Note to Exhibit 10.2
The following Participation Agreement is substantially identical in
all material respects to three additional Participation Agreements except as
follows:
--------------------------------------------------------------------------------
Owner Participant Date Aircraft (Tail No.)
--------------------------------------------------------------------------------
NCC Charlie Company* September 10, 1998* N575ML*
--------------------------------------------------------------------------------
NCC Charlie Company September 10, 1998 N576ML
--------------------------------------------------------------------------------
General Electric Capital Corporation November 10, 1998 N577ML
--------------------------------------------------------------------------------
----------
* Filed document
================================================================================
PARTICIPATION AGREEMENT [N576ML]
Dated as of September 10, 1998
among
MIDWAY AIRLINES CORPORATION,
Lessee
NCC CHARLIE COMPANY
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
THE FIRST NATIONAL BANK OF MARYLAND,
Indenture Trustee
THE FIRST NATIONAL BANK OF MARYLAND,
Pass-Through Trustee
and
THE FIRST NATIONAL BANK OF MARYLAND
Subordination Agent
================================================================================
COVERING ONE CANADAIR REGIONAL JET SERIES 200ER
AIRCRAFT BEARING U.S. REGISTRATION NO. N576ML
TABLE OF CONTENTS
PAGE
----
ARTICLE I. INTERPRETATION................................................-2-
Section 1.01 Definitions.....................................-2-
Section 1.02 References......................................-2-
Section 1.03 Headings........................................-2-
Section 1.04 Appendices Schedules and Exhibits...............-3-
ARTICLE II. SALE, LEASING AND SECURED LOAN TRANSACTIONS...................-3-
Section 2.01 Participation...................................-3-
(a) Sale and Purchase...............................-3-
(b) Leasing.........................................-3-
(c) Owner Participant's Equity Investment...........-3-
(d) Secured Loan....................................-3-
(e) Delivery Date...................................-3-
Section 2.02 Closing Procedure...............................-4-
(a) Time and Place..................................-4-
(b) Actions of the Owner Trustee....................-4-
(c) Actions of the Lessee...........................-5-
ARTICLE III. CONDITIONS PRECEDENT..........................................-6-
Section 3.01 Conditions Precedent to Obligations
of Participant..................................-6-
(a) Notice..........................................-6-
(b) Delivery of Documents...........................-6-
(c) Airworthiness...................................-9-
(d) Other Commitments...............................-9-
(e) Violation of Law................................-9-
(f) [Reserved]......................................-10-
(g) No Event of Default.............................-10-
(h) No Event of Loss................................-10-
(i) Title...........................................-10-
(j) Certification...................................-10-
(k) Section 1110....................................-10-
(l) Filings.........................................-10-
(m) Financing Statements............................-10-
(n) Precautionary Financing Statements..............-10-
(o) No Proceedings..................................-11-
(p) Governmental Action.............................-11-
(q) Note Purchase Agreement.........................-11-
(r) Perfected Security Interest.....................-11-
(s) Representations and Warranties..................-11-
-i-
Section 3.02 Conditions Precedent to Obligations
of Lessee ......................................-11-
(a) Documents.......................................-11-
(b) Other Conditions Precedent......................-12-
(c) [Reserved]......................................-12-
Section 3.03 Post-Registration Opinion.......................-12-
ARTICLE IV. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS.............-12-
Section 4.01 Lessee's Representations and Warranties.........-12-
Section 4.02 Certain Covenants of Lessee.....................-15-
(a) Filings and Recordings..........................-15-
(b) Registration....................................-16-
(c) Information.....................................-18-
(d) Corporate Existence.............................-18-
(e) Merger and Consolidation........................-18-
(f) Change of Location..............................-19-
(g) Financial Statements............................-20-
(h) Notice of Sublease..............................-20-
(i) Filing of Documents.............................-21-
(j) Annual Foreign Opinion..........................-21-
(k) Lessee's Agreement Regarding Debt...............-21-
Section 4.03 Survival of Representations and
Warranties......................................-21-
ARTICLE V. 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..................................-23-
(c) Assignment of Interests of Owner
Participant.....................................-24-
(d) Actions with Respect to Lessor's Estate,
Etc.............................................-25-
(e) Citizenship.....................................-25-
Section 5.02 Citizenship.....................................-26-
(a) Generally.......................................-26-
(b) Owner Trustee...................................-26-
Section 5.03 Representations, Warranties and Covenants
of Trust Company and the Owner Trustee..........-27-
(a) Representations and Warranties..................-27-
(b) Lessor's Liens..................................-29-
(c) Indemnity for Lessor's Liens....................-29-
(d) Securities Act..................................-29-
(e) Actions With Respect to Lessor's Estate,
Etc.............................................-29-
(f) Other Business..................................-29-
(g) Performance of Agreements.......................-29-
-ii-
Section 5.04 Representations, Warranties and Covenants of
the Indenture Trustee............................-30-
(a) Representations and Warranties...................-30-
(b) Indenture Trustee's Liens........................-31-
(c) Indemnity for Indenture Trustee's Liens..........-31-
Section 5.05 Indenture Trustee's Notice of Default............-31-
Section 5.06 Releases from Indenture..........................-31-
Section 5.07 The Lessee's Right of Quiet Enjoyment............-31-
Section 5.08 Pass-Through Trustee's Representations and
Warranties.......................................-31-
Section 5.09 Survival of Representations, Warranties and
Covenants........................................-33-
Section 5.10 Lessee's Assumption of the Equipment Notes.......-33-
Section 5.11 Compliance with Trust Agreement, Etc.............-35-
Section 5.12 Subordination Agent's Representations, Warranties
and Covenants....................................-35-
(a) Representations and Warranties...................-35-
(b) Covenants........................................-37-
Section 5.13 Amendments to the Indenture......................-37-
ARTICLE VI. TAXES.........................................................-37-
Section 6.01 Lessee's Obligation to Pay Taxes.................-37-
(a) Generally........................................-37-
(b) Exceptions.......................................-39-
(c) Withholding......................................-41-
Section 6.02 After-Tax Basis..................................-42-
Section 6.03 Time of Payment..................................-43-
Section 6.04 Contests.........................................-43-
(a) Notice of Claim..................................-43-
(b) Request for Contest..............................-43-
(c) Declining to Contest; Settlement.................-46-
(d) Continuing Claims................................-46-
(e) Claims Barred....................................-47-
Section 6.05 Refunds..........................................-47-
Section 6.06 Reports..........................................-47-
Section 6.07 Survival of Obligations..........................-48-
Section 6.08 Payment of Taxes.................................-48-
Section 6.09 Reimbursements by Indemnitees Generally..........-48-
Section 6.10 Forms............................................-48-
Section 6.11 Verification.....................................-49-
Section 6.12 Non-Parties......................................-49-
Section 6.13 Foreign Tax On Loan Payments.....................-49-
ARTICLE VII. GENERAL INDEMNITY ............................................-49-
Section 7.01 Generally........................................-49-
(a) Indemnity........................................-49-
-iii-
(b) Exceptions.....................................-51-
Section 7.02 Notice and Payment.............................-52-
Section 7.03 Defense of Claims..............................-53-
Section 7.04 Insured Claims.................................-53-
Section 7.05 Subrogation....................................-54-
Section 7.06 Information....................................-54-
Section 7.07 Survival of Obligations........................-54-
Section 7.08 Effect of Other Indemnities....................-54-
Section 7.09 Waiver of Certain Claims.......................-54-
Section 7.10 Certain Limitations............................-55-
Section 7.11 Certain Transfers..............................-55-
ARTICLE VIII. TRANSACTION COSTS............................................-56-
Section 8.01 Transaction Costs and Other Costs..............-56-
(a) Transaction Costs..............................-56-
(b) Continuing Expenses............................-56-
(c) Amendments and Supplements.....................-56-
ARTICLE IX. SUCCESSOR OWNER TRUSTEE .....................................-57-
Section 9.01 Appointment of Successor Owner Trustee.........-57-
(a) Resignation and Removal........................-57-
(b) Conditions to Appointment......................-57-
ARTICLE X. LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND
HOLDERS......................................................-58-
Section 10.01 Liabilities of the Owner Participant...........-58-
Section 10.02 Interest of Holders of Equipment Notes.........-58-
ARTICLE XI. OTHER DOCUMENTS..............................................-58-
Section 11.01 Consent of Lessee to Other Documents...........-58-
Section 11.02 Pass-Through Trustee's and Subordination
Agent's Acknowledgment.........................-59-
-iv-
ARTICLE XII. NOTICES.......................................................-59-
Section 12.01 Notices.........................................-59-
ARTICLE XIII. REFINANCING...................................................-60-
Section 13.01 Refinancing.....................................-60-
ARTICLE XIV. PUBLICITY.....................................................-63-
Section 14.01 Publicity.......................................-63-
ARTICLE XV. MISCELLANEOUS ................................................-63-
Section 15.01 Counterparts....................................-63-
Section 15.02 No Oral Modifications...........................-63-
Section 15.03 Captions........................................-63-
Section 15.04 Successors and Assigns..........................-64-
Section 15.05 Concerning the Owner Trustee, Indenture
Trustee and the Pass-Through Trustee............-64-
Section 15.06 Severability....................................-64-
Section 15.07 Certain Limitations on Reorganization...........-64-
Section 15.08 GOVERNING LAW...................................-65-
Section 15.09 Section 1110 Compliance.........................-66-
Section 15.10 Reliance of Liquidity Providers.................-66-
-v-
Schedule I Commitments
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 & ▇▇▇▇▇▇▇▇, as
special counsel to the Owner Trustee
Exhibit A-5 Form of Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C.
Exhibit A-6 Form of Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special counsel for the
Owner Participant and the Owner Participant Guarantor
Exhibit A-7 Form of Opinion of Counsel to the Owner Participant and the
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 and the
Owner Participant Guarantor in respect of the Assignment and
Assumption Agreement
-vi-
PARTICIPATION AGREEMENT [N576ML] dated as of September 10, 1998
(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"), NCC CHARLIE COMPANY, a Delaware corporation (together with its
successors and permitted assigns, the "Owner Participant"), THE FIRST NATIONAL
BANK OF MARYLAND, a national banking association, as indenture trustee under the
Indenture referred to below (together with its successors and permitted assigns,
the "Indenture Trustee"), THE FIRST NATIONAL BANK OF MARYLAND, a national
banking association, as pass-through trustee of four separate Pass-Through
Trusts (together with its successors and permitted assigns, the "Pass-Through
Trustee"), and THE FIRST NATIONAL BANK OF MARYLAND, a national banking
association, as subordination agent (together with its successors and permitted
assigns, the "Subordination Agent").
W I T N E S S E T H:
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof.
WHEREAS, pursuant to the Purchase Agreement the Manufacturer agreed
to manufacture and sell to the Lessee and the Lessee agreed to purchase from the
Manufacturer the Aircraft; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant and First Union Trust Company, National
Association, are entering into the Trust Agreement whereby, among other things,
First Union Trust Company, National Association, is appointed as Owner Trustee
and has undertaken to acquire and hold the Trust Estate in trust for the benefit
of the Owner Participant; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Owner Trustee is willing to purchase the Aircraft from the Seller for immediate
lease to the Lessee pursuant to the Lease; and
WHEREAS, subject to the terms and conditions of this Agreement and
the Trust Agreement, the Owner Participant is willing to make the equity
investment provided for herein to fund such purchase by the Owner Trustee; and
WHEREAS, the Owner Trustee and the Indenture Trustee are
concurrently entering into the Indenture for the benefit of the 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
-1-
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 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 Warranties (as defined in the Engine Warranty
Assignment), respectively; and
WHEREAS, to induce the Owner Participant to make the equity
investment provided for herein to fund the purchase of the Aircraft by the Owner
Trustee from the Seller, the Manufacturer has agreed to enter into the Residual
Agreement [N576ML], dated as of September 10, 1998 (the "Residual Agreement")
with the Owner Participant and to undertake the obligations provided therein;
and
WHEREAS, to induce the Owner Trustee to purchase the Aircraft and to
enter into the Lease, Investissement-Quebec, as agent of the Government of the
Province of Quebec (the "Deficiency Obligor") has agreed to enter into the
Deficiency Agreement [N576ML], dated as of September 10, 1998 (the "Deficiency
Agreement") with the Owner Trustee and the Owner Participant and to undertake
the obligations provided therein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration and receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:
ARTICLE I.
INTERPRETATION
Section 1.1 Definitions. Capitalized terms used herein and defined
in 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 1.2 References. References in this Agreement to sections,
paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.
-2-
Section 1.3 Headings. The headings of the various sections,
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 1.4 Appendices Schedules and Exhibits. The appendices,
schedules and exhibits are part of this Agreement.
ARTICLE II.
SALE, LEASING AND SECURED LOAN TRANSACTIONS
Section 2.1 Participation. Subject to all of the terms and
conditions of this Agreement, the parties agree to participate in the sale,
leasing and secured loan transactions with respect to the Aircraft provided for
in this Section 2.
(a) Sale and Purchase. The Owner Trustee agrees to purchase the
Aircraft from the Seller on the Delivery Date for a purchase price equal to
Lessor's Cost.
(b) Leasing. The Owner Trustee agrees to lease to the Lessee, and
the Lessee agrees to lease from the Owner Trustee, the Aircraft pursuant to the
Lease, such leasing to take place concurrently with the purchase of the Aircraft
by the Owner Trustee on the Delivery Date.
(c) Owner Participant's Equity Investment. The Owner Participant
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") by paying such amount to the
Owner Trustee prior to the time of closing on the Delivery Date at the account
specified by the Lessee 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). Such funds, once so applied, shall constitute an equity
investment by the Owner Participant in the Trust Estate.
(d) Secured Loan. Each Loan 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 (each such
commitment being referred to as 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 Lessee 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 Loan Participants). Such funds, once so
applied, shall constitute a loan to the Owner Trustee to be evidenced by the
Equipment Notes and secured as provided in the Indenture.
-3-
(e) Delivery Date. The "Delivery Date" shall be the date fixed 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
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 Commitments at the
closing shall be deemed a waiver of notice of the Delivery Date by such Loan
Participants respectively and the Indenture Trustee.
Section 2.2 Closing Procedure.
(a) Time and Place. The closing shall take place at 11:00 a.m. 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 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 Trust Indenture Estate to the Indenture
Trustee. To accomplish such transactions, the Owner Trustee shall, concurrently
with the actions of the Lessee pursuant to
-4-
Section 2.02(c), take the following actions: (i) pay or cause to be paid an
amount equal to Lessor's Cost to the Lessee 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; (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 and the Indenture Supplement; (vi) deliver the
Aircraft to the Lessee pursuant to the Lease; and (vii) execute and deliver all
other documents or certificates and take such other actions as may be required
of the Owner Trustee on or before the Delivery Date pursuant to any Operative
Agreement. In addition, the Owner Trustee shall take such actions as may be
requested by the Lessee to effect the due registration of the Aircraft with the
FAA in the name of the Owner Trustee and to file and perfect the security
interest of the Indenture Trustee in all or any part of the Indenture Estate.
(c) Actions of the Lessee. Upon satisfaction or waiver by the Lessee
of the conditions precedent set forth in Section 3.02, the Lessee shall on the
Delivery Date sell the Aircraft (or cause the Aircraft to be sold) to the Owner
Trustee, lease the Aircraft from the Owner Trustee pursuant to the Lease, assign
to the Owner Trustee pursuant to the Purchase Agreement Assignment certain of
the Lessee's rights and interests in and to the Purchase Agreement and assign to
the Owner Trustee pursuant to the Engine Warranty Assignment the Lessee's rights
and interests in and to the Warranties (as defined in the Engine Warranty
Assignment). To accomplish such transactions the Lessee shall, concurrently with
the actions of the Owner Trustee pursuant to Section 2.02(b), take the following
actions:
(i) execute and deliver the Lease and the Lease Supplement;
(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.
-5-
ARTICLE III.
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Obligations of Participants. The
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
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), (xii),
(xix)(H) and (xx) shall not be conditions precedent to the obligation of 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 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:
(i) the Lease; provided that, only the Indenture Trustee shall
receive the sole executed chattel paper original thereof;
(ii) Lease Supplement No. 1; provided that, only the Indenture
Trustee shall receive the sole executed chattel paper original thereof;
(iii) the Tax Indemnity Agreement; provided that, only Owner
Participant and Lessee shall receive copies of the Tax Indemnity
Agreement;
(iv) the Trust Agreement;
(v) the Indenture;
(vi) Indenture Supplement No. 1;
(vii) the Purchase Agreement and the Manufacturer's invoice
with respect to the Aircraft;
(viii) the Purchase Agreement Assignment and the Engine
Warranty Assignment;
-6-
(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 authenticated
Equipment Notes;
(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 GRA Aviation
Specialists, Inc., which appraisal or appraisals shall be satisfactory in
form and substance to Owner Participant; provided, that only Owner
Participant shall receive copies of such appraisal or appraisals;
(xiv) 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, FNBM and Trust Company as to the person or
persons authorized to execute and deliver the relevant Operative
Agreements on behalf of such party; and (C) a copy of the Certificate of
Incorporation or Articles of Incorporation or Articles of Association and
By-Laws and general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization of
Owner Participant, FNBM and Trust Company, certified as of the Delivery
Date by the Secretary or an Assistant Secretary of Owner Participant, FNBM
and Trust Company, respectively, which authorize the execution, delivery
and performance by Owner Participant, FNBM 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
-7-
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 FNBM, dated as of the
Delivery Date, stating that its representations and warranties, in its
individual capacity or as Indenture Trustee, a 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
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 & ▇▇▇▇▇▇▇▇, 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;
-8-
(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 Pass-Through Trustee, each Liquidity
Provider and the Lessee;
(G) 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 Pass-Through Trustee, each Liquidity
Provider and the Lessee;
(H) in the case of the Owner Participant only, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP,
tax counsel to the Owner Participant, addressed to the Owner Participant, with
respect to tax matters;
(I) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, special counsel for the Owner Participant
and the Owner Participant Guarantor, and the Counsel to the Owner Participant
and the Owner Participant Guarantor, substantially in the forms of Exhibits A-6
and A-7, addressed to the Indenture Trustee, the Owner Trustee, the Pass-Through
Trustee, each Liquidity Provider and the Lessee;
(J) counsel for the Deficiency Obligor, in a form reasonably
acceptable to the Owner Participant and addressed to the Owner Participant;
(K) counsel for the Seller, in a form reasonably acceptable to the
Owner Participant and addressed to the Owner Participant;
(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;
(xxi) the Deficiency Agreement shall be in full force and
effect; and
(xxii) the Residual Agreement shall be in full force and
effect.
(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
-9-
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 any Loan Participant, to acquire an
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 even
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.
(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
-10-
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.
(r) Perfected Security Interest. On the Delivery Date, after giving
effect to the filing of the documents referenced in Section 3.01(l)(ii) and the
financing statements referenced in Sections 3.01(m) and (n), the Indenture
Trustee shall have received a duly perfected first priority security interest in
all of Owner Trustee's right, title and interest in the 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.
Section 3.2 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.
-11-
(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) 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 3.3 Post-Registration Opinion. Promptly upon the
registration of the Aircraft and the recordation of the Documents referenced in
Section 3.01(l)(ii), Lessee will direct ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special counsel in
Oklahoma City, Oklahoma, to deliver to Lessee, each Participant, Owner Trustee
and the Indenture Trustee a favorable opinion or opinions addressed to each of
them with respect to such registration and recordation.
ARTICLE IV.
LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.1 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 Durham, North Carolina, 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 an "air carrier" within the meaning of the
Transportation Code and a holder of a certificate under Section 41102(a) of the
Transportation Code and a "citizen of the United States" within the meaning of
-12-
Section 40102(a)(15) of the Transportation Code holding an "air carrier
operating certificate" issued under Chapter 447 of the Transportation Code for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of
cargo, and each such certificate is in full force and effect;
(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 Sections 3.01(b)(xviii)(E) and the filings referred to in
Section 3.01(l)(ii);
(g) neither the execution, delivery or performance by the Lessee of
the Lessee Documents nor compliance with the terms and provisions hereof or
thereof, conflicts or will conflict with or results or will result in a breach
or violation of any of the terms, conditions or provisions of, or will require
any consent (other than the PAA Consent and the Engine Manufacturer's Consent)
or approval under, any 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;
-13-
(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 Trust 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 of the representations contained in Section
3.12 of the Pass-Through Trust Agreements and compliance with Section 10.05 of
the Indenture, the execution and delivery of this Agreement and the other
Operative Agreements and the consummation of the transactions contemplated
hereby and thereby will not involve any prohibited transaction within the
meaning of Section 406(a) of ERISA or Section 4975(c)(1)(A) through (D) of the
Code;
(m) all premiums which have become due with respect to the insurance
required to be provided by the Lessee on or prior to the Delivery Date under
Section 9 of the Lease have been paid by the Lessee;
(n) no Default or Event of Default exists and no Event of Loss, or
event which with the passage of time would constitute an Event of Loss, exists;
(o) the Aircraft is in such condition so as to enable the
airworthiness certificate of such Aircraft to be in good standing under the
Transportation Code; the Aircraft has been duly certificated by the FAA as to
type and airworthiness; there is in effect with respect to the Aircraft a
current and valid airworthiness certificate issued by the FAA pursuant to the
Transportation Code;
-14-
(p) the Lessee shall not be 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
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 to the Owner
Participant;
(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;
(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; and
-15-
(x) Lessee is not an "investment company" or a company controlled by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 4.2 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
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:
(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 (including the
reasonable fees and expenses of local counsel in such country) relating to
such 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
-16-
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
Indenture Trustee's Lien thereon;
(iv) the obligations of the Lessee (and of the Permitted
Sublessee under a Sublease) and the rights and remedies of the Lessor and
the Owner Participant under the Operative Agreements shall remain or be,
as the case may be, legal, valid, binding and enforceable in such country;
(v) the Lessee shall ensure that all insurance required by
Section 9 of the Lease shall be in full force and effect prior to, at the
time of, and after such change in registration 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 enforcing remedies contained in the
Lease or the Indenture or the related Sublease 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;
(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
-17-
the Owner Trustee or the Indenture Trustee, it being agreed that the
Lessee shall be responsible for the cost thereof;
(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) 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) and (xiii);
(xvi) 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
(xvii) 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; and
(xviii) the Deficiency Agreement and the Residual Agreement
shall remain in full force and effect.
-18-
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 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 Section 1110, (iv) if not the Lessee, executes a duly
authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Trustee and Owner Participant,
containing an effective assumption of all of the Lessee's, as applicable,
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, (v) provides an
opinion from counsel (which counsel may be in 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 (iv) above comply with this Section 4.02(e), that such instrument 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 (vi) 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; provided that, no such merger, consolidation or
conveyance, transfer or lease shall be permitted if, immediately after
-19-
giving effect to such consolidation, merger, purchase, conveyance, transfer,
lease or other disposition, an Event of Default shall have occurred and be
continuing.
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 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 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; provided that, notice is hereby given that the Lessee plans to so change
such address on or about March 1, 1999 to: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(g) Financial Statements. The Lessee agrees to furnish to the Owner
Participant during the Term:
(i) within 60 days after the end of each of the first three
fiscal quarters in each fiscal year of the Lessee, unaudited consolidated
balance sheets of the Lessee and its subsidiaries (if any) as of the end
of such quarter and related consolidated statements of income,
shareholder's equity and cash flows of the Lessee and its subsidiaries (if
any) for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, provided that so long as the Lessee
is subject to the reporting provisions of the Securities Exchange Act of
1934, a copy of the Lessee's quarterly report on Form 10-Q will satisfy
this requirement;
(ii) within 120 days after the end of each fiscal year of the
Lessee, a copy of the annual report for such year for the Lessee or the
affiliated group of which the Lessee is a member (on a consolidated basis,
if applicable) and a balance sheet of the Lessee and its subsidiaries (if
any) as of the end of such
-20-
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 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.: (212)
533-1607) and (ii) Standard and Poor's Rating Agency, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (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 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 UCC 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
-21-
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 4.3 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 V.
OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.1 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 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 ccorporate action on its part and,
do not require any governmental approvals that would be required to be
obtained by the Owner Participant;
-22-
(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, or will require any consent
or approval under 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 or results or will
result in the imposition of any Lien upon any of its properties, 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;
(vii) the funds to be used by the Owner Participant to acquire
its interests under this Agreement do not constitute assets (within the
meaning of ERISA and any applicable rules and regulations) of an ERISA
Plan; and
-23-
(viii) the Owner Participant Guarantor is a corporation with a
combined capital and surplus or net worth of at least $50,000,000.
Notwithstanding the foregoing or anything else contained in this
Agreement, the Owner Participant makes no representation or warranty in this
Agreement with respect to laws, rules or regulations relating to aviation or to
the nature or use of the equipment owned by the Owner Trustee, including,
without limitation, the airworthiness, value, condition, workmanship, design,
patent or trademark infringement, operation, merchantability or fitness for use
of the Aircraft, other than such laws, rules or regulations relating to the
citizenship requirements of the Owner Participant under applicable aviation law.
(b) Lessor's Liens. The Owner Participant represents, warrants and
covenants that on the Delivery Date there are no Lessor's Liens attributable to
it (or an Affiliate thereof). The Owner Participant agrees with and for the
benefit of the Lessee, the Owner Trustee, the Indenture Trustee and the
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 Trust 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 institutional investor or an Affiliate of an institutional
investor 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 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
-24-
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 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, 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), 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 shall expressly
agree to assume all obligations of the Owner Participant under the Trust
Agreement and this Agreement and (c) provide representations, warranties, and
covenants substantially similar to those contained in clauses (a), (c) and (f)
of this Section 5.01; 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
-25-
aircraft directly and not as a result of the transfer to such entity of any
aircraft subject to an existing lease with Lessee; provided that Lessee's
consent shall not be required if an Event of Default shall have occurred and be
continuing at the time of such transfer; and provided further that neither such
transferee nor any Affiliate thereof shall (x) be a party to any material
litigation or arbitration (whether as plaintiff or defendant) with the Lessee or
any Affiliate of the Lessee or (y) be attempting a hostile takeover of the
Lessee or any Affiliate of the Lessee. A transferee hereunder shall be a Citizen
of the United States or has established a voting trust, voting powers or other
arrangement reasonably satisfactory to 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 as above provided, the transferee shall
be deemed the "Owner Participant" for all purposes of the Operative Agreements,
and shall be deemed to have acquired the same interest in the Lessor's Estate as
theretofore held by its transferor; and each reference therein to the "Owner
Participant" shall thereafter be deemed a reference to such transferee. 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.
(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
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
-26-
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 and this Agreement, 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 5.2 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 any Owner
Participant that such lack of United States citizenship would have any adverse
effect on the Lessee, the Indenture Trustee, the Holders or any Owner
Participant. The Owner Trustee, in its individual capacity, further covenants
that if at any time it appears reasonably probable that it will cease to be a
Citizen of the United States based on information that is (i) known to a
Responsible Officer of the Owner Trustee or (ii) generally known to the public,
it will promptly so notify, to the extent permitted by law, all parties to this
Agreement.
Section 5.3 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),
-27-
(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, 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 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
-28-
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 UCC) 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 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 Trust 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 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
-29-
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) hereof.
(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 5.4 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 national banking association duly organized and
validly existing in good standing under the laws of the United States of
America 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 association 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 Trust Indenture Estate; and
-31-
(vi) there are no pending or, to the knowledge of the
Indenture Trustee, threatened actions or proceedings against the Indenture
Trustee before any court, administrative agency or tribunal which, if
determined adversely to the Indenture Trustee, would materially adversely
affect the ability of the Indenture Trustee to perform its obligations
under any of the Operative Agreements to which it is a party.
(b) Indenture Trustee's Liens. The Indenture Trustee, in its
individual capacity, represents, warrants and covenants that there are no
Indenture Trustee's Liens on the Delivery Date. The Indenture Trustee, in its
individual capacity, covenants and agrees that it will not directly or
indirectly create, incur, assume or suffer to exist any Indenture Trustee's Lien
and that it will at its own expense take such action as may be necessary to duly
discharge and satisfy in full, promptly, and in any event within 30 days, after
the same shall first become known to it, any Indenture Trustee's Liens.
(c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee,
in its individual capacity, agrees to indemnify and hold harmless the Lessee,
the Owner Participant, the Owner Trustee and 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 Trust 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 5.5 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 5.6 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 5.7 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
-32-
Term, provided that nothing contained herein shall affect any of the rights of
the Owner Participant, the Owner Trustee or the Indenture Trustee expressly
granted to such Person under any Operative Agreement.
Section 5.8 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 national banking association duly organized and
validly existing in good standing under the laws of the United States of
America 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 association, 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
-33-
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 taxable as corporations, but, rather, will be classified as grantor
trusts under subpart E, Part I of Subchapter J of the Code or as a
partnership under Subchapter K of the Code, and assuming 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 5.9 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 pursuant
to the terms of the Operative Agreements, 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
-34-
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 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 (or, if the Lease
has not been entered into, the form of Lease attached hereto as Exhibit
A-2 to the Note Purchase Agreement) 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 (or such form, as the case may be) and covenants substantially
identical to the covenants of the Lessee hereunder and under the Lease (or
such form, as the case may be);
(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 Trust 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);
-35-
(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; and
(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
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.
(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
-36-
including, without limitation, conveyances, financing statements and
continuation statements with respect to financing statements and take such
further action as the Indenture Trustee may from time to time reasonably request
in order to protect the rights and remedies created or intended to be created in
favor of the Indenture Trustee under the Indenture and to create for the benefit
of the Holders a valid first priority Lien with respect to, and a first and
prior perfected security interest in, the Trust 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 national banking association duly organized and
validly existing in good standing under the laws of the United States of
America 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
association, 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
-37-
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 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) In connection with the deposit in the applicable Cash
Account of amounts drawn pursuant to any Downgrade Drawing or
Non-Extension Drawing (as defined in the Liquidity Facility) under a
Liquidity Facility, the Subordination Agent agrees, so long as no Event of
Default shall have occurred and be continuing, to pay to the Lessee
promptly following each Regular Distribution Date any Investment Earnings
on the amount so deposited
-38-
which remain after application of such Investment Earnings pursuant to
Section 2.06 of such Liquidity Facility to the interest payable on such
Downgrade Drawing under Section 3.07 of such Liquidity Facility.
Capitalized terms used in this Section 7.01(b) shall have the meanings
specified in the Intercreditor Agreement.
Section 5.13 Amendments to the Indenture.
Each of the Owner Trustee and the Indenture Trustee agrees that it
will not during the Term enter into any amendment or supplement to the Indenture
without the prior consent of the Lessee, if such amendment or supplement would
have the effect of limiting any right or of increasing any obligation or
liability of the Lessee under the terms of the Lease or any other Operative
Agreement.
ARTICLE VI.
TAXES
Section 6.1 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 Trust 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,
-39-
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;
(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 Trust 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:
-40-
(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") imposed by
the United States or by any state, local or foreign jurisdiction in which
such Tax Indemnitee is subject to tax without regard to the transactions
contemplated by the Operative Agreement, provided, however, that this
clause shall not exclude from the indemnity described in Section 6.01(a)
above any such Income Taxes to be imposed 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, (it being understood that any such indemnity for Income Taxes
not excluded from the indemnity described in Section 6.01(a) shall be
payable only to the extent of the net harm incurred by the Tax Indemnitee
from such Income Taxes, taking into account any incremental Tax benefit in
another tax jurisdiction resulting from payment of such Income Taxes);
(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, (B) the
expiration of the Term of the Lease or (C) the termination of the Lease in
accordance with the applicable provisions of the Lease thereof;
(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
-41-
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) Other than with respect to the Owner Trustee or Owner
Participant, Taxes imposed on a successor, assign or other transferee of
any interest of such Tax Indemnitee (including, without limitation, a
transferee which is a new lending office of an original Tax Indemnitee) to
the extent that such Taxes would not have been imposed on the original Tax
Indemnitee or exceed the amount of Taxes that would have been imposed and
would have been indemnifiable pursuant to Section 6.01(a) hereof had there
not been a succession, assignment or other transfer by such original Tax
Indemnitee of any such interest of such Tax Indemnitee in the Aircraft or
any Part, any interest in or under any Operative Agreement, or any
proceeds thereunder unless such sale, assignment, transfer or disposition
occurs in connection with the exercise of Lease remedies;
(viii) Other than with respect to the Owner Trustee or the
Owner Participant, Taxes imposed by any jurisdiction that would not have
been imposed on the Owner Trustee or the Owner Participant but for the
activities or the status of the Owner Trustee or the Owner Participant in
such jurisdiction unrelated to the transactions contemplated by the
Operative Agreements;
(ix) Any Taxes which have been properly included in the
Purchase Price;
-42-
(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; or
(xv) United States withholding Taxes imposed on an Owner
Participant as a result of such Owner Participant not being a U.S. Person.
(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, 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 Trust 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.
-43-
Section 6.2 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 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.
-44-
Section 6.3 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 6.4 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 materially and adversely impaired 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), 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; 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 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, and (y) for the payment of which
such reserves, if any, as required to be provided under generally
-45-
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, 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, (E) if such contest shall be conducted in a manner
requiring the payment of the claim, the Lessee shall have paid the amount
required, (F) Lessee shall have acknowledged its liability for such claims, (G)
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 (H)
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.
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, 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 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
-46-
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 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.
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 pursue any appeals to the United States Supreme Court
provided that with respect to an appeal of a judicial decision it must be more
likely than not that such appeal will be successful. Notwithstanding the
foregoing, the Lessee shall not be permitted or entitled to contest any such Tax
in its own name unless the Tax is reflected in a report or a return of the
Lessee or raised in an audit or other proceeding of the Lessee, the Lessee is
allowed to contest such Tax under applicable law of the taxing jurisdiction, and
no tax return of the Tax Indemnitee is kept open as a result of such contest
beyond
-47-
the applicable statute of limitations period. 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.
If such Tax Indemnitee shall elect to contest a claim for Taxes by
paying the Tax claimed (including such amounts payable as interest, penalties or
additions to tax) and seeking a refund, then upon timely request by such Tax
Indemnitee, the Lessee shall advance to such Tax Indemnitee on an interest-free
basis the amount of such Tax (including such amounts payable as interest,
penalties or additions to tax) and shall indemnify the Tax Indemnitee on an
After-Tax Basis against any additional net cost to such Tax Indemnitee with
respect to such advance.
(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,
-48-
and such Tax Indemnitee shall have received an opinion of independent tax
counsel selected by it and reasonably approved by the Lessee and furnished at
the Lessee's sole expense to the effect that, as a result of such change or new
facts, it is more likely than not that the position which such Tax Indemnitee or
the Lessee, as the case may be, had asserted in such previous contest, would
prevail.
(e) Claims Barred. If (A) any Tax Indemnitee fails to give the
Lessee written notice pursuant to this Section 6.04 of any claim by any
government or taxing authority for any Tax for which the Lessee is obligated
pursuant to this Section 6.01, (B) as a direct result of such failure the
contest of such claim becomes barred by law and (C) the Lessee furnishes, at the
Lessee's expense, an opinion of counsel selected by the Lessee and reasonably
satisfactory to such Tax Indemnitee to the effect that, had the contest of such
claim not become barred by law, 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 6.5 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 less (x) all
payments then due to such Tax Indemnitee under this Article 6, and (y) Taxes
imposed with respect to the accrual or receipt thereof, including interest
received attributable thereto, plus any tax benefit realized by such Tax
Indemnitee as a result of any payment by such Tax Indemnitee made pursuant to
this sentence; provided, however, that such amount shall not be payable (a)
before such time as the Lessee shall have made all payments or indemnities then
due and payable to such Tax Indemnitee under this Article 6 and (b) to the
extent that the amount of such payment 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).
-49-
Section 6.6 Reports. In case any report or return is required to be
made with respect to any Taxes against which the Lessee is or may be obligated
to indemnify the Indemnities 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 and shall send a copy of the applicable portions of such report or
return to the Tax Indemnitee and the Owner Trustee or will notify the Tax
Indemnitee of such requirement and make such report or return in such manner as
shall be satisfactory to such Tax Indemnitee and the Owner Trustee. The Lessee
will provide such information within the possession or control of the Lessee as
the Tax Indemnitee may reasonably request in writing from the Lessee to enable
the Tax Indemnitee to fulfill its tax filing requirements with respect to the
transactions contemplated by the Operative Agreements (without duplication of
any comparable requirements of the Tax Indemnity Agreement) and any audit
information request arising from any such filing. The Tax Indemnitee will
provide such information within its possession or control as the Lessee may
reasonably require from such Tax Indemnitee to enable the Lessee to fulfill its
tax filing requirements with respect to the transactions contemplated by the
Operative Agreements and any audit information request arising from such filing;
provided that in no event shall any Tax Indemnitee be required to provide copies
of any of its tax returns.
Section 6.7 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 6.8 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 6.9 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
-50-
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
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 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 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 Foreign Tax On Loan Payments. If an Owner Participant
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
foreign withholding Taxes are imposed on any Pass-Through Trustee, Pass-Through
Trust, or Holder, then Owner Participant shall reimburse Lessee for any payments
Lessee is required to make to or on behalf of any Pass-Through Trust, or Holder
under this Article 6 as a result of the imposition of such Taxes. The amount
payable by Owner Participant to Lessee shall be an amount which, after taking
into account any such Taxes, any Tax imposed upon the receipt or accrual by
Lessee of such payment by Owner Participant and any tax benefits or tax savings
realized by Lessee with respect to the payment of such withholding Tax or the
payment hereunder, shall equal the amount of Lessee's payment to or on behalf of
such Pass-Through Trustee, or Holder.
-51-
ARTICLE VII.
GENERAL INDEMNITY
Section 7.1 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, obligations, losses, damages, settlements, penalties, 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;
(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
-52-
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 connection with the
acquisition or holding of the Owner Participant's interest in the Trust
Estate.
(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 Aircraft is no longer part
of the Lessor's Estate or, if the Aircraft remains a part of the Lessor's
Estate, after the expiration of the Term (unless the Aircraft is being
returned at such time, in which case after return of physical possession;
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), or to acts or events which occur after
return of possession of the Aircraft by the Lessee in accordance with the
provisions of the Lease (subject to the foregoing proviso if the Lessor
has terminated the Lease pursuant to Section 17 of the Lease); provided
that nothing in this clause (ii) shall be deemed
-53-
to exclude or limit any claim that any Indemnitee may have under
Applicable Law by reason of an Event of Default or for damages from Lessee
for breach of Lessee's covenants contained in the Lessee Documents or to
release Lessee from any of its obligations under the Lessee Documents that
expressly provide for performance after termination of the Term;
(iii) other than as expressly provided herein or in the other
Operative Agreements, is a Tax or loss of a Tax benefit, whether or not
the Lessee is required to indemnify therefor pursuant to Article 6 hereof
or pursuant to the Tax Indemnity Agreement;
(iv) is a cost or expense expressly required to be paid by
such Indemnitee or its permitted transferees (and not by the Lessee)
pursuant to this Agreement or any other Operative Agreement and for which
the Lessee is not otherwise obligated to reimburse such Indemnitee,
directly or indirectly pursuant to the terms of this Agreement or such
other Operative Agreement;
(v) is attributable to the incorrectness or breach by such
Indemnitee of its representations or warranties, under any of the
Operative Agreements except to the extent such incorrectness or breach was
caused by a breach by Lessee of any representation or warranty or by any
failure of Lessee to perform any obligation under an Operative Agreement;
(vi) is attributable to the failure by such Indemnitee to
perform any of its obligations under any of the Operative Agreements
except to the extent such failure was caused by a breach of 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 pursuant
to the exercise of remedies under Section 17 of the Lease;
(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
-54-
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 7.2 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, or reasonably should have had actual knowledge,
for which the Lessee is, or may be, liable under this Article 7; provided,
however, that failure to give such notice shall not terminate any of the rights
of an Indemnitee under this Article 7 and shall not release Lessee from any of
its obligations to indemnify such Indemnitee hereunder, except to the extent
that such failure adversely affects any applicable defense or counterclaim,
otherwise increases the amount the Lessee would have been liable for in the
absence of such failure to provide such notice or adversely affects the ability
of Lessee's insurers to defend such claim.
Section 7.3 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 and each Indemnitee shall cooperate with 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), (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 Trust
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 and, in any such case,
the relevant Indemnitee will, in good faith, undertake the defense of such
-55-
claim at the expense of the Lessee. 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. 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. The Lessee shall not enter into any settlement or
compromise with respect to which the Lessee has not agreed to indemnify such
Indemnitee to such Indemnitee's satisfaction or which admits any criminal
violation, gross negligence or willful misconduct on the part of any Indemnitee
without the prior written consent of such Indemnitee.
Section 7.4 Insured Claims. Notwithstanding any other provision of
this Article 7 to the contrary, in the case of any claim indemnified by the
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee 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 7.5 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 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. Should an Indemnitee receive any refund, 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
-56-
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 7.6 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 7.7 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.
Section 7.8 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 7.9 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
-57-
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 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 outstanding on such Termination
Date (and accrued interest thereon) 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 any payment of
Basic Rent due on or prior to the Termination Date.
ARTICLE VIII.
TRANSACTION COSTS
Section 8.1 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, following receipt by the Owner
Participant of appropriate invoices with respect thereto: (i) the out-of-pocket
expenses of the Owner Participant relating to the time sharing charges of ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇ and the reasonable fees and expenses of counsel for Owner Participant;
(ii) the reasonable fees and expenses of the respective counsel for the Lessee,
the Owner Trustee, the Indenture Trustee, the Manufacturer, the Subordination
Agent, the Pass-Through Trustee, 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 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
-58-
memorandum for the offering of the Pass-Through Certificates; (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. The fees and expenses
described in clauses (ii) through (viii) of this paragraph shall be allocable to
the Owner Participant under this Agreement in such manner as is agreed to by the
Owner Participant and the Lessee.
(b) Continuing Expenses. The Lessee agrees to pay, as Supplemental
Rent, (i) the continuing fees, expenses and disbursements (including reasonable
counsel fees and expenses) of Trust Company and the Owner Trustee, with respect
to the administration of the Lease and the Lessor's Estate; (ii) the continuing
fees, expenses and disbursements (including reasonable counsel fees and
expenses) of the Indenture Trustee, with respect to the administration of the
Trust Indenture Estate; (iii) the continuing fees, expenses and disbursements
(including reasonable counsel fees and expenses) of the Pass-Through Trustee and
the Subordination Agent; 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; 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 Indemnitee
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
offer or, seller, or transferor shall be responsible for all such fees and
expenses), unless such offer, sale or transfer shall occur (A) pursuant to the
exercise of remedies under Section 17 of the Lease, or (B) in connection with
the termination of the Lease or action or direction of the Lessee pursuant to
Section 8, 13 or 14 of the Lease.
ARTICLE IX.
-59-
SUCCESSOR OWNER TRUSTEE
Section 9.1 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 3.11 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 5.04 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
-60-
appointment as may be necessary in connection with maintaining the
validity, perfection and priority of the Lien of the Indenture and the
valid and continued registration of the Aircraft in accordance with the
Transportation Code.
ARTICLE X.
LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND
HOLDERS
Section 10.1 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 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 10.2 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 Trust 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 XI.
OTHER DOCUMENTS
Section 11.1 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 11.2 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.
-61-
ARTICLE XII.
NOTICES
Section 12.1 Notices. Except as otherwise specifically provided
herein, all notices, requests, approvals or consents required or permitted by
the terms hereof shall be in writing (it being understood that the specification
of a writing in certain instances and not in others does not imply an intention
that a writing is not required as to the latter). Any notice shall be effective
when received. Any notice shall either be mailed, certified or registered mail,
return receipt requested with proper first class postage prepaid, or sent in the
form of a telecopy, provided that there is receipt of such notice the next
Business Day from an overnight courier service, or by overnight delivery service
or delivered by hand. Any notice shall be directed to the Lessee, the Lessor,
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 (919)
▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as the Lessee shall
from time to time designate in writing to the Lessor, the Indenture Trustee and
any 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: Asset Administrator, 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 Lessor, 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 Lessor,
the Lessee and the Indenture Trustee.
-62-
ARTICLE XIII.
REFINANCING
Section 13.1 Refinancing
(a) Subject to the terms and conditions of this Section 13.01, the
Lessee may request the Owner Participant to participate in two refinancings in
whole but not in part, of the Equipment Notes prior to the end of the Basic Term
(a "Refinancing"). Such Refinancing may be placed in either the private or
public markets and shall be denominated in Dollars and shall be on terms
reasonably satisfactory to the Owner Participant. The Owner Participant will
agree to negotiate promptly in good faith to conclude an agreement with the
Lessee as to the terms of any such Refinancing transaction (including the terms
of any debt to be issued in connection with such refinancing and the
documentation to be executed in connection therewith). Without the prior written
consent of the Owner Participant, the prospectus and other offering materials
relating to any Refinancing in the form of a public offering shall not identify
the Owner Participant and shall not 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 and setting forth Termination
Values payable pursuant to the Lease 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.
-63-
(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).
(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;
-64-
(iv) All authorizations, approvals and consents which in the
reasonable judgment of the Owner Participant are necessary for such
Refinancing shall have been obtained;
(v) No Specified Default shall exist or would occur
immediately after giving effect to such Refinancing;
(vi) In the event the Lessee shall not prohibit the purchase
of the Refinancing loan certificates by, or with the assets of, an ERISA
Plan, the Lessee will permit the placement of the Refinancing loan
certificates with an ERISA Plan only if either (A) if such placement is in
the form of pass-through certificates, the sole underwriter or the manager
or co-manager of the underwriting syndicate or the selling or placement
agent of such pass-through certificates represents to the Lessee that it
has a prohibited transaction exemption from the U.S. Department of Labor
with respect to Pass-Through certificates (such as Prohibited Transaction
Exemption 89-88 or any other comparable exemption) or (B) purchasers of
the Refinancing loan certificates (or if the Refinancing involves the
issuance and sale of pass-through certificates, purchasers of such
pass-through certificates) provide a representation (which may be in the
form of a deemed representation) regarding their source of funds used in
acquiring the Refinancing loan certificates (or such pass-through
certificates, as the case may be) and, if such purchasers represent that
they are using funds of an ERISA Plan in acquiring the Refinancing loan
certificates (or such pass-through certificates, as the case may be), such
purchasers further represent that they are relying on a prohibited
transaction exemption from the U.S. Department of Labor with respect to
their purchase and holding of the Refinancing loan certificates (or such
pass-through certificates, as the case may be). The 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;
(vii) The Lessee shall pay all costs and expenses (including
legal fees and disbursements) incurred in connection with any proposed or
actually consummated Refinancing; and
(viii) In the case of Refinancings after the first
Refinancing, the Lessee shall pay the Owner Participant, upon the
consummation of any such Refinancing, a refinancing fee in the aggregate
amount of $75,000 (it being understood that there is no such refinancing
fee payable on the first Refinancing); provided that, in the event such
Refinancing also involves the indebtedness issued under any Related
Indenture, the payment of this fee under this Section 13.01(e)(viii) will
satisfy the Lessee's obligation under any similar provision in any other
"Participation Agreement" (as defined in any such Related Indenture).
-65-
ARTICLE XIV.
PUBLICITY
Section 14.1 Publicity. Each party hereto agrees that it will use
its commercially reasonable efforts not to disclose, or permit any of its
employees or agents to disclose after the Delivery Date, the identity of the
Owner Participant or the terms of the Operative Agreements in connection with
the issuance or release for external publication of any article or advertising
or publicity matter relating to the terms and conditions of any of the Operative
Agreements or the transactions contemplated thereby without the prior written
consent of the Owner Participant and Lessee. Nothing in this Section 14.01 shall
prevent the Lessee from filing any information with the SEC as is required by
Applicable Law.
ARTICLE XV.
MISCELLANEOUS
Section 15.1 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 15.2 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 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 6.01(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 15.3 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.
-66-
Section 15.4 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 15.5 Concerning the Owner Trustee, Indenture Trustee and the
Pass-Through Trustee. Each of Trust Company and FNBM 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 FNBM, 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
FNBM 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 FNBM 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.
Section 15.6 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 15.7 Certain Limitations on Reorganization. The Indenture
Trustee and the Pass-Through Trustee 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
-67-
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 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) the Indenture
Trustee actually receives any Recourse Amount which reflects any payment by the
Owner Participant on account of (ii) above, then the Indenture Trustee 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 the Indenture Trustee exceeds the amount which would have been received by
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 15.8 GOVERNING LAW. (a) THIS AGREEMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.
(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) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES THAT
THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE
BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT
THE ADDRESS SET FORTH PURSUANT TO SECTION 12.01. EACH PARTY HERETO AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 15.08(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON
SUCH
-68-
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 15.9 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.
* * *
-69-
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
By:
-------------------------------------
Name:
Title:
NCC CHARLIE COMPANY
By:
-------------------------------------
Name:
Title:
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, except as otherwise expressly
provided herein but solely as Owner
Trustee
By:
-------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF MARYLAND, as
Indenture Trustee, Pass-Through Trustee
and Subordination Agent
By:
-------------------------------------
Name:
Title:
-70-
Schedule I
Commitments
Participants Amount of Commitment
------------ --------------------
NCC CHARLIE COMPANY ____% of Lessor's Cost
1998-1A Pass-Through Trust ____% of Lessor's Cost
1998-1B Pass-Through Trust ____% of Lessor's Cost
1998-1C Pass-Through Trust ____% of Lessor's Cost
1998-1D Pass-Through Trust ____% of Lessor's Cost
-71-