any Engine other
than by lease to the United States of America or any instrumentality
thereof pursuant to the Civil Reserve Air Fleet Program (as
administered pursuant to Executive Order 12656, or any substitute
order) or any similar or substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by the Company or the Lessee in the
ordinary course of business that do not contemplate or require the
transfer of title to, use for the remainder of its useful life, or
registration of the Airframe or title to, or use for the remainder of
its useful life of such Engine; provided, however, that if the
Company's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to the Airframe or such Engine and the Company shall comply
with Section 4(f) in respect thereof;
(iv) install an Engine on an airframe that is owned by the
Lessee, provided that such airframe is free and clear of all Liens on
property of the Lessee except (A) Liens permitted under the Lease, (B)
Liens that apply only to the engines (other than the Engines),
appliances, parts, instruments, appurtenances, accessories, furnishings
<PAGE>
-11-
and other equipment (other than Parts) installed on such airframe (but
not to the airframe as an entirety), and (C) the rights of any Domestic
Air Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to the Lessee or
owned by the Lessee subject to a conditional sale or other security
agreement, provided that: (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe and except
Liens of the type permitted by clause (iv) above and (B) the Agent
shall have received from the lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any
Engine by reason of such Engine being installed on such airframe at any
time when such Engine is subject to this Mortgage;
(vi) install an Engine on an airframe owned or leased by the
Lessee subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided, that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and the Company shall comply with Section
4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for the Airframe and the Engines or engines
installed thereon with any third party pursuant to which the Company
has operational control of the Airframe and any Engines installed
thereon, such operation to be performed solely by individuals under the
operational control of the Company possessing all current certificates
and licenses that would be required under the applicable laws of the
United States for the performance by such employees of similar
functions within the United States; provided, that the Company's
obligations hereunder shall continue in full force and effect
notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and the Leases shall be made expressly subject and
subordinate to, the lien and security interest of this
<PAGE>
-12-
Mortgage and all of the Agent's rights hereunder and the Company shall remain
primarily liable hereunder for the performance of all the terms of this Mortgage
to the same extent as if such transfer had not occurred, and any such instrument
of transfer shall include appropriate provisions for the maintenance and
insurance of the Airframe or such Engine, and any such instrument of transfer
(other than the Lease) shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of the Company's obligations to the Agent hereunder or
under the Credit Agreement. In the event that the Agent shall have received from
the lessor, conditional vendor or secured party of any airframe leased to the
Lessee or purchased by the Lessee subject to a conditional sale or other
security agreement, a written agreement complying with clause (B) of Section
4(d)(v), and the lease or conditional sale or other security agreement covering
such airframe also covers an engine, engines or spare engines owned by the
lessor under such lease, conditionally owned by the conditional vendor under
such conditional sale agreement, or subject to such security agreement, the
Agent hereby agrees for the benefit of such lessor, conditional vendor or
secured party that the Agent will not acquire or claim, as against such lessor,
conditional vendor or secured party, any right, title or interest in any such
engine or spare engine as the result of such engine or spare engine being
installed on the Airframe at any time while such engine or spare engine is
subject to such lease or conditional sale or other security agreement and owned
by such lessor, conditionally owned by such conditional vendor or subject to
such security agreement.
(e) Replacement and Pooling of Parts; Alterations,
Modifications and Additions.
(i) Except as otherwise provided in Section 4(e)(iv), the
Company, at its own cost and expense, will promptly replace all Parts,
that may from time to time be incorporated or installed in or attached
to the Airframe or any Engine and that may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason whatsoever.
In addition, in the ordinary course of maintenance, service, repair or
testing, the Company at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use; provided,
that, except as otherwise provided in Section 4(e)(iv), the Company at
its own cost and expense shall replace such Parts as promptly as
practicable. All replacement Parts shall be owned by the Company free
and clear of all Liens (except Permitted Encumbrances and the Lease,
and for pooling arrangements to the extent permitted by Section
4(e)(ii)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced assuming
such
<PAGE>
-13-
property were in the condition and repair required to be maintained by
the terms hereof.
All Parts at any time removed from the Airframe or any Engine
shall remain the property of the Company and shall remain subject to
the lien and security interest of this Mortgage, no matter where
located until such time as such Parts shall be replaced by parts that
have been incorporated or installed in or attached to the Airframe or
any Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Airframe or any Engine
as above provided, without further act, (A) title to such replacement
Part shall vest in and such replacement part shall become the property
of the Company and shall become subject to the lien and security
interest of this Mortgage and shall be deemed part of the Airframe or
such Engine for all purposes hereof to the same extent as the property
originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of
the Company and shall thereupon become free and clear of all rights of
the Agent hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from the Airframe or any Engine as
provided in Section 4(e)(i) may be subjected by the Company or the
Lessee to a normal pooling arrangement of the type customary in the
airline industry entered into by the Lessee in the ordinary course of
its business and entered into with Domestic Air Carriers that are not
the subject of any bankruptcy, insolvency, or similar proceeding,
voluntary or involuntary, provided that the Part replacing such removed
Part shall be incorporated or installed in or attached to the Airframe
or such Engine in accordance with Section 4(e)(i) as promptly as
possible after the removal of such removed part. In addition, any
replacement Part when incorporated or installed in or attached to the
Airframe or any Engine in accordance with Section 4(e)(i) may be owned
subject to such a pooling arrangement, provided that the Company, at
its expense, as promptly thereafter as possible, either (A) causes such
replacement Part to become subject to the lien and security interest of
this Mortgage in accordance with Section 4(e)(i) by the Company's
acquiring title thereto for the benefit of the Agent free and clear of
all Liens (except Permitted Encumbrances and the Lease) or (B) replaces
such replacement Part by incorporating or installing in or attaching to
the Airframe or such Engine a further replacement Part owned by the
Company free and clear of all Liens (except Permitted Encumbrances and
the Lease).
(iii) The Company, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and additions to
the Airframe and the Engines as may be required from time to time to
meet the standards of the FAA or other governmental authority having
jurisdiction; provided, that the Company may, in good
<PAGE>
-14-
faith, contest the validity or application of any such standard in any
reasonable matter that shall not adversely affect the Lien of this
Mortgage or Lenders' interests therein. The Company also agrees, at its
own cost and expense, to make or cause to be made such alterations and
modifications in and additions to the Airframe and the Engines as may
be required from time to time to meet the standards or requirements of
any directive issued by a manufacturer relating to the Airframe or any
Engine. In addition, so long as no Potential Event of Default or Event
of Default shall have occurred and be continuing, the Company, at its
own cost and expense, may from time to time make such alterations and
modifications in and additions to the Airframe and any Engine as the
Company may deem desirable in the proper conduct of its business or to
accommodate the business of the Lessee, provided that no such
alteration, modification or addition diminishes the value or utility or
impairs the condition or airworthiness of the Airframe or such Engine
below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition,
assuming that the Airframe or such Engine were then in the condition
and airworthiness required to be maintained by the terms of this
Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to the Airframe or any Engine as the result of such alteration,
modification or addition shall, without further act, become the
property of, and title to such parts shall vest in the Company and
shall be subject to the lien and security interest of this Mortgage;
provided, that, so long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, the Company may remove
and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or
installed in or attached to the Airframe or such Engine on the date
hereof, on the date the Engine first becomes subject to the lien of
this Mortgage, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or
attached or added to the Airframe or such Engine pursuant to the terms
of Section 4(c) hereof or any other provision of this Mortgage and (C)
can be removed from the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness that the Airframe or such
Engine would have had at such time had such alteration, modification or
addition not occurred, assuming that the Aircraft Collateral was
otherwise in the condition required by this Mortgage. Upon the removal
by the Company of any such Part, as above provided, title thereto
shall, without further act, be free and clear of all rights of the
Agent hereunder and such Part shall no longer be deemed a Part
hereunder.
(v) The Company will ensure that, pursuant to the terms of the
Leases, all obligations of the Company pursuant to this Section 4(e)
shall be performed by the Lessee, at the Lessee's own cost and expense,
and all Parts and alterations, improve-
<PAGE>
-15-
ments or modifications in and additions to the Aircraft shall become
subject to the Lien of this Mortgage and shall be leased to the Lessee
under the applicable Lease.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to an
Airframe or an Engine, the Company will promptly notify the Agent
thereof in writing (in any event within five (5) days of such
occurrence) and will, not later than 180 days after the receipt of
Proceeds in connection with such Event of Loss, mortgage hereunder, by
complying with all of the terms of subsection (ii) below and otherwise
taking all necessary actions to provide that the Company (and the Agent
upon foreclosure of the Company's interest in the Lease) will continue
to be entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to the replacement airframe or engine referred to below,
an Acceptable Alternate Airframe or Acceptable Alternate Engine free of
all Liens (other than Permitted Encumbrances and the Lease). Upon
compliance with the preceding sentence within such 180-day period, the
Agent will execute and deliver to the Company a partial release, in
recordable form, releasing the lien of this Mortgage to the extent that
it covers such Airframe or Engine with respect to which such Event of
Loss has occurred. Such Acceptable Alternate Airframe or Acceptable
Alternate Engine shall thereupon constitute an "Airframe" or an
"Engine," as the case may be, for all purposes hereof and shall be
deemed to constitute part of the Aircraft.
(ii) Whenever the Company shall subject any Airframe or Engine
to the lien and security interest of this Mortgage (as contemplated by
paragraph (i) above), the Company will on or prior thereto:
(A) deliver to the Agent and duly file for recording
under the Act, a Supplemental Chattel Mortgage substantially
in the form of Exhibit A hereto duly executed by the Company
appropriately describing such engine to be subjected to the
lien and security interest of this Mortgage;
(B) deliver to the Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of
the States of Colorado and New York (or such other States as
may be required at such time) covering the security interest
created by this Mortgage to perfect the security interest of
the Agent in the Airframe or Engine to be subjected to the
lien and security interest of this Mortgage;
(C) deliver to the Agent an Officers' Certificate
dated the date of execution of said Supplemental Chattel
Mortgage, stating:
<PAGE>
-16-
(I) that the representations and warranties
contained in Section 3 hereof are true and correct on
and as of such date of execution with respect to such
Airframe or Engine and the Company;
(II) that, upon consummation of the terms of
this Section 4(f), no Potential Event of Default or
Event of Default will exist; and
(III) that all conditions precedent
contemplated in this Section 4(f)(ii) have been
complied with;
(D) furnish the Agent with evidence of compliance
with the insurance provisions of Section 4(g) hereof with
respect to such Airframe or Engine as the Agent may reasonably
request;
(E) furnish the Agent with a warranty (as to title)
bill of sale, in form and substance reasonably satisfactory to
the Agent with respect to such Airframe or Engine;
(F) furnish the Agent with such evidence of title
such as the bill of sale as the Agent may reasonably request
concerning such Airframe or Engine;
(G) cause to be delivered to the Agent an appraisal
by the Approved Appraisers relating to the Airframe or Engine
to be subjected to the lien and the security interest of this
Mortgage stating that it has a value and utility at least
equal to, and in as good operating condition as the Airframe
or Engine subject to such Event of Loss immediately prior to
such Event of Loss, assuming compliance by the Company with
all the terms of this Mortgage with respect to such Airframe
or Engine; and
(H) cause to be delivered to the Agent an opinion or
opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the Airframe or Engine specifically
described in said Supplemental Chattel Mortgage, is
free and clear of all recorded Liens,
(II) that said Supplemental Chattel Mortgage
(1) has been duly authorized, executed and delivered
by Company, and (2) creates a valid, perfected and
first priority security interest in and to the
Airframe or Engine described in said Supplemental
Chattel Mortgage, enforceable against all third
parties and securing the payment of all obligations
<PAGE>
-17-
purported to be secured thereby and that all action
required to perfect fully such security interest has
been taken and completed,
(III) that said Supplemental Chattel
Mortgage has been duly filed for recordation in
accordance with the provisions of the Act to continue
the perfection and priority of the security interest
intended to be created by the Mortgage,
(IV) that the Company (and the Agent upon
succeeding to the Company's interest in the Lease)
will continue to be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to
the lease of the Airframe or Engine described in said
Supplemental Chattel Mortgage, and
(V) as to such other matters as the Agent
may reasonably request.
Promptly upon the recording of each Supplemental
Chattel Mortgage under the Act, the Company will
cause to be delivered to the Agent an opinion of
counsel for the Company as to the due recording of
such Supplemental Chattel Mortgage in accordance with
the Act.
(iii) With respect to the Airframe or any Engine as between
the Agent and the Company, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of
which is provided for in Section 4(g) below and under the terms of the
Credit Agreement) received from any government authority or other
person shall be applied as follows:
(A) if such payments are received with respect to an
Event of Loss to an Airframe or Engine that has been or is
being replaced by the Company pursuant to the terms hereof, so
long as there shall exist no Event of Default or Potential
Event of Default, such payment shall be paid over to or
retained by the Company or the Lessee upon satisfaction of the
conditions for replacement contained in paragraph (ii) above
and until such time shall be held by the Agent in accordance
with the provisions hereof as security for the Secured
Obligations; and
(B) if such payments are received with respect to an
Event of Loss with respect to which no replacement is being
effected, such payments shall be applied to the prepayment of
the Notes required pursuant to the terms of the
<PAGE>
-18-
Credit Agreement and shall be held pursuant to the terms of
this Mortgage, and the balance, if any, shall be paid over to
or retained by the Company.
(C) In the event of a requisition for use by the
United States Government of the Airframe or any Engine, the
Company shall promptly notify the Agent of such requisition
and all of the Company's obligations under this Mortgage shall
continue to the same extent as if such requisition had not
occurred. Any payments received by the Agent or the Company
from the United States Government for the use of the Airframe
or such Engine, shall be paid over to, or retained by, the
Company.
(D) Any amount referred to in paragraph (iii) or (iv)
of this Section 4(f) that is payable to or retained by the
Company shall not be paid to the Company or retained by the
Company, if at the time of such payment or retention any Event
of Default or a Potential Event of Default shall have occurred
and be continuing, but shall be held by or paid over to the
Agent as security for the obligations of the Company under
this Mortgage and the other Loan Documents, and, if the Agent
shall declare the Credit Agreement to be in default, shall be
applied against the Company's obligations hereunder and
thereunder as and when due. At such time as there shall not be
continuing any such Event of Default or Potential Event of
Default, such amount shall be paid to the Company to the
extent not previously applied in accordance with the preceding
sentence. In addition, and whether or not there shall exist an
Event of Default or Potential Event of Default, until such
time as the Company shall request to be paid any amount
referred to in paragraph (iii) or (iv) in order to effect the
mortgaging hereunder of a replacement Airframe or Engine, any
amounts referred to in paragraphs (iii) or (iv) of this
Section 4(f) shall be held by the Agent as security for the
obligations of the Company under this Mortgage and the other
Loan Documents.
(g) Insurance.
(i) The Company will cause the Lessee at all times to carry
and maintain on or with respect to the Aircraft, at the Lessee's own
cost and expense, public liability (including without limitation,
contractual liability, cargo liability, passenger legal liability,
bodily injury and product liability, but excluding manufacturer's
product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar aircraft
by corporations engaged in the same or similar business and similarly
situated with the Lessee but in no event in an amount less than
$500,000,000 per occurrence (which shall include war risk, governmental
confiscation and expro-
<PAGE>
-19-
priation and allied perils coverage). During any period when the
Aircraft is on the ground and not in operation, the Lessee may carry or
cause to be carried, in lieu of insurance required by this Section,
insurance otherwise conforming with the provisions of this Section
except that the amounts of coverage shall not be required to exceed the
amounts of comprehensive airline liability insurance, and the scope of
risk covered and type of insurance shall be the same, as are
customarily carried with respect to similar aircraft on the ground by
corporations engaged in the same or similar business and similarly
situated with the Lessee. Any policies of insurance carried in
accordance with this Section 4(g) and any policies taken out in
substitution or replacement of any such policies (A) shall be amended
to name the Agent and the Lenders as additional named insureds, (B)
shall be primary without right of contribution from any other insurance
which is carried by the Lessee, (C) shall expressly provide that all
provisions thereof, except the limits of the liability, shall operate
in the same manner as if there were a separate policy covering each
insured, and (D) shall provide that the insurer shall waive any right
of subrogation against the Agent or the Lenders.
(ii) The Company will cause the Lessee at all times to carry
and maintain with insurers of recognized responsibility and reputation
on or with respect to the Aircraft, at the Lessee's own cost and
expense, aircraft ground and flight all-risk hull insurance as well as
fire and extended coverage insurance on Engines and other equipment
while removed from the Airframe or airframe (which shall include war
risk, governmental confiscation and expropriation (other than by the
United States Government) and allied perils including (A) strikes,
riots, civil commotions or labor disturbances, (B) any malicious act or
act of sabotage and (C) hijacking (air piracy) or any unlawful seizure
or wrongful exercise of control of the Aircraft or crew in flight
(including any attempt at such seizure or control) made by any person
or persons aboard the Aircraft or another aircraft acting without the
consent of the insured, if and to the extent the same shall be
maintained by the Lessee with respect to similar aircraft owned or
operated by the Lessee on the same routes or if the Aircraft or another
aircraft is operated on routes where the custom is for Domestic
Carriers similarly situated with the Lessee flying comparable routes
with similar aircraft to carry such insurance, of the type usually
carried by corporations engaged in the same or similar business and
similarly situated with the Lessee; provided, that such insurance
(including any self-insurance to the extent permitted below) shall at
all times be for an amount not less than the greater of the amount
required by the applicable Lease and $50,000,000. During any period
when the Aircraft is on the ground and not in operation the Lessee may
carry or cause to be carried, in lieu of the insurance required by this
Section, insurance otherwise conforming hereto except that the scope of
risk covered and type of insurance shall be the same as are from time
to time customarily carried with respect to similar aircraft or spare
engines by corporations engaged in the same or similar
<PAGE>
-20-
business and similarly situated with the Lessee for aircraft on the
ground in an amount at least equal to the applicable amount provided
above. All such insurance shall name the Agent and the Lenders as
additional insureds and loss payees to the extent their interest may
appear and shall provide that any loss to the Airframe or an Engine in
excess of $2,000,000 (and, if a Potential Event of Default or Event of
Default has occurred and is continuing, any such loss) shall be payable
to the Agent for the benefit of the Lenders; and shall be primary
without right of contribution from any other insurance that is carried
by the Agent with respect to its interest therein.
The Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section 4(g)(ii) in such reasonable amounts as
are then applicable to other similar aircraft or spare engines in the
Lessee's fleet that are of a value comparable to the Aircraft, and as
are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with the
Lessee; provided, however, that the Company shall not permit the Lessee
to self-insure in an amount in excess of $1,000,000 without the prior
written consent of the Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name the
Agent and the Lenders as additional named insureds, but without the
Agent or the Lenders being thereby liable for premiums; (B) provide
that in respect of the interest of the Agent or the Lenders in such
policies the insurance shall not be invalidated by any action or
inaction of the Lessee and shall insure the interests of the Agent and
the Lenders regardless of any breach or violation by the Lessee or any
Person (other than the Agent) of any warranty, declaration or condition
contained in such policies; (C) provide that if such insurance is
cancelled, or if any material change is made in the coverage that
affects the interest of the Agent or any Lender, or if such insurance
is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to the Agent for thirty (30)
days (seven (7) days, or such shorter or longer period as may from time
to time be customarily available in the industry, in the case of any
war risk and allied perils coverage) after receipt by the Agent of
written notice from such insurers of such cancellation, change or
lapse; (D) be in full force and effect throughout any geographical
areas at any time traversed by the Aircraft and shall be payable in
U.S. dollars; (E) waive any right of the insurers to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise
in respect of any liability of the Agent; and (F) waive all rights of
subrogation against the Agent.
(iv) In the case of a lease or contract with the United States
or any agency or instrumentality thereof in respect of the Airframe or
any Engine, a valid agreement by the United States or such agency or
instrumentality to indemnify the Lessee against
<PAGE>
-21-
the same risks against which the Lessee is required hereunder to insure
shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the
subject of any such agreement to indemnify.
(v) On or prior to the date hereof, and annually thereafter on
or prior to January 31, the Company will cause the Lessee to furnish to
the Agent (A) a report signed by a firm of independent aircraft
insurance brokers, appointed by the Lessee and not objected to by the
Agent, describing in reasonable detail acceptable to the Agent the
insurance then carried and maintained on or with respect to the
Aircraft and the Engines and stating that in the opinion of such firm
such insurance complies with the terms of this Section 4(g) and is
adequate to protect the interests of the Lessee, the Company and the
Agent, and (B) certificates of the insurer or insurers evidencing the
insurance covered by the report. The Company will cause the Lessee to
cause such brokers to advise the Agent in writing (x) promptly of any
default in the payment of any premium and of any other act or omission
on the part of the Lessee of which such firm has knowledge and which
might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft or any Engine and (y) at least thirty (30)
days prior to the expiration or termination date, or date of
effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(vi) All insurance payments and other payments received by the
Agent or the Company from insurance referred to in paragraph (ii) above
shall be, if received by the Company, immediately paid to the Agent and
shall be held by the Agent as security for the Secured Obligations and
all other obligations required to be paid in accordance with the terms
of this Mortgage and the Credit Agreement and such payments shall be
paid to the Company upon compliance by the Company with the terms of
Subsection 4(f) with respect to the replacement of an airframe or an
engine, as the case may be, provided that no Potential Event of Default
or Event of Default shall have occurred and be continuing.
All insurance payments and other payments received by the
Agent or the Company from insurance referred to in paragraph (ii) above
and paid other than as a result of an Event of Loss shall be paid by
the Agent to or be retained by the Company, and promptly applied by the
Company to the extent necessary to repair the damage to the Airframe or
the Engine for which such insurance was paid, provided that the Agent
shall not be required to make any such payment to the Company if a
Potential Event of Default or Event of Default has occurred and is
continuing, but shall be held or paid over to the Agent as security for
the obligations of the Company under this Mortgage and the other Loan
Documents, and, if the Agent shall declare the Credit Agreement to be
in default, shall be applied against the Company's obligations
hereunder and thereunder as and when due. Retention by the Agent of any
amounts pursuant to the pre-
<PAGE>
-22-
ceding sentence shall not relieve the Company of its obligations to
make promptly all repairs and replacements required by Sections 4(c)
and (e) hereof and to pay for the same with the Company's funds or
cause payment of the same under the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit the Agent or
any Lender from obtaining insurance with respect to the Aircraft for
its own account. The Company may, at its own expense, carry insurance
with respect to its interest in the Aircraft in amounts in excess of
that required to be maintained by this Section 4(g). No insurance
maintained by the Agent or any Lender shall prevent the Company from
causing the Lessee to carry the insurance required or permitted by this
Section or adversely affect such insurance or the cost thereof.
Proceeds of any such insurance carried by the Agent or any Lender shall
be paid as provided in the insurance policy relating thereto and the
Agent shall have no duty to obtain any such insurance.
(h) Inspection. The Company will permit, and cause the Lessee
to permit, any officers, employees or authorized representatives of the Agent to
inspect, at the Lessee's cost and expense under the Lease, the Aircraft
Collateral and Aircraft Related Collateral, or any part thereof, and to examine,
copy or make extracts from, any and all books, records and documents in the
possession of the Company relating to such Collateral or any part thereof and
performance of this Mortgage, all at such reasonable times and as often as may
be requested. The Agent shall have no duty to make any such inspection or
examination and shall not incur any liability or obligation by reason of making
or not making any such inspection or examination.
(i) Insignia. The Company shall, at its own cost and expense,
or pursuant to the Lease, cause the Airframe and each Engine included in the
Aircraft Collateral to be legibly marked (in a reasonably prominent location,
which in the case of the Airframe shall be adjacent to the airworthiness
certificate) with such a plate, disk, or other marking of customary size, and
bearing the legend "Owned by Atlas Freighter Leasing III, Inc., and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the opinion
of the Agent be appropriate or desirable to evidence the fact that it is subject
to the lien and security interest created by this Mortgage. The Company shall
not remove or deface, or permit to be removed or defaced, any such plate, disk,
or other marking or the identifying manufacturer's serial number, and, in the
event of such removal or defacement, shall promptly cause such plate, disk, or
other marking or serial number to be promptly replaced. Except as provided
above, the Company shall not allow the name of any person, association or
corporation to be placed on the Airframe or any Engine as a designation that
might be interpreted as a claim of ownership or of any security interest
therein, except that any permitted lessee may place its customary colors and
insignia or the insignia of the manufacturer on the Airframe or any Engine.
<PAGE>
-23-
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing,
then the Agent may, without notice of any kind to the Company, exercise in
respect of the Aircraft Collateral and Aircraft Related Collateral, (i) all the
rights and remedies of a secured party on default under the Uniform Commercial
Code as in effect at the time in any applicable jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Aircraft Collateral), (ii) any
and all remedies under the Leases and all of the rights and remedies of the
Lessor under the Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in any other
agreement between the Company and the Agent, and (iv) such other rights and
remedies as may be provided by law or otherwise.
(b) After an Event of Default has occurred and is continuing,
the Agent may, without notice, take possession of the Aircraft Collateral or any
part thereof and may exclude the Company and the Lessee, and all persons
claiming under the Company or the Lessee, wholly or partly therefrom. At the
request of the Agent, the Company shall promptly deliver or cause the Lessee to
deliver to the Agent or to whomsoever the Agent shall designate, at such time or
times and place or places as the Agent may specify, and fly or cause to be flown
to such airport or airports in the United States as the Agent may specify,
without risk or expense to the Agent, the Aircraft Collateral or any part
thereof. In addition, the Company will provide, or cause the Lessee to provide,
without cost or expense to the Agent, storage facilities for the Aircraft
Collateral. If the Company or the Lessee shall for any reason fail to deliver
the Aircraft Collateral or any part thereof after demand by the Agent, the Agent
may, without being responsible for loss or damage, (i) obtain a judgment
conferring on the Agent the right to immediate possession or requiring the
Company and the Lessee to deliver immediate possession of the Aircraft
Collateral or any part thereof to the Agent, the entry of which judgment the
Company hereby specifically consents and the Lessor's consent to which will be
obtained by the Company under the Lease, or (ii) with or without such judgment,
pursue the Aircraft Collateral or any part thereof wherever it may be found and
may enter any of the premises of the Company and the Lessee where the Aircraft
Collateral may be and search for the Aircraft Collateral and take possession of
and remove the same. The Company agrees to pay to the Agent, upon demand, all
expenses incurred in taking any such action; and all such expenses shall, until
paid, be secured by the lien of this Mortgage. Upon every such taking of
possession, the Agent may, from time to time, make all such reasonable
expenditures for maintenance, insurance, repairs, replacements, alterations,
additions and improvements to and of the Aircraft Collateral, as it may deem
proper. In each such case, the Agent shall have the right to maintain, use,
operate, store, lease, control or manage the Aircraft Collateral or any part
thereof and to carry on the business and exercise all rights and powers of
Company relating to the Aircraft Collateral, as the Agent shall deem best,
including the right to enter into any and all such agreements with respect to
the maintenance, use, operation, storage, leasing,
<PAGE>
-24-
control, management or disposition of the Aircraft Collateral or any part
thereof as the Agent may determine. Further, after the occurrence and during the
continuation of an Event of Default, the Agent shall be entitled to collect and
receive directly all tolls, rents, revenues, issues, income, products and
profits of the Aircraft Collateral or any part thereof, including without
limitation, all payments under any of the Leases. Such tolls, rents, revenues,
issues, income, products and profits shall be applied to pay the expenses of the
use, operation, storage, leasing, control, management or disposition of the
Aircraft Collateral, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments that the Agent
may be required or may elect to make, if any, for taxes, assessments, or other
proper charges upon the Aircraft Collateral and all other payments that the
Agent may be required or authorized to make under any provision of this
Mortgage, as well as just and reasonable compensation for the services of the
Agent and of all persons properly engaged and employed for such purposes by the
Agent.
(c) The Agent, with or without taking possession of the
Aircraft Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales,
as an entirety or in separate lots or parcels, the Aircraft Collateral
or any part thereof, at public or private sale, at such place or places
and at such time or times and upon such terms, including terms of
credit (which may include the retention of title by the Agent to the
property so sold), as the Agent may determine, whether or not the
Aircraft Collateral shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this
Mortgage by suit, whether for specific performance of any covenant
herein contained or in aid of the exercise of any power herein granted
or for the foreclosure of this Mortgage and the sale of the Aircraft
Collateral under the judgment or decree of a court of competent
jurisdiction or for the enforcement of any other right.
(d) After an Event of Default has occurred and is continuing,
the Company agrees to the fullest extent that it lawfully may, that it and the
Lessee will not (and hereby irrevocably waives its right to) at any time plead,
or claim the benefit or advantage of, any appraisement, valuation, stay,
extension, moratorium, or redemption law now or hereafter in force, in order to
prevent or hinder the enforcement of this Mortgage or the absolute sale of the
Aircraft Collateral. The Company, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have all or any portion
of the Aircraft Collateral marshalled upon any foreclosure hereof.
(e) Each and every remedy of the Agent shall be cumulative and
shall not be exclusive of any other remedies provided now or hereafter at law,
in equity or otherwise.
<PAGE>
-25-
The Company shall reimburse the Agent, upon demand, for all fees and other
expenses paid or incurred by the Agent in exercising any rights, powers or
remedies granted hereby. All such fees and expenses shall, until paid, be
secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this
Mortgage or the Lease, the Agent shall at all times have the right, to the
exclusion of the Company, to declare the Lease in default in accordance with its
terms and to exercise all remedies set forth in the Leases.
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease
(including, without limitation, amounts received in connection with the exercise
by the Lessee of any purchase option or Event of Loss) and the proceeds of any
sale, lease or other disposition of all or any of the Aircraft Collateral or
Aircraft Related Collateral under this Mortgage and all other sums realized by
the Agent pursuant to this Mortgage or any proceedings hereunder shall be
applied in the following order of priority:
First: To the payment of the costs and expenses of such sale,
lease, disposition or other realization, including reasonable
compensation to the Agent's agents and counsel, and all expenses,
liabilities and advances made or incurred by the Agent in connection
therewith, including, without limitation, taxes upon or with respect to
the sale, lease, disposition or realization and the payment of taxes
and Liens, if any, prior to the lien and security interest of this
Mortgage (except any taxes or Liens to which the respective sale,
lease, disposition or realization shall have been subject) and to the
payment of expenses and the reimbursement of payments incurred or made
by the Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid
on the Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which
payment shall be applied to the principal installments of the Notes in
the manner specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by the
Company under the Credit Agreement, this Mortgage or any other Loan
Document, and otherwise to the Company or to such other Person(s) as
may lawfully be entitled, or as any court of competent jurisdiction may
direct, the remainder.
<PAGE>
-26-
SECTION 7. Agent as Attorney.
The Company hereby irrevocably appoints the Agent the true and
lawful attorney of the Company (with full power of substitution) in the name,
place and stead of, and at the expense of, the Company at any time after the
occurrence and during the continuation of an Event of Default (i) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Aircraft Collateral and Aircraft Related Collateral, (ii) to make all necessary
transfers of all or any part of the Aircraft Collateral and Aircraft Related
Collateral in connection with any sale, lease or other disposition made pursuant
hereto, (iii) to execute and deliver for value all necessary or appropriate
bills of sale, assignments and other instruments in connection with any such
sale, lease or other disposition, and (iv) generally to do, at the Agent's
option and the Company's cost and expense, at any time, or from time to time,
all acts and things that the Agent deems necessary to protect, preserve or
realize upon the Aircraft Collateral and Aircraft Related Collateral and the
Agent's security interest therein, in order to effect the intent of this
Mortgage, all as fully and effectively as the Company might do, the Company
hereby ratifying and confirming all that its said attorney (or any substitute)
shall lawfully do hereunder and pursuant hereto.
SECTION 8. Cash Collateral.
All monies received by the Agent to be held and applied under
this Section, and all monies if any, required to be paid to the Agent hereunder,
which disposition is not elsewhere herein otherwise specifically provided for,
shall be held by the Agent and applied from time to time as provided herein and
in the Credit Agreement and the other Loan Documents and shall be held in an
account in the name of the Agent and invested in Cash Equivalents for the
benefit and at the risk of the Company.
SECTION 9. Agent's Right to Perform.
If the Company fails to make any payment required to be made
by it hereunder or fails to perform or comply with any of its agreements
contained herein, the Agent may itself make such payment or perform or comply
with such agreement (including, without limitation, the agreement of the Company
to maintain insurance pursuant to Section 4(g) hereof), and the amount of such
payment and the amount of the reasonable expenses of the Agent incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified in the Credit Agreement from time to time, shall be payable by the
Company to the Agent on demand and shall constitute additional indebtedness
secured by the lien and security interest of this Mortgage.
<PAGE>
-27-
SECTION 10. Further Assurances.
The Company at its expense will promptly and duly execute and
deliver such documents and assurances and take such action as may be necessary
or desirable, or as the Agent may from time to time request, in order to correct
any defect, error or omission which may at any time hereafter be discovered in
the contents of this Mortgage or in the execution or delivery hereof, and/or in
order to more effectively carry out the intent and purpose of this Mortgage and
to establish, protect and perfect the rights, remedies and security interests
created or intended to be created in favor of the Agent hereunder, including,
without limitation, the execution, delivery and filing of any instruments with
the FAA and of any Uniform Commercial Code financing and continuation statements
with respect to the security interests created hereby, in form and substance
satisfactory to the Agent, in such jurisdictions as the Agent may reasonably
request. The Company hereby authorizes the Agent to file any such statements
without the signature of the Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in
the Aircraft Collateral and Aircraft Related Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of the Agent hereunder, to the
benefit of the Agent and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Agent or any Lender
may, subject to any restrictions contained in the Credit Agreement, assign or
otherwise transfer any of its interests in the Credit Agreement or in any Note
to any other person or entity, and such other benefits in respect thereof
granted to the Agent or any Lender herein or otherwise. Upon the indefeasible
payment in full of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Aircraft Collateral and Aircraft Related
Collateral shall revert to Company. Upon any such termination, the Agent will
execute and deliver to the Company, at the Company's expense, such instruments
of release and termination as the Company may reasonably request to evidence
such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the Company
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or
<PAGE>
-28-
terminated orally, but only by an instrument in writing signed by the Company
and the Agent. The captions and headings in this Mortgage are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against the Company with
respect to this Mortgage may be brought in any state or federal court of
competent jurisdiction in the State of New York or Colorado and by execution and
delivery of this Mortgage Company accepts for itself and in connection with the
Aircraft Collateral and Aircraft Related Collateral, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Mortgage. The Company hereby agrees that service of process in any
such proceeding in any such court may be made by registered or certified mail
return receipt requested to the Company at its address provided on the signature
pages of the Mortgage, such service being hereby acknowledged by the Company to
be effective and binding service in every respect. A copy of any such process so
served shall be mailed by registered mail to the Company, at its address
specified in Section 15 hereof, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of process. If any agent appointed by the Company refuses to accept
service, the Company hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Company in the courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR AIRCRAFT COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder
shall be in writing (including facsimile communication) and mailed or telecopied
or delivered to the Com-
<PAGE>
-29-
pany or the Agent, as the case may be, addressed to it at the address of such
party specified on the signature page hereof, or as to either party at such
other address as shall be designated by such party in a written notice to each
other party complying as to delivery with the terms of this Section 15. All such
notices and other communications shall, when mailed, be effective when deposited
in the mails, addressed as aforesaid.
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Mortgage.
[Remainder of page intentionally left blank.]
<PAGE>
-30-
IN WITNESS WHEREOF, the Company and the Agent have caused this
Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING III, INC.
By:
--------------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
--------------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE>
SCHEDULE I
to Security Agreement
and Chattel Mortgage
AIRFRAME
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial Number Registry No.
- ------------ ----- ------------- ------------
<S> <C> <C> <C>
Boeing 747-2D7B 22471 N527MC
</TABLE>
<PAGE>
SCHEDULE II
to Security Agreement
and Chattel Mortgage
ENGINES
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ------------ ----- -------------
<S> <C> <C>
General Electric CF6-50E2 528420
General Electric CF6-50E2 517532
General Electric CF6-50E2 455793
General Electric CF6-50E2 455430
</TABLE>
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE>
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated April 25, 2000,
between Atlas Freighter Leasing III, Inc., a Delaware corporation (the
"Company"), and Bankers Trust Company, as Administrative Agent for and
representative of (in such capacity, the "Agent") the financial institutions
(the "Lenders") party to the Credit Agreement dated as of April 25, 2000, among
the Company, the Lenders and the Agent.
The Company and the Agent have heretofore entered into a
Security Agreement and Chattel Mortgage dated April 25, 2000, (the "Mortgage")
and the terms defined therein and not otherwise defined herein are used herein
as therein defined. The Mortgage provides for the execution and delivery of
supplements thereto substantially in the form hereof, for the purpose of
particularly describing each Engine subjected to the lien of the Mortgage
pursuant to Section 4(f) thereof, and shall specifically mortgage such Engine to
the Agent.
The Mortgage relates to the Engine(s) described below and a
counterpart of the Mortgage has been recorded by the Federal Aviation
Administration on April __, 2000, and has been assigned Conveyance No.
____________.
NOW, THEREFORE, that, to secure the due and punctual payment
and performance of the Secured Obligations and in consideration of the premises
and of the covenants contained in the Mortgage, the Company hereby mortgages to
the Agent, its successors and assigns, and grants and assigns to the Agent, its
successors and assigns, a first priority purchase money security interest in all
estate, right, title and interest of the Company in and to the property
described in Schedule I annexed hereto (whether or not such Engine shall be
installed on or attached to the Airframe), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as
supplemental to the Mortgage and shall form a part thereof, and the Mortgage is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED
IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT
STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
A-1
<PAGE>
This Supplemental Chattel Mortgage may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Remainder of page intentionally left blank]
A-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Chattel Mortgage to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date first above
written.
ATLAS FREIGHTER LEASING III, INC.
By:
-----------------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
-----------------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
A-3
<PAGE>
SCHEDULE I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Serial Number
- ------------ ----- ----------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
- --------------------------------------------------------------------------------
LEASE AGREEMENT
DATED AS OF APRIL 25, 2000
BETWEEN
ATLAS FREIGHTER LEASING III, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
---------------------------
Three General Electric CF6-80C2 Engines
Manufacturer's Serial Nos. 704699, 704860, 704918
---------------------------
- --------------------------------------------------------------------------------
THE LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN
AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Definitions.......................................................1
SECTION 2. Acceptance and Lease.............................................22
SECTION 3. Term and Rent....................................................23
(a) Term and Basic Rent.......................................23
(b) Adjustments to Basic Rent.................................23
(c) Supplemental Rent.........................................23
(d) Payments in General.......................................24
(e) Minimum Rent..............................................24
(f) Prepayment of Rent Payments...............................25
SECTION 4. Certain Representations and Warranties...........................25
SECTION 5. Lessee's Representations and Warranties..........................26
(a) Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries...............................26
(b) Authorization of Transaction Documents, etc...............27
(c) Financial Condition.......................................28
(d) No Material Adverse Change; No Restricted
Junior Payments.........................................29
(e) Title to Properties, Liens................................29
(f) Litigation, Adverse Facts.................................30
(g) Payment of Taxes..........................................30
(h) Performance of Agreements.................................30
(i) Governmental Regulation...................................31
(j) Employee Benefit Plans....................................31
(k) Certain Fees..............................................31
(l) Environmental Protection..................................31
(m) Employee Matters..........................................32
(n) Solvency..................................................32
(o) Disclosure................................................32
(p) Registration and Filing; Chief Executive Office...........33
-i-
<PAGE>
Page
SECTION 6. Lessee's Affirmative Covenants...................................33
(a) Financial Statements and Other Reports....................33
(b) Corporate Existence.......................................39
(c) Payment of Taxes and Claims; Tax Consolidation............39
(d) Maintenance of Properties; Insurance......................39
(e) Inspection; Lender Meeting................................40
(f) Compliance with Laws, etc.................................40
(g) Lessee's Remedial Action Regarding Hazardous Materials....41
(h) Employee Benefit Plans....................................41
(i) Corporate Separateness....................................41
SECTION 7. Lessee's Negative Covenants......................................42
(a) Indebtedness..............................................42
(b) Liens and Related Matters.................................43
(c) Investments; Joint Ventures...............................44
(d) Contingent Obligations....................................45
(e) Restricted Junior Payments................................46
(f) Financial Covenants.......................................47
(g) Restriction on Fundamental Changes; Asset Sales
and Acquisitions; New Subsidiaries .....................52
(h) Amendments of Material Agreements.........................54
(i) Restriction on Leases.....................................55
(j) Sales and Lease-Backs.....................................55
(k) Transactions with Shareholders and Affiliates.............56
(l) Disposal of Subsidiary Stock..............................56
(m) Conduct of Business.......................................56
(n) Change of Chief Executive Office..........................57
SECTION 8. Return of the Engines............................................57
(a) Condition Upon Return.....................................57
(b) Overhaul and Repair.......................................57
(c) Repairs...................................................57
(d) Modifications.............................................57
(e) Airworthiness Directives..................................58
(f) Return of the Engines.....................................58
(g) Deferred Maintenance......................................58
(h) Corrosion Treatment.......................................58
(i) Manuals...................................................58
(j) Storage Upon Return.......................................58
-ii-
<PAGE>
Page
(k) Severable Parts...........................................59
(l) Survival..................................................59
(m) Deregistration and Export.................................59
SECTION 9. Liens............................................................60
SECTION 10. Registration, Maintenance and Operation; Possession
and Subleases; Insignia........................................60
(a) Maintenance and Operation.................................60
(b) Possession................................................62
(c) Insignia..................................................64
(d) Holding Out...............................................64
(e) No Pledging of Credit.....................................64
(f) Title.....................................................64
(g) Information and Records...................................65
SECTION 11. Replacement and Pooling of Parts; Alterations,
Modifications and Additions....................................66
SECTION 12. Indemnities......................................................68
SECTION 13. Event of Loss....................................................69
SECTION 14. Insurance........................................................71
SECTION 15. Assignment.......................................................74
SECTION 16. Events of Default................................................75
SECTION 17. Remedies.........................................................79
SECTION 18. Lessee's Cooperation Concerning Certain Matters..................82
SECTION 19. Notices..........................................................82
SECTION 20. Net Lease, True Lease, etc.......................................83
SECTION 21. Purchase Option..................................................84
(a) Purchase Option...........................................84
(b) Notice of Purchase........................................85
SECTION 22. Lessor's Right to Perform for Lessee.............................85
-iii-
<PAGE>
Page
SECTION 23. Miscellaneous....................................................85
SECTION 24. Security for Lessor's Obligations................................86
SCHEDULES
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
-iv-
<PAGE>
LEASE AGREEMENT
LEASE AGREEMENT dated as of April 25, 2000, between ATLAS FREIGHTER LEASING
III, INC., a Delaware corporation (the "Lessor"), and ATLAS AIR, INC., a
Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessee desires to lease from the Lessor and the Lessor is
willing to lease to the Lessee the Engines upon the terms and subject to the
conditions of this Lease;
WHEREAS, the Lessor and the Lessee desire that this be a net lease;
WHEREAS, the Lessor has incurred certain Loans under the Credit Agreement
in connection with the Engines to be leased pursuant to the terms of this Lease
and other aircraft and spare engines to be leased pursuant to the other Leases:
WHEREAS, the Lessor and the Lessee desire that this Lease be, and be
treated as, a Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the Lessor and the Lessee hereby
agree as follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Engine" means a General Electric CF6-80C2 engine or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and suitable
for installation and use on one or more of the Boeing 747-400 aircraft used by
the Lessee in its business; provided, that such engine shall be an engine of a
type then being utilized by the Lessee on other Boeing 747-400 aircraft operated
by the Lessee, and shall have been maintained, serviced, repaired and overhauled
in substantially the same manner as required under this Lease without in any way
discriminating against such engine.
"ACMI Contract" means (i) any contract entered into by the Lessee pursuant
to which the Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with the Lessee's historical practices.
<PAGE>
-2-
"ACMI Contracted Aircraft" means an aircraft acquired by the Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis, effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided, that such projected cash operating expenses shall
not be less on a per block hour basis than the average historical per block hour
operating expenses of the Lessee for the four full fiscal quarters immediately
preceding the date of calculation; and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which the Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
<PAGE>
-3-
"Aircraft" means each of the "Aircraft" as defined in the Credit Agreement.
"Aircraft Chattel Mortgage" means each Security Agreement and Aircraft
Chattel Mortgage entered into in connection with the Credit Agreement.
"Airframe" means each "Airframe" as defined in the Credit Agreement.
"Amended Aircraft Credit Facility" means the Fourth Amended and Restated
Credit Agreement dated as of April 25, 2000, among the Lessee, as borrower, the
lenders listed therein, and Bankers Trust Company, as administrative agent,
without giving effect to any amendments, modifications, supplements or waivers
thereof.
"Approved Appraiser" means any of AvSolutions, Inc., BK Associates, Inc.,
Simat, Helliesen & Eichner, Inc., Morton Beyer & Agnew, Inc., AVITAS, Inc.,
Airclaims, Ltd., Aircraft Information Services, Inc., or any other nationally
recognized firm of aircraft appraisers reasonably satisfactory to the Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction other
than sale-leaseback transactions permitted by subsections 7(i) and 7(j) of this
Lease) by the Lessee or any of its Subsidiaries to any other Person of (i) any
of the stock of any of the Lessee's Subsidiaries, (ii) substantially all of the
assets of any division or line of business of the Lessee or any of its
Subsidiaries, or (iii) any other assets (whether tangible or intangible) of the
Lessee or any of its Subsidiaries outside of the ordinary course of business,
excluding (A) any such other assets to the extent that the aggregate value of
such assets sold in any single transaction or related series of transactions is
equal to $5,000,000 or less, (B) transactions related to aircraft engines,
components, parts or spare parts pursuant to customary pooling, exchange or
similar arrangements, (C) asset swaps involving aircraft engines, components,
parts or spare parts, provided that the assets received by the Lessee or any
Subsidiary have a fair market value at least equal to the assets transferred
(provided that with respect to any asset swap or series of related asset swaps
involving assets of the Lessee or any Subsidiary with a fair market value
exceeding $10,000,000, such determination shall be made by the Board of
Directors of the Lessee), (D) asset sales involving obsolete, worn-out, excess
or redundant equipment as long as the proceeds therefrom are used to replace or
to upgrade the aircraft or the equipment installed thereon, (E) transactions
permitted by Section 9.21 of the Credit Agreement and (F) the sale by the Lessor
of a single aircraft pursuant to Section 6.6 (ii) of the Credit Agreement.
"Bankruptcy Code" means Title 11 of the United States Code, entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
<PAGE>
-4-
"Basic Rent" means, for the Term, the rent payable for the Engines pursuant
to Section 3(a) of this Lease adjusted as provided in Section 3(b) of this
Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day that is
a legal holiday under the laws of the States of New York or Colorado or is a day
on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease," as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
<PAGE>
-5-
"Compliance Certificate" means a certificate, substantially in the form of
Exhibit D annexed hereto, delivered to the Lessor, the Agent and the Lenders by
the Lessee pursuant to subsection 6(a)(3) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the December 31, 1999, balance sheet of Atlas, all of the foregoing
as determined on a consolidated basis for the Lessee and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of the Lessee and its
Subsidiaries) by the Lessee and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of the Lessee and its Subsidiaries plus (ii) to the extent not covered by
clause (i) of this definition, the aggregate of all expenditures by the Lessee
and its Subsidiaries during that period to acquire (by purchase or otherwise)
the business, property or fixed assets of any Person, or the stock or other
evidence of beneficial ownership of any Person that, as a result of such
acquisition, becomes a Subsidiary of the Lessee.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of the Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of the Lessee
and its Subsidiaries, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3 of
the Amended Aircraft Credit Facility on or before the Fourth Restatement Date
(as such term is defined in the Amended Aircraft Credit Facility).
"Consolidated Leverage Ratio" means, as of the last day of any fiscal
quarter of the Lessee, the ratio of (i) Consolidated Total Debt as of such date
(less Cash and Cash Equivalents held by the Lessee in excess of $25 million as
of such date) plus seven times Consolidated Rental Payments (for the four fiscal
quarter period ending as of such date) to (ii) Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending as of
such date.
<PAGE>
-6-
"Consolidated Net Income" means, for any period, the net income (or loss)
of the Lessee and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP; provided, that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of the Lessee) in which any other Person (other than the Lessee or
any of its Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Lessee or any of
its Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of the Lessee or is
merged into or consolidated with the Lessee or any of its Subsidiaries or that
Person's assets are acquired by the Lessee or any of its Subsidiaries, (iii) the
income of any Subsidiary of the Lessee to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any pension plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of the Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by the Lessee and its Subsidiaries on a
consolidated basis (excluding rent paid pursuant to the Leases) during that
period under all Capital Leases and Operating Leases to which the Lessee or any
of its Subsidiaries is a party as lessee (net of sublease income other than
income from ACMI Contracts). For the avoidance of doubt, all rental payments to
the Lessor shall not be included in Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of the Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for
<PAGE>
-7-
reimbursement of drawings, or (iii) under Interest Rate Agreements and Currency
Agreements. Contingent Obligations shall include, without limitation, (a) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation," as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, deed to secure debt, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
"Contribution" means the "Atlas Contribution" as defined in the Credit
Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated as of April 25,
2000, by and among the Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect the Lessee or any of its
Subsidiaries against fluctuations in currency values.
<PAGE>
-8-
"Default" means any event that, with the giving of notice or the lapse of
time or both, would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the NationsBanc/Banc of
America Agreement, the Senior Note Documents, any Permitted Extension
Indebtedness and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier," as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, that (i) is in a cargo configuration capable of immediate
operation in the business of the Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA that is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the General Electric CF6-80C2 aircraft engines
listed in the initial Lease Supplement, whether or not from time to time
installed on any Airframe or any other airframe; (ii) any Acceptable Alternate
Engine that may from time to time be substituted for any of such engine pursuant
to the terms of this Lease; and (iii) in any case, any and all Parts that are
from time to time incorporated or installed in or attached to any such engine
and any and all parts removed therefrom so long as title thereto remains vested
in the Lessor in accordance herewith. The term "Engines" means, as of any date
of determination, all Engines then leased under this Lease.
<PAGE>
-9-
"Environmental Claim" means any investigation, notice, claim, suit or
order, by any governmental authority or any Person, arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equipment Obligations" means the "Equipment Obligations" as defined in the
Credit Agreement.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of the Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation that
is, or was at any time, a member of a controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code of which that Person
is, or was at any time, a member; (ii) any trade or business (whether or not
incorporated) that is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" means any of the following events with respect to any
Engine: (A) loss of such Engine or the use thereof due to theft or disappearance
of the Engine that results in the loss of possession thereof for a period of 120
days (or for a shorter period ending on the date on which there is an insurance
settlement for a total loss on the basis of the theft or disappearance of such
Engine, (B) the destruction, damage beyond repair or rendition of such Engine
permanently unfit for normal use for any reason whatsoever, (C) the
condemnation, confiscation or seizure of, or requisition of title to, or adverse
use or possession (other than
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use by the United States Government if the Lessee obtains adequate compensation
from the United States Government) of such Engine, (D) as a result of any rule,
regulation, order or any other action by the FAA or any other governmental body
having jurisdiction, the use of such Engine in the normal course of interstate
air transportation of persons or cargo shall have been prohibited for a period
of more than nine consecutive months unless the Lessee, prior to the expiration
of such nine month period, shall have undertaken and shall be diligently
carrying forward all steps that are necessary or desirable to permit the normal
use of such property by the Lessee or, in any event, if such use shall have been
prohibited for a period of twelve consecutive months, (E) the operation or
location of such Engine, while under requisition for use by the United States or
any instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Engine, if the Lessee shall be
unable to obtain indemnity or "war-risk" insurance in lieu thereof from the
United States, (F) any damage that results in an insurance settlement with
respect to such Engine on the basis of an actual or constructive total loss or
(G) a divestiture of such Engine as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage under the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of any Engine shall mean the value that would be
obtained in an arm's-length transaction between an informed and willing
lessee-user or buyer-user (other than a lessee currently in possession or a used
equipment dealer) under no compulsion to lease or buy, as the case may be, and
an informed and willing lessor or seller, as the case may be, under no
compulsion to lease or sell, as the same shall be specified by agreement between
the Lessor and the Lessee or, if not agreed to by the Lessor and the Lessee
within a period of 15 days after either party requests a determination, then as
specified in an appraisal prepared and delivered in New York City by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
the Lessee, or, if such appraiser cannot be agreed to within 20 days, then
either party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining Fair Market Sales Value by appraisal or otherwise, it will be
assumed that the Engine is in the condition, location and overhaul status in
which it is required to be returned to the Lessor pursuant to Section 8 of this
Lease, that all modifications and improvements shall be taken into account, that
the Lessee has removed all Parts that it is entitled to remove pursuant to
Section 11 of this Lease and that the Engine is not encumbered by this Lease.
Except as otherwise expressly provided in the Lease, all appraisal costs will be
shared equally by the Lessor and the Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in Title 49, United States Code, or any similar legislation of
the United
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States enacted to supersede, amend or supplement such Act and the rules and
regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Final Maturity Date" means April 25, 2006.
"Financed Aircraft" means all "Financed Aircraft" as defined in the Amended
Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996, between FINOVA and the Lessee, as amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of the Agent located at 130
Liberty Street, New York, New York 10006, Attention: Marguerite Sutton.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by the Lessee to the Lessor, the Agent and the Lenders pursuant
to clauses (1), (2), (3) and (12) of subsection 6(a) hereunder shall be prepared
in accordance with GAAP as in effect as of the date of such preparation.
Calculations in connection with the definitions, covenants and other provisions
of this Lease shall utilize accounting principles and policies in conformity
GAAP as in effect as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
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"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, the Lessee.
"Holding Company" has the meaning assigned to that term in the definition
of "Holding Company Reorganization."
"Holding Company Reorganization" means the acquisition, in one transaction
or a series of related transactions, of all of the outstanding Securities of the
Lessee that are entitled to vote in the election of directors, other than
Securities having such power only by reason of the happening of a contingency,
(and all other Securities convertible into such Securities) by another
corporation (the "Holding Company"); provided, that the Holding Company
Reorganization may involve more than one holding company of the Lessee, so long
as the ultimate Holding Company directly or indirectly owns 100% of the Lessee;
and provided further, that in connection with the Holding Company Reorganization
the Lessee and its Subsidiaries shall not incur any material obligations or
liabilities of any type other than those permitted to be paid without causing a
Lease Event of Default under Section 16(v).
"Holding Company Subsidiary" means any Subsidiary of a Holding Company
other than the Lessee and its Subsidiaries.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
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"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"Initial Borrowing Date" means the date on which the Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect the Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by the Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of the
Lessee from any Person other than the Lessee or any of its Subsidiaries, of any
equity Securities of such Subsidiary, or (iii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by the Lessee or any of its Subsidiaries to
any other Person (other than a wholly-owned Subsidiary of the Lessee), including
all indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between the Lessor and the Lessee
for the purpose of leasing the Engines under and pursuant to the terms of the
Lease, and any subsequent Lease Supplement entered into in accordance with the
terms of the Lease.
<PAGE>
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"Leases" means the Lease Agreements, dated as of April 25, 2000, between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing III, Inc., as Lessor under the
Lease, and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of the Lessor in the
jurisdiction imposing the Tax that is unrelated to the Lessor's dealings
with the Lessee or the transactions contemplated by this Lease or the
operation of any Engine by the Lessee; or
(b) imposed on the net income, profits or gains of the Lessor by the
United States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority of any
jurisdiction if and to the extent that such Tax results from (i) the use,
operation, presence or registration of any Engine or any Part in the
jurisdiction imposing the Tax, or (ii) the situs of organization, any place
of business or any activity of the Lessee or any other Person having use,
possession or custody of any Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to the
Lessor's dealings with the Lessee or to the transactions contemplated by
this Lease.
"Lessor's Lien" means any Lien over any of the Engines (i) arising as a
result of any act or omission of the Lessor that constitutes a breach of any of
the terms of this Lease, (ii) arising as a result of any indebtedness, liability
or other obligation arising by through or under the Lessor, including, without
limitation, any Tax, that is not indemnified against by the Lessee or (iii)
resulting from the Credit Agreement or any other Lien from time to time created
by or through the Lessor in connection with the financing of the Engines.
<PAGE>
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"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc/Banc of America Agreement, the Senior Note Documents and agreements
in respect of Permitted Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means Moody's Investors Service, Inc.
"NationsBanc/Banc of America Agreement" means the Loan Agreement, dated as
of March 28, 1997, between Atlas Air, Inc., as borrower, and NationsBanc Leasing
Corporation/Banc of America Leasing & Capital LLC, as lender, and as further
amended, supplemented and modified in accordance with this Lease and all other
related documents.
"Obligations" means all obligations of the Lessor to pay all amounts due
from time to time under the Credit Agreement and the other Loan Documents to the
Agent, the Lenders or any of them, whether for principal, interest, fees,
expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property
<PAGE>
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(whether real, personal or mixed) that is not a Capital Lease other than any
such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate that does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of the Lessee and its Subsidiaries or any less
favorable, from the perspective of the Lessor or the Lenders, than any other
Designated Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
Airframes, airframes, or complete Engines, Spare Engines or engines, that are
from time to time incorporated or installed in or attached to any Engine, and
all such items that are subsequently removed therefrom so long as title thereto
shall vest in the Lessor in accordance with this Lease.
"Pass Through Trust Documents" means, collectively, (i) those six certain
Pass Through Trust Agreements, dated as of February 9, 1998, between Atlas Air,
Inc., and Wilmington Trust Company, as trustee (the "1998 Pass Through Trust
Agreements") and any related agreements, notes, guaranties, indentures, security
documents or other documents, including, without limitation, documents relating
to the equipment notes to be held in trust pursuant to the 1998 Pass Through
Trust Agreements and all related documents, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Lease, (ii) that certain Pass Through Trust Agreement, dated as of
April 1, 1999, between Atlas Air, Inc., and Wilmington Trust Company, as trustee
(the "1999 Pass Through Trust Agreement") and any related agreements, trust
supplements, notes, guaranties, indentures, security documents or other
documents, including, without limitation, documents relating to the equipment
notes to be held in trust pursuant to the 1999 Pass Through Trust Agreement and
all related documents, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease and (iii)
that certain Pass Through Trust Agreement dated as of January 28, 2000, between
Atlas Air, Inc., and Wilmington Trust Company, as trustee (the "2000 Pass
Through Trust Agreement") and any related agreements, trust supplements, notes,
guaranties, indentures, security documents or other documents, including,
without limitation, documents relating to the equipment notes to be held in
trust pursuant to the 2000 Pass Through Trust Agreement and all related
documents, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
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"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages and (II) Sections 4(d) and 4(e) of the
aircraft chattel mortgages entered into in connection with the Amended
Aircraft Credit Facility;
<PAGE>
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(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xi) Liens granted pursuant to the Transaction Documents;
(xii) Liens arising pursuant to the Amended Aircraft Credit Facility;
and
(xiii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by the Lessee
of any Indebtedness of the Lessee, including any such successive transactions by
the Lessee, so long as (i) any such Indebtedness bears interest at a rate that
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of the Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of the Lessee hereunder at least to the same
extent as the Indebtedness immediately prior to such extension, (iv) such
Permitted Extension Indebtedness has a final stated maturity later than the end
of the stated maturity of the Indebtedness being extended immediately prior to
such extension and (v) the amortization and the other terms, provisions,
conditions, covenants and events of default thereof taken as a whole shall be no
more onerous or restrictive from the perspective of the Lessee and its
Subsidiaries or any less favorable, from the perspective of the Lessor and the
Lenders than those contained in the Indebtedness immediately prior to such
extension.
"Permitted Holders" means Michael A. Chowdry, his spouse, his descendant(s)
or any entity controlled by any of the foregoing, or any trust solely for the
benefit of any of the foregoing.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability partnerships, limited
liability companies, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
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"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pricing Certificate" shall have the meaning assigned to that term in
Section 6(a)(13).
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by the Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by the Lessee or any of its Subsidiaries or any other related action
that requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with the Lessor and the Agent using the consolidated
financial statements of the Lessee and its Subsidiaries, which shall be
reformulated as if any such incurrence of Indebtedness and the application of
proceeds, acquisition, disposition or other related action had been consummated
at the beginning of the period specified in the covenant with respect to which
Pro Forma Basis compliance is required. "Proceedings" has the meaning assigned
to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of the Lessee
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of the Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of the Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-
<PAGE>
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substance or legal defeasance), sinking fund or similar payment with respect to,
any Designated Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Senior Note Documents" means (i) the Indenture, dated as of August 13,
1997, between Atlas Air, Inc., and State Street Bank and Trust Company, relating
to the 10 3/4% $150 million Senior Notes due 2005 of the Lessee (the "10 3/4%
Senior Notes"), and any and all related agreements, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Lease, (ii) the Indenture, dated as of April 9, 1998, between Atlas
Air, Inc., and State Street Bank and Trust Company, relating to the 9 1/4% $175
million Senior Notes due 2008 of the Lessee (the "9 1/4% Senior Notes"), and any
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease and (iii)
the Indenture, dated as of November 18, 1998, between Atlas Air, Inc., and State
Street Bank and Trust Company, relating to the 9 3/8% $150 million Senior Notes
due 2006 of the Lessee (the "9 3/8% Senior Notes," and together with the 10 3/4%
Senior Notes and the 9 1/4% Senior Notes, the "Senior Notes"), and any and all
related agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Services Agreement" means a Services Agreement between the Lessor and the
Lessee dated as of April 25, 2000.
"Solvent" means, with respect to any Person, that, as of the date of
determination, both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person, (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction, and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due, and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws re-
<PAGE>
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lating to fraudulent transfers and conveyances. For purposes of this definition,
the amount of any contingent liability at any time shall be computed as the
amount that, in light of all of the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.
"Spare Engines" means each "Spare Engine" as defined in the Credit
Agreement.
"Special Purpose Subsidiary" means a Subsidiary of the Lessee formed solely
for the purpose of refinancing Indebtedness associated with a Financed Aircraft
or acquiring or refinancing other aircraft with Permitted Extension Indebtedness
or Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided, that the Lessee beneficially owns and controls at least
95% of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" means each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Engines shall mean, as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f), plus all accrued and unpaid interest on the
Loans relating to the Engines on the date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Lease other than the financial covenants set forth in subsection 7(f) and
the definitions related thereto, the Lessor shall not be considered a Subsidiary
of the Lessee.
<PAGE>
-22-
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) that the Lessee assumes or agrees to pay to the Lessor or
others under any of the Transaction Documents, including payments of Stipulated
Loss Value and other amounts referred to in Section 3(c) of this Lease.
"Tax" or "Taxes" shall have the meaning assigned to that term in Section
12(a) hereunder.
"Technical Records" shall have the meaning assigned to that term in Section
8(i).
"Term" means the term for which the Engines are leased hereunder pursuant
to Section 3(a) of this Lease, beginning on the Initial Borrowing Date and
ending on the Final Maturity Date, or such earlier date as this Lease may be
terminated in accordance with the terms hereof.
"Transaction" means, collectively, (i) the Contribution, (ii) the
Transfers, (iii) the leasing by the Lessor to the Lessee of the Spare Engines
and the Aircraft pursuant to the Leases, (iv) the repayment of the Equipment
Obligations and (v) the release and termination of all security interests and
Liens encumbering the Spare Engines and any part thereof and any other assets of
the Lessor.
"Transaction Documents" means the Amended Aircraft Credit Facility, any
bills of sale or certificates of transfer for each Aircraft and each Spare
Engine leased pursuant to the Leases (including bills of sale on AC Form 8050-2)
delivered in connection with the Transaction, the Leases, all documents relating
to the repayment of the Equipment Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Atlas
Contribution and the Transfers.
"Transfers" mean the "Transfers" as defined in the Credit Agreement.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, the Lessor hereby agrees to lease to the Lessee
hereunder, and the Lessee hereby agrees to accept on the Initial Borrowing Date
from the Lessor hereunder, each of the Engines as evidenced by the execution by
the Lessor and the Lessee of a Lease Supplement leasing the Engines hereunder.
The Lessee agrees to appoint in writing one or more of its
<PAGE>
-23-
employees as its authorized representative to accept delivery of the Engines
pursuant to the terms hereof. The Lessee hereby agrees that acceptance of
delivery by such employee or employees shall, without further act, irrevocably
constitute acceptance by the Lessee of the Engines for all purposes of this
Lease Agreement.
SECTION 3. Term and Rent.
(a) Term and Basic Rent. The Term shall commence on the Initial Borrowing
Date and end on the Final Maturity Date or such earlier date as this Lease may
be terminated in accordance with the provisions hereof. Basic Rent shall accrue
during the Term in accordance with Exhibit B hereto. The Lessee shall pay to the
Lessor on each Basic Rent Payment Date an amount of Basic Rent specified
opposite each Basic Rent Payment Date on Exhibit B hereto as such amounts may be
adjusted pursuant to Section 3 plus accrued interest on Basic Rent previously
accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by the Agent and notified
to the Lessor and the Lessee prior to the Basic Rent Payment Date, that
represents the amount of interest due and payable on the Loans relating to the
Engines on such Basic Rent Payment Date and determined in accordance with the
Credit Agreement.
(c) Supplemental Rent. The Lessee shall pay (or cause to be paid) to the
Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent constituting Stipulated Loss Value as the same shall become due and owing
and all other amounts of Supplemental Rent within 10 days after demand, and in
the event of any failure on the part of the Lessee to pay any Supplemental Rent
when due, the Lessor shall have all rights, powers and remedies provided for
herein or by law or equity or otherwise in the case of nonpayment of Basic Rent.
The Lessee also will pay to the Lessor, or to whomsoever shall be entitled
thereto, as assignee of the Lessor, on demand, as Supplemental Rent, (i) all
amounts of interest payable by the Lessor pursuant to subsection 2.2(C) of the
Credit Agreement that (I) are payable on the Loans relating to the Engines and
(II) fall due on any day that is not a Basic Rent Payment Date, (ii) interest at
the Past Due Rate with respect to any part of any installment of Basic Rent not
paid when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid when due for the period and, to the extent
permitted by law, on interest accrued on Basic Rent which itself was accrued and
not paid to the extent that such accrued interest was not paid when due until
the same shall be paid and on any other amounts payable hereunder that are not
paid when due and (iii) all amounts payable by the Lessor pursuant to
subsections 2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however,
that, to the extent that any Supplemental Rent required to be paid pursuant to
clause (iii) of this subsection 2(c) has been paid by the Lessee pursuant to the
terms of another
<PAGE>
-24-
Lease, then the Lessee's obligations hereunder shall be deemed to be satisfied
by the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by the
Lessee prior to 12:00 p.m. (New York time), to the Lessor at its office at 538
Commons Drive, Golden, CO 80401, Attention: Richard H. Shuyler (or such other
office of the Lessor in the continental United States or such other account as
the Lessor shall direct in a notice to the Lessee at least 10 Business Days
prior to the date when such payment of Rent is due); provided, that, so long as
any Obligations remain outstanding, all Rent shall be paid directly to the Agent
at the Funding and Payment Office; and provided further, that to the extent the
amount of Rent paid directly to the Agent is in excess of the amount of
principal and interest on the Loans relating to the Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to
aircraft or other spare engines leased pursuant to the other Leases and after
taking into account all other payments of rent pursuant to the other Leases on
such date), then such excess amounts shall be paid by the Agent to the Lessor at
its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day, then such
payment shall be made on the next succeeding Business Day; provided, however,
that if any date on which a payment of Rent becomes due is not a Business Day
and is a day of the month after which no further Business Day occurs in such
month, then the payment of Rent shall be made on the next preceding Business
Day. No interest shall accrue on the amount of any payment made on the Business
Day next succeeding the regularly scheduled Basic Rent Payment Date, if such
payment is made on such next succeeding Business Day because the original date
of payment was not a Business Day (it being understood that the amount of Basic
Rent includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for the Lessor to pay in full principal and interest on the
Loans relating to the Engines required to be paid by the Lessor on or
within five Business Days of the due date of such installment of Basic
Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount that (when taken together with
any other Basic Rent due and payable in connection therewith) is at least
equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Engines and
all other unpaid Obligations of the Lessor (other than principal and
interest on Loans relating
<PAGE>
-25-
to aircraft or other spare engines and after taking into account all other
payments of Stipulated Loss Value pursuant to the other Leases on such
date).
(f) Prepayment of Rent Payments:
(i) In the event that the Lessor is at any time required to repay
Loans relating to the Engines pursuant to Section 2.4C(ii) of the Credit
Agreement, the Lessor shall notify the Lessee of such required prepayment
and the Lessee shall immediately prepay an amount of Basic Rent equal to
the amount of such required prepayment less any required payments of the
Loans relating to the Engines actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to prepay Basic Rent
voluntarily at any time and from time to time, without premium or penalty,
upon not less than three Business Days' prior written or telephonic notice
to the Lessor and the Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f),
the schedules of Basic Rent and Stipulated Loss Value shall be adjusted so
as to preserve the after tax yield and after tax cash flows of the Lessor
and, to the extent consistent therewith, to minimize the net present value
of Basic Rent payments. All such computations shall be made on the basis of
the same assumptions and the method of computations employed in the
original calculations of Basic Rent and Stipulated Loss Values (except to
the extent that such assumptions have been changed as a result of such
prepayment or any prior such adjustment). At the Lessee's written request,
independent public accountants mutually selected by the Lessor and the
Lessee shall confirm the required adjustments. The final determination of
any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, costs and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding, after
giving effect to the foregoing adjustments, the revised Basic Rent and
Stipulated Loss Values shall permit the Lessee to comply with Section 3(e)
hereof.
SECTION 4. Certain Representations and Warranties. THE LESSEE ACKNOWLEDGES
AND AGREES THAT, AS BETWEEN THE LESSOR AND THE LESSEE (A) EACH ENGINE IS OF A
SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE
AND THE LESSEE TAKES THE
<PAGE>
-26-
SAME "AS IS," (B) THE LESSEE IS SATISFIED THAT EACH ENGINE IS SUITABLE FOR ITS
PURPOSES, (C) THE LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND, AND (D) NEITHER THE LESSOR NOR THE AGENT NOR ANY LENDER MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF ANY ENGINE OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER
PROPRIETARY RIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY ENGINE OR ANY PART THEREOF, except that the Lessor covenants
that it will not, through its own actions or inactions, in such capacity,
interfere in the Lessee's quiet enjoyment of the Engines unless this Lease shall
have been declared or deemed to have been declared in default pursuant to
Section 17 hereof. None of the provisions of this Section 4 or any other
provision of this Lease shall be deemed to amend, modify or otherwise affect the
representations, warranties or other obligations (express or implied) of any
manufacturer, any affiliate thereof, any subcontractor or supplier of any
manufacturer or any affiliate thereof, with respect to any Engine or any Parts,
or to release the manufacturer, any affiliate thereof, or any such subcontractor
or supplier from any such representation, warranty or obligation. Unless a
Default or Lease Event of Default shall have occurred and be continuing, the
Lessor agrees to make available to the Lessee such rights as the Lessor may have
under any warranty with respect to any Engine made by the manufacturer or any
affiliate thereof or any of its subcontractors or suppliers and any other claims
against the manufacturer or any affiliate thereof, or any such subcontractor or
supplier with respect to any Engine, all pursuant to and in accordance with the
terms of any applicable purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce the
Lessor to enter into this Lease and the Agent and the Lenders to make the Loans
under the Credit Agreement, the Lessee represents and warrants to the Lessor,
the Agent and each Lender on the date of this Lease that the following
statements are true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. The Lessee is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Lessee has all requisite corporate power and
authority to own and operate its proper-
<PAGE>
-27-
ties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and
to carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. The Lessee is qualified to do
business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations,
except in jurisdictions where the failure to be so qualified or in good
standing has not had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of the Lessee as of the
Initial Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto.
The capital stock of each of the Subsidiaries of the Lessee identified in
Schedule 5(a)(iii) annexed hereto (as so supplemented) is duly authorized,
validly issued, fully paid and nonassessable and none of such capital stock
constitutes Margin Stock. Each of the Subsidiaries of the Lessee identified
in Schedule 5(a)(iii) annexed hereto is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted, and
is qualified to do business and in good standing in every jurisdiction
where its assets are located and wherever necessary to carry out its
business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and
authority has not had and will not have a Material Adverse Effect. Schedule
5(a)(iii) annexed hereto correctly sets forth the ownership interest of the
Lessee and each of its Subsidiaries in each of the Subsidiaries of the
Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery
and performance of this Lease and the other Transaction Documents have been
duly authorized by all necessary corporate action on the part of the Lessee
or its Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by the
Lessee or its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated
by the Transaction Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to the Lessee
or any of its Subsidiaries, the certificate or articles of incorporation or
bylaws of the Lessee or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on
<PAGE>
-28-
the Lessee or any of its Subsidiaries, (ii) conflict with in any material
respect, result in a material breach of or constitute (with due notice or
lapse of time or both) a material default under any material Contractual
Obligation of the Lessee or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties
or assets of the Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor
of the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of the Lessee or any of its Subsidiaries, except for such
approvals or consents as will be obtained on or before the Initial
Borrowing Date and disclosed in writing to the Lessor and the Lenders.
(iii) Governmental Consents. The execution, delivery and performance
by the Lessee and its Subsidiaries, as the case may be, of this Lease and
the other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and
will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body that has not been obtained or
made on or prior to the date required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by the Lessee and its
Subsidiaries, as the case may be, to the extent that it is a party thereto,
and is the legally valid and binding obligation of each such Person,
enforceable against each such Person in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
(c) Financial Condition.
(A) The Lessee has heretofore delivered to the Lessor, the Agent and
the Lenders, the following financial statements and information: the
audited consolidated and consolidating balance sheets of the Lessee and its
Subsidiaries as at December 31, 1999, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
the Lessee and its Subsidiaries for the fiscal year then ended. All such
statements were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated and, where applicable, consolidating
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case
of any such unaudited financial statements, to changes resulting from audit
and normal year-end adjustments. Neither the Lessee nor any of
<PAGE>
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its Subsidiaries has (and will not, following the Initial Borrowing Date,
have) any Contingent Obligation, contingent liability or liability for
taxes, long-term lease or unusual forward or long-term commitment that is
not reflected in the foregoing financial statements or the notes thereto
and which in any such case is material in relation to the business,
operations, properties, assets, condition (financial or otherwise) or
prospects of the Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to the Lessee and its Subsidiaries
of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in
aggregate, could reasonably be expected to be material to the Lessee and
its Subsidiaries taken as a whole. As of the Initial Borrowing Date, the
Lessee does not know of any basis for the assertion against it of any
liability or obligation of any nature whatsoever that is not fully
disclosed in the financial statements delivered pursuant to Section 5(c)(A)
which, either individually or in the aggregate, could reasonably be
expected to be material to the Lessee and its Subsidiaries taken as a
whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since December 31, 1999, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect. Since December 31, 1999, neither the Lessee nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made, or
set apart any sum or property for, any Restricted Junior Payment or agreed
to do so, except as permitted by subsection 7(e) hereunder.
(e) Title to Properties, Liens.
The Lessee and its Subsidiaries have (i) good, sufficient and legal
title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or
personal property), or (iii) good title to (in the case of all other
personal property), all of the properties and assets reflected in the
financial statements referred to in subsection 5(c) or in the most recent
financial statements delivered pursuant to subsection 6(a), in each case
except for assets disposed of since the date of such financial statements
in the ordinary course of business or as otherwise permitted under
subsection 7(g). Except as permitted by this Lease, all such properties and
assets are free and clear of Liens.
<PAGE>
-30-
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of the Lessee or any
of its Subsidiaries) at law or in equity or in admiralty or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee
or any of its Subsidiaries or any property of the Lessee or any of its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither the Lessee nor any
of its Subsidiaries is (i) in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to result in
a Material Adverse Effect or (ii) subject to or in default with respect to
any final judgments, writs, injunctions, decrees, rules or regulations of
any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of the Lessee and its Subsidiaries required to be filed by any of
them have been timely filed, and all taxes, assessments, fees and other
governmental charges upon the Lessee and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises that are
due and payable have been paid when due and payable. The Lessee does not
know of any proposed tax assessment against the Lessee or any of its
Subsidiaries that is not being actively contested by the Lessee or such
Subsidiary in good faith and by appropriate proceedings; provided, that
such reserves or other appropriate provisions, if any, for liabilities for
taxes as shall be required in conformity with GAAP shall have been made or
provided in the financial statements of the Lessee. There are no agreements
with respect to taxes between the Lessee and any tax agency or authority.
(h) Performance of Agreements.
Neither the Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or
both, would constitute such a default, except where the consequences,
direct or indirect, of such default or defaults, if any, would not have a
Material Adverse Effect.
<PAGE>
-31-
(i) Governmental Regulation.
Neither the Lessee nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act or the Investment Company
Act of 1940 or under any other federal or state statute or regulation that
may limit its ability to incur Indebtedness or that may otherwise render
all or any portion of its obligations under the Transaction Documents
unenforceable.
(j) Employee Benefit Plans.
The Lessee maintains a qualified retirement plan under Section 401(k)
of the Internal Revenue Code and a medical benefit plan. The Lessee's
401(k) Plan has no unfunded liabilities in excess of $10,000,000, and the
Lessee is in compliance with all applicable provisions and requirements of
ERISA and the regulations and published interpretations thereunder with
respect to each Employee Benefit Plan and has performed all of its
obligations under such Employee Benefit Plan in all material respects. The
Lessee has no Employee Benefit Plans, other than its 401(k) Plan and the
medical benefit plan. The Lessee has no ERISA Affiliates that sponsor,
maintain, contribute to or are liable with respect to any Employee Benefit
Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect
to this Lease or any other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries
are, and have been to the best of the Lessee's knowledge, in compliance in
all material respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity, (a) arising at any facilities owned or
operated by the Lessee or (b) arising in connection with the operations of
the Lessee or any of its Subsidiaries (including the transportation of
Hazardous Materials), which conditions, occurrences or Hazardous Materials
Activity could reasonably be expected to form the basis of an Environmental
Claim against the Lessee and which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
<PAGE>
-32-
(iii) To the best of the Lessee's knowledge, there are no pending or
threatened Environmental Claims against the Lessee or any of its
Subsidiaries, and neither the Lessee nor any of its Subsidiaries has
received any written notices, inquiries, or requests for information with
respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened
involving the Lessee or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect.
(n) Solvency.
The Lessee and each of its Subsidiaries is and, upon the incurrence of
any obligations by the Lessee under the Leases, will be, after giving
effect to the transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of the Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to the Lessor, the
Agent or the Lenders by or on behalf of the Lessee or any of its
Subsidiaries for use in connection with the transactions contemplated by
this Lease and the other Transaction Documents contains any untrue
statement of a material fact or omits to state a material fact (known to
the Lessee, in the case of any document not furnished by it) necessary in
order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. Any projections and
pro forma financial information contained in such materials are based upon
good faith estimates and assumptions believed by the Lessee to be
reasonable at the time made, it being recognized by the Lessor, the Agent
and the Lenders that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.
There are no facts known (or which should upon the reasonable exercise of
diligence be known) to the Lessee (other than matters of a general economic
nature) that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect and that have not been
disclosed herein or in such other documents, certificates and statements
furnished to the Lessor, the Agent and the Lenders for use in connection
with the transactions contemplated hereby.
<PAGE>
-33-
(p) Registration and Filing; Chief Executive Office.
(1) Except for the registration of this Lease and the Lease Supplement
with the FAA and the filing of a financing statement under the Uniform
Commercial Code in Colorado, it is not necessary or advisable under
Colorado law or the law of the State of New York in order to ensure the
validity, effectiveness or enforceability of this Lease or to protect the
rights of the Lessor in any of the Engines or any part thereof that any
other instrument be filed, registered or recorded or that any action be
taken, and, under Colorado law or the law of the State of New York, the
rights of the Lessor in each of the Engines will have priority in all
respects over the claims of all creditors of the Lessee other than certain
claims by landlords of hangars, materialmen, mechanics and warehousemen in
respect of the Engines that have priority under Colorado law.
(2) The Lessee's chief executive office (as that term is defined in
Article 9 of the Uniform Commercial Code as in effect in Colorado) is
located at 538 Commons Drive, Golden, Colorado 80401, and the records of
the Lessee concerning the Aircraft are maintained at such chief executive
office or at the operations center at JFK International Airport, Building
151, Jamaica, New York 11430, where the Lessee normally maintains aircraft
records.
SECTION 6. Lessee's Affirmative Covenants. The Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, the Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
The Lessee will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements
in conformity with GAAP. The Lessee will deliver to the Lessor, the Agent
and the Lenders:
(1) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each fiscal
year, (a) the consolidated and consolidating balance sheets of the
Lessee and its Subsidiaries as at the end of such fiscal quarter and
the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Lessee and its Subsidiaries
for such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding periods of the previous fiscal year, all in
reasonable detail and certi-
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fied by the chief financial officer of the Lessee that they fairly
present the financial condition of the Lessee and its Subsidiaries as
at the dates indicated and the results of their operations and their
cash flows for the periods indicated, subject to changes resulting
from audit and normal year-end adjustments, and (b) a narrative report
describing the operations of the Lessee and its Subsidiaries in the
form prepared for presentation to senior management for such fiscal
quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter; provided, that delivery
of the Lessee's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 6(a)(1);
(2) Year-End Financials: as soon as available and in any event
within 90 days after the end of each fiscal year, (a) the consolidated
and consolidating balance sheets of the Lessee and its Subsidiaries as
at the end of such fiscal year and the related consolidated and
consolidating statements of income, stockholders' equity and cash
flows of the Lessee and its Subsidiaries for such fiscal year, setting
forth in each case in comparative form the corresponding figures for
the previous fiscal year, all in reasonable detail and certified by
the chief financial officer of the Lessee that they fairly present the
financial condition of the Lessee and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for
the periods indicated, (b) a narrative report describing the
operations of the Lessee and its Subsidiaries in the form prepared for
presentation to senior management for such fiscal year, and (c) in the
case of such consolidated financial statements, a report thereon of
Arthur Andersen LLP or other independent certified public accountants
of recognized national standing selected by the Lessee and
satisfactory to the Lessor and the Agent, which report shall be
unqualified, shall express no doubts about the ability of the Lessee
and its Subsidiaries to continue as a going concern, and shall state
that such consolidated financial statements fairly present the
consolidated financial position of the Lessee and its Subsidiaries as
at the dates indicated and the results of their operations and their
cash flows for the periods indicated in conformity with GAAP applied
on a basis consistent with prior years (except as otherwise disclosed
in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing
standards; provided, that delivery of the Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a)
and (b) of this subsection 6(a)(2);
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(3) Officers' and Compliance Certificates: together with each
delivery of financial statements of the Lessee and its Subsidiaries
pursuant to subdivisions (1) and (2) above after the Initial Borrowing
Date, (a) an Officers' Certificate of the Lessee stating that the
signers have reviewed the terms of this Lease and have made, or caused
to be made under their supervision, a review in reasonable detail of
the transactions and condition of the Lessee and its Subsidiaries
during the accounting period covered by such financial statements and
that such review has not disclosed the existence during or at the end
of such accounting period, and that the signers do not have knowledge
of the existence as at the date of such Officers' Certificate, of any
condition or event that constitutes a Default or Lease Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
the Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly
and annual accounting periods with the restrictions contained in
Section 7;
(4) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation
of the audited financial statements referred to in subsection 5(c),
the consolidated financial statements of the Lessee and its
Subsidiaries delivered pursuant to subdivision (1) or (2) of this
subsection 6(a) will differ in any material respect from the
consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (1) or (2) of
this subsection 6(a) following such change, consolidated financial
statements of the Lessee and its Subsidiaries for (y) the current
fiscal year to the effective date of such change and (z) the two full
fiscal years immediately preceding the fiscal year in which such
change is made, in each case prepared on a pro forma basis as if such
change had been in effect during such periods, and (b) together with
each delivery of financial statements pursuant to subdivision (1) or
(2) of this subsection 6(a) following such change, a written statement
of the chief accounting officer or chief financial officer of the
Lessee setting forth the differences that would have resulted if such
financial statements had been prepared without giving effect to such
change;
(5) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of the Lessee or any of its
Subsidiaries or by independ-
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ent consultants, with respect to significant environmental matters at
any facility or that relate to an Environmental Claim that could
result in a Material Adverse Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of the Lessee and its Subsidiaries
pursuant to subdivision (2) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the
terms of this Lease and the other Transaction Documents as they relate
to accounting matters, (b) stating whether, in connection with their
audit examination, any condition or event that constitutes a Default
or Lease Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided, that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such
Default or Lease Event of Default that would not be disclosed in the
course of their audit examination, and (c) stating that based on their
audit examination nothing has come to their attention that causes them
to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (3) above is
not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision
(3) above for the applicable fiscal year are not stated in accordance
with the terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all
reports submitted to the Lessee by independent certified public
accountants in connection with each annual, interim or special audit
of the financial statements of the Lessee and its Subsidiaries made by
such accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(8) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices
and proxy statements sent or made available generally by the Lessee to
its security holders, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by the Lessee or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority, and
(c) all press releases and other statements made available generally
by the Lessee or any of its Subsidiaries to the public concerning
material developments in the business of the Lessee or any of its
Subsidiaries;
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(9) Lease Events of Default, etc.: promptly upon any officer of
the Lessee obtaining knowledge (a) of any condition or event that
constitutes a Default or Lease Event of Default, (b) that any Person
has given any notice to the Lessee or any of its Subsidiaries or taken
any other action with respect to a claimed default or event or
condition of the type referred to in subsection 16(1), (c) of any
condition or event that would be required to be disclosed in a current
report filed by the Lessee with the Securities and Exchange Commission
on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the
date hereof) if the Lessee were required to file such reports under
the Exchange Act, or (d) of the occurrence of any event or change that
has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the
nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Lease Event of Default, Default, default, event
or condition, and what action the Lessee has taken, is taking and
proposes to take with respect thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any
officer of the Lessee obtaining knowledge of (X) the institution of,
or non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting the Lessee or any of its Subsidiaries
or any property of the Lessee or any of its Subsidiaries
(collectively, "Proceedings") not previously disclosed in writing by
the Lessee to the Lessor and the Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of,
the transactions contemplated hereby and under the other
Transaction Documents;
written notice thereof together with such other information as may be
reasonably available to the Lessee to enable the Lessor and the
Lenders and their counsel to evaluate such matters; and (b) within
twenty days after the end of each fiscal quarter of the Lessee, a
schedule of all Proceedings involving an alleged liability of, or
claims against or affecting, the Lessee or any of its Subsidiaries
equal to or greater than $1,000,000 and promptly after request by the
Lessor and the Agent such other information as may be reasonably
requested
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by the Lessor and the Agent to enable the Agent and its counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a)
each annual report (Form 5500 Series) filed by the Lessee or any of
its ERISA Affiliates with the Internal Revenue Service with respect to
each Employee Benefit Plan, (b) any notices received by the Lessee or
any of its ERISA Affiliates with respect to a "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA, (c) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as the Lessor or the Agent shall reasonably request and
(d) promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any material and adverse event with respect to any of
the Lessee's Employee Benefit Plans, a written notice specifying the
nature thereof, what action the Lessee has taken, is taking or
proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the Pension Benefit Guaranty Corporation;
(12) Insurance: as soon as practicable and in any event by the
last day of each fiscal year, a report in form and substance
satisfactory to the Lessor and the Agent outlining all material
insurance coverage maintained as of the date of such report by the
Lessee and its Subsidiaries and all material insurance coverage
planned to be maintained by the Lessee and its Subsidiaries in the
immediately succeeding fiscal year;
(13) Pricing Certificates: (a) together with each delivery of
financial statements of the Lessee and its Subsidiaries pursuant to
subdivisions (1) and (2) above, (b) within one Business Day after any
public release by S&P or Moody's lowering the Lessee's "Senior Secured
Debt Rating" or "Senior Secured Rating," as applicable, and (c) at
such additional times as the Lessee may elect, a certificate setting
forth its "Senior Secured Debt Rating" and "Senior Secured Rating," as
assigned by S&P or Moody's, as applicable (each, a "Pricing
Certificate");
(14) Holding Company: at least 5 Business Days prior to the
consummation thereof, the terms of the Holding Company Reorganization,
and, on and after the consummation of the Holding Company
Reorganization, in addition to the information requirements in this
Section 6(a) with respect to the Lessee, the same information shall be
delivered (and at the same times) with respect to the Holding Company
and its Subsidiaries; and
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(15) Other Information: with reasonable promptness, such other
information and data with respect to the Lessee or any of its
Subsidiaries as from time to time may be reasonably requested by the
Lessor or the Agent or any Lender.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, the Lessee will,
and will cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its corporate existence and all rights and
franchises material to its business; provided, however, that the corporate
existence of any such Subsidiary may be terminated if such termination is
in the interests of the Lessee and its Subsidiaries and is not materially
disadvantageous to the Lessor or to any assignee of the Lease. The Lessee
will at all times maintain its corporate existence as a United States
Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) The Lessee will, and will cause its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of
its properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all
claims (including, without limitation, claims for labor, services,
materials and supplies) for sums that have become due and payable and that
by law have or may become a Lien upon any of its properties or assets,
prior to the time when any penalty fine or interest shall be incurred with
respect thereto; provided, that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such reserve or other
appropriate provision, if any, with respect to any liability for taxes, as
shall be required in conformity with GAAP shall have been made therefor in
the financial statements of the Lessee.
(ii) The Lessee will not, and will not permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return
with any Person (other than any Subsidiary of the Lessor or the Lessee and
other than the Holding Company and its Subsidiaries).
(d) Maintenance of Properties; Insurance.
The Lessee will, and will cause its Subsidiaries to, maintain or cause
to be maintained in good repair, working order and condition, ordinary wear
and tear excepted, all material properties used or useful in the business
of the Lessee and its Subsidiaries and from time to time will make or cause
to be made all appropriate repairs,
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renewals and replacements thereof. The Lessee will maintain or cause to be
maintained, with insurers of recognized responsibility and reputation,
insurance with respect to its properties and business and the properties
and businesses of its Subsidiaries against loss or damage (including,
without limitation, flood insurance, if necessary or advisable) of the
kinds customarily carried or maintained under similar circumstances by
corporations engaged in similar businesses.
(e) Inspection; Lender Meeting.
The Lessee will, and will cause its Subsidiaries to, permit any
authorized representatives designated by the Lessor, the Agent or any
Lender to visit and inspect any of the properties of the Lessee or any of
its Subsidiaries, including any Engine or any part thereof, and its and
their financial and accounting records, and, with the permission of the
Lessee, which shall not be unreasonably withheld, to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided, that the Lessee may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be
reasonably requested, provided, so long as no Lease Event of Default shall
have occurred and be continuing, that such inspection is not disruptive to
the Lessee's business, as reasonably determined by the Lessee. The cost of
any such inspection shall be borne by the Lessee if an Event of Default has
occurred and is continuing or if the Lessee is thereby shown to be in
material breach of any of its obligations hereunder, and otherwise by the
party making the inspection. Neither the Lessor, the Agent nor any Lender
shall have any obligation to make any inspection. Without limiting the
foregoing, the Lessor (or its authorized representative) may attend any
Engine shop visit. The Lessee shall provide the Lessor not less than twenty
days' prior written notice of any such scheduled visit; provided, that if a
scheduled visit is to occur less than twenty days after the scheduling
thereof, the Lessee shall provide written notice of such scheduled visit
promptly upon the scheduling thereof. Without in any way limiting the
foregoing, the Lessee will, upon the request of the Lessor or the Agent,
participate in a meeting of the Agent and the Lenders once during each
fiscal year to be held at the Lessee's corporate offices (or such other
location as may be agreed to by the Lessee, the Lessor and the Agent) at
such time as may be agreed to by the Lessee, the Lessor and the Agent.
(f) Compliance with Laws, etc.
The Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with
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which could reasonably be expected to cause a Material Adverse Effect or
prevent the Lessee from performing its obligations hereunder. The Lessee
shall not conduct, and shall not permit the conduct of, any Hazardous
Materials Activity at any facility or at any other location that could
reasonably be expected to form the basis of an Environmental Claim against
the Lessee and that could reasonably be expected to have a Material Adverse
Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
The Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with
the presence, storage, use, disposal, transportation or Release of any
Hazardous Materials on, under or about any facility in order to comply with
all applicable Environmental Laws and Governmental Authorizations. In the
event that the Lessee or any of its Subsidiaries undertakes any remedial
action with respect to any Hazardous Materials on, under or about any
facility, the Lessee or such Subsidiary will conduct and complete such
remedial action in compliance with all applicable Environmental Laws, and
in accordance with the policies, orders and directives of all federal,
state and local governmental authorities except when, and only to the
extent that, the Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous
Materials is being contested in good faith by the Lessee or such
Subsidiary. Notwithstanding anything to the contrary contained in this
Lease, the Lessee and its Subsidiaries may engage in the transportation of
Hazardous Materials in the ordinary course of business so long as such is
conducted in compliance with all applicable Environmental Laws, and all
other applicable laws, policies, orders, directives and regulations.
(h) Employee Benefit Plans.
The Lessee will not establish or permit to be established any Employee
Benefit Plans for the Lessee or any of its employees and will not permit
any ERISA Affiliate to establish any Employee Benefit Plan that, in either
case, could reasonably be expected to result in a liability for the Lessee,
under Title IV of ERISA or the minimum funding standards of Part 3 of
Subtitle B of Title I of ERISA, in excess of $20 million.
(i) Corporate Separateness.
The Lessee will take all such action as is necessary to keep its
operations separate and apart from those of the Holding Company or any of
its Affiliates, including, without limitation, ensuring that all customary
corporate formalities, including the maintenance of separate corporate
records and documents and holding regular meetings, are followed. Any
financial statements distributed to any creditors of the Lessee
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shall clearly establish the corporate separateness of the Lessee from the
Holding Company and each of the Holding Company's other Subsidiaries. The
Lessee shall not take any action or conduct its affairs in a manner that is
likely to result in the corporate existence of the Lessee on the one hand
and of the Holding Company or any Subsidiary of the Holding Company on the
other hand being disregarded, or in the assets and liabilities of the
Holding Company or any Subsidiary of the Holding Company being
substantively consolidated with those of the Lessee in a bankruptcy,
reorganization or other insolvency proceeding.
SECTION 7. Lessee's Negative Covenants. The Lessee covenants and agrees
that, so long as any amounts remain owing under this Lease, the Lessee shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
(a) Indebtedness.
The Lessee shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to create, incur, assume or guaranty, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except that:
(1) the Lessee may become and remain liable with respect to the
obligations under the Amended Aircraft Credit Facility;
(2) the Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by subsection 7(d)
and, upon any matured obligations actually arising pursuant thereto,
the Indebtedness corresponding to the Contingent Obligations so
extinguished;
(3) the Lessee and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Capital Leases; provided,
that such Capital Leases are permitted under the terms of subsection
7(i);
(4) the Lessee and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 7(a)(4)
annexed hereto;
(5) the Lessee may become and remain liable with respect to
Permitted Extension Indebtedness, provided that, with respect to any
transaction in which Permitted Extension Indebtedness is incurred with
respect to any Financed Aircraft, the cash proceeds from such
Permitted Extension Indebtedness are sufficient to repay in full the
Indebtedness associated with such Financed Aircraft;
<PAGE>
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(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and the Lessee
delivers an Officers' Certificate to the Lessor, the Agent and the
Lenders, in form and substance reasonably satisfactory to the Lessor
and the Agent, confirming that, on a Pro Forma Basis after giving
effect to such incurrence of Indebtedness, (i) the ratio of
Consolidated Total Debt (less Cash and Cash Equivalents held by the
Lessee in excess of $25 million) as of the last day of the most
recently ended fiscal quarter (the "Determination Date") plus seven
times Consolidated Rental Payments for the four fiscal quarter period
ending on such Determination Date to Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending
on such Determination Date does not exceed the ratio set forth in
subsection 7(f)(ii) for the fiscal quarter in which such Indebtedness
is to be incurred, (ii) the ratio of Consolidated Adjusted EBITDA for
such four fiscal quarter period to Consolidated Interest Expense for
such four fiscal quarter period is not less than the ratio set forth
in subsection 7(f)(i) for the fiscal quarter in which such
Indebtedness is to be incurred, and (iii) the Lessee will be in
compliance with all covenants set forth in subsection 7(f) hereof, the
Lessee and its Subsidiaries may incur Other Permitted Indebtedness;
(7) the Lessee may become and remain liable with respect to
Indebtedness under the NationsBanc/Banc of America Agreement;
(8) the Lessee may become and remain liable with respect to the
Senior Notes;
(9) the Lessee and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount
not to exceed, without duplication, when added to the maximum
aggregate liability, contingent or otherwise, of the Lessee and its
Subsidiaries outstanding in accordance with Section 7(d)(6), $50
million at any time outstanding; and
(10) the Lessee may become and remain liable with respect to
Indebtedness in respect of the Leases; provided that, notwithstanding
the foregoing, the Lessee may not become or remain liable, directly or
indirectly, for any Indebtedness of any Holding Company Subsidiary.
(b) Liens and Related Matters.
A. Prohibition on Liens. The Lessee shall not, and shall not permit
any of its Subsidiaries, directly or indirectly, to create, incur, assume
or permit to exist any
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Lien on or with respect to any property or asset of any kind (including any
document or instrument in respect of goods or accounts receivable) of the
Lessee or any of its Subsidiaries, whether now owned or hereafter acquired,
or any income or profits therefrom, or file or permit the filing of, or
permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and
Other Permitted Indebtedness, provided that such Liens encumber only
assets subject to purchase money Liens securing such Indebtedness and
do not encumber any assets subject to the Aircraft Chattel Mortgages;
and
(iii) other Liens, securing Indebtedness in an aggregate amount
not to exceed $10 million at any time outstanding, that do not
encumber any assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event
shall the Lessee create, incur, assume or permit to exist Liens on or with
respect to any assets subject to the Aircraft Chattel Mortgages except for
Permitted Encumbrances of the type described in clauses (i), (ii) or (viii)
of the definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7(b) annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
the Lessee will not, and will not permit any of its Subsidiaries to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such
Subsidiary's capital stock (i) to pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by the Lessee
or any other Subsidiary of the Lessee, (ii) to repay or prepay any
Indebtedness owed by such Subsidiary to the Lessee or any other Subsidiary
of the Lessee, (iii) to make loans or advances to the Lessee or any other
Subsidiary of the Lessee, or (iv) to transfer any of its property or assets
to the Lessee or any other Subsidiary of the Lessee.
(c) Investments; Joint Ventures.
The Lessee shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to make or own any Investment in any Person,
including any Joint Venture, except:
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(i) the Lessee may make and own Investments in Cash Equivalents;
(ii) the Lessee and its Subsidiaries may continue to own the
Investments owned by them as of the Initial Borrowing Date in any
Subsidiaries of the Lessee;
(iii) the Lessee may make and own Investments in Special Purpose
Subsidiaries, provided that the Lessee delivers to the Lessor and the
Agent an Officer's Certificate in form and substance satisfactory to
the Lessor and the Agent demonstrating that such Special Purpose
Subsidiary meets the requirements set forth in the definition thereof;
(iv) the Lessee may make Investments in Joint Ventures in an
aggregate amount not to exceed (A) $50 million plus (B) 20% of
cumulative Consolidated Net Income for each fiscal year commencing
with fiscal year 2000 and ending before the date of determination less
(C) the sum of (x) the aggregate amount of Restricted Junior Payments
with respect to the Common Stock of the Lessee declared or paid in
each such fiscal year (excluding Restricted Junior Payments made in
accordance with Section 7(e)(4)) and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in each such
fiscal year; provided, that the Lessee shall not incur liabilities
related to any such Joint Venture in excess of the Lessee's Investment
therein;
(v) the Lessee and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7(c)(v) annexed
hereto and Investments made in compliance with subsection 7(c)(iv);
and
(vi) the Lessee and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed $15 million at any
time outstanding.
(d) Contingent Obligations.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to
any Contingent Obligation, except:
(1) any Subsidiary may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the
obligations under any Material Agreement;
<PAGE>
-46-
(2) the Lessee may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements and Currency
Agreements arising under any Material Agreement;
(3) the Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets or securities;
(4) the Lessee and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule
7(d)(4) annexed hereto;
(5) the Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations to the extent that such
Contingent Obligations are permitted pursuant to subsections 7(i) and
7(j); and
(6) the Lessee and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided, that the
maximum aggregate liability, contingent or otherwise, of the Lessee
and its Subsidiaries in respect of all such Contingent Obligations
when added, without duplication, to the aggregate principal amount of
Indebtedness outstanding in accordance with Section 7(a)(9) shall at
no time exceed $50 million.
(e) Restricted Junior Payments.
The Lessee shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to declare, order, pay, make or set apart any sum
for any Restricted Junior Payment; provided, that the Lessee may make
scheduled payments of principal, mandatory prepayments of principal
(including through the exercise of remedies) and payment of interest from
time to time on Designated Indebtedness; and provided further, that, so
long as no Default or Lease Event of Default has occurred and is
continuing, or would result therefrom:
(1) the Lessee may prepay Designated Indebtedness from the
proceeds of Permitted Extension Indebtedness or Other Permitted
Indebtedness;
(2) the Lessee may make Restricted Junior Payments with respect
to its Common Stock in an amount not to exceed, in any fiscal year,
the lesser of 20% of Consolidated Net Income for such fiscal year and
$15 million;
<PAGE>
-47-
(3) the Lessee may apply Equity Proceeds to prepay Designated
Indebtedness;
(4) the Lessee may repurchase its Common Stock in an amount not
to exceed in any fiscal year $15 million for purposes of establishing
or contributing to an employee benefit plan; provided, that any such
repurchased Common Stock resold to employees of the Lessee shall, to
the extent of the price paid for such Common Stock by such employee,
be excluded from the calculation of the $15 million limit set forth
above;
(5) the Lessee shall be permitted to consummate the Transaction;
and
(6) the Lessee may repurchase or redeem all or any portion of the
Senior Notes for aggregate cash consideration, when aggregated with
any "change of control" put payments arising as a result of the
Holding Company Reorganization, not to exceed $75,000,000, provided
that (A) after giving effect to the proposed repurchase or redemption,
the Lessee shall have not less than $150,000,000 in Cash or Cash
Equivalents on its balance sheet and (B) its Consolidated Leverage
Ratio (calculated on a pro forma basis as if the proposed repurchase
or redemption had been consummated on the last day of the most recent
four fiscal quarter period) shall not exceed the lower of 4.25:1.00 or
the ratio required to be met in accordance with Section 7(f)(ii) for
the immediately succeeding fiscal quarter end.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. The Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
Expense for the four fiscal quarter period ending as of the last day of any
fiscal quarter of the Lessee set forth below to be less than the
correlative ratio indicated:
==================================== ==================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
==================================== ==================================
March 31, 2000 2.10:1.00
------------------------------------ ----------------------------------
June 30, 2000 2.10:1.00
------------------------------------ ----------------------------------
September 30, 2000 2.20:1.00
------------------------------------ ----------------------------------
<PAGE>
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==================================== ==================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
==================================== ==================================
December 31, 2000 2.20:1.00
------------------------------------ ----------------------------------
March 31, 2001 2.40:1.00
------------------------------------ ----------------------------------
June 30, 2001 2.40:1.00
------------------------------------ ----------------------------------
September 30, 2001 2.50:1.00
------------------------------------ ----------------------------------
December 31, 2001 2.50:1.00
------------------------------------ ----------------------------------
March 31, 2002 2.50:1.00
------------------------------------ ----------------------------------
June 30, 2002 2.50:1.00
------------------------------------ ----------------------------------
September 30, 2002 2.50:1.00
------------------------------------ ----------------------------------
December 31, 2002 2.50:1.00
------------------------------------ ----------------------------------
March 31, 2003 2.50:1.00
------------------------------------ ----------------------------------
June 30, 2003 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2003 2.75:1.00
------------------------------------ ----------------------------------
December 31, 2003 2.75:1.00
------------------------------------ ----------------------------------
March 31, 2004 2.75:1.00
------------------------------------ ----------------------------------
June 30, 2004 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2004 2.75:1.00
------------------------------------ ----------------------------------
December 31, 2004 2.75:1.00
------------------------------------ ----------------------------------
March 31, 2005 2.75:1.00
------------------------------------ ----------------------------------
June 30, 2005 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2005 2.75:1.00
------------------------------------ ----------------------------------
<PAGE>
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==================================== ==================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
==================================== ==================================
December 31, 2005 2.75:1.00
------------------------------------ ----------------------------------
March 31, 2006 2.75:1.00
------------------------------------ ----------------------------------
June 30, 2006 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2006 2.75:1.00
------------------------------------ ----------------------------------
December 31, 2006 2.75:1.00
==================================== ==================================
(ii) Maximum Leverage Ratio. The Lessee shall not permit the ratio of
(i) Consolidated Total Debt at the end of any four fiscal quarter period
ending during one of the periods set forth below (less Cash and Cash
Equivalents held by the Lessee in excess of $25 million as of such date)
plus seven times Consolidated Rental Payments for such four fiscal quarter
period to (ii) Consolidated Adjusted EBITDA plus Consolidated Rental
Payments for such four fiscal quarter period to exceed the correlative
ratio indicated below:
==================================== ==================================
Fiscal Quarter Maximum
Ending Leverage Ratio
==================================== ==================================
March 31, 2000 4.75:1.00
------------------------------------ ----------------------------------
June 30, 2000 4.75:1.00
------------------------------------ ----------------------------------
September 30, 2000 4.75:1.00
------------------------------------ ----------------------------------
December 31, 2000 4.75:1.00
------------------------------------ ----------------------------------
March 31, 2001 4.75:1.00
------------------------------------ ----------------------------------
June 30, 2001 4.50:1.00
------------------------------------ ----------------------------------
September 30, 2001 4.50:1.00
------------------------------------ ----------------------------------
December 31, 2001 4.50:1.00
------------------------------------ ----------------------------------
March 31, 2002 4.50:1.00
------------------------------------ ----------------------------------
<PAGE>
-50-
==================================== ==================================
Fiscal Quarter Maximum
Ending Leverage Ratio
==================================== ==================================
June 30, 2002 4.50:1.00
------------------------------------ ----------------------------------
September 30, 2002 4.50:1.00
------------------------------------ ----------------------------------
December 31, 2002 4.25:1.00
------------------------------------ ----------------------------------
March 31, 2003 4.25:1.00
------------------------------------ ----------------------------------
June 30, 2003 4.25:1.00
------------------------------------ ----------------------------------
September 30, 2003 4.25:1.00
------------------------------------ ----------------------------------
December 31, 2003 4.00:1.00
------------------------------------ ----------------------------------
March 31, 2004 4.00:1.00
------------------------------------ ----------------------------------
June 30, 2004 4.00:1.00
------------------------------------ ----------------------------------
September 30, 2004 4.00:1.00
------------------------------------ ----------------------------------
December 31, 2004 3.75:1.00
------------------------------------ ----------------------------------
March 31, 2005 3.75:1.00
------------------------------------ ----------------------------------
June 30, 2005 3.75:1.00
------------------------------------ ----------------------------------
September 30, 2005 3.75:1.00
------------------------------------ ----------------------------------
December 31, 2005 3.50:1.00
------------------------------------ ----------------------------------
March 31, 2006 3.50:1.00
------------------------------------ ----------------------------------
June 30, 2006 3.50:1.00
------------------------------------ ----------------------------------
September 30, 2006 3.50:1.00
------------------------------------ ----------------------------------
December 31, 2006 3.50:1.00
==================================== ==================================
<PAGE>
-51-
(iii) Minimum Consolidated Net Worth. The Lessee shall not permit
Consolidated Net Worth at any time during any of the periods set forth
below to be less than the correlative amount indicated:
==================================== ==================================
Minimum Consolidated
Period Net Worth
==================================== ==================================
March 31, 2000 $300 million
------------------------------------ ----------------------------------
June 30, 2000 $300 million
------------------------------------ ----------------------------------
September 30, 2000 $325 million
------------------------------------ ----------------------------------
December 31, 2000 $325 million
------------------------------------ ----------------------------------
March 31, 2001 $350 million
------------------------------------ ----------------------------------
June 30, 2001 $350 million
------------------------------------ ----------------------------------
September 30, 2001 $350 million
------------------------------------ ----------------------------------
December 31, 2001 $350 million
------------------------------------ ----------------------------------
March 31, 2002 $400 million
------------------------------------ ----------------------------------
June 30, 2002 $400 million
------------------------------------ ----------------------------------
September 30, 2002 $400 million
------------------------------------ ----------------------------------
December 31, 2002 $400 million
------------------------------------ ----------------------------------
March 31, 2003 $450 million
------------------------------------ ----------------------------------
June 30, 2003 $450 million
------------------------------------ ----------------------------------
September 30, 2003 $450 million
------------------------------------ ----------------------------------
December 31, 2003 $450 million
------------------------------------ ----------------------------------
March 31, 2004 $450 million
------------------------------------ ----------------------------------
<PAGE>
-52-
==================================== ==================================
Minimum Consolidated
Period Net Worth
==================================== ==================================
June 30, 2004 $450 million
------------------------------------ ----------------------------------
September 30, 2004 $450 million
------------------------------------ ----------------------------------
December 31, 2004 $450 million
------------------------------------ ----------------------------------
March 31, 2005 $450 million
------------------------------------ ----------------------------------
June 30, 2005 $450 million
------------------------------------ ----------------------------------
September 30, 2005 $450 million
------------------------------------ ----------------------------------
December 31, 2005 $450 million
------------------------------------ ----------------------------------
March 31, 2006 $450 million
------------------------------------ ----------------------------------
June 30, 2006 $450 million
------------------------------------ ----------------------------------
September 30, 2006 $450 million
------------------------------------ ----------------------------------
December 31, 2006 $450 million
==================================== ==================================
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions;
New Subsidiaries.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, sub-lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
property or fixed assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or any portion of the business,
property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person,
except that:
(1) any Subsidiary of the Lessee may be merged with or into the
Lessee or any wholly-owned Subsidiary of the Lessee, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to the
Lessee or any such wholly-owned Subsidiary
<PAGE>
-53-
of the Lessee; provided, that, in the case of such a merger, the
Lessee or such wholly-owned Subsidiary shall be the continuing or
surviving corporation;
(2) the Lessee and its Subsidiaries may sell or otherwise dispose
of assets in transactions that do not constitute Asset Sales;
provided, that the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof;
(3) subject to subsection 7(m), the Lessee and its Subsidiaries
may make Asset Sales of assets having a fair market value not in
excess of $100 million in any fiscal year or $500 million in the
aggregate; provided, that (x) the consideration received for such
assets shall be in an amount at least equal to the fair market value
thereof, (y) the consideration received shall be at least 75% cash,
and (z) the proceeds of such Asset Sales shall be applied to repay
permanently senior bank debt or prepay Basic Rent;
(4) the Lessee may lease or transfer any Financed Aircraft to the
extent expressly permitted by the mortgages encumbering such Financed
Aircraft as in effect on the date of this Lease;
(5) the Lessee may make acquisitions of the capital stock of
another Person or all or substantially all of the assets of a division
or line of business of another Person, provided that (a) the
acquisition primarily involves the acquisition of assets to be used in
the business of the Lessee, (b) if such acquisition is structured as a
merger or a stock or other equity acquisition, then either (i) the
Person so acquired becomes a wholly-owned Subsidiary of the Lessee or
(ii) such Person is merged with and into the Lessee or a wholly-owned
Subsidiary of the Lessee (with the Lessee or such wholly-owned
Subsidiary being the surviving corporation of such merger), (c) if
such acquisition is structured as an asset acquisition, then such
assets are acquired either by the Lessee directly or by a wholly-owned
Subsidiary of the Lessee, (d) immediately before and after giving
effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (e) immediately after giving effect to the
acquisition, the Lessee shall be in compliance on a Pro Forma Basis
with the financial covenants in subsection 7(f) and such compliance
shall be evidenced by an Officer's Certificate demonstrating such
compliance, (f) the Lessor and the Agent shall have reviewed and be
reasonably satisfied with the nature and amount of all contingent
liabilities or other liabilities not on the balance sheet of the
Lessee assumed in connection with such acquisition and (g) the
aggregate amount of cash payments made in connection with all such
acquisitions other than with
<PAGE>
-54-
the proceeds from sales or issuances of equity by the Lessee does not
exceed $100,000,000;
(6) the Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of
Eligible Aircraft permitted to be purchased, but not purchased, during
the previous fiscal year (but in no event shall any such number of
Eligible Aircraft once carried forward to the next fiscal year be
carried forward to any fiscal year thereafter) together with
Consolidated Capital Expenditures with respect to the acquisition, in
the normal course of business, of spare parts and spare engines
associated with such Eligible Aircraft;
(7) the Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal
course of business;
(8) the Lessee and its Subsidiaries may make other Consolidated
Capital Expenditures not in excess of $10 million during any fiscal
year; provided, that any amount of such other Consolidated Capital
Expenditures permitted, but not made, in any fiscal year may be
carried forward to and made during the immediately succeeding fiscal
year (but no amount once carried forward to the next fiscal year may
be carried forward to any fiscal year thereafter);
(9) the Lessee shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and
operations to Colorado; provided, that the aggregate consideration
paid with respect to the acquisition of assets shall be in an amount
not to exceed $20 million; and
(10) the Holding Company Reorganization and any transaction
effected in accordance with Subsection 10(b) of this Lease or Section
6.6 (ii) or Section 9.21 of the Credit Agreement shall be permitted..
(h) Amendments of Material Agreements.
The Lessee shall not permit (i) its certificate or articles of
incorporation or bylaws to be amended or otherwise modified in any manner
that could reasonably be expected to have a Material Adverse Effect or (ii)
any Material Agreement to be amended or otherwise modified in any manner
with respect to any provision providing
<PAGE>
-55-
material representations and warranties to the Lessee, indemnification
rights to the Lessee, or limiting the Lessee's remedies or rights upon the
other party to such agreements failing to perform.
(i) Restriction on Leases.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any
lease, whether an Operating Lease or a Capital Lease (other than
intercompany leases between the Lessee and its wholly-owned Subsidiaries,
including the Lessor); provided, however, that the Lessee may become so
obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such
lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year do not exceed $35 million plus the amount of
Consolidated Rental Payments made during such fiscal year in respect of up
to eight 747-400F aircraft subject to Operating Leases as of the Initial
Borrowing Date plus the amount of Consolidated Rental Payments in respect
of up to two 747-400F aircraft per year, subject to the agreement dated
June 9, 1997, between the Lessee and The Boeing Company regarding the
purchase of twelve new 747-400F aircraft, and the option to purchase eight
additional new 747-400F aircraft, plus an amount, not to exceed $15 million
during any fiscal year, equal to Consolidated Rental Payments incurred in
connection with sale and leaseback transactions described in subsection
7(j), plus Consolidated Rental Payments assumed pursuant to acquisitions
permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real, personal or mixed), whether
now owned or hereafter acquired, (i) that the Lessee or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than the Lessee or any of its Subsidiaries) or (ii) that the
Lessee or any of its Subsidiaries intends to use for substantially the same
purpose as any other property that has been or is to be sold or transferred
by the Lessee or any of its Subsidiaries to any Person (other than the
Lessee or any of its Subsidiaries) in connection with such lease; provided,
that the Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to
the extent that the Lessee or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease under subsection 7(i).
<PAGE>
-56-
(k) Transactions with Shareholders and Affiliates.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with any holder of 10% or
more of any class of equity Securities of the Lessee or with any Affiliate
of the Lessee or of any such holder, on terms that are less favorable to
the Lessee or that Subsidiary, as the case may be, than those that might be
obtained at the time from Persons who are not such holders or Affiliates;
provided, that the foregoing restriction shall not apply to (i) reasonable
and customary fees paid to and indemnification of members of the Boards of
Directors of the Lessee and its Subsidiaries, (ii) reasonable and customary
salaries, bonuses and other compensation paid to and indemnification of
employees of the Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of the Lessee, (iii)
performance by the Lessee of its obligations under and in accordance with
the Services Agreement or (iv) the Holding Company Reorganization.
(l) Disposal of Subsidiary Stock.
The Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law or to a wholly-owned Subsidiary of the
Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to the Lessee, another
wholly-owned Subsidiary of the Lessee, or to qualify directors if
required by applicable law.
Notwithstanding the foregoing, the Lessor shall be permitted to
issue preferred stock in an amount not to exceed $100,000 to a third
party.
(m) Conduct of Business.
From and after the Initial Borrowing Date, the Lessee shall not, and
shall not permit any of its Subsidiaries to, engage in any business other
than the businesses engaged in by the Lessee and its Subsidiaries on the
Initial Borrowing Date and similar or related businesses.
<PAGE>
-57-
(n) Change of Chief Executive Office.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
change its chief executive office without giving 30 days' prior written
notice to the Lessor and the Agent.
SECTION 8. Return of the Engines.
(a) Condition Upon Return. Unless any Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return any Engine to the Lessor
hereunder, the Lessee, at its own expense, will return such Engine to the Lessor
at a location specified by the Lessor to the Lessee in writing. At the time of
such return, the Lessee will cause such Engine to be in compliance with the
maintenance covenants contained in this Lease.
At the time of such return, such Engine (A) shall have an airworthiness
certificate from the Federal Aviation Administration and shall be in full
compliance with the provisions of Federal Aviation Regulations, Part 121 (or
successor regulation), and shall be in material compliance with all applicable
FAA noise, corrosion, environmental and aging aircraft requirements, (B) shall
be free and clear of all Liens and (C) shall be in as good condition as when
originally delivered to the Lessee, ordinary wear and tear excepted, and
otherwise in the condition required to be maintained under the Lessee's
FAA-approved maintenance plan; and in all such cases the Engines shall not have
been discriminated against as compared to other engines owned or leased by the
Lessee whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Engines and all Parts shall have been, and
shall be properly documented to have been, repaired or overhauled by certified
repair stations acceptable to the FAA.
(c) Repairs. The Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Engines are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date that deviate from the certified configuration and that are still in
existence on the Engines shall have approval or certification by the FAA (or its
designee) or certification if required. All such modifications shall be
accompanied by complete data and documentation necessary to substantiate their
certification and approval and methods of compliance.
<PAGE>
-58-
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Engines or Acceptable Alternate Engines or Parts, as well as all mandatory
service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be, taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered by the Lessee, the Lessee, concurrently with such delivery,
will, at no cost to the Lessor, furnish, or cause to be furnished, to the Lessor
a full warranty (as to title) bill of sale with respect to each such Acceptable
Alternate Engine, in form and substance reasonably satisfactory to the Lessor
(together with an opinion of counsel to the effect that such full warranty bill
of sale has been duly authorized and delivered and is enforceable in accordance
with its terms and that any such Acceptable Alternate Engine is free and clear
of all Liens) against receipt from the Lessor of a bill of sale evidencing the
transfer, without recourse or warranty by the Lessor to the Lessee or its
designee of all of the Lessor's right, title and interest in and to any Engine
for which the Acceptable Alternate Engine was substituted.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against any of the Engines
including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, each of the Engines shall
have been maintained by cleaning and treating all mild and moderate corrosion
and correcting of all severe or exfoliate corrosion in accordance with the
Lessee's approved maintenance program or manufacturer's structural repair
manual.
(i) Manuals. Upon the return of the Engines upon any termination of this
Lease, the Lessee shall deliver or cause to be delivered to the Lessor all logs,
manuals and data and maintenance, inspection, modification and overhaul records
and similar records required to be maintained with respect to the Engines and
Parts under FAA rules and the Engine maintenance program (the "Technical
Records"). If any such logs, manuals, records or other data are missing,
incomplete or otherwise not in accordance with FAA standards applicable to the
Lessee, the Lessee shall re-accomplish the maintenance tasks necessary to
produce such records in accordance with its approved maintenance program prior
to delivery of the Engines or otherwise perform all necessary acts (without
regard to any applicable waivers or deferrals) to obtain such records in a
manner satisfactory to the FAA and the Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, the Lessee receives from
the Lessor a written request for storage of any Engine upon its return
hereunder, the Lessee will provide
<PAGE>
-59-
the Lessor, or cause the Lessor to be provided, with storage facilities for such
Engine at the Lessee's risk and at the Lessee's expense for a period not
exceeding 30 days, and thereafter at the Lessor's risk and at the Lessor's cost
for insurance, maintenance and the Lessee's out-of-pocket expenses for such
storage for a period not exceeding 90 days (provided, that if such termination
occurs as a result of a Lease Event of Default hereunder, such storage shall be
at the cost of the Lessee), commencing on the date when such Engine is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by the Lessee and used by the Lessee as a
location for the long-term storage of engines.
(k) Severable Parts. At any time that any Engine is to be returned to the
Lessor, the Lessee shall, at the Lessor's request, advise the Lessor of the
nature and condition of all severable nonproprietary Parts (other than Parts
otherwise required by Sections 10 or 11 to be maintained on the Engine) owned by
the Lessee that have been used by the Lessee during the prior six months and
that the Lessee has or intends to remove from the Engine in accordance with
Section 11 hereof. The Lessor may, at its option, upon 30 days notice to the
Lessee, purchase any or all of such nonproprietary Parts from the Lessee upon
the expiration of the Term at their fair market value.
(l) Survival. The obligations of the Lessee to comply with the terms of
this Section 8 shall survive the expiration or other termination of this Lease.
(m) Deregistration and Export. At such time as the Lessee is obligated to
redeliver any Engine to the Lessor pursuant to this Lease, the Lessee shall at
its expense upon the request of the Lessor:
(i) promptly take all such steps (not including procuring the
discharge of any Lessor's Liens) as may be necessary to cancel the existing
registration of each Engine (subject to the Lessor giving, or procuring
that any mortgagee of the Engine gives, such notices and/or required
consents to the cancellation of such registration) and obtain and deliver
to the Lessor all certificates relating to the Engine required by
applicable law on any transfer of or alteration to the registration
thereof;
(ii) provide to the Lessor all assistance as the Lessor may reasonably
request so as to enable the Lessor to obtain any documents (including,
without limitation, any export certificate of airworthiness) required by
applicable law in relation to the export of such Engine from the state of
registration or such other country in which such Engine is for the time
being located and shall re-assign or otherwise confirm to the Lessor the
benefit of any indemnities or warranties available to the Lessee from the
manufacturer or any other supplier or manufacturer of such Engine or any
Part; and
<PAGE>
-60-
(iii) provide to the Lessor such assistance with respect to
information and documentation as the Lessor may reasonably require so as to
enable such Engine to be registered and certified as to airworthiness under
any applicable laws and/or regulations of any country other than the state
of registration; provided, that the Lessor shall reimburse, the Lessee for
its reasonable out-of-pocket expenses incurred in providing such
assistance.
SECTION 9. Liens. The Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the Engines,
title thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. The Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such Lien
not excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. The Lessee, at its own cost and expense,
until the expiration or earlier termination of this Lease, (i) will be a
"citizen of the United States" as defined in Section 40102(15) of Title 49 of
the United States Code and will be an air carrier certificated under Sections
401 and 609 of the Federal Aviation Act and hold all necessary air carrier
operating certificates; (ii) will cause ownership of the Engines to be duly
registered and remain duly registered with the FAA in the name of the Lessor in
accordance with the Federal Aviation Act and otherwise registered under all
applicable laws of the United States so as to be eligible to operate in
commercial air service under the Federal Aviation Act; and (iii) will service,
repair, inspect, test, maintain and overhaul each Engine, install replacement
equipment and parts on each Engine and maintain the Technical Records (A) so as
to keep each Engine in such operating condition as may be required to permit
each Engine to be utilized in commercial operations in the United States, (B) in
accordance with the Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care used
by the Lessee with respect to the same or similar engines owned or operated by
the Lessee so as to keep the same in as good operating condition as when
originally leased hereunder, ordinary wear and tear excepted, which practices
shall at all times be at or above the standard of the industry in the United
States for prudent maintenance of similar equipment, (C) in such manner as may
be necessary to maintain in full force all warranties of the manufacturers
thereof, and (D) to enable the Lessee to deliver the Engines to the Lessor in
accordance with Section 8. The Lessee shall maintain all records, logs and other
materials that may be required to permit each Engine to be so utilized.
The Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this
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Lease and the rules and regulations of the FAA from time to time in force and
applicable to the Engines. No Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
such Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of any Engine, the Lessee, at
its own cost and expense, will conform thereto or obtain conformance therewith
and will maintain the same in proper operating condition under such laws, rules,
regulations and orders, provided, however, that the Lessee may, in good faith
(after having delivered to the Lessor and the Agent an Officers' Certificate
stating the facts with respect thereto), contest the validity or application of
any such law, rule, regulation or order in any reasonable manner that does not,
in the Lessor's and the Agent's opinion (in their sole discretion), adversely
affect the interests of the Lessor, the Agent or any Lender.
The Lessee covenants and agrees with the Lessor that, the better to ensure
the availability of the benefits of Section 1110 of the Bankruptcy Code, the
Lessee shall not object to any motion, petition or application filed by the
Lessor with any bankruptcy court having jurisdiction over the Lessee, solely as
to the portion thereof that seeks, and to the extent that such motion, petition
or application seeks, a determination that such Section 1110 of the Bankruptcy
Code applies to the lease of the Engines hereunder. In the event that Section
1110 is amended, or if it is repealed and another statute is enacted in lieu
thereof, the Lessor and the Lessee (at the Lessee's expense) agree to amend this
Lease and take such other action not inconsistent with this Lease as the Lessor
reasonably deems necessary so as to afford to the Lessor the rights and benefits
as such amended or substituted statute confers upon owners, lessors and
conditional vendors of aircraft engines similarly situated to the Lessor.
The Lessee will not operate, use or locate any Engine, (I) in any area in
which any insurance required to be maintained pursuant to Section 14 shall not
be at the time in full force and effect, or in any area excluded from coverage
by an insurance policy in effect with respect to such Engine, except in the case
of a requisition for use by the United States of America, and then only if the
Lessee obtains indemnity in lieu of such insurance from the United States of
America against the risks and in the amounts required by said Section covering
such area, or (II) in any recognized or threatened area of hostilities unless
such Engine is operated or used under contract with the Government of the United
States of America under which contract that Government assumes liabilities for
any damages, loss, destruction or failure to return possession of such Engine at
the end of the term of such contract and for injury to persons or damage to
property of others.
The Lessee shall not use any Engine nor suffer it to be used in any manner
or for any purpose excepted from any of the insurance on or in respect of the
Engine or for the purpose of carriage of goods of any description excepted from
such insurance nor do, or per-
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mit to be done, anything which, or omit to do anything the omission of which,
may invalidate any of such insurance.
(b) Possession. The Lessee will not, without the prior written consent of
the Agent and the Lessor, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer the right,
title or interest of the Lessee in, any Engine except that, unless a Default or
Lease Event of Default shall have occurred and be continuing, the Lessee may,
without the prior written consent of the Agent and the Lessor, take the
following actions so long as the actions to be taken shall not deprive the Agent
of the first priority Lien under the Aircraft Chattel Mortgage in the assets
subject thereto and so long as the actions to be taken shall not deprive the
Lessor of the protections of Section 1110 of the Bankruptcy Code with respect to
the any Engine and shall not deprive the Agent of the protections of Section
1110 of the Bankruptcy Code with respect to the any Engine as assignee of the
Lessee's rights under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of any Engine other than by lease to the
United States of America or any instrumentality thereof pursuant to the
Civil Reserve Air Fleet Program (as administered pursuant to Executive
Order 12656, or any substitute order) or any similar or substitute
programs;
(ii) transfer possession of any Engine to the manufacturer thereof for
testing or other similar purposes or any other organization for service,
repairs, maintenance or overhaul or, to the extent permitted by Section 11
hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by the Lessee in the ordinary course of business that do
not contemplate or require the transfer of title to or use for the
remainder of its useful life of such Engine; provided, however, that if the
Lessee's title to or use for the remainder of its useful life of any Engine
shall be divested under any such agreement or arrangement, such divesture
shall be deemed to be an Event of Loss with respect to such Engine and the
Lessee shall comply with Section 13 in respect thereof;
(iv) install any Engine on an airframe that is owned by the Lessee
free and clear of all Liens except (A) those permitted under clauses (i) or
(ii) of the definition of Permitted Encumbrances in the Credit Agreement,
(B) those that apply only to the engines (other than the Engines),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe (but not to
the airframe as an entirety), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements that are customary in the
airline industry and do
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not contemplate or require the transfer of title to such airframe or the
engines installed thereon;
(v) install any Engine on an airframe leased to the Lessee or owned by
the Lessee subject to a conditional sale or other security agreement,
provided that: (A) such airframe is free and clear of all Liens, except for
the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except for Liens of the type
permitted by clause (iv) above; and (B) the Agent and the Lessor shall have
received from the lessor, conditional vendor or secured party and each of
the purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which may be
the lease, conditional sale agreement or mortgage covering such airframe),
whereby such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional vendor
or secured party expressly and effectively agrees that neither it nor its
successors and assigns will acquire or claim any right, title or interest
in any Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install any Engine on an airframe owned by the Lessee, leased by
the Lessee or owned by the Lessee subject to a conditional sale or other
security agreement under circumstances where neither clause (iv) nor clause
(v) above is applicable; provided, that any divesture of title to such
Engine resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and the Lessee shall comply with Section
13 in respect thereof;
(vii) enter into an ACMI Contract or wet lease for any Engine with any
third party pursuant to which the Lessee has operational control of such
Engine, such operation to be performed solely by individuals under the
operational control of the Lessee possessing all current certificates and
licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided, that the Lessee's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI Contract or
wet lease; and
(viii) replace any Engine in accordance with Section 9.21 of the
Credit Agreement;
provided, however, that the rights of any transferee (other than with respect to
any transactions referred to in paragraph (viii) above) who receives possession
of any Engine permitted by the terms hereof shall be made subject and
subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and
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security interest of the Aircraft Chattel Mortgage and all of the Agent's rights
thereunder and the Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such transfer
had not occurred, and any such instrument of transfer shall include appropriate
provisions for the maintenance and insurance of such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of such
Engine or any assignment of the rights thereunder; and provided further, that no
such lease, pooling arrangement or other transfer or relinquishment of the
possession of any Engine shall in any way discharge or diminish any of the
Lessee's obligations to the Lessor hereunder.
(c) Insignia. The Lessee shall, at its own cost and expense, cause each
Engine to be legibly marked with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing III,
Inc., and Mortgaged to Bankers Trust Company, as the Agent" or such other
legend, as shall in the opinion of the Lessor and the Agent be appropriate or
desirable to evidence the fact that it is subject to the ownership of the Lessor
and the lien and security interest created by the Aircraft Chattel Mortgage. The
Lessee shall not remove or deface, or permit to be removed or defaced, any such
plate, disk, or other marking or the identifying manufacturer's serial number,
and, in the event of such removal or defacement, shall promptly cause such
plate, disk, or other marking or serial number to be promptly replaced. Except
as provided above, the Lessee shall not allow the name of any person,
association or corporation to be placed on any Engine as a designation that
might be interpreted as a claim of ownership or of any security interest
therein, except that the Lessee or any permitted lessee may place its customary
colors and insignia or the insignia of the manufacturer on any Engine.
(d) Holding Out. The Lessee agrees that it will not at any time represent
or hold out the Lessor, the Agent, any Lender or any Affiliate of any of them
(and will use its best efforts to ensure that none of the Lessor, the Agent, any
Lender or any Affiliate of any of them is not at any time represented or held
out) as being in any way connected or associated with any operation of any
Engine or any Part or any other operations or carriage undertaken by the Lessee.
(e) No Pledging of Credit. The Lessee is not authorized to, and agrees that
it will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, any Engine or any Part, or for any other purpose
whatsoever.
(f) Title. Title to each of the Engines shall remain vested in the Lessor
subject to the Aircraft Chattel Mortgage and any assignments, charges or other
disposals that the Lessor may make in accordance with this Lease. The Lessee
shall not do or knowingly permit to be done anything that would jeopardize the
rights of the Lessor as owner of, or the rights of any Lender in, any of the
Engines and shall cause to be taken all actions necessary or
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reasonably requested by the Lessor to prevent the rights of the Lessor and the
Lenders in the Engines from being jeopardized. The Lessee shall not hold itself
out to any third party as the owner of the Engines or any part thereof, and when
any third party inquires as to ownership of any Engine or any part thereof, it
will make clear to such third party that title to the same is held by the Lessor
and that such Engine is mortgaged to the Lenders. Without limiting the
foregoing, if at any time subsequent to the initial registration of the Engines,
any filing, recording or act is necessary or reasonably requested by the Lessor
to perfect, protect and preserve the rights and interests of the Lessor in any
of the Engines and the rights and interests of any Lender under the Aircraft
Chattel Mortgage, the Lessee, at its own cost and expense, will procure that
such filings, recordings and acts are done pursuant to applicable laws. At the
reasonable request of the Lessor, the Lessee shall furnish to the Lessor an
opinion of counsel or other evidence satisfactory to the Lessor of each such
filing, recordation and act. The Lessor will reimburse the Lessee for its
reasonable out-of-pocket expenses incurred in complying with its obligations
under this Section 10(f) insofar as they relate to any Lender; provided, that,
to the extent that such expenses relate to (i) any reregistration of the Engines
under Section 8 or any sublease of the Engines, (ii) any Event of Default or
(iii) any substitution of Parts or Engines pursuant to the terms hereof, the
Lessor shall not be obligated to reimburse the Lessee for such increase in
expense.
(g) Information and Records. The Lessee shall:
(i) promptly furnish to the Lessor all such information as the Lessor
may from time to time reasonably request regarding any Engine or any part
thereof, its use, location and condition;
(ii) keep, or procure that there are kept, the Technical Records and
shall keep as part thereof accurate, complete and current records of all
Flight Hours and Cycles of each Engine and the Parts, and of all
maintenance and repairs carried out on each Engine and every Part;
(iii) procure that the Technical Records shall be kept and maintained
in English and in such manner, form and location as the FAA and any
applicable law may from time to time require and shall disclose the
location of all Engines and Parts, which Technical Records, unless
otherwise required by applicable law, shall be the property of the Lessor;
(iv) make the Technical Records available to the Lessor (or any
authorized representative of the Lessor) for examination during normal
business hours (or at such other time as the Lessee and the Lessor shall
mutually agree) upon giving reasonable written notice, provided that, so
long as no Event of Default shall have occurred and be continuing, such
examination does not impede the normal commercial operation of
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the Engines, and provided further that the cost of any such inspection
shall be borne by the Lessee if the Lessee is thereby shown to be in breach
of its material obligations hereunder, and otherwise by the party making
the inspection; and
(v) promptly on, but in no event later than three Business Days after,
becoming aware of the same, notify the Lessor of: (I) any Total Loss with
respect to any Engine, (II) any loss, theft, damage or destruction to any
Engine or any part thereof if the potential cost of repairs or replacement
may exceed $2,000,000, (III) any loss, arrest, hijacking, confiscation,
seizure, requisitioning, impounding, taking in execution, detention or
forfeiture of any Engine or any part thereof and (IV) any event in respect
of any of the Engines that might reasonably be expected to involve the
Lessor, the Lessee, the Agent or any Lender in any loss or liability.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), the Lessee, at its own
cost and expense, will promptly replace all Parts, which may from time to time
be incorporated or installed in or attached to any Engine and which may from
time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance, service, repair
or testing, the Lessee at its own cost and expense may remove any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, that, except as
otherwise provided in Section 11(d), the Lessee at its own cost and expense
shall replace such Parts as promptly as practicable. All replacement Parts shall
be owned by the Lessor free and clear of all Liens (except Permitted
Encumbrances and for pooling arrangements to the extent permitted by Section
11(b)), and shall be in as good operating condition as, and shall have a value
and utility at least equal to, the Parts replaced, assuming that such parts were
in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from any Engine shall remain the property of
the Lessor and shall remain subject to the lien and security interest of the
Aircraft Chattel Mortgage, no matter where located, until such time as such
Parts shall be replaced by parts that have been incorporated or installed in or
attached to any Engine and that meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to any Engine as above provided, without further act,
(A) title to such replacement Part shall vest in and such replacement part shall
become the property of the Lessor and shall become subject to this Lease and the
lien and security interest of the Aircraft Chattel Mortgage and shall be deemed
part of such Engine for all purposes hereof to the same extent as the property
originally comprising, or installed on, such
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Engine, and (B) title to the replaced part shall no longer be the property of
the Lessor and shall thereupon become free and clear of all rights of the Lessor
hereunder and all rights derivative of the Lessor's and shall no longer be
deemed a Part hereunder.
(b) Any Part removed from any Engine as provided in Section 11(a) may be
subjected by the Lessee to a normal pooling arrangement of the type customary in
the airline industry entered into by the Lessee in the ordinary course of its
business and entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or involuntary;
provided, that the Part replacing such removed Part shall be incorporated or
installed in or attached to such Engine in accordance with Section 11(a) as
promptly as possible after the removal of such removed part. In addition, any
replacement Part when incorporated or installed in or attached to any Engine in
accordance with Section 11(a) may be owned by any third party subject to such a
pooling arrangement, provided that the Lessee, at its expense, as promptly
thereafter as possible, either (A) causes such replacement Part to become
property of the Lessor and subject to the lien and security interest of the
Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Engine) or (B) replaces such replacement Part by incorporating or
installing in or attaching to such Engine a further replacement Part owned by
the Lessee which shall become the property of the Lessor subject to the lien and
security interest of the mortgage free and clear of all Liens (except Permitted
Encumbrances and the Aircraft Chattel Mortgage relating to the Engine).
(c) The Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to each of the Engines as
may be required from time to time to meet the standards of the FAA or other
governmental authority having jurisdiction; provided, that the Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or the Agent's
respective interests. The Lessee also agrees, at its own cost and expense, to
make or cause to be made such alterations and modifications in and additions to
the Engines as may be required from time to time to meet the standards or
requirements of any directive issued by a manufacturer relating to any Engine.
In addition, so long as no Default or Lease Event of Default shall have occurred
and be continuing, the Lessee, at its own cost and expense, may from time to
time make such alterations and modifications in and additions to any Engine as
the Lessee may deem desirable in the proper conduct of its business, provided
that no such alteration, modification or addition diminishes the value or
utility or impairs the condition or airworthiness of such Engine below the
value, utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition, assuming that such Engine were then in the
condition and airworthiness required to be maintained by the terms of this
Lease.
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(d) All Parts incorporated or installed in or attached to or added to any
Engine as the result of such alteration, modification or addition shall, without
further act, become the property of, and title to such parts shall vest in the
Lessor and shall be subject to the lien and security interest of the Aircraft
Chattel Mortgage; provided, that, so long as no Default or Lease Event of
Default shall have occurred and be continuing, the Lessee may remove and not
replace any such Part if it (A) is in addition to, and not in replacement of or
in substitution for, any Part incorporated or installed in or attached to such
Engine on the date hereof, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or attached or
added to such Engine pursuant to the terms of Section 10(a) hereof or any other
provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from such Engine without diminishing or impairing the value, utility or
airworthiness that the such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming that such Engine was
otherwise in the condition required by this Lease and the Aircraft Chattel
Mortgage. Upon the removal by the Lessee of any such Part, as above provided,
title thereto shall, without further act, be free and clear of the interests of
the Lessor and all rights derivative of the Lessor's and such Part shall no
longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, any Engine, (ii) any
grounding of any Engine, (iii) suspension of certification of any Engine, or
(iv) loss of revenue suffered by the Lessee for any reason whatsoever.
SECTION 12. Indemnities.
(a) The Lessee will pay, and hereby indemnifies, on an after-tax basis, the
Lessor and its assignees, if any, from and against, any and all fees and taxes,
levies, imposts, duties, charges or withholdings, together with any penalties,
fines or interest thereon (any of the foregoing for the purposes of this Section
12 being called a "Tax"), that may from time to time be imposed on or asserted
against the Lessor and its assignees, if any, or any Engine or any part thereof
or interest therein by any federal, state or local government or other taxing
authority in the United States or by any foreign government or subdivision
thereof or by any foreign taxing authority in connection with, relating to or
resulting from: (i) any Engine or any part thereof or interest therein, (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of any Engine, (iii) any rentals or other
earnings therefor or arising therefrom or the income or other proceeds received
with respect thereto, or (iv) this Lease or the Aircraft Chattel Mortgage;
provided, however, that there shall be excluded from any indemnification under
this Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien that may have attached as security for such Tax,
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nothing in this Section shall require the payment of any Tax so long as and to
the extent that the validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
the Lessee shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
(b) The Lessee agrees to defend, indemnify, pay and hold harmless the
Lessor, the Agent and each Lender, and the officers, directors, partners,
employees, agents and affiliates of the Lessor, the Agent and each Lender,
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, commenced or threatened by any Person, whether or not any
such Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including, without
limitation, securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable or other cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Lease or the other
Transaction Documents or the transactions contemplated hereby or thereby
(including, without limitation, the Lenders' agreement to make the Loans to the
Lessor or the use or intended use of the proceeds of any of the Loans)
(collectively called the "Indemnified Liabilities"); provided, that the Lessee
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent that such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, the Lessee shall contribute the maximum portion that
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to any Engine, the Lessee will promptly notify the Lessor and the Agent thereof
in writing (in any event within five (5) days of such occurrence) and will, not
later than 180 days after the occurrence of such Event of Loss, convey or cause
to be conveyed to the Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Engine. Prior to or at the time
of any such conveyance, the Lessee, at its own expense, will, as conditions to
such transfer, (i) furnish the Lessor with a warranty (as to title) bill of
sale, from a person and in form and substance reasonably satisfactory to the
Lessor, with respect to such Acceptable Alternate Engine, (ii) cause a Lease
Supplement to be filed for recording pursuant
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to Title 49 of the United States Code, as amended, (iii) furnish the Lessor with
such evidence of the Lessee's title to such Acceptable Alternate Engine and of
compliance with the insurance provisions of Section 14 hereof with respect to
such Acceptable Alternate Engine as the Lessor may reasonably request, (iv)
furnish the Lessor with an opinion of the Lessee's counsel to the effect that
title to such Acceptable Alternate Engine has been duly conveyed to the Lessor
free and clear of all Liens except Permitted Encumbrances and the Lessor and the
Agent continue to have 1110 protection with respect to such Engine. Upon
satisfaction of the foregoing conditions, the Lessor shall transfer to or at the
direction of the Lessee without recourse or warranty all of the Lessor's right,
title and interest, if any, in and to (A) the Engine with respect to which such
Event of Loss occurred and furnish to or at the direction of the Lessee, at the
Lessee's expense, a bill of sale without warranty other than to the absence of a
Lessor Lien in form and substance reasonably satisfactory to the Lessee,
evidencing such transfer and (B) all claims, if any, against third parties, for
damage to or loss of the Engine subject to such Event of Loss, and such Engine
shall thereupon cease to be a Engine leased hereunder. The Lessee shall
cooperate with the Lessor and take all such actions as shall be requested by the
Lessor so that the Lessor complies with Section 4(f) of the Aircraft Chattel
Mortgage. For all purposes hereof, each such Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Engine." No Event of Loss under the circumstance
contemplated by the terms of this paragraph (a) shall result in any reduction in
Basic Rent or any other obligation of the Lessee hereunder.
(b) With respect to any Engine, as between the Lessor and the Lessee, any
payments on account of an Event of Loss (other than insurance proceeds or other
payments the application of which is provided for in Section 14 below) received
from any governmental authority or other person shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
any Engine that has been or is being replaced by the Lessee pursuant to the
terms hereof, so long as there shall exist no Default or Lease Event of
Default, such payment shall be paid over to or retained by the Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by the Lessor as security for the
obligations of the Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by the Lessee to the Lessor and following the
foregoing application, the balance, if any, of such payments shall be
distributed between the Lessee and the Lessor as their respective interests
may appear;
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(c) In the event of a requisition for use by the United States Government
of any Engine, the Lessee shall promptly notify the Lessor and the Agent of such
requisition and all of the Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by the Lessor or the Lessee from the United States Government for the
use of such Engine, to the extent allocable to the Term, shall be paid over to,
or retained by, the Lessee.
(d) Any amount referred to in this Section 13 that is payable to or
retained by the Lessee shall not be paid to the Lessee or retained by the
Lessee, if at the time of such payment or retention any Default or Lease Event
of Default shall have occurred and be continuing, but shall be held by or paid
over to the Lessor as security for the obligations of the Lessee under the Lease
and shall be applied against the Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Lease Event of
Default, such amount shall be paid to the Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 14. Insurance. (a) The Lessee will at all times carry and maintain
on or with respect to each of the Engines, at its own cost and expense, public
liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar engines by
corporations engaged in the same or similar business and similarly situated with
the Lessee but in no event in an amount less than $500,000,000 per occurrence
(which shall include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when any of the Engines are on the
ground and not in operation, the Lessee may in respect of any such Engines carry
or cause to be carried, in lieu of insurance required by this Section, insurance
otherwise conforming with the provisions of this Section except that the amounts
of coverage shall not be required to exceed the amounts of comprehensive airline
liability insurance, and the scope of risk covered and type of insurance shall
be the same, as are customarily carried with respect to similar Engines on the
ground by corporations engaged in the same or similar business and similarly
situated with the Lessee. Any policies of insurance carried in accordance with
this Section 14 and any policies taken out in substitution or replacement of any
such policies (A) shall be amended to name the Agent, the Lenders and the Lessor
and their respective shareholders, directors, officers, members, partners,
servants, employees and agents as additional named insureds, (B) shall be
primary without right of contribution from any other insurance that is carried
by the Lessee, (C) shall expressly provide that all provisions thereof, except
the limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against the Agent, the Lenders and the
Lessor.
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(b) The Lessee will at all times carry and maintain with insurers of
recognized responsibility and reputation on or with respect to the Engines, at
its own cost and expense, aircraft ground and flight all-risk hull insurance as
well as fire and extended coverage insurance on the Engines and other equipment
while removed from any airframe, which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) and
allied perils (if and to the extent that the same shall be maintained by the
Lessee with respect to similar engines owned or operated by the Lessee on the
same routes or if the Engines or other engines are operated on routes where the
custom is for Domestic Air Carriers similarly situated with the Lessee flying
comparable routes with similar engines to carry such insurance, of the type
usually carried by corporations engaged in the same or similar business and
similarly situated with the Lessee) including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of sabotage and
(C) hijacking (air piracy) or any unlawful seizure or wrongful exercise of
control of the Engine or crew of the aircraft in which such Engine is installed
in flight (including any attempt at such seizure or control) made by any person
or persons aboard such aircraft or another aircraft acting without the consent
of the insured; provided, that such insurance (including any self-insurance to
the extent permitted below) shall at all times be for an agreed value not less
than the greater of the Stipulated Loss Value as of the closest Stipulated Loss
Determinate Date and $50,000,000. During any period when any Engine is on the
ground and not in operation, the Lessee may in respect of any such Engines carry
or cause to be carried, in lieu of the insurance required by this Section,
insurance otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time customarily carried
with respect to similar engines by corporations engaged in the same or similar
business and similarly situated with the Lessee for engines on the ground in an
amount at least equal to the applicable amount provided above. All such
insurance shall name the Agent, the Lenders and the Lessor as additional
insureds and loss payees to the extent that their interest may appear and shall
provide that any loss to any Engine in excess of $2,000,000 (and, if a Default
or Lease Event of Default has occurred and is continuing, any such loss) shall
be payable to the Lessor and to the Agent for the benefit of the Lenders; and
shall be primary without right of contribution from any other insurance that is
carried by the Lessor or the Agent with respect to its interest therein. In the
event that the Lessee arranges separate insurances to cover the all-risk hull
insurance and the war and perils hull insurance, the Lessee shall ensure that
the insurers subscribing to such insurances shall agree to a 50/50 claims
funding arrangement in the event of any dispute as to which insurance is
applicable.
The Lessee may self-insure, by way of deductible or equivalent provisions
in insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
engines in the Lessee's fleet that are of a value comparable to the Engines, and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly
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situated with the Lessee; provided, however, that the Lessee may not self-insure
in an amount in excess of $1,000,000 without the prior written consent of the
Lessor and the Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name the Lessor, the Agent and the
Lenders as additional named insureds, but without the Lessor, the Agent or the
Lenders being thereby liable for premiums (and the insurance companies waiving
their right with respect thereto), (B) provide that in respect of the interest
of (x) the Lessor or (y) the Agent or the Lenders in such policies the insurance
shall not be invalidated by any action or inaction of (x) the Lessee or (y) the
Lessee or the Lessor, respectively, and shall insure the interests of the Agent
and the Lenders regardless of any breach or violation by the Lessee, the Lessor
or any Person (other than the Agent) of any warranty, declaration, condition or
exclusion from coverage contained in such policies, (C) provide that if such
insurance is cancelled, or if any material change is made in the coverage that
affects the interest of the Lessor, the Agent or any Lender, or if such
insurance is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to the Lessor, the Agent or any Lender
for thirty (30) days (seven (7) days, or such shorter or longer period as may
from time to time be customarily available in the industry, in the case of any
war risk and allied perils coverage) after receipt by the Agent and the Lessor
of written notice from such insurers of such cancellation, change or lapse, (D)
be in full force and effect throughout any geographical areas at any time
traversed by any Engine and shall be payable in U.S. dollars, (E) waive any
right of the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of the Lessee,
the Lessor or the Agent except in respect of outstanding premium due for the
Engines, (F) waive all rights of subrogation against the Lessor and the Agent
and (G) include a year 2000 date recognition writeback.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of any Engine, a valid agreement by the
United States or such agency or instrumentality to indemnify the Lessee against
the same risks against which the Lessee is required hereunder to insure shall be
considered adequate insurance with respect to such Engine to the extent of the
risks and in the amounts that are the subject of any such agreement to
indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, the Lessee will furnish to the Lessor and the Agent (A) a report
signed by a firm of independent aircraft insurance brokers, appointed by the
Lessee and not objected to by the Lessor or the Agent, describing in reasonable
detail acceptable to the Lessor and the Agent the insurance then carried and
maintained on or with respect to the Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of the Lessee, the Lessor and the Agent, and
(B) certificates of the insurer or insurers evidencing the insurance covered by
the report. The Lessee will cause
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such brokers to advise the Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of the
Lessee of which such firm has knowledge and that might invalidate or render
unenforceable, in whole or in part, any insurance on any Engine and (y) at least
thirty (30) days prior to the expiration or termination date, or date of
effectiveness of any material change, of any insurance carried and maintained on
the Engines hereunder.
(f) All insurance payments and other payments received by the Agent, the
Lessor or the Lessee from insurance referred to in paragraph (b) above shall be,
if received by the Lessor or the Lessee, immediately paid to the Agent, as agent
for itself and the Lessor and shall be paid to the Lessee upon compliance by the
Lessee with the terms of Section 13, provided that no Default or Lease Event of
Default shall have occurred and be continuing.
(g) The Lessee shall not create or permit to exist any Lien over the
insurances required by this Lease, or its interest therein, save as constituted
by this Lease and the Credit Agreement.
(h) If at any time the Lessee fails to maintain in full force and effect
insurances in compliance with any provision of this Article 14, the Lessor shall
be entitled but not bound (without prejudice to any other rights that it may
have or acquire under this Lease by reason of such failure) (i) to pay any
premiums due or to effect or maintain insurances satisfactory to the Lessor or
otherwise remedy such failure in such manner as the Lessor considers
appropriate, and the Lessee shall immediately reimburse the Lessor in full for
any amount so expended by the Lessor and/or (ii) at any time while such failure
is continuing, to require any Engine to remain at any airport, or to proceed to
and remain at any airport designated by the Lessor, the Agent or the Lenders,
until such failure is remedied.
(i) Nothing in this Section 14 shall prohibit the Agent, or any Lender or
the Lessor from obtaining insurance with respect to any Engine for its own
account. The Lessee may, at its own expense, carry insurance with respect to its
interest in any Engine in amounts in excess of that required to be maintained by
this Section 14. No insurance maintained by the Agent, the Lessor or any Lender
shall prevent the Lessee from carrying the insurance required or permitted by
this Section. Proceeds of any such insurance carried by the Lessee, the Agent or
any Lender shall be paid as provided in the insurance policy relating thereto
and no such Person shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
the Lessee will not, without the prior written consent of the Lessor, assign any
of its rights hereunder or in any of the Engines. The Lessor agrees that it will
not assign or convey its right, title or interest in or to this Lease or any of
the Engines except in accordance with the Credit Agreement. Subject to the
foregoing, the terms and provisions of this Lease shall be
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binding upon and inure to the benefit of the Lessor and the Lessee and their
respective successors and permitted assigns and shall inure to the direct
benefit of, and shall also be enforceable by, the Agent and the Lenders, and
their respective successors, as assignees of the Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) the Lessee shall fail to pay any installment of Rent, Stipulated
Loss Value or any other amounts owing pursuant to this Lease within 5 days
after the due date thereof;
(b) the Lessee shall fail (i) to comply in any material respect with
the maintenance standards or (ii) to procure insurance coverage as
prescribed herein or (iii) to operate any Engine at a time or in a place
where insurance described in Article 14 shall not be in effect;
(c) there shall exist a Lease Event of Default under, and as defined
in, any other Lease or the Lessee shall fail to perform or observe any
other covenant or condition set forth in this Lease or any other
Transaction Document, which failure shall remain unremedied for a period of
10 Business Days after written notice from the Lessor or the Agent, unless
action has been taken within 15 Business Days to remedy such breach and
such action is being diligently pursued, provided such breach is capable of
being remedied;
(d) any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Lessee or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against the Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the
<PAGE>
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premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Lessee
or any of its Subsidiaries, or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the
appointment of an interim receiver, trustee or other custodian of the
Lessee or any of its Subsidiaries; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of the Lessee or any of its subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged;
(f) (i) the Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or the Lessee or
any of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) the Lessee or any of its Subsidiaries shall be unable,
or shall fail generally, or shall admit in writing its inability, to pay
its debts as such debts become due; or the Board of Directors of the Lessee
or any of its Subsidiaries (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii);
(g) any order, judgment or decree shall be entered against the Lessee
or any of its Subsidiaries decreeing the dissolution or split up of the
Lessee or any of its Subsidiaries and such order shall remain undischarged
or unstayed for a period in excess of 30 days;
(h) registration of any Engine is canceled and is not cured within 15
Business Days;
(i) any Engine is arrested or detained in exercise of any lien and the
Lessee does not procure the release of such Engine within 15 business days;
(j) there shall have occurred an Event of Default or Potential Event
of Default under the Amended Aircraft Credit Facility (whether or not such
Event of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) the Lessee shall not be a Certificated Air Carrier within the
meaning of Title 49 of the United States Code, as amended;
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(l) the Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by the
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise);
(m) any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against the Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder);
(n) (i) (a) Permitted Holders shall cease to own beneficially and
control shares of capital stock of the Lessee representing at least 30% of
the combined voting power of all Securities of the Lessee entitled to vote
in the election of directors, other than Securities having such power only
by reason of the happening of a contingency, or (b) any Person or any two
or more Persons acting in concert (in any such case, excluding Permitted
Holders) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Exchange
Act), directly or indirectly, of Securities of the Lessee (or other
Securities convertible into such Securities) representing 20% or more of
the combined voting power of all Securities of the Lessee entitled to vote
in the election of directors, other than Securities having such power only
by reason of the happening of a contingency, or
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(c) the Board of Directors of the Lessee shall not consist of a majority of
Continuing Directors or (ii) a "Change of Control" shall occur under any of
the Pass Through Trust Documents, any of the Senior Note Documents or any
other Material Agreement (as in effect on the date of such occurrence);
provided, however, that, following the consummation of the Holding Company
Reorganization, references in clause (i) above to the Lessee shall be
deemed to be references to the Holding Company, and, after the consummation
of the Holding Company Reorganization, it shall also be a Lease Event of
Default if, at any time, the Holding Company ceases to own directly or
indirectly 100% of the outstanding Securities of the Lessee; provided
further, however, that a "Lease Event of Default" under clause (ii) above
arising as a result of the Holding Company Reorganization shall not
constitute a "Lease Event of Default;" provided further, however, that, in
the event that Permitted Holders cease to own 30% of the combined voting
power of all Securities of the Lessee (or the Holding Company, as the case
may be) because of the issuance of Securities of the Lessee, or the Holding
Company, as the case may be, (as opposed to the Permitted Holders selling
Securities), then the failure to maintain the 30% ownership level shall not
constitute a Lease Event of Default unless the Permitted Holders shall
cease to own shares of capital stock constituting 25% of the combined
voting power of all Securities of the Lessee (or the Holding Company, as
the case may be);
(o) if any consent, authorization, license or approval of, or
registration with or declaration to any governmental entity required by the
Lessee to authorize, or required by the Lessee in connection with, the
execution, delivery, validity, enforceability or admissibility in evidence
of this Lease or any other Transaction Document or the performance by the
Lessee of its obligations hereunder or thereunder is modified in a manner
unacceptable to the Lessor or is withheld, or is revoked, suspended,
canceled, withdrawn or terminated or expires and is not renewed, or
otherwise ceases to be in full force and effect and the Lessor reasonably
determines that such modification, withholding revocation, suspension,
cancellation, withdrawal, termination or non-renewal or cessation may
significantly prejudice its rights under or in connection with this Lease,
may have a material adverse effect on the Lessee's ability to perform its
obligations hereunder or jeopardize the respective interests of the Lessor
or any Lender in any of the Engines or may give rise to criminal liability
of or the Lessor;
(p) if any event occurs, circumstance arises or proceeding is taken
with respect to the Lessee in any jurisdiction to which the Lessee is
subject that has an effect equivalent or similar to any of the events
mentioned in Sections 16(e) or (f);
(q) if the Lessee suspends or ceases or threatens to suspend or cease
to carry on its business;
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(r) if the Lessee disposes, threatens to dispose or takes any action
to dispose of all or a material part of its assets, whether by one or a
series of transactions, related or not, and such disposal or action will
have a material adverse effect on its ability to perform its obligations
under this Lease or any other Transaction Document;
(s) if the existence, validity, enforceability or priority of the
rights of the Lessor in respect of any of the Engines hereunder, or the
rights of any Lender, as mortgagee, of any of the Engines or the Lender as
assignee of the insurances are challenged by the Lessee or any other person
claiming through the Lessee;
(t) if the Lessee sells or executes any bill of sale affecting any of
the Engines or any interest therein or agrees or purposes to do any of the
same, or contests in any legal proceedings the Lessor's ownership of any of
the Engines;
(u) if any governmental authority shall have condemned, seized or
appropriated all or substantially all of the property of the Lessee; or
(v) if the Lessee becomes obligated to make any "change of control"
put payments in connection with the Holding Company Reorganization that,
when aggregated with all payments made under Section 7(e)(6), exceed
$75,000,000 or if, after giving effect to such "change of control" put
payments, (A) the Lessee shall have less than $150,000,000 in Cash or Cash
Equivalents on its balance sheet or (B) its Consolidated Leverage Ratio
(calculated on a pro forma basis as if the proposed payment had been
consummated on the last day of the most recent four fiscal quarter period)
shall exceed the lower of 4.25:1.00 or the ratio to be met in accordance
with Section 7(f)(ii) for the immediately succeeding fiscal quarter end.
SECTION 17. Remedies. Upon the occurrence of any Lease Event of Default and
at any time thereafter so long as the same shall be continuing, the Lessor may,
at its option, declare, by written notice to the Lessee, this Lease to be in
default, except that upon the occurrence of a Lease Event of Default referred to
in clauses (e), (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, the
Lessor may do one or more of the following with respect to all or any part of
any or all of the Engines as the Lessor in its sole discretion shall elect:
(a) upon the written demand of the Lessor and at the Lessee's expense,
promptly return any Engine as the Lessor may so demand to the Lessor or its
order in the manner and condition required by, and otherwise in accordance
with all the provisions of, Section 8 hereof as if such Engine were being
returned at the end of the Term, or the Lessor, at its option, may enter
upon the premises where all or any part of any Engine is located and take
immediate possession of and remove the same by
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summary proceedings or otherwise, all without liability accruing to the
Lessor for or by reason of such entry or taking of possession or removal,
whether for the restoration of damage to property caused by such action or
otherwise; provided, that if the Lessee shall for any reason fail to
execute and deliver instruments deemed necessary or advisable by the Lessor
to obtain possession of any of the Engines, the Lessor shall be entitled,
in a proceeding (which proceeding may be done on an ex parte basis without
notice to the Lessee), to a preliminary injunction granting the Lessor the
right to possess the Engines without having to post a bond or provide any
other type of security and to a final judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
the Lessee to execute and deliver such instruments to the Lessor;
(b) sell any Engine at public or private sale, as the Lessor may
determine, or otherwise dispose of, hold, use, operate, lease to others or
keep idle any Engine as the Lessor, in its sole discretion, may determine,
all free and clear of any rights of the Lessee, except as hereinafter set
forth in this Section 17, and without any duty to account to the Lessee
with respect to such action or inaction;
(c) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) or
(b) above with respect to the Engine, the Lessor, by written notice to the
Lessee specifying a payment date, may demand that the Lessee pay to the
Lessor, and the Lessee shall pay the Lessor, on the payment date so
specified, any Basic Rent due on or before the payment date so specified
plus, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of the installments of Basic Rent for the Engines due after the date
specified in such notice if any), an amount equal to the Stipulated Loss
Value for the Engines computed as of the immediately preceding Stipulated
Loss Determination Date, together with interest, if any, at the Past Due
Rate on the amount of such Basic Rent and Stipulated Loss Value from the
Stipulated Loss Determination Date as of which Stipulated Loss Value is
computed until the date of actual payment; and upon such payment of
liquidated damages and all Supplemental Rent then due and payable by the
Lessee hereunder, the Lessor shall transfer (without any representation,
recourse or warranty whatsoever) the Engines to the Lessee and the Lessor
shall execute and deliver such documents evidencing such transfer and take
such further action as the Lessee shall reasonably request to effect such
transfer;
(d) in the event that the Lessor, pursuant to paragraph (b) above,
shall have sold any of the Engines, the Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to the Engines, may, if it
shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall
pay to the Lessor, on the date of such sale, any accrued rent with respect
to the Engines due on or prior to such date plus, as liquidated
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damages for loss of a bargain and not as a penalty, the amount of any
deficiency between the net proceeds of such sale (after deduction of all
reasonable costs of sale) and the Stipulated Loss Value of such the
Engines, computed as of the date of such sale together with interest, if
any, on the amount of such deficiency, at the Past Due Rate, from the date
of such sale to the date of actual payment of such amount;
(e) the Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) the Lessor may exercise any other right or remedy which may be
available to it under applicable law.
In addition, the Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies and for all reasonable legal fees and other costs and expenses incurred
by the Lessor and the Agent and any Lender (including reasonable allocated time
charges of internal counsel for the Lender) in connection with the Lease Event
of Default, the exercise of remedies and the return of any Engine in accordance
with the terms of Section 8 hereof or in placing such Engine (which for purposes
hereof, shall include, without limitation, all logs, manuals and data and
inspection, maintenance, modification and overhaul and similar records with
respect thereto) in the condition and airworthiness required by such Section.
The Lessee hereby acknowledges that it shall be directly liable for such costs
and expenses to any Person designated by the Lessor, the Agent or any Lender (as
the case may be) to provide services in connection with or to effect the return
of any Engine in accordance with the terms of Section 8 hereof or in placing
such Engine (which for purposes hereof shall include, without limitation, such
logs, manuals and records) in the condition and airworthiness required by such
Section.
At any sale of any Engine or any part thereof pursuant to this Section 17,
the Lessor or the Agent or any Lender may bid for and purchase such property.
The Lessor agrees to give the Lessee at least 10 days' written notice of the
date fixed for any public sale of any Engine or of the date on or after which
will occur the execution of any contract providing for any private sale. Except
as otherwise expressly provided above, no remedy referred to in this Section 17
is intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to the Lessor at law or in
equity or otherwise; and the exercise or beginning of exercise by the Lessor of
any one or more of such remedies shall not preclude the simultaneous or later
exercise by the Lessor of any or all of such other remedies. No waiver by the
Lessor of any Lease Event of Default shall in any way be, or be construed to be,
a waiver of any future or subsequent Lease Event of Default. To the extent
permitted by applicable law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise that may require the Lessor to sell,
lease, or otherwise use any
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Engine or any part thereof in mitigation of the Lessor's damages as set forth in
this Section 17 or that may otherwise limit or modify any of the Lessor's rights
and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to any Engine or other Obligations (other than principal
and interest on Loans relating to aircraft or other spare engines) are
outstanding under the Credit Agreement, all rights of the Lessor under this
Section 17 shall be exercised only by the Agent as assignee of the Lessor's
rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, the Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Engines. In addition, the Lessee at its
expense will promptly and duly execute and deliver to the Lessor and the Agent
such further documents and take such further action as the Lessor and the Agent
may from time to time reasonably request in order more effectively to carry out
the intent and purpose of this Lease and the other Transaction Documents and to
establish and protect the rights and remedies created or intended to be created
in favor of the Lessor and the Agent hereunder and under the other Transaction
Documents, including, without limitation, if requested by the Lessor and the
Agent, the execution and delivery of supplements or amendments hereto, at the
expense of the Lessee, each in recordable form, and all financing statements and
continuation statements, and all similar notices required by applicable law at
all times to be kept recorded and filed in such manner and such places as the
Lessor and the Agent may reasonably request.
(b) The Lessee agrees at its own expense to furnish to the Lessor and the
Agent promptly after execution and delivery of any supplement and amendment
hereto, an opinion of counsel satisfactory to the Lessor and the Agent (which
may include the Lessee's general counsel) stating that, in the opinion of such
counsel, such supplement or amendment to the Lease (or a financing statement,
continuation statement or similar notice thereof if and to the extent permitted
or required by applicable law) has been properly recorded or filed for record in
all public offices in which such recording or filing is necessary to protect the
right, title and interest of the Lessor hereunder and the Agent under the Loan
Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received,
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(b) if given by certified mail, three Business Days after being deposited in the
United States mail, with appropriate postage prepaid, (c) if given by telex,
upon receipt by the party transmitting the telex of such party's answerback code
at the end of such telex (receipt of confirmation in writing not being necessary
to the effectiveness of any telex) and (d) if given by overnight service or
other means, when received or personally delivered, addressed:
(i) if to the Lessee, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Counsel, or to such other address as the Lessee shall from time
to time designate in writing to the Lessor; and
(ii) if to the Lessor, at 538 Commons Drive, Golden, Colorado 80401,
Attention: Mr. Richard H. Shuyler, or to such other address as the Lessor
shall from time to time designate in writing to the Lessee, with a copy to
the Agent at 130 Liberty Street, New York, New York 10006, Attention:
Marguerite Sutton.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
that the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration under Title
49 of the United States Code, as amended, or other applicable law, condition,
design, compliance with specifications, operation or fitness for use of, or any
damage to or loss or destruction of, the Engines, or any theft, interference,
interruption or cessation in or prohibition of the use or possession thereof by
the Lessee or any sublessee for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority or any other Person, (iii)
any Liens, encumbrances or rights of any other Person with respect to the
Engines, (iv) the invalidity or unenforceability or lack of due authorization or
other infirmity of this Lease or any other Transaction Document or document or
instrument executed pursuant hereto or thereto, or any lack of right, power or
authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to any Engine or
any Part, (vi) any insolvency, bankruptcy, reorganization or similar proceedings
by or against the Lessee or any other Person, or (vii) any failure, breach or
delay by the Lessor or any other Person in performing or complying with any term
of this Lease or any other cause whether similar or dissimilar to the foregoing,
any present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to any
setoff or any reduction for any reason whatsoever, including any present or
future claims of the Lessee against the Lessor or any other
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Person under this Lease or otherwise. The Lessee hereby waives, and hereby
agrees to waive at any future time at the request of the Lessor, to the full
extent now or then permitted by applicable law, any and all rights that it may
now have or that at any time hereafter may be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender this Lease except in
accordance with the express terms hereof. Each payment of Rent made by the
Lessee to the Lessor shall be final as to the Lessor and the Lessee. The Lessee
will not seek to recover all or any part of any such payment of Rent from the
Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent, as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage, shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Engines and Parts as provided herein,
and in any circumstances where more than one construction of the terms and
conditions of this Lease is possible, a construction that would preserve such
benefits shall control over any construction that would not preserve such
benefits or would render them doubtful. To the extent consistent with the
provisions of 11 U.S.C. ss. 1110 or any analogous section of the federal
bankruptcy laws, as amended from time to time, it is hereby expressly agreed,
that notwithstanding any other provisions of the federal bankruptcy law, as
amended from time to time, any right of the Lessor and the Agent, as assignee of
the Lessor under the Aircraft Chattel Mortgage, to take possession of the
Engines in compliance with the provisions of this Lease shall not be affected by
the provisions of 11 U.S.C. ss. 362 or ss. 363, as amended from time to time, or
any analogous provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and the Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code, and neither the Lessor nor
the Lessee shall file any tax returns in a manner or take any other action or
position inconsistent with the foregoing or with the Lessor's ownership of the
Engines. Nothing contained in this Lease shall be construed as conveying to the
Lessee any right, title or interest in the Engines except as a Lessee only. The
Engines shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, the Lessee shall have the option to purchase the Engines at the
end of the Term for a purchase price equal to the higher of the Fair Market
Sales Value (assuming that the Engines are in the condition required by the
Lease) as of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by the Lessee of the full of such
amounts, the Lessor shall convey to the Lessee all right, title and
<PAGE>
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interest of the Lessor in and to the Engines on an "as-is, where is" basis,
without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, the Lessee shall be required to give not less than 90 days (but not
more than 360 days) irrevocable prior written notice to the Lessor. The Lessee
will give the Lessor prior written irrevocable notice not less than 90 days (but
not more than 360 days) before the expiration of the Term of its determination
to return the Engines and not exercise any purchase option under this Section
21. If the Lessee fails to give notice as required herein, the Lessee will be
deemed to have elected to return the Engines to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If the Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to perform
or comply with any of its agreements contained herein, then the Lessor may
itself make such payment or perform or comply with such agreement but shall not
be obligated hereunder to do so, and the amount of such payment and the amount
of the reasonable expenses of the Lessor incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the Lessor, the Lessee and the Agent. This
Lease shall constitute an agreement of lease, and nothing contained herein shall
be construed as conveying to the Lessee any right, title or interest in the
Engines except as a lessee only. Neither the Lessee nor any Affiliate of the
Lessee will file any tax returns in a manner inconsistent with the foregoing
fact or with the Lessor's ownership of the Engines or with the parties'
agreement that this Lease be treated as a tax lease for purposes of the Internal
Revenue Code. The section and paragraph headings in this Lease and the table of
contents are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof and all reference herein
to numbered sections, unless otherwise indicated, are to sections of this Lease.
THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. EACH OF THE LESSEE
AND THE LESSOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
IT IS A PARTY INVOLVING, DIRECTLY OR INDI-
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RECTLY, ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE OR ANY OTHER
TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND
WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER
THE PAYMENT, OBSERVANCE OR PERFORMANCE OF THE LESSEE'S OR THE LESSOR'S
OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may
be executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
(c) The time stipulated in this Lease for all payments and notices by the
Lessee to the Lessor and for the performance of the Lessee's other obligations
under this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent each of the Engines, subject to the reservations
and conditions therein set forth. All rights of the Lessor hereunder are subject
to the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so
long as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments, (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. The
Lessee hereby acknowledges due notice of, and consents to, such assignment and
to the creation of such mortgage and security interest. To the extent, if any,
that this Lease and any Lease Supplement constitutes chattel paper (as such term
is in effect in any applicable jurisdiction), no security interest in this Lease
or any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
(Remainder of page intentionally left blank)
<PAGE>
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IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease
to be duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING III, INC.,
Lessor
By:
---------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By:
---------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of April, 2000.
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
SPARE ENGINE CHATTEL MORTGAGE
SECURITY AGREEMENT AND CHATTEL MORTGAGE
(CF6-80C2 SPARE ENGINE POOL)
THIS SECURITY AGREEMENT AND CHATTEL MORTGAGE is dated as of April 25, 2000
(this "Mortgage"), and entered into by and between ATLAS FREIGHTER LEASING III,
INC., a Delaware corporation (the "Company" or "Lessor") and BANKERS TRUST
COMPANY, as administrative agent for and representative of (in such capacity,
the "Agent") the financial institutions (the "Lenders") party to the Credit
Agreement referred to below.
PRELIMINARY STATEMENTS
The Company has entered into a credit agreement dated as of April 25, 2000,
(said credit agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with the
Lenders and the Agent, pursuant to which the Lenders have agreed, on the terms
and conditions set forth in the Credit Agreement, to make term loans to the
Company in the principal amount of up to $300 million (the "Loans") to enable
the Company to refinance certain indebtedness currently encumbering the Spare
Engine Collateral (as defined below). The indebtedness with respect to the Loans
made by the Lenders is to be evidenced by certain promissory notes of the
Company to the order of the Lenders of even date herewith issued under and
pursuant to the Credit Agreement (such promissory notes, as they may be amended,
modified, supplemented, renewed, converted or extended from time to time, being
the "Notes"). It is a condition precedent to the making by the Lenders of the
Loans under the Credit Agreement that this Mortgage be executed, delivered and
filed for recordation.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make the Loans, the Company hereby agrees with the Agent as follows:
SECTION 1. Mortgage and Grant of Security.
To secure the due and punctual payment of the Notes, together with accrued
interest thereon, and all other amounts from time to time payable by the Company
under the Credit Agreement, this Mortgage and the other Loan Documents (as
defined below) (including payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code), and to secure performance of all obligations and covenants of
the Company under the Credit Agreement, this Mortgage and the other Loan
Documents (all such payment and performance obligations of the Com-
<PAGE>
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pany, the "Secured Obligations"), the Company hereby mortgages to the Agent, for
the benefit of the Lenders, and their respective successors and assigns, and
hereby grants and assigns to the Agent, for the benefit of the Lenders, and
their respective successors and assigns, a first priority security interest in
each Spare Engine (the "Spare Engine Collateral") and a first priority security
interest in all estate, right, title and interest of the Company in, to and
under, the other below described property wherever the same may be located (the
"Spare Engine Related Collateral"):
(a) Spare Engine Collateral. All of the Company's right, title and
interest in and to:
(i) each of the engines that are listed in Schedule I hereto or
which are described in a Supplemental Chattel Mortgage (a
"Supplemental Chattel Mortgage") substantially in the form of Exhibit
A attached hereto, supplementing this Mortgage, and listed by
manufacturer's serial number in such Schedule or in such Supplemental
Chattel Mortgage, whether or not from time to time thereafter
installed on any Aircraft or on any other aircraft or airframe, and
any replacement engine that may be substituted for such engine in
accordance with the provisions of Section 4(f) hereof or Section 9.21A
of the Credit Agreement, together, in each case, with any and all
Parts incorporated or installed in or attached thereto and any and all
Parts removed therefrom, until such Parts are replaced in accordance
with Section 4(e) hereof (each such engine, and replacement engine,
together with any and all such Parts, hereinafter referred to as an
"Engine" and collectively, the "Engines");
(ii) all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other
than complete Engines or engines), that may from time to time be
incorporated or installed in or attached to any Engine, including all
such appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment purchased by the Company for
incorporation or installation in or attachment to any Engine pursuant
to the terms of any agreement whether or not identified in a
Supplemental Chattel Mortgage (collectively referred to herein as
"Parts"); and
(iii) all records, logs and other materials required by
applicable law or regulation to be maintained and all other records,
logs and materials maintained in the ordinary course of business with
respect to the properties described in paragraphs (i) and (ii) above
(together with such Engines, the "Spare Engines").
<PAGE>
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(b) Spare Engine Related Collateral. All of the Company's right, title
and interest in and to:
(i) all the tolls, rents, issues, profits, revenues and other
income of the property subject or required to be subject to the lien
of this Mortgage including, without limitation, all payments or
proceeds payable to the Company after termination of the Lease with
respect to the Spare Engines as the result of the sale, lease or other
disposition thereof, and all estate, right, title and interest of
every nature whatsoever of the Company in and to the same and every
part thereof;
(ii) all monies and securities deposited or required to be
deposited with the Agent pursuant to any term of this Mortgage and
held or required to be held by the Agent hereunder or paid to the
Agent in accordance with the terms of the Lease;
(iii) the contractual rights of the Company under any purchase or
modification agreement or manufacturer's warranty, together with all
rights, powers, privileges, options, licenses and other benefits of
the Company (including such indemnities, rights of assignment, rights
and remedies for breach of any warranty and/or claims for damages,
rights to receive title to parts and materials to the extent same
relates to any Engine including any agreement assigned therewith;
(iv) all amounts payable to the Company by any manufacturer,
supplier or vendor of any of the Spare Engine Collateral or any
component thereof pursuant to any warranty or indemnity covering any
such Spare Engine Collateral;
(v) all amounts payable as proceeds of insurance, as an award or
otherwise in connection with any loss, confiscation, condemnation,
requisition or other taking of any Spare Engine Collateral to the
extent payable to the Company under the Lease or to the Agent
hereunder;
(vi) the Lease, including without limitation all Basic Rent (as
defined in the Lease), Supplemental Rent (as defined in the Lease),
insurance proceeds, requisition, indemnity and other payments of any
kind thereunder, and including all rights of the Company, as lessor,
to execute any election or option or to give any notice, consent,
waiver or approval under or in respect of the Lease or to accept any
surrender of any Engine or any part thereof, as well as any rights,
powers or remedies on the part of the Lessor, whether arising under
the Lease
<PAGE>
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or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default (as defined in the Lease), including, without
limitation, all rights under Section 1110 of the Bankruptcy Code; and
(vii) all proceeds of any and all of the properties described
above, including, without limitation, all payments under insurance
proceeds or payment under any indemnity, payable by reason of any loss
or damage to any Engine.
The Company shall deliver to the Agent an executed chattel paper original
counterpart of each Lease and the Lease Supplements covering the Spare Engines.
All property referred to in this granting clause, whenever acquired by the
Lessor under the Lease, shall secure all Secured Obligations. The Company does
hereby warrant and represent that it has not assigned or pledged, and hereby
covenants that it will not assign or pledge, so long as the assignment hereunder
shall remain in effect, any of its right, title or interest hereby assigned to
anyone other than the Agent, and that it will not, except as provided herein or
in the Credit Agreement, enter into any agreement amending or supplementing any
purchase agreement, modification agreement to the extent such agreement relates
to the Spare Engines, or execute any waiver or modification of, or consent
under, any such agreement, or settle or compromise any claim arising under any
such agreement or submit or consent to the submission of any dispute, difference
or other matter arising under or in any respect of any such agreement to
arbitration thereunder.
SECTION 2. Definitions.
Unless the context otherwise requires, the following terms shall have the
following meanings for all purposes of this Mortgage and shall be equally
applicable to both the singular and the plural forms of such terms. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined.
"Acceptable Alternate Engine" means a General Electric CF6-80C2 aircraft
engine or an engine of the same or another manufacturer of equivalent or greater
residual value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on one of the Aircraft or one of the Boeing
747-400 aircraft operated by the Lessee; provided, that such engine shall be of
the same make, model and manufacturer as the other engines installed on the
Aircraft or Boeing 747-400 aircraft operated by the Lessee, shall be an engine
of a type then being utilized by the Lessee on other Boeing 747-200 or 747-400
operated by the Lessee, and shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as required under the Lease without
in any way discriminating against such engine.
<PAGE>
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"ACMI Contract" means (i) any contract entered into by the Lessee pursuant
to which the Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all in accordance with the Lessee's
historical practices.
"Act" means the Federal Aviation Act of 1958, as amended and recodified in
Title 49, United States Code, or any similar legislation of the United States
enacted to supersede, amend or supplement such Act and the rules and regulations
promulgated thereunder.
"Agent" has the meaning specified in the first paragraph of this
instrument.
"Aircraft" means any Aircraft as defined in the Credit Agreement.
"Company" has the meaning specified in the first paragraph of this
instrument.
"Credit Agreement" has the meaning specified in the Preliminary Statements.
"Domestic Air Carrier" means any United States "domestic air carrier," as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulations.
"Engine" has the meaning specified in Section 1 hereof.
"Event of Default" means any Event of Default as defined in the Credit
Agreement.
"Lease" means that certain Lease Agreement, dated as of April 25, 2000, by
and between Atlas Freighter Leasing III, Inc., as Lessor, and Atlas Air, Inc.,
as Lessee, for the lease of the Spare Engine Pool, together with any amendments,
modifications, supplements or additions thereto.
"Lessee" means Atlas Air, Inc., a Delaware corporation.
"Lessor" has the meaning specified in the first paragraph of this Mortgage.
"Loans" has the meaning specified in the Preliminary Statements.
"Mortgage" has the meaning specified in the first paragraph of this
instrument.
"Notes" has the meaning specified in the Preliminary Statements.
"Parts" has the meaning specified in Section 1 hereof.
<PAGE>
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"Secured Obligations" has the meaning specified in Section 1 hereof.
"Spare Engine Collateral" has the meaning specified in Section 1 hereof.
"Spare Engine Related Collateral" has the meaning specified in Section 1
hereof.
"Supplemental Chattel Mortgage" has the meaning specified in Section 1
hereof.
SECTION 3. Representations and Warranties.
The Company hereby represents and warrants that, in the case of each Engine
initially or subsequently mortgaged hereunder on the date such Engine is
mortgaged hereunder as follows:
(a) The Company has good and marketable title to the Spare Engine
Collateral free and clear of all Liens except for the lien of this Mortgage
and Permitted Encumbrances and the Lease and has full power and authority
to mortgage and grant the lien and security interest in the Spare Engine
Collateral and Spare Engine Related Collateral intended by the terms hereof
and in the manner aforesaid and has not assigned or pledged any of its
right, title or interest hereby assigned to anyone other than the Agent.
(b) The Company is a "citizen of the United States" as defined in
Section 40102(15) of Title 49 of the United States Code.
(c) Ownership of each of the Engines is duly registered in the name of
the Company in accordance with the Act; and the Spare Engines are not
registered under the laws of any other country.
(d) This Mortgage or a Supplemental Chattel Mortgage, as the case may
be, is in due form for recording in accordance with the Act and has been
duly filed for recording in accordance with the Act against such Engine.
(e) An airworthiness certificate has been duly issued under the Act
for each of the Engines (evidence of which has been supplied to the Agent),
and the airworthiness certificate for the Engines is in full force and
effect.
(f) Each of the Engines is in such condition so as to comply with the
requirements of Section 4(c) hereof; and the insurance required by Section
4(g) hereof is in full force and effect.
<PAGE>
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(g) This Mortgage or this Mortgage as supplemented by a Supplemental
Chattel Mortgage constitutes the legally valid and binding obligation of
the Company enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditors' rights generally, and creates a valid, perfected and first
priority mortgage on and security interest in the Spare Engine Collateral,
securing the payment and performance of the Secured Obligations.
(h) The Company has delivered to the Agent for filing financing
statements under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York and such other states as may be required with respect
to that portion of the Spare Engine Collateral not covered by the filing
system established under the Act and with respect to the Spare Engine
Related Collateral; and except for the filings described in this paragraph
and in paragraph (d) above of this Section 3, no filing or recording of any
instrument shall be required to establish and perfect a first priority
security interest in the Spare Engine Collateral and Spare Engine Related
Collateral under the laws of the United States or any State thereof.
(i) The chief place of business and the chief executive office of the
Company is located at 538 Commons Drive, Golden, Colorado 80401.
SECTION 4. Covenants.
The Company hereby covenants that so long as this Mortgage is in effect:
(a) Liens. The Company will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the Spare
Engine Collateral, or Spare Engine Related Collateral, title thereto or any
interest therein, except the lien of this Mortgage and Permitted
Encumbrances, including the Lease. The Company will promptly, at its own
expense, take such action as may be necessary to duly discharge any such
Lien not excepted above if the same shall arise at any time.
(b) Taxes. The Company will pay, and hereby indemnifies the Agent from
and against, any and all fees and taxes, levies, imposts, duties, charges
or withholdings, together with any penalties, fines or interest thereon
(any of the foregoing for the purposes of this Section 4(b) being called a
"Tax"), which may from time to time be imposed on or asserted against the
Agent or any Lender or any Engine or any part thereof or interest therein
by any Federal, state or local government or other taxing authority in the
United States or by any foreign government or subdivision thereof or by any
foreign taxing authority in connection with, relating to or resulting from:
(i) any Engine or any part thereof of interest therein; (ii) the
manufacture, purchase,
<PAGE>
-8-
ownership, mortgaging, lease, sublease, use, storage, maintenance, sale or
other disposition of any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Mortgage; provided, however, that there shall
be excluded from any indemnification any Lessor Tax (as defined in the
Lease) and unless the payment of any such Tax shall be a condition to the
enforceability of this Mortgage or the perfection of the lien hereof or
unless proceedings shall have been commenced to foreclose any lien which
may have attached as security for such Tax, nothing in this Section shall
require the payment of any Tax so long as and to extent that validity
thereof shall be contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and the Company shall have set
aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(c) Registration; Maintenance and Operation. The Company, at its own
cost and expense, (i) will be a "citizen of the United States" as defined
in Section 40102(15) of Title 49 of the United States Code; (ii) will cause
ownership of the Engines to be duly registered and remain duly registered
in the United States of America in the name of the Company in accordance
with the Act; and (iii) will cause the Lessee to service, repair, inspect,
test, maintain, overhaul each Engine and install replacement equipment and
parts on each Engine (A) so as to keep each Engine in such operating
condition as may be required to permit each Engine to be utilized in
commercial operations, (B) so as to enable the airworthiness certification
of the Engines to be maintained in good standing at all times under the
Act, except when engines of the same type, model or series as the Engines
registered in the United States have been grounded by the FAA; provided,
however, that if following its issuance, the United States FAA
airworthiness certificate of any Engine shall be withdrawn, then subject to
the provisions of Section 4(f) hereof, so long as the Company is diligently
taking or causing to be taken all necessary action to promptly correct the
condition which caused such withdrawal, no Event of Default shall arise
from such withdrawal, (C) in accordance with the Lessee's FAA-approved
maintenance, inspection and maintenance control programs, and in the same
manner and with the same care used by the Lessee with respect to the same
or similar aircraft and engines owned or operated by the Lessee so as to
keep the same in as good operating condition as when originally mortgaged
hereunder, ordinary wear and tear excepted, which practices shall at all
times be at or above the standard of the industry in the United States for
prudent maintenance of similar equipment, and (D) in such manner as may be
necessary to maintain in full force all warranties of the manufacturers
thereof. The Company shall maintain, or shall cause Lessee to maintain, all
records, logs and other materials which may be required to permit each
Engine to be so utilized.
<PAGE>
-9-
The Company will comply in all material respects with all
airworthiness directives, mandatory notes or modifications or similar
requirements affecting the same (including those issued by the manufacturer
or supplier) in such condition so as to comply with the provisions of this
Mortgage and the rules and regulations of the FAA from time to time in
force and applicable to the Engines. No Engine will be maintained, used or
operated in violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to such Engine issued by any such authority, and in
the event that such laws, rules, regulations or orders require alteration
of any Engine, the Company, at its own cost and expense, will conform
thereto or obtain conformance therewith and will maintain the same in
proper operating condition under such laws, rules, regulations and orders;
provided, however, that the Company may, in good faith (after having
delivered to the Agent an Officer's Certificate stating the facts with
respect thereto), contest the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not, in the
Agent's opinion, adversely affect the interests under this Mortgage of the
Agent or any Lender.
The Company will not operate, use or locate any Engine, (I) in any
area in which any insurance required to be maintained pursuant to Section
4(g) shall not be at the time in full force and effect, or in any area
excluded from coverage by an insurance policy in effect with respect to any
such Engine, except in the case of a requisition for use by the United
States of America, and then only if Company obtains indemnity or "war risk"
insurance in lieu of such insurance from the United States of America
against the risks and in the amounts required by said Section covering such
area, or (II) in any recognized or threatened area of hostilities unless
fully covered to the Agent's satisfaction by war risk and political risk
and allied perils insurance or unless any such Engine is operated or used
under contract with the Government of the United States of America under
which contract that Government provides "war risk" insurance or assumes
liabilities for any damages, loss, destruction or failure to return
possession of any such Engine at the end of the term of such contract and
for injury to persons or damage to property of others.
The Company shall not use any Engine nor suffer it to be used in any
manner or for any purpose excepted from any of the insurance on or in
respect of any such Engine or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit to be done,
anything which, or admit to do anything the admission of which, may
invalidate any of such insurance.
(d) Possession. The Company will not, without the prior written
consent of the Agent, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish
<PAGE>
-10-
possession or control of, or transfer the right, title or interest of the
Company in, any Engine except that the Company may enter into and perform
all provisions and terms of the Lease and the Lessee or the Company, unless
a Potential Event of Default or Event of Default shall have occurred and be
continuing, without the prior written consent of the Agent, may take the
following actions so long as the actions to be taken shall not deprive the
Agent of the first priority Lien of this Mortgage on the assets subject
hereto and so long as the actions to be taken shall not deprive the Company
as Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to any of the Engines nor shall such actions deprive the Agent of
the protections of Section 1110 of the Bankruptcy Code with respect to any
of the Engines as assignee of the Company's rights under this Mortgage:
(i) transfer possession of any Engine other than by lease to the
United States of America or any instrumentality thereof pursuant to
the Civil Reserve Air Fleet Program (as administered pursuant to
Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of any Engine to the manufacturer
thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 4(e) hereof, for alterations or
modifications;
(iii) subject any Engine to normal interchange or pooling
agreements or arrangements of the type customary in the United States
airline industry and entered into by the Company or the Lessee in the
ordinary course of business that do not contemplate or require the
transfer of title to, or use for the remainder of the useful life of,
any such Engine; provided, however, that if the Company's title to or
use for the remainder of its useful life of any Engine shall be
divested under any such agreement or arrangement, such divesture shall
be deemed to be an Event of Loss with respect to such Engine and the
Company shall comply with Section 4(f) in respect thereof;
(iv) install Engine on an airframe that is owned by the Lessee,
provided that such airframe is free and clear of all Liens on property
of the Lessee except (A) Liens permitted under the Lease, (B) Liens
that apply only to the engines (other than the Engines), appliances,
parts, instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe (but not to
the airframe as an entirety), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements which are customary in
the airline industry and do not contemplate or require the transfer of
title to such airframe or the engines installed thereon;
<PAGE>
-11-
(v) install Engine on an airframe leased to the Lessee or owned
by the Lessee subject to a conditional sale or other security
agreement, provided that: (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe and except
Liens of the type permitted by clause (iv) above and (B) the Agent
shall have received from the lessor, conditional vendor or secured
party and each of the purchasers, mortgagees and encumbrancers of such
lessor, conditional vendor or secured party of such airframe a written
agreement (which may be the lease, conditional sale agreement or
mortgage covering such airframe), whereby such lessor, conditional
vendor or secured party and each of the purchasers, mortgagees and
encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors
and assigns will acquire or claim any right, title or interest in any
Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to this Mortgage;
(vi) install Engine on an airframe owned or leased by the Lessee
subject to a conditional sale or other security agreement under
circumstances where neither clause (iv) nor clause (v) above is
applicable; provided, that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and the Company shall comply with
Section 4(f) in respect thereof;
(vii) authorize or permit the Lessee to enter into an ACMI
Contract or wet lease for any Engine with any third party pursuant to
which the Company has operational control of the Engines installed
thereon, such operation to be performed solely by individuals under
the operational control of the Company possessing all current
certificates and licenses that would be required under the applicable
laws of the United States for the performance by such employees of
similar functions within the United States; provided, that the
Company's obligations hereunder shall continue in full force and
effect notwithstanding any such ACMI Contract or wet lease;
provided, however, that the rights of any transferee who receives
possession of any Engine permitted by the terms hereof shall be made
subject and subordinate to, and the Leases shall be made expressly
subject and subordinate to, the lien and security interest of this
Mortgage and all of the Agent's rights hereunder and the Company shall
remain primarily liable hereunder for the performance of all the terms
of this Mortgage to the same extent as if such transfer had not
occurred, and any such instrument of transfer shall include
appropriate provisions for the maintenance and insurance of such
Engine, and any such in-
<PAGE>
-12-
strument of transfer (other than the Lease) shall expressly prohibit
any further transfer of such Engine or any assignment of the rights
thereunder; and provided further, that no such lease, pooling
arrangement or other transfer or relinquishment of the possession of
any Engine shall in any way discharge or diminish any of the Company's
obligations to the Agent hereunder or under the Credit Agreement. In
the event that the Agent shall have received from the lessor,
conditional vendor or secured party of any airframe leased to the
Lessee or purchased by the Lessee subject to a conditional sale or
other security agreement, a written agreement complying with clause
(B) of Section 4(d)(v), and the lease or conditional sale or other
security agreement covering such airframe also covers an engine,
engines or spare engines owned by the lessor under such lease,
conditionally owned by the conditional vendor under such conditional
sale agreement, or subject to such security agreement, the Agent
hereby agrees for the benefit of such lessor, conditional vendor or
secured party that the Agent will not acquire or claim, as against
such lessor, conditional vendor or secured party, any right, title or
interest in any such engine or spare engine as the result of such
engine or spare engine being installed on an airframe at any time
while such engine or spare engine is subject to such lease or
conditional sale or other security agreement and owned by such lessor,
conditionally owned by such conditional vendor or subject to such
security agreement.
(e) Replacement and Pooling of Parts; Alterations, Modifications and
Additions.
(i) Except as otherwise provided in Section 4(e)(iv), the
Company, at its own cost and expense, will promptly replace all Parts,
that may from time to time be incorporated or installed in or attached
to any Engine and that may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In
addition, in the ordinary course of maintenance, service, repair or
testing, the Company at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use; provided,
that, except as otherwise provided in Section 4(e)(iv), the Company at
its own cost and expense shall replace such Parts as promptly as
practicable. All replacement Parts shall be owned by the Company free
and clear of all Liens (except Permitted Encumbrances and the Lease,
and for pooling arrangements to the extent permitted by Section
4(e)(ii)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced
assuming such property were in the condition and repair required to be
maintained by the terms hereof.
<PAGE>
-13-
All Parts at any time removed from any Engine shall remain the
property of the Company and shall remain subject to the lien and
security interest of this Mortgage, no matter where located until such
time as such Parts shall be replaced by parts that have been
incorporated or installed in or attached to any Engine and which meet
the requirements for replacement parts specified above. Immediately
upon any replacement Part becoming incorporated or installed in or
attached to any Engine as above provided, without further act, (A)
title to such replacement Part shall vest in and such replacement part
shall become the property of the Company and shall become subject to
the lien and security interest of this Mortgage and shall be deemed
part of such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Engine, and (B)
title to the replaced part shall no longer be the property of the
Company and shall thereupon become free and clear of all rights of the
Agent hereunder and shall no longer be deemed a Part hereunder.
(ii) Any Part removed from any Engine as provided in Section
4(e)(i) may be subjected by the Company or the Lessee to a normal
pooling arrangement of the type customary in the airline industry
entered into by the Lessee in the ordinary course of its business and
entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided that the Part replacing such removed Part shall
be incorporated or installed in or attached to such Engine in
accordance with Section 4(e)(i) as promptly as possible after the
removal of such removed part. In addition, any replacement Part when
incorporated or installed in or attached to any Engine in accordance
with Section 4(e)(i) may be owned subject to such a pooling
arrangement, provided that the Company, at its expense, as promptly
thereafter as possible, either (A) causes such replacement Part to
become subject to the lien and security interest of this Mortgage in
accordance with Section 4(e)(i) by the Company's acquiring title
thereto for the benefit of the Agent free and clear of all Liens
(except Permitted Encumbrances and the Lease) or (B) replaces such
replacement Part by incorporating or installing in or attaching to
such Engine a further replacement Part owned by the Company free and
clear of all Liens (except Permitted Encumbrances and the Lease).
(iii) The Company, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and additions
to the Engines as may be required from time to time to meet the
standards of the FAA or other governmental authority having
jurisdiction; provided, that the Company may, in good faith, contest
the validity or application of any such standard in any reasonable
matter that shall not adversely affect the Lien of this Mortgage or
Lenders' interests therein. The Company also agrees, at its own cost
and expense, to make or cause to be made such alterations and
modifications in and additions to the Engines as may be required from
time to
<PAGE>
-14-
time to meet the standards or requirements of any directive issued by
a manufacturer relating to any Engine. In addition, so long as no
Potential Event of Default or Event of Default shall have occurred and
be continuing, the Company, at its own cost and expense, may from time
to time make such alterations and modifications in and additions to
any Engine as the Company may deem desirable in the proper conduct of
its business or to accommodate the business of the Lessee, provided
that no such alteration, modification or addition diminishes the value
or utility or impairs the condition or airworthiness of such Engine
below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition,
assuming that such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Mortgage.
(iv) All Parts incorporated or installed in or attached to or
added to any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title
to such parts shall vest in the Company and shall be subject to the
lien and security interest of this Mortgage; provided, that, so long
as no Potential Event of Default or Event of Default shall have
occurred and be continuing, the Company may remove and not replace any
such Part if it (A) is in addition to, and not in replacement of or in
substitution for, any Part incorporated or installed in or attached to
such Engine on the date hereof, on the date the Engine first becomes
subject to the lien of this Mortgage, or any Part in replacement of or
substitution for any such Part, (B) is not required to be incorporated
or installed in or attached or added to such Engine pursuant to the
terms of Section 4(c) hereof or any other provision of this Mortgage
and (C) can be removed from such Engine without diminishing or
impairing the value, utility or airworthiness that such Engine would
have had at such time had such alteration, modification or addition
not occurred, assuming that the Spare Engine was otherwise in the
condition required by this Mortgage. Upon the removal by the Company
of any such Part, as above provided, title thereto shall, without
further act, be free and clear of all rights of the Agent hereunder
and such Part shall no longer be deemed a Part hereunder.
(v) The Company will ensure that, pursuant to the terms of the
Lease, all obligations of the Company pursuant to this Section 4(e)
shall be performed by the Lessee, at the Lessee's own cost and
expense, and all Parts and alterations, improvements or modifications
in and additions to any of the Engines shall become subject to the
Lien of this Mortgage and shall be leased to the Lessee under the
applicable Lease.
(f) Event of Loss.
(i) If an Event of Loss shall occur with respect to any Engine,
the Company will promptly notify the Agent thereof in writing (in any
event within five (5) days of
<PAGE>
-15-
such occurrence) and will, not later than 180 days after the receipt
of Proceeds in connection with such Event of Loss, mortgage hereunder,
by complying with all of the terms of subsection (ii) below and
otherwise taking all necessary actions to provide that the Company
(and the Agent upon foreclosure of the Company's interest in the
Lease) will continue to be entitled to the benefits of Section 1110 of
the Bankruptcy Code with respect to the replacement engine referred to
below, an Acceptable Alternate Engine free of all Liens (other than
Permitted Encumbrances and the Lease). Upon compliance with the
preceding sentence within such 180-day period, the Agent will execute
and deliver to the Company a partial release, in recordable form,
releasing the lien of this Mortgage to the extent that it covers such
Engine with respect to which such Event of Loss has occurred. Such
Acceptable Alternate Engine shall thereupon constitute an "Engine" for
all purposes hereof and shall be deemed to constitute part of the
Spare Engine Collateral.
(ii) Whenever the Company shall subject any Engine to the lien
and security interest of this Mortgage (as contemplated by paragraph
(i) above), the Company will on or prior thereto:
(A) deliver to the Agent and duly file for recording under
the Act, a Supplemental Chattel Mortgage substantially in the
form of Exhibit A hereto duly executed by the Company
appropriately describing such engine to be subjected to the lien
and security interest of this Mortgage;
(B) deliver to the Agent for filing financing statements
under Article 9 of the Uniform Commercial Code of the States of
Colorado and New York (or such other States as may be required at
such time) covering the security interest created by this
Mortgage to perfect the security interest of the Agent in the
Engine to be subjected to the lien and security interest of this
Mortgage;
(C) deliver to the Agent an Officers' Certificate dated the
date of execution of said Supplemental Chattel Mortgage, stating:
(I) that the representations and warranties contained
in Section 3 hereof are true and correct on and as of such
date of execution with respect to such Engine and the
Company;
(II) that, upon consummation of the terms of this
Section 4(f), no Potential Event of Default or Event of
Default will exist; and
<PAGE>
-16-
(III) that all conditions precedent contemplated in
this Section 4(f)(ii) have been complied with;
(D) furnish the Agent with evidence of compliance with the
insurance provisions of Section 4(g) hereof with respect to such
Engine as the Agent may reasonably request;
(E) furnish the Agent with a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to the Agent
with respect to such Engine;
(F) furnish the Agent with such evidence of title such as
the bill of sale as the Agent may reasonably request concerning
such Engine;
(G) cause to be delivered to the Agent an appraisal by the
Approved Appraisers relating to the Engine to be subjected to the
lien and the security interest of this Mortgage stating that it
has a value and utility at least equal to, and in as good
operating condition as the Engine subject to such Event of Loss
immediately prior to such Event of Loss, assuming compliance by
the Company with all the terms of this Mortgage with respect to
such Engine; and
(H) cause to be delivered to the Agent an opinion or
opinions of counsel dated the date of execution of such
Supplemental Chattel Mortgage, stating:
(I) that the Engine specifically described in said
Supplemental Chattel Mortgage, is free and clear of all
recorded Liens,
(II) that said Supplemental Chattel Mortgage (1) has
been duly authorized, executed and delivered by Company, and
(2) creates a valid, perfected and first priority security
interest in and to the Engine described in said Supplemental
Chattel Mortgage, enforceable against all third parties and
securing the payment of all obligations purported to be
secured thereby and that all action required to perfect
fully such security interest has been taken and completed,
(III) that said Supplemental Chattel Mortgage has been
duly filed for recordation in accordance with the provisions
of the Act to continue the perfection and priority of the
security interest intended to be created by the Mortgage,
<PAGE>
-17-
(IV) that the Company (and the Agent upon succeeding to
the Company's interest in the Lease) will continue to be
entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the lease of the Engine described in
said Supplemental Chattel Mortgage, and
(V) as to such other matters as the Agent may
reasonably request.
Promptly upon the recording of each Supplemental Chattel
Mortgage under the Act, the Company will cause to be delivered to the
Agent an opinion of counsel for the Company as to the due recording of
such Supplemental Chattel Mortgage in accordance with the Act.
(iii) With respect to any Engine as between the Agent and the
Company, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is
provided for in Section 4(g) below and under the terms of the Credit
Agreement) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event
of Loss to an Engine that has been or is being replaced by the
Company pursuant to the terms hereof, so long as there shall
exist no Event of Default or Potential Event of Default, such
payment shall be paid over to or retained by the Company or the
Lessee upon satisfaction of the conditions for replacement
contained in paragraph (ii) above and until such time shall be
held by the Agent in accordance with the provisions hereof as
security for the Secured Obligations; and
(B) if such payments are received with respect to an Event
of Loss with respect to which no replacement is being effected,
such payments shall be applied to the prepayment of the Notes
required pursuant to the terms of the Credit Agreement and shall
be held pursuant to the terms of this Mortgage, and the balance,
if any, shall be paid over to or retained by the Company.
(iv) In the event of a requisition for use by the United States
Government of any Engine, the Company shall promptly notify the Agent
of such requisition and all of the Company's obligations under this
Mortgage shall continue to the same extent as if such requisition had
not occurred. Any payments received by the Agent or the Company from
the United States Government for the use of such Engine, shall be paid
over to, or retained by, the Company.
<PAGE>
-18-
(v) Any amount referred to in paragraph (iii) or (iv) of this
Section 4(f) that is payable to or retained by the Company shall not
be paid to the Company or retained by the Company, if at the time of
such payment or retention any Event of Default or a Potential Event of
Default shall have occurred and be continuing, but shall be held by or
paid over to the Agent as security for the obligations of the Company
under this Mortgage and the other Loan Documents, and, if the Agent
shall declare the Credit Agreement to be in default, shall be applied
against the Company's obligations hereunder and thereunder as and when
due. At such time as there shall not be continuing any such Event of
Default or Potential Event of Default, such amount shall be paid to
the Company to the extent not previously applied in accordance with
the preceding sentence. In addition, and whether or not there shall
exist an Event of Default or Potential Event of Default, until such
time as the Company shall request to be paid any amount referred to in
paragraph (iii) or (iv) in order to effect the mortgaging hereunder of
a replacement Engine, any amounts referred to in paragraphs (iii) or
(iv) of this Section 4(f) shall be held by the Agent as security for
the obligations of the Company under this Mortgage and the other Loan
Documents.
(g) Insurance.
(i) The Company will cause the Lessee at all times to carry and
maintain on or with respect to the Engines, at the Lessee's own cost
and expense, public liability (including without limitation,
contractual liability, cargo liability, passenger legal liability,
bodily injury and product liability, but excluding manufacturer's
product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar
equipment by corporations engaged in the same or similar business and
similarly situated with the Lessee but in no event in an amount less
than $500,000,000 per occurrence (which shall include war risk,
governmental confiscation and expropriation and allied perils
coverage). During any period when the Engines are on the ground and
not in operation, the Lessee may carry or cause to be carried, in lieu
of insurance required by this Section, insurance otherwise conforming
with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risk covered and type of
insurance shall be the same, as are customarily carried with respect
to similar equipment on the ground by corporations engaged in the same
or similar business and similarly situated with the Lessee. Any
policies of insurance carried in accordance with this Section 4(g) and
any policies taken out in substitution or replacement of any such
policies (A) shall be amended to name the Agent and the Lenders as
additional named insureds, (B) shall be primary without right of
contribution from any other insurance which is carried by the Lessee,
(C) shall expressly pro-
<PAGE>
-19-
vide that all provisions thereof, except the limits of the liability,
shall operate in the same manner as if there were a separate policy
covering each insured, and (D) shall provide that the insurer shall
waive any right of subrogation against the Agent or the Lenders.
(ii) The Company will cause the Lessee at all times to carry and
maintain with insurers of recognized responsibility and reputation on
or with respect to the Engines, at the Lessee's own cost and expense,
aircraft ground and flight all-risk hull insurance as well as fire and
extended coverage insurance on the Engines and other equipment while
removed from an airframe (which shall include war risk, governmental
confiscation and expropriation (other than by the United States
Government) and allied perils including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of
sabotage and (C) hijacking (air piracy) or any unlawful seizure or
wrongful exercise of control of the aircraft on which any Engine is
installed or crew of such aircraft in flight (including any attempt at
such seizure or control) made by any person or persons aboard such
aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by the Lessee with respect to
similar equipment owned or operated by the Lessee on the same routes
or if such aircraft is operated on routes where the custom is for
Domestic Carriers similarly situated with the Lessee flying comparable
routes with similar equipment to carry such insurance, of the type
usually carried by corporations engaged in the same or similar
business and similarly situated with the Lessee; provided, that such
insurance (including any self-insurance to the extent --------
permitted below) shall at all times be for an amount not less than the
greater of the amount required by the applicable Lease and $3,000,000
per Engine. During any period when an Engine is on the ground and not
in operation the Lessee may carry or cause to be carried, in lieu of
the insurance required by this Section, insurance otherwise conforming
hereto except that the scope of risk covered and type of insurance
shall be the same as are from time to time customarily carried with
respect to similar spare engines by corporations engaged in the same
or similar business and similarly situated with the Lessee for spare
engines on the ground in an amount at least equal to the applicable
amount provided above. All such insurance shall name the Agent and the
Lenders as additional insureds and loss payees to the extent their
interest may appear and shall provide that any loss to an Engine in
excess of $2,000,000 (and, if a Potential Event of Default or Event of
Default has occurred and is continuing, any such loss) shall be
payable to the Agent for the benefit of the Lenders; and shall be
primary without right of contribution from any other insurance that is
carried by the Agent with respect to its interest therein.
The Lessee may self-insure, by way of deductible or equivalent
provisions in insurance policies, the risks required to be insured
against pursuant to this Section
<PAGE>
-20-
4(g)(ii) in such reasonable amounts as are then applicable to other
similar spare engines in the Lessee's fleet that are of a value
comparable to the Engines, and as are not substantially greater than
amounts self-insured by corporations engaged in the same or similar
business and similarly situated with the Lessee; provided, however,
that the Company shall not permit the Lessee to self-insure in an
amount in excess of $1,000,000 without the prior written consent of
the Agent.
(iii) Any policies of insurance required pursuant to either
paragraph (i) or paragraph (ii) above shall: (A) be amended to name
the Agent and the Lenders as additional named insureds, but without
the Agent or the Lenders being thereby liable for premiums; (B)
provide that in respect of the interest of the Agent or the Lenders in
such policies the insurance shall not be invalidated by any action or
inaction of the Lessee and shall insure the interests of the Agent and
the Lenders regardless of any breach or violation by the Lessee or any
Person (other than the Agent) of any warranty, declaration or
condition contained in such policies; (C) provide that if such
insurance is cancelled, or if any material change is made in the
coverage that affects the interest of the Agent or any Lender, or if
such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to the Agent
for thirty (30) days (seven (7) days, or such shorter or longer period
as may from time to time be customarily available in the industry, in
the case of any war risk and allied perils coverage) after receipt by
the Agent of written notice from such insurers of such cancellation,
change or lapse; (D) be in full force and effect throughout any
geographical areas at any time traversed by any of the Engines and
shall be payable in U.S. dollars; (E) waive any right of the insurers
to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise in respect of any liability of the Agent; and
(F) waive all rights of subrogation against the Agent.
(iv) In the case of a lease or contract with the United States or
any agency or instrumentality thereof in respect of any Engine, a
valid agreement by the United States or such agency or instrumentality
to indemnify the Lessee against the same risks against which the
Lessee is required hereunder to insure shall be considered adequate
insurance with respect to such Engine to the extent of the risks and
in the amounts that are the subject of any such agreement to
indemnify.
(v) On or prior to the date hereof, and annually thereafter on or
prior to January 31, the Company will cause the Lessee to furnish to
the Agent (A) a report signed by a firm of independent aircraft
insurance brokers, appointed by the Lessee and not objected to by the
Agent, describing in reasonable detail acceptable to the Agent the
insurance then carried and maintained on or with respect to the
Engines and stating that in the opinion of such firm such insurance
complies with the terms of this Section 4(g) and is adequate to
protect the interests of the Lessee, the Company and
<PAGE>
-21-
the Agent, and (B) certificates of the insurer or insurers evidencing
the insurance covered by the report. The Company will cause the Lessee
to cause such brokers to advise the Agent in writing (x) promptly of
any default in the payment of any premium and of any other act or
omission on the part of the Lessee of which such firm has knowledge
and which might invalidate or render unenforceable, in whole or in
part, any insurance on any Engine and (y) at least thirty (30) days
prior to the expiration or termination date, or date of effectiveness
of any material change, of any insurance carried and maintained on the
Engines hereunder.
(vi) All insurance payments and other payments received by the
Agent or the Company from insurance referred to in paragraph (ii)
above shall be, if received by the Company, immediately paid to the
Agent and shall be held by the Agent as security for the Secured
Obligations and all other obligations required to be paid in
accordance with the terms of this Mortgage and the Credit Agreement
and such payments shall be paid to the Company upon compliance by the
Company with the terms of Subsection 4(f) with respect to the
replacement of an engine, provided that no Potential Event of Default
or Event of Default shall have occurred and be continuing.
All insurance payments and other payments received by the Agent
or the Company from insurance referred to in paragraph (ii) above and
paid other than as a result of an Event of Loss shall be paid by the
Agent to or be retained by the Company, and promptly applied by the
Company to the extent necessary to repair the damage to the Engine for
which such insurance was paid, provided that the Agent shall not be
required to make any such payment to the Company if a Potential Event
of Default or Event of Default has occurred and is continuing, but
shall be held or paid over to the Agent as security for the
obligations of the Company under this Mortgage and the other Loan
Documents, and, if the Agent shall declare the Credit Agreement to be
in default, shall be applied against the Company's obligations
hereunder and thereunder as and when due. Retention by the Agent of
any amounts pursuant to the preceding sentence shall not relieve the
Company of its obligations to make promptly all repairs and
replacements required by Sections 4(c) and (e) hereof and to pay for
the same with the Company's funds or cause payment of the same under
the Lease by the Lessee.
(vii) Nothing in this Section 4(g) shall prohibit the Agent or
any Lender from obtaining insurance with respect to any Engine for its
own account. The Company may, at its own expense, carry insurance with
respect to its interest in any Engine in amounts in excess of that
required to be maintained by this Section 4(g). No insurance
maintained by the Agent or any Lender shall prevent the Company from
causing the Lessee to carry the insurance required or permitted by
this Section or adversely affect such insurance or the cost thereof.
Proceeds of any such insurance carried by the
<PAGE>
-22-
Agent or any Lender shall be paid as provided in the insurance policy
relating thereto and the Agent shall have no duty to obtain any such
insurance.
(h) Inspection. The Company will permit, and cause the Lessee to
permit, any officers, employees or authorized representatives of the Agent
to inspect, at the Lessee's cost and expense under the Lease, the Spare
Engine Collateral and Spare Engine Related Collateral, or any part thereof,
and to examine, copy or make extracts from, any and all books, records and
documents in the possession of the Company relating to such Collateral or
any part thereof and performance of this Mortgage, all at such reasonable
times and as often as may be requested. The Agent shall have no duty to
make any such inspection or examination and shall not incur any liability
or obligation by reason of making or not making any such inspection or
examination.
(i) Insignia. The Company shall, at its own cost and expense, or
pursuant to the Lease, cause each Engine included in the Spare Engine
Collateral to be legibly marked (in a reasonably prominent location) with
such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing III, Inc., and Mortgaged to
Bankers Trust Company, as Agent" or such other legend, as shall in the
opinion of the Agent be appropriate or desirable to evidence the fact that
it is subject to the lien and security interest created by this Mortgage.
The Company shall not remove or deface, or permit to be removed or defaced,
any such plate, disk, or other marking or the identifying manufacturer's
serial number, and, in the event of such removal or defacement, shall
promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, the Company shall not allow
the name of any person, association or corporation to be placed on any
Engine as a designation that might be interpreted as a claim of ownership
or of any security interest therein, except that any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer
on any Engine.
SECTION 5. Remedies.
(a) If any Event of Default shall occur and be continuing, then the Agent
may, without notice of any kind to the Company, exercise in respect of the Spare
Engine Collateral and Spare Engine Related Collateral, (i) all the rights and
remedies of a secured party on default under the Uniform Commercial Code as in
effect at the time in any applicable jurisdiction (whether or not the Uniform
Commercial Code applies to the affected Spare Engine Collateral), (ii) any and
all remedies under the Leases and all of the rights and remedies of the Lessor
under the Lease, (iii) all the rights and remedies provided for in this
Mortgage, the Credit Agreement and any other Loan Document, and in any other
agreement between the Company and the Agent, and (iv) such other rights and
remedies as may be provided by law or otherwise.
<PAGE>
-23-
(b) After an Event of Default has occurred and is continuing, the Agent
may, without notice, take possession of the Spare Engine Collateral or any part
thereof and may exclude the Company and the Lessee, and all persons claiming
under the Company or the Lessee, wholly or partly therefrom. At the request of
the Agent, the Company shall promptly deliver or cause the Lessee to deliver to
the Agent or to whomsoever the Agent shall designate, at such time or times and
place or places as the Agent may specify, and fly or cause to be flown to such
airport or airports in the United States as the Agent may specify, without risk
or expense to the Agent, the Spare Engine Collateral or any part thereof. In
addition, the Company will provide, or cause the Lessee to provide, without cost
or expense to the Agent, storage facilities for the Spare Engine Collateral. If
the Company or the Lessee shall for any reason fail to deliver the Spare Engine
Collateral or any part thereof after demand by the Agent, the Agent may, without
being responsible for loss or damage, (i) obtain a judgment conferring on the
Agent the right to immediate possession or requiring the Company and the Lessee
to deliver immediate possession of the Spare Engine Collateral or any part
thereof to the Agent, the entry of which judgment the Company hereby
specifically consents and the Lessor's consent to which will be obtained by the
Company under the Lease, or (ii) with or without such judgment, pursue the Spare
Engine Collateral or any part thereof wherever it may be found and may enter any
of the premises of the Company and the Lessee where the Spare Engine Collateral
may be and search for the Spare Engine Collateral and take possession of and
remove the same. The Company agrees to pay to the Agent, upon demand, all
expenses incurred in taking any such action; and all such expenses shall, until
paid, be secured by the lien of this Mortgage. Upon every such taking of
possession, the Agent may, from time to time, make all such reasonable
expenditures for maintenance, insurance, repairs, replacements, alterations,
additions and improvements to and of the Spare Engine Collateral, as it may deem
proper. In each such case, the Agent shall have the right to maintain, use,
operate, store, lease, control or manage the Spare Engine Collateral or any part
thereof and to carry on the business and exercise all rights and powers of
Company relating to the Spare Engine Collateral, as the Agent shall deem best,
including the right to enter into any and all such agreements with respect to
the maintenance, use, operation, storage, leasing, control, management or
disposition of the Spare Engine Collateral or any part thereof as the Agent may
determine. Further, after the occurrence and during the continuation of an Event
of Default, the Agent shall be entitled to collect and receive directly all
tolls, rents, revenues, issues, income, products and profits of the Spare Engine
Collateral or any part thereof, including without limitation, all payments under
any of the Leases. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of the use, operation, storage,
leasing, control, management or disposition of the Spare Engine Collateral, and
of all maintenance, insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments that the Agent may be required or may
elect to make, if any, for taxes, assessments, or other proper charges upon the
Spare Engine Collateral and all other payments that the Agent may be required or
authorized to make under any provision of this Mortgage, as well as just and
reasonable com-
<PAGE>
-24-
pensation for the services of the Agent and of all persons properly engaged and
employed for such purposes by the Agent.
(c) The Agent, with or without taking possession of the Spare Engine
Collateral, may, without notice:
(i) to the extent permitted by law, sell at one or more sales, as an
entirety or in separate lots or parcels, the Spare Engine Collateral or any
part thereof, at public or private sale, at such place or places and at
such time or times and upon such terms, including terms of credit (which
may include the retention of title by the Agent to the property so sold),
as the Agent may determine, whether or not the Spare Engine Collateral
shall be at the place of sale; and
(ii) proceed to protect and enforce its rights under this Mortgage by
suit, whether for specific performance of any covenant herein contained or
in aid of the exercise of any power herein granted or for the foreclosure
of this Mortgage and the sale of the Spare Engine Collateral under the
judgment or decree of a court of competent jurisdiction or for the
enforcement of any other right.
(d) After an Event of Default has occurred and is continuing, the Company
agrees to the fullest extent that it lawfully may, that it and the Lessee will
not (and hereby irrevocably waives its right to) at any time plead, or claim the
benefit or advantage of, any appraisement, valuation, stay, extension,
moratorium, or redemption law now or hereafter in force, in order to prevent or
hinder the enforcement of this Mortgage or the absolute sale of the Spare Engine
Collateral. The Company, for itself and all who may claim under it, waives, to
the extent that it lawfully may, all right to have all or any portion of the
Spare Engine Collateral marshalled upon any foreclosure hereof.
(e) Each and every remedy of the Agent shall be cumulative and shall not be
exclusive of any other remedies provided now or hereafter at law, in equity or
otherwise. The Company shall reimburse the Agent, upon demand, for all fees and
other expenses paid or incurred by the Agent in exercising any rights, powers or
remedies granted hereby. All such fees and expenses shall, until paid, be
secured by the lien of this Mortgage.
(f) Notwithstanding anything to the contrary contained in this Mortgage or
the Lease, the Agent shall at all times have the right, to the exclusion of the
Company, to declare the Lease in default in accordance with its terms and to
exercise all remedies set forth in the Leases.
<PAGE>
-25-
SECTION 6. Application of Proceeds.
The proceeds of amounts received pursuant to the Lease (including, without
limitation, amounts received in connection with the exercise by the Lessee of
any purchase option or Event of Loss) and the proceeds of any sale, lease or
other disposition of all or any of the Spare Engine Collateral or Spare Engine
Related Collateral under this Mortgage and all other sums realized by the Agent
pursuant to this Mortgage or any proceedings hereunder shall be applied in the
following order of priority:
First: To the payment of the costs and expenses of such sale, lease,
disposition or other realization, including reasonable compensation to the
Agent's agents and counsel, and all expenses, liabilities and advances made
or incurred by the Agent in connection therewith, including, without
limitation, taxes upon or with respect to the sale, lease, disposition or
realization and the payment of taxes and Liens, if any, prior to the lien
and security interest of this Mortgage (except any taxes or Liens to which
the respective sale, lease, disposition or realization shall have been
subject) and to the payment of expenses and the reimbursement of payments
incurred or made by the Agent pursuant to Section 9 hereof;
Second: To the ratable payment of interest accrued and unpaid on the
Notes to and including the date of such application;
Third: To the ratable payment of principal of the Notes, which payment
shall be applied to the principal installments of the Notes in the manner
specified by the Credit Agreement; and
Fourth: To the payment of all other amounts payable by the Company
under the Credit Agreement, this Mortgage or any other Loan Document, and
otherwise to the Company or to such other Person(s) as may lawfully be
entitled, or as any court of competent jurisdiction may direct, the
remainder.
SECTION 7. Agent as Attorney.
The Company hereby irrevocably appoints the Agent the true and lawful
attorney of the Company (with full power of substitution) in the name, place and
stead of, and at the expense of, the Company at any time after the occurrence
and during the continuation of an Event of Default (i) to ask, demand, collect,
sue for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Spare Engine Collateral
and Spare Engine Related Collateral, (ii) to make all necessary transfers of all
or any part of the Spare Engine Collateral and Spare Engine Related Collateral
in connection with any sale, lease or other disposition made pursuant hereto,
(iii) to execute and
<PAGE>
-26-
deliver for value all necessary or appropriate bills of sale, assignments and
other instruments in connection with any such sale, lease or other disposition,
and (iv) generally to do, at the Agent's option and the Company's cost and
expense, at any time, or from time to time, all acts and things that the Agent
deems necessary to protect, preserve or realize upon the Spare Engine Collateral
and Spare Engine Related Collateral and the Agent's security interest therein,
in order to effect the intent of this Mortgage, all as fully and effectively as
the Company might do, the Company hereby ratifying and confirming all that its
said attorney (or any substitute) shall lawfully do hereunder and pursuant
hereto.
SECTION 8. Cash Collateral.
All monies received by the Agent to be held and applied under this Section,
and all monies if any, required to be paid to the Agent hereunder, which
disposition is not elsewhere herein otherwise specifically provided for, shall
be held by the Agent and applied from time to time as provided herein and in the
Credit Agreement and the other Loan Documents and shall be held in an account in
the name of the Agent and invested in Cash Equivalents for the benefit and at
the risk of the Company.
SECTION 9. Agent's Right to Perform.
If the Company fails to make any payment required to be made by it
hereunder or fails to perform or comply with any of its agreements contained
herein, the Agent may itself make such payment or perform or comply with such
agreement (including, without limitation, the agreement of the Company to
maintain insurance pursuant to Section 4(g) hereof), and the amount of such
payment and the amount of the reasonable expenses of the Agent incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified in the Credit Agreement from time to time, shall be payable by the
Company to the Agent on demand and shall constitute additional indebtedness
secured by the lien and security interest of this Mortgage.
SECTION 10. Further Assurances.
The Company at its expense will promptly and duly execute and deliver such
documents and assurances and take such action as may be necessary or desirable,
or as the Agent may from time to time request, in order to correct any defect,
error or omission which may at any time hereafter be discovered in the contents
of this Mortgage or in the execution or delivery hereof, and/or in order to more
effectively carry out the intent and purpose of this Mortgage and to establish,
protect and perfect the rights, remedies and security interests created or
intended to be created in favor of the Agent hereunder, including, without
limitation, the execution, delivery and filing of any instruments with the FAA
and of any Uniform Com-
<PAGE>
-27-
mercial Code financing and continuation statements with respect to the security
interests created hereby, in form and substance satisfactory to the Agent, in
such jurisdictions as the Agent may reasonably request. The Company hereby
authorizes the Agent to file any such statements without the signature of the
Company to the extent permitted by applicable law.
SECTION 11. Continuing Security Interest.
This Mortgage shall create a continuing security interest in the Spare
Engine Collateral and Spare Engine Related Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations, (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of the Agent hereunder, to the
benefit of the Agent and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Agent or any Lender
may, subject to any restrictions contained in the Credit Agreement, assign or
otherwise transfer any of its interests in the Credit Agreement or in any Note
to any other person or entity, and such other benefits in respect thereof
granted to the Agent or any Lender herein or otherwise. Upon the indefeasible
payment in full of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Spare Engine Collateral and Spare Engine
Related Collateral shall revert to Company. Upon any such termination, the Agent
will execute and deliver to the Company, at the Company's expense, such
instruments of release and termination as the Company may reasonably request to
evidence such termination.
SECTION 12. Miscellaneous.
Any provision of this Mortgage which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the Company
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect. No term or provision of this Mortgage may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the Company and the Agent. The captions and headings in this
Mortgage are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13. Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against the Company with respect to this
Mortgage may be brought in any state or federal court of competent jurisdiction
in the State of New York or Colorado and by execution and delivery of this
Mortgage Company accepts for itself and in connection with the Spare Engine
Collateral and Spare Engine Related Collateral,
<PAGE>
-28-
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Mortgage. The Company hereby agrees that service of process
in any such proceeding in any such court may be made by registered or certified
mail return receipt requested to the Company at its address provided on the
signature pages of the Mortgage, such service being hereby acknowledged by the
Company to be effective and binding service in every respect. A copy of any such
process so served shall be mailed by registered mail to the Company, at its
address specified in Section 15 hereof, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of process. If any agent appointed by the Company refuses to accept
service, the Company hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Company in the courts of any other jurisdiction.
SECTION 14. GOVERNING LAW; TERMS.
THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR AIRCRAFT COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 15. Addresses for Notices.
All notices and other communications provided for hereunder shall be in
writing (including facsimile communication) and mailed or telecopied or
delivered to the Company or the Agent, as the case may be, addressed to it at
the address of such party specified on the signature page hereof, or as to
either party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section 15. All such notices and other communications shall, when mailed,
be effective when deposited in the mails, addressed as aforesaid.
<PAGE>
-29-
SECTION 16. Counterparts.
This Mortgage may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same Mortgage.
[Remainder of page intentionally left blank.]
<PAGE>
-30-
IN WITNESS WHEREOF, the Company and the Agent have caused this Mortgage to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
ATLAS FREIGHTER LEASING III, INC.
By:
-------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
-------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
<PAGE>
SCHEDULE I
to Security Agreement
and Chattel Mortgage
ENGINES
================================================================================
Manufacturer's
Manufacturer Model Serial Number
- --------------------------------------------------------------------------------
General Electric CF6-80C2 704699
- --------------------------------------------------------------------------------
General Electric CF6-80C2 704860
- --------------------------------------------------------------------------------
General Electric CF6-80C2 704918
================================================================================
Each such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
<PAGE>
EXHIBIT A
to Security Agreement
and Chattel Mortgage
SUPPLEMENTAL CHATTEL MORTGAGE NO.
THIS SUPPLEMENTAL CHATTEL MORTGAGE is dated April 25, 2000, between Atlas
Freighter Leasing III, Inc., a Delaware corporation (the "Company"), and Bankers
Trust Company, as Administrative Agent for and representative of (in such
capacity, the "Agent") the financial institutions (the "Lenders") party to the
Credit Agreement dated as of April 25, 2000, among the Company, the Lenders and
the Agent.
The Company and the Agent have heretofore entered into a Security Agreement
and Chattel Mortgage dated April 25, 2000, (the "Mortgage") and the terms
defined therein and not otherwise defined herein are used herein as therein
defined. The Mortgage provides for the execution and delivery of supplements
thereto substantially in the form hereof, for the purpose of particularly
describing each Engine subjected to the lien of the Mortgage pursuant to Section
4(f) thereof, and shall specifically mortgage such Engine to the Agent.
The Mortgage relates to the Engine(s) described below and a counterpart of
the Mortgage has been recorded by the Federal Aviation Administration on April
__, 2000, and has been assigned Conveyance No. ____________.
NOW, THEREFORE, that, to secure the due and punctual payment and
performance of the Secured Obligations and in consideration of the premises and
of the covenants contained in the Mortgage, the Company hereby mortgages to the
Agent, its successors and assigns, and grants and assigns to the Agent, its
successors and assigns, a first priority purchase money security interest in all
estate, right, title and interest of the Company in and to the property
described in Schedule I annexed hereto (whether or not such Engine shall be
installed on or attached to an Aircraft), and the proceeds thereof.
This Supplemental Chattel Mortgage shall be construed as supplemental to
the Mortgage and shall form a part thereof, and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
THIS SUPPLEMENTAL CHATTEL MORTGAGE IS INTENDED TO BE DELIVERED IN THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THAT STATE, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
A-1
<PAGE>
This Supplemental Chattel Mortgage may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Supplemental Chattel Mortgage.
[Remainder of page intentionally left blank]
A-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Chattel Mortgage to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ATLAS FREIGHTER LEASING III, INC.
By:
-------------------------------------
Name:
Title:
Notice Address:
Atlas Freighter Leasing III, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Richard H. Shuyler
Executive Vice President -
Strategic Planning and Treasurer
BANKERS TRUST COMPANY, as Agent
By:
-------------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Marguerite Sutton
A-3
<PAGE>
EXHIBIT I-A
to Supplemental
Chattel Mortgage
SCHEDULE OF ENGINES
================================================================================
Manufacturer's Serial United States
Manufacturer Model Number Registry No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Such engine having 750 or more rated takeoff horsepower or the equivalent
thereof.
