Exhibit 10.24
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PARTICIPATION AGREEMENT [N361ML]
Dated as of September 27, 2000
among
MIDWAY AIRLINES CORPORATION,
as Lessee
SILVERMINE RIVER FINANCE ONE, INC.,
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
ALLFIRST BANK,
as Indenture Trustee
ALLFIRST BANK,
as Pass-Through Trustee
and
ALLFIRST BANK,
as Subordination Agent
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COVERING ONE BOEING MODEL 737-7BX AIRCRAFT
BEARING U.S. REGISTRATION NUMBER N361ML
AND MANUFACTURER'S SERIAL NUMBER 30736
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................................................................. 3
Section 2.01. Participation................................................................................. 3
(a) Sale and Purchase............................................................................. 3
(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........................................................................................ 6
(b) Delivery of Documents......................................................................... 6
(c) Airworthiness................................................................................. 10
(d) Other Commitments............................................................................. 10
(e) Violation of Law.............................................................................. 10
(f) [Reserved].................................................................................... 10
(g) No Event of Default........................................................................... 10
(h) No Event of Loss.............................................................................. 10
(i) Title......................................................................................... 10
(j) Certification................................................................................. 10
(k) Section 1110.................................................................................. 11
(l) Filings....................................................................................... 11
(m) Financing Statements.......................................................................... 11
(n) Precautionary Financing Statements............................................................ 11
(o) No Proceedings................................................................................ 11
(p) Governmental Action........................................................................... 11
(q) Note Purchase Agreement....................................................................... 11
(r) Perfected Security Interest................................................................... 12
(s) Representations and ▇▇▇▇▇▇▇▇▇▇................................................................ ▇▇
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(▇) Trust Company Filing.......................................................................... 12
Section 3.02. Conditions Precedent to Obligations of Lessee................................................. 12
(a) Documents..................................................................................... 12
(b) Other Conditions Precedent.................................................................... 12
(c) [Reserved].................................................................................... 12
Section 3.03. Post-Registration Opinion..................................................................... 12
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.................................................................................. 16
(c) Information................................................................................... 19
(d) Corporate Existence........................................................................... 19
(e) Merger and Consolidation...................................................................... 19
(f) Change of Location............................................................................ 20
(g) Financial Statements.......................................................................... 20
(h) Notice of Sublease............................................................................ 21
(i) Filing of Documents........................................................................... 21
(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............................................................................................... 22
Section 5.01. Representations, Warranties and Covenants of Owner Participant................................ 22
(a) Representations and Warranties................................................................ 22
(b) Lessor's Liens................................................................................ 24
(c) Assignment of Interests of Owner Participant.................................................. 24
(d) Actions with Respect to Lessor's Estate, Etc.................................................. 26
(e) Citizenship................................................................................... 26
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
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(f) Other Business................................................................................ 30
(g) Performance of Agreements..................................................................... 30
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
Section 5.06. Releases from Indenture....................................................................... 32
Section 5.07. The Lessee's Right of Quiet Enjoyment......................................................... 32
Section 5.08. Pass-Through Trustee's Representations and Warranties......................................... 33
Section 5.09. Survival of Representations, Warranties and Covenants......................................... 34
Section 5.10. Lessee's Assumption of the Equipment Notes.................................................... 34
Section 5.11. Compliance with Trust Agreement, Etc.......................................................... 36
Section 5.12. Subordination Agent's Representations, Warranties and Covenants............................... 37
(a) Representations and Warranties................................................................ 37
(b) Covenants..................................................................................... 38
Section 5.13. Amendments to the Indenture................................................................... 38
ARTICLE 6. TAXES....................................................................................................... 39
Section 6.01. Lessee's Obligation to Pay Taxes.............................................................. 39
(a) Generally..................................................................................... 39
(b) Exceptions.................................................................................... 40
(c) Withholding................................................................................... 42
Section 6.02. After-Tax Basis............................................................................... 43
Section 6.03. Time of Payment............................................................................... 44
Section 6.04. Contests...................................................................................... 44
(a) Notice of Claim............................................................................... 44
(b) Request for Contest........................................................................... 44
(c) Declining to Contest; Settlement.............................................................. 47
(d) Continuing Claims............................................................................. 47
(e) Claims Impaired............................................................................... 47
Section 6.05. Refunds....................................................................................... 47
Section 6.06. Reports....................................................................................... 48
Section 6.07. Survival of Obligations....................................................................... 49
Section 6.08. Payment of Taxes.............................................................................. 49
Section 6.09. Reimbursements by Indemnitees Generally....................................................... 49
Section 6.10. Forms......................................................................................... 49
Section 6.11. Verification.................................................................................. 49
Section 6.12. Non-Parties................................................................................... 50
Section 6.13. Non-U.S. Owner Participant.................................................................... 50
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ARTICLE 7. GENERAL INDEMNITY .......................................................................................... 50
Section 7.01. Generally..................................................................................... 50
(a) Indemnity..................................................................................... 50
(b) Exceptions.................................................................................... 52
Section 7.02. Notice and Payment............................................................................ 53
Section 7.03. Defense of Claims............................................................................. 54
Section 7.04. Insured Claims................................................................................ 55
Section 7.05. Subrogation................................................................................... 55
Section 7.06. Information................................................................................... 55
Section 7.07. Survival of Obligations....................................................................... 55
Section 7.08. Effect of Other Indemnities................................................................... 56
Section 7.09. Waiver of Certain Claims...................................................................... 56
Section 7.10. Certain Limitations........................................................................... 56
Section 7.11. Certain Transfers............................................................................. 56
ARTICLE 8. TRANSACTION COSTS........................................................................................... 57
Section 8.01. Transaction Costs and Other Costs............................................................. 57
(a) Transaction Costs............................................................................. 57
(b) Continuing Expenses........................................................................... 57
(c) Amendments and Supplements.................................................................... 58
ARTICLE 9. SUCCESSOR OWNER TRUSTEE .................................................................................... 59
Section 9.01. Appointment of Successor Owner Trustee........................................................ 59
(a) Resignation and Removal....................................................................... 59
(b) Conditions to Appointment..................................................................... 59
ARTICLE 10. LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT
AND HOLDERS........................................................................................... 60
Section 10.01. Liabilities of the Owner Participant.......................................................... 60
Section 10.02. Interest of Holders of Equipment Notes........................................................ 60
ARTICLE 11. OTHER DOCUMENTS............................................................................................ 60
Section 11.01. Consent of Lessee to Other Documents.......................................................... 60
Section 11.02. Pass-Through Trustee's and Subordination Agent's
Acknowledgment.............................................................................. 60
ARTICLE 12. NOTICES.................................................................................................... 60
Section 12.01. Notices....................................................................................... 60
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ARTICLE 13. REFINANCING................................................................................................ 61
Section 13.01. Refinancing................................................................................... 61
ARTICLE 14. [RESERVED]................................................................................................. 64
ARTICLE 15. MISCELLANEOUS ............................................................................................. 64
Section 15.01. Counterparts.................................................................................. 64
Section 15.02. No Oral Modifications......................................................................... 64
Section 15.03. Captions...................................................................................... 65
Section 15.04. Successors and Assigns........................................................................ 65
Section 15.05. Concerning the Owner Trustee, Indenture Trustee and
the Pass-Through Trustee................................................................... 65
Section 15.06. Severability.................................................................................. 66
Section 15.07. Certain Limitations on Reorganization......................................................... 66
Section 15.08. GOVERNING LAW................................................................................. 66
Section 15.09. Section 1110 Compliance....................................................................... 67
Section 15.10. Reliance of Liquidity Providers............................................................... 67
Section 15.11. Agreement Regarding Engine.................................................................... 67
Schedule I Commitments
Schedule II Wire Instructions
Appendix A Definitions
Exhibit A-1(a) Form of Opinion of General Counsel of Lessee
Exhibit A-1(b) Form of Opinion of Special North Carolina counsel
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, Subordination Agent and Pass-
Through 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.
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Exhibit A-6 Form of Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special
counsel for the Owner Participant and Owner
Participant Guarantor
Exhibit A-7 Form of Opinion of Counsel to the Owner
Participant and Owner Participant Guarantor
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 [N361ML] dated as of September 27, 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"), SILVERMINE RIVER FINANCE ONE, INC., a Delaware corporation (together
with its successors and permitted assigns, the "Owner Participant"), 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"), ALLFIRST BANK, a Maryland state-chartered commercial
bank, as pass-through trustee of three separate Pass-Through Trusts (together
with its successors and permitted assigns, the "Pass- Through Trustee"), and
ALLFIRST BANK, a Maryland state-chartered commercial bank, as subordination
agent (together with its successors and permitted assigns, the "Subordination
Agent").
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; and
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 Holders of the Equipment
Notes, pursuant to which Indenture the Owner Trustee shall, subject to the terms
and conditions set forth therein, issue to the Pass- Through Trustee under each
of the Pass-Through Trust Agreements, as a Loan Participant, Equipment Notes
substantially in the form set forth in the Indenture as evidence of the loan to
be
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made by each 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
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 CFM Warranty, respectively;
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,
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paragraphs 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,
---------------------------------
schedules and exhibits are part of this Agreement.
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
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the Aircraft from the Seller on the Delivery Date for a purchase price equal to
Lessor's Cost.
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(b) Leasing. The Owner Trustee agrees to lease to the Lessee,
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and the 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
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Participant 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 28, 2000.
(d) Secured Loan. Each Loan Participant agrees to provide
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immediately 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
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by the 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
two Business Days' notice to each other party hereto of the Delivery Date, which
notice shall also specify 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
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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 Commitments at
the closing shall be deemed a waiver of notice of the Delivery Date by the Loan
Participants and the Indenture Trustee.
Section 2.02. Closing Procedure.
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(a) Time and Place. The closing shall take place at 11:00 a.m.
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New 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
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Owner 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
the Equipment Notes to the Pass-Through Trustee 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 on or
prior to the Delivery Date; provided that, the Owner Trustee may satisfy a
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portion of such obligation to pay Lessor's Cost by repaying directly to any
lender the principal and interest on any pre-delivery deposit loans relating to
the Aircraft made by such lender to the Lessee; (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) accept the Bills of Sale for the
Aircraft; (iv) execute, and cause to be authenticated and delivered to each Loan
Participant with respect to each Pass-Through Trust Agreement, the Equipment
Notes specified, by reference to principal amounts, maturity dates and interest
rates, in the Indenture; (v) execute and deliver the Lease, the Lease
Supplement, the Indenture, 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.
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(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 CFM Warranty. 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) and
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(xix)(H) shall not be conditions precedent to the obligation of any Loan
Participant and Sections 3.01(q) 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
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the 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:
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(i) the Lease; provided that, only the Indenture Trustee
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shall receive the sole executed chattel paper original thereof;
(ii) Lease Supplement No. 1; provided that, only the
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Indenture Trustee shall receive the sole executed chattel paper
original thereof;
(iii) the Tax Indemnity Agreement; provided that, only
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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 CFM Warranty;
(viii) the Purchase Agreement Assignment and the Engine
Warranty Assignment;
(ix) the PAA Consent and the Engine Manufacturer's
Consent;
(x) the Equipment Notes dated the Delivery Date;
provided that, only the Subordination Agent shall receive the
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authenticated Equipment Notes, all other parties shall receive
photocopies;
(xi) the Bills of Sale;
(xii) the broker's report and insurance certificates
required by Section 9 of the Lease;
(xiii) 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
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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
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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);
(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, as Pass-Through
Trustee or Subordination Agent, as the case may be, 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) (I) ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
and General Counsel of the Lessee substantially in the form of Exhibit
A-1(a) hereto and (II) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special
North Carolina counsel to the
-8-
Lessee, substantially in the form of Exhibit A-1(b) hereto, in each
case addressed to the Owner Participant, the Owner Trustee, the Pass-
Through Trustee, the Subordination Agent, each Liquidity Provider and
the Indenture Trustee.
(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 Subordination Agent,
the Owner Trustee, the Pass- Through Trustee, each Liquidity Provider
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 Subordination Agent, the Pass-Through Trustee, each
Liquidity Provider and the Lessee;
(D) Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a Professional
Corporation, special counsel for the Indenture Trustee, Pass-Through
Trustee and Subordination Agent in the form of Exhibit A-4 hereto and
addressed to the Indenture Trustee, the Owner Participant, the
Subordination Agent, the Owner Trustee, the Pass-Through Trustee, each
Liquidity Provider 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 Subordination Agent, the
Owner Trustee, the Pass-Through Trustee, each Liquidity Provider and
the Lessee;
(F) special counsel for the Manufacturer, in a form
reasonably acceptable to the Owner Participant and addressed to the
Owner Participant, the Indenture Trustee, the Owner Trustee, the
Subordination Agent, the Pass-Through Trustee, each Liquidity Provider
and the Lessee;
(G) special counsel for the Engine Manufacturer, in a
form reasonably acceptable to the Owner Participant and addressed to
the Owner Participant, the Indenture Trustee, the Owner Trustee, the
Subordination Agent, the Pass-Through Trustee, each Liquidity Provider
and the Lessee;
(H) 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
(I) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special counsel for the
Owner Participant and Owner Participant Guarantor, and internal counsel
to the Owner Participant and Owner Participant Guarantor, substantially
in the forms of Exhibits
-9-
A-6 and A-7, addressed to the Indenture Trustee, the Owner Trustee, the
Pass- Through Trustee, each Liquidity Provider and the Lessee;
(xx) an Officer's Certificate of Lessee, dated as of the
Delivery Date, stating that the conditions to the purchase of the
Equipment Notes by the Pass- Through Trustee under the Pass-Through
Agreements have been duly satisfied or waived in accordance with its
terms; provided that only Owner Participant shall receive a copy of
--------
such Officer's Certificate; and
(xxi) the Owner Participant Guaranty, in form and substance
reasonably satisfactory to Lessee, Owner Trustee, Indenture Trustee and
the Trust Company.
(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, Subordination Agent, Pass-Through Trustee,
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].
(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.
(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.
-10-
(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.
(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) Note Purchase Agreement. The conditions precedent to
-----------------------
the obligations of the Loan Participants and the other requirements relating to
the Aircraft and the Equipment Notes set forth in the Note Purchase Agreement
shall have been satisfied.
-11-
(r) Perfected Security Interest. On the Delivery Date,
---------------------------
Section 3.01(l)(ii) and the financing statements referenced in after giving
effect to the filing of the documents 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.
(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) Trust Company Filing. The Trust Company shall have
--------------------
provided evidence that the filing required by Section 131.3 of the New York
Banking Law has been effected.
Section 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.
(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) and (t) 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.
(c) [Reserved].
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.
-12-
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 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);
-13-
(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 law, governmental rule or regulation 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 its ability to perform its obligations
under the Lessee Documents;
(h) except as disclosed in the Offering Memo, 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 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 3.12 of the Pass-Through Trust Agreements, the
representations and warranties contained in Section 5.01(a)(vii) and the
representations and warranties deemed to be made pursuant to Section 10.05 of
the Indenture and in reliance upon such representations and warranties, the
execution and delivery of this Agreement and the other Operative Agreements and
the consummation
-14-
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 Placement Agents and the Lessee
Advisor (as defined in Section 8.01(a)) referred to in Article 8 hereof;
(s) the Lessee represents and warrants that it has authorized
no one to act on its behalf in connection with the offer or sale of any interest
in the Equipment Notes or the Pass-Through Certificates other than the Placement
Agents;
(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 on or
prior to the date hereof, or (c) otherwise disclosed in writing by Lessee to the
Owner Participant prior to the date hereof;
-15-
(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 Pass-Through Trustee 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 or the Indenture Trustee 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 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:
-16-
(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 and each other party 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 and the Owner
Participant, 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 or the Owner Participant to register or qualify to do
business in such country;
(viii) no Liens (except Permitted Liens) 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);
-17-
(ix) none of the Owner Trustee, the Indenture Trustee
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 Owner Participant, 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 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
-18-
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; and
(xviii) Lessee shall deliver such request to Lessor and
Owner Participant in writing at least 20 days in advance of the date of
any such proposed change in registration.
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 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 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)
is a Section 1110 Person, so long as such status is a condition to the
availability of protection for the Lessor and the Indenture Trustee under
Section 1110, (iv) the benefits of Section 1110 available to the Owner Trustee
and the Indenture Trustee immediately prior to such transaction shall
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not be adversely affected as a result of such transaction, (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 Owner Participant 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 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 and the Indenture Trustee 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 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 during the Term:
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(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 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) Notice of Sublease. In the event that the Lessee
------------------
subleases the Aircraft pursuant to Section 5(b)(x) of the Lease, it shall give
notice of such sublease to each of (i) ▇▇▇▇▇'▇ Investor Service, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Rating Division
(facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇) and (ii) Standard & Poor's Ratings Services, a
division of the ▇▇▇▇▇▇-▇▇▇▇ Companies Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇).
(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
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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 or any Pass-Through
Certificate; provided that the Lessee may, if such purchase would reduce or
--------
eliminate any claim by the Owner Participant under Section 6.01(a)(x) or
7.01(a)(vii) purchase Pass-Through Certificates in an aggregate principal amount
not exceeding an amount equal to 20% of the aggregate principal amount of
Equipment Notes then outstanding.
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.
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 Delaware and
it has full corporate power, authority
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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, except for any such conflict,
breach or default which would not have a material adverse effect on the
Owner Participant or its ability to perform its obligations under the
Operative Agreements;
(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 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; and
-23-
(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.
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
Pass-Through Trustee 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 and 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 Indenture Trustee) 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 Indenture Trustee) (which counsel may be
in-house counsel) to the effect that such transferee and any guarantor of the
payment
-24-
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 or the Pass-Through Certificates, in each case assuming
that the Lessee and the Holders of the Equipment Notes and the Pass-Through
Certificates are U.S. Persons. 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 the
Indenture Trustee 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 Indenture
Trustee, it being acknowledged that by acceptance of the Owner Participant
Guaranty on the Delivery Date, the Lessee is not acknowledging that the form of
such Owner Participant Guaranty is acceptable if delivered by any party other
than the original Owner Participant Guarantor who executed and delivered such
Owner Participant Guaranty on the Delivery Date), 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 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
-------- -------
-25-
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 the Indenture Trustee, 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 in accordance with the provisions of
this Section 5.01(c), 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 Holder 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.
(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, the Pass-Through Trustee, 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
-26-
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,
the Pass-Through Trustee 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 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 the Owner
Participant that such lack of United States citizenship would have any adverse
effect on the Lessee, the Indenture Trustee, the Holders or the 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.
-27-
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) assuming due authorization, execution and
delivery by each other party thereto, 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,
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 each other party thereto, 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
-28-
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;
(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 Pass-Through Trustee, Subordination Agent, 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
-29-
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 and the Pass-Through Trustee 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, the Pass-
Through Trustee 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 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.
-30-
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 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, 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 of, any Federal or Maryland
governmental authority or agency governing its banking and 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
-31-
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 the Pass-Through Trustee
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 the Pass-Through Trustee 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
XIV 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.
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.
-32-
Section 5.08. Pass-Through Trustee's Representations and Warranties.
-----------------------------------------------------
The Pass-Through Trustee, in its individual capacity (except with respect to
clause (iii) below), represents and warrants as of the Delivery Date that:
(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 full corporate power and authority to enter
into and perform its obligations under the Pass-Through Trust
Agreements, the Intercreditor Agreement and this Agreement and to
execute and authenticate the Pass- Through Certificates to be delivered
on the Pass-Through Closing Date;
(ii) the execution, delivery and performance of this
Agreement, and the Pass-Through Trust Agreement and the performance of
its obligations hereunder and thereunder have been fully 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 bylaws or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it or its properties may be bound or affected;
(iii) each of this Agreement and the Pass-Through Trust
Agreement has been duly executed and delivered by it (in its individual
and trust capacities) 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 Pass-Through Trustee (in its individual and trust capacities),
enforceable in accordance with its respective terms except as limited
by bankruptcy, insolvency, moratorium, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and
(iv) there are no Taxes payable by the Pass-Through
Trustee imposed by the State of Maryland or any political subdivision
or taxing authority thereof in connection with the execution, delivery
and performance by the Pass-Through Trustee of this Agreement, any of
the Pass-Through Trust Agreements (other than franchise or other taxes
based on or measured by any fees or compensation received by the Pass-
Through Trustee for services rendered in connection with the
transactions contemplated by the Pass-Through Trust Agreements), and
there are no Taxes payable by the Pass-Through Trustee imposed by the
State of Maryland or any political subdivision thereof in connection
with the acquisition, possession or ownership by the Pass-Through
Trustee of any of the Equipment Notes other than franchise or other
taxes based on or measured by any fees or compensation received by the
Pass-Through Trustee for services rendered in connection with the
transactions contemplated by the Pass-Through Trust Agreements and,
assuming that the trusts created by the Pass-Through Trust Agreements
will not be classified as an association or a publicly traded
partnership taxable as a corporation for federal income tax purposes,
and assuming
-33-
that the assets of the trusts will be treated as held for investment
purposes as provided in each Pass-Through Trust Agreement, such trusts
will not be subject to any taxes (including, without limitation, net or
gross income, tangible or intangible property, net worth, capital,
franchise or doing business tax), fee or other governmental charge
under the laws of the State of Maryland or any political subdivision
thereof.
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 Pass-Through Trustee (in its
individual or trust capacity), the Indenture Trustee (in its individual or trust
capacity) and the Subordination Agent (in its individual or trust capacity)
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 Pass-Through Trustee 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 Holders 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 Holders 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, Make-Whole Premium, if
any, interest, and all other sums owing on all Outstanding Equipment
Notes (or on the Lessee's substituted
-34-
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;
(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 Holders 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) the Indenture Trustee shall have received a
certificate from the Lessee that no Specified Default exists as of the
effective date of such assumption;
(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 Holders, and (z) with respect to
the continued availability of the benefits of Section 1110 to the
Indenture Trustee for the benefit of the Holders with respect to the
Aircraft after giving effect to such assumption (but only to the extent
such benefits would have been available to the Holders 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
-35-
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; and
(vi) the Lessee shall (i) obtain a written confirmation
from each Rating Agency that such assumption will not result in a
withdrawal, suspension or downgrading of the ratings of any class of
Pass-Through Certificates, (ii) provides the Indenture Trustee with an
opinion of counsel (both counsel and opinion reasonably satisfactory to
the Indenture Trustee) that the Pass-Through Trusts will not be subject
to U.S. federal income tax as a result of such assumption and (iii)
furnishes to the Indenture Trustee either (A) an opinion of counsel
(both counsel and opinion reasonably satisfactory to the Indenture
Trustee) that the holders of the Pass-Through Certificates will not
recognize gain or loss for U.S. federal income tax purposes and will be
subject to U.S. federal income tax on the same amount and in the same
manner and at the same time as would have been the case if such
assumption had not occurred or (B) both an opinion of counsel (both
counsel and opinion reasonably satisfactory to the Indenture Trustee)
that the holders of the Pass-Through Certificates should not recognize
gain or loss for U.S. federal income tax purposes in connection with
such assumption and should be subject to U.S. federal income tax on the
same amount and in the same manner and at the same time as would have
been the case if such assumption had not occurred and an indemnity in
favor of the holders of the Pass-Through Certificates in form and
substance reasonably satisfactory to the Indenture Trustee.
(c) The Lessee shall pay all reasonable expenses (including
reasonable fees and expenses of counsel) of the Indenture Trustee, the Owner
Trustee, the Pass-Through Trustee, each Liquidity Provider 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, the Liquidity Providers and the Pass-Through Trustee 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 materially 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 materially 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, the Liquidity Providers and the Pass-Through
Trustee 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
-36-
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 Holders a valid first priority Lien with respect to, and a first and
prior perfected security interest in, the Indenture Estate.
Section 5.12. Subordination Agent's Representations, Warranties and
-----------------------------------------------------
Covenants.
----------
(a) Representations and Warranties. The Subordination
------------------------------
Agent represents and warrants as of the Delivery Date, that:
(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 this Agreement, the Liquidity Facilities
and the Intercreditor Agreement;
(ii) the execution, delivery and performance of this
Agreement, each of the Liquidity Facilities and the Intercreditor
Agreement and the performance of its obligations hereunder and
thereunder have been fully 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 bylaws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(iii) each of this Agreement, the Liquidity Facilities and
the Intercreditor Agreement 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 Subordination Agent,
enforceable in accordance with its respective terms except as limited
by bankruptcy, insolvency, moratorium, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(iv) there are no Taxes payable by the Subordination Agent
imposed by the State of Maryland or any political subdivision or taxing
authority thereof in connection with the execution, delivery and
performance by the Subordination Agent of this Agreement, any of the
Liquidity Facilities or the Intercreditor Agreement (other than
franchise or other taxes based on or measured by any fees or
compensation received by the Subordination Agent for services rendered
in connection with the transactions contemplated by the Intercreditor
Agreement or any of the Liquidity Facilities), and there are no Taxes
payable by the Subordination Agent imposed by the State of Maryland or
any political subdivision thereof
-37-
in connection with the acquisition, possession or ownership by the
Subordination Agent of any of the Equipment Notes other than franchise
or other taxes based on or measured by any fees or compensation
received by the Subordination Agent for services rendered in connection
with the transactions contemplated by the Intercreditor Agreement or
any of the Liquidity Facilities);
(v) to the best of the Subordination Agent's knowledge,
there are no pending or threatened actions or proceedings against the
Subordination Agent before any court or administrative agency which
individually or in the aggregate, if determined adversely to it, would
materially adversely affect the ability of the Subordination Agent to
perform its obligations under this Agreement, the Intercreditor
Agreement or any Liquidity Facility;
(vi) the Subordination Agent has not directly or
indirectly offered any Equipment Note for sale to any Person or
solicited any offer to acquire any Equipment Notes from any Person, nor
has the Subordination Agent authorized anyone to act on its behalf to
offer directly or indirectly any Equipment Note for sale to any Person,
or to solicit any offer to acquire any Equipment Note from any Person;
and the Subordination Agent is not in default under any Liquidity
Facility; and
(vii) the Subordination Agent is not directly or
indirectly controlling, controlled by or under common control with the
Owner Participant, the Owner Trustee, any Placement Agent or the
Lessee.
(b) Covenants.
---------
(i) The Subordination Agent agrees not to amend any
Liquidity Facility or the Intercreditor Agreement without the consent
of the Lessee.
(ii) At any time when directed by the Lessee, the
Subordination Agent shall replace any Liquidity Provider pursuant to
Section 3.6(e) of the Intercreditor Agreement. Except as otherwise
expressly provided in the Intercreditor Agreement, the Subordination
Agent shall not in any other instance replace any Liquidity Provider in
respect of any Liquidity Facility.
(iii) [Reserved].
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.
-38-
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, the Pass-Through Trusts, the Pass-
Through Certificates, 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 construction, mortgaging, financing,
refinancing, purchase, charter, rental, assignment, 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 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 (w)
received with respect to the Aircraft attributable to the transactions
contemplated by the Operative Agreements, (x) held by the Owner Trustee
under the Trust Agreement or after an Event of Default under the Lease,
(y) held by the Indenture Trustee under the Indenture or (z) held by
the Pass-Through Trustee under the Pass-Through Trust Agreement;
(iv) with respect to any Operative Agreement, any
interest therein or by reason of the transactions described in or
contemplated by the Operative Agreements;
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(v) the principal or interest or other amounts payable
with respect to the Equipment Notes;
(vi) the Pass-Through Certificates or 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.
(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 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
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from the indemnity described in Section 6.01(a) above any such Income
Taxes imposed on the Owner Participant or the Owner Trustee by any
jurisdiction (other than the United States or any state or local taxing
authority in any state in the United States) 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;
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(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 the Owner Trustee or the Owner
Participant or any successor, assign or Affiliate thereof which became
payable by reason of 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 a
transfer or disposition of shares or other interests in the Owner
Trustee or the Owner Participant (not including any transfers of any
Equipment Note pursuant to Section 13.01 (a) hereof) or a disposition
in connection with a bankruptcy or similar proceedings involving either
the Lessor or the Owner Participant or a transfer or disposition of
shares or other interests in the Owner Trustee or the Owner Participant
in each case other than (A) transfers resulting from a loss,
substitution or modification of the Aircraft, Engines or any Part, (B)
transfers pursuant to the Lessor's exercise of remedies in accordance
with Section 17 of the Lease, (C) termination of the Lease upon the
Lessee's exercise of Lessee options pursuant to Section 14 of the
Lease, or (D) a transfer to Lessee pursuant to Section 13(b) of the
Lease; the parties agree to cooperate to minimize any such Taxes
covered by this provision;
(vi) 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 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) hereof, 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
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connection with a bankruptcy, insolvency or other proceeding for the
relief of debtors in which the Lessee is a debtor, or (y) any
successor, assign or transferee of any interest of the Owner
Participant unless such successor, assign or transferee is a Non-U.S.
Person;
(viii) [Reserved];
(ix) Any Taxes which have been properly included in the
Purchase Price;
(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;
(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 other than Income Taxes that would not have
been imposed but for the existence or status of any trust used to hold
title to the Aircraft;
(xiii) 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), the Pass-Through Certificates, the Trust Estate or
the Trust Agreement;
(xiv) Taxes that are being contested in accordance with the
provisions hereof;
(xv) United States withholding Taxes imposed on an Owner
Participant as a result of such Owner Participant not being a U.S.
Person; 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. The Pass-Through Trustee shall withhold
-----------
any Taxes required by law to be withheld on payments to any holder of a Pass-
Through Certificate. The Indenture Trustee shall withhold any Taxes required to
be withheld on any payment to a Holder pursuant to Section 5.09 of the
Indenture. If the Indenture Trustee or the Pass-Through Trustee fails to
withhold a Tax required to be withheld with respect to any Holder of an
Equipment Note or any holder of a Pass-Through Certificate or any claim is
otherwise asserted by a taxing authority against the Owner Trustee or Owner
Participant for any withholding tax, unless the Owner Participant is an entity
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described in Section 6.13 the Lessee will indemnify the Owner Trustee and the
Owner Participant (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. The Indenture Trustee or the Pass-Through Trustee, as the case may be, in
its individual capacity (and without recourse to the Indenture Estate), shall
indemnify the Lessee (without regard to the exclusions set forth in Section
6.01(b) hereof) on an After-Tax Basis for any payment the Lessee shall have made
pursuant to the preceding sentence.
Section 6.02. After-Tax Basis. 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 with respect to Owner Participant, the Owner
Participant has not determined in good faith that claiming such benefit would
have a material adverse impact on the Owner Participant 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 has not occurred and is not continuing, such
Tax Indemnitee shall promptly pay to the Lessee, to the extent such tax benefit
was 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, such amount shall be
payable by any Tax Indemnitee to the Lessee upon the Lessee's curing all Events
of Default. 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
-43-
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 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 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
-------- -------
shall not be permitted or entitled to contest any Tax unless (A) such contest
will not result in the risk of
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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 the more than 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 acknowledged its liability for such claims, and (F) if
requested by the Owner Participant, independent tax counsel selected by Owner
Participant and reasonably acceptable to the Lessee has rendered an opinion
within 30 days of the Owner Participant providing notice of the claim to the
Lessee that a Reasonable Basis exists for contesting such claim; provided,
--------
further, that if the contest is being conducted in the name of the Owner
-------
Participant, the Lessee shall not be permitted to appeal any adverse decision to
the United States Supreme Court in the name of the Owner Participant without the
written consent of the Owner Participant.
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 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,
-------- -------
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
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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 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 decision to the United States Supreme
-46-
Court and provided that with respect to an appeal of an adverse judicial
decision a substantial basis in law and fact must exist that such appeal will be
successful. 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 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 fees and expenses
(including reasonable attorney's and accountant's fees) 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 Impaired. 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
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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 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
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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 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, such
amount shall be payable by any Tax Indemnitee to the Lessee upon the Lessee's
curing all Events of Default.
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
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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
-------- -------
the Lessee shall not make 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) with respect to Owner Participant, the Owner Participant has
determined in good faith that furnishing such form could not have a material
adverse impact on the Owner Participant 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
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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) 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 Pass-Through
Document or any transaction contemplated thereby;
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(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, 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 any Pass-Through Trust Agreement, or the
falsity or inaccuracy of any representation or warranty of the Lessee
in any of the Operative Agreements or any Pass-Through Trust Agreement
(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, any Pass-Through Certificate (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
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connection with the acquisition or holding of the Owner Participant's
interest in the Trust Estate or any Holder's interest in any Equipment
Note or any holder's interest in any Pass- Through Certificate.
(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
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;
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(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 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 or Pass-
Through Documents;
(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
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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 involves 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 Indenture
Estate 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,
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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 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.
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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" (as defined
in the Pass-Through Trust Agreements) will be paid or (ii) with respect to the
residual value of the Aircraft or any part thereof.
Section 7.11. Certain Transfers. If the Owner Participant (i) makes any
-----------------
claim for payment as a result of the indemnity provided by the Lessee in Section
6.01(a)(x) or 7.01(a)(vii), and (ii) such claim is the result of the direct or
indirect acquisition or holding of a Pass-Through Certificate by an ERISA Plan,
established or maintained by Owner Participant or any entity that is treated as
a single employer with Owner Participant under Section 414(b), (c), (m) or (o)
of the Code (an "ERISA Affiliate") or as to which Owner Participant or any ERISA
Affiliate of Owner Participant contributed or is a member, the Lessee shall have
the right, upon 30 days notice to the Owner Participant, to purchase the
Beneficial Interest, on a Termination Date specified in such notice, for a price
equal to the higher of (1) the Owner Participant's Share of Termination Value
and (2) the Owner Participant's Share of FMV. In connection with any such
purchase, the Lessee shall (i) obtain a written confirmation from each Rating
Agency that such purchase will not result in a withdrawal, suspension or
downgrading of the ratings of any class of Pass-Through Certificates and (ii)
pay all unpaid Supplemental Rent (including payment of such indemnity claim) due
on or before such Termination Date. The Lessee shall not have the right to
purchase the Beneficial Interest in any instance pursuant to the foregoing
sentence in the event the Owner Participant waives any claim for payment it may
have in such instance pursuant to clause (i) above. For purposes of this Section
7.11, "Owner Participant's Share of Termination Value" means the excess of (w)
the Termination Value as of such Termination Date, over (x) the aggregate
principal amount of Equipment Notes that would be outstanding on such
Termination Date (and accrued interest thereon at the Debt Rate) assuming all
payments of Basic Rent payable on or prior to such Termination Date shall have
been paid when due, and "Owner Participant's Share of FMV" means the Fair Market
Sales Value of the Aircraft as of such Termination Date, determined in
accordance with the definition thereof but assuming (y) that the Aircraft is
subject to the Lease, the Indenture, the indebtedness evidenced by the Equipment
Notes and the other Operative Agreements and (z) that the violation giving rise
to such indemnity claim has been cured. Nothing in this Section 7.11 shall
affect the obligation of the Lessee to make
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any payment of Supplemental Rent or Basic Rent due on or prior to such
Termination Date, the payment of which amount is a condition precedent to the
exercise by the Lessee of its rights under this Section 7.11; provided that, the
-------- ----
portion, if any, of Basic Rent payable on such Termination Date that is
specified in column (4) of Exhibit C-1 to the Lease as allocable to the
Allocation Period commencing on the day immediately following such Termination
Date shall, in connection with any purchase under this Section 7.11, be deemed
to be paid following such purchase, and accordingly the Owner Participant shall
have no interest in such portion of Basic Rent following such purchase.
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 offering of the Pass-Through Certificates contemplated by the
Placement Agreement and related 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 reasonable fees and expenses
of counsel for Owner Participant; (ii) the reasonable fees and expenses of the
respective counsel for the Lessee, the Owner Trustee, the Indenture Trustee, the
Manufacturer, the Engine Manufacturer, the Subordination Agent, the Pass-Through
Trustee, the Paying Agent, each Liquidity Provider and the Placement Agents
(other than those fees, expenses and disbursements payable by the Placement
Agent pursuant to the Placement Agreement); (iii) the reasonable fees and
expenses of special aviation counsel; (iv) any initial fees and expenses of the
Pass-Through Trustee and the initial fees and expenses of the Owner Trustee, the
Subordination Agent, the Paying Agent, the Indenture Trustee; (v) any
compensation, commissions and discounts payable to the Placement Agents pursuant
to the Placement Agreement; (vi) the fees and expenses incurred in connection
with printing any offering memorandum for the offering of the Pass-Through
Certificates and printing and duplication expense and any recording and filing
fees incurred in connection with the Operative Agreements; (vii) the fees and
expenses of ▇▇▇▇▇'▇ and S&P; (viii) the fees and expenses of The Seabury Group
LLC (the "Lessee Advisor"); (ix) any amounts paid in connection with any
appraisal report prepared for the Owner Participant; and (x) 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 (x) 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
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Lessor's Estate; (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; (iii) the continuing fees, expenses
and disbursements (including reasonable counsel fees and expenses) of the Pass-
Through Trustee, the Paying Agent and the Subordination Agent (including, (x) in
the case of the Pass-Through Trustee, (1) any reasonable fees, costs and
expenses incurred in connection with the preparation and filing of tax returns
or reports, including any schedule, if any, required to be filed on any Pass-
Through Trust (other than any such fees, costs or expenses which are incurred in
the normal course of the performance of the Pass-Through Trustee's duties and
for which the Pass-Through Trustee would not otherwise seek reimbursement from
the Pass-Through Trust) and (2) any reasonable fees, costs and expenses incurred
and any penalties incurred by the Pass-Through Trustee or imposed upon a Pass-
Through Trust relating to the failure to file any such tax return unless such
failure is the result of the gross negligence or willful misconduct of the Pass-
Through Trustee and (y) in the case of the Subordination Agent, any reasonable
fees and expenses incurred in connection with the replacement of any Liquidity
Provider as provided in the Intercreditor Agreement); and (iv) the continuing
fees, expenses and disbursements (including reasonable counsel fees and
expenses) of the Liquidity Providers as expressly provided in each Liquidity
Facility.
(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, the Subordination Agent, the
Liquidity Providers and the Pass-Through Trustee 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, 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 Holder 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.
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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, the Pass- Through Trustee 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 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
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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 HOLDERS
Section 10.01. Liabilities of the Owner Participant. The Owner
------------------------------------
Participant shall not have any obligation or duty to the Lessee or to any Holder
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 8.02 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 Holders of Equipment Notes. Each Holder of
--------------------------------------
an Equipment Note 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 Holder and all other sums payable to such Holder 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, the
Trust Agreement, the Intercreditor Agreement and the Liquidity Facilities.
Section 11.02. Pass-Through Trustee's and Subordination Agent's
------------------------------------------------
Acknowledgment. The Pass-Through Trustee and the Subordination Agent hereby
--------------
acknowledge and agree to be bound by all of the terms and conditions of the
Indenture, including without limitation, Section 8.02 thereof regarding the
rights of the Owner Participant to purchase the Equipment Notes under the
circumstances specified therein.
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
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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
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 and the Owner Participant;
(b) if to the Lessor or the Owner Trustee, to its office at One
▇▇▇▇▇▇ Square, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust Administration, telephone (▇▇▇) ▇▇▇-▇▇▇▇,
facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as the Lessor shall
from time to time designate in writing to the Lessee and the Indenture
Trustee, 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 and the Indenture Trustee;
(d) if to the Indenture Trustee, the Subordination Agent or the
Pass-Through Trustee, to its office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Mail
Code 101-591, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Corporate Trust
Department, telephone (▇▇▇) ▇▇▇-▇▇▇▇ facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to
such other address as the Indenture Trustee or the Pass-Through
Trustee, as the case may be, shall from time to time designate in
writing to the Owner Trustee, the Lessee and the Owner Participant; and
(e) if to the Liquidity Provider, to its office at ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇
▇▇▇▇, telephone (▇▇▇) ▇▇▇-▇▇▇▇ and facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such
other address as a Liquidity Provider shall from time to time designate
in writing to the Owner Trustee, the Lessee and the Indenture Trustee.
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
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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 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 Make-Whole Premium or other amounts
due under the Indenture).
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(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 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, Make-Whole Premium, 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
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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 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]
ARTICLE 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. 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.
The consent of each of the Pass-Through Trustee and the
Subordination Agent, in its capacity as a party to this Agreement and not as a
Holder, shall not be required to modify, amend or
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supplement this Agreement or to give any consent, waiver, authorization or
approval with respect to this Agreement under the circumstances in which the
consent of the Indenture Trustee would not be required for such modification,
amendment, supplement, consent, waiver or approval in accordance with Section
8.01(b) of the Indenture, provided that the Pass-Through Trustee and the
--------
Subordination Agent shall be entitled to receive an Opinion of Counsel (as
defined in the Pass- Through Trust Agreement) necessary, in its sole discretion,
to establish that the Indenture Trustee's consent would not be required under
such circumstances.
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 Subordination Agent and its successors and
permitted assigns, including without limitation each Holder of an Equipment
Note, 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 and the Pass-Through Trustee and its successors as Pass-Through
Trustee (and any additional Pass-Through trustee appointed).
Section 15.05. Concerning the Owner Trustee, Indenture Trustee and the
-------------------------------------------------------
Pass-Through Trustee. Each of Trust Company and Allfirst 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 but
solely as Owner Trustee under the Trust Agreement, in the case of Allfirst, not
in its individual capacity but solely as Indenture Trustee under the Indenture
and as Pass- Through Trustee under the Pass-Through Trust Agreement and as
Subordination Agent under the Subordination Agreement, and except as otherwise
expressly provided in this Agreement or in the Lease, the Indenture, the
Pass-Through Trust Agreement or the Trust Agreement, neither Trust Company nor
Allfirst 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 Allfirst 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 3.05 and 3.08 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.
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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 and each Holder agree 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 Holder, the
debtor, the Owner Trustee or the trustee of the debtor directly or indirectly on
account of any amount payable as Make-Whole Premium, 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 Holder or the Indenture Trustee actually receives any Recourse
Amount which reflects any payment by the Owner Participant on account of (ii)
above, then such Holder 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 Holder or the Indenture Trustee exceeds the amount which would have been
received by such Holder 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 the Indenture Trustee from enforcing any
individual obligation (and retaining the proceeds thereof) of the Owner
Participant under this Agreement or, any other 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 SHALL BE GOVERNED
-------------
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
(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
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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.
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. Reliance of Liquidity Providers. Each of the parties
-------------------------------
hereto agrees and acknowledges that each Liquidity Provider shall be a third
party beneficiary of each of the representations and warranties made herein by
such party (and of each covenant herein made by such party to each Liquidity
Provider), and that each Liquidity Provider may rely on such representations,
warranties and covenants to the same extent as if such representations,
warranties and covenants were made to such Liquidity Provider directly. The
terms of this Agreement shall inure to the benefit of each Liquidity Provider,
their respective successors and permitted assigns.
Section 15.11. Agreement Regarding Engine. The Indenture Trustee hereby
--------------------------
agrees for the benefit of the lessor or secured party of any engine (other than
the Engines) or of any airframe (other than the Airframe) leased to the Lessee
or purchased by the Lessee and subject to a conditional sale or other security
agreement, which lease or conditional sale or other security agreement (in the
case of any such airframe) also covers an engine or engines (other than the
Engines) owned by the lessor under such lease or subject to a security interest
in favor of the secured party under such conditional sale or other security
agreement, that the Indenture Trustee will not seek to acquire, claim, or
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exercise as against such lessor or secured party, any rights, title or interest
in any such engine as a result of such engine being installed on the Airframe at
any time while such engine is owned by such lessor or is subject to such
conditional sale or other security agreement or security interest in favor of
such secured party.
* * *
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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
SILVERMINE RIVER FINANCE ONE, INC.,
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,
Pass-Through Trustee and Subordination Agent
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
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Schedule I
Commitments
Participants Amount of Commitment
------------ --------------------
Silvermine River Finance One, Inc. * % of Lessor's Cost
----
2000-1A Pass-Through Trust * % of Lessor's Cost
----
2000-1B Pass-Through Trust * % of Lessor's Cost
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2000-1C Pass-Through Trust * % of Lessor's Cost
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________________________________
* Indicates information deleted for confidentiality purposes.
Schedule II
Wire Instructions
Silvermine River Finance One, Inc. ("Owner Participant")
Wire Transfer Instructions:
wire transfer of immediately available funds to:
Bank Name: Bankers Trust Company
Bank Address: New York, New York
ABA No.: *
T&I Depository Account, Account
Number *
Reference: *
or as otherwise specified by the Owner Participant.
________________________________
* Indicates information deleted for confidentiality purposes.