Note to Exhibit 10.14
The following Participation Agreement is substantially identical in
all material respects to two additional Participation Agreements except as
follows:
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Aircraft (Tail No.)
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N588ML*
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N589ML
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N590ML
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__________
* Filed document
EXHIBIT 10.14
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PARTICIPATION AGREEMENT N588ML
Dated as of September 21, 2000
among
MIDWAY AIRLINES CORPORATION,
as Lessee,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant,
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity (except as otherwise
expressly set forth herein) but solely
as Owner Trustee,
EACH LOAN PARTICIPANT
IDENTIFIED ON SCHEDULE II HERETO,
as Loan Participants,
and
ALLFIRST BANK,
as Indenture Trustee
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COVERING ONE CANADAIR REGIONAL JET SERIES 200ER
AIRCRAFT BEARING U.S. REGISTRATION NO. N588ML
AND MANUFACTURER'S SERIAL NUMBER 7368
TABLE OF CONTENTS
ARTICLE 1. INTERPRETATION.............................................................. 3
Section 1.01. Definitions............................................................ 3
Section 1.02. References............................................................. 3
Section 1.03. Headings............................................................... 3
Section 1.04. Appendices Schedules and Exhibits...................................... 3
ARTICLE 2. SALE, LEASING AND SECURED LOAN TRANSACTIONS................................. 4
Section 2.01. Participation.......................................................... 4
(a) Sale and Purchase...................................................... 4
(b) Leasing................................................................ 4
(c) Owner Participant's Equity Investment.................................. 4
(d) Secured Loan........................................................... 4
(e) Delivery Date.......................................................... 4
Section 2.02. Closing Procedure...................................................... 5
(a) Time and Place......................................................... 5
(b) Actions of the Owner Trustee........................................... 5
(c) Actions of the Lessee.................................................. 6
ARTICLE 3. CONDITIONS PRECEDENT........................................................ 6
Section 3.01. Conditions Precedent to Obligations of Participants.................... 6
(a) Notice................................................................. 7
(b) Delivery of Documents.................................................. 7
(c) Airworthiness.......................................................... 10
(d) Other Commitments...................................................... 10
(e) Violation of Law....................................................... 10
(f) Reserved............................................................... 10
(g) No Event of Default.................................................... 11
(h) No Event of Loss....................................................... 11
(i) Title.................................................................. 11
(j) Certification.......................................................... 11
(k) Section 1110........................................................... 11
(l) Filings................................................................ 11
(m) Financing Statements................................................... 11
(n) Precautionary Financing Statements..................................... 11
(o) No Proceedings......................................................... 12
(p) Governmental Action.................................................... 12
(q) Trust Company Filing................................................... 12
(r) Perfected Security Interest............................................ 12
(s) Representations and Warranties......................................... 12
(t) Up-Front Fee........................................................... 12
Section 3.02. Conditions Precedent to Obligations of Lessee.......................... 12
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(a) Documents.................................................................. 12
(b) Other Conditions Precedent................................................. 13
Section 3.03. Post-Registration Opinion.................................................. 13
ARTICLE 4. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS.............................. 13
Section 4.01. Lessee's Representations and Warranties.................................... 13
Section 4.02. Certain Covenants of Lessee................................................ 16
(a) Filings and Recordings..................................................... 16
(b) Registration............................................................... 17
(c) Information................................................................ 19
(d) Corporate Existence........................................................ 20
(e) Merger and Consolidation................................................... 20
(f) Change of Location......................................................... 21
(g) Financial Statements....................................................... 21
(h) Reserved................................................................... 22
(i) Filing of Documents........................................................ 22
(j) Annual Foreign Opinion..................................................... 22
(k) Lessee's Agreement Regarding Debt.......................................... 22
Section 4.03. Survival of Representations and Warranties................................. 22
ARTICLE 5. OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS........................ 23
Section 5.01. Representations, Warranties and Covenants of Owner Participant............. 23
(a) Representations and Warranties............................................. 23
(b) Lessor's Liens............................................................. 24
(c) Assignment of Interests of Owner Participant............................... 24
(d) Actions with Respect to Lessor's Estate, Etc............................... 27
(e) Citizenship................................................................ 27
Section 5.02. Citizenship................................................................ 27
(a) Generally.................................................................. 27
(b) Owner Trustee.............................................................. 27
Section 5.03. Representations, Warranties and Covenants of Trust Company and the
Owner Trustee........................................................... 28
(a) Representations and Warranties............................................. 28
(b) Lessor's Liens............................................................. 30
(c) Indemnity for Lessor's Liens............................................... 30
(d) Securities Act............................................................. 30
(e) Actions With Respect to Lessor's Estate, Etc............................... 30
(f) Other Business............................................................. 31
(g) Performance of Agreements.................................................. 31
Section 5.04. Representations, Warranties and Covenants of the Indenture Trustee......... 31
(a) Representations and Warranties............................................. 31
(b) Indenture Trustee's Liens.................................................. 32
(c) Indemnity for Indenture Trustee's Liens.................................... 32
Section 5.05. Indenture Trustee's Notice of Default...................................... 32
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Section 5.06. Releases from Indenture................................................ 32
Section 5.07. The Lessee's Right of Quiet Enjoyment.................................. 33
Section 5.08. Representations and Warranties of the Loan Participants................ 33
(a) Representations and Warranties......................................... 33
(b) Transfer of Equipment Notes............................................ 33
Section 5.09. Survival of Representations, Warranties and Covenants.................. 33
Section 5.10. Lessee's Assumption of the Equipment Notes............................. 34
Section 5.11. Compliance with Trust Agreement, Etc................................... 36
Section 5.12. Swap Matters........................................................... 36
Section 5.13. Amendments to the Indenture............................................ 37
ARTICLE 6. TAXES...................................................................... 37
Section 6.01. Lessee's Obligation to Pay Taxes....................................... 37
(a) Generally.............................................................. 37
(b) Exceptions............................................................. 38
(c) Withholding............................................................ 41
Section 6.02. After-Tax Basis........................................................ 42
Section 6.03. Time of Payment........................................................ 43
Section 6.04. Contests............................................................... 43
(a) Notice of Claim........................................................ 43
(b) Request for Contest.................................................... 44
(c) Declining to Contest; Settlement....................................... 46
(d) Continuing Claims...................................................... 47
(e) Claims Barred.......................................................... 47
Section 6.05. Refunds................................................................ 47
Section 6.06. Reports................................................................ 48
Section 6.07. Survival of Obligations................................................ 48
Section 6.08. Payment of Taxes....................................................... 48
Section 6.09. Reimbursements by Indemnitees Generally................................ 49
Section 6.10. Forms.................................................................. 49
Section 6.11. Verification........................................................... 49
Section 6.12. Non-Parties............................................................ 49
Section 6.13. Foreign Tax On Loan Payments........................................... 49
ARTICLE 7. GENERAL INDEMNITY.......................................................... 50
Section 7.01. Generally.............................................................. 50
(a) Indemnity.............................................................. 50
(b) Exceptions............................................................. 51
Section 7.02. Notice and Payment..................................................... 53
Section 7.03. Defense of Claims...................................................... 53
Section 7.04. Insured Claims......................................................... 54
Section 7.05. Subrogation............................................................ 54
Section 7.06. Information............................................................ 55
Section 7.07. Survival of Obligations................................................ 55
Section 7.08. Effect of Other Indemnities............................................ 55
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Section 7.09. Waiver of Certain Claims.............................................. 55
Section 7.10. Certain Limitations................................................... 55
ARTICLE 8. TRANSACTION COSTS............................................................ 56
Section 8.01. Transaction Costs and Other Costs..................................... 56
(a) Transaction Costs..................................................... 56
(b) Continuing Expenses................................................... 56
(c) Amendments and Supplements............................................ 56
ARTICLE 9. SUCCESSOR OWNER TRUSTEE...................................................... 57
Section 9.01. Appointment of Successor Owner Trustee................................ 57
(a) Resignation and Removal............................................... 57
(b) Conditions to Appointment............................................. 57
ARTICLE 10. LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND NOTEHOLDERS........... 58
Section 10.01. Liabilities of the Owner Participant.................................. 58
Section 10.02. Interest of Noteholders............................................... 58
ARTICLE 11. OTHER DOCUMENTS.............................................................. 58
Section 11.01. Consent of Lessee to Other Documents.................................. 58
ARTICLE 12. NOTICES...................................................................... 58
Section 12.01. Notices............................................................... 58
ARTICLE 13. REFINANCING.................................................................. 59
Section 13.01. Refinancing........................................................... 59
ARTICLE 14. RESERVED..................................................................... 62
ARTICLE 15. MISCELLANEOUS................................................................ 62
Section 15.01. Counterparts.......................................................... 62
Section 15.02. No Oral Modifications................................................. 62
Section 15.03. Captions.............................................................. 62
Section 15.04. Successors and Assigns................................................ 62
Section 15.05. Concerning the Owner Trustee and Indenture Trustee................... 62
Section 15.06. Payments Made By Indenture Trustee.................................... 63
Section 15.07. Severability.......................................................... 63
Section 15.08. Certain Limitations on Reorganization................................. 64
Section 15.09. GOVERNING LAW......................................................... 65
Section 15.10. Section 1110 Compliance............................................... 65
Section 15.11. Indenture Trustee Consent............................................. 65
Section 15.12. Correction to Lease and Appendix A to this Agreement, the Lease
and the Indenture..................................................... 65
Schedule I Commitments
Schedule II Participants
Appendix A Definitions
Exhibit A-1 Form of Opinion of General Counsel of Lessee
Exhibit A-2 Form of Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
Exhibit A-3 Form of Opinion of Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, as special counsel to Indenture
Trustee
Exhibit A-4 Form of Opinion of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP, as
special counsel to the Owner Trustee
Exhibit A-5 Form of Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C.
Exhibit A-6 Form of Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special counsel for
the Owner Participant
Exhibit A-7 Form of Opinion of Counsel to the Owner Participant
Exhibit B-1 Form of Assignment and Assumption Agreement
Exhibit B-2 Form of Owner Participant Guaranty
Exhibit B-3 Form of Opinion of counsel to the Owner Participant in respect
of the Assignment and Assumption Agreement
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PARTICIPATION AGREEMENT N588ML dated as of September 21, 2000 (this
"Agreement") among MIDWAY AIRLINES CORPORATION, a Delaware corporation (herein,
together with its successors and permitted assigns, the "Lessee"), FIRST UNION
TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, except as otherwise expressly stated herein, but solely as
owner trustee under the Trust Agreement referred to below (in such capacity as
trustee, together with its successors and permitted assigns, the "Owner
Trustee"), GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
(together with its successors and permitted assigns, the "Owner Participant"),
each Loan Participant identified on Schedule II hereto (together with their
respective successors and permitted assigns, the "Loan Participants"), and
ALLFIRST BANK, a Maryland state-chartered commercial bank, as indenture trustee
under the Indenture referred to below (together with its successors and
permitted assigns, the "Indenture Trustee").
W I T N E S S E T H:
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WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof.
WHEREAS, pursuant to the Purchase Agreement the Manufacturer agreed to
manufacture and sell to the Lessee and the Lessee agreed to purchase from the
Manufacturer the Aircraft; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant and First Union Trust Company, National
Association, are entering into the Trust Agreement whereby, among other things,
First Union Trust Company, National Association, is appointed as Owner Trustee
and has undertaken to acquire and hold the Trust Estate in trust for the benefit
of the Owner Participant; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Owner Trustee is willing to purchase the Aircraft from the Seller for immediate
lease to the Lessee pursuant to the Lease; and
WHEREAS, subject to the terms and conditions of this Agreement and the
Trust Agreement, the Owner Participant is willing to make the equity investment
provided for herein to fund such purchase by the Owner Trustee; and
WHEREAS, the Owner Trustee and the Indenture Trustee are concurrently
entering into the Indenture for the benefit of the Noteholders, pursuant to
which Indenture the Owner Trustee shall, subject to the terms and conditions set
forth therein, issue to each Loan Participant an Equipment Note substantially in
the form set forth in the Indenture as evidence of the loan to be made by such
Loan Participant to the Owner Trustee to finance a portion of Lessor's Cost for
the Aircraft, all as more particularly described herein and in the Indenture;
and
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WHEREAS, subject to the terms and conditions of this Agreement, the
Lessee has agreed to assign to the Owner Trustee, upon the terms and conditions
contained in the Purchase Agreement Assignment and the Engine Warranty
Assignment, respectively, certain of the Lessee's rights and interests in and to
the Purchase Agreement and the Warranties (as defined in the Engine Warranty
Assignment), respectively; and
WHEREAS, to induce the Owner Participant to make the equity investment
provided for herein to fund the purchase of the Aircraft by the Owner Trustee
from the Seller, the Manufacturer has agreed to enter into the Residual
Agreement N588ML, dated as of September 21, 2000 (the "Residual Agreement")
with the Owner Participant and to undertake the obligations provided therein;
and
WHEREAS, to induce the Owner Trustee to purchase the Aircraft and to
enter into the Lease, Bombardier Inc. (the "Deficiency Obligor") has agreed to
enter into the Deficiency Agreement N588ML, dated as of September 21, 2000 (the
"Deficiency Agreement") with the Owner Trustee and the Owner Participant and to
undertake the obligations provided therein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration and receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:
ARTICLE 1.
INTERPRETATION
Section 1.01. Definitions. Capitalized terms used herein and defined in
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Appendix A shall, except as such definitions may be specifically modified in the
body of this Agreement for the purposes of a particular section, paragraph or
clause, have the meanings given such terms in Appendix A.
Section 1.02. References. References in this Agreement to sections,
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paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.
Section 1.03. Headings. The headings of the various sections, paragraphs
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and clauses of this Agreement 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.
Section 1.04. Appendices Schedules and Exhibits. The appendices,
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schedules and exhibits hereto are part of this Agreement.
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ARTICLE 2.
SALE, LEASING AND SECURED LOAN TRANSACTIONS
Section 2.01. Participation. Subject to all of the terms and conditions
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of this Agreement, the parties agree to participate in the sale, leasing and
secured loan transactions with respect to the Aircraft provided for in this
Section 2.
(a) Sale and Purchase. The Owner Trustee agrees to purchase the
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Aircraft from the Seller on the Delivery Date for a purchase price equal to
Lessor's Cost.
(b) Leasing. The Owner Trustee agrees to lease to the Lessee, and the
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Lessee agrees to lease from the Owner Trustee, the Aircraft pursuant to the
Lease, such leasing to take place concurrently with the purchase of the Aircraft
by the Owner Trustee on the Delivery Date.
(c) Owner Participant's Equity Investment. The Owner Participant
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agrees to provide immediately available funds in the amount determined by
multiplying Lessor's Cost by the percentage set forth opposite its name on
Schedule I (the Owner Participant's "Commitment") (i) by paying such amount to
the Owner Trustee prior to the time of closing on the Delivery Date at the
account specified by the Owner Trustee on or prior to the Delivery Date, such
amount to be held and applied toward the Owner Trustee's payment of Lessor's
Cost for the Aircraft on the Delivery Date (and if not so applied, to be
promptly returned to the Owner Participant) or (ii) by paying such amount at the
time of the closing on the Delivery Date directly to the Seller's account
specified by the Lessee prior to the closing to be applied toward the payment of
Lessor's Cost. Such funds, once so applied, shall constitute an equity
investment by the Owner Participant in the Trust Estate. The Owner Participant
shall have no obligation to provide its Commitment after September 22, 2000.
(d) Secured Loan. Each Loan Participant agrees to provide immediately
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available funds in the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite its name on Schedule I (a Loan Participant's
"Commitment") to or on behalf of the Owner Trustee by paying or causing to be
paid such amount to the Owner Trustee, at the account specified by the Owner
Trustee on or prior to the Delivery Date, such amount to be held and applied
toward the Owner Trustee's payment of Lessor's Cost for the Aircraft on the
Delivery Date (and if not so applied, to be promptly returned to such Loan
Participant). Such funds, once so applied, shall constitute a loan to the Owner
Trustee to be evidenced by an Equipment Note substantially in the form set forth
in the Indenture and as more particularly described herein and in the Indenture
and secured as provided in the Indenture.
(e) Delivery Date. The "Delivery Date" shall be the date fixed by the
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Lessee in accordance with this Section 2.01(e) for the closing of the sale,
leasing and loan transactions with respect to the Aircraft contemplated hereby,
except that following such closing the "Delivery Date" shall mean the date on
which such transactions actually closed. The Lessee shall give at least three
Business Days' notice to each other party hereto of the Delivery Date, which
notice shall also specify
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the amount of the Owner Participant's Commitment and each Loan Participant's
Commitment. The Lessee may postpone a scheduled Delivery Date from time to time,
for any reason by notice given to the other parties hereto not later than 2:00
p.m. on the date last scheduled as the Delivery Date, such notice to specify a
new Delivery Date. In the event that a Participant shall have provided the
amount of its Commitment to the Owner Trustee prior to such a postponement, the
Owner Trustee shall return such amount to such Participant by 2:00 p.m. on the
scheduled Delivery Date unless such Participant shall have agreed otherwise in
writing. Absent such an agreement, in the event that the Owner Participant's
Commitment is not returned to the Owner Participant by 2:00 p.m. on a scheduled
Delivery Date on which the closing does not occur, the Lessee shall pay interest
to the Owner Participant at a rate equal to the rate per annum announced from
time to time by Citibank, N.A. as its prime rate plus two percent (2%) per annum
for each day that such commitment is not returned to the Owner Participant by
2:00 p.m.. The making available by the Owner Participant of its Commitment at
the closing shall be deemed a waiver of notice of the Delivery Date by the Owner
Participant and the Owner Trustee, and the making available by the Loan
Participants of their respective Commitment at the closing shall be deemed a
waiver of notice of the Delivery Date by the Loan Participants and the Indenture
Trustee. The provisions of this Section 2.01(e) shall, as relates to the Loan
Participants, be superseded by any funding agreement entered into by the Lessee
and the Loan Participants.
Section 2.02. Closing Procedure.
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(a) Time and Place. The closing shall take place at 11:00 a.m. New
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York City local time on the Delivery Date at the offices of Fulbright & ▇▇▇▇▇▇▇▇
L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other time and place as
the parties may agree. The closing shall be preceded by a pre-closing at the
same place, the time for which shall be fixed by the Lessee, at which the forms
of the Operative Agreements to be executed, the certificates and other documents
to be delivered and the forms of the legal opinions to be delivered at the
closing by each party or its counsel pursuant to this Agreement shall be
available for inspection by the parties and their respective counsel.
(b) Actions of the Owner Trustee. Upon receipt in full by the Owner
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Trustee of the Commitment of each Participant together with instructions (which
may be oral) from each Participant or its special counsel that the applicable
conditions precedent set forth in Section 3.01 have been satisfied or waived by
such Participant, the Owner Trustee on the Delivery Date shall purchase the
Aircraft from the Seller, lease the Aircraft to the Lessee, issue an Equipment
Note to each Loan Participant and make a security assignment of all of its
right, title and interest in and to the Indenture Estate to the Indenture
Trustee. To accomplish such transactions, the Owner Trustee shall, concurrently
with the actions of the Lessee pursuant to Section 2.02(c), take the following
actions: (i) pay or cause to be paid an amount equal to Lessor's Cost to the
Seller for the purchase of the Aircraft by transferring such amount in
immediately available funds to the account specified by the Lessee in a funding
memorandum on or prior to the Delivery Date; (ii) authorize its representative
or representatives, who shall be a person or persons designated by the Lessee
and acceptable to the Owner Trustee, to accept delivery of the Aircraft pursuant
to this Agreement; (iii)
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accept the Bills of Sale for the Aircraft; (iv) execute, and cause to be
authenticated and delivered to each Loan Participant, its Equipment Note
specified, by reference to principal amount, maturity date and interest rate, in
the Indenture; (v) execute and deliver the Lease, the Lease Supplement, the
Indenture and the Indenture Supplement and each other Operative Agreement to
which it is a party; (vi) deliver the Aircraft to the Lessee pursuant to the
Lease; and (vii) execute and deliver all other documents or certificates and
take such other actions as may be required of the Owner Trustee on or before the
Delivery Date pursuant to any Operative Agreement. In addition, the Owner
Trustee shall take such actions as may be requested by the Lessee to effect the
due registration of the Aircraft with the FAA in the name of the Owner Trustee
and to file and perfect the security interest of the Indenture Trustee in all or
any part of the Indenture Estate.
(c) Actions of the Lessee. Upon satisfaction or waiver by the
---------------------
Lessee of the conditions precedent set forth in Section 3.02, the Lessee shall
on the Delivery Date sell the Aircraft (or cause the Aircraft to be sold) to the
Owner Trustee, lease the Aircraft from the Owner Trustee pursuant to the Lease,
assign to the Owner Trustee pursuant to the Purchase Agreement Assignment
certain of the Lessee's rights and interests in and to the Purchase Agreement
and assign to the Owner Trustee pursuant to the Engine Warranty Assignment the
Lessee's rights and interests in and to the Warranties (as defined in the Engine
Warranty Assignment). To accomplish such transactions the Lessee shall,
concurrently with the actions of the Owner Trustee pursuant to Section 2.02(b),
take the following actions:
(i) execute and deliver the Lease and the Lease Supplement and cause
the Bills of Sale to be executed and delivered;
(ii) authorize its representative or representatives (who shall be
the same person or persons designated by the Lessee for purposes of clause
(ii) of Section 2.02(b)), to accept delivery of the Aircraft from the Owner
Trustee pursuant to the Lease; and
(iii) execute and deliver all other documents or certificates and take
such other actions as may be required of the Lessee on or before the
Delivery Date pursuant to any Operative Agreement.
ARTICLE 3.
CONDITIONS PRECEDENT
Section 3.01. Conditions Precedent to Obligations of Participants. The
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obligation of each Participant to make the Dollar amount of its respective
Commitment available for payment as directed by the Owner Trustee on the
Delivery Date is subject to satisfaction or waiver by each such Participant, on
or prior to the Delivery Date, of the conditions precedent set forth below in
this Section 3.01; provided, that it shall not be a condition precedent to the
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obligation of any Participant that any document be produced or action taken that
is to be produced or taken by such Participant or by a Person within such
Participant's control; provided, further, that Sections 3.01(b)(iii), (xiii)
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-6-
(A) and (xix)(H)(A) shall not be conditions precedent to the obligation of any
Loan Participant and Sections 3.01(b)(xiii)(B), 3.01(b)(xix)(H)(B) and 3.01(r)
shall not be conditions precedent to the obligation of Owner Participant:
(a) Notice. Such Participant shall have received the notice of the
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Delivery Date as provided in Section 2.01(e), or shall have waived such notice.
(b) Delivery of Documents. Such Participant shall, except as noted
---------------------
below, have received executed counterparts of the following agreements,
instruments, certificates or documents, and such counterparts (a) shall have
been duly authorized, executed and delivered by the respective party or parties
thereto, (b) shall be reasonably satisfactory in form and substance to such
Participant and (c) shall be in full force and effect:
(i) the Lease; provided that, only the Indenture Trustee shall
-------- ----
receive the sole executed chattel paper original thereof;
(ii) Lease Supplement No. 1; provided that, only the Indenture
-------- ----
Trustee shall receive the sole executed chattel paper original thereof;
(iii) the Tax Indemnity Agreement; provided that, only Owner
-------- ----
Participant and Lessee shall receive copies of the Tax Indemnity Agreement;
(iv) the Trust Agreement;
(v) the Indenture;
(vi) Indenture Supplement No. 1;
(vii) the Purchase Agreement and the Manufacturer's invoice with
respect to the Aircraft;
(viii) the Purchase Agreement Assignment and the Engine Warranty
Assignment;
(ix) the PAA Consent and the Engine Manufacturer's Consent;
(x) the Equipment Notes of the Loan Participants each dated
the Delivery Date; provided that, only the Loan Participants shall receive
-------- ----
their respective original Equipment Notes, all other parties shall receive
photocopies;
(xi) the Bills of Sale;
-7-
(xii) the broker's report and insurance certificates required by
Section 9 of the Lease;
(xiii) (A) an appraisal or appraisals from BK Associates, which
appraisal or appraisals shall be satisfactory in form and substance to
Owner Participant; provided, that only Owner Participant shall receive
--------
copies of such appraisal or appraisals and (B) an appraisal or appraisals
from GRA Associates which appraisal or appraisals shall be satisfactory in
form and substance to the Loan Participants; provided, that only the Loan
--------
Participants shall receive copies of such appraisal or appraisals;
(xiv) (A) a copy of the Certificate of Incorporation and By-Laws
of Lessee and resolutions of the board of directors of Lessee, in each case
certified as of the Delivery Date, by the Secretary or an Assistant
Secretary of Lessee, duly authorizing the execution, delivery and
performance by Lessee of the Operative Agreements required to be executed
and delivered by Lessee on or prior to the Delivery Date in accordance with
the provisions hereof and thereof; (B) an incumbency certificate of Lessee,
Owner Participant, Allfirst and Trust Company as to the person or persons
authorized to execute and deliver the relevant Operative Agreements on
behalf of such party; and (C) a copy of the Certificate of Incorporation or
Articles of Incorporation or Articles of Association and By-Laws and
general authorizing resolutions of the boards of directors (or executive
committees) or other satisfactory evidence of authorization of Owner
Participant, Allfirst and Trust Company, certified as of the Delivery Date
by the Secretary or an Assistant Secretary of Owner Participant, Allfirst
and Trust Company, respectively, which authorize the execution, delivery
and performance by Owner Participant, Allfirst and Trust Company,
respectively, of each of the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to it as any
Participant may reasonably request in order to establish the consummation
of the transactions contemplated by this Agreement and the taking of all
corporate proceedings in connection therewith;
(xv) an Officer's Certificate of Lessee, dated as of the
Delivery Date, stating that its representations and warranties set forth in
this Agreement are true and correct as of the Delivery Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xvi) an Officer's Certificate of Trust Company, dated as of the
Delivery Date, stating that its representations and warranties, in its
individual capacity and as Owner Trustee, set forth in this Agreement are
true and correct as of the Delivery Date (or, to the extent that any such
representation and warranty expressly relates to an earlier date, true and
correct as of such earlier date);
-8-
(xvii) an Officer's Certificate of Owner Participant, dated as of
the Delivery Date, stating that its representations and warranties set
forth in this Agreement are true and correct as of the Delivery Date (or,
to the extent that any such representation and warranty expressly relates
to an earlier date, true and correct as of such earlier date);
(xviii) an Officer's Certificate of Allfirst, dated as of the
Delivery Date, stating that its representations and warranties, in its
individual capacity or as Indenture Trustee, set forth in this Agreement
are true and correct as of the Delivery Date (or, to the extent that any
such representation and warranty expressly relates to an earlier date, true
and correct as of such earlier date);
(xix) the following opinions of counsel, in each case dated the
Delivery Date:
(A) ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President and General
Counsel of the Lessee substantially in the form of Exhibit A-1 hereto,
(B) Fulbright & ▇▇▇▇▇▇▇▇, L.L.P. special counsel for the
Lessee substantially in the form of Exhibit A-2 hereto addressed to the
Owner Participant, the Indenture Trustee, the Owner Trustee, the Loan
Participants and the Lessee;
(C) Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP, special
counsel for the Owner Trustee substantially in the form of Exhibit A-3
hereto addressed to the Owner Participant, the Indenture Trustee, the Owner
Trustee, the Loan Participants and the Lessee;
(D) Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Corporation, special counsel for the Indenture Trustee in the form of
Exhibit A-4 hereto and addressed to the Indenture Trustee, the Owner
Participant, the Owner Trustee, the Loan Participants and the Lessee;
(E) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special aviation counsel,
substantially in the form of Exhibit A-5 hereto and addressed to the Owner
Participant, the Indenture Trustee, the Owner Trustee, the Loan
Participants and the Lessee;
(F) ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, special counsel for the
Manufacturer and the Seller, in a form reasonably acceptable to the
Participants and addressed to the Owner Participant, the Indenture Trustee,
the Owner Trustee, the Loan Participants and the Lessee;
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(G) counsel for the Engine Manufacturer, in a form reasonably
acceptable to the Participants and addressed to the Owner Participant, the
Indenture Trustee, the Owner Trustee, the Loan Participants and the Lessee;
(H) (A) in the case of the Owner Participant only, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ LLP, special tax counsel to the Owner Participant, addressed to
the Owner Participant, with respect to tax matters and (B) in the case of
the Loan Participants only, Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, special
counsel to the Loan Participants, addressed to the Loan Participants, with
respect to certain matters;
(I) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special counsel for the Owner
Participant, and internal counsel to the Owner Participant, substantially
in the forms of Exhibits A-6 and A-7, addressed to the Indenture Trustee,
the Owner Trustee, the Loan Participants and the Lessee;
(J) counsel for the Manufacturer, in respect of the Deficiency
Agreement and the Residual Agreement, in a form reasonably acceptable to
the Owner Participant and addressed to the Owner Participant; and
(K) counsel for the Seller, in a form reasonably acceptable to
the Participants and addressed to the Participants;
(xx) the Deficiency Agreement; and
(xxi) the Residual Agreement.
(c) Airworthiness. Each Participant shall receive a copy of a
-------------
current, valid Standard Certificate of Airworthiness for the Aircraft duly
issued by the FAA.
(d) Other Commitments. Each other Participant shall have made
-----------------
available the Dollar amount of its Commitment as directed by Owner Trustee in
accordance with Section 2.01(c) or 2.01(d), as the case may be.
(e) Violation of Law. No change shall have occurred after the
----------------
date of this Agreement in any Applicable Law that makes it a violation of law
for (a) Lessee, any Participant, Owner Trustee or the Indenture Trustee to
execute, deliver and perform the Operative Agreements to which any of them is a
party or (b) any Participant to make the Dollar amount of its Commitment
available or, in the case of a Loan Participant, to acquire its Equipment Note
or to realize the benefits of the security afforded by the Indenture.
(f) Reserved.
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(g) No Event of Default. On the Delivery Date, no event shall have
-------------------
occurred and be continuing, or would result from the sale, mortgage or lease of
the Aircraft, which constitutes a Default, Event of Default, Indenture Default
or Indenture Event of Default.
(h) No Event of Loss. No Event of Loss with respect to the Airframe
----------------
or any Engine shall have occurred and no circumstance, condition, act or event
that, with the giving of notice or lapse of time or both, would give rise to or
constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.
(i) Title. Owner Trustee shall have good title (subject to filing and
-----
recordation of the FAA ▇▇▇▇ of Sale with the FAA) to the Aircraft, free and
clear of Liens, except Permitted Liens not of record.
(j) Certification. The Aircraft shall have been duly certificated by
-------------
the FAA as to type and airworthiness as required by the terms of the Lease and
shall have been delivered new by the Manufacturer in calendar year 2000.
(k) Section 1110. Owner Trustee, as lessor under the Lease (and
------------
Indenture Trustee, as assignee of Owner Trustee under the Indenture), shall be
entitled to the benefits of Section 1110 (as currently in effect) with respect
to the right to take possession of the Airframe and Engines as provided in the
Lease in the event of a case under Chapter 11 of the Bankruptcy Code in which
Lessee is a debtor.
(l) Filings. On the Delivery Date (i) application for registration of
-------
the Aircraft in the name of the Owner Trustee shall have been duly made with the
FAA in compliance with the provisions of the Transportation Code; and (ii) the
Indenture, Indenture Supplement No. 1, the Lease, Lease Supplement No. 1 and the
FAA ▇▇▇▇ of Sale shall have been duly filed for recordation (or shall be in the
process of being so duly filed for recordation) with the FAA in accordance with
the Transportation Code.
(m) Financing Statements. A Uniform Commercial Code financing
--------------------
statement or statements covering the security interest contemplated by the
Indenture shall have been executed and delivered by the Owner Trustee as debtor
and by the Indenture Trustee as secured party, and such financing statement or
statements shall have been duly filed in all places necessary or desirable
within the State of Delaware.
(n) Precautionary Financing Statements. A Uniform Commercial Code
----------------------------------
"precautionary" financing statement or statements describing the Lease as a
lease but covering any security interest in favor of the Owner Trustee (and the
Indenture Trustee as assignee of the Owner Trustee) which may be created
thereby, shall have been executed and delivered by the Lessee and the Owner
Trustee (naming the Owner Trustee as Lessor and secured party and Indenture
Trustee as assignee), and shall have been duly filed in all places necessary or
desirable within the State of North Carolina.
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(o) No Proceedings. No action or proceeding shall have been
--------------
instituted, nor shall any action be threatened in writing, before any
governmental authority, nor shall any order, judgment or decree have been issued
or proposed to be issued by any governmental authority, to set aside, restrain,
enjoin or prevent the completion and consummation of this Agreement or any other
Operative Agreement or the transactions contemplated hereby or thereby.
(p) Governmental Action. All appropriate action required to have been
-------------------
taken prior to the Delivery Date by the FAA, or any governmental or political
agency, subdivision or instrumentality of the United States, in connection with
the transactions contemplated by this Agreement shall have been taken, and all
orders, permits, waivers, authorizations, exemptions and approvals of such
entities required to be in effect on the Delivery Date in connection with the
transactions contemplated by this Agreement shall have been issued.
(q) Trust Company Filing. The Trust Company shall have provided
--------------------
evidence reasonably satisfactory to the Participants that the filing required by
Section 131.3 of the New York Banking Law has been effected.
(r) Perfected Security Interest. On the Delivery Date, after giving
---------------------------
effect to the filing of the documents referenced in Section 3.01(l)(ii) and the
financing statements referenced in Sections 3.01(m) and (n), the Indenture
Trustee shall have received a duly perfected first priority security interest in
all of Owner Trustee's right, title and interest in the Indenture Estate, the
Aircraft and the Lease subject only to Permitted Liens not of record.
(s) Representations and Warranties. The representations and
------------------------------
warranties of each other party to this Agreement made, in each case, in this
Agreement and in any other Operative Agreement to which it is party, shall be
true and accurate in all material respects as of the Delivery Date (unless any
such representation and warranty shall have been made with reference to a
specified date, in which case such representation and warranty shall be true and
accurate as of such specified date) and each other party to this Agreement shall
have performed and observed, in all material respects, all of its covenants,
obligations and agreements in this Agreement and in any other Operative
Agreement to which it is a party to be observed or performed by it as of the
Delivery Date.
(t) Up-Front Fee. The Loan Participants shall have received their
------------
upfront fee in the amount separately agreed.
Sections 3.02. Conditions Precedent to Obligations of Lessee. The
---------------------------------------------
obligation of Lessee to lease the Aircraft on the Delivery Date is subject to
the satisfaction or waiver by Lessee, on or prior to the Delivery Date, of the
conditions precedent set forth below in this Section 3.02.
(a) Documents. Executed originals of the agreements, instruments,
---------
certificates, documents and opinions described in Section 3.01(b) shall have
been received by Lessee, except as specifically provided therein, and shall be
satisfactory to Lessee, unless the failure to receive any such agreement,
instrument, certificate or document is the result of any action or inaction by
Lessee.
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(b) Other Conditions Precedent. Each of the conditions set forth in
--------------------------
Sections 3.01(c), (d) (as to all Participants), (e), (g) (as to Indenture
Defaults and Indenture Events of Default not arising from Defaults or Events of
Default, as the case may be), (h), (i), (j), (k), (l), (m), (n) and (o) shall
have been satisfied or waived by Lessee, unless the failure of any such
condition to be satisfied is the result of any action or inaction by Lessee.
Section 3.03. Post-Registration Opinion. Promptly upon the registration
-------------------------
of the Aircraft and the recordation of the documents referenced in Section
3.01(l)(ii), Lessee will direct ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special counsel in
Oklahoma City, Oklahoma, to deliver to Lessee, each Participant, Owner Trustee
and the Indenture Trustee a favorable opinion or opinions addressed to each of
them with respect to such registration and recordation.
ARTICLE 4.
LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01. Lessee's Representations and Warranties. The Lessee
---------------------------------------
represents and warrants that, as of the Delivery Date (unless any such
representation and warranty is specifically made as of an earlier date, in which
case the Lessee represents and warrants as of such earlier date):
(a) the Lessee is a corporation duly organized and validly existing
and is in good standing under the laws of Delaware, has its principal place of
business and chief executive office (as such terms are used in Article 9 of the
Uniform Commercial Code) in Morrisville, North Carolina at the address set forth
in Section 12.01(a), and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the failure to be
so qualified or in good standing would have a materially adverse effect on its
business or would impair its ability to perform its obligations under the Lessee
Documents;
(b) the Lessee has full power, authority and legal right to conduct
its business and operations as currently conducted and to own or hold under
lease its properties and to enter into and perform its obligations under the
Lessee Documents;
(c) the Lessee is a Certificated Air Carrier;
(d) the Lessee possesses all necessary certificates, franchises,
licenses, permits, rights and concessions and consents (collectively "permits")
which are necessary to the operation of the routes flown by it and the conduct
of its business and operations as currently conducted and each such permit is in
full force and effect, except for any such permits the failure to have or
maintain which would not have a material adverse effect on the Lessee or its
ability to perform its obligations under the Lessee Documents;
(e) the execution, delivery and performance of the Lessee Documents by
the Lessee have been duly authorized by all necessary corporate action on the
part of the Lessee and do
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not require any stockholder approval, or approval or consent of any trustee or
holder of any indebtedness or obligations of the Lessee, and each such Lessee
Documents has been duly executed and delivered and constitutes the legal, valid
and binding obligations of the Lessee enforceable against it in accordance with
the terms thereof except as such enforceability may be limited by bankruptcy,
insolvency, or other similar laws or by general equitable principles;
(f) no authorization, consent or approval of or other action by, and
no notice to or filing with, any United States federal or state governmental
authority or regulatory body is required for the execution, delivery or
performance by the Lessee of the Lessee Documents except for such registrations,
applications and recordings referred to in the opinion of ▇▇▇▇▇ and ▇▇▇▇▇▇▇ P.C.
delivered pursuant to Section 3.01(b)(xix)(E) and the filings referred to in
Section 3.01(l)(ii);
(g) neither the execution, delivery or performance by the Lessee of
the Lessee Documents nor compliance with the terms and provisions hereof or
thereof, conflicts or will conflict with or results or will result in a breach
or violation of any of the terms, conditions or provisions of, or will require
any consent (other than the PAA Consent and the Engine Manufacturer's Consent)
or approval under, any Applicable Law or the charter documents, as amended, or
bylaws, as amended, of the Lessee or any order, writ, injunction or decree of
any court or governmental authority against the Lessee or by which it or any of
its properties is bound or any indenture, mortgage or contract or other
agreement or instrument to which the Lessee is a party or by which it or any of
its properties is bound, or constitutes or will constitute a default thereunder
or results or will result in the imposition of any Lien upon the Aircraft or any
of its properties (other than Permitted Liens), except for any such conflict,
breach or default which would not have a material adverse effect on the Lessee
or the Participants or have a material adverse effect on Lessee's ability to
perform its obligations under the Lessee Documents;
(h) except as disclosed in any of the filings of the Lessee referred
to in Section 4.01(t) or as otherwise disclosed in writing to the Owner
Participant and the Loan Participants, in each case prior to the execution and
delivery hereof, there are no pending or, to the knowledge of the Lessee,
threatened actions, suits, investigations or proceedings against or affecting
the Lessee or any of its properties before or by any court, governmental agency,
arbitration board, tribunal or other administrative agency which, (A) may
reasonably be expected to have a materially adverse effect on the Lessee's
consolidated financial condition, business, or operations, or (B) would
materially adversely affect the ability of the Lessee to consummate the
transactions contemplated by the Operative Agreements or perform its obligations
under the Lessee Documents;
(i) Reserved.
(j) except for (A) the registration in the Owner Trustee's name of the
Aircraft pursuant to the Transportation Code, (B) the filing with and, where
appropriate, recordation by the FAA pursuant to the Transportation Code of the
Indenture (including Indenture Supplement No. 1), and the Lease (including Lease
Supplement No. 1), (C) the filing of the financing statements referred to in
Sections 3.01(m) and 3.01(n) and (D) the taking of possession by the Indenture
Trustee of the
-14-
original counterpart of the Lease (including Lease Supplement No. 1), no further
action, including any filing or recording of any document, is necessary or
advisable in order (i) to establish the Owner Trustee's title to and interest in
the Aircraft and the Lessor's Estate as against the Lessee and any third
parties, or (ii) to perfect the first security interest in and Lien on the
Indenture Estate in favor of the Indenture Trustee;
(k) the Owner Trustee has received good and marketable title to the
Aircraft, free and clear of all Liens, except Permitted Liens;
(l) assuming the truth and accuracy of the representations and
warranties contained in Section 5.01(a)(vii) made by the Owner Participant and
Section 5.08(a)(iii) made by the Loan Participants and in reliance upon such
representations and warranties, the execution and delivery of this Agreement and
the other Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not involve any prohibited transaction
within the meaning of Section 406(a) of ERISA or Section 4975(c)(1)(A) through
(D) of the Code;
(m) all premiums which have become due with respect to the insurance
required to be provided by the Lessee on or prior to the Delivery Date under
Section 9 of the Lease have been paid by the Lessee;
(n) no Default or Event of Default exists and no Event of Loss, or
event which with the passage of time would constitute an Event of Loss, exists;
(o) the Aircraft is in such condition so as to enable the
airworthiness certificate of such Aircraft to be in good standing under the
Transportation Code; the Aircraft has been duly certificated by the FAA as to
type and airworthiness; there is in effect with respect to the Aircraft a
current and valid airworthiness certificate issued by the FAA pursuant to the
Transportation Code;
(p) the Lessee is not in default (after any applicable grace periods)
in the performance of any material term or condition of the Purchase Agreement;
(q) neither the Lessee nor any subsidiary of the Lessee is an
"investment company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended;
(r) there are no broker's or underwriter's fees payable on behalf of
the Lessee in connection with the transactions contemplated in the Operative
Agreements, other than those of the Lessee Advisor (as defined in Section
8.01(a)) referred to in Article 8 hereof;
(s) the Lessee represents and warrants that neither it nor anyone
acting on its behalf has directly or indirectly offered any Equipment Note or
any security similar thereto for sale to, or solicited any offer to acquire any
of the same from, anyone other than the Loan Participants;
-15-
and not more than 50 institutions believed capable of evaluating and bearing the
risks of investment in the transactions contemplated hereby;
(t) the audited consolidated balance sheet of Lessee with respect to
Lessee's most recent fiscal year included in Lessee's most recent Annual Report
on Form 10-K, as amended, filed by Lessee with the SEC, and the related
consolidated statements of operations and cash flows for the period then ended
have been prepared in accordance with generally accepted accounting principles
in the United States and fairly present in all material respects the financial
condition of Lessee and its consolidated subsidiaries as of such date and the
results of its operations and cash flows for such period, and since the date of
such balance sheet, there has been no material adverse change in such financial
condition or operations of Lessee, except for matters disclosed in (a) the
financial statements referred to above, (b) any subsequent Quarterly Report on
Form 10-Q or Current Report on Form 8-K filed by Lessee with the SEC, or (c)
otherwise disclosed in writing by Lessee to the Participants prior to the date
of execution and delivery hereof.
(u) to the best of Lessee's knowledge, Lessee is not in default under,
or in violation of, any Applicable Law, the violation of which would give rise
to a Material Adverse Change to Lessee;
(v) neither Lessee nor any person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or security relating to
the ownership of the Aircraft or the Lease or any interest in the Trust Estate
and Trust Agreement, or any of the Equipment Notes or any other interest in or
security under the Indenture, for sale to, or solicited any offer to acquire any
such interest or security from, or has sold any such interest or security to,
any person in violation of the Securities Act or any applicable state securities
laws; and
(w) Owner Trustee, as lessor under the Lease (and Indenture Trustee,
as assignee under the Indenture), is entitled to the benefits of Section 1110
(as currently in effect) with respect to the Aircraft.
Section 4.02. Certain Covenants of Lessee. The Lessee covenants and
---------------------------
agrees as follows:
(a) Filings and Recordings. The Lessee will cause to be done,
----------------------
executed, acknowledged and delivered, at the Lessee's cost and expense, all such
further acts, conveyances and assurances as the Owner Trustee, the Indenture
Trustee, the Loan Participants or the Owner Participant shall reasonably require
for accomplishing the purposes of the Operative Agreements. Without limiting the
generality of this Section 4.02(a), the Lessee will promptly take, or cause to
be taken, at the Lessee's cost and expense, such action with respect to the
recording, filing, re-recording and re-filing of the Indenture (including each
supplement thereto), the Lease (including each supplement thereto), and any
financing statements or other instruments as may be reasonably requested by the
Owner Trustee, the Owner Participant, the Indenture Trustee or any Noteholder
and appropriate, to maintain the perfection of the first security interest and
the Lien created by the Indenture, and the Owner Trustee's title to and interest
in the Aircraft and the Lessor's Estate, as
-16-
against the Lessee and any third parties, or if the Lessee cannot itself take,
or cause to be taken, such action, will furnish to the Indenture Trustee and the
Owner Trustee timely notice of the necessity of such action, together with such
instruments, in execution form, and such other information as may be required to
enable either of them to take such action at the Lessee's cost and expense in a
timely manner.
(b) Registration. From and after the Delivery Date, the Lessee shall
------------
cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Owner Trustee (provided, that the Owner Trustee
--------
and the Owner Participant shall be and remain Citizens of the United States),
under the Transportation Code, and shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make application
for such registration; provided, however, that the Lessee may, at any time cause
-------- -------
the Aircraft to be appropriately re-registered under the laws of a country with
which at the time of such registration the United States maintains normal
diplomatic relations and is listed on Exhibit E to the Lease; provided that
--------
prior to any change in the country of registry of the Aircraft the following
conditions are met:
(i) at the time of re-registration, no Specified Default exists
or would occur as a result of such re-registration;
(ii) the Lessee shall pay all fees and expenses, recording and
registration taxes (including the reasonable fees and expenses of local
counsel in such country) relating to such re-registration or proposed re-
registration;
(iii) the Lessee shall, at its cost, cause the interest of the
Owner Trustee as owner of the Aircraft and the Indenture Trustee as
mortgagee thereof to be duly registered or recorded under the laws of such
country and at all times thereafter to remain so duly registered or
recorded unless and until the registration of the Aircraft is changed as
provided herein, and shall, at its cost, cause to be done at all times all
other acts including the filing, recording and delivery of any document or
instrument and the payment of any sum necessary or, by reference to prudent
industry practice in such country, advisable in order to create, preserve
and protect such interest in the Aircraft (including the first priority
duly perfected Lien under the Indenture) as against the Lessee or any third
parties in such jurisdiction, and the laws of such country would give
effect to the Owner Trustee's title to and ownership interest in the
Aircraft and the Lien of the Indenture Trustee thereon;
(iv) the obligations of the Lessee (and of the Permitted
Sublessee under a Sublease) and the rights and remedies of the Lessor and
the Owner Participant under the Operative Agreements shall remain or be, as
the case may be, legal, valid, binding and enforceable in such country;
(v) the Lessee shall ensure that all insurance required by
Section 9 of the Lease shall be in full force and effect prior to, at the
time of, and after such change in registration
-17-
and the Owner Participant, the Noteholders, the Owner Trustee, and the
Indenture Trustee shall receive a certificate of Lessee's insurance broker
to such effect;
(vi) the country of such re-registration imposes aircraft
maintenance standards approved by, or at least as stringent as those
approved by, the FAA or the central civil aviation authority of the United
Kingdom, France, Germany, Japan, the Netherlands or Canada;
(vii) it shall not be necessary by reason of such re-registration
or for purposes of exercising rights or enforcing remedies contained in the
Lease or the Indenture or the related Sublease or other Operative
Agreements for the Owner Trustee, the Indenture Trustee, the Noteholders or
the Owner Participant to register or qualify to do business in such
country;
(viii) no Liens (except Permitted Liens not of record) shall arise
by reason of such re-registration, and the Indenture shall continue as a
first priority Lien on the collateral thereunder (subject only to Permitted
Liens not of record);
(ix) none of the Owner Trustee, the Indenture Trustee, the
Noteholders, and the Owner Participant shall be subjected to any risk of
adverse tax consequences as a result of such re-registration for which the
Lessee does not then indemnify or cause to be indemnified such Person in a
manner satisfactory in form and substance to such Person;
(x) any export licenses and certificate of deregistration
required in connection with any repossession or return of the Aircraft will
be readily obtainable in the normal course without material delay or
material burden on the Owner Trustee, the Indenture Trustee or the
Participants, it being agreed that the Lessee shall be responsible for the
cost thereof and (if not contrary to the Applicable Laws of such country)
the Indenture Trustee (or, if the Indenture shall have been satisfied and
discharged in accordance with its terms, the Owner Trustee) will be granted
a deregistration power of attorney by the Lessee and the Permitted
Sublessee;
(xi) there is no tort liability of the owner or lessor of an
aircraft not in possession thereof under the laws of such jurisdiction more
onerous than under the laws of the United States or any state thereof (it
being agreed that, in the event such opinion cannot be given in a form
satisfactory to the Owner Participant, such opinion shall be waived if
insurance reasonably satisfactory to the Owner Participant is provided to
cover such risk);
(xii) unless Lessee shall have agreed to provide insurance
reasonably satisfactory to the Owner Participant covering the risk of
requisition of use of or title to the Aircraft by the government of such
country (so long as the Aircraft is registered under the laws of such
country), the laws of such country require fair compensation by the
government of such country payable in currency freely convertible into
Dollars and freely removable from such country (without license or permit,
unless Lessee prior to such proposed reregistration has
-18-
obtained such license or permit or such license or permit will be readily
obtainable in the normal course without material delay or material burden
on the Owner Participant) for the taking or requisition by such government
of such use or title;
(xiii) the courts of such proposed country of registry will
respect the choice of New York law to govern the Lease;
(xiv) such re-registration may not be affected until after the
Recovery Period unless the Lessee prepays on a lump sum basis any liability
due under the Tax Indemnity Agreement as a result of such re-registration;
(xv) there exist no possessory rights in favor of the Lessee
(or any Permitted Sublessee) under the laws of such Permitted Sublessee's
country of domicile that would, upon bankruptcy or insolvency of or other
default by the Lessee and assuming that at such time such Permitted
Sublessee is not insolvent or bankrupt, prevent the return or repossession
of the Aircraft in accordance with and when permitted by the terms of
Section 17(a) of the Lease upon the exercise by Lessor of its remedies
under Section 17(a) of the Lease;
(xvi) the Owner Participant, the Owner Trustee, and the
Indenture Trustee shall have received opinions in scope, form and substance
reasonably satisfactory to them, of counsel, expert in the laws of such
country, to the effect set forth in clauses (iii), (iv) (with respect to
the obligations of the Lessee under the Lease), (vii), (ix), (x), (xi),
(xii), (xiii) and (xv) of this Section 4.02(b);
(xvii) such proposed change in registration is made in connection
with a Sublease to a Permitted Air Carrier and such Permitted Sublessee is
domiciled in such country;
(xviii) Lessee shall deliver such request to Lessor, the Indenture
Trustee and Owner Participant in writing at least 20 days in advance of the
date of any such proposed change in registration; and
(xix) the Deficiency Agreement and the Residual Agreement shall
remain in full force and effect.
Lessee agrees to pay on an After-Tax Basis all reasonable out-of-pocket costs
and expenses (including, without limitation, reasonable counsel fees and
disbursements) of the Owner Participant, the Noteholders, the Owner Trustee, and
the Indenture Trustee in connection with any re-registration pursuant to this
Section.
(c) Information. The Lessee shall promptly furnish to the
-----------
Owner Trustee and the Owner Participant such information as may be required to
enable the Owner Trustee and the Owner Participant timely to file any reports
required to be filed by the Owner Trustee as the Lessor and the
-19-
Owner Participant under the Lease with any governmental authority as a result of
the Owner Trustee's ownership interest in the Aircraft.
(d) Corporate Existence. The Lessee shall at all times maintain its
-------------------
corporate existence, except as permitted by Section 4.02(e) hereof, and all of
its rights, privileges and franchises necessary in the normal conduct of its
business, except for any corporate right, privilege or franchise that it
determines is no longer necessary or desirable in the conduct of its business.
(e) Merger and Consolidation. The Lessee shall not, during the Term,
------------------------
enter into any merger with or into or consolidation with, or sell, convey,
transfer, lease or otherwise dispose of in one or a series of transactions all
or substantially all of its assets as an entirety to any Person, unless (x) no
Event of Default of the type described in Section 16(a), (f), (g) or (h) of the
Lease shall have occurred and be continuing, (y) no Event of Default shall arise
as a result of such merger, consolidation, purchase, conveyance, transfer, lease
or other disposition and (z) the surviving corporation or Person which acquires
by purchase, conveyance, transfer or lease all or substantially all of the
assets of the Lessee as an entirety (i) is a domestic corporation organized and
existing under the laws of the United States or any State of the United States,
(ii) is a Citizen of the United States, (iii) the benefits of Section 1110
available to the Owner Trustee and the Indenture Trustee immediately prior to
such transaction shall not be adversely affected as a result of such
transaction, (iv) is a Section 1110 Person, so long as such status is a
condition to the availability of protection for the Owner Trustee and the
Indenture Trustee under Section 1110, (v) if not the Lessee, executes a duly
authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Trustee, Owner Participant and
Indenture Trustee, containing an effective assumption of all of the Lessee's
obligations hereunder and under the other Operative Agreements, and each other
document contemplated hereby or thereby and delivers such instrument to the
Indenture Trustee, the Participants and the Owner Trustee, (vi) provides an
opinion from counsel (which counsel may be the Lessee's General Counsel)
delivered to the Owner Trustee, the Indenture Trustee, the Noteholders and the
Owner Participant, which opinion shall be reasonably satisfactory to the Owner
Participant and the Indenture Trustee, and an officer's certificate (which may
rely, as to legal matters, on such legal opinion), each stating that such
merger, consolidation, conveyance, transfer, lease or other disposition and the
instrument noted in clause (v) above comply with this Section 4.02(e), that such
instrument has been duly authorized, executed and delivered and is a legal,
valid and binding obligation of, and is enforceable against, such survivor or
Person, and that all conditions precedent herein provided for relating to such
transaction have been complied with, and (vii) such survivor or Person makes
such filings and recordings with the FAA as may be required pursuant to part A
of subtitle VII or ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code to evidence such merger or
consolidation and such filings and recordings necessary in order to preserve and
protect the rights of the Owner Trustee, the Indenture Trustee and the
Noteholders under the Indenture.
Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Lessee and the satisfaction of
the conditions specified in this Section 4.02(e), the successor corporation
formed by such consolidation or into which the Lessee is merged or the Person to
which such conveyance, transfer or lease is made shall succeed to, and
-20-
be substituted for, and may exercise every right and power of, the Lessee under
this Agreement and the Lease and each other Operative Agreement and any other
document contemplated hereby and thereby to which the Lessee is a party with the
same effect as if such successor corporation had been named as the Lessee herein
and therein. No such consolidation or merger, or sale, conveyance, transfer or
lease of all or substantially all of the assets of the Lessee as an entirety
shall have the effect of releasing the Lessee or any successor corporation which
shall theretofore have become the Lessee hereunder in the manner prescribed in
this Section 4.02(e) from its liability hereunder or under the other Operative
Agreements. Nothing contained herein shall permit any lease, sublease, or other
arrangement for the use, operation or possession of the Aircraft except in
compliance with the applicable provisions of the Lease.
(f) Change of Location. The Lessee agrees to give prompt written
------------------
notice (but in any event within 30 days prior to the expiration of the period of
time specified under Applicable Law to prevent lapse of perfection) to the Owner
Participant, the Owner Trustee and the Indenture Trustee of any change in its
jurisdiction of incorporation, the address of its chief executive office (as
such term is used in Section 9-103(3) of the North Carolina Uniform Commercial
Code) or of any change in its corporate name.
(g) Financial Statements. The Lessee agrees to furnish to the Owner
--------------------
Participant and the Indenture Trustee during the Term:
(i) within 60 days after the end of each of the first three
fiscal quarters in each fiscal year of the Lessee, unaudited consolidated
balance sheets of the Lessee and its subsidiaries (if any) as of the end of
such quarter and related consolidated statements of income, shareholder's
equity and cash flows of the Lessee and its subsidiaries (if any) for the
period commencing at the end of the previous fiscal year and ending with
the end of such quarter, provided that so long as the Lessee is subject to
--------
the reporting provisions of the Securities Exchange Act of 1934, a copy of
the Lessee's quarterly report on Form 10-Q will satisfy this requirement;
(ii) within 120 days after the end of each fiscal year of the
Lessee, a copy of the annual report for such year for the Lessee or the
affiliated group of which the Lessee is a member (on a consolidated basis,
if applicable) and a balance sheet of the Lessee and its subsidiaries (if
any) as of the end of such fiscal year and related statements of income,
shareholder's equity and cash flows of the Lessee for such fiscal year, in
comparative form with the preceding fiscal year, in each case certified by
independent certified public accountants of national standing as having
been prepared in accordance with generally accepted accounting principles
in the United States, provided that so long as the Lessee is subject to the
--------
reporting provisions of the Securities Exchange Act of 1934, a copy of the
Lessee's annual report on Form 10-K will satisfy this requirement;
(iii) within 120 days after the end of each fiscal year of the
Lessee, an Officer's Certificate of the Lessee, to the effect that the
signer is familiar with or has reviewed the
-21-
relevant terms of the Lease and has made, or caused to be made under his
supervision, a review of the transactions and conditions of the Lessee
during the preceding fiscal year and that such review has not disclosed the
existence during such period, nor does the signer have knowledge of the
existence as of the date of such certificate, of any condition or event
which constituted or constitutes a Default or 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 or is taking or
proposes to take with respect thereof; and
(iv) from time to time, such other non-confidential financial
information as the Lessor or the Owner Participant may reasonably request.
(h) Reserved.
--------
(i) Filing of Documents. Lessee, at its sole cost and expense, will
-------------------
cause the documents filed with the FAA pursuant to Section 3.01(l), the
financing statements required pursuant to Section 3.01(m) and (n) and all
continuation statements (and any amendments necessitated by any combination,
consolidation or merger pursuant to Section 4.02(e), or any relocation of its
chief executive office) in respect of such financing statements to be prepared
and, subject only to the execution and delivery thereof by Owner Trustee and
Indenture Trustee, as applicable, duly and timely filed and recorded, or filed
for recordation, to the extent permitted under the Transportation Code (with
respect to such documents filed with the FAA) or the Uniform Commercial Code or
similar law of any other applicable jurisdiction (with respect to such other
documents).
(j) Annual Foreign Opinion. If the Aircraft has been registered in a
----------------------
country other than the United States pursuant to Section 4.02(b), Lessee will
furnish to Owner Trustee, Indenture Trustee and each Participant annually after
such registration is effected, an opinion of special counsel reasonably
satisfactory to Owner Participant and Indenture Trustee stating that, in the
opinion of such counsel, either that (i) such action has been taken with respect
to the recording, filing, rerecording and refiling of the Operative Agreements
and any supplements and amendments thereof as is necessary to establish, perfect
and protect Owner Trustee's and Indenture Trustee's respective right, title and
interest in and to the Aircraft and the Operative Agreements, reciting the
details of such actions, or (ii) no such action is necessary to maintain the
perfection of such right, title and interest.
(k) Lessee's Agreement Regarding Debt. Neither the Lessee nor any
---------------------------------
Person authorized to act on its behalf will acquire, or guaranty the payment of
any amounts due in respect of, any Equipment Note.
Section 4.03. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Lessee provided in Section 4.01 and in any
other Operative Agreement shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.
-22-
ARTICLE 5.
OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01. Representations, Warranties and Covenants of Owner
--------------------------------------------------
Participant.
-----------
(a) Representations and Warranties. The Owner Participant represents
------------------------------
and warrants that, as of the Delivery Date (unless any such representation and
warranty is specifically made as of an earlier date, in which case the Owner
Participant represents and warrants as of such earlier date):
(i) it is a corporation duly incorporated and validly existing
in good standing under the laws of the State of New York and it has full
corporate power, authority and legal right to carry on its present business
and operations, to own or lease its properties and to enter into and to
carry out the transactions contemplated by this Agreement and the other
Operative Agreements to which it is party;
(ii) the execution, delivery and performance by it of this
Agreement and the other Operative Agreements to which it is party have been
duly authorized by all necessary corporate action on its part;
(iii) neither the execution, delivery or performance by the Owner
Participant of the Operative Agreements to which it is party, nor
compliance with the terms and provisions hereof or thereof, conflicts or
will conflict with or results or will result in a breach or violation of
any of the terms, conditions or provisions of, any law, governmental rule
or regulation applicable to the Owner Participant or the charter documents,
as amended, or bylaws, as amended, of the Owner Participant or any order,
writ, injunction or decree of any court or governmental authority against
the Owner Participant or by which it or any of its properties is bound or
any indenture, mortgage or contract or other agreement or instrument to
which the Owner Participant is a party or by which it or any of its
properties is bound, or constitutes or will constitute a default
thereunder;
(iv) the Operative Agreements to which it is party have been
duly executed and delivered by the Owner Participant and constitute the
legal, valid and binding obligations of the Owner Participant enforceable
against it in accordance with their terms except as such enforceability may
be limited by bankruptcy, insolvency, or other similar laws or general
equitable principles;
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions, suits, investigations or proceedings
against the Owner Participant before any court, administrative agency or
tribunal which are expected to materially adversely affect the ability of
the Owner Participant to perform its obligations under this Agreement and
the other Operative Agreements to which it is or is to be a party and the
Owner Participant knows of no pending or threatened actions or proceedings
before any court, administrative
-23-
agency or tribunal involving it in connection with the transactions
contemplated by the Operative Agreements;
(vi) neither the execution and delivery by it of this Agreement
or the other Operative Agreements to which it is a party nor the
performance of obligations hereunder or thereunder requires the consent or
approval of or the giving of notice to, the registration with, or the
taking of any other action in respect of, any governmental authority or
agency that would be required to be obtained or taken by the Owner
Participant except for filings contemplated by this Agreement;
(vii) the funds to be used by the Owner Participant to acquire
its interests under this Agreement do not constitute assets (within the
meaning of ERISA and any applicable rules and regulations) of an ERISA
Plan; and
(viii) the Owner Participant is a bank, trust company, insurance
company, financial institution or corporation with a combined capital and
surplus or net worth of at least $50,000,000.
Notwithstanding the foregoing or anything else contained in this
Agreement, the Owner Participant makes no representation or warranty in this
Agreement with respect to laws, rules or regulations relating to aviation or to
the nature or use of the equipment owned by the Owner Trustee, including,
without limitation, the airworthiness, value, condition, workmanship, design,
patent or trademark infringement, operation, merchantability or fitness for use
of the Aircraft, other than such laws, rules or regulations relating to the
citizenship requirements of the Owner Participant under applicable aviation law.
(b) Lessor's Liens. The Owner Participant represents, warrants and
--------------
covenants that on the Delivery Date there are no Lessor's Liens attributable to
it (or an Affiliate thereof). The Owner Participant agrees with and for the
benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the
Noteholders that the Owner Participant will, at its own cost and expense, take
such action as may be necessary to duly discharge and satisfy in full, promptly
after the same first becomes known to the Owner Participant, any Lessor's Lien
attributable to the Owner Participant (or an Affiliate thereof), provided,
--------
however, that the Owner Participant shall not be required to discharge or
-------
satisfy such Lessor's Lien which is being contested by the Owner Participant in
good faith and by appropriate proceedings so long as such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Aircraft or the
Lessor's Estate or the Indenture Estate or any interest in any thereof or
otherwise materially adversely affect the validity or priority of the Lien of
the Indenture.
(c) Assignment of Interests of Owner Participant. At any time after
--------------------------------------------
the Delivery Date and subject to satisfaction of the conditions set forth in
this Section 5.01(c), the Owner Participant may assign, convey or otherwise
transfer to a single Person all (but not less than all) of the Beneficial
Interest, provided that (i) the Owner Participant gives the Lessee, the
--------
Noteholders and
-24-
the Indenture Trustee at least 10 days' notice of such assignment, conveyance or
other transfer, (ii) the Owner Participant and any Owner Participant Guarantor
shall remain liable for all obligations of the Owner Participant under the Trust
Agreement and the other Operative Agreements to which the Owner Participant is a
party to the extent (but only to the extent) relating to the period on or before
the date of such transfer, (iii) the transferee agrees by a written instrument
substantially in the form attached hereto as Exhibit B-1 (or otherwise in form
and substance reasonably satisfactory to Lessee and a Majority in Interest of
Noteholders) to assume liability for, and undertake performance of, all
obligations of the Owner Participant under the Trust Agreement and the other
Operative Agreements to which such Owner Participant is a party relating to the
period after the date of transfer, (iv) the transferee shall make a
representation to the effect that the funds to be used by the transferee to
acquire the Beneficial Interest do not constitute the assets of an ERISA Plan,
(v) at or prior to the time of such transfer, the transferee shall furnish an
opinion of counsel substantially in the form attached hereto as Exhibit B-3 (or
otherwise in form and substance reasonably satisfactory to Lessee and a Majority
in Interest of Noteholders) (which counsel may be in-house counsel) to the
effect that such transferee and any guarantor of the payment and performance
obligations of such transferee, as the case may be, shall have requisite power
and authority and legal right to enter into and carry out the transactions
contemplated hereby; and that such agreement and any guaranty of the
transferee's obligations has been duly authorized, executed and delivered by the
transferee or the guarantor of the payment and performance obligations of such
transferee, as the case may be, and is a valid and binding agreement of the
transferee or the guarantor of the payment and performance obligations of such
transferee enforceable in accordance with its terms, subject to customary
exceptions for such opinions and that the transfer does not violate the
Applicable Law of the jurisdiction in which such counsel is located, and (vi)
the Lessee shall have received an opinion from counsel selected by Owner
Participant and reasonably acceptable to Lessee that no withholding tax will be
imposed by the U.S. on Basic Rent or by any foreign jurisdiction on the interest
on the Equipment Notes assuming that the Lessee and the Noteholders are U.S.
Persons. In connection with any such transfer, the Owner Participant shall use
reasonable efforts to consult with the Noteholders in respect of the identity of
the transferee and its experience in aircraft leveraged leasing. Any such
transferee shall (a) be (i) a bank, savings institution, finance company,
leasing company or trust company, national banking association acting for its
own account or in a fiduciary capacity as trustee or agent under any pension,
retirement, profit sharing or similar trust or fund, insurance company,
financial institution, fraternal benefit society or a corporation acting for its
own account having a combined capital and surplus (or, if applicable,
consolidated net worth or its equivalent) of not less than $50,000,000, (ii) a
subsidiary of any Person described in clause (i) where such Person provides (A)
support for the obligations assumed by such transferee subsidiary reasonably
satisfactory to the Lessee, the Owner Trustee and a Majority in Interest of
Noteholders or (B) a guaranty of such transferee subsidiary's obligations
substantially in the form attached hereto as Exhibit B-2 (or otherwise in form
and substance reasonably satisfactory to Lessee, Owner Trustee and a Majority in
Interest of Noteholders), or (iii) an Affiliate of the transferring Owner
Participant, so long as such Affiliate has a combined capital and surplus (or,
if applicable, consolidated net worth or its equivalent) of not less than
$50,000,000 (unless the Owner Participant remains liable for the obligations of
such Affiliate under the Operative Agreements, in which case there shall be such
net worth requirement), (b) be legally capable of binding itself to the
obligations of the Owner
-25-
Participant, and (c) provide representations and warranties substantially
similar to those contained in Section 5.01(a); provided that, without the prior
--------
written consent of the Lessee, such transferee shall not be an airline or other
aircraft operator or competitor of the Lessee in the business of air
transportation or an Affiliate of any thereof unless such Affiliate is (i)
General Electric Company, International Lease Finance Corporation, GPA, GATX
Corporation or Bouillon Aviation, (ii) any wholly-owned subsidiary of an entity
listed in the foregoing clause (i) that is (X) a special purpose corporation
limited to holding Owner Participant's interest in the transactions or (Y)
primarily engaged in the business of owning and leasing assets to third-party
lessees and which is not engaged in the business of an airline, other commercial
aircraft operation or freight forwarder or (iii) an entity from which Lessee has
leased an aircraft directly (or through a trust) and not as a result of the
transfer to such entity of any aircraft subject to an existing lease with
Lessee; provided that Lessee's consent shall not be required if an Event of
--------
Default shall have occurred and be continuing at the time of such transfer; and
provided further that neither such transferee nor any Affiliate thereof shall
-------- -------
(x) be a party to any material litigation or arbitration (whether as plaintiff
or defendant) with the Lessee or any Affiliate of the Lessee or (y) be
attempting a hostile takeover of the Lessee or any Affiliate of the Lessee. A
transferee hereunder shall be a Citizen of the United States or has established
a voting trust, voting powers or other arrangement reasonably satisfactory to a
Majority in Interest of Noteholders, the Owner Trustee, and the Lessee to permit
the Owner Trustee to be the registered owner of the Aircraft under the
Transportation Code, without in any way restricting the Lessee's use and
operation of the Aircraft. The Owner Trustee shall not be on notice of or
otherwise bound by any such assignment, conveyance or transfer unless and until
it shall have received an executed counterpart of the instrument of such
assignment, conveyance or transfer. Upon any such disposition by the Owner
Participant to a transferee as above provided, the transferee shall be deemed
the "Owner Participant" for all purposes of the Operative Agreements, and shall
be deemed to have acquired the same interest in the Lessor's Estate as
theretofore held by its transferor; and each reference therein to the "Owner
Participant" shall thereafter be deemed a reference to such transferee and the
transferring Owner Participant shall be released from all of its obligations
under the Operative Agreements to the extent such obligations are assumed by
such transferee. All reasonable fees and expenses incurred by Lessee, Owner
Participant, Indenture Trustee, any Noteholder or Owner Trustee in connection
with any transfer by the Owner Participant permitted by this Section 5.01(c)
will be reimbursed by the Owner Participant, unless an Event of Default has
occurred and is continuing, in which case any fees and expenses incurred by
Lessee shall not be so reimbursed; provided, however, that in each case bills
-------- -------
shall be submitted to the Owner Participant prior to payment. Each of the
parties hereto agree, to the extent so requested by the Owner Participant, to
use reasonable efforts to cooperate with the Owner Participant in effecting any
assignment, conveyance or other transfer permitted pursuant to this Section
5.01(c), including providing its written consent and acknowledgement to any such
assignment, conveyance or other transfer and, in the case of the Lessee,
providing new insurance certificates that reflect the interest of the
transferee. After the expiration or termination of the Term of the Lease, the
Owner Participant may freely assign, convey or otherwise transfer all or any
part of the Beneficial Interest without compliance with this Section 5.01(c),
provided that no such transfer shall release the Owner Participant from its
obligations under the Operative Agreements accrued prior to the end of the Term.
-26-
(d) Actions with Respect to Lessor's Estate, Etc. The Owner
---------------------------------------------
Participant agrees that it will not take any action to subject the Lessor's
Estate or the trust established by the Trust Agreement, as debtor, to the
reorganization or liquidation provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statute.
(e) Citizenship. The Owner Participant agrees, solely for the benefit
-----------
of the Lessee, each Noteholder, the Indenture Trustee and the Owner Trustee,
that if at any time on or after the Delivery Date when the Aircraft is
registered or the Lessee proposes to register the Aircraft in the United States
(i) either the Owner Participant shall cease to be, or an event which has been
publicly disclosed has occurred of which the Owner Participant has knowledge and
which will cause the Owner Participant to cease to be, a Citizen of the United
States, and (ii) the Aircraft shall or would therefore become ineligible for
registration in the name of the Owner Trustee under the Transportation Code and
regulations then applicable thereunder (such eligibility to be determined
without regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting where it is based or used), then the Owner Participant
shall give notice thereof to the Lessee, the Owner Trustee, each Noteholder and
the Indenture Trustee and shall (at its own expense and without any
reimbursement or indemnification from the Lessee) immediately (and in any event
within a period of 20 days) promptly (x) effect a voting trust or other similar
arrangement, (y) transfer in accordance with the terms of this Agreement and the
Trust Agreement all its rights, title and interest in and to such Trust
Agreement, the Lessor's Estate, this Agreement and the other Operative
Agreements to which the Owner Participant is a party, or (z) take any other
alternative action that would prevent any deregistration, or maintain or permit
the United States registration, of the Aircraft (determined without regard to
any provision of law that permits the U.S. registration of the Aircraft by
restricting where it is based or used). Each party hereto agrees, upon the
request and at the sole expense of the Owner Participant, to cooperate with the
Owner Participant in complying with its obligations under the provisions of the
first sentence of this Section 5.01(e), but without any obligation on the part
of such other party to take any action believed by it in good faith to be
unreasonably burdensome to such party or materially adverse to its business
interests.
Section 5.02. Citizenship.
-----------
(a) Generally. The Owner Trustee, in its individual capacity,
---------
represents and warrants that it is and on the Delivery Date will be a Citizen of
the United States. If the Owner Trustee in its individual capacity does not
comply with the requirements of this Section 5.02, the Owner Trustee and the
Indenture Trustee hereby agree that no Default shall be deemed to exist due to
non-compliance by the Lessee with the registration requirements in the Lease or
in Section 4.02(b) hereof occasioned solely by such noncompliance of the Owner
Trustee.
(b) Owner Trustee. The Owner Trustee, in its individual capacity,
-------------
covenants that if at any time on or after the Delivery Date any of its
Responsible Officers shall have actual knowledge that it has ceased to be a
Citizen of the United States, it will resign immediately as the Owner Trustee if
such citizenship is necessary for registration of the Aircraft in the Owner
Trustee's name under the Transportation Code as in effect at such time (such
necessity to be determined
-27-
without regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting where it is based or used) or, if it is not necessary
for such registration, if the Owner Trustee is informed in writing by the
Lessee, the Indenture Trustee or any Owner Participant that such lack of United
States citizenship would have any adverse effect on the Lessee, the Indenture
Trustee, the Noteholders or any Owner Participant. The Owner Trustee, in its
individual capacity, further covenants that if at any time it appears reasonably
probable that it will cease to be a Citizen of the United States based on
information that is (i) known to a Responsible Officer of the Owner Trustee or
(ii) generally known to the public, it will promptly so notify, to the extent
permitted by law, all parties to this Agreement.
Section 5.03. Representations, Warranties and Covenants of Trust Company
----------------------------------------------------------
and the Owner Trustee.
---------------------
(a) Representations and Warranties. In addition to and without
------------------------------
limiting its other representations and warranties provided for in this Article
5, Trust Company represents and warrants, in its individual capacity with
respect to items (i), (ii), (iii)(A), (iv), (v), (vi), (vii), (viii), (ix) and
(x) below, and as the Owner Trustee with respect to items (iii)(B) and (iv), on
the Delivery Date that:
(i) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States with
its principal place of business and chief executive office (as such terms
are used in Article 9 of the Uniform Commercial Code) in Delaware at the
address set forth in Section 12.01(b), and has full corporate power and
authority, in its individual capacity or (assuming the Trust Agreement has
been duly authorized, executed and delivered by the Owner Participant) as
the Owner Trustee, as the case may be, to carry on its business as now
conducted, and to execute, deliver and perform this Agreement and the
Operative Agreements to which it is or is to be a party;
(ii) the execution, delivery and performance by Trust Company,
either in its individual capacity or as the Owner Trustee, as the case may
be, of this Agreement and the Operative Agreements to which it is or is to
be party have been duly authorized by all necessary corporate action on its
part, and do not contravene its articles of association or by-laws; each of
this Agreement and the other Operative Agreements to which it is or is to
be a party has been duly authorized, and has been duly executed and
delivered by Trust Company, either in its individual capacity or as the
Owner Trustee, as the case may be, and neither the execution and delivery
thereof nor Trust Company performance of or compliance with any of the
terms and provisions thereof will violate any federal or Delaware law or
regulation governing Trust Company's banking or trust powers,
(iii) (A) each of the Operative Agreements to which it is or is to
be party when duly executed and delivered will, to the extent each such
document is entered into by Trust Company in its individual capacity,
constitute the legal, valid and binding obligation of Trust Company in its
individual capacity enforceable against it in such capacity in accordance
with its respective terms, except as such enforceability may be limited by
bankruptcy, insolvency,
-28-
reorganization or other similar laws or equitable principles of general
application to or affecting the enforcement of creditors' rights
(regardless of whether enforceability is considered in a proceeding in
equity or at law), and the performance by Trust Company in its individual
capacity of any of its obligations thereunder does not contravene any
lease, regulation or contractual restriction binding on Trust Company in
its individual capacity;
(B) assuming due authorization, execution and delivery by the
Owner Participant of the Trust Agreement, each of the Operative Agreements
to which it is or is to be party when duly executed and delivered will, to
the extent each such document is entered into by the Owner Trustee in its
trust capacity, constitute the legal, valid and binding obligation of the
Owner Trustee enforceable against it in such capacity in accordance with
its respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws or general
equitable principles, and the performance by the Owner Trustee of any of
its obligations thereunder does not contravene any lease, regulation or
contractual restriction binding on the Owner Trustee;
(iv) there are no pending or, to its knowledge, threatened actions
or proceedings against Trust Company before any court or administrative
agency which would materially adversely affect the ability of Trust
Company, either in its individual capacity or as the Owner Trustee, as the
case may be, to perform its obligations under the Operative Agreements to
which it is or is to be party;
(v) its chief executive office (as such term is defined in Article
9 of the Uniform Commercial Code) is One ▇▇▇▇▇▇ Square, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and it shall give the Lessee, the
Indenture Trustee and the Owner Participant at least 30 days' prior written
notice in the event of any change in its chief executive office or name;
(vi) neither the execution and delivery by it, either in its
individual capacity or as the Owner Trustee, as the case may be, of any of
the Operative Agreements to which it is or is to be a party, requires on
the part of Trust Company in its individual capacity or any of its
Affiliates the consent or approval of or the giving of notice to, the
registration with, or the taking of any other action in respect of, any
federal or Delaware governmental authority or agency governing its banking
or trust powers;
(vii) the Owner Trustee holds whatever title to the Aircraft as was
conveyed to it by the Seller and the Aircraft is free of Lessor's Liens
attributable to Trust Company in its individual capacity;
(viii) Trust Company is a Citizen of the United States;
-29-
(ix) Trust Company has made a filing with the New York State Banking
Department under Section 131.3 of the New York State Banking Law with
respect to the trust formed by the Trust Agreement; and
(x) there are no Expenses or Taxes that may be imposed on or
asserted against the Trust, the Trust Estate or any part thereof or any
interest therein, the Indenture Estate, Lessee, Owner Participant, any
Noteholder, Owner Trustee or Indenture Trustee (except, as to Owner
Trustee, Taxes imposed on the fees payable to Owner Trustee) under the laws
of the State of Delaware in connection with the execution, delivery or
performance of any Operative Agreement by Owner Trustee or in connection
with the issuance of the Equipment Notes, which Expenses or Taxes would not
have been imposed if Owner Trustee had not (x) had its principal place of
business in, (y) performed (in its individual capacity or as Owner Trustee)
any or all of its duties under the Operative Agreements in or (z) engaged
in any activities unrelated to the transactions contemplated by the
Operative Agreements in, the State of Delaware.
(b) Lessor's Liens. Trust Company, in its individual capacity,
--------------
further represents, warrants and covenants that there are no Lessor's Liens
attributable to it in its individual capacity on the Delivery Date. The Owner
Trustee, in its trust capacity, and at the cost and expense of the Lessee,
covenants that it will in its trust capacity promptly, and in any event within
30 days after the same shall first become known to it, take such action as may
be necessary to discharge duly any Lessor's Liens attributable to it in its
trust capacity. Trust Company, in its individual capacity, covenants and agrees
that it will at its own expense take such action as may be necessary to duly
discharge and satisfy in full, promptly, and in any event within 30 days after
the same shall first become known to it, any Lessor's Liens attributable to it
in its individual capacity which may arise at any time after the date of this
Agreement.
(c) Indemnity for Lessor's Liens. Trust Company, in its individual
----------------------------
capacity, agrees to indemnify and hold harmless the Lessee, the Indenture
Trustee, the Owner Participant, each Noteholder and the Owner Trustee from and
against any loss, cost, expense or damage which may be suffered by the Lessee,
the Indenture Trustee, the Owner Participant, each Noteholder or the Owner
Trustee as a result of the failure of Trust Company to discharge and satisfy any
Lessor's Liens attributable to it in its individual capacity, as described in
Section 5.03(b).
(d) Securities Act. None of Trust Company, the Owner Trustee or
--------------
any Person authorized by either of them to act on its behalf has directly or
indirectly offered or sold or will directly or indirectly offer or sell any
interest in the Lessor's Estate, or in any similar security relating to the
Lessor's Estate, or in any security the offering of which for purposes of the
Securities Act of 1933, as amended, would be deemed to be part of the same
offering as the offering of the aforementioned securities to, or solicited any
offer to acquire any of the same from, any Person.
(e) Actions With Respect to Lessor's Estate, Etc. Neither Trust
--------------------------------------------
Company, in its individual capacity, nor the Owner Trustee will take any action
to subject the Lessor's Estate or the
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trust established by the Trust Agreement, as debtor, to the reorganization or
liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy
or insolvency statute.
(f) Other Business. Owner Trustee will not enter into any business or
--------------
other activity except as contemplated by the Operative Agreements.
(g) Performance of Agreements. Owner Trustee shall perform its
-------------------------
obligations under the Operative Agreements to which it is a party in accordance
with the terms thereof.
Section 5.04. Representations, Warranties and Covenants of the Indenture
----------------------------------------------------------
Trustee.
-------
(a) Representations and Warranties. The Indenture Trustee in its
------------------------------
individual capacity represents on the Delivery Date as follows:
(i) it is a state-chartered commercial bank duly organized and
validly existing in good standing under the laws of the State of Maryland
and has the corporate power and authority to enter into and perform its
obligations under the Indenture, this Agreement and the other Operative
Agreements to which it is a party and to authenticate the Equipment Notes
to be delivered to the Loan Participants on the Delivery Date;
(ii) the Indenture and this Agreement and the other Operative
Agreements to which it is or is to be a party, and the authentication of
the Equipment Notes to be delivered to the Loan Participants on the
Delivery Date, have been duly authorized by all necessary corporate action
on its part, and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will violate any
federal or Maryland law or regulation relating to its banking or trust
powers or contravene or result in any breach of, or constitute any default
under, its articles of incorporation or by-laws;
(iii) each of the Indenture and this Agreement, and the other
Operative Agreements to which it is a party, has been duly executed and
delivered by it and, assuming that each such agreement is the legal, valid
and binding obligation of each other party thereto, is (or will be, as the
case may be), the legal, valid and binding obligation of the Indenture
Trustee, enforceable against the Indenture Trustee in accordance with its
terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws or equitable principles of
general application to or affecting the enforcement of creditors' rights
(regardless of whether enforceability is considered in a proceeding in
equity or at law);
(iv) neither the execution and delivery by it of the Indenture
and this Agreement and the other Operative Agreements to which it is or is
to be a party, nor the performance by it of any of the transactions
contemplated hereby or thereby, requires the consent or approval of, the
giving of notice to, the registration with, or the taking of any other
action in respect
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of, any Federal or Maryland governmental authority or agency governing its
banking or trust powers;
(v) it has made a filing with the New York State Banking
Department under Section 131.3 of the New York Banking Law in respect of
the performance of its duties relating to the Indenture Estate; and
(vi) there are no pending or, to the knowledge of the Indenture
Trustee, threatened actions or proceedings against the Indenture Trustee
before any court, administrative agency or tribunal which, if determined
adversely to the Indenture Trustee, would materially adversely affect the
ability of the Indenture Trustee to perform its obligations under any of
the Operative Agreements to which it is a party.
(b) Indenture Trustee's Liens. The Indenture Trustee, in its
-------------------------
individual capacity, represents, warrants and covenants that there are no
Indenture Trustee's Liens on the Delivery Date. The Indenture Trustee, in its
individual capacity, covenants and agrees that it will not directly or
indirectly create, incur, assume or suffer to exist any Indenture Trustee's Lien
and that it will at its own expense take such action as may be necessary to duly
discharge and satisfy in full, promptly, and in any event within 30 days, after
the same shall first become known to it, any Indenture Trustee's Liens.
(c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee,
---------------------------------------
in its individual capacity, agrees to indemnify and hold harmless the Lessee,
the Owner Participant, the Owner Trustee and each Noteholder from and against
any actual out-of-pocket loss, cost, expense or damage (including but not
limited to any reduction in the amount payable out of the Trust Estate or the
Indenture Estate and any interference with the possession, operation or other
use of all or any part of the Aircraft) which may be suffered by the Lessee, the
Indenture Trustee, the Owner Participant, the Owner Trustee or any Noteholder as
a result of the failure of the Indenture Trustee to discharge and satisfy any
Indenture Trustee's Liens attributable to it in its individual capacity, as
described in Section 5.04(b) hereof.
Section 5.05. Indenture Trustee's Notice of Default. The Indenture
-------------------------------------
Trustee agrees to give the Lessee and the Owner Participant notice of any
Default or Event of Default promptly upon a Responsible Officer of the Indenture
Trustee having actual knowledge thereof.
Section 5.06. Releases from Indenture. The Indenture Trustee covenants
-----------------------
and agrees, for the benefit of the Lessee and the Owner Participant, to execute
and deliver the instruments of release from the Lien of the Indenture which it
is required to execute and deliver in accordance with the provisions of Article
IX of the Indenture, and the Owner Participant agrees, for the benefit of the
Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute
and deliver such instruments of release upon written notice from the Lessee to
make such request.
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Section 5.07 The Lessee's Right of Quiet Enjoyment. Notwithstanding any
-------------------------------------
other provision of any of the Operative Agreements, each other party to this
Agreement agrees, severally and as to its own actions only, that it will not, so
long as no Event of Default shall have occurred and be continuing, take or cause
to be taken any action contrary to the Lessee's rights under the Lease,
including, without limitation, its rights to possession, use and quiet enjoyment
of the Aircraft during the Term, provided that nothing contained herein shall
--------
affect any of the rights of the Owner Participant, the Owner Trustee or the
Indenture Trustee expressly granted to such Person under any Operative
Agreement.
Section 5.08 Representations and Warranties of the Loan Participants.
-------------------------------------------------------
(a) Representations and Warranties. Each Loan Participant represents
------------------------------
and warrants that, as of the Delivery Date (unless any such representation and
warranty is specifically made as of an earlier date, in which case such Loan
Participant represents and warrants as of such earlier date):
(i) the Equipment Note to be issued to such Loan Participant on
the Delivery Date is being acquired by it in the ordinary course of its
commercial banking business; and
(ii) each Loan Participant represents and warrants that it is
not acquiring and will not at any time hold its interest in its Equipment
Note with the assets of, or as an asset of, and ERISA Plan.
(b) Transfer of Equipment Notes. Each Loan Participant
---------------------------
acknowledges that its Equipment Note has not been registered under the
Securities Act of 1933, as amended, and the Indenture has not been registered
under the Trust Indenture Act of 1939, as amended, and that any disposition
thereof will require registration and/or qualification under said Acts unless it
is a transaction exempt from registration and/or qualification. A Loan
Participant may transfer its interest in and to the Equipment Note held by such
Loan Participant to any Person which is not an airline or an Affiliate of an
airline; provided, however, (i) a Loan Participant shall not transfer any
-------- -------
interest in an Equipment Note except pursuant to a transaction which is exempt
from registration under the Securities Act of 1933, as amended and (ii) in
connection with any such transfer, (A) the proposed transferee shall make a
representation for the benefit of the Lessee identical to the representation
made by such Loan Participant in Section 5.08(a)(ii) with respect to the source
of the funds being used by such transferee to purchase such interest in such
Equipment Note, and (B) the proposed transferee shall agree to be bound by the
provisions of the Indenture (to the extent applicable to such Loan Participant)
and this Agreement (including, without limitation, this Section 5.08(b)) in
connection with any transfer by such transferee of its Equipment Note to the
same extent as such Loan Participant is bound in connection with any transfer
thereby.
Section 5.09. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Representations, warranties and covenants of the Owner Participant, the Owner
Trustee (in its individual or trust capacity), the Loan Participants and the
Indenture Trustee (in its individual or trust capacity)
-33-
provided for in this Article 5, and their respective obligations under any and
all of them, shall survive the delivery of the Aircraft and the expiration or
other termination of this Agreement and the other Operative Agreements.
Section 5.10. Lessee's Assumption of the Equipment Notes.
------------------------------------------
(a) Subject to compliance by the Lessee with all of its obligations
under the Operative Agreements, each of the Owner Participant, the Owner
Trustee, the Indenture Trustee, the Noteholders and the Lessee covenants and
agrees that if the Lessee elects to purchase the Aircraft on the EBO Date
pursuant to Section 13(b) of the Lease, if no Event of Default shall exist,
then, upon compliance with the applicable provisions of the Operative
Agreements, the Owner Trustee will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens attributable to the Owner
Trustee) but subject to the Lien of the Indenture, all of the Owner Trustee's
right, title and interest in and to the Aircraft, and if the Lessee, in
connection with such purchase, elects to assume the obligations of the Owner
Trustee to the Indenture Trustee and the Noteholders under the Indenture, the
Equipment Notes, and hereunder, the Lessee shall so notify the Indenture Trustee
(such notice to be given at least 30 and not more than 60 days prior to the
effective date of such assumption), and each of the parties shall execute and
deliver appropriate documentation permitting the Lessee to assume such
obligations on the basis of full recourse to the Lessee, maintaining for the
benefit of the Noteholders the security interest in the Aircraft created by the
Indenture, and upon compliance with the provisions of this Section 5.10
releasing the Owner Participant and the Owner Trustee from all obligations in
respect of the Equipment Notes, the Indenture, this Agreement, and the other
Operative Agreements, except any obligations relating to the period prior to
such assumption and take all such other actions, at the Lessee's expense, as are
reasonably necessary to permit such assumption by the Lessee.
(b) In connection with such assumption:
(i) the Lessee shall execute and deliver an instrument (A)
pursuant to which the Lessee irrevocably and unconditionally assumes and
undertakes, with full recourse to the Lessee, to pay, satisfy, and
discharge when and as due (at the stated maturity thereof, by acceleration
or otherwise) the principal of, Breakage Cost, if any, interest, and all
other sums owing on all Outstanding Equipment Notes (or on the Lessee's
substituted obligations) in accordance with their terms, and punctually to
perform and observe all of the covenants and obligations hereunder and
under the Indenture and the Equipment Notes (as the same may be amended in
connection with such assumption) to be performed or observed by the Owner
Trustee, and (B) which contains amendments to the Indenture, in form and
substance as reasonably satisfactory to the Indenture Trustee, that
incorporate therein such provisions from the Lease and this Agreement as
may be appropriate, including, without limitation, events of default
substantially identical in scope and effect to those set forth in the Lease
and covenants substantially identical to the covenants of the Lessee
hereunder and under the Lease;
-34-
(ii) the instrument referred to in paragraph (i) of this Section
5.10(b), any Uniform Commercial Code financing statements relating thereto,
and any other documents which shall be necessary (or reasonably requested
by the Indenture Trustee) to establish the Lessee's title to and interest
in the Aircraft or to reflect the substitution of the Lessee for the Owner
Trustee under the Operative Agreements or to continue the perfection of the
security interests in the Aircraft and the other rights, property, and
interests included in the Indenture Estate for the benefit of the
Noteholders shall be filed in such form, manner, and places as are
necessary or, in the reasonable opinion of the Indenture Trustee, advisable
for such purpose;
(iii) the Indenture Trustee shall have received an insurance
report dated the effective date of such assumption of an independent
insurance broker and certificates of insurance, each in form and substance
satisfactory to the Indenture Trustee, as to the due compliance as of the
effective date of such assumption with the terms of Section 9 of the Lease
(as it relates to the Indenture Trustee) relating to the insurance with
respect to the Aircraft (provided that the required amount of all-risk hull
--------
insurance, subject to the self insurance rights of the Lessee, shall be in
an amount at least equal to the aggregate outstanding amount of the
Equipment Notes plus six months interest);
(iv) no Specified Default as of the effective date of such
assumption shall be continuing and the Indenture Trustee shall have
received a certificate from the Lessee to such effect;
(v) the Indenture Trustee shall have received (A) from counsel
for the Lessee (who may be the Lessee's General Counsel) a legal opinion,
in form and substance as reasonably satisfactory to the Indenture Trustee:
(w) with respect to the compliance of the assumption contemplated hereby
with the terms hereof, (x) with respect to the due authorization,
execution, delivery, validity, and enforceability of the instrument
referred to in paragraph (i) of this Section 5.10(b), (y) with respect to
the continued perfection of the security interest in the Aircraft for the
benefit of the Noteholders, and (z) with respect to the continued
availability of the benefits of Section 1110 to the Indenture Trustee for
the benefit of the Noteholders with respect to the Aircraft after giving
effect to such assumption (but only to the extent such benefits would have
been available to the Noteholders prior to such assumption assuming
compliance with the Operative Agreements by the parties thereto), (B) from
counsel to the Indenture Trustee and Lessee's special aviation counsel, a
legal opinion comparable to the respective opinions delivered on the
Delivery Date, as the case may be, with such changes therein as may be
appropriate in light of such assumption, and (C) in the case of each
opinion described in clause (A) or (B) above, covering such additional
matters as the Indenture Trustee shall reasonably request (including
opinions of the scope furnished by Lessee's counsel as specified counsel on
the Delivery Date); and
(vi) in the event that any Noteholder is subject to United
States federal income tax with respect to its interest in the Equipment
Notes (as evidenced by a notice from such
-35-
Noteholder or the Indenture Trustee), upon request by one or more
Noteholders that are subject to United States federal income taxes with
respect to the Equipment Notes such requesting Noteholders shall have
received either (x) an opinion of independent tax counsel chosen by the
Lessee and reasonably acceptable to such Noteholders or evidence of a
ruling from the Internal Revenue Service to the effect that such assumption
by the Lessee will not result in the recognition of gain or loss for United
States federal income tax purposes by the Noteholders as a result of the
application of Treasury Regulations Section 1001-3 (or any successor
provision thereto) or (y) an indemnity from the Lessee to such requesting
Noteholders that is reasonably acceptable to such Noteholders for adverse
income tax consequences resulting from the application of Treasury
Regulations Section 1001-3 (or any successor provision thereto) with
respect to the assumption.
(c) The Lessee shall pay all reasonable expenses (including reasonable
fees and expenses of counsel) of the Indenture Trustee, the Owner Trustee, each
Noteholder and the Owner Participant in connection with such assumption.
Section 5.11. Compliance with Trust Agreement, Etc. Each of the Owner
-------------------------------------
Participant, Trust Company, and the Owner Trustee agrees with the Lessee, the
Indenture Trustee and the Noteholders that so long as the Lien of the Indenture
shall be in effect it will (i) comply with all of the terms of the Trust
Agreement applicable to it in its respective capacity, the noncompliance with
which would adversely affect any such party and (ii) not take any action, or
cause any action to be taken, to amend, modify or supplement any other provision
of the Trust Agreement in a manner that would adversely affect any such party
without the prior written consent of such party. The Owner Trustee confirms for
the benefit of the Lessee, the Indenture Trustee and the Noteholders that it
will comply with the provisions of Article 2 of the Trust Agreement.
Notwithstanding anything else to the contrary in the Trust Agreement, so long as
the Lease remains in effect, the Owner Participant agrees not to terminate or
revoke the trust created by the Trust Agreement without the consent of the
Lessee. If and so long as the Indenture shall not have been discharged the
consent of the Indenture Trustee shall also be required prior to any termination
or revocation of such trust and in addition, the Owner Trustee will, at the
Lessee's expense, promptly and duly execute and deliver to the Indenture Trustee
such documents and assurances including, without limitation, conveyances,
financing statements and continuation statements with respect to financing
statements and take such further action as the Indenture Trustee may from time
to time reasonably request in order to protect the rights and remedies created
or intended to be created in favor of the Indenture Trustee under the Indenture
and to create for the benefit of the Noteholders a valid first priority Lien
with respect to, and a first and prior perfected security interest in, the
Indenture Estate.
Section 5.12. Swap Matters. Subject to due compliance and payment in
------------
full of all obligations owing to it, any Swap Breakage Gain actually received by
any Noteholder that arises as a result of a prepayment contemplated by Section
2.10 of the Indenture shall be paid by such Noteholder to the Owner Trustee
promptly following the same is paid to such Noteholder, in immediately available
funds to such account as the Owner Trustee shall direct. The Owner Trustee shall
pay to the Lessee promptly after receipt by it, any amount received by it
pursuant to the
-36-
preceding sentence, to such account as the Lessee shall direct. Any Swap
Breakage Gain actually received by the Noteholders that arises as a result of
(i) a purchase contemplated by Section 2.12 of the Indenture shall be applied as
provided in such Section or (ii) an acceleration contemplated by Section 4.04 of
the Indenture shall be applied as provided in Section 3.03(b) of the Indenture.
Section 5.13. Amendments to the Indenture.
---------------------------
Each of the Owner Trustee and the Indenture Trustee agrees that it
will not during the Term enter into any amendment or supplement to the Indenture
without the prior consent of the Lessee, if such amendment or supplement would
have the effect of limiting any right or of increasing any obligation or
liability of the Lessee under the terms of the Lease or any other Operative
Agreement.
ARTICLE 6.
TAXES
Section 6.01. Lessee's Obligation to Pay Taxes.
--------------------------------
(a) Generally. The Lessee agrees promptly to pay when due, and to
---------
indemnify on an After Tax Basis and hold each Tax Indemnitee harmless from all
license, recording, documentary, registration and other fees and all taxes
(including, without limitation, income, gross receipts, sales, rental, use,
value added, property (tangible and intangible), ad valorem, excise and stamp
-- -------
taxes), fees, levies, imposts, recording duties, duties, charges, assessments or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax or interest thereon (individually, a "Tax," and
collectively called "Taxes"), however imposed or asserted (whether imposed upon
any Tax Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any
Engine or any Part or the Lessor's Estate, the Indenture Estate, Rent, the
Equipment Notes or any interest therein, or otherwise upon or with respect to
any Operative Agreement or any transactions contemplated thereunder or any
payments thereunder or otherwise in connection therewith), by any Federal, state
or local government or taxing authority in the United States, or by any
government or taxing authority of a foreign country or of any political
subdivision or taxing authority thereof or by a territory or possession of the
United States or an international taxing authority, in any such case as relating
to or measured by:
(i) the acquisition, construction, mortgaging, financing,
refinancing, purchase, charter, rental, assignment, testing, existence,
insurance, presence, overhaul, control, acceptance, rejection, delivery,
nondelivery, transport, location, ownership, registration, reregistration,
deregistration, insuring, assembly, possession, repossession, operation,
use, non-use, condition, maintenance, repair, improvement, conversion,
sale, return, abandonment, preparation, installation, storage, redelivery,
replacement, manufacture, leasing, subleasing, sub-subleasing,
modification, alteration, rebuilding, importation, transfer of title,
transfer of registration, exportation or other application or disposition
of, or the
-37-
imposition of any Lien (or the incurrence of any liability to refund or pay
over any amount as a result of any Lien) on, the Aircraft, the Airframe,
any Engine or any Part or any interest therein;
(ii) amounts payable under the Operative Agreements;
(iii) the Aircraft, or the income or other proceeds (x) received
with respect to the Aircraft attributable to the transactions contemplated
by the Operative Agreements, (y) held by the Owner Trustee under the Trust
Agreement or after an Event of Default under the Lease or (z) held by the
Indenture Trustee under the Indenture or after an Indenture Default;
(iv) with respect to any Operative Agreement, any interest
therein or by reason of the transactions described in or contemplated by
the Operative Agreements;
(v) the principal or interest or other amounts payable with
respect to the Equipment Notes;
(vi) the Equipment Notes or the issuance, sale, acquisition,
reoptimization, or refinancing thereof or the beneficial interests in the
Trust Estate or the Indenture Estate or the creation thereof under the
Trust Agreement or the Indenture, or the security interest created or
perfected thereby or by any filing thereof;
(vii) any assumption by the Lessee pursuant to Section 5.10 of
this Agreement;
(viii) the Aircraft, the Airframe, any Engine or any Part;
(ix) the rentals (including Basic Rent and Supplemental Rent),
receipts, earnings, principal, interest, fees, proceeds and any other
income or amounts payable, whether actual or deemed, arising upon, under or
in connection with any of the Operative Agreements;
(x) in the case of the Owner Participant, any "prohibited
transaction," within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Code, arising out of or in connection with the
acquisition or holding of the Owner Participant's interest in the Trust
Estate;
(xi) the execution, delivery or registration of this Agreement
or any other Operative Agreement.
(b) Exceptions. The indemnity provided for in Section 6.01(a) shall
----------
not extend to any of the following:
(i) With respect to a Tax Indemnitee, Taxes, whether imposed by
withholding or otherwise, based upon, measured by or with respect to the
net or gross income, items of
-38-
tax preference or minimum tax or excess profits, alternative minimum taxes,
receipts, capital, franchise, net worth (whether, denominated income,
excise, capital stock, or doing business taxes) or other similarly-based
taxes (other than taxes that are in the nature of license, sales, use,
value-added, transfer, rental, ad valorem, stamp, property, or similar
taxes) ("Income Taxes"), provided, however, that this clause shall not
-------- -------
exclude from the indemnity described in Section 6.01(a) above any such
Income Taxes imposed on a Tax Indemnitee by any jurisdiction (other than
the United States or any state or local taxing authority in any state in
the United States and, with respect to any Tax Indemnitee other than the
Owner Participant and the Owner Trustee, other than Income Taxes imposed on
such Tax Indemnitee by the country or jurisdiction in which such Tax
Indemnitee is incorporated or in which such Tax Indemnitee's principal
place of business is located) as a result of (I) the operation,
registration, location, presence, or use of the Aircraft, Airframe, any
Engine or any Part thereof, by the Lessee or any Affiliate thereof or any
Sublessee within the jurisdiction of the taxing authority imposing such
Tax, (II) the presence of activities of the Lessee or any Affiliate thereof
or any Sublessee within the jurisdiction of the taxing authority imposing
such Tax, (III) the status of the Lessee or any Affiliate thereof or any
Sublessee as a foreign entity or as an entity owned in whole or in part by
foreign persons, or (IV) the Lessee or any Affiliate thereof or any
Sublessee having made (or having been deemed to have made) payments to such
Tax Indemnitee from the jurisdiction of the taxing authority imposing such
Tax;
(ii) Taxes imposed with respect to any period beginning after the
later of (A) the discharge in full of the Lessee's obligation, if any, to
pay Termination Value under and in accordance with the Lease, or (B) the
expiration of the Term of the Lease or, if earlier, the termination of the
Lease in accordance with the applicable provisions of the Lease;
(iii) As to the Owner Trustee, Taxes imposed against the Owner
Trustee upon or with respect to any fees for services rendered in its
capacity as Owner Trustee under the Trust Agreement or, as to the Indenture
Trustee, Taxes imposed against the Indenture Trustee upon or with respect
to any fees received by it for services rendered in its capacity as
Indenture Trustee under the Indenture;
(iv) With respect to any Tax Indemnitee, Taxes resulting from the
willful misconduct or gross negligence of such Tax Indemnitee or a Related
Tax Indemnitee or the breach by any Tax Indemnitee other than with respect
to the Owner Trustee or Owner Participant, of any representation, warranty
or covenant contained in the Operative Agreements or any document delivered
in connection therewith (unless attributable to a breach of representation,
warranty or covenant of the Lessee);
(v) Taxes imposed on a Tax Indemnitee which became payable by
reason of (x) any voluntary transfer or disposition by such Tax Indemnitee
subsequent to the Delivery Date, including revocation of the Trust, of any
interest in some or all of the Aircraft, Airframe, Engines or Parts thereof
or its interest in the Lessor's Estate or Indenture Estate
-39-
or a transfer or disposition of shares or other interests in the Tax
Indemnitee or a transfer of any interest in the Operative Agreements or the
Equipment Notes (not including any transfers of any Equipment Note pursuant
to Section 13.01 (a) hereof) or (y) a transfer or disposition of any of the
foregoing in connection with a bankruptcy or similar proceedings involving
a Tax Indemnitee, in each case other than (A) transfers resulting from a
loss, substitution or modification of the Airframe, Aircraft, Engines or
any Part, (B) if an Event of Default shall have occurred and be continuing,
transfers pursuant to the Lessor's exercise of remedies in accordance with
Section 17 of the Lease or the Indenture Trustee's exercise of remedies
pursuant to Section 4.04 or Section 4.05 of the Indenture, (C) termination
of the Lease upon the Lessee's exercise of Lessee's options pursuant to
Section 14 of the Lease, (D) a transfer to Lessee pursuant to Section 13(b)
of the Lease or an assumption by the Lessee pursuant to Section 5.10
hereof, or (E) except in the case of a transfer in connection with an event
described in clause (y) hereof, any other transfer required by the
Operative Agreements; the parties agree to cooperate to minimize any such
Taxes covered by this provision;
(vi) With respect to the Owner Participant, Taxes subject to
indemnification by the Lessee pursuant to the Tax Indemnity Agreement;
(vii) Taxes imposed on a successor, assign or other transferee of
any interest of a Tax Indemnitee (including, without limitation, a
transferee which is a new lending office of an original Tax Indemnitee) to
the extent that the aggregate amount of such Taxes exceed the aggregate
amount of Taxes that would have been imposed on the transferor (determined
at the time of transfer) and that would have been indemnifiable pursuant to
Section 6.01(a), provided that the exclusion in this clause (vii) shall not
apply in the case of (x) any such sale, assignment, transfer or disposition
that occurs in connection with an Event of Default or in connection with a
bankruptcy, insolvency or other proceeding for the relief of debtors in
which the Lessee is a debtor, (y) any successor, assign or transferee of
any interest of the Owner Participant, or (z) any such sale, assignment,
transfer or disposition that occurs within six months after the Delivery
Date by a Tax Indemnitee which is a Noteholder on the Delivery Date;
(viii) Taxes imposed on a Tax Indemnitee other than the Owner
Participant and the Owner Trustee by any jurisdiction that would not have
been imposed on such Tax Indemnitee but for the activities or the status of
such Tax Indemnitee in such jurisdiction unrelated to the transactions
contemplated by the Operative Agreements;
(ix) Any Taxes which have been properly included in the Purchase
Price and properly paid to the relevant taxing authority;
(x) Any Taxes imposed on the Owner Trustee or Owner Participant
which would not have been imposed but for a Lessor's Lien or any Taxes
imposed on the Indenture Trustee which would not have been imposed but for
an Indenture Trustee's Lien;
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(xi) In the case of the Owner Participant, any Taxes relating
to, resulting from, arising out of or in connection with a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Code resulting from the direct or indirect use of assets
of any ERISA Plan to acquire or hold Owner Participant's interest in the
Trust Estate or in the case of any transferee of the Owner Participant
referred to in Section 5.01(c), to purchase the Beneficial Interest
pursuant to Section 5.01(c);
(xii) Other than with respect to the Owner Trustee or the Owner
Participant, taxes in the nature of an intangible or similar Tax imposed on
or with respect to the Equipment Notes (or the indebtedness evidenced
thereby) unless such Tax is in the nature of a sales or use tax;
(xiii) Taxes that are being contested in accordance with the
provisions hereof;
(xiv) United States withholding Taxes imposed on a Tax Indemnitee
as a result of such Tax Indemnitee not being a U.S. Person;
(xv) In the case of a Noteholder, Taxes imposed by section 4975
of the Code or any successor provision thereto in respect of a "prohibited
transaction" under ERISA attributable to such Tax Indemnitee; or
(xvi) Interest, penalties, fines or additions to tax to the
extent they relate solely to Taxes for which no indemnity would be payable by
the Lessee pursuant to this Section 6.01(b).
(c) Withholding. (i) The Indenture Trustee shall withhold any
-----------
Taxes required to be withheld on any payment to a Noteholder pursuant to Section
3.08 of the Indenture. If the Indenture Trustee fails to withhold a Tax required
to be withheld with respect to any Noteholder or any claim is otherwise asserted
by a taxing authority against the Owner Trustee, the Owner Participant or a
Treaty Lender (as defined in clause (iii) below) for any withholding tax, unless
the Owner Participant is an entity described in Section 6.13 the Lessee will
indemnify the Owner Trustee, the Owner Participant and such Treaty Lender
(without regard to the exclusions set forth in Section 6.01(b) hereof) on an
After-Tax Basis against any such Taxes required to be withheld and any interest
and penalties with respect thereto, along with any other costs (including
reasonable attorney's fees) incurred in connection with any such claim.
(ii) Anything contained in Section 6.01(b) to the contrary
notwithstanding, the Lessee agrees that any payment made to or for the benefit
of a Loan Participant that is a Treaty Lender with respect to interest,
principal, or other amounts payable on or with respect to an Equipment Note or
the Indenture shall be free of all withholdings or deductions with respect to
United States Federal income withholding Taxes ("U.S. Withholding Taxes"), and
----------------------
in the event that the Indenture Trustee or any other Person or shall be required
by applicable law to make any such withholding or deduction for U.S. Withholding
Taxes (a) the Lessee shall pay to such Loan Participant an additional amount so
that after making all required withholdings or deductions for
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U.S. Withholding Taxes from such payment such Loan Participant receives on an
After-Tax Basis the same amount it would have received had no such withholdings
or deductions been made, (b) the Indenture Trustee shall make all such
withholdings or deductions, and (c) the Indenture Trustee shall pay such amount
withheld or deducted to the Internal Revenue Service in accordance with
applicable law; provided, however, that the Lessee shall only have an obligation
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under this Section 6.01(c) for U.S. Withholding Taxes if such Loan Participant
is a Treaty Lender and complies with its obligations pursuant to Section 6.10
and such U.S. Withholding Taxes result from a change after the Delivery Date in
the income tax treaty between the United States and Austria, France, Germany,
Ireland, the Netherlands or the United Kingdom (each, a "Specified Transferee
--------------------
Jurisdiction") or any applicable law or regulation or other interpretation of
-------------
any thereof as set forth in a Revenue Ruling, Revenue Procedure, judicial
decision or other official administrative interpretation of general
applicability, which affects the applicability or interpretation of such treaty.
(iii) For purposes of this Section 6.01(c), the term "Treaty Lender"
-------------
shall mean (a) a Loan Participant who is a resident of a Specified Transferee
Jurisdiction and entitled to claim the benefits of the income tax treaty between
the United States and such Specified Transferee Jurisdiction on the Delivery
Date or (b) a transferee of a Treaty Lender described in clause (a) of this
Section 6.01(c)(iii) which transferee satisfies all the requirements of such
clause (a) at the time it acquires its interest in an Equipment Note.
(iv) Each Loan Participant agrees to investigate alternatives for
reducing or avoiding any Taxes indemnifiable pursuant to this Section 6.01(c)
and to use reasonable efforts to avoid or minimize, to the greatest extent
possible, any liability with respect to such Taxes, including, without
limitation, by transferring its interest in the Equipment Notes to an Affiliate
or to a third party or by designating a different lending office, if such
transfer, designation or other action would avoid the need for, or reduce the
amount of, any such Taxes; provided, however, that this sentence shall not
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obligate any Loan Participant to take any action that would, in its reasonable
judgment, cause such Loan Participant to incur any loss, cost, tax or other
adverse consequence unless the Lessee agrees to reimburse such Loan Participant
therefor in a manner reasonably satisfactory to such Loan Participant.
Section 6.02. After-Tax Basis. Notwithstanding the exclusions
---------------
contained in Section 6.01(b) hereof, the amount which the Lessee shall be
required to pay with respect to any Tax indemnified against under Section 6.01
(an "Indemnifiable Tax") shall be an amount sufficient to restore the Tax
Indemnitee, on an After-Tax Basis, to the same position such party would have
been in had such Tax not been incurred, taking into account any tax benefits
recognized by such Tax Indemnitee as a result of the Indemnifiable Tax. If any
Tax Indemnitee actually realizes a tax benefit (whether by credit, deduction or
otherwise), or would have realized such a benefit as to which it has been given
notice if properly claimed, and as to which the Tax Indemnitee has not
determined in good faith that claiming such benefit would have a material
adverse impact on the Tax Indemnitee or an Affiliate thereof, by reason of the
payment of any Tax paid or indemnified against by the Lessee, provided that an
Event of Default or Specified Default has not occurred and is not continuing,
such Tax Indemnitee shall promptly pay to the Lessee, to the extent such tax
benefit was
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not previously taken into account in computing such payment or indemnity, but
not before the Lessee shall have made all payments then due to such Tax
Indemnitee under this Agreement, the Tax Indemnity Agreement and any other
Operative Agreement, an amount equal to the lesser of (x) the sum of such tax
benefit plus any other tax benefit realized by such Tax Indemnitee that would
not have been realized but for any payment made by such Tax Indemnitee pursuant
to this sentence and not already paid to the Lessee, or (y) the amount of the
payment made under Section 6.01 hereof and this Section 6.02 by the Lessee to
such Tax Indemnitee plus the amount of any other payments by the Lessee to such
Tax Indemnitee theretofore required to be made under this Section 6.02 and
Sections 6.01 and 6.05 hereof (and the excess, if any, of the Tax benefit over
the applicable amount described in clause (x) over the amount described in
clause (y) above shall be carried forward and applied to reduce pro tanto any
--- -----
subsequent obligations of the Lessee to make payments to such Tax Indemnitee
pursuant to Section 6.01 hereof). If an amount payable by any Tax Indemnitee to
the Lessee pursuant to this Section 6.02 is not paid when due because of the
occurrence and continuation of any Event of Default or Specified Default, such
amount shall be payable by any Tax Indemnitee to the Lessee upon the Lessee's
curing all Events of Default and Specified Defaults. The Lessee shall reimburse
on an After-Tax Basis such Tax Indemnitee (subject to Section 6.01(b), but only
insofar as subsections (iv), (vi), (vii), (x), (xi), (xii), (xiii), (xiv) and
(xv) thereof would apply) for any payment of a tax benefit pursuant to the
preceding sentence (or a tax benefit otherwise taken into account in calculating
the Lessee's indemnity obligation hereunder) to the extent that such tax benefit
is subsequently disallowed or reduced.
In determining the order in which any Tax Indemnitee utilizes
withholding or other foreign taxes as a credit against such Tax Indemnitee's
United States income taxes, such Tax Indemnitee shall be deemed to utilize (i)
first, all foreign taxes other than those described in clause (ii) below; and
(ii) then, on a pro rata basis, all foreign taxes with respect to which such Tax
Indemnitee is entitled to obtain indemnification pursuant to an indemnification
provision contained in any lease, loan agreement, or other financing document
(including this Participation Agreement) that is similar to the indemnification
provision in this Article 6.
Section 6.03. Time of Payment. Any amount payable to a Tax Indemnitee
---------------
pursuant to this Article 6 shall be paid promptly, but in any event within 30
days after receipt of a written demand therefor from such Tax Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable, provided that in
--------
the case of amounts which are being contested by the Lessee in good faith or by
the Tax Indemnitee in either case pursuant to Section 6.04 hereof, or subject to
verification proceedings pursuant to Section 6.11 hereof, such amount shall be
payable within 30 days after the time such contest or verification proceeding,
as the case may be, is finally resolved. In no event shall any amount be payable
under Section 6.01 until two Business Day prior to the due date for Tax in
issue.
Section 6.04. Contests.
--------
(a) Notice of Claim. If a written claim is made against any Tax
---------------
Indemnitee for Taxes with respect to which the Lessee is liable for a payment or
indemnity hereunder, such Tax
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Indemnitee shall promptly (but in any event within 30 days of receipt thereof)
give the Lessee notice in writing of such claim and shall furnish the Lessee
with copies of any written requests for information sent to such Tax Indemnitee
from any taxing authority to the extent relating to such Taxes with respect to
which the Lessee may be required to indemnify hereunder; provided, however, that
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the failure of a Tax Indemnitee to give such notice or furnish such copy shall
not terminate any of the rights of such Tax Indemnitee under this Article 6,
except (A) to the extent that the Lessee's contest rights have been effectively
precluded by the failure to provide such notice or copy or (B) to the extent
that such failure results in the imposition of, or an increase in the amount of,
any penalties, interest or additions to Tax related to the Tax which is the
subject of such claim or proceeding.
(b) Request for Contest. If a written claim shall be made for any
-------------------
Tax, other than an Income Tax, for which the Lessee may be obligated to
indemnify pursuant to Section 6.01 hereunder, and under applicable law of the
taxing jurisdiction the Lessee is allowed to contest directly such Tax and the
Tax to be contested is not reflected in a report or return with other Taxes of
any Tax Indemnitee (as confirmed in writing by such Tax Indemnitee) and if the
Tax Indemnitee determines in good faith that it will not suffer any adverse
consequences as a result (as confirmed in writing by such Tax Indemnitee) and
that no tax return of the Tax Indemnitee will be kept open as a result of such
contest beyond the applicable statute of limitations period (as confirmed in
writing by such Tax Indemnitee), then the Lessee shall be permitted, at its
expense and in its own name, or, if consented to in writing by the Tax
Indemnitee, in the name of such Tax Indemnitee, to contest the imposition of
such Tax (a "Lessee Controlled Contest"); provided, however, that the Lessee
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shall not be permitted or entitled to contest any Tax unless (A) such contest
will not result in the risk of an imposition of criminal penalties or a more
than de minimis risk of a sale, forfeiture or loss of the Aircraft, the
Airframe, the Engines or any part thereof or the creation of any Lien other than
Liens for Taxes of the Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve the
risk of an imposition of criminal penalties or more than a de minimis risk of
any sale, forfeiture or loss of the Aircraft (unless the Lessee has provided a
bond or other sufficient protection against any such risk satisfactory to the
Tax Indemnitee), and (y) for the payment of which such reserves, if any, as
required to be provided under generally accepted accounting principles have been
provided and, to the extent permitted by law, the Lessee shall be entitled to
withhold payment during pendency of such contest, (B) if an Event of Default
shall have occurred and be continuing, the Lessee shall have provided security
for its obligations hereunder reasonably satisfactory to the Owner Participant
by placing in escrow funds to cover any such obligations, (C) the Lessee shall
have agreed to pay such Tax Indemnitee on demand and on an After-Tax Basis all
costs and expenses that such Tax Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, or penalties,
interest and addition to tax), (D) if such contest shall be conducted in a
manner requiring the payment of the claim in advance, the Lessee shall have
advanced sufficient funds, on an interest free basis, to make the payment
required (or the Lessee shall have paid the amount required directly to the
appropriate taxing authority), and agreed to indemnify the Tax Indemnitee
against any additional net adverse tax consequences on an After-Tax Basis to
such Tax Indemnitee of such advance or payment (E) Lessee shall have
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acknowledged its liability for such claim, and (F) if requested by a Tax
Indemnitee, independent tax counsel selected by such Tax Indemnitee and
reasonably acceptable to the Lessee has rendered an opinion within 30 days of
such Tax Indemnitee providing notice of the claim to the Lessee that a
Reasonable Basis exists for contesting such claim; provided, further, that if
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the contest is being conducted in the name of a Tax Indemnitee, the Lessee shall
not be permitted to appeal any adverse decision to the United States Supreme
Court in the name of such Tax Indemnitee without the written consent of such Tax
Indemnitee.
If the Lessee shall so request within 30 days after receipt of such notice
from a Tax Indemnitee under this Section 6.04 hereof and with respect to a Tax
for which the Lessee may be obligated to indemnify pursuant to Section 6.01 (and
with respect to which the requirements to constitute a Lessee Controlled Contest
are not satisfied), such Tax Indemnitee shall in good faith at the Lessee's
after-tax expense contest the imposition of such Tax; provided, however, that
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such Tax Indemnitee, after considering in good faith any advice of the Lessee
and the Lessee's counsel concerning the forum in which the adjustment is most
likely to be favorably resolved, may in its sole discretion select the manner
and forum for such contest and determine whether any such contest shall be made
by (a) resisting payment thereof if lawful and practicable or not paying the
same except under protest if protest is necessary and proper in each case so
long as non-payment will not result in a more than de minimis risk of the sale,
forfeiture or loss of, or the creation of a Lien other than a Permitted Lien on
the Aircraft, Airframe or any Engine or any risk of criminal liability; or (b)
if the payment be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and/or judicial proceedings; provided further,
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however, that at such Tax Indemnitee's option, such contest shall be conducted
-------
by the Lessee in the name of such Tax Indemnitee if such Tax Indemnitee so
requests in writing and that in no event shall such Tax Indemnitee be required
or the Lessee permitted to contest under this paragraph the imposition of any
Tax for which the Lessee may be obligated pursuant to this Section 6.01 unless:
(i) in the case of an Income Tax, the Lessee shall have furnished at
the Lessee's expense an opinion of counsel selected by the Lessee and
reasonably satisfactory to such Tax Indemnitee to the effect that a
Reasonable Basis exists for pursuing such contest;
(ii) the Lessee shall have agreed to pay such Tax Indemnitee on demand
and on an After-Tax Basis all reasonable costs and expenses that such Tax
Indemnitee may incur in connection with contesting such claim (including,
without limitation, all costs expenses, losses, reasonable legal and
accounting fees, disbursements, penalties, interest and additions to tax);
(iii) such Tax Indemnitee shall have determined that the action to be
taken will not result in any more than de minimis danger of sale,
forfeiture or loss of, or the creation of any Lien other the Liens for
Taxes of the Lessee (or any Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve any more than de minimis risk of the sale,
forfeiture or loss of the Aircraft, the Airframe or any Engine or any
interest therein (unless the Lessee has provided a bond or
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other sufficient protection against any such risk satisfactory to the Tax
Indemnitee) and for the payment of which such reserves, if any, as are
required to be provided under generally accepted accounting principles have
been provided;
(iv) if an Event of Default shall have occurred and be continuing, the
Lessee shall have provided security for its obligations hereunder
reasonably satisfactory to the Owner Participant by placing in escrow
sufficient funds to cover any such obligations;
(v) Lessee shall have acknowledged its liability for such claims;
(vi) such contest and related contests involving other equipment
involve potential payments and/or indemnities by the Lessee (whether or not
such indemnity is pursuant to this Agreement) of at least $25,000 in the
aggregate; and
(vii) if such contest shall be conducted in a manner requiring the
payment of the claim in advance, the Lessee shall have advanced sufficient
funds, on an interest free basis, to make the payment required, and agreed
to indemnify the Tax Indemnitee against any additional net adverse tax
consequences on an After-Tax Basis to such Tax Indemnitee of such advance.
In the case of a contest which is not a Lessee Controlled Contest, if
requested by the Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to appeal any adverse judicial decision unless it is more likely than
not that such appeal will be successful, and, provided, further, no Tax
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Indemnitee shall be required to appeal any adverse decision to the United States
Supreme Court. If the Lessee is permitted under applicable law to contest a Tax
asserted against the Lessee and the same or similar Tax is also asserted against
the Tax Indemnitee, subject to the conditions herein, each of the Lessee and
such Tax Indemnitee shall conduct its contest in its own name and the Lessee and
such Tax Indemnitee will cooperate in a reasonable manner with respect to the
respective contests of such Tax.
(c) Declining to Contest; Settlement. (i) If, after the Lessee has
--------------------------------
properly requested a contest in accordance with this Section 6.04 and Lessee is
then complying with the terms of this Section 6.04, any Tax Indemnitee shall at
any time decline to take any action required under Section 6.04 with respect to
such contest, then, if such failure shall cause the contest to be determined
adversely or shall preclude such contest as a matter of law, the Lessee shall
not be obligated to indemnify such Tax Indemnitee for such Tax and such Tax
Indemnitee shall reimburse the Lessee for all amounts previously advanced by the
Lessee in connection with such contest (other than costs and expenses of such
contest).
(ii) No Tax Indemnitee shall settle a contest of any indemnified Tax
without requesting the Lessee's written consent (which consent will not be
unreasonably withheld, as determined in the Lessee's good faith judgment).
If any Tax Indemnitee shall settle a contest for any Tax without receiving
the Lessee's written consent, then the Lessee shall not
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be obligated to indemnify such Tax Indemnitee for such Tax and the Tax
Indemnitee shall reimburse the Lessee for all amounts previously advanced
with respect to such contest (other than costs and expenses of such
contest). Notwithstanding the preceding two sentences, no Tax Indemnitee
shall be required to take or continue any action unless the Lessee shall
have agreed to pay the Tax Indemnitee on a current and After Tax Basis all
reasonable costs and expenses (including, without limitation, all costs,
expenses, losses, reasonable attorney's and accountant's fees,
disbursements, penalties, interest and additions to tax) which such Tax
Indemnitee may incur as a result of contesting such Taxes.
(d) Continuing Claims. Notwithstanding anything contained in this
-----------------
Section 6.04 to the contrary, no Tax Indemnitee shall be required to contest any
claim if the subject matter thereof shall be of a continuing nature and shall
have previously been adversely decided pursuant to the contest provisions of
this Section 6.04 unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings and court decisions) or the Lessee shall have provided new facts after
such claim shall have been so previously decided, and such Tax Indemnitee shall
have received an opinion of independent tax counsel selected by it and
reasonably approved by the Lessee and furnished at the Lessee's sole expense to
the effect that, as a result of such change or new facts, it is more likely than
not that the position which such Tax Indemnitee or the Lessee, as the case may
be, had asserted in such previous contest, would prevail.
(e) Claims Barred. If (A) any Tax Indemnitee fails to give the Lessee
-------------
written notice pursuant to this Section 6.04 of any claim by any government or
taxing authority for any Tax for which the Lessee is obligated pursuant to this
Section 6.01, (B) as a direct result of such failure the contest of such claim
has been effectively precluded, and (C) the Lessee furnishes, at the Lessee's
expense, an opinion of counsel selected by the Lessee and reasonably
satisfactory to such Tax Indemnitee to the effect that, had the contest of such
claim not been effectively precluded, a Reasonable Basis would have existed for
pursuing such contest, such Tax Indemnitee shall be deemed to have waived its
right to any payment by the Lessee that would otherwise be payable by the Lessee
pursuant to this Section 6.01 in respect of such claim.
Section 6.05. Refunds. When a Tax Indemnitee becomes entitled to
-------
receive a refund or credit against Tax of all or any part of any Taxes which the
Lessee shall have paid for such Tax Indemnitee or for which the Lessee shall
have reimbursed or indemnified such Tax Indemnitee, such Tax Indemnitee shall
pay, provided an Event of Default or Specified Default has not occurred and is
not continuing, to the Lessee an amount equal to the amount of such refund or
credit, together with any interest attributable thereto less (x) all payments
then due to such Tax Indemnitee under this Article 6, and (y) Taxes imposed with
respect to the accrual or receipt thereof, including interest received
attributable thereto, plus any tax benefit realized by such Tax Indemnitee as a
result of any payment by such Tax Indemnitee made pursuant to this sentence;
provided, however, that such amount shall not be payable (a) before such time
-------- -------
as the Lessee shall have made all payments or indemnities then due and payable
to such Tax Indemnitee under this Article 6 and (b) to the extent that the
amount of such payment (without regard to any interest component thereof) would
exceed (i) the amount of all prior payments by the Lessee to such Tax Indemnitee
pursuant to this Article
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6 less (ii) the amount of all prior payments by such Tax Indemnitee to the
Lessee pursuant to this Article 6 (any such excess shall be carried forward to
reduce pro tanto any subsequent obligations of the Lessee to make payments to
--- -----
such Tax Indemnitee pursuant to Section 6.01 hereof). If an amount payable by
any Tax Indemnitee to the Lessee pursuant to this Section 6.02 is not paid when
due because of the occurrence and continuation of an Event of Default or
Specified Default, such amount shall be payable by any Tax Indemnitee to the
Lessee upon the Lessee's curing all Events of Default and Specified Defaults.
Any subsequent loss of such refund or tax benefit shall be treated as a
Tax subject to indemnification under the provisions of this Article 6 (in the
case of any such tax benefit, subject to Section 6.01(b) but only insofar as
subsections (iv), (vi), (vii), (x), (xi), (xii), (xiii), (xiv) and (xv) thereof
would apply).
Section 6.06. Reports. In case any report or return is required to be
-------
made with respect to any Taxes (other than Income Taxes) against which the
Lessee is or may be obligated to indemnify the Tax Indemnitees under this
Article 6, the Lessee shall, to the extent it has knowledge thereof, make such
report or return, except for any such report or return that the Tax Indemnitee
has notified the Lessee that it intends to file, in such manner as will show the
ownership of the Aircraft in the Owner Trustee (unless the ownership of the
Aircraft is not required to be shown on such report or return) and, upon
request, shall send a copy of the applicable portions of such report or return
to the Tax Indemnitee and the Owner Trustee or will notify the Tax Indemnitee of
such requirement and make such report or return in such manner as shall be
satisfactory to such Tax Indemnitee and the Owner Trustee. The Lessee will
provide such information within the possession or control of the Lessee as the
Tax Indemnitee may reasonably request in writing from the Lessee to enable the
Tax Indemnitee to fulfill its tax filing requirements with respect to the
transactions contemplated by the Operative Agreements (without duplication of
any comparable requirements of the Tax Indemnity Agreement) and any audit
information request arising from any such filing. The Tax Indemnitee will
provide such information within its possession or control as the Lessee may
reasonably require from such Tax Indemnitee to enable the Lessee to fulfill its
tax filing requirements with respect to the transactions contemplated by the
Operative Agreements and any audit information request arising from such filing;
provided that in no event shall any Tax Indemnitee be required to provide copies
--------
of any of its tax returns.
Section 6.07. Survival of Obligations. The representations, warranties,
-----------------------
indemnities and agreements of the Lessee provided for in this Article 6 and the
Lessee's obligations under any and all of them, in each case, with respect to
events or periods prior to the expiration or termination of the Lease shall
survive the expiration or other termination of the Operative Agreements.
Section 6.08. Payment of Taxes. With respect to any Tax otherwise
----------------
indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe,
any Engine or Parts, to the extent permitted by the applicable federal, state,
local or foreign law, the Lessee shall pay such tax directly to the relevant
Taxing authority and file any returns or reports required with respect thereto
to the extent legally entitled to do so in its own name; provided, however, that
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the Lessee shall not make
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any statements or take any action which would indicate that the Lessee or any
Person other than the Owner Trustee or Owner Participant is the owner of the
Aircraft, the Airframe, any Engine or any Part or which would otherwise be
inconsistent with the terms of the Lease or the Tax Indemnity Agreement and the
position thereunder of the Owner Trustee and the Owner Participant.
Section 6.09 Reimbursements by Indemnitees Generally. To the extent the
---------------------------------------
Lessee is required to pay or withhold any Tax imposed on or with respect to a
Tax Indemnitee in respect of the transactions contemplated by the Operative
Agreements, which Tax is not otherwise the responsibility of the Lessee under
the Operative Agreements, or any other written agreements between the Lessee and
such Tax Indemnitee, then such Tax Indemnitee shall pay to the Lessee within 30
days of the Lessee's demand therefor an amount which equals the amount actually
paid by the Lessee with respect to such Taxes.
Section 6.10. Forms. Each Tax Indemnitee agrees to furnish from time to
-----
time to Lessee or to such other person as Lessee may designate, at Lessee's or
the Indenture Trustee's request, such duly executed and properly completed forms
as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any taxing authority, if
(x) such reduction or exemption is available to such Tax Indemnitee, (y) Lessee
or the Indenture Trustee has provided such Tax Indemnitee with any information
necessary to complete such form not otherwise reasonably available to such Tax
Indemnitee, and (z)other than a form necessary for a Treaty Lender (as defined
in Section 6.01(c)(iii)) to claim a reduction of or exemption from any U.S.
Withholding Taxes (as defined in Section 6.01(c)(ii)) , such Tax Indemnitee has
determined in good faith that furnishing such form could not have a material
adverse impact on such Tax Indemnitee or an Affiliate thereof.
Section 6.11. Verification. At the Lessee's request, the accuracy of any
------------
calculation of amount(s) payable pursuant to this Article 6 shall be verified by
independent public accountants selected by the applicable Tax Indemnitee and
reasonably satisfactory to the Lessee, and such verification shall bind the
applicable Tax Indemnitee and the Lessee. In order, and to the extent
necessary, to enable such independent accountants to verify such amounts, such
Tax Indemnitee shall provide to such independent accountants (for their
confidential use and not to be disclosed to the Lessee or any other person) all
information reasonably necessary for such verification. Verification shall be at
the expense of the Lessee, unless such verification results in an adjustment in
the Lessee's favor of $10,000 or more of the amount of the payment as computed
by such Tax Indemnitee, in which case the verification shall be at the expense
of the Tax Indemnitee.
Section 6.12. Non-Parties. If a Tax Indemnitee is not a party to this
-----------
Agreement, Lessee may require the Tax Indemnitee to agree in writing, in a form
reasonably acceptable to Lessee, to the terms of this Article 6 prior to making
any payment to such Tax Indemnitee hereunder.
Section 6.13. Non-U.S. Owner Participant. If an Owner Participant is a
--------------------------
Non-U.S. Person or is incorporated or organized in a country other than the
United States or in a territory, possession or commonwealth of the United States
(within the meaning of the tax law of that foreign jurisdiction)
-49-
and if as a result thereof any withholding taxes are imposed by the United
States with respect to payments of Rent or any foreign withholding Taxes are
imposed on any payments to any Noteholder, then Owner Participant shall
indemnify and hold harmless on an After-Tax Basis the Lessee and each Tax
Indemnitee from any adverse consequences resulting from such withholding or
withholding requirements.
ARTICLE 7.
GENERAL INDEMNITY
Section 7.01. Generally.
---------
(a) Indemnity. The Lessee agrees to indemnify each Indemnitee
---------
against and agrees to protect, defend, save and keep harmless each Indemnitee
from and against and in respect of, and will pay on an After-Tax Basis, any and
all liabilities (including strict or absolute liability without fault in tort or
otherwise), obligations, losses, damages, settlements, penalties, fines, claims,
actions, suits, costs, disbursements and expenses, demands or judgments
(including reasonable legal fees and expenses) of every kind and nature, whether
or not any of the transactions contemplated by this Agreement are consummated
and whether arising before, on or after the Delivery Date (individually, an
"Expense," collectively, "Expenses"), which may be imposed on, incurred or
suffered by or asserted against any Indemnitee, in any way relating to, arising
out of or in connection with, any one or more of the following:
(i) any Operative Agreement, Sublease or any transaction
contemplated thereby;
(ii) the operation, possession, use, non-use, maintenance,
storage, overhaul, delivery, non-delivery, control, condition, alteration,
modification, addition, improvement, airworthiness, replacement,
substitution, return, abandonment, redelivery or other disposition, repair
or testing of the Aircraft, Airframe, or any Engine or any engine used in
connection with the Airframe, or any Part thereof by the Lessee, any
sublessee or any other Person whatsoever, whether or not such operation,
possession, use, non-use, maintenance, storage, overhaul, delivery, non-
delivery, control, condition, alteration, modification, addition,
improvement, airworthiness, replacement, substitution, return, abandonment,
redelivery or other disposition, repair or testing is in compliance with
the terms of the Lease, including, without limitation, claims for death,
personal injury or property damage or other loss or harm to any Person
whatsoever, including, without limitation, any passengers, shippers or
other Persons wherever located, claims or penalty relating to any laws,
rules or regulations, including, without limitation, environmental control,
noise and pollution laws, rules or regulation and any Liens in respect of
the Aircraft, any Engine or any Part;
(iii) the manufacture, design, sale, return, purchase,
acceptance, nonacceptance, rejection, delivery, non-delivery, condition,
repair, modification, servicing, rebuilding, airworthiness, registration,
reregistration, deregistration, ownership, financing, import,
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export, performance, non-performance, lease, sublease, transfer,
merchantability, fitness for use, alteration, substitution or replacement
of any Airframe, Engine, or Part or other transfer of use or possession, or
other disposition of the Aircraft, the Airframe, any Engine or any Part
including, without limitation, latent and other defects, whether or not
discoverable, tort liability, whether or not arising out of the negligence
of any Indemnitee (whether active, passive or imputed and including strict
liability without fault), and any claims for patent, trademark or copyright
infringement;
(iv) any breach of or failure to perform or observe, or any other
non-compliance with, any condition, covenant or agreement to be performed,
or other obligations of the Lessee under any of the Operative Agreements,
or the falsity or inaccuracy of any representation or warranty of the
Lessee in any of the Operative Agreements (other than representations and
warranties in the Tax Indemnity Agreement) or the occurrence of any Default
or Event of Default;
(v) the enforcement of the terms of the Operative Agreements
(including this Section 7.01(a));
(vi) the offer, issuance, sale or delivery of any Equipment Note
(or any certificates or securities issued in connection with any
refinancing thereof pursuant to Article 13 hereof) or interest in the
Lessor's Estate or the Trust Agreement or any similar interest; and
(vii) in the case of the Owner Participant, any "prohibited
transaction," within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Code, arising out of or in connection with the
acquisition or holding of the Owner Participant's interest in the Trust
Estate or any Noteholder's interest in any Equipment Note.
(b) Exceptions. The indemnity provided for in Section 7.01(a) shall
----------
not extend to any Expense of any Indemnitee to the extent it:
(i) is attributable to the willful misconduct or gross
negligence of such Indemnitee (other than gross negligence or willful
misconduct imputed to such person by reason of its interest in the Aircraft
or any transaction documents);
(ii) except to the extent fairly attributable to acts or events
occurring prior thereto, is attributable to acts or events (other than the
performance by Lessee of its obligations pursuant to the terms of the
Operative Agreements) which occur after the earlier of (i) the return of
possession of the Aircraft to the Lessor or its designee in accordance with
the Lease and (ii) if the Lessee is not required to return the Aircraft to
the Lessor, termination of the Lease and payment by the Lessee of all
amounts then required to be paid by the Lessee pursuant to the terms of the
Operative Agreements; provided that if the Lease has been terminated
--------
pursuant to Section 17 thereof, the indemnity provided in Section 7.01(a)
hereof shall survive for so long as Lessor or the Indenture Trustee shall
be exercising remedies
-51-
under such Section 17), and provided further that nothing in this clause
-------- -------
(ii) shall be deemed to exclude or limit any claim that any Indemnitee may
have under Applicable Law by reason of an Event of Default or for damages
from Lessee for breach of Lessee's covenants contained in the Lessee
Documents or to release Lessee from any of its obligations under the Lessee
Documents that expressly provide for performance after termination of the
Term;
(iii) other than as expressly provided herein or in the other
Operative Agreements, is a Tax or loss of a Tax benefit, whether or not the
Lessee is required to indemnify therefor pursuant to Article 6 hereof or
pursuant to the Tax Indemnity Agreement;
(iv) is a cost or expense expressly required to be paid by such
Indemnitee or its permitted transferees (and not by the Lessee) pursuant to
this Agreement or any other Operative Agreement and for which the Lessee is
not otherwise obligated to reimburse such Indemnitee, directly or
indirectly pursuant to the terms of this Agreement or such other Operative
Agreement;
(v) is attributable to the incorrectness or breach by such
Indemnitee of its representations or warranties, under any of the Operative
Agreements except to the extent such incorrectness or breach was caused by
a breach by Lessee of any representation or warranty or by any failure of
Lessee to perform any obligation under an Operative Agreement;
(vi) is attributable to the failure by such Indemnitee to
perform any of its obligations under any of the Operative Agreements except
to the extent such failure was caused by a breach by Lessee of any
representation or warranty or by any failure of Lessee to perform any
obligation under an Operative Agreement;
(vii) is, in the case of the Owner Participant, Lessor's Liens
attributable to the Owner Participant; in the case of the Owner Trustee,
Lessor's Liens to the extent attributable to the Owner Trustee; in the case
of Trust Company, Lessor's Liens to the extent attributable to Trust
Company; and in the case of the Indenture Trustee, Indenture Trustee's
Liens;
(viii) is, in the case of the Owner Participant or the Owner
Trustee, attributable to the offer or sale by such Indemnitee of any
interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any
similar interest (including an offer or sale resulting from bankruptcy or
other proceedings for the relief of debtors in which such Indemnitee is the
debtor), unless in each case such offer or sale shall occur (a) pursuant to
the exercise of remedies under Section 17 of the Lease or (b) pursuant to
Section 5(b), 7(b), 7(d), 7(e), 8, 12(b), 13(b) or 14 of the Lease or (c)
in connection with any other transfer required by the Operative Agreements;
(ix) in the case of the Owner Participant, is an Expense
relating to, resulting from, arising out of or in connection with a
"prohibited transaction" within the meaning of Section
-52-
406 of ERISA or Section 4975(c)(1) of the Code resulting from the direct or
indirect use of assets of any ERISA Plan to acquire or hold Owner
Participant's interest in the Trust Estate or in the case of any transferee
of the Owner Participant referred to in Section 5.01(c), to purchase the
Beneficial Interest pursuant to Section 5.01(c);
(x) except during the continuation of an Event of Default, is
attributable to any amendment to any of the Operative Agreements which is
not requested, or consented to, by the Lessee or is not required or made
pursuant to the terms of any of the Operative Agreements;
(xi) is attributable to the exercise by any Indemnitee of any
right to inspect the Aircraft except with respect to any such inspection
conducted while an Event of Default is continuing; and
(xii) constitutes the loss of future profits of such Indemnitee
or losses attributable to such Indemnitee's overhead.
Section 7.02. Notice and Payment. Each Indemnitee shall give prompt
------------------
written notice to the Lessee of any liability as to which an officer of such
Indemnitee has actual knowledge, for which the Lessee is, or may be, liable
under this Article 7; provided, however, that failure to give such notice shall
-------- -------
not terminate any of the rights of an Indemnitee under this Article 7 and shall
not release Lessee from any of its obligations to indemnify such Indemnitee
hereunder, except to the extent that such failure adversely affects any
applicable defense or counterclaim, otherwise increases the amount the Lessee
would have been liable for in the absence of such failure to provide such notice
or adversely affects the ability of Lessee's insurers to defend such claim.
Section 7.03. Defense of Claims. The Lessee or its insurers shall have
-----------------
the right (in each such case at the Lessee's sole expense) to investigate,
defend (and control the defense of) any such claim for which indemnification is
sought pursuant to this Article 7 (so long as Lessee has agreed in writing
reasonably acceptable to the relevant Indemnitee that Lessee is liable to such
Indemnitee for any Expenses relating to or arising out of the claim for which
indemnification is sought, provided that Lessee will not be so liable to the
extent that it is reasonably determined that one or more of the exclusions
contained in Section 7.01(b) would be applicable to such claim) and each
Indemnitee shall cooperate, at Lessee's expense, with all reasonable requests of
the Lessee or its insurers with respect thereto, provided that, without limiting
-------- ----
the right of the Lessee's insurers to assume and control the defense of or to
compromise, any such claim, the Lessee shall not be entitled to assume and
control the defense of or compromise any such claim (A) during the continuance
of any Event of Default arising under Sections 16(a), (b), (f), (g) or (h) of
the Lease, (B) if an actual or potential material conflict of interest exists
making it advisable in the good faith opinion of such Indemnitee (on the basis
of prevailing standards of professional responsibility) for such Indemnitee to
be represented by separate counsel or if such proceeding involve the potential
imposition of criminal liability on such Indemnitee or (C) if such proceeding
will involve any non-de minimis risk of the sale, forfeiture or loss of, or the
creation of any Lien (other than Permitted Liens) on the Aircraft, the
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or the Trust Estate (unless the Lessee posts a bond or
other security reasonably acceptable in form and substance to such Indemnitee)
or involve any risk of criminal liability to such Indemnitee. Subject to the
immediately foregoing sentence, where the Lessee or the insurers under a policy
of insurance maintained by the Lessee undertake the defense of an Indemnitee
with respect to such a claim, no additional legal fees or expenses of such
Indemnitee in connection with the defense of such claim shall be indemnified
hereunder unless the fees or expenses were incurred at the written request of
the Lessee or such insurers. Subject to the requirement of any policy of
insurance applicable to a claim, an Indemnitee may participate at its own
expense at any judicial proceeding controlled by the Lessee or its insurers
pursuant to the preceding provisions, to the extent that such party's
participation does not, in the reasonable opinion of the independent counsel
appointed by the Lessee or its insurers to conduct such proceedings, interfere
with the defense of such claim (it being agreed that the making of copies,
giving notice of proceedings and the like shall not be considered interference);
and such participation shall not constitute a waiver of the indemnification
provided in this Section 7.03. Nothing contained in this Article 7 shall be
deemed to require an Indemnitee to contest any Expense or to assume
responsibility for or control of any judicial proceeding with respect thereto.
No Indemnitee shall enter into any settlement or other compromise with respect
to any claim described in this Section 7.03 (other than any claim involving
potential criminal liability) without the prior written consent of the Lessee,
unless such Indemnitee waives its right to be indemnified under this Article 7
with respect to such claim or unless an Event of Default under Section 16(a),
16(f), 16(g) or 16(h) of the Lease is continuing. The Lessee shall not enter
into any settlement or compromise with respect to which the Lessee has not
agreed to indemnify such Indemnitee to such Indemnitee's satisfaction or which
admits any criminal violation, gross negligence or willful misconduct on the
part of any Indemnitee without the prior written consent of such Indemnitee.
Section 7.04. Insured Claims. Notwithstanding any other provision of
--------------
this Article 7 to the contrary, in the case of any Expense indemnified by the
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee (or a Permitted Sublessee) pursuant to Section 9 of the Lease or
otherwise, it shall be a condition of such indemnity with respect to any
particular Indemnitee that such Indemnitee shall cooperate with the insurers in
the exercise of their rights to investigate, defend or compromise such claim as
may be required to retain the benefits of such insurance with respect to such
claim.
Section 7.05. Subrogation. To the extent that an Expense indemnified by
-----------
the Lessee under this Article 7 is in fact paid in full by the Lessee and/or an
insurer under a policy of insurance maintained by the Lessee, the Lessee and/or
such insurer as the case may be shall, so long as no Specified Default or Event
of Default has occurred and is continuing, be subrogated to the extent of such
payment to the rights and remedies of the Indemnitee on whose behalf such
Expense was paid with respect to the transaction or event giving rise to such
Expense (other than the rights and remedies in respect of insurance policies
maintained by such Indemnitee and other than the rights of the Trust Company or
the Owner Trustee and remedies against the Owner Participant under the Trust
Agreement). Should an Indemnitee receive any refund (except under insurance
policies paid for by such Indemnitee), in whole or in part, with respect to any
Expense paid in full by the Lessee
-54-
hereunder, it shall promptly pay over the amount refunded (but not an amount in
excess of the amount Lessee and/or such insurer has paid to such Indemnitee in
respect of such Expense) to the Lessee unless a Specified Default or an Event of
Default shall have occurred and be continuing (or would have occurred and be
continuing if the Owner Participant had given the notice specified in Section
16(a) of the Lease), in which case, provided that Lessee shall have paid such
Indemnitee all amounts required under this Article 7 or under any other
Operative Agreement, such amounts shall be paid over to Owner Trustee (or, so
long as the Indenture shall not have been discharged, to the Indenture Trustee)
to hold as security for Lessee's obligations under the Lessee Documents or, if
requested by Lessee, applied to satisfy such obligations.
Section 7.06. Information. Subject to Section 7.04, Lessee will provide
-----------
the relevant Indemnitee with such information, not within the control of such
Indemnitee, as is in Lessee's control or is reasonably available to Lessee,
which such Indemnitee may reasonably request, and will otherwise cooperate with
such Indemnitee, so as to enable such Indemnitee to fulfill its obligations
under Section 7.03 and to control or participate in any proceeding to the extent
permitted by Section 7.03. The Indemnitee shall supply Lessee with such
information, not within the control of Lessee, as is in such Indemnitee's
control or is reasonably available to such Indemnitee, which Lessee may
reasonably request to control or participate in any proceeding to the extent
permitted by Section 7.03.
Section 7.07. Survival of Obligations. The indemnities and agreements
-----------------------
of the Lessee provided for in this Article 7 shall survive the expiration or
other termination of this Agreement and the other Operative Agreements.
Section 7.08. Effect of Other Indemnities. The Lessee's obligations
---------------------------
under this Article 7 shall be those of a primary obligor whether or not the
Person indemnified shall also be indemnified with respect to the same matter
under the terms of this Agreement, or any other document or instrument, and the
Person seeking indemnification from the Lessee pursuant to any provision of this
Agreement may proceed directly against the Lessee without first seeking to
enforce any other right of indemnification.
Section 7.09. Waiver of Certain Claims. The Lessee hereby waives and
------------------------
releases any Expense now or hereafter existing against any Indemnitee arising
out of death or personal injury to personnel of the Lessee, loss or damage to
property of the Lessee, or the loss of use of any property of the Lessee, which
results from or arises out of the condition, use or operation of the Aircraft
during the Term, including, without limitation, any latent or patent defect
whether or not discoverable.
Section 7.10. Certain Limitations. The Lessee does not guarantee and
-------------------
nothing in the general indemnification provisions of this Article 7 shall be
construed as a guarantee (or an indemnification) by the Lessee (i) that the
principal of, premium, if any, or interest on any Equipment Note will be paid or
(ii) with respect to the residual value of the Aircraft or any part thereof.
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ARTICLE 8.
TRANSACTION COSTS
Section 8.01. Transaction Costs and Other Costs.
---------------------------------
(a) Transaction Costs. If the transactions contemplated by this
-----------------
Agreement to occur on the Delivery Date are consummated, the Owner Participant
shall pay (or reimburse the Lessee if the Lessee shall have previously made such
payment) all fees and expenses of the following persons relating to the
transactions contemplated hereby up to an aggregate maximum amount equal to the
Assumed Transaction Costs (as defined in Exhibit B to the Lease), following
receipt by the Owner Participant of appropriate invoices with respect thereto:
(i) the out-of-pocket expenses of the Owner Participant relating to the time
sharing charges of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and the reasonable fees and expenses of
counsel for Owner Participant; (ii) the reasonable fees and expenses of the
respective counsel or special counsel for the Lessee, the Owner Trustee, the
Indenture Trustee, the Manufacturer, the Seller, the Deficiency Obligor and the
Loan Participants (including, in the case of ▇▇▇▇▇▇ Price, ▇▇▇▇▇▇▇ & Kammholz,
special counsel to the Loan Participants, fees and expenses relating to post-
closing syndication of the Equipment Notes); (iii) the reasonable fees and
expenses of special aviation counsel; (iv) the initial fees and expenses of the
Loan Participants and the initial fees and expenses of the Owner Trustee and the
Indenture Trustee; (v) printing and duplication expenses and any recording and
filing fees incurred in connection with the Operative Agreements; (vi) the fees
and expenses of The Seabury Group LLC (the "Lessee Advisor"); (vii) any amounts
paid in connection with any appraisal report prepared for the Owner Participant
or the Loan Participant; and (viii) any other amounts approved by the Lessee and
the Owner Participant. To the extent Transaction Costs exceed the Assumed
Transaction Costs, the Owner Participant may elect to have the Lessee pay the
amount of such excess, and if the Owner Participant so elects the Lessee shall
pay the amount of such excess by paying those of the costs set forth in clauses
(i) through (viii) as are specified by the Owner Participant and the Owner
Participant shall have no obligation to pay (or reimburse the Lessee for) the
amount of such excess.
(b) Continuing Expenses. The Lessee agrees to pay, as Supplemental
-------------------
Rent, (i) the continuing fees, expenses and disbursements (including reasonable
counsel fees and expenses) of Trust Company and the Owner Trustee, with respect
to the administration of the Lease and the Lessor's Estate; and (ii) the
continuing fees, expenses and disbursements (including reasonable counsel fees
and expenses) of the Indenture Trustee, with respect to the administration of
the Indenture Estate.
(c) Amendments and Supplements. Without limitation of the foregoing,
--------------------------
the Lessee agrees to pay, as Supplemental Rent, to the Owner Trustee, the Owner
Participant, the Indenture Trustee and each Noteholder all costs and expenses
(including reasonable legal fees and expenses) incurred by any of them in
connection with any amendment, supplement, waiver or consent (whether or not
entered into) under this Agreement or any other Operative Agreement or document
or instrument delivered pursuant to any of them, which amendment, supplement,
waiver or consent is required by any provision of any Operative Agreement
(including any adjustment pursuant to Section 3(d) of the Lease) or is requested
by the Lessee or necessitated by the action or inaction of the Lessee or occurs
after an Event of Default has occurred and is continuing; provided,
--------
-56-
however, that the Lessee shall not be responsible for fees or expenses incurred
-------
in connection with the offer, sale or other transfer (whether pursuant to
Section 5.01(c) hereof or otherwise) by the Owner Participant, the Owner
Trustee, the Indenture Trustee, or any Noteholder of any interest in the
Aircraft, the Lessor's Estate, the Beneficial Interest or the Trust Agreement or
any similar interest (and the offeror, seller, or transferor shall be
responsible for all such fees and expenses), unless such offer, sale or transfer
shall occur (A) pursuant to the exercise of remedies under Section 17 of the
Lease, or (B) in connection with the termination of the Lease or action or
direction of the Lessee pursuant to Section 8, 13 or 14 of the Lease.
ARTICLE 9.
SUCCESSOR OWNER TRUSTEE
Section 9.01. Appointment of Successor Owner Trustee.
--------------------------------------
(a) Resignation and Removal. The Owner Trustee or any
-----------------------
successor Owner Trustee may resign or may be removed (with the consent of the
Lessee) by the Owner Participant, and a successor Owner Trustee may be appointed
and a Person may become Owner Trustee under the Trust Agreement only in
accordance with the provisions of Section 9.01 of the Trust Agreement and the
provisions of paragraphs (b) and (c) of this Section 9.01.
(b) Conditions to Appointment. The appointment in any manner
-------------------------
of a successor Owner Trustee pursuant to Section 9.01 of the Trust Agreement
shall be subject to the following conditions:
(i) such successor Owner Trustee shall be a Citizen of the
United States;
(ii) such successor Owner Trustee shall be a bank or a
trust company having combined capital, surplus and undivided profits of at
least $100,000,000 or a bank or trust company fully guaranteed by a direct
or indirect parent thereof having a combined capital, surplus and undivided
profits of at least $100,000,000;
(iii) such appointment shall not violate any provisions of
the Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered or create a relationship which would be in
violation of the Transportation Code or any applicable rule or regulation
of the applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered;
(iv) such successor Owner Trustee shall enter into an
agreement or agreements, in form and substance reasonably satisfactory to
the Lessee, the Owner Participant, each Noteholder and the Indenture
Trustee whereby such successor Owner Trustee confirms that it shall be
deemed a party to this Agreement and each other Operative Agreement to
which the Owner Trustee is a party and agrees to be bound by all the terms
of such documents applicable to the Owner Trustee and makes the
representations and warranties contained in
-57-
Section 5.03 hereof (except that it may be duly incorporated, validly
existing and in good standing under the laws of the United States of
America or any State thereof); and
(v) all filings of Uniform Commercial Code financing and
continuation statements, filings in accordance with the Transportation Code
and amendments thereto shall be made and all further actions taken in
connection with such appointment as may be necessary in connection with
maintaining the validity, perfection and priority of the Lien of the
Indenture and the valid and continued registration of the Aircraft in
accordance with the Transportation Code.
ARTICLE 10.
LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND NOTEHOLDERS
Section 10.01. Liabilities of the Owner Participant. The Owner
------------------------------------
Participant shall not have any obligation or duty to the Lessee or to any
Noteholder with respect to the transactions contemplated by this Agreement,
except those obligations or duties expressly set forth in this Agreement, the
Indenture (but only to the extent set forth in Section 2.12 of the Indenture) or
(to the Lessee only) the Tax Indemnity Agreement or in any other Operative
Agreement to which the Owner Participant is a party and the Owner Participant
shall not be liable for the performance by any other party hereto of such other
party's obligations or duties hereunder.
Section 10.02. Interest of Noteholders. Each Noteholder shall have no
-----------------------
further interest in, or other right with respect to, the Indenture Estate when
and if the principal and interest on all Equipment Notes held by such Noteholder
and all other sums payable to such Noteholder under this Agreement, under the
Indenture and under such Equipment Notes shall have been paid in full.
ARTICLE 11.
OTHER DOCUMENTS
Section 11.01. Consent of Lessee to Other Documents. The Lessee hereby
------------------------------------
consents in all respects to the execution and delivery of the Indenture and the
Trust Agreement.
ARTICLE 12.
NOTICES
Section 12.01. Notices. Except as otherwise specifically provided
-------
herein, all notices, requests, approvals or consents required or permitted by
the terms hereof shall be in writing (it being understood that the specification
of a writing in certain instances and not in others does not imply an intention
that a writing is not required as to the latter). Any notice shall be effective
when received. Any notice shall either be mailed, certified or registered mail,
return receipt requested with proper first class postage prepaid, or sent in the
form of a telecopy, provided that there is receipt of such notice the next
--------
Business Day from an overnight courier service, or by overnight delivery service
-58-
or delivered by hand. Any notice shall be directed to the Lessee, the Owner
Trustee, the Indenture Trustee or any other party hereto to the respective
addresses set forth below or to such other address or telecopy number as any
such party may designate pursuant to this Section 12.01:
(a) if to the Lessee, to its office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel, telephone (▇▇▇) ▇▇▇-▇▇▇▇,
facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as the Lessee shall from
time to time designate in writing to the Owner Trustee, the Indenture
Trustee, the Owner Participant and each Noteholder;
(b) if to the Lessor or the Owner Trustee, to its office at One ▇▇▇▇▇▇
Square, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Trust Administration, telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (302)
888-7544; or to such other address as the Lessor shall from time to time
designate in writing to the Lessee, the Indenture Trustee and each
Noteholder, with a copy to the Owner Participant;
(c) if to the Owner Participant to its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Contracts Manager, telephone
(▇▇▇) ▇▇▇-▇▇▇▇ facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as the
Owner Participant shall from time to time designate in writing to the
Lessee, and the Owner Trustee, the Indenture Trustee and each Noteholder;
(d) if to the Indenture Trustee, to its office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Mail Code 101-591, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Corporate
Trust Department, telephone (▇▇▇) ▇▇▇-▇▇▇▇ facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to
such other address as the Indenture Trustee shall from time to time
designate in writing to the Owner Trustee, the Lessee, the Owner
Participant and each Noteholder;
(e) if to a Loan Participant, to its address set forth in Schedule II.
ARTICLE 13.
REFINANCING
Section 13.01. Refinancing.
-----------
(a) Subject to the terms and conditions of this Section 13.01, the
Lessee may request the Owner Participant to participate in two refinancings in
whole but not in part, of the Equipment Notes prior to the end of the Basic Term
(a "Refinancing"). Such Refinancing may be placed in either the private or
public markets and shall be denominated in Dollars and shall be on terms
reasonably satisfactory to the Owner Participant. The Owner Participant will
agree to negotiate promptly in good faith to conclude an agreement with the
Lessee as to the terms of any such Refinancing transaction (including the terms
of any debt to be issued in connection with such refinancing and the
documentation to be executed in connection therewith). Without the prior
written consent of the Owner Participant, the prospectus and other offering
materials relating to any Refinancing in the form of a public offering shall not
identify the Owner Participant and shall not
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include any financial statements of the Owner Participant or any Affiliate
thereof. In connection with any such Refinancing in the form of a public
offering, the Lessee shall indemnify the Owner Participant in a manner
satisfactory to it for any liabilities under federal, state or foreign
securities laws resulting from such offering. The aggregate principal amount of
the new Equipment Notes issued in connection with any Refinancing shall be the
same as the aggregate principal amount outstanding on the Equipment Notes being
refinanced.
(b) Notwithstanding anything herein to the contrary, no Refinancing
will be permitted unless the Owner Participant and the Indenture Trustee shall
have received at least 15 days' prior written notice of the scheduled closing
date of such Refinancing and the Owner Participant shall have been provided such
longer period as it shall have required for a reasonable opportunity to review
the relevant documentation and the Owner Participant shall have determined in
good faith that neither it nor the Owner Trustee shall suffer any loss or
expense or bear any increased risk as a result of such Refinancing (including,
without limitation, any risk with respect to taxes or other adverse consequences
to the Owner Participant including the application of Revenue Procedures 75-21
and 75-28 and Section 467 of the Code) for which it has not been or will not
have been indemnified in a manner satisfactory in form and substance to the
Owner Participant.
Prior to the consummation of any Refinancing pursuant to this Section
13.01, the Owner Participant and the Lessee shall agree upon a schedule setting
forth each installment of Basic Rent, the Basic Rent allocations, the
Termination Values payable pursuant to the Lease and the EBO Amount as a result
of the Refinancing in accordance with Section 3(d) of the Lease, and thereafter
the amounts set forth in such schedule shall become the amounts payable under
the Lease. Upon the consummation of the Refinancing, the evidence of
indebtedness issued pursuant to the Refinancing shall be considered "Equipment
Notes" for purposes of this Agreement and the Lease.
(c) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any Refinancing transaction as contemplated by this
Section 13.01 unless the Lessee provides an indemnity on an After Tax Basis to
the Owner Trustee and the Owner Participant by agreement in form and substance
satisfactory to each of them (provided that Taxes are excluded from such
--------
indemnity), for any liability, obligation (other than, in the case of the Owner
Trustee, the non-recourse obligation to pay principal and interest in respect of
the refinanced indebtedness), cost or expense (including, without limitation,
reasonable attorneys' fees and Breakage Cost or other amounts due under the
Indenture).
(d) Without the prior written consent of the Owner Participant, no such
refinancing shall (1) cause the aggregate principal amount of the indebtedness
to be substituted for the Equipment Notes to exceed the aggregate principal
amount of the then outstanding Equipment Notes, (2) cause the weighted average
life of such indebtedness to be longer than the remaining weighted average life
of the then outstanding Equipment Notes, or (3) cause the date of maturity of
such indebtedness to be later than the date of maturity of the Equipment Notes
being refinanced.
(e) Subject to the foregoing provisions of this Section 13.01, each
party agrees to take or cause to be taken all requested action, including,
without limitation, the execution and delivery of any documents and instruments,
including, without limitation, amendments or
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supplements to the Lease, which may be reasonably necessary or desirable to
effect such Refinancing, including, in the case of the Owner Participant,
direction to the Owner Trustee by the Owner Participant to prepay the Equipment
Notes then outstanding; provided, however, that such Refinancing shall be
-------- -------
subject to the satisfaction of each of the following conditions:
(i) Payment shall have been made with respect to principal,
accrued interest, Breakage Cost, if any, and all other sums due and owing
on the Equipment Notes payable under the Indenture;
(ii) Payment in full of all other amounts then due and owing by
the Lessee under this Agreement, the Indenture, the Lease, the Trust
Agreement, and the Equipment Notes then outstanding shall have been made by
the Lessee;
(iii) Such party shall have received such opinions of counsel
(including, without limitation, an opinion received by the Owner
Participant from independent tax counsel selected by Owner Participant and
reasonably satisfactory to the Lessee that such Refinancing shall not
result in any, or the risk of any, adverse tax consequences to such Owner
Participant, unless the Lessee shall have provided, or caused to be
provided, an indemnity in respect thereof satisfactory in form and
substance to the Owner Participant), certificates and other documents as it
may reasonably request, each in form and substance reasonably satisfactory
to such party;
(iv) All authorizations, approvals and consents which in the
reasonable judgment of the Owner Participant are necessary for such
Refinancing shall have been obtained;
(v) No Specified Default shall exist or would occur immediately
after giving effect to such Refinancing;
(vi) In the event the Lessee shall not prohibit the purchase of
the Refinancing loan certificates by, or with the assets of, an ERISA Plan,
the Lessee will permit the placement of the Refinancing loan certificates
with an ERISA Plan only if either (A) if such placement is in the form of
pass-through certificates, the sole underwriter or the manager or co-
manager of the underwriting syndicate or the selling or placement agent of
such pass-through certificates represents to the Lessee that it has a
prohibited transaction exemption from the U.S. Department of Labor with
respect to pass-through certificates (such as Prohibited Transaction
Exemption 89-88 or any other comparable exemption) or (B) purchasers of the
Refinancing loan certificates (or if the Refinancing involves the issuance
and sale of pass-through certificates, purchasers of such pass-through
certificates) provide a representation (which may be in the form of a
deemed representation) regarding their source of funds used in acquiring
the Refinancing loan certificates (or such pass-through certificates, as
the case may be) and, if such purchasers represent that they are using
funds of an ERISA Plan in acquiring the Refinancing loan certificates (or
such pass-through certificates, as the case may be), such purchasers
further represent that they are relying on a prohibited transaction
exemption from the U.S. Department of Labor with respect to their purchase
and holding of the Refinancing loan certificates (or such pass-through
certificates, as the case may be). The
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reliance on any such exemption will not be conditional on the Owner
Participant's representation concerning its party in interest or other
status with respect to ERISA Plans; and
(vii) The Lessee shall pay all costs and expenses (including legal
fees and disbursements) incurred in connection with any proposed or
actually consummated Refinancing.
ARTICLE 14.
RESERVED
ARTTICLE 15.
MISCELLANEOUS
Section 15.01. Counterparts. This Agreement may be executed by the
------------
parties 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.
Section 15.02. No Oral Modifications. Neither this Agreement nor any of
---------------------
its terms may be terminated, amended, supplemented, waived or modified orally,
but only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification is
sought and in the case of the Noteholders, by such an instrument approved by the
Noteholders in accordance with Section 8.01 of the Indenture. No such written
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy shall have been delivered to and executed by the Owner
Trustee and the Indenture Trustee. A copy of each such termination, amendment,
supplement, waiver or modification shall also be delivered to each other party
to this Agreement.
Section 15.03. Captions. The table of contents preceding this Agreement
--------
and the headings of the various Articles and Sections of this Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions of this Agreement.
Section 15.04. Successors and Assigns. The terms of this Agreement shall
----------------------
be binding upon, and shall inure to the benefit of, the Lessee and its
successors and permitted assigns, the Loan Participants and their respective
successors and permitted assigns, including without limitation each other
Noteholder, the Owner Participant and its successors and permitted assigns, the
Owner Trustee and its successors as Owner Trustee (and any additional owner
trustee appointed) under the Trust Agreement, the Indenture Trustee and its
successors as Indenture Trustee (and any additional indenture trustee appointed)
under the Indenture.
Section 15.05. Concerning the Owner Trustee and Indenture Trustee. Each
--------------------------------------------------
of Trust Company and Indenture Trustee is entering into this Agreement solely in
its capacities (except to the extent otherwise expressly indicated), in the case
of Trust Company, not in its individual capacity
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but solely as Owner Trustee under the Trust Agreement, in the case of Indenture
Trustee, not in its individual capacity but solely as Indenture Trustee under
the Indenture, and except as otherwise expressly provided in this Agreement or
in the Lease, the Indenture or the Trust Agreement, neither Trust Company nor
Indenture Trustee shall be personally liable for or on account of its
statements, representations, warranties, covenants or obligations under this
Agreement; provided, however, that each of Trust Company and Indenture Trustee
-------- -------
accepts the benefits running to it under this Agreement, and each agrees that
(except as otherwise expressly provided in this Agreement or any other Operative
Agreement to which it is a party) it shall be liable in its individual capacity
for (a) its own gross negligence or willful misconduct (whether in its capacity
as trustee or in its individual capacity), (b) any breach of representations and
warranties or any breach of covenants made in its individual capacity pursuant
to or in connection with this Agreement or the other Operative Agreements to
which it is a party, (c) any breach, in the case of the Owner Trustee, of its
covenants contained in Sections 4.01 and 6.03 of the Indenture, (d) the failure
to use ordinary care in receiving, handling and disbursing funds, (e) in the
case of the Owner Trustee, Lessor's Liens attributable to it in its individual
capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens,
and (g) taxes, fees or other charges on, or based on, or measured by, any fees,
commissions or compensation received by it in connection with the transactions
contemplated by the Operative Agreements.
Section 15.06. Severability. Any provision of this Agreement 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 15.07. Certain Limitations on Reorganization. The Indenture
-------------------------------------
Trustee, each Loan Participant and each Noteholder each agrees that, if (i) the
Owner Trustee becomes or all or any part of the Lessor's Estate or the trust
created by the Trust Agreement becomes the property of, a debtor subject to the
reorganization provisions of the Bankruptcy Code or any other applicable
bankruptcy or insolvency statutes, (ii) pursuant to any such reorganization
provisions, the Owner Participant is held to have recourse liability to the
Indenture Trustee, any Noteholder, the debtor, the Owner Trustee or the trustee
of the debtor directly or indirectly on account of any amount payable as
Breakage Cost, principal or interest on the Equipment Notes, or any other amount
payable on any Equipment Note that is provided in the Operative Agreements to be
nonrecourse to the Owner Participant and (iii) any Noteholder or the Indenture
Trustee actually receives any Recourse Amount which reflects any payment by the
Owner Participant on account of (ii) above, then such Noteholder or the
Indenture Trustee, as the case may be, shall promptly refund to the Owner
Participant such Recourse Amount. For purposes of this Section 15.07, "Recourse
Amount" means the amount by which the portion of such payment by the Owner
Participant on account of clause (ii) above received by such Noteholder or the
Indenture Trustee exceeds the amount which would have been received by such
Noteholder or the Indenture Trustee if the Owner Participant had not become
subject to the recourse liability referred to in (ii) above. Nothing contained
in this Section shall prevent any Loan Participant, any Noteholder or the
Indenture Trustee from enforcing any individual obligation (and retaining the
proceeds thereof) of the Owner Participant under this Agreement or, any other
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Operative Agreement to the extent herein or therein provided, for which the
Owner Participant has expressly agreed by the terms of this Agreement to accept
individual responsibility.
Section 15.08. GOVERNING LAW. (a) THIS AGREEMENT IS BEING DELIVERED IN
-------------
THE STATE OF NEW YORK, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF
THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY
LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY IRREVOCABLY CONSENTS AND AGREES THAT THE SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY MAILING COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET FORTH PURSUANT
TO SECTION 12.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 15.08(c), SHALL CONSTITUTE
VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO
HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH
SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE VALIDITY OF
SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING
BASED THEREON.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
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Section 15.09. Section 1110 Compliance. The parties hereto agree
-----------------------
that the transactions contemplated by the Operative Agreements are expressly
intended to be, shall be, and should be construed so as to be entitled to the
benefits and protection of Section 1110.
Section 15.10. Indenture Trustee Consent. Whenever any provision of
-------------------------
an Operative Document requires the consent, approval, waiver or the taking of
any action by the Indenture Trustee, unless otherwise expressly provided, such
consent, approval, waiver or the taking of such action by shall be effected by
the Indenture Trustee acting at the direction of a Majority in Interest of
Noteholders.
Section 15.11. Payments Made By Indenture Trustee. In any provision
----------------------------------
of the Operating Documents requires the Indenture Trustee to make any payment in
respect of Swap Breakage Loss or LIBOR Breakage Amount, the amount to be so paid
shall be set forth in a certificate from each applicable Noteholder and
delivered to the Indenture Trustee after such amount has been calculated in
accordance with the applicable provision of the Operative Documents.
Section 15.12. Correction to Lease and Appendix A to this Agreement,
-----------------------------------------------------
the Lease and the Indenture. The parties hereby acknowledge that a correction
---------------------------
was made immediately prior to closing to Section 13(a) of the Lease and to the
definition of "Termination Date" in Appendix A to the Participation Agreement,
Lease and Indenture which appears in the counterparts of this Agreement and the
Lease and the Indenture not filed at the FAA but does not appear in the
counterparts of the Lease and the Indenture filed at the FAA. The parties agree
that with respect to such Section 13(a), Section 13(a) of the Lease appearing in
the counterparts of the Lease not filed at the FAA shall be controlling. The
parties agree that with respect to such definition, the definition of
"Termination Date" appearing in Appendix A to the counterparts of this Agreement
and the Lease and the Indenture not filed at the FAA shall be controlling.
* * *
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IN WITNESS WHEREOF, the parties have caused this Participation
Agreement to be executed by their respective, duly authorized officers as of the
day and year first written above.
MIDWAY AIRLINES CORPORATION,
as Lessee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
General Counsel
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant
By: /s/ ▇▇▇▇▇▇ ▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇
Title: Vice President
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual capacity,
except as otherwise expressly provided herein
but solely as Owner Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
ALLFIRST BANK, as Indenture Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
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DEUTSCHE VERKEHRSBANK AG
as Loan Participant
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
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Schedule I
Commitments
-----------
Participants Amount of Commitment
------------ --------------------
General Electric Capital Corporation * % of Lessor's Cost
-
Deutsche VerkehrsBank AG * % of Lessor's Cost
-
________________
* Indicates information deleted for confidentiality purposes.
Schedule II
PARTICIPANTS
------------
OWNER PARTICIPANT
-----------------
Name Wire Transfer Instructions
---- --------------------------
General Electric Capital Corporation wire transfer of immediately available
funds to:
Bank Name: Bankers Trust Company
Bank Address: * New York New York
ABA No.: * for the account of GECC
T&I Depository Account, Account
Number *
Reference: *
or as otherwise specified by the Owner
Participant.
LOAN PARTICIPANTS
-----------------
Name Wire Transfer Instructions
---- --------------------------
For LOAN ADMINISTRATIVE Matters
-------------------------------
Deutsche VerkehrsBank AG, Bank: Northern Trust
London Head Office ABA No.: *
* For the account of: American Express
Bank, Ltd., New York
Account No.: *;
For further credit to: Deutsche
VerkehrsBank AG Frankfurt
Account No.: *
Reference: *
With a Copy to:
Deutsche VerkehrsBank AG
New York Office
*
________________
* Indicates information deleted for confidentiality purposes.
For CREDIT and COLLATERAL Matters
---------------------------------
Deutsche VerkehrsBank AG - New York Office
*
________________
* Indicates information deleted for confidentiality purposes.
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