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Exhibit 10.19
PARTICIPATION AGREEMENT [N281SK]
Dated as of February 23, 2001
among
CHAUTAUQUA AIRLINES, INC.,
as Lessee
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant,
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity (except as otherwise
expressly set forth herein) but solely
as Owner Trustee
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COVERING ONE EMBRAER MODEL EMB-145LR AIRCRAFT
AIRCRAFT BEARING U.S. REGISTRATION NO. N281SK
AND MANUFACTURER'S SERIAL NUMBER 145391
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Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. The
omitted materials have been filed separately with the Securities and Exchange
Commission.
PARTICIPATION AGREEMENT [N281SK] dated as of February 23, 2001 (this
"Agreement") among CHAUTAUQUA AIRLINES, INC., a New York corporation (herein,
together with its successors and permitted assigns, the "Lessee"), FIRST
SECURITY BANK, 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"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
(together with its successors and permitted assigns, the "Owner Participant").
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; and
WHEREAS, pursuant to the Embraer Purchase Agreement, the Manufacturer
agreed to manufacture and sell to Seller and Seller agreed to purchase from the
Manufacturer the Aircraft; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant and First Security Bank, National Association,
are entering into the Trust Agreement whereby, among other things, First
Security Bank, 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, pursuant to the Embraer Purchase Agreement the Manufacturer
has delivered the Aircraft to the Seller and subject to the terms and conditions
of this Agreement, the Owner Trustee is willing to purchase the Aircraft from
the Seller pursuant to the Aircraft Purchase Agreement 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, Seller has agreed to assign the Assigned Warranties to the
Owner Trustee and the Manufacturer has consented to such assignment, upon the
terms and conditions contained in the Embraer Warranty Assignment and Consent;
and
WHEREAS, Seller has agreed to assign the Engine Warranties to the
Owner Trustee and the Engine Manufacturer has consented to such assignment, upon
the terms and conditions contained in the Engine Warranty Assignment and
Consent; 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 Value
Guarantee Agreement (▇▇▇▇▇▇▇▇▇/N281SK), dated as of February 23, 2001 (the
"Residual Value Guarantee 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, the Manufacturer has agreed to enter into the Guarantee
Agreement (▇▇▇▇▇▇▇▇▇/N281SK), dated February 23, 2001 (the "Guarantee
Agreement") with the Owner Trustee and the Owner Participant and to undertake
the obligations provided therein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration and receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:
ARTICLE 1.
INTERPRETATION
Section 1.01. DEFINITIONS. Capitalized terms used herein and defined
in Appendix A shall, except as such definitions may be specifically modified in
the body of this Agreement for the purposes of a particular section, paragraph
or clause, have the meanings given such terms in Appendix A.
Section 1.02. REFERENCES. References in this Agreement to sections,
paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.
Section 1.03. HEADINGS. The headings of the various sections,
paragraphs and clauses of this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
Section 1.04. APPENDICES SCHEDULES AND EXHIBITS. The appendices,
schedules and exhibits hereto are part of this Agreement.
ARTICLE 2.
SALE AND LEASING TRANSACTIONS
Section 2.01. PARTICIPATION. Subject to all of the terms and
conditions of this Agreement, the parties agree to participate in the sale and
leasing transactions with respect to the Aircraft provided for in this
Article 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 pursuant to the Aircraft Purchase Agreement.
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(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 an amount equal to the Lessor's
Cost (the "Commitment") (i) by paying such amount to the Owner Trustee prior to
the time of closing on the Delivery Date at the account specified by the Owner
Trustee on or prior to the Delivery Date, such amount to be held and applied
toward the Owner Trustee's payment of Lessor's Cost for the Aircraft on the
Delivery Date (and if not so applied, to be promptly returned to the Owner
Participant) or (ii) by paying such amount at the time of the closing on the
Delivery Date directly to the Seller's account specified by the Seller prior to
the closing to be applied toward the payment of Lessor's Cost. Such funds, once
so applied, shall constitute an equity investment by the Owner Participant in
the Trust Estate.
(d) DELIVERY DATE. The "Delivery Date" shall be the date fixed by
the Lessee in accordance with this Section 2.01(d) for the closing of the
sale and leasing 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 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 the Owner Participant shall have provided
the amount of the Commitment to the Owner Trustee prior to such a
postponement, the Owner Trustee shall return such amount to the Owner
Participant by 2:00 p.m. on the scheduled Delivery Date unless the Owner
Participant shall have agreed otherwise in writing. Absent such an agreement,
in the event that the 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 [*] 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
the Commitment at the closing shall be deemed a waiver of notice of the
Delivery Date by the Owner Participant and the Owner Trustee.
Section 2.02. 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.
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* Confidential
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(b) ACTIONS OF THE OWNER TRUSTEE. Upon receipt in full by the Owner
Trustee of the Commitment of the Owner Participant together with instructions
(which may be oral) from the Owner Participant or its special counsel that the
applicable conditions precedent set forth in Section 3.01 have been satisfied or
waived by the Owner Participant, the Owner Trustee on the Delivery Date shall
purchase the Aircraft from the Seller and lease the Aircraft to the Lessee. To
accomplish such transactions, the Owner Trustee shall, concurrently with the
actions of the Lessee pursuant to Section 2.02(c), take the following actions:
(i) pay or cause to be paid an amount equal to Lessor's Cost to
the Seller for the purchase of the Aircraft by transferring such amount in
immediately available funds to the account specified by the Seller 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 deliver the Lease and the Lease Supplement;
(v) deliver the Aircraft to the Lessee pursuant to the Lease;
(vi) 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; and
(vii) take such actions as may be requested by the Seller and
Lessee to effect the due registration of the Aircraft with the FAA in the
name of the Owner Trustee.
(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 lease the Aircraft from the Owner Trustee pursuant to the Lease.
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.
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ARTICLE 3.
CONDITIONS PRECEDENT
Section 3.01. CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER
PARTICIPANT. The obligation of the Owner Participant to make the Commitment
available for payment as directed by the Owner Trustee on the Delivery Date is
subject to satisfaction or waiver by the Owner 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 the
Owner Participant that any document be produced or action taken that is to be
produced or taken by the Owner Participant or by a Person within the Owner
Participant's control:
(a) NOTICE. The Owner Participant shall have received the notice of
the Delivery Date as provided in Section 2.01(d), or shall have waived such
notice.
(b) DELIVERY OF DOCUMENTS. The Owner 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 the Owner
Participant and (c) shall be in full force and effect:
(i) the Lease;
(ii) Lease Supplement No. 1;
(iii) the Tax Indemnity Agreement;
(iv) the Trust Agreement;
(v) the Guarantee Agreement;
(vi) the Residual Value Guarantee Agreement;
(vii) the Aircraft Purchase Agreement;
(viii) the Embraer Warranty Assignment and Consent;
(ix) the Engine Warranty Assignment and Consent;
(x) the Bills of Sale;
(xi) the broker's report and insurance certificates required by
Section 9 of the Lease;
(xii) an appraisal or appraisals from Avitas, which appraisal or
appraisals shall be satisfactory in form and substance to Owner
Participant;
(xiii) (A) a copy of the Certificate of Incorporation and By-Laws
of Lessee and resolutions of the board of directors of Lessee, in each case
certified as of the Delivery Date, by the Secretary or an Assistant
Secretary of Lessee, duly authorizing the
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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 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 Trust
Company, certified as of the Delivery Date by the Secretary or an Assistant
Secretary of Trust Company, which authorize the execution, delivery and
performance by Trust Company of each of the Operative Agreements to which
it is a party, together with such other documents and evidence with respect
to it as Owner 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;
(xiv) 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);
(xv) an Officer's Certificate of Trust Company, dated as of the
Delivery Date, stating that its representations and warranties, in its
individual capacity and as Owner Trustee, set forth in this Agreement are
true and correct as of the Delivery Date (or, to the extent that any such
representation and warranty expressly relates to an earlier date, true and
correct as of such earlier date);
(xvi) the following opinions of counsel, in each case dated the
Delivery Date:
(A) ▇▇▇▇▇▇ ▇▇▇▇▇, Principal and General Counsel of the Lessee
substantially in the form of Exhibit A-1 hereto and addressed to the Owner
Participant and the Owner 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 Owner Trustee and the Lessee;
(C) Ray, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel for the Owner Trustee
substantially in the form of Exhibit A-3 hereto addressed to the Owner
Participant and the Lessee;
(D) Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇, a Professional
Corporation, special aviation counsel, substantially in the form of Exhibit
A-4 hereto and addressed to the Owner Participant, the Owner Trustee and
the Lessee;
(E) special counsel for the Manufacturer, in a form reasonably
acceptable to the Owner Participant and addressed to the Owner Participant,
the Owner Trustee and the Lessee;
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(F) in the case of the Owner Participant only, Holland & Knight
LLP, tax counsel to the Owner Participant, addressed to the Owner
Participant, with respect to tax matters;
(G) Holland & Knight LLP, special counsel for the Owner
Participant, substantially in the forms of Exhibits A-5, addressed to the
Lessee and the Owner Trustee;
(H) ▇▇▇ ▇▇▇▇▇▇, Senior Vice President and Associate General
Counsel to GE Capital Aviation Services, Inc., an Affiliate of the Owner
Participant, substantially in the form of Exhibit A-6, addressed to the
Lessee and the Owner Trustee;
(I) ▇▇▇▇▇▇ ▇▇▇▇▇, General Counsel of Seller, in a form reasonably
acceptable to the Owner Participant and addressed to the Owner Participant,
the Owner Trustee and the Lessee;
(J) Fulbright & ▇▇▇▇▇▇▇▇, L.L.P., relating to the Aircraft
Purchase Agreement, in a form reasonably acceptable to the Owner
Participant and addressed to the Owner Participant, the Owner Trustee and
the Lessee;
(xvii) the Guarantee Agreement shall be in full force and effect;
and
(xviii) the Residual Value Guarantee Agreement shall be in full
force and effect.
(c) AIRWORTHINESS. Owner Participant shall receive a copy of a
current, valid Standard Certificate of Airworthiness for the Aircraft duly
issued by the FAA.
(d) 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, Owner Participant, or Owner Trustee to execute, deliver and perform the
Operative Agreements to which any of them is a party or (b) Owner Participant to
make the Commitment available.
(e) 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 or Event of Default.
(f) NO EVENT OF LOSS. No Event of Loss with respect to the Airframe or
any Engine shall have occurred and no circumstance, condition, act or event
that, with the giving of notice or lapse of time or both, would give rise to or
constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.
(g) 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.
(h) CERTIFICATION. The Aircraft shall have been duly certificated by
the FAA as to type and airworthiness as required by the terms of the Lease.
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(i) SECTION 1110. Owner Trustee, as lessor under the Lease, 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.
(j) 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
Trust Agreement, 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.
(k) 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 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 shall
have been duly filed in all places necessary or desirable within the State of
Indiana.
(l) 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.
(m) 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.
(n) 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 3.02. CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE. The
obligation of Lessee to lease the Aircraft on the Delivery Date is subject to
the satisfaction or waiver by Lessee, on or prior to the Delivery Date, of the
conditions precedent set forth below in this Section 3.02.
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(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) CORPORATE DOCUMENTS. (A) An incumbency certificate of Owner
Participant as to the person or persons authorized to execute and deliver the
relevant Operative Agreements on behalf of Owner Participant; and (B) 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, certified as of the Delivery Date by the
Secretary or an Assistant Secretary of Owner Participant which authorize the
execution, delivery and performance by Owner Participant of each of the
Operative Agreements to which it is a party, together with such other documents
and evidence with respect to it as Lessee 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;
(c) OFFICER'S CERTIFICATE. 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);
(d) OTHER CONDITIONS PRECEDENT. Each of the conditions set forth in
Sections 3.01(c), (d), (f), (g), (h), (i), (j), (l) and (n) shall have been
satisfied or waived by Lessee, unless the failure of any such condition to be
satisfied is the result of any action or inaction by Lessee.
Section 3.03. POST-REGISTRATION OPINION. Promptly upon the
registration of the Aircraft and the recordation of the documents referenced in
Section 3.01(j)(ii), Lessee will direct Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇, a
Professional Corporation, special counsel in Oklahoma City, Oklahoma, to deliver
to Lessee, Owner Participant and Owner Trustee a favorable opinion or opinions
addressed to each of them with respect to such registration and recordation.
ARTICLE 4.
LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01. LESSEE'S REPRESENTATIONS AND WARRANTIES. The Lessee
represents and warrants that, as of the Delivery Date (unless any such
representation and warranty is specifically made as of an earlier date, in which
case the Lessee represents and warrants as of such earlier date):
(a) the Lessee is a corporation duly organized and validly existing
and is in good standing under the laws of the State of New York, has its
principal place of business and chief executive office (as such terms are used
in Article 9 of the Uniform Commercial Code) in Indianapolis, Indiana at the
address set forth in Section 12.01(a), and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
failure to
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be so qualified or in good standing would have a materially adverse effect on
its business or would impair its ability to perform its obligations under the
Lessee Documents;
(b) the Lessee has full power, authority and legal right to conduct
its business and operations as currently conducted and to own or hold under
lease its properties and to enter into and perform its obligations under the
Lessee Documents;
(c) the Lessee is a Certificated Air Carrier;
(d) the Lessee possesses all necessary certificates, franchises,
licenses, permits, rights and concessions and consents (collectively "permits")
which are necessary to the operation of the routes flown by it and the conduct
of its business and operations as currently conducted and each such permit is in
full force and effect, except for any such permits the failure to have or
maintain which would not have a material adverse effect on the Lessee or its
ability to perform its obligations under the Lessee Documents;
(e) the execution, delivery and performance of the Lessee Documents by
the Lessee have been duly authorized by all necessary corporate action on the
part of the Lessee and do not require any stockholder approval, or approval or
consent of any trustee or holder of any indebtedness or obligations of the
Lessee, and each such Lessee Documents has been duly executed and delivered and
constitutes the legal, valid and binding obligations of the Lessee enforceable
against it in accordance with the terms thereof except as such enforceability
may be limited by bankruptcy, insolvency, or other similar laws or by general
equitable principles;
(f) no authorization, consent or approval of or other action by, and
no notice to or filing with, any United States federal or state governmental
authority or regulatory body is required for the execution, delivery or
performance by the Lessee of the Lessee Documents except for such registrations,
applications and recordings referred to in the opinion of Daugherty, Fowler,
Peregrin & ▇▇▇▇▇▇, a Professional Corporation delivered pursuant to Section
3.01(b)(xvi)(D) and the filings referred to in Section 3.01(j)(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 Embraer Warranty Assignment and Consent and the
Engine Warranty Assignment and Consent) or approval under, any Applicable Law or
the charter documents, as amended, or bylaws, as amended, of the Lessee or any
order, writ, injunction or decree of any court or governmental authority against
the Lessee or by which it or any of its properties is bound or any indenture,
mortgage or contract or other agreement or instrument to which the Lessee is a
party or by which it or any of its properties is bound, or constitutes or will
constitute a default thereunder or results or will result in the imposition of
any Lien upon the Aircraft or any of its properties (other than Permitted
Liens), except for any such conflict, breach or default which would not have a
material adverse effect on the Lessee or its ability to perform its obligations
under the Lessee Documents;
(h) except as disclosed in any of the financial statements referred to
in Section 4.01(p) or as otherwise disclosed in writing to the Owner
Participant, there are no pending or, to
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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) 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
Lease (including Lease Supplement No. 1) and (C) the filing of the financing
statement referred to in Section 3.01(k), no further action, including any
filing or recording of any document, is necessary or advisable in order 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;
(j) the Owner Trustee has received good and marketable title to the
Aircraft, free and clear of all Liens, except Permitted Liens;
(k) 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;
(l) 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;
(m) 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;
(n) 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;
(o) there are no broker's or underwriter's fees payable on behalf of
the Lessee in connection with the transactions contemplated in the Operative
Agreements, other than those of the Lessee Advisor (as defined in
Section 8.01(a)) referred to in Article 8 hereof;
(p) the audited consolidated balance sheet of Lessee as of December
31, 1999 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 December 31, 1999, there has been no material adverse
change in such financial condition or operations of Lessee, except for matters
disclosed in (a) the financial
11
statements referred to above or (b) otherwise disclosed in writing by Lessee to
the Owner Participant;
(q) 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;
(r) neither the Lessee nor any Person authorized by the Lessee to act
on its behalf has directly or indirectly offered any beneficial interest in the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement, or in any similar security relating to the Aircraft, the Lease,
the Trust Estate or the Trust Agreement, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any Person in violation of the Securities Act or any applicable
state securities laws; and
(s) Owner Trustee, as lessor under the Lease, is entitled to the
benefits of Section 1110 (as currently in effect) with respect to the Aircraft.
Section 4.02. CERTAIN COVENANTS OF LESSEE. The Lessee covenants and
agrees as follows:
(a) FILINGS AND RECORDINGS. The Lessee will cause to be done,
executed, acknowledged and delivered at the Lessee's cost and expense all such
further acts, conveyances and assurances as the Owner Trustee 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 Lease (including each supplement thereto), and any financing
statements or other instruments as may be reasonably requested by the Owner
Trustee and appropriate, to maintain 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 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;
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(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 to be duly registered or recorded
under the laws of such country and at all times thereafter to remain so
duly registered or recorded unless and until the registration of the
Aircraft is changed as provided herein, and shall, at its cost, cause to be
done at all times all other acts including the filing, recording and
delivery of any document or instrument and the payment of any sum necessary
or, by reference to prudent industry practice in such country, advisable in
order to create, preserve and protect such interest in the Aircraft 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;
(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
and the Owner 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 related
Sublease for the Owner 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;
(ix) none of the Owner Trustee and the Owner Participant shall be
subjected to any risk of adverse tax consequences as a result of such
re-registration for which the Lessee does not then indemnify or cause to be
indemnified such Person in a manner satisfactory in form and substance to
such Person;
(x) any export licenses and certificate of deregistration
required in connection with any repossession or return of the Aircraft will
be readily obtainable in the normal course without material delay or
material burden on the Owner Trustee, it being agreed that the Lessee shall
be responsible for the cost thereof;
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(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 effected 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 and the Owner 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) of this
Section 4.02(b);
(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.
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 and the Owner 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.
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(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
Owner Participant and the Owner Trustee, (v) provides an opinion from counsel
(which counsel may be the Lessee's General Counsel) delivered to the Owner
Trustee and the Owner Participant, which opinion shall be reasonably
satisfactory to the Owner Participant, 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 of ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code to
evidence such merger or consolidation; PROVIDED THAT, no such merger,
consolidation or conveyance, transfer or lease shall be permitted if (1)
immediately after giving effect to such consolidation, merger, purchase,
conveyance, transfer, lease or other disposition, an Event of Default shall have
occurred and be continuing or (2) the surviving Person in such transaction has a
tangible net worth, as determined in accordance with generally accepted
accounting principles immediately following such transaction, of less than
seventy-five percent (75%) of Lessee, as measured immediately prior to such
transaction.
Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Lessee and the satisfaction of
the conditions specified in this Section 4.02(e), the successor corporation
formed by such consolidation or into which the Lessee is merged or the Person to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Lessee under
this Agreement and the Lease and each other Operative Agreement and any other
document contemplated hereby and thereby to which the Lessee is a party with the
same effect as if such successor corporation had been named as the Lessee herein
and therein. No such consolidation or merger, or sale, conveyance, transfer or
lease of all or substantially all of the assets of the Lessee as an entirety
shall have the effect of releasing the Lessee or any successor corporation which
shall theretofore have become the Lessee hereunder in the manner prescribed in
this Section 4.02(e) from its
15
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 and the Owner Trustee of any change in the address of its chief
executive office (as such term is used in Article 9 of the Uniform Commercial
Code) or of any change in its corporate name.
(g) FINANCIAL STATEMENTS. The Lessee agrees to furnish to the Owner
Participant during the Term:
(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;
(ii) within 120 days after the end of each fiscal year of the
Lessee, a copy of the annual report for such year for the Lessee or the
affiliated group of which the Lessee is a member (on a consolidated basis,
if applicable) and a balance sheet of the Lessee and its subsidiaries (if
any) as of the end of such fiscal year and related statements of income,
shareholder's equity and cash flows of the Lessee for such fiscal year, in
comparative form with the preceding fiscal year, in each case certified by
independent certified public accountants of national standing as having
been prepared in accordance with generally accepted accounting principles
in the United States;
(iii) within 120 days after the end of each fiscal year of the
Lessee, an Officer's Certificate of the Lessee, to the effect that the
signer is familiar with or has reviewed the relevant terms of the Lease and
has made, or caused to be made under his supervision, a review of the
transactions and conditions of the Lessee during the preceding fiscal year
and that such review has not disclosed the existence during such period,
nor does the signer have knowledge of the existence as of the date of such
certificate, of any condition or event which constituted or constitutes a
Default or Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action the Lessee has taken or is taking or proposes to take with respect
thereof; and
(iv) from time to time, such other non-confidential financial
information as the Lessor or the Owner Participant may reasonably request.
(h) FILING OF DOCUMENTS. Lessee, at its sole cost and expense, will
cause the documents filed with the FAA pursuant to Section 3.01(j), the
financing statements required pursuant to Section 3.01(k) 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
16
chief executive office) in respect of such financing statements to be prepared
and, subject only to the execution and delivery thereof by Owner Trustee, duly
and timely filed and recorded, or filed for recordation, to the extent permitted
under the Transportation Code (with respect to such documents filed with the
FAA) or the Uniform Commercial Code or similar law of any other applicable
jurisdiction (with respect to such other documents).
(i) 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 and Owner Participant annually after such registration
is effected, an opinion of special counsel reasonably satisfactory to Owner
Participant stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, rerecording and
refiling of the Operative Agreements and any supplements and amendments thereof
as is necessary to establish, perfect and protect Owner Trustee's 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.
Section 4.03. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Lessee provided in Section 4.01 and in any
other Operative Agreement shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.
ARTICLE 5.
OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OWNER
PARTICIPANT.
(a) REPRESENTATIONS AND WARRANTIES. The Owner Participant represents
and warrants that, as of the Delivery Date (unless any such representation and
warranty is specifically made as of an earlier date, in which case the Owner
Participant represents and warrants as of such earlier date):
(i) it is a corporation duly incorporated and validly existing in
good standing under the laws of State of New York and it has full corporate
power, authority and legal right to carry on its present business and
operations, to own or lease its properties and to enter into and to carry
out the transactions contemplated by this Agreement and the other Operative
Agreements to which it is party;
(ii) the execution, delivery and performance by it of this
Agreement and the other Operative Agreements to which it is party have been
duly authorized by all necessary corporate action on its part;
(iii) neither the execution, delivery or performance by the Owner
Participant of the Operative Agreements to which it is party, nor
compliance with the terms and provisions hereof or thereof, conflicts or
will conflict with or results or will result in a breach or violation of
any of the terms, conditions or provisions of, 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,
17
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;
(viii) the Owner Participant is a bank, trust company, insurance
company, financial institution or corporation with a combined capital and
surplus or net worth of at least $50,000,000;
(ix) the Owner Participant acknowledges that the Residual Value
Guarantee Agreement and the Guarantee Agreement have not been disclosed to
or reviewed by the Lessee;
(x) the Owner Participant has not granted any right to the
Manufacturer under the Residual Value Guarantee Agreement or the Guarantee
Agreement which is inconsistent with the rights of the Lessee under the
Operative Agreements; and
18
(xi) the amount guaranteed by the Manufacturer under the Residual
Value Guarantee Agreement is the Guaranteed Amount.
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 and the Owner 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 any interest in any thereof.
(c) ASSIGNMENT OF INTERESTS OF OWNER PARTICIPANT. At any time after
the Delivery Date and subject to satisfaction of the conditions set forth in
this Section 5.01(c), the Owner Participant may assign, convey or otherwise
transfer to a single Person all (but not less than all) of the Beneficial
Interest, PROVIDED that (i) the Owner Participant gives the Lessee at least 10
days' notice of such assignment, conveyance or other transfer, (ii) the Owner
Participant and any Owner Participant Guarantor shall remain liable for all
obligations of the Owner Participant under the Trust Agreement and the other
Operative Agreements to which the Owner Participant is a party to the extent
(but only to the extent) relating to the period on or before the date of such
transfer, (iii) the transferee agrees by a written instrument substantially in
the form attached hereto as Exhibit B-1 (or otherwise in form and substance
reasonably satisfactory to Lessee) to assume liability for, and undertake
performance of, all obligations of the Owner Participant under the Trust
Agreement and the other Operative Agreements to which such Owner Participant is
a party relating to the period after the date of transfer, (iv) the transferee
shall make a representation to the effect that the funds to be used by the
transferee to acquire the Beneficial Interest do not constitute the assets of an
ERISA Plan, (v) at or prior to the time of such transfer, the transferee shall
furnish an opinion of counsel substantially in the form attached hereto as
Exhibit B-3 (or otherwise in form and substance reasonably satisfactory to
Lessee) (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
19
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, assuming that the Lessee is a U.S. Person. Any such transferee shall
(a) be (i) a bank, savings institution, finance company, leasing company or
trust company, national banking association acting for its own account or in a
fiduciary capacity as trustee or agent under any pension, retirement, profit
sharing or similar trust or fund, insurance company, financial institution,
fraternal benefit society or a corporation acting for its own account having a
combined capital and surplus (or, if applicable, consolidated net worth or its
equivalent) of not less than $50,000,000, (ii) a subsidiary of any Person
described in clause (i) where such Person provides (A) support for the
obligations assumed by such transferee subsidiary reasonably satisfactory to the
Lessee and the Owner 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 and Owner
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 no 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) and (c) 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 aircraft directly (or through a trust) and not as a result of the
transfer to such entity of any aircraft subject to an existing lease with
Lessee; PROVIDED that Lessee's consent shall not be required if an Event of
Default shall have occurred and be continuing at the time of such transfer; and
PROVIDED FURTHER that neither such transferee nor any Affiliate thereof shall
(x) be a party to any material litigation or arbitration (whether as plaintiff
or defendant) with the Lessee or any Affiliate of the Lessee or (y) be
attempting a hostile takeover of the Lessee or any Affiliate of the Lessee. A
transferee hereunder shall be a Citizen of the United States or has established
a voting trust, voting powers or other arrangement reasonably satisfactory to
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
20
transferor; and each reference therein to the "Owner Participant" shall
thereafter be deemed a reference to such transferee and the transferring Owner
Participant shall be released from all of its obligations under the Operative
Agreements to the extent such obligations are assumed by such transferee. All
reasonable fees and expenses incurred by Lessee, Owner Participant or Owner
Trustee in connection with any transfer by the Owner Participant permitted by
this Section 5.01(c) will be reimbursed by the Owner Participant, unless an
Event of Default has occurred and is continuing, in which case any fees and
expenses incurred by Lessee shall not be so reimbursed; PROVIDED, HOWEVER, that
in each case bills shall be submitted to the Owner Participant prior to payment.
Each of the parties hereto agree, to the extent so requested by the Owner
Participant, to use reasonable efforts to cooperate with the Owner Participant
in effecting any assignment, conveyance or other transfer permitted pursuant to
this Section 5.01(c), including providing its written consent and
acknowledgement to any such assignment, conveyance or other transfer and, in the
case of the Lessee, providing new insurance certificates that reflect the
interest of the transferee. After the expiration or termination of the Term of
the Lease, the Owner Participant may freely assign, convey or otherwise transfer
all or any part of the Beneficial Interest without compliance with this
Section 5.01(c), provided that no such transfer shall release the Owner
Participant from its obligations under the Operative Agreements accrued prior to
the end of the Term.
(d) ACTIONS WITH RESPECT TO LESSOR'S ESTATE, ETC. The Owner
Participant agrees that it will not take any action to subject the Lessor's
Estate or the trust established by the Trust Agreement, as debtor, to the
reorganization or liquidation provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statute.
(e) CITIZENSHIP. The Owner Participant agrees, solely for the benefit
of the Lessee 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 and
the Owner Trustee and shall (at its own expense and without any reimbursement or
indemnification from the Lessee) immediately (and in any event within a period
of 20 days) promptly (x) effect a voting trust or other similar arrangement, (y)
transfer in accordance with the terms of this Agreement and the Trust Agreement
all its rights, title and interest in and to such Trust Agreement, the Lessor's
Estate 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.
21
(f) GUARANTEES. The Owner Participant agrees for the benefit of the
Lessee that it shall not make or consent to any changes to the Residual Value
Guarantee Agreement or the Guarantee Agreement that would make the
representation in Section 5.01(a)(x) incorrect at the time of such change or
that would increase the Guaranteed Amount and the Owner Participant agrees to
provide notice to the Lessee of any decrease in the Guaranteed Amount and the
amount of such decrease.
Section 5.02. CITIZENSHIP.
(a) GENERALLY. The Owner Trustee, in its individual capacity,
represents and warrants that it is and on the Delivery Date will be a Citizen of
the United States. If the Owner Trustee in its individual capacity does not
comply with the requirements of this Section 5.02, the Owner Trustee and the
Lessee 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 or the Owner Participant that such lack of
United States citizenship would have any adverse effect on the Lessee or the
Owner Participant. The Owner Trustee, in its individual capacity, further
covenants that if at any time it appears reasonably probable that it will cease
to be a Citizen of the United States based on information that is (i) known to a
Responsible Officer of the Owner Trustee or (ii) generally known to the public,
it will promptly so notify, to the extent permitted by law, all parties to this
Agreement.
Section 5.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUST
COMPANY AND THE OWNER TRUSTEE.
(a) REPRESENTATIONS AND WARRANTIES. In addition to and without
limiting its other representations and warranties provided for in this Article
5, Trust Company represents and warrants, in its individual capacity with
respect to items (i), (ii), (iii)(A), (iv), (v), (vi), (vii), (viii), (ix) and
(x) below, and as the Owner Trustee with respect to items (iii)(B) and (iv), on
the Delivery Date that:
(i) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States with
its principal place of business and chief executive office (as such terms
are used in Article 9 of the Uniform Commercial Code) in the State of Utah
at the address set forth in Section 12.01(b), and has full corporate power
and authority, in its individual capacity or (assuming the Trust Agreement
has been duly authorized, executed and delivered by the Owner Participant)
as the Owner Trustee, as the case may be, to carry on its business as now
conducted, and
22
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 or other
constitutional documents; 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 Utah 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 may be limited by bankruptcy,
insolvency, reorganization or other similar laws or general equitable
principles, and the performance by the Owner Trustee of any of its
obligations thereunder does not contravene any lease, regulation or
contractual restriction binding on the Owner Trustee;
(iv) there are no pending or, to its knowledge, threatened
actions or proceedings against Trust Company before any court or
administrative agency which would materially adversely affect the ability
of Trust Company, either in its individual capacity or as the Owner
Trustee, as the case may be, to perform its obligations under the Operative
Agreements to which it is or is to be party;
(v) its chief executive office (as such term is defined in
Article 9 of the Uniform Commercial Code) is ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and it
23
shall give the Lessee 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, Lessee, Owner Participant or Owner Trustee (except, as to
Owner Trustee, Taxes imposed on the fees payable to Owner Trustee) under
the laws of the State of Utah in connection with the execution, delivery or
performance of any Operative Agreement by Owner Trustee, which Expenses or
Taxes would not have been imposed if Owner Trustee had not (x) had its
principal place of business in, (y) performed (in its individual capacity
or as Owner Trustee) any or all of its duties under the Operative
Agreements in or (z) engaged in any activities unrelated to the
transactions contemplated by the Operative Agreements in, the State of
Utah.
(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 (other than a Permitted Security Interest)
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 Owner
Participant and the Owner Trustee from and against any loss, cost, expense or
damage which may be suffered by the Lessee, the Owner Participant or the Owner
Trustee as a result of the failure of Trust Company to discharge
24
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 any interest in the Lessor's Estate, or in any similar
security relating to the Lessor's Estate, 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.
(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.
Section 5.04. THE LESSEE'S RIGHT OF QUIET ENJOYMENT. Notwithstanding
any other provision of any of the Operative Agreements, each other party to this
Agreement agrees, severally and as to its own actions only, that it will not, so
long as no Event of Default shall have occurred and be continuing, take or cause
to be taken any action contrary to the Lessee's rights under the Lease,
including, without limitation, its rights to possession, use and quiet enjoyment
of the Aircraft during the Term, PROVIDED that nothing contained herein shall
affect any of the rights of the Owner Participant or the Owner Trustee expressly
granted to such Person under any Operative Agreement.
Section 5.05. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Representations, warranties and covenants of the Owner Participant and the Owner
Trustee (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 5.06. COMPLIANCE WITH TRUST AGREEMENT, ETC. Each of the Owner
Participant, Trust Company, and the Owner Trustee agrees with the Lessee that so
long as the Lease 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 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.
25
ARTICLE 6.
TAXES
Section 6.01. LESSEE'S OBLIGATION TO PAY TAXES.
(a) GENERALLY. The Lessee agrees promptly to pay when due, and to
indemnify on an After Tax Basis and hold each Tax Indemnitee harmless from all
license, recording, documentary, registration and other fees and all taxes
(including, without limitation, income, gross receipts, sales, rental, use,
value added, property (tangible and intangible), AD VALOREM, excise and stamp
taxes), fees, levies, imposts, recording duties, duties, charges, assessments or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax or interest thereon (individually, a "Tax," and
collectively called "Taxes"), however imposed or asserted (whether imposed upon
any Tax Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any
Engine or any Part or the Lessor's Estate, Rent, 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, purchase, charter, rental, assignment,
presence, overhaul, control, acceptance, rejection, delivery, nondelivery,
transport, location, ownership, registration, reregistration,
deregistration, insuring, assembly, possession, repossession, operation,
use, non-use, condition, maintenance, repair, improvement, conversion,
sale, return, abandonment, preparation, installation, storage, redelivery,
replacement, manufacture, leasing, subleasing, sub-subleasing,
modification, alteration, rebuilding, importation, transfer of title,
transfer of registration, exportation or other application or disposition
of, or the imposition of any Lien (or the incurrence of any liability to
refund or pay over any amount as a result of any Lien) on, the Aircraft,
the Airframe, any Engine or any Part or any interest therein;
(ii) amounts payable under the Operative Agreements;
(iii) the Aircraft, or the income or other proceeds (x) received
with respect to the Aircraft attributable to the transactions contemplated
by the Operative Agreements or (y) held by the Owner Trustee under the
Trust Agreement or after an Event of Default under the Lease;
(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 Aircraft, the Airframe, any Engine or any Part;
(vi) 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;
26
(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 6.01(a) shall
not extend to any of the following:
(i) With respect to a Tax Indemnitee, Taxes, whether imposed by
withholding or otherwise, based upon, measured by or with respect to the
net or gross income, items of tax preference or minimum tax or excess
profits, alternative minimum taxes, receipts, capital, franchise, net worth
(whether, denominated income, excise, capital stock, or doing business
taxes) or other similarly-based taxes (other than taxes that are in the
nature of, sales, use, transfer, ad valorem, stamp, property, or similar
taxes) ("Income Taxes") imposed by the United States or by any state, local
or foreign jurisdiction, 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 such 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 or activities of
the Lessee or any Affiliate thereof or any Sublessee within the
jurisdiction of the taxing authority imposing such Tax, (III) the status of
the Lessee or any Affiliate thereof or any Sublessee as a foreign entity or
as an entity owned in whole or in part by foreign persons, or (IV) the
Lessee or any Affiliate thereof or any Sublessee having made (or having
been deemed to have made) payments to such Tax Indemnitee from the
jurisdiction of the taxing authority imposing such Tax,;
(ii) Taxes imposed with respect to any period beginning after the
earlier 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;
(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;
(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 mortgage, pledge, financing, 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
27
Lessor's Estate or a transfer or disposition of shares or other interests
in the Owner Trustee or the Owner Participant 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's
options pursuant to Section 14 of the Lease, or (D) a transfer to Lessee
pursuant to Section 13(b) of the Lease; the parties agree to cooperate to
minimize any such Taxes covered by this provision;
(vi) Taxes subject to indemnification by the Lessee pursuant to
the Tax Indemnity Agreement;
(vii) Taxes imposed on a successor, assign or other transferee of
any interest of a Tax Indemnitee in the Aircraft, any Engine or any Part or
any Operative Agreement or any proceeds thereunder to the extent that the
aggregate amount of such Taxes exceeds the aggregate amount of Taxes that
would have been imposed on the transferor (determined at the time of the
transfer) and that would have been indemnifiable pursuant to
Section 6.01(a) hereof, provided that the exclusion in this clause (vii)
shall not apply in the case of any such sale, assignment, transfer or
disposition that occurs in connection with an Event of Default or in
connection with a bankruptcy, insolvency or other proceeding for the relief
of debtors in which the Lessee is a debtor;
(viii) Any Taxes which have been properly included in the
Purchase Price;
(ix) Any Taxes imposed on the Owner Trustee or Owner Participant
which would not have been imposed but for a Lessor's Lien;
(x) 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);
(xi) Taxes that are being contested in accordance with the
provisions hereof;
(xii) United States withholding Taxes imposed on the Owner
Participant as a result of the Owner Participant not being a U.S. Person;
or
(xiii) interest, penalties, fines or additions to tax to the
extent they relate to Taxes for which no indemnity would be payable by
Lessee pursuant to this Section 6.01(b).
28
Section 6.02. AFTER TAX BASIS. The amount which the Lessee shall be
required to pay with respect to any Tax indemnified against under Section 6.01
(an "Indemnifiable Tax") shall be an amount sufficient to restore the Tax
Indemnitee, on an After Tax Basis, to the same position such party would have
been in had such Tax not been incurred, taking into account any tax benefits
recognized by such Tax Indemnitee as a result of the Indemnifiable Tax. If any
Tax Indemnitee actually realizes a tax benefit (whether by credit, deduction or
otherwise), or would have realized such a benefit as to which it has been given
notice if properly claimed, and with respect to Owner Participant, the Owner
Participant has not determined in good faith that claiming such benefit would
have a material adverse impact on the Owner Participant or an Affiliate thereof,
by reason of the payment of any Tax paid or indemnified against by the Lessee,
provided that an Event of Default has not occurred and is not continuing, such
Tax Indemnitee shall promptly pay to the Lessee, to the extent such tax benefit
was not previously taken into account in computing such payment or indemnity,
but not before the Lessee shall have made all payments then due to such Tax
Indemnitee under this Agreement, the Tax Indemnity Agreement and any other
Operative Agreement, an amount equal to the lesser of (x) the sum of such tax
benefit plus any other tax benefit realized by such Tax Indemnitee that would
not have been realized but for any payment made by such Tax Indemnitee pursuant
to this sentence and not already paid to the Lessee, or (y) the amount of the
payment made under Section 6.01 hereof and this Section 6.02 by the Lessee to
such Tax Indemnitee plus the amount of any other payments by the Lessee to such
Tax Indemnitee theretofore required to be made under this Section 6.02 and
Sections 6.01 and 6.05 hereof (and the excess, if any, of the tax benefit over
the applicable amount described in clause (x) over the amount described in
clause (y) above shall be carried forward and applied to reduce PRO TANTO any
subsequent obligations of the Lessee to make payments to such Tax Indemnitee
pursuant to Section 6.01 hereof). If an amount payable by any Tax Indemnitee to
the Lessee pursuant to this Section 6.02 is not paid when due because of the
occurrence and continuation of any Event of Default, such amount shall be
payable by any Tax Indemnitee to the Lessee upon the Lessee's curing all Events
of Default. The Lessee shall reimburse on an After Tax Basis such Tax Indemnitee
(subject to Section 6.01(b), but only insofar as subsections (iv), (vi), (vii),
(ix), (x), (xi), (xii) and (xiii) 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 Agreement) that is similar to the indemnification provision in
this Article 6.
Section 6.03. TIME OF PAYMENT. Any amount payable to a Tax Indemnitee
pursuant to this Article 6 shall be paid promptly, but in any event within 30
days after receipt of a written demand therefor from such Tax Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable, PROVIDED that in
the case of amounts which are being contested by the Lessee in good faith or by
the Tax Indemnitee in either case pursuant to Section 6.04 hereof, or subject to
29
verification proceedings pursuant to Section 6.11 hereof, such amount shall be
payable within 30 days after the time such contest or verification proceeding,
as the case may be, is finally resolved. In no event shall any amount be payable
under Section 6.01 until two Business Day prior to the due date for Tax
in issue.
Section 6.04. CONTESTS.
(a) NOTICE OF CLAIM. If a written claim is made against any Tax
Indemnitee for Taxes with respect to which the Lessee is liable for a payment or
indemnity hereunder, such Tax Indemnitee shall promptly (but in any event within
30 days of receipt thereof) give the Lessee notice in writing of such claim and
shall furnish the Lessee with copies of any written requests for information
sent to such Tax Indemnitee from any taxing authority to the extent relating to
such Taxes with respect to which the Lessee may be required to indemnify
hereunder; PROVIDED, HOWEVER, that the failure of a Tax Indemnitee to give such
notice or furnish such copy shall not terminate any of the rights of such Tax
Indemnitee under this Article 6, except (A) to the extent that the Lessee's
contest rights have been 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 against any
Tax Indemnitee 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 and that no tax return of the
Tax Indemnitee will be kept open as a result of such contest beyond the
applicable statute of limitations period (as confirmed in writing by such Tax
Indemnitee), then the Lessee shall be permitted, at its expense and in its own
name, or, if consented to in writing by the Tax Indemnitee, in the name of such
Tax Indemnitee, to contest the imposition of such Tax (a " Lessee Controlled
Contest"); PROVIDED, HOWEVER, that the Lessee shall not be permitted or entitled
to contest any Tax unless (A) such contest will not result in the risk of 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 a more than de minimis risk of any sale, forfeiture or loss of the
Aircraft (unless the Lessee has provided a bond or other sufficient protection
against any such risk reasonably satisfactory to the Tax Indemnitee), and (y)
for the payment of which such reserves, if any, as required to be provided under
generally accepted accounting principles have been provided and, to the extent
permitted by law, the Lessee shall be entitled to withhold payment during
pendency of such contest, (B) if an Event of Default shall have occurred and be
continuing, the Lessee shall have provided security for its obligations
hereunder reasonably satisfactory to the Owner Participant by placing in escrow
funds to cover any such obligations, (C) the Lessee shall have agreed to pay
such Tax Indemnitee on demand and on an After Tax Basis all costs and expenses
that such Tax Indemnitee actually incurs in connection with contesting such
claim (including, without limitation, all costs, expenses, losses, reasonable
legal
30
and accounting fees, disbursements, or penalties, interest and addition to tax),
(D) if such contest shall be conducted in a manner requiring the payment of the
claim in advance, the Lessee shall have advanced sufficient funds, on an
interest free basis, to make the payment required (or the Lessee shall have paid
the amount required directly to the appropriate taxing authority), and agreed to
indemnify the Tax Indemnitee against any additional net adverse tax consequences
on an After Tax Basis to such Tax Indemnitee of such advance, and (E) if
requested by the Owner Participant, independent tax counsel selected by Owner
Participant and reasonably acceptable to the Lessee has rendered an opinion
within 30 days of the Owner Participant providing notice of the claim to the
Lessee that a Reasonable Basis exists for contesting such claim.
If the Lessee shall so request within 30 days after receipt of such
notice from a Tax Indemnitee under this Section 6.04 hereof and with respect to
a Tax for which the Lessee may be obligated to indemnify pursuant to
Section 6.01 and which does not satisfy the requirements to constitute a Lessee
Controlled Contest, 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 satisfactory to such Tax Indemnitee to the effect that a
Reasonable Basis exists for pursuing such contest;
(ii) the Lessee shall have agreed to pay such Tax Indemnitee on
demand and on an After Tax Basis all reasonable costs and expenses that
such Tax Indemnitee may incur in connection with contesting such claim
(including, without limitation, all costs expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax);
(iii) such Tax Indemnitee shall have determined that the action
to be taken will not result in any more than de minimis danger of sale,
forfeiture or loss of, or the creation of any Lien other the Liens for
Taxes of the Lessee (or any Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve any more than de minimis risk of the sale,
forfeiture or loss of the Aircraft, the Airframe or any Engine or any
interest therein (unless the Lessee has
31
provided a bond or other sufficient protection against any such risk
reasonably satisfactory to the Tax Indemnitee) and for the payment of
which such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided;
(iv) if an Event of Default shall have occurred and be
continuing, the Lessee shall have provided security for its obligations
hereunder reasonably satisfactory to the Owner Participant by placing in
escrow sufficient funds to cover any such obligations;
(v) Lessee shall have acknowledged its liability for such claims;
(vi) such contest and related contests involving other equipment
involve potential payments and/or indemnities by the Lessee (whether or not
such indemnity is pursuant to this Agreement) of at least $25,000 in the
aggregate; and
(vii) if such contest shall be conducted in a manner requiring
the payment of the claim in advance, the Lessee shall have advanced
sufficient funds, on an interest free basis, to make the payment required,
and agreed to indemnify the Tax Indemnitee against any additional net
adverse tax consequences on an After Tax Basis to such Tax Indemnitee of
such advance.
In the case of a contest which is not a Lessee Controlled Contest, if
requested by the Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to appeal any adverse decision to the United States Supreme Court
provided that with respect to an appeal of an adverse judicial decision a
substantial basis in law and fact must exist that such appeal will be
successful. If the Lessee is permitted under applicable law to contest a Tax
asserted against the Lessee and the same or similar Tax is also asserted against
the Tax Indemnitee, subject to the conditions herein, each of the Lessee and
such Tax Indemnitee shall conduct its contest in its own name and the Lessee and
such Tax Indemnitee will cooperate in a reasonable manner with respect to the
respective contests of such Tax.
(c) DECLINING TO CONTEST; SETTLEMENT.
(i) If, after the Lessee has properly requested a contest in
accordance with this Section 6.04 and Lessee is then complying with the
terms of this Section 6.04, any Tax Indemnitee shall at any time decline to
take any action required under Section 6.04 with respect to such contest,
then, if such failure shall cause the contest to be determined adversely or
shall preclude such contest as a matter of law, the Lessee shall not be
obligated to indemnify such Tax Indemnitee for such Tax and such Tax
Indemnitee shall reimburse the Lessee for all amounts previously advanced
by the Lessee in connection with such contest (other than costs and
expenses of such contest).
(ii) No Tax Indemnitee shall settle a contest of any indemnified
Tax without requesting the Lessee's written consent (which consent will not
be unreasonably withheld, as determined in the Lessee's good faith
judgment). If any Tax Indemnitee shall settle a contest for any Tax without
receiving the Lessee's written consent, then the
32
Lessee shall not be obligated to indemnify such Tax Indemnitee for such Tax
and the Tax Indemnitee shall reimburse the Lessee for all amounts
previously advanced with respect to such contest (other than costs and
expenses of such contest). Notwithstanding the preceding two sentences, no
Tax Indemnitee shall be required to take or continue any action unless the
Lessee shall have agreed to pay the Tax Indemnitee on a current and After
Tax Basis all reasonable fees and expenses (including reasonable attorney's
and accountant's fees) which such Tax Indemnitee may incur as a result of
contesting such Taxes.
(d) CONTINUING CLAIMS. Notwithstanding anything contained in this
Section 6.04 to the contrary, no Tax Indemnitee shall be required to contest any
claim if the subject matter thereof shall be of a continuing nature and shall
have previously been adversely decided pursuant to the contest provisions of
this Section 6.04 unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings and court decisions) or the Lessee shall have provided new facts after
such claim shall have been so previously decided, and such Tax Indemnitee shall
have received an opinion of independent tax counsel selected by it and
reasonably approved by the Lessee and furnished at the Lessee's sole expense to
the effect that, as a result of such change or new facts, it is more likely than
not that the position which such Tax Indemnitee or the Lessee, as the case may
be, had asserted in such previous contest, would prevail.
(e) CLAIMS BARRED. If (A) any Tax Indemnitee fails to give the Lessee
written notice pursuant to this Section 6.04 of any claim by any government or
taxing authority for any Tax for which the Lessee is obligated pursuant to this
Section 6.01, (B) as a direct result of such failure the contest of such claim
has been materially and adversely impaired and (C) the Lessee furnishes, at the
Lessee's expense, an opinion of counsel selected by the Lessee and reasonably
satisfactory to such Tax Indemnitee to the effect that, had the contest of such
claim not been materially and adversely impaired, a Reasonable Basis would have
existed for pursuing such contest, such Tax Indemnitee shall be deemed to have
waived its right to any payment by the Lessee that would otherwise be payable by
the Lessee pursuant to this Section 6.01 in respect of such claim.
Section 6.05. REFUNDS. When a Tax Indemnitee becomes entitled to
receive a refund or credit against Tax of all or any part of any Taxes which the
Lessee shall have paid for such Tax Indemnitee or for which the Lessee shall
have reimbursed or indemnified such Tax Indemnitee, such Tax Indemnitee shall
pay, provided an Event of Default has not occurred and is not continuing, to the
Lessee an amount equal to the amount of such refund or credit, together with any
interest attributable thereto, less (x) all payments then due to such Tax
Indemnitee under this Article 6, and (y) Taxes imposed with respect to the
accrual or receipt thereof, including interest received attributable thereto,
plus any tax benefit realized by such Tax Indemnitee as a result of any payment
by such Tax Indemnitee made pursuant to this sentence; PROVIDED, HOWEVER, that
such amount shall not be payable (a) before such time as the Lessee shall have
made all payments or indemnities then due and payable to such Tax Indemnitee
under this Article 6 and (b) to the extent that the amount of such payment
(without regard to any interest component thereof) would exceed (i) the amount
of all prior payments by the Lessee to such Tax Indemnitee pursuant to this
Article 6 less (ii) the amount of all prior payments by such Tax Indemnitee to
the Lessee pursuant to this Article 6 (any such excess shall be carried forward
to
33
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), (ix),(x), (xi), (xii) and (xiii) thereof would
apply).
Section 6.06. REPORTS. In case any report or return is required to be
made with respect to any Taxes (other than Income Taxes) against which the
Lessee is or may be obligated to indemnify the Indemnitees under this Article 6,
the Lessee shall, to the extent it has knowledge thereof, make such report or
return, except for any such report or return that the Tax Indemnitee has
notified the Lessee that it intends to file, in such manner as will show the
ownership of the Aircraft in the Owner Trustee (unless the ownership of the
Aircraft is not shown on such report or return) and, upon request, shall send a
copy of the applicable portions of such report or return to the Tax Indemnitee
and the Owner Trustee or will notify the Tax Indemnitee of such requirement and
make such report or return in such manner as shall be satisfactory to such Tax
Indemnitee and the Owner Trustee. The Lessee will provide such information
within the possession or control of the Lessee as the Tax Indemnitee may
reasonably request in writing from the Lessee to enable the Tax Indemnitee to
fulfill its tax filing requirements with respect to the transactions
contemplated by the Operative Agreements (without duplication of any comparable
requirements of the Tax Indemnity Agreement) and any audit information request
arising from any such filing. The Tax Indemnitee will provide such information
within its possession or control as the Lessee may reasonably require from such
Tax Indemnitee to enable the Lessee to fulfill its tax filing requirements with
respect to the transactions contemplated by the Operative Agreements and any
audit information request arising from such filing; PROVIDED that in no event
shall any Tax Indemnitee be required to provide copies of any of its
tax returns.
Section 6.07. SURVIVAL OF OBLIGATIONS. The representations,
warranties, indemnities and agreements of the Lessee provided for in this
Article 6 and the Lessee's obligations under any and all of them, in each case,
with respect to events or periods prior to the expiration or termination of the
Lease shall survive the expiration or other termination of the Operative
Agreements.
Section 6.08. PAYMENT OF TAXES. With respect to any Tax otherwise
indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe,
any Engine or Parts, to the extent permitted by the applicable federal, state,
local or foreign law, the Lessee shall pay such tax directly to the relevant
Taxing authority and file any returns or reports required with respect thereto
to the extent legally entitled to do so in its own name; PROVIDED, HOWEVER, that
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
34
the terms of the Lease or the Tax Indemnity Agreement and the position
thereunder of the Owner Trustee and the Owner Participant.
Section 6.09. REIMBURSEMENTS BY INDEMNITEES GENERALLY. To the extent
the Lessee is required to pay or withhold any Tax imposed on or with respect to
a Tax Indemnitee in respect of the transactions contemplated by the Operative
Agreements, which Tax is not otherwise the responsibility of the Lessee under
the Operative Agreements, or any other written agreements between the Lessee and
such Tax Indemnitee, then such Tax Indemnitee shall pay to the Lessee within 30
days of the Lessee's demand therefor an amount which equals the amount actually
paid by the Lessee with respect to such Taxes.
Section 6.10. FORMS. Each Tax Indemnitee agrees to furnish from time
to time to Lessee or to such other person as Lessee may designate, at Lessee's
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.
ARTICLE 7.
GENERAL INDEMNITY
Section 7.01. GENERALLY.
(a) INDEMNITY. The Lessee agrees to indemnify each Indemnitee against
and agrees to protect, defend, save and keep harmless each Indemnitee from and
against and in respect of, and will pay on an After Tax Basis, any and all
liabilities, obligations, losses, damages, settlements, penalties, claims,
actions, suits, costs, disbursements and expenses,
35
demands or judgments (including reasonable legal fees and expenses) of every
kind and nature, whether or not any of the transactions contemplated by this
Agreement are consummated and whether arising before, on or after the Delivery
Date (individually, an "Expense," collectively, "Expenses"), which may be
imposed on, incurred or suffered by or asserted against any Indemnitee, in any
way relating to, arising out of or in connection with, any one or more of the
following:
(i) any Operative Agreement, Sublease or any transaction
contemplated thereby;
(ii) the operation, possession, use, non-use, maintenance,
storage, overhaul, delivery, non-delivery, control, condition, alteration,
modification, addition, improvement, airworthiness, replacement,
substitution, return, abandonment, redelivery or other disposition, repair
or testing of the Aircraft, Airframe, or any Engine or any engine used in
connection with the Airframe, or any Part thereof by the Lessee, any
sublessee or any other Person whatsoever, whether or not such operation,
possession, use, non-use, maintenance, storage, overhaul, delivery,
non-delivery, control, condition, alteration, modification, addition,
improvement, airworthiness, replacement, substitution, return, abandonment,
redelivery or other disposition, repair or testing is in compliance with
the terms of the Lease, including, without limitation, claims for death,
personal injury or property damage or other loss or harm to any Person
whatsoever, including, without limitation, any passengers, shippers or
other Persons wherever located, claims or penalty relating to any laws,
rules or regulations, including, without limitation, environmental control,
noise and pollution laws, rules or regulation and any Liens in respect of
the Aircraft, any Engine or any Part;
(iii) the manufacture, design, sale, return, purchase,
acceptance, nonacceptance, rejection, delivery, non-delivery, condition,
repair, modification, servicing, rebuilding, airworthiness, registration,
reregistration, deregistration, ownership, financing, import, export,
performance, non-performance, lease, sublease, transfer, merchantability,
fitness for use, alteration, substitution or replacement of any Airframe,
Engine, or Part or other transfer of use or possession, or other
disposition of the Aircraft, the Airframe, any Engine or any Part
including, without limitation, latent and other defects, whether or not
discoverable, tort liability, whether or not arising out of the negligence
of any Indemnitee (whether active, passive or imputed and including strict
liability without fault), and any claims for patent, trademark or copyright
infringement;
(iv) any breach of or failure to perform or observe, or any other
non-compliance with, any condition, covenant or agreement to be performed,
or other obligations of the Lessee under any of the Operative Agreements,
or the falsity or inaccuracy of any representation or warranty of the
Lessee in any of the Operative Agreements (other than representations and
warranties in the Tax Indemnity Agreement) or the occurrence of any Default
or Event of Default;
(v) the enforcement of the terms of the Operative Agreements
(including this Section 7.01(a));
36
(vi) any 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 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 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
37
representation or warranty or by any failure of Lessee to perform any
obligation under an Operative Agreement;
(vi) is attributable to the failure by such Indemnitee to perform
any of its obligations under any of the Operative Agreements except to the
extent such failure was caused by a breach by Lessee of any representation
or warranty or by any failure of Lessee to perform any obligation under an
Operative Agreement;
(vii) is, in the case of the Owner Participant, Lessor's Liens
attributable to the Owner Participant; in the case of the Owner Trustee,
Lessor's Liens to the extent attributable to the Owner Trustee; in the case
of Trust Company, Lessor's Liens to the extent attributable to Trust
Company;
(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 resulting from the direct or indirect use of
assets of any ERISA Plan to acquire or hold Owner Participant's interest in
the Trust Estate or in the case of any transferee of the Owner Participant
referred to in Section 5.01(c), to purchase the Beneficial Interest
pursuant to Section 5.01(c);
(x) except during the continuation of an Event of Default, is
attributable to any amendment to any of the Operative Agreements which is
not requested, or consented to, by the Lessee or is not required or made
pursuant to the terms of any of the Operative Agreements;
(xi) is attributable to the exercise by any Indemnitee of any
right to inspect the Aircraft except with respect to any such inspection
conducted while an Event of Default is continuing; and
(xii) constitutes the loss of future profits of such Indemnitee
or losses attributable to such Indemnitee's overhead.
Section 7.02. NOTICE AND PAYMENT. Each Indemnitee shall give prompt
written notice to the Lessee of any liability as to which an officer of such
Indemnitee has actual knowledge, for which the Lessee is, or may be, liable
under this Article 7; PROVIDED, HOWEVER, that failure to give such notice shall
not terminate any of the rights of an Indemnitee under this Article 7 and shall
not release Lessee from any of its obligations to indemnify such Indemnitee
hereunder, except to the extent that such failure adversely affects any
applicable defense or counterclaim, otherwise increases the amount the Lessee
would have been liable for in the
38
absence of such failure to provide such notice or adversely affects the ability
of Lessee's insurers to defend such claim.
Section 7.03. DEFENSE OF CLAIMS. The Lessee or its insurers shall have
the right (in each such case at the Lessee's sole expense) to investigate,
defend (and control the defense of) any such claim for which indemnification is
sought pursuant to this Article 7 (so long as Lessee has agreed in writing
reasonably acceptable to the relevant Indemnitee that Lessee is liable to such
Indemnitee for any Expenses relating to or arising out of the claim for which
indemnification is sought, provided that Lessee will not be so liable to the
extent that it is reasonably determined that one or more of the exclusions
contained in Section 7.01(b) would be applicable to such claim) and each
Indemnitee shall cooperate 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),
(b), (f), (g) or (h) of the Lease, (B) if an actual or potential material
conflict of interest exists making it advisable in the good faith opinion of
such Indemnitee (on the basis of prevailing standards of professional
responsibility) for such Indemnitee to be represented by separate counsel or if
such proceeding involves the potential imposition of criminal liability on such
Indemnitee or (C) if such proceeding will involve any non-de minimis risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than Permitted
Liens) on the Aircraft or the Trust Estate (unless the Lessee posts a bond or
other security reasonably acceptable in form and substance to such Indemnitee)
or involve any risk of criminal liability to such Indemnitee. Subject to the
immediately foregoing sentence, where the Lessee or the insurers under a policy
of insurance maintained by the Lessee undertake the defense of an Indemnitee
with respect to such a claim, no additional legal fees or expenses of such
Indemnitee in connection with the defense of such claim shall be indemnified
hereunder unless the fees or expenses were incurred at the written request of
the Lessee or such insurers. Subject to the requirement of any policy of
insurance applicable to a claim, an Indemnitee may participate at its own
expense at any judicial proceeding controlled by the Lessee or its insurers
pursuant to the preceding provisions, to the extent that such party's
participation does not, in the reasonable opinion of the independent counsel
appointed by the Lessee or its insurers to conduct such proceedings, interfere
with the defense of such claim (it being agreed that the making of copies,
giving notice of proceedings and the like shall not be considered interference);
and such participation shall not constitute a waiver of the indemnification
provided in this Section 7.03. No Indemnitee shall enter into any settlement or
other compromise with respect to any claim described in this Section 7.03 (other
than any claim involving potential criminal liability) without the prior written
consent of the Lessee, unless such Indemnitee waives its right to be indemnified
under this Article 7 with respect to such claim or unless an Event of Default
under Section 16(a), 16(f), 16(g) or 16(h) of the Lease is continuing. The
Lessee shall not enter into any settlement or compromise with respect to which
the Lessee has not agreed to indemnify such Indemnitee to such Indemnitee's
satisfaction or which admits any criminal violation, gross negligence or willful
misconduct on the part of any Indemnitee without the prior written consent of
such Indemnitee.
Section 7.04. INSURED CLAIMS. Notwithstanding any other provision of
this Article 7 to the contrary, in the case of any 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
39
otherwise, it shall be a condition of such indemnity with respect to any
particular Indemnitee that such Indemnitee shall cooperate with the insurers in
the exercise of their rights to investigate, defend or compromise such claim as
may be required to retain the benefits of such insurance with respect to such
claim.
Section 7.05. SUBROGATION. To the extent that an Expense indemnified
by the Lessee under this Article 7 is in fact paid in full by the Lessee and/or
an insurer under a policy of insurance maintained by the Lessee, the Lessee
and/or such insurer as the case may be shall be subrogated to the extent of such
payment to the rights and remedies of the Indemnitee on whose behalf such
Expense was paid with respect to the transaction or event giving rise to such
Expense (other than the rights and remedies in respect of insurance policies
maintained by such Indemnitee and other than the rights of the Trust Company or
the Owner Trustee and remedies against the Owner Participant under the Trust
Agreement). Should an Indemnitee receive any refund, 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 to hold as security for Lessee's
obligations under the Lessee Documents or, if requested by Lessee, applied to
satisfy such obligations.
Section 7.06. INFORMATION. Subject to Section 7.04, Lessee will
provide the relevant Indemnitee with such information, not within the control of
such Indemnitee, as is in Lessee's control or is reasonably available to Lessee,
which such Indemnitee may reasonably request, and will otherwise cooperate with
such Indemnitee, so as to enable such Indemnitee to fulfill its obligations
under Section 7.03 and to control or participate in any proceeding to the extent
permitted by Section 7.03. The Indemnitee shall supply Lessee with such
information, not within the control of Lessee, as is in such Indemnitee's
control or is reasonably available to such Indemnitee, which Lessee may
reasonably request to control or participate in any proceeding to the extent
permitted by Section 7.03.
Section 7.07. SURVIVAL OF OBLIGATIONS. The indemnities and agreements
of the Lessee provided for in this Article 7 shall survive the expiration or
other termination of this Agreement.
Section 7.08. EFFECT OF OTHER INDEMNITIES. The Lessee's obligations
under this Article 7 shall be those of a primary obligor whether or not the
Person indemnified shall also be indemnified with respect to the same matter
under the terms of this Agreement, or any other document or instrument, and the
Person seeking indemnification from the Lessee pursuant to any provision of this
Agreement may proceed directly against the Lessee without first seeking to
enforce any other right of indemnification.
Section 7.09. WAIVER OF CERTAIN CLAIMS. The Lessee hereby waives and
releases any Expense now or hereafter existing against any Indemnitee arising
out of death or personal injury to personnel of the Lessee, loss or damage to
property of the Lessee, or the loss of use of
40
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 with respect to
the residual value of the Aircraft or any part thereof.
ARTICLE 8.
TRANSACTION COSTS
Section 8.01. TRANSACTION COSTS AND OTHER COSTS.
(a) TRANSACTION COSTS. If the transactions contemplated by this
Agreement to occur on the Delivery Date are consummated, the Owner
Participant shall pay (or reimburse the Lessee if the Lessee shall have
previously made such payment) all fees and expenses of the following persons
relating to the transactions contemplated hereby up to an aggregate maximum
amount of [*] following receipt by the Owner Participant of appropriate
invoices with respect thereto: (i) the reasonable fees and expenses of
counsel for Owner Participant; (ii) the reasonable fees and expenses of the
respective counsel for the Lessee, the Owner Trustee, the Manufacturer, the
Engine Manufacturer and the Seller; (iii) the reasonable fees and expenses of
special aviation counsel; (iv) the initial fees and expenses of the Owner
Trustee; (v) the fees and expenses of Seabury Securities, LLC (the "Lessee
Advisor"); (vi) any amounts paid in connection with any appraisal report
prepared for the Owner Participant; and (vii) any other amounts approved by
the Lessee and the Owner Participant. The fees and expenses described in
clauses (ii) through (v) 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, 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.
(c) AMENDMENTS AND SUPPLEMENTS. Without limitation of the foregoing,
the Lessee agrees to pay, as Supplemental Rent, to the Owner Trustee and the
Owner Participant 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 or the Owner Trustee of any interest in the Aircraft, the
Lessor's Estate, the Beneficial Interest or the Trust Agreement or any similar
interest (and the
-----------
* Confidential
41
offeror, seller, or transferor shall be responsible for all such fees and
expenses), unless such offer, sale or transfer shall occur (A) pursuant to the
exercise of remedies under Section 17 of the Lease, or (B) in connection with
the termination of the Lease or action or direction of the Lessee pursuant to
Section 8, 13 or 14 of the Lease.
ARTICLE 9.
SUCCESSOR OWNER TRUSTEE
Section 9.01. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE.
(a) RESIGNATION AND REMOVAL. The Owner Trustee or any successor Owner
Trustee may resign or may be removed (with the consent of the Lessee) by the
Owner Participant, and a successor Owner Trustee may be appointed and a Person
may become Owner Trustee under the Trust Agreement only in accordance with the
provisions of Section 8.01 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 8.01 of the Trust Agreement shall be
subject to the following conditions:
(i) such successor Owner Trustee shall be a Citizen of the United
States;
(ii) such successor Owner Trustee shall be a bank or a trust
company having combined capital, surplus and undivided profits of at least
$100,000,000 or a bank or trust company fully guaranteed by a direct or
indirect parent thereof having a combined capital, surplus and undivided
profits of at least $100,000,000;
(iii) such appointment shall not violate any provisions of the
Transportation Code or any applicable rule or regulation of the applicable
regulatory agency or body of any other jurisdiction in which the Aircraft
may then be registered or create a relationship which would be in violation
of the Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered;
(iv) such successor Owner Trustee shall enter into an agreement
or agreements, in form and substance reasonably satisfactory to the Lessee
and the Owner Participant whereby such successor Owner Trustee confirms
that it shall be deemed a party to this Agreement and each other Operative
Agreement to which the Owner Trustee is a party and agrees to be bound by
all the terms of such documents applicable to the Owner Trustee and makes
the representations and warranties contained in Section 5.03 hereof (except
that it may be duly incorporated, validly existing and in good standing
under the laws of the United States of America or any State thereof); and
(v) all filings of Uniform Commercial Code financing and
continuation statements, filings in accordance with the Transportation Code
and amendments thereto shall be made and all further actions taken in
connection with such
42
appointment as may be necessary in connection with maintaining the valid
and continued registration of the Aircraft in accordance with the
Transportation Code.
ARTICLE 10.
LIABILITIES OF THE OWNER PARTICIPANT
Section 10.01. LIABILITIES OF THE OWNER PARTICIPANT. The Owner
Participant shall not have any obligation or duty to the Lessee with respect to
the transactions contemplated by this Agreement, except those obligations or
duties expressly set forth in this Agreement 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.
ARTICLE 11.
OTHER DOCUMENTS
Section 11.01. CONSENT OF LESSEE TO OTHER DOCUMENTS. The Lessee hereby
consents in all respects to the execution and delivery of the Trust Agreement.
Section 11.02. CONSENT OF OWNER PARTICIPANT TO OTHER DOCUMENTS. The
Owner Participant hereby consents in all respects to the execution and delivery
of the Lease and hereby agrees to follow the terms of the Lease which are
applicable to it.
ARTICLE 12.
NOTICES
Section 12.01. NOTICES. Except as otherwise specifically provided
herein, all notices, requests, approvals or consents required or permitted by
the terms hereof shall be in writing (it being understood that the specification
of a writing in certain instances and not in others does not imply an intention
that a writing is not required as to the latter). Any notice shall be effective
when received. Any notice shall either be sent by overnight courier service or
overnight delivery service or by hand, 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 Owner
Participant 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: President; telephone (▇▇▇) ▇▇▇-▇▇▇▇,
facsimile (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to c/o Wexford Management, LLC, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇, telephone (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇ ▇▇▇▇▇▇▇▇) and (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇▇▇▇
▇▇▇▇▇), facsimile (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇ ▇▇▇▇▇▇▇▇) and (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇▇▇▇
▇▇▇▇▇); or to such other address as the Lessee shall from time to time designate
in writing to the Lessor and any Owner Participant;
43
(b) if to the Lessor or the Owner Trustee, to its office at ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department,
telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as
the Lessor shall from time to time designate in writing to the Lessee, with a
copy to the Owner Participant;
(c) if to the Owner Participant to its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Contracts Manager, telephone (203)
▇▇▇-▇▇▇▇ 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;
ARTICLE 13.
MISCELLANEOUS
Section 13.01. COUNTERPARTS. This Agreement may be executed by the
parties in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 13.02. NO ORAL MODIFICATIONS. Neither this Agreement nor any
of its terms may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification is sought. No such written termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy shall have been
delivered to and executed by the Owner Trustee. A copy of each such termination,
amendment, supplement, waiver or modification shall also be delivered to each
other party to this Agreement.
Section 13.03. CAPTIONS.
The table of contents preceding this Agreement and the headings of the
various Articles and Sections of this Agreement are for convenience of reference
only and shall not modify, define, expand or limit any of the terms or
provisions of this Agreement.
Section 13.04. SUCCESSORS AND ASSIGNS. The terms of this Agreement
shall be binding upon, and shall inure to the benefit of, the Lessee and its
successors and permitted assigns, the 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.
Section 13.05. CONCERNING THE OWNER TRUSTEE. Trust Company is entering
into this Agreement solely in its capacities (except to the extent otherwise
expressly indicated), not in its individual capacity but solely as Owner Trustee
under the Trust Agreement, and except as otherwise expressly provided in this
Agreement or in the Lease or the Trust Agreement, Trust Company shall not be
personally liable for or on account of its statements, representations,
warranties, covenants or obligations under this Agreement; PROVIDED, HOWEVER,
that Trust Company accepts the benefits running to it under this Agreement, and
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
44
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) the failure to use
ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens
attributable to it in its individual capacity, and (e) 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 13.06. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 13.07. 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) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY IRREVOCABLY CONSENTS AND AGREES THAT THE SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY MAILING COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET FORTH PURSUANT
TO SECTION 12.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 13.07(c), SHALL CONSTITUTE
VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO
HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH
SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE VALIDITY OF
SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING
BASED THEREON.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR
45
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 13.08. 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 13.09. ASSIGNMENT.
(a) The Owner Trustee may make a security assignment of or grant a
security interest in some or all of the Lessor's Estate ("Permitted Security
Interest"), as security for the Owner Trustee's obligations in connection with
any financing by the Owner Trustee pursuant to documents reasonably acceptable
to Lessee and otherwise in compliance with this Section 13.09, to a lender
("Lessor's Lender") which (x) shall be a bank, savings institution, finance
company, leasing company, or trust company or national banking association or
other financial institution acting for its own account or in a fiduciary
capacity as trustee or agent for other financial institutions or funds, (y)
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; and (z)
shall not be a party to any material current or overtly threatened litigation or
arbitration (whether as plaintiff or defendant) with the Lessee or any Affiliate
of the Lessee.
The Owner Trustee will give Lessee at least ten (10) days prior
written notice of a Permitted Security Interest and Lessee agrees to execute and
deliver in connection with any Permitted Security Interest such documents and
assurances (including an acknowledgment of the Permitted Security Interest and a
certificate as to the absence of any Default under the Lease) and to take such
further action as the Owner Trustee may reasonably request in connection with
the Permitted Security Interest. A Lessor's Lender shall be entitled to be an
Indemnitee and an Additional Insured.
(b) In connection with a Permitted Security Interest of the Lessor's
Estate by the Owner Trustee:
(i) as a condition precedent to such Permitted Security Interest
becoming effective, the Owner Trustee will procure that the Lessor's Lender
shall execute and deliver to Lessee a letter of quiet enjoyment reasonably
acceptable to Lessee in respect of Lessee's use and possession of the
Aircraft;
(ii) the Owner Trustee shall reimburse to Lessee its reasonable
out-of-pocket expenses (including reasonable legal fees and expenses)
actually incurred in connection with any such Permitted Security Interest
referred to in this Section 13.09,
46
provided that such expenses are substantiated to the Owner Trustee's
reasonable satisfaction; and
(iii) no such Permitted Security Interest shall impair the rights
and benefits, or increase the burdens or obligations, of Lessee hereunder
or under the Lease, including, without limitation, obligations with respect
to the payment of Rent or under Section 6.01 or 7.01 hereof.
[The remainder of this page is intentionally left blank.]
47
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.
CHAUTAUQUA AIRLINES, INC.,
as Lessee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participation
By: /s/ ▇▇▇▇▇▇ ▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇
Title: Vice President
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, except as otherwise expressly
provided herein but solely as Owner
Trustee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
48
APPENDIX A
DEFINITIONS [N281SK]
GENERAL PROVISIONS
The following terms shall have the following meanings for all
purposes of the Operative Agreements (as defined below), unless otherwise
defined in an Operative Agreement or the context thereof shall otherwise
require. In the case of any conflict between the provisions of this Appendix and
the provisions of any Operative Agreement, the provisions of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to
agreements shall be deemed to mean such agreements as amended and supplemented
from time to time, and any agreement, instrument or document entered into in
substitution or replacement therefor, and (ii) references to parties to
agreements shall be deemed to include the successors and permitted assigns of
such parties.
"ADDITIONAL INSUREDS" means the Owner Trustee (in its individual and
trust capacities) and the Owner Participant.
"AERONAUTICAL AUTHORITY" means as of any time of determination, the FAA
or other governmental airworthiness authority having jurisdiction over the
Aircraft or the Airframe and Engines or engines attached thereto under the laws
of the country in which the Airframe is then registered.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling 50% or more of any class of voting securities
of such Person or otherwise controlling, controlled by or under common control
with such Person. For the purposes of this definition, "control" (including
"controlled by" and "under common control with") shall mean the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether through the ownership of voting securities or by contract
or otherwise.
"AFTER TAX BASIS" means a basis such that any payment to be received or
deemed to be received by a Person shall be supplemented by a payment to such
Person so that the sum of such payments, after deduction of all Taxes (taking
into account any related credits or deductions) resulting from the actual or
constructive receipt or accrual of such payments, shall be equal to the payment
to be received.
"AIRCRAFT" means the Airframe together with the Engines, whether or not
any of the Engines may at the time of determination be installed on the Airframe
or installed on any other airframe or on any other aircraft.
"AIRCRAFT PURCHASE AGREEMENT" means the Aircraft Purchase Agreement
[N281SK] dated as of February 23, 2001, among the Seller, the Owner Trustee and
GECC, as amended and supplemented from time to time.
"AIRFRAME" means (i) the Embraer model EMB-145LR aircraft (excluding
the Engines and any other engines which may from time to time be installed
thereon, but including any and all Parts which may from time to time be
incorporated in, installed on or attached to such aircraft, and including any
and all such Parts removed therefrom so long as title to such removed Parts
remains vested in the Lessor under the terms of Section 7 of the Lease)
originally delivered and leased under the Lease, identified by national
registration number and manufacturer's serial number in the Lease Supplement
executed and delivered on the Delivery Date, so long as a Replacement Airframe
shall not have been substituted therefor pursuant to Section 8 of the Lease, and
(ii) a Replacement Airframe, so long as another Replacement Airframe shall not
have been substituted therefor pursuant to Section 8 of the Lease.
"APPRAISAL PROCEDURE" has the meaning specified in Exhibit F-2 to the
Lease.
"APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any court, governmental agency or
authority and rules, regulations, orders, directives, licenses and permits of
any governmental body, instrumentality, agency or authority.
"APPLICABLE RATE" has the meaning specified in Exhibit B to the Lease.
"ASSIGNED WARRANTIES" has the meaning specified in the Embraer Warranty
Assignment and Consent.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended,
and any successor thereto.
"BASIC RENT" means the rent payable on Basic Rent Payment Dates
throughout the Basic Term for the Aircraft pursuant to Section 3(b) of the Lease
and rent payable during any Renewal Term pursuant to Section 13(a) of the Lease.
"BASIC RENT PAYMENT DATE" means each date listed under the heading
"Basic Rent Payment Date" in Exhibit C to the Lease.
"BASIC TERM" means the period commencing at the beginning of the day on
the Delivery Date and ending at end of the day on the Expiration Date, or such
earlier date on which the Lease shall be terminated as provided therein.
"BENEFICIAL INTEREST" means the interest of the Owner Participant under
the Trust Agreement.
"BILLS OF SALE" means the FAA ▇▇▇▇ of Sale and the Warranty ▇▇▇▇ of
Sale.
"BUSINESS DAY" means any day other than a Saturday or Sunday or other
day on which commercial banks are authorized or required by law to close in New
York City, New York, Indianapolis, Indiana and Salt Lake City, Utah.
2
"CERTIFICATED AIR CARRIER" means an "air carrier" within the meaning of
the Transportation Code and a "citizen of the United States" within the meaning
of Section 40102(a)(15) (or any successor provision) of the Transportation Code
holding an "air carrier operating certificate" issued under Chapter 447 (or any
successor provision) of the Transportation Code for aircraft capable of carrying
ten or more individuals or 6,000 pounds or more of cargo, with each such
certificate in full force and effect.
"CITIZEN OF THE UNITED STATES" means a citizen of the United States as
defined in Section 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.
"CODE" means the United States Federal Internal Revenue Code of 1986,
as amended from time to time, or any similar legislation of the United States
enacted to supersede, amend, or supplement such Code (and any reference to a
provision of the Code shall refer to any successor provision(s), however
designated).
"COMMITMENT" shall have the meaning given such term in Section 2.01(c)
of the Participation Agreement.
"CRAF PROGRAM" has the meaning specified in Section 5(b)(vii) of the
Lease.
"DEFAULT" means any event or condition which, with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"DELIVERY DATE" means the date on which the Aircraft is delivered and
sold to the Lessor and leased by the Lessor to the Lessee under the Lease, which
date shall be the date of the initial Lease Supplement.
"DOLLARS", "DOLLAR" and "$" means dollars in lawful currency of the
United States.
"DOT" means the United States Department of Transportation or any
successor thereto.
"EBO DATE" has the meaning given to such term in Exhibit B to the
Lease.
"EBO AMOUNT" has the meaning given to such term in Exhibit B to the
Lease.
"EMBRAER PURCHASE AGREEMENT" means the EMB-145 Purchase Agreement
Number GCT-025/98 dated June 17, 1998, between the Manufacturer and Seller, as
amended and supplemented from time to time.
"EMBRAER WARRANTY ASSIGNMENT AND CONSENT" means the Warranty Assignment
Agreement and Consent [N281SK], dated as of February 23, 2001, between Seller
and Owner Trustee and consented to by the Manufacturer.
"ENGINE" means (A) each of the two ▇▇▇▇▇▇▇ model AE3007A1P engines
originally delivered and leased under the Lease, identified by manufacturer's
serial number in the Lease Supplement executed and delivered on the Delivery
Date, so long as a Replacement Engine shall not have been substituted therefor
pursuant to Section 7(e) of the Lease, and (B) a Replacement
3
Engine, so long as another Replacement Engine shall not have been substituted
therefor pursuant to Section 7(e) of the Lease, whether or not such engine or
Replacement Engine, as the case may be, is from time to time installed on the
Airframe or installed on any other aircraft, and including in each case all
Parts incorporated or installed in or attached thereto and any and all Parts
removed therefrom so long as title to such Parts remains vested in the Lessor
under the terms of Section 7 of the Lease. The term "ENGINES" means, as of any
date of determination, the two engines each of which is an Engine on that date.
"ENGINE MANUFACTURER" means ▇▇▇▇▇▇▇ Engine Company, Inc. a subsidiary
of the Rolls-Royce Corporation, and its successors and permitted assigns.
"ENGINE WARRANTIES" has the meaning specified in the Engine Warranty
Assignment and Consent.
"ENGINE WARRANTY AGREEMENT" means the Rolls-Royce AE3007A Series Engine
Warranty Agreement made effective as of April 30, 1999, among the Engine
Manufacturer, Seller and the Lessee, as amended and supplemented from time to
time.
"ENGINE WARRANTY ASSIGNMENT AND CONSENT" means the Engine Warranty
Assignment Agreement and Consent [N281SK], dated as of February 23, 2001,
between Seller and Owner Trustee and consented to by the Engine Manufacturer.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
any regulations and rulings issued thereunder all as amended and in effect from
time to time.
"ERISA PLAN" means, individually or collectively, an employee benefit
plan, as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA
or any applicable regulation thereunder or a plan or individual retirement
account which is subject to Section 4975(c) of the Code;
"EVENT OF DEFAULT" has the meaning given to such term in Section 16 of
the Lease.
"EVENT OF LOSS" means any of the following events with respect to the
Aircraft, the Airframe or any Engine:
(i) any theft, hijacking or disappearance of such property for
a period of 60 consecutive days or more or, if earlier for a period
that extends until the end of the Term;
(ii) destruction, damage beyond economic repair or rendition
of such property permanently unfit for normal use for any reason
whatsoever;
(iii) any event which results in an insurance settlement with
respect to such property on the basis of an actual, constructive or
compromised total loss;
(iv) condemnation, confiscation or seizure of, or requisition
of title to or use of such property by any foreign government or
purported government (or in the case of any such requisition of title,
by the Government) or any agency or instrumentality thereof, for a
period in excess of (A) in the case of any requisition of use, 180
consecutive days (for
4
countries listed in Exhibit E to the Lease) or 30 consecutive days (for
any other country) or (B) in the case of any condemnation, confiscation
or seizure of, or requisition of title, 10 consecutive days, or, in any
of the cases in this clause (iv), such shorter period ending on the
expiration of the Term;
(v) condemnation, confiscation or seizure of, or requisition
of use of such property by the Government for a period extending beyond
the Term;
(vi) as a result of any law, rule, regulation, order or other
action by the Aeronautical Authority, the use of the Aircraft or
Airframe in the normal course of air transportation shall have been
prohibited by virtue of a condition affecting all Embraer model
EMB-145LR aircraft equipped with engines of the same make and model as
the Engines for a period of 180 consecutive days (or beyond the end of
the Term), unless the Lessee, prior to the expiration of such 180-day
period, shall be diligently carrying forward all necessary and
desirable steps to permit normal use of the Aircraft and shall within
12 months have conformed at least one Embraer model EMB-145LR aircraft
(but not necessarily the Aircraft) to the requirements of any such law,
rule, regulation, order or action, and shall be diligently pursuing
conformance of the Aircraft in a non-discriminatory manner provided
that, notwithstanding the foregoing, if such normal use of such
property subject to the Lease shall be prohibited at the end of the
Term, or if such normal use of such property shall be prohibited for a
period of eighteen (18) consecutive months, an Event of Loss shall be
deemed to have occurred; and
(vii) with respect to an Engine only, the requisition or
taking of use thereof by any government, and any divestiture of title
or ownership deemed to be an Event of Loss with respect to an Engine
under Section 5(b)(iii) or 5(b)(vi) of the Lease.
The date of such Event of Loss shall be (aa) the 31st day following loss of such
property or its use due to theft or disappearance or the 91st day following such
loss if such period shall have been extended (or the end of the Term if
earlier); (bb) the date of any destruction, damage beyond economic repair or
rendition of such property permanently unfit for normal use; (cc) the date of
any insurance settlement on the basis of an actual, constructive or compromised
total loss; (dd) the 181st day (for countries listed in Exhibit E to the Lease)
or 31st day (for any other country) following condemnation, confiscation,
seizure or requisition of title to such property by a foreign government
referred to in clause (iv) above (or the 11th day in the case of appropriation
of title), or the end of the Term if earlier than such 181st, 31st or 11th day;
(ee) the last day of the Term in the case of requisition of title to or use of
such property by the Government; and (ff) the last day of the applicable period
referred to in clause (vi) above (or if earlier, the end of the Term without the
Lessee's having conformed at least one Embraer model EMB-145LR aircraft to the
applicable requirements). An Event of Loss with respect to the Aircraft shall be
deemed to have occurred if any Event of Loss occurs with respect to the
Airframe.
"EXPENSES" has the meaning given to such term in Section 7.01(a) of the
Participation Agreement.
"EXPIRATION DATE" means the date specified as such in the Lease
Supplement executed and delivered on the Delivery Date.
5
"FAA ▇▇▇▇ OF SALE" means (A) the ▇▇▇▇ of sale for the Airframe on AC
Form 8050-2, or such other form as may be approved by the Aeronautical
Authority, executed by the Seller in favor of the Owner Trustee and to be dated
the Delivery Date, and (B) a ▇▇▇▇ of sale for a Replacement Airframe on AC Form
8050-2, or such other form as may be approved by the Aeronautical Authority,
executed by the seller thereof in favor of the Owner Trustee.
"FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" of the Airframe
or any Engine shall mean the value that would be obtained in an arms'-length
transaction between an informed and willing lessee-user or buyer-user (other
than a lessee currently in possession or a used equipment dealer) under no
compulsion to lease or buy, as the case may be, and an informed and willing
lessor or seller, as the case may be, under no compulsion to lease or sell, as
the same shall be specified by agreement between the Lessor and the Lessee or,
if not agreed to by the Lessor and the Lessee within a period of 15 days after
either party requests a determination, then as specified in an appraisal
prepared and delivered in New York City mutually agreed to by two recognized
independent aircraft appraisers, one of which shall be appointed by the Lessor
and the other of which shall be appointed by the Lessee, or, if such appraisers
cannot agree on such appraisal, an appraisal arrived at by a third independent
recognized appraiser chosen by the mutual consent of the two aircraft
appraisers. If either party should fail to appoint an appraiser within 15 days
of receiving notice of the appointment of an appraiser by the other party, then
such appraisal shall be made by the appraiser appointed by the first party. If
the two appraisers cannot agree on such appraisal and fail to appoint a third
independent recognized aircraft appraiser within 15 days after the appointment
of the second appraiser, then either party may apply to the American Arbitration
Association to make such appointment. The appraisal shall be completed within 30
days of the appointment of the last appraiser appointed. In determining Fair
Market Rental Value or Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe or Engine is in the condition,
location and overhaul status in which it is required to be returned to the
Lessor pursuant to Section 12 of the Lease and that the Lessee has removed all
Parts which it is entitled to remove pursuant to Section 7 of the Lease and that
the Aircraft is not encumbered by the Lease. Except as otherwise expressly
provided in the Lease, all appraisal costs will be shared equally by the Lessor
and the Lessee; PROVIDED that if the Lessee elects not to renew the Lease or
purchase the Aircraft following the conclusion of such appraisal, the Lessee
shall pay all appraisal costs. Notwithstanding the foregoing, for purposes of
Section 17 of the Lease, the "Fair Market Rental Value" or "Fair Market Sales
Value" of the Aircraft, the Airframe or any Engine, shall be determined on an
"as is, where is" basis and shall take into account customary brokerage and
other out-of-pocket fees and expenses which typically would be incurred in
connection with a re-lease or sale of the Aircraft, the Airframe or any Engine.
Any such determination pursuant to Section 17 of the Lease shall be made by a
recognized independent aircraft appraiser selected by Lessor and the costs and
expenses associated therewith shall be borne by Lessee, unless Lessor does not
obtain possession of the Aircraft, Airframe and Engines pursuant to Section 17
of the Lease, in which case an appraiser shall not be appointed and Fair Market
Rental Value and Fair Market Sales Value for purposes of Section 17 of the Lease
shall be zero. If the Owner Participant provides a Residual Notice pursuant to
Section 13(b)(iii) of the Lease, Fair Market Sales Value will be determined as
provided in the definition of Appraisal Procedure.
"FAIR MARKET VALUE RENEWAL TERM" has the meaning given to such term in
Section 13(a) of the Lease.
6
"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration and any successor agency or agencies thereto.
"FIXED RENEWAL TERM" has the meaning given to such term in Section
13(a) of the Lease.
"GECC" means General Electric Capital Corporation, a New York
corporation.
"GOVERNMENT" means the United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and credit
of the United States of America.
"GUARANTEE AGREEMENT" has the meaning given to such term in the
recitals of the Participation Agreement.
"GUARANTEED AMOUNT" has the meaning specified in Exhibit B to the
Lease.
"INDEMNITEE" means each of Trust Company, in its individual capacity
and as Owner Trustee, the Owner Participant, and each Affiliate, officer,
director, employee, agent, servant, successor and permitted assigns of any of
the foregoing Persons.
"LEASE" means the Lease Agreement [N281SK], dated as of February 23,
2001 between the Owner Trustee and the Lessee.
"LEASE SUPPLEMENT" means any Lease Supplement, substantially in the
form of Exhibit A to the Lease, entered into between the Lessor and the Lessee
for the purpose of leasing the Aircraft under and pursuant to the terms of the
Lease, including any amendment thereto entered into subsequent to the Delivery
Date.
"LESSEE" means Chautauqua Airlines, Inc., a New York corporation, and
its successors and permitted assigns.
"LESSEE DOCUMENTS" means the Operative Agreements to which the Lessee
is a party.
"LESSOR" means First Security Bank, National Association, a national
banking association, not in its individual capacity but solely as Owner Trustee
under the Trust Agreement, and its successors and permitted assigns.
"LESSOR'S COST" has the meaning given to such term in Exhibit B of the
Lease.
"LESSOR'S ESTATE" means all estate, right, title and interest of the
Owner Trustee in and to the Aircraft, and Engines and the Operative Agreements
(other than the Tax Indemnity Agreement) including, without limitation, all
amounts of Rent, insurance proceeds and requisition, indemnity or other payments
of any kind.
"LESSOR'S LENDER" has the meaning given to such term in Section 13.09
of the Participation Agreement.
"LESSOR'S LIENS" means Liens against, on or with respect to the
Aircraft, any Engine, the Lessor's Estate or any part thereof, title thereto or
any interest therein arising as a result of (i)
7
claims against or affecting the Lessor, in its individual capacity or as Owner
Trustee, or the Owner Participant, in each case not related to the Operative
Agreements or the transactions contemplated thereby, (ii) acts or omissions of
the Lessor in its individual capacity or as Owner Trustee, or of the Owner
Participant not contemplated or permitted under the terms of the Operative
Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its
individual capacity or as Owner Trustee, Owner Participant, Lessor's Estate or
the trust created by the Trust Agreement which are not required to be
indemnified against by the Lessee pursuant to Articles 6 or 7 of the
Participation Agreement and which are not required to be indemnified against by
the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the
Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant
arising from the transfer by the Lessor or the Owner Participant of its
interests in the Aircraft or any Engine other than a transfer of the Aircraft or
any other portion of the Lessor's Estate pursuant to Section 5(b), 7(b), 7(c),
7(d), 7(e), 8, 12(b), 13(b), 14(a) or 17 of the Lease and other than a transfer
pursuant to the exercise of the remedies set forth in Section 17 of the Lease;
PROVIDED that any Lien that is attributable solely to Owner Participant or
Lessor, in its individual capacity or as Owner Trustee, and would otherwise be
included as part of Lessor's Liens hereunder shall not constitute part of
Lessor's Liens hereunder, so long as (A) the existence of such Lien poses no
material risk of the sale, forfeiture or loss of the Aircraft, Airframe, any
Engine, the Lessor's Estate or any interest of Lessee or any other Person
therein or interference with any of Lessee's rights under any Operative
Agreement, (B) the existence of such Lien does not constitute a default by Owner
Participant or Lessor, in its individual capacity or as Owner Trustee, of its
respective obligations under the Lease, and (C) Owner Participant or Lessor, in
its individual capacity or as Owner Trustee, is diligently contesting such Lien
by appropriate proceedings.
"LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
security interest, claim, or other similar interest of any nature whatsoever.
"MANUFACTURER" means EMBRAER - Empresa Brasileira de Aeronautica S.A.,
a Brazilian corporation, and its successors and permitted assigns.
"MATERIAL ADVERSE CHANGE" means, with respect to any Person, any event,
condition or circumstance that materially and adversely affects such Person's
business or consolidated financial condition.
"MINIMUM LIABILITY AMOUNT" has the meaning given to such term in
Exhibit B to the Lease.
"NET ECONOMIC RETURN" means the Owner Participant's nominal after-tax
book yield (utilizing the multiple investment sinking fund method of analysis),
computed through the EBO Date and the Expiration Date on the basis of the same
methodology, constraints and assumptions as were utilized by the initial Owner
Participant in determining Basic Rent percentages and Termination Value
percentages as of the Delivery Date; PROVIDED, that, if the initial Owner
Participant shall have transferred its interest, Net Economic Return shall be
calculated as if the initial Owner Participant had retained its interest.
"NON-U.S. PERSON" means any Person other than a U.S. Person.
8
"OFFICER'S CERTIFICATE" means as to any company a certificate signed by
a Responsible Officer of such company.
"OPERATIVE AGREEMENTS" means the Participation Agreement, the Trust
Agreement, the FAA ▇▇▇▇ of Sale, the Warranty ▇▇▇▇ of Sale, the Embraer Warranty
Assignment and Consent, the Engine Warranty Assignment and Consent, the Lease,
each Lease Supplement, any Owner Participant Guaranty and the Tax Indemnity
Agreement.
"OWNER PARTICIPANT" means General Electric Capital Corporation, a New
York corporation and its successors and permitted transferees and assigns.
"OWNER PARTICIPANT GUARANTOR" means the provider of an Owner
Participant Guaranty.
"OWNER PARTICIPANT GUARANTY" means any guaranty delivered or to be
delivered to support the obligations of the Owner Participant under the
Operative Agreements in connection with the transfer by the Owner Participant of
the Beneficial Interest.
"OWNER TRUSTEE" means the Trust Company, not in its individual capacity
except as otherwise expressly stated, but solely as trustee under the Trust
Agreement, and its successors and permitted assigns.
"PARTICIPATION AGREEMENT" means the Participation Agreement [N281SK],
dated as of February 23, 2001, among the Lessee, the Owner Trustee not in its
individual capacity except as otherwise expressly provided therein, but solely
as owner trustee and the Owner Participant.
"PARTS" means any and all appliances, parts, instruments, components,
appurtenances, accessories, furnishings, seats, and other equipment of whatever
nature (other than complete Engines or engines and temporary replacement parts
as provided in Section 8 of the Lease and cargo containers) which may from time
to time be incorporated or installed in or attached to any Airframe or any
Engine, exclusive of any items leased by the Lessee from third parties and not
required in the navigation of the Aircraft.
"PAST DUE RATE" means a rate per annum identified in Exhibit B to the
Lease.
"PERMITTED AIR CARRIER" means (a) any Section 1110 Person and (b) any
foreign air carrier that is principally based in any foreign country listed on
Exhibit E to the Lease, except those that do not maintain normal diplomatic
relations with the United States.
"PERMITTED INVESTMENTS" means (a) direct obligations of the United
States of America or any agency or instrumentality thereof, (b) obligations
fully guaranteed by the United States of America or any agency or
instrumentality thereof, (c) any mutual fund the portfolio of which is limited
to obligations of the type described in clauses (a) and (b), (d) certificates of
deposit issued by, or bankers' acceptances of, or time deposits or a deposit
account with, any bank, trust company, or national banking association
incorporated or doing business under the laws of the United States of America or
one of the states thereof, having a combined capital and surplus of at least
$100,000,000 and having a rating of "A" or better from the ▇▇▇▇▇ Bank Watch
Service, (e) commercial paper issued by companies in the United States which
directly issue their own commercial paper and which are doing business under the
laws of the United States of America
9
or one of the states thereof and in each case having a rating assigned to such
commercial paper by a nationally recognized rating organization in the United
States of America equal to the highest rating assigned by such organization, or
(f) obligations of the type described in clauses (a), (b), (d), or (e) above,
purchased from any bank, trust company, or banking association referred to in
clause (d) above pursuant to repurchase agreements obligating such bank, trust
company, or banking association to repurchase any such obligation not later than
30 days after the purchase of any such obligation. Unless otherwise specified in
writing by the Owner Trustee, all such Permitted Investments shall mature not
later than 30 days from the date of purchase.
"PERMITTED LIEN" has the meaning given to such term in Section 10 of
the Lease.
"PERMITTED SECURITY INTEREST" has the meaning given to such term in
Section 13.09 of the Participation Agreement.
"PERMITTED SUBLESSEE" means (a) any Permitted Air Carrier, (b) any
airframe or engine manufacturer, or Affiliate of such a manufacturer, who is
domiciled in the United States of America or a country listed on Exhibit E to
the Lease or (c) the United States of America or any instrumentality or agency
thereof.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, limited liability company or government (federal,
state, local, foreign or any agency, instrumentality, division or body thereof)
or other entity of whatever nature.
"PURCHASE PRICE" means an amount equal to Lessor's Cost.
"REASONABLE BASIS" means that a realistic possibility of success,
within the meaning of ABA Formal Opinion No. 85-352, exists for pursuing such
contest.
"RECOVERY PERIOD" means "Tax Attribute Period" as defined in the Tax
Indemnity Agreement.
"RELATED LEASE" means the fifteen aircraft lease agreements of Embraer
model EMB-145LR aircraft that have been or shall be entered into in years 2000
and 2001 between the Trust Company as trustee of a trust the beneficiary of
which is GECC or an Affiliate of GECC, as lessor, and the Lessee, as lessee, in
substantially the form of the Lease, each when executed and delivered by such
parties.
"RELATED TAX INDEMNITEE" means any Affiliate of any Tax Indemnitee.
"RENEWAL TERM" has the meaning given to such term in Section 13(a) of
the Lease.
"RENT" means Basic Rent and Supplemental Rent, collectively.
"REPLACEMENT AIRCRAFT" means any Aircraft of which a Replacement
Airframe is part.
10
"REPLACEMENT AIRFRAME" means an Embraer model EMB-145LR aircraft or a
comparable or improved model of such aircraft of the Manufacturer (except
Engines or engines from time to time installed thereon) which shall have become
subject to the Lease pursuant to Section 8 thereof.
"REPLACEMENT CLOSING DATE" has the meaning given such term in Section
8(d) of the Lease.
"REPLACEMENT ENGINE" means an ▇▇▇▇▇▇▇ model AE3007A1P engine (or engine
of the same manufacturer of a comparable or an improved model and suitable for
installation and use on the Airframe), which has a value, utility and remaining
useful life at least equal to, and which is in good operating condition as, the
Engine to be replaced thereby (assuming that such Engine being replaced was in
the condition required to be maintained in accordance with the Lease), and which
shall have become subject to the Lease pursuant to Section 7(e) thereof.
"RESIDUAL VALUE GUARANTEE AGREEMENT" has the meaning given to such term
in the recitals of the Participation Agreement.
"RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any
officer in its Corporate Trust Administration, as the case may be, designated by
such Person to perform obligations under the Operative Agreements, and with
respect to any other party, any corporate officer of a party who, in the normal
performance of his or her operational responsibilities, with respect to the
subject matter of any covenant, agreement or obligation of such party pursuant
to any Operative Agreement, would have responsibility for and knowledge of such
matter and the requirements of any Operative Agreement with respect thereto.
"SEC" means the Securities and Exchange Commission of the United States
and any successor agencies or authorities.
"SECTION 1110" means 11 U.S.C. Section 1110 or any successor or
analogous section of the federal bankruptcy law in effect from time to time.
"SECTION 1110 PERSON" means a Citizen of the United States who is an
air carrier holding a valid air carrier operating certificate issued pursuant to
49 U.S.C. ch. 447 for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" means Solitair Corp., a Delaware corporation, and its
successors and permitted assigns.
"SPECIFIED DEFAULT" means (a) an event or condition described in
Section 16(a), (f), (g) or (h) of the Lease that, after the giving of notice or
lapse of time, or both, would become an Event of Default, or (b) any Event of
Default.
"SUBLEASE" means any sublease agreement between the Lessee and a
Permitted Sublessee as permitted by Section 5(b) of the Lease.
11
"SUPPLEMENTAL RENT" means all amounts, liabilities, indemnities and
obligations which the Lessee assumes or agrees to perform or pay under the Lease
or under the Participation Agreement or Tax Indemnity Agreement or any other
Operative Agreement to the Lessor, the Owner Participant, or others, including
payments of Termination Value, EBO Amount, and amounts calculated by reference
to Termination Value, all other amounts payable under Section 3(c) of the Lease,
and all amounts required to be paid by Lessee under the agreements, covenants,
and indemnities contained in the Lease or in the Participation Agreement or the
Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic
Rent.
"TAX" or "TAXES" has the meaning set forth in Section 6.01(a) of the
Participation Agreement.
"TAX INDEMNITEE" means each of Trust Company, individually and as Owner
Trustee, the Owner Participant and any Affiliate thereof.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement [N281SK],
dated as of February 23, 2001 between the Lessee and the Owner Participant.
"TERM" has the meaning given to such term in Section 3(a) of the Lease.
"TERMINATION DATE" means each date listed in the column entitled
"Termination Date" in Exhibit D to the Lease or, during a Renewal Term or
otherwise during any period following the last day of the Term, the second day
of each month.
"TERMINATION VALUE" means (a) as of any Termination Date during the
Basic Term, the amount determined as set forth in Exhibit D to the Lease for
that Termination Date, and (b) during any Renewal Term, the amount for the date
involved, determined in accordance with Section 13(a) of the Lease, in either
case adjusted as required by Section 3(d) of the Lease.
"TRANSACTION COSTS" means those costs and expenses set forth in Section
8.01(a) of the Participation Agreement.
"TRANSPORTATION CODE" means Title 49 of the United States Code,
subtitle VII, as amended and in effect on the date of the Lease or as
subsequently amended, or any successor or substituted legislation at the time in
effect and applicable, and the regulations promulgated pursuant thereto.
"TRUST AGREEMENT" means the Trust Agreement [N281SK], dated as of
February 23, 2001, between the Owner Participant and the Trust Company.
"TRUST COMPANY" means First Security Bank, National Association, a
national banking association, and its successors and permitted assigns.
"TRUST ESTATE" means the Lessor's Estate.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
effect from time to time in any relevant jurisdiction.
12
"UNITED STATES", "U.S." or "US" means the United States of America.
"U.S. PERSON" means a Person described in Section 7701(a)(30) of the
Code.
"WARRANTY ▇▇▇▇ OF SALE" means (A) the full warranty ▇▇▇▇ of sale
covering the Aircraft (and specifically referring to each Engine) executed by
the Seller in favor of the Owner Trustee and to be dated the Delivery Date, and
(B) a full warranty ▇▇▇▇ of sale covering a Replacement Aircraft (and
specifically referring to each Engine) executed by the seller thereof in favor
of the Owner Trustee.
13
EXHIBIT A-1 TO
THE PARTICIPATION AGREEMENT
[Form of Opinion of General Counsel of Lessee]
_______________, 2000
Aircraft Services Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
First Security Bank, National Association
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Re: CHAUTAUQUA AIRLINES, INC.
Ladies and Gentlemen:
I have acted as counsel for Chautauqua Airlines, Inc., a New York
Corporation (the "Corporation"), in connection with the execution and delivery
by the Corporation of (i) the Participation Agreement [N2__SK] dated as of
__________, 2000 among the Corporation, as Lessee, First Security Bank, National
Association, not in its individual capacity but solely as Owner Trustee (the
"Owner Trustee") and Aircraft Services Corporation, as Owner Participant (the
"Owner Participant"); (ii) the Lease Agreement [N2__SK] dated as of __________,
2000 (the "Lease") between the Owner Trustee, as Lessor ("Lessor") and the
Corporation, as Lessee; (iii) the Lease Supplement No. 1 [N2__SK] dated
__________, 2000 between the Lessor and the Corporation; (iv) the Tax Indemnity
Agreement [N2__SK] dated as of __________, 2000 between the Corporation and the
Owner Participant; (v) the Warranty Assignment Agreement and Consent (N2__SK)
dated as of __________, 2000 among Solitair Corp., the Owner Trustee and the
Corporation and consented to by Rolls-Royce Corporation; and (vi) the Lease
Termination Agreement [N2__SK] dated as of __________, 2000 between Solitair
Corp. and the Corporation (collectively, the "Lessee Documents"). Unless
otherwise defined herein, capitalized terms used herein have the meanings
assigned to them in Appendix A to the Lease.
In rendering this opinion, I have examined originals or copies, certified
or otherwise identified to my satisfaction, of the Lessee Documents, and have
investigated such questions of law, and have examined such other corporate
records of the Corporation and other documents, and have obtained and relied
(without independent investigation) upon such certificates and assurances from
public officials, as I have deemed necessary as a basis for the purpose of
rendering this opinion.
For the purpose of rendering this opinion, I have assumed, without any
independent investigation, the capacity of all natural persons, the authenticity
of all documents and instruments submitted to me as originals, and the
conformity to authentic original documents and
EXHIBIT A-1 PAGE 1
instruments of all documents and instruments submitted to me as certified,
conformed photostatic or facsimile copies.
Based upon and subject to the foregoing, and subject to the qualifications
set forth below, I am of the opinion that:
1. The Corporation is duly incorporated, validly existing, and in good
standing under the laws of the State of New York, and has the corporate power
and authority to carry on its business as presently conducted and to perform its
obligations under the Lessee Documents.
2. Each of the Lessee Documents has been duly authorized, executed and
delivered by the Corporation.
3. The execution and delivery of the Lessee Documents, the consummation
by the Corporation of the transactions contemplated thereby and compliance by
the Corporation with the terms and provisions thereof (i) do not require
stockholder approval, and (ii) do not require any consent or approval, do not
contravene, and will not result in any breach of or constitute any default
under, or result in the creation of any lien, charge or encumbrance upon any
property of the Corporation, under any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, bank loan, credit agreement,
corporate charter, by-law or other agreement or instrument to which the
Corporation is a party or by which the Corporation or its properties or assets
may be bound.
4. The Corporation provides interstate transportation of passengers or
property by aircraft as a common carrier for compensation. The Corporation is
the holder of an air carrier operating certificate issued by the Federal
Aviation Administration under Part 121 of the Federal Aviation Regulations and
49 U.S. Code Section 44705 for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo. The Corporation is an air carrier
that conducts air taxi operations under an exemption issued by the Department of
Transportation under authority of Part 298 of the Federal Aviation Regulations.
The Corporation holds all licenses, certificates and permits from applicable
governmental authorities necessary for the conduct of its business as an air
carrier and the performance of its obligations under the Lessee Documents.
5. There are no suits or proceedings, pending or threatened, against the
Corporation before any executive, legislative, judicial, administrative or
regulatory body which, if adversely determined, might, individually or in the
aggregate, have a material adverse effect on the financial condition or business
of the Corporation or its ability to perform its obligations under the Lessee
Documents.
6. Neither the Corporation nor any of its properties or assets has the
right of immunity from suit or execution on the grounds of sovereignty.
7. The Corporation is organized under the laws of the State of New York.
The president and at least two-thirds of the board of directors and other
managing officers of the Corporation are individuals who are citizens of the
United States. At least 75% of the voting
EXHIBIT A-1 PAGE 2
interest in the Corporation is owned or controlled, directly or indirectly, by
individuals who are citizens of the United States.
The opinions expressed herein are qualified in their entirety as follows:
(a) no opinion is expressed with respect to laws other than the federal laws of
the United States and the State of New York; and (b) to the extent that any one
or more of the foregoing opinions relates to the enforceability of any agreement
or instrument: (1) the opinions are subject to the effect of applicable laws or
judicial decisions regarding bankruptcy, reorganization, insolvency, fraudulent
transfers, moratorium and other laws affecting creditors' rights and debtors'
relief generally; (2) the enforceability of the provisions of any such agreement
or instrument is subject to the application of principles of equity, whether in
a proceeding at law or in equity, including the exercise of discretionary powers
of any tribunal before which equitable remedies may be sought (including,
without limitation, specific performance and injunctive relief); and (3) the
enforceability of the provisions of any such agreement or instrument in
accordance with its respective terms may be limited by laws affecting the
remedies which it is provides, including, but not limited to, laws and judicial
decisions limiting such enforceability.
This opinion is rendered solely to you for your use in connection with the
transactions contemplated by the Lessee Documents, and may not be relied upon by
you for any other purpose, and may not be furnished to or relied upon by any
other person for any purpose, or otherwise used, circulated or quoted, without
my prior written consent. This opinion is rendered as of the date hereof, and I
disclaim any undertaking to advise of any changes that may hereafter be brought
to my attention.
Very truly yours,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
General Counsel
EXHIBIT A-1 PAGE 3
EXHIBIT A-2 TO
THE PARTICIPATION AGREEMENT
[Form of Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.]
__________, 2000
To Each of the Parties Listed
on the Attached Schedule
Re: LEASE FINANCING OF ONE EMBRAER MODEL EMB-145LR AIRCRAFT
BEARING UNITED STATES REGISTRATION NUMBER N2__SK
Ladies and Gentlemen:
We have acted as special New York counsel for Chautauqua Airlines, Inc., a
New York corporation (the "Lessee"), in connection with the Participation
Agreement [N2__SK] dated as of __________, 2000, among the Lessee; Aircraft
Services Corporation, as Owner Participant; and First Security Bank, National
Association ("FSB"), as Owner Trustee. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth or referred to in the
Participation Agreement. For purposes hereof, "Documents" shall be a collective
reference to the Participation Agreement, the Lease, the Lease Supplement No. 1
and the Tax Indemnity Agreement.
This opinion is furnished to you pursuant to Section 3.01(b)(xvi)(B) of the
Participation Agreement.
In rendering this opinion, we have examined the Documents and such other
Operative Agreements as are necessary in order to give the opinions expressed
herein. We have further examined and relied upon the accuracy of original,
certified, conformed, photographic or telecopied copies of such records,
agreements, certificates, certificates of public officials and such other
documents, and have made an investigation of such laws, as we have deemed
necessary and appropriate for the purpose of rendering this opinion. As to
certain questions of fact material to our opinions, we have relied solely upon
the accuracy of the statements, representations and warranties made in the
Documents and such other Operative Agreements and we have made no independent
investigation or inquiry with respect to such factual matters.
Based on the foregoing and upon an examination of such questions of law as
we have considered necessary or appropriate, and subject to the assumptions,
exceptions, qualifications and limitations set forth below, we advise you that
in our opinion:
EXHIBIT A-2 PAGE 1
1. Each of the Documents constitutes a legal, valid and binding
obligation of the Lessee, enforceable against the Lessee in accordance with its
terms.
2. The execution and delivery by the Lessee of the Documents, the
consummation by the Lessee of the transactions contemplated thereby and the
compliance by the Lessee with any of the terms and provisions thereof do not
contravene any applicable federal law of the United States or any applicable law
of New York.
3. Except for the filings with the FAA referred to in paragraph 4 below,
the execution and delivery by the Lessee of the Documents and the consummation
by the Lessee of the transactions contemplated thereby do not require the
consent or approval of, or the giving of notice to, or the registration,
recording or filing of any document with, or the taking of any other action with
respect to any authority or agency of the federal government of the United
States of America or the State of New York.
4. The Lease as supplemented by Lease Supplement No. 1 thereto are in due
form for filing in accordance with Subtitle VII of Title 49 of the United States
Code (the "Act"). Except for the filings with the FAA referred to in the opinion
dated today and addressed to you of Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇ and the
filing of the Uniform Commercial Code financing statement referenced in Section
3.01(k) of the Participation Agreement, which filing we assume has been duly
effected and is adequate for its intended purpose (and subject to the timely
filings in the future of continuation statements with respect to such financing
statement), no recording or filing in the United States of America of any of the
Documents, nor any other action, is necessary or advisable in order to establish
and perfect in the United States of America, the Owner Trustee's rights and
interest in the Aircraft as against the Lessee or any third party.
5. The Participation Agreement, the Lease and Lease Supplement No. 1
(the "Owner Trustee Instruments") constitute legal, valid and binding
obligations of FSB, to the extent any of such Owner Trustee Instruments were
entered into by FSB in its individual capacity, and the Owner Trustee, or both,
as the case may be, enforceable against FSB or the Owner Trustee, or both, as
the case may be, in accordance with the terms of such agreements.
6. So long as at the time of entering into the Lease the Lessee is a
"citizen of the United States," as defined in Section 40102 of Title 49 of the
United States Code, holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code for aircraft capable of carrying 10 or more individuals or 6,000
pounds or more of cargo, the Owner Trustee, as lessor under the Lease, would be
entitled to the benefits of Section 1110 of the Bankruptcy Code ("Section 1110")
with respect to the Aircraft.
The foregoing opinions are subject to the following assumptions,
exceptions, qualifications and limitations:
EXHIBIT A-2 PAGE 2
A. The foregoing opinions are expressly limited to matters under and
governed by the internal laws of the State of New York and applicable federal
laws of the United States of America, except that we express no opinion as to
the securities law of any state, including the State of New York. Our opinion in
paragraph 2 above as to the contravention of certain laws, rules and regulations
is based upon such examination of laws and regulations as in our judgment was
necessary and appropriate for the purpose of such opinion.
B. The foregoing opinions regarding the enforceability of the Documents
against any of the parties thereto are subject to the following:
(i) The enforceability of any of the Operative Agreements may be
limited or affected by (a) bankruptcy, insolvency,
reorganization, moratorium, liquidation, rearrangement, probate,
conservatorship, fraudulent transfer, fraudulent conveyance and
other similar laws (including court decisions) now or hereafter
in effect and affecting the rights and remedies of creditors
generally or providing for the relief of debtors, (b) the
refusal of a particular court to grant (1) equitable remedies,
including, without limiting the generality of the foregoing,
specific performance and injunctive relief or (2) a particular
remedy sought by the Owner Trustee under the Lease as opposed to
another remedy provided for therein or another remedy available
at law or in equity, but which does not in our opinion make such
remedies inadequate for the practical realization of the
benefits intended to be provided thereby, (c) general principles
of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and (d) the refusal of a federal
court to grant jurisdiction in connection with any suit
commenced relating to the Operative Agreements.
(ii) In rendering the foregoing opinions, we express no opinion as to
the enforceability of provisions of any of the Operative
Agreements (a) purporting to waive or affect rights, claims,
defenses or other benefits bestowed by law, including without
limitation the right to receive notices, to the extent that any
of the same cannot be waived or affected or (b) relating to
indemnities to the extent prohibited by public policy or limited
by federal or state securities laws or which might require
indemnification for losses or expenses caused by gross
negligence, willful misconduct, fraud or illegality of an
indemnified party, the rights of third parties, or the exercise
of rights and remedies with respect to the Aircraft other than
in a commercially reasonable manner or as otherwise provided in
the Uniform Commercial Code or other applicable law.
EXHIBIT A-2 PAGE 3
(iii) We note that the enforceability of specific provisions of the
Operative Agreements may be subject to standards of
reasonableness, care and diligence and "good faith" limitations
and obligations such as those provided in Sections 1-102(3) and
I-203, of the Uniform Commercial Code and similar applicable
principles of common law and judicial decisions.
(iv) We express no opinion with respect to compliance with the
anti-fraud provisions of applicable federal rules or
regulations.
C. We have assumed the due authorization, execution and delivery of the
Operative Agreements by each of the parties thereto (including the Lessee) and
that each of such parties has the full power, authority and legal right to
execute, deliver and perform such documents.
D. Except to the extent expressly set forth in paragraphs 1 and 5, we
have assumed that each of the Operative Agreements is enforceable against each
of the parties thereto.
E. With respect to the opinion given in paragraph 5, our opinion is
subject to limitations of Utah law applicable to FSB and the Owner Trustee, as
to which we express no opinion.
F. We have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to the
originals of all documents submitted to us as copies, which facts we have not
verified independently.
G. We express no opinion as to whether the Lease constitutes a "true
lease."
H. We have assumed that the Operative Agreements and the transactions
contemplated thereby are not within the prohibitions of Section 406 of the
Employee Retirement Income Security Act of 1974.
I. With respect to the opinion given in paragraph 6, we express no
opinion as to the availability of the benefits of Section 1110 of the Bankruptcy
Code to any Replacement Aircraft or Replacement Engine.
J. In giving the foregoing opinion, we have relied upon the opinions
delivered to you today of Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇ with respect to
the matters set forth therein. Our opinion is suitable to all applicable
qualifications and exceptions set forth in such opinion.
The opinions expressed herein are solely for the benefit of, and may only
be relied upon by, the named addressees in connection with the transactions
contemplated by the Participation Agreement. This opinion may not be furnished
or relied upon by any other person without the prior written consent of this
Firm. We make no undertaking to amend or supplement such opinions as
EXHIBIT A-2 PAGE 4
facts and circumstances come to our attention or changes in the law occur which
could affect such opinions.
Very truly yours,
EXHIBIT A-2 PAGE 5
SCHEDULE OF ADDRESSEES
Aircraft Services Corporation
First Security Bank, National Association,
individually and as Owner Trustee
EXHIBIT A-2 PAGE 6
EXHIBIT A-3 TO
THE PARTICIPATION AGREEMENT
[Form of Opinion of Ray, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇]
February __, 2001
TO EACH OF THE PARTIES SET FORTH
IN SCHEDULE A HERETO:
Re: Trust Agreement [N281SK] dated as of February __, 2001
Dear Sir or Madam:
We have acted as special counsel for First Security Bank, National Association,
a national banking association, in its individual capacity ("First Security")
and in its capacity as trustee (the "Owner Trustee") under Trust Agreement
[N281SK] dated as of February__, 2001 (the "Trust Agreement") between it and
General Electric Capital Corporation, a New York corporation, as owner
participant (the "Owner Participant"), in connection with the execution and
delivery by First Security of the Trust Agreement and by the Owner Trustee of
the Operative Agreements to which it is a party. Except as otherwise defined
herein, the terms used herein shall have the meanings set forth in Appendix A to
the Participation Agreement dated as of February __, 2001 (the "Participation
Agreement") between the Owner Trustee, the Owner Participant and Chautauqua
Airlines, Inc., as Lessee.
We have examined originals or copies, certified or otherwise Identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary or advisable for the purpose of rendering this opinion.
Based upon the foregoing, we are of the opinion that:
1. First Security is a national banking association duly organized,
validly existing and in good standing under the laws of the United States,
is a "citizen of the United States" within the meaning of Section
40102(a)(15) of Title 49 of the United States Code and has under the laws
of the state of Utah and federal banking law the power and authority to
enter into and perform its obligations under the Trust Agreement and,
acting as Owner Trustee thereunder, the Operative Agreements to which it is
a party.
2. The Trust Agreement has been duly authorized, executed and delivered
by one of the officers of first Security and, assuming due authorization,
execution and delivery by the Owner Participant, is the legal, valid and
blinding of First Security, enforceable against First Security in
accordance with its terms.
3. The Operative Agreements to which the Owner Trustee is a party have
been duly authorized, executed and delivered by the Owner Trustee, acting
pursuant to the Trust Agreement, and assuming due authorization, execution
and delivery by the other parties thereto, are legal, valid and binding
obligations of the Owner Trustee enforceable against the Owner Trustee in
accordance with their respective terms.
4. The execution and delivery by First Security of the Trust Agreement
and by the Owner Trustee of the Operative Agreements to which it is a party
are not, and the performance by First Security or the Owner Trustee, as the
case be, of its obligations under each will not be, inconsistent with the
articles of association or by-laws of First Security, do not and will not
contravene any Utah or federal banking law, governmental rule of regulation
or any judgment or order of which we have knowledge and which is
applicable to First security or the Owner Trustee, as the case may be, and
do not and will not contravene any provision of, or constitute a default
under, or result in the creation of any Lien upon the property of Owner
Trustee pursuant to its charter documents or by-laws or any indenture,
mortgage, contract or other instrument to which First Security or the Owner
Trustee, as the case may be, is a party or by which either is bound or
require the consent or approval of or the giving of notice to, or the
registration with, or the taking of any action in respect of, or under, any
federal banking law or the laws of the State of Utah or any subdivision or
agency thereof governing its banking or trust powers, other than any such
consent, approval, notice, registration or action as has been duly
obtained, given or taken and is in full force and effect.
5. There are no applicable taxes, fees or other charges, except taxes
imposed on fees payable to the Owner Trustee, required to be paid under the
laws of Salt Lake City or the State of Utah in connection with the
execution, delivery or performance of the Trust Agreement and the Operative
Agreements to which the Owner Trustee or First Security is a party solely
because the Owner Trustee or First Security, as the case may be, has its
principle place of business in the State of Utah and performs certain of
its obligations under the Trust Agreement and the Operative Agreements to
which it is a party in Salt Lake City or the State of Utah. Neither the
Owner Trustee nor the trust created under the Trust Agreement will be
subject to any tax, fee, or other charges under the laws of the State of
Utah or any political subdivisions thereof on, based on or measured by,
directly or indirectly, the gross receipts, net income or value of the
Trust Estate.
6. To our knowledge, there are no proceedings pending or threatened
against or affecting First Security or the Owner Trustee, as the case may
be, in any court or before any governmental authority, agency or
arbitration board or tribunal which, if adversely determined, individually
or in the aggregate, would materially and adversely affect the right, power
and authority of First Security or the Owner Trustee to enter into or
perform its obligations under the Operative Agreements to which it is a
party.
The foregoing opinions are subject to the following assumptions, exceptions and
qualifications:
A. The foregoing opinions are limited to the laws of the State of Utah
and the federal laws of the United States of America governing the banking and
trust powers of First Security. In addition, without limiting the foregoing, we
express no opinion with respect to (i) federal securities laws, including the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the Trust Indenture Act of 1939, as amended, (ii) Title 49 of the
United States Code Annotated, previously known as the Federal Aviation Act of
1958, as amended [except with respect to the opinion set forth in paragraph 1
above concerning the citizenship of First Security], (iii) the Federal
Communications Act of 1934, as amended, or (iv) state securities or blue sky
laws. Insofar as the foregoing opinions relate to the legality, validity,
binding effect and enforceability of the documents involved in these
transactions, which by their terms are governed by the laws of a state other
than Utah, we have assumed that such documents constitute legal, valid, binding
and enforceable agreements under the laws of such other state, as to which we
express no opinion.
B. The foregoing opinions regarding enforceability of any document or
instrument are subject to (i) applicable bankruptcy, insolvency, moratorium,
reorganization, receivership and similar laws affecting the rights and remedies
of creditors generally, and (ii) general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
C. The opinion set forth in paragraph 1 above concerning the citizenship
of First Security is based upon the facts contained in an affidavit of First
Security, made by its authorized officer, which facts we have not independently
verified.
D. We have assumed that all signatures, other than those of the Owner
Trustee or First Security, on documents and instruments involved in these
transactions are genuine, that all documents and instruments submitted to us as
originals are authentic, and that all documents and instruments submitted to us
as copies conform with the originals, which facts we have not independently
verified.
E. Other than the opinion set forth in paragraph 1 above concerning the
citizenship of First Security, we do not purport to be experts in respect of, or
express any opinion concerning laws, rules or regulations applicable to the
particular nature of the equipment involved in these transactions.
F. We have made no investigation of, and we express no opinion
concerning, the nature of the title to any part of the equipment involved in
these transactions or the priority of any mortgage or security interest.
G. In addition to any other limitation by operation of law upon the
scope, meaning, or purpose of this opinion, this opinion speaks only as of the
date hereof. We have no obligation to advise the recipients of this opinion (or
any third party) of changes of law or fact that may occur after the date hereof,
even though the change may affect the legal analysis, a legal conclusion or an
information confirmation herein.
H. The opinions expressed in this letter are solely for the use of the
parties to which it is addressed (and their permitted successors and assigns) in
matters directly related to the Operative Agreements and the transactions
contemplated thereunder and these opinions may not be rolled on by any other
persons or for any other purpose without our prior written approval. The
opinions expressed in this letter are limited to the matter set forth in this
letter, and no other opinions should be inferred beyond the matters expressly
stated.
Very truly yours,
RAY, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
SCHEDULE A
First Security Bank, National Association
General Electric Capital Corporation
Chautauqua Airlines, Inc.
EXHIBIT A-4 TO
THE PARTICIPATION AGREEMENT
[Form of Opinion of Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇, a Professional
Corporation]
February 23, 2001
To the Parties Named on
Schedule A attached hereto
Ladies and Gentlemen:
We acted as special counsel in connection with the transactions
contemplated by the hereinafter described instruments and this opinion is
furnished to you with respect to that portion of Subtitle VII of Title 49 of the
United States Code relative to the recordation of instruments and the
registration of aircraft thereunder.
Capitalized terms not otherwise defined herein shall have the meanings
given them in Annex I attached hereto.
We have examined and filed on this date with the Federal Aviation
Administration (the "FAA") the following described instruments at the respective
times listed below:
(a) AC Form 8050-2 Aircraft ▇▇▇▇ of Sale dated February 23, 2001 (the "FAA
▇▇▇▇ of Sale") from Solitair Corp., as seller, conveying title to the
Airframe to First Security Bank, National Association, as owner
trustee under the Trust Agreement (the "Owner Trustee"), which FAA
▇▇▇▇ of Sale was filed at 11:28 a.m., C.S.T.,
(b) AC Form 8050-1 Aircraft Registration Application dated February 23,
2001 (the "Aircraft Registration Application") by the Owner Trustee as
applicant,
To the Parties Named on
Schedule A attached hereto
February 23, 2001
Page 2
with respect to the Airframe, which Aircraft Registration Application
was filed at 11:28 a.m., C.S.T.;
(c) Affidavit or Citizenship dated February 23, 2001 (the "Owner Trustee
Affidavit") by the Owner Trustee pursuant to Section 47.7(c)(2)(ii) of
the Federal Aviation Regulations with Affidavit of Citizenship dated
February 16, 2001 (the "Owner ,Participant Affidavit") by General
Electric Capital Corporation, as owner participant (the "Owner
Participant"), attached thereto, which Owner Trustee Affidavit with
the Owner Participant Affidavit attached was filed at 11:28 a.m.,
C.S.T.;
(d) Trust Agreement [N281SK] dated as of February 23, 2001 (the "Trust
Agreement") between the Owner Participant and the Owner Trustee, which
Trust Agreement was filed at 11:28 a.m., C.S.T., and,
(e) Lease Agreement [N281SK] dated as of February 23, 2001 (the "Lease")
between the Owner Trustee, as lessor, and Chautauqua Airlines, Inc.,
as lessee (the "Lessee"), with Lease Supplement No.1 [N281SK] dated
February 23, 2001 (the "Lease Supplement") by the Owner Trustee, as
lessor, and the Lessee, with respect to the Aircraft, attached
thereto, which Lease with the Lease Supplement attached was filed at
11:29 a.m., C.S.T.
The Confidential Omissions were intentionally omitted from the FAA
filing counterpart of the Lease, as supplemented by the Lease Supplement, as
containing confidential financial information.
Based upon our examination of the above described instruments and of
such records of the FAA as we deemed necessary to render this opinion, it is our
opinion that:
1. the FAA ▇▇▇▇ of Sale, the Lease and the Lease Supplement are in due
form for recordation by and have been duly filed for recordation with
the FAA pursuant to and in accordance with the provisions of 49 U.S.C.
Section 44107;
To the Parties Named on
Schedule A attached hereto
February 23, 2001
Page 3
2. the Aircraft Registration Application, the Owner Trustee Affidavit
with the Owner Participant Affidavit attached and the Trust Agreement
are in due form for filing and have been duly filed with the FAA
pursuant to and in accordance with the provisions of 49 U.S.C. Section
44103(a) and Section 47.7(c) of the Federal Aviation Regulations;
3. the Airframe is eligible for registration under 49 U.S.C. Section
44102 in the name of the Owner Trustee and the filing with the FAA of
the FAA ▇▇▇▇ of Sale, the Aircraft Registration Application, the Owner
Trustee Affidavit with the Owner Participant Affidavit attached and
the Trust Agreement will cause the FAA to register the Airframe, in
due course, in the name of the Owner Trustee and to issue to the Owner
Trustee an AC Form 8050-3 Certificate of Aircraft Registration for the
Airframe pursuant to and in accordance with the provisions of 49
U.S.C. Section 44103(a);
4. the Owner Trustee holds legal title to the Airframe and the Aircraft
is free and clear of liens and encumbrances of record except as
created by the Lease, as supplemented by the Lease Supplement;
5. the rights of the Owner Trustee, as lessor, and the Lessee under the
Lease, as supplemented by the Lease Supplement, with respect to the
Aircraft, are perfected; and,
6. no authorization, approval, consent, license or order of, or
registration with, or the giving of notice to, the FAA is required for
the valid authorization, delivery and performance of the Lease, as
supplemented by the Lease Supplement, or the Trust Agreement, except
for such filings as are referred to above.
No opinion is expressed as to the Airframe during any period or
periods of time during which it has not been subject to United States
registration.
No opinion is expressed as to laws other than Federal laws of the
United States.
To the Parties Named on
Schedule A attached hereto
February 23, 2001
Page 4
In rendering this opinion, we were subject to the accuracy of the FAA, its
employees and agents, in the filing, indexing and recording of instruments filed
with the FAA and in the search for encumbrance cross-reference index cards for
the Engines. Further, in rendering this opinion we are assuming the validity and
enforceability of the above described instruments under local law. Since our
examination was limited to records maintained by the FAA, our opinion does not
cover liens which are perfected without the filing of notice thereof with the
FAA, such as federal tax liens, liens arising under 29 U.S.C. Section 1368(a),
possessory artisan's liens, or matters of which the parties have actual notice.
In rendering this opinion we are assuming that there are no documents with
respect to the Aircraft which have been filed for recording under the recording
system of the FAA but have not yet been listed in the available records of such
system as having been so filed.
In rendering this opinion we have relied upon the opinion of the
Aeronautical Center Counsel dated February 21, 2001, a copy of which is attached
hereto. In rendering this opinion with respect to the eligibility of the Lease,
as supplemented by the Lease Supplement, for recordation with the Confidential
Omissions, we have relied upon the opinion of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Deputy Chief
Counsel of the FAA issued September 16, 1994 (Federal Register/Volume 59,
Number 182/September 21, 1994).
Very truly yours,
[ILLEGIBLE]
Annex I
CERTAIN DEFINITIONS
AIRFRAME, ENGINES AND AIRCRAFT
One (1) Embraer EMB-145LR aircraft bearing manufacturer's serial
number 145391 and U.S. Registration No. N281SK (the "Airframe") and two (2)
▇▇▇▇▇▇▇ AE3007A1P aircraft engines bearing manufacturer's serial numbers
CAE311697 and CAE311698 (the "Engines") (the Airframe and the Engines are
referred to collectively as the "Aircraft").
CONFIDENTIAL OMISSIONS
The Lease, as supplemented by the Lease Supplement, was filed with the
Federal Aviation Administration with (i) Exhibit B (Certain Economic
Information); (ii) Exhibit C-1 (Basic Rent Payment Schedule); (iii) Exhibit C-2
(Basic Rent Allocation Schedule); (iv) Exhibit D (Termination Values); (v)
Exhibit F-1 (Return Conditions); and, (vi) Exhibit F-2 (Return Conditions)
Intentionally omitted from FAA filing counterpart thereof as containing
confidential financial information.
SCHEDULE A
First Security Bank, National Association,
as Owner Trustee
General Electric Capital Corporation
Chautauqua Airlines, Inc.
[LETTERHEAD OF U.S. DEPARTMENT OF TRANSPORTATION]
February 21, 2001
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇,
Re: Aircraft N280SK & N281SK
As requested in your letter of February 16, 2001, this office has reviewed the
forms of the Trust Agreement and Affidavits submitted to support registration of
the above referenced Aircraft in the name of the Owner Trustee pursuant to 14
C.F.R. Section 47.7(c).
You have requested our opinion as to whether:
1) The referenced Aircraft are eligible for registration under 49 U.S.C. 44102
in the name of the Owner Trustee upon the filing of the above described
instruments, along with appropriate evidence of ownership and an Aircraft
Registration Application form,
2) The form of the Trust Agreement satisfies the requirements of Section
47.7(c)(2)(i) of the Federal Aviation Regulations (FAR) (14 C.F.R.
47.7(c)(2)(i)), and
3) The form of the Affidavit of Citizenship of the Owner Trustee, as
supported by the form of the Affidavit of Citizenship of the Owner
Participant, satisfies the requirements of Section 47.7(c)(2)(ii) of the
FAR (14 C.F.R. 47.7(c)(2)(ii).
Based on our review of the documents described above it is our opinion that:
1) The referenced Aircraft are eligible for registration in the name of First
Security Bank, National Association, as Owner Trustee, provided there is
sufficient evidence of ownership,
2) The form of the Trust Agreement meets the requirements of Section
47.7(c)(2)(i) of the FAR, and
3) The form of the Affidavit of Citizenship of the Owner Trustee, as supported
by the
form of the Affidavit of the Owner Participant, meets the requirements of
Section 47.7(c)(2)(ii) of the FAR.
As reflected in the Trust Agreement, the Owner Participant, Aircraft Services
Corporation, a Nevada Corporation, empowers the Owner Trustee, First Security
Bank, N.A., to hold the Trust Estate for the use and benefit of the Owner
Participant, and to make application for registration. (Reference Sections 2.02
and 3.01(v) of the Trust Agreement)
Based on our review, it appears that the form of the Trust Agreement meets the
requirements of 14 C.F.R. 47.7(c)(2)(i) and the form of the Owner Trustee's
Affidavit of Citizenship, as supported by the form of the Affidavit of
Citizenship of the Owner Participant, meets the requirements of 14 C.F.R.
47.7(c)(2)(ii), and we so determine.
Your submission of these documents, in duly executed versions, will support
registration in the name of First Security Bank, N.A., as Owner Trustee,
provided there is suitable evidence of ownership.
Sincerely,
▇▇▇▇▇▇ ▇. Standell
Aeronautical Center Counsel
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
General Attorney
EXHIBIT A-5 TO
THE PARTICIPATION AGREEMENT
[FORM OF OPINION OF HOLLAND & KNIGHT]
February __, 2001
To Each of the Addressees
Listed in Schedule A
Attached Hereto
Re: CHAUTAUQUA AIRLINES, INC./ GENERAL ELECTRIC CAPITAL
CORPORATION - PARTICIPATION AGREEMENT [N281SK]
Ladies and Gentleman:
We have acted as special counsel to General Electric Capital
Corporation, a New York corporation ("GECC"), in connection with the
transactions contemplated by the Participation Agreement [N281SK], dated as of
February __, 2001 (the "PARTICIPATION AGREEMENT"), among (a) Chautauqua
Airlines, Inc., (b) GECC, and (c) First Security Bank, National Association, not
in its individual capacity but solely as Owner Trustee. This opinion letter is
delivered to you pursuant to Section 3.01(b)(xvi)(G) of the Participation
Agreement.
All capitalized terms used but not defined herein shall have the
respective meanings given to such terms in the Participation Agreement.
In rendering the opinions expressed below, we have examined the
agreements and other documents set forth in EXHIBIT A hereto. The documents
described in EXHIBIT A are hereinafter referred to herein as the "OPINION
DOCUMENTS."
In our examination, we have assumed, with your permission and without
independent investigation: (i) the genuineness of all signatures; (ii) the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies and the authenticity of the
originals of such copies; (iii) the due organization, valid existence and good
standing of each party to the Opinion Documents and the due authorization,
execution and delivery of each Opinion Document by each party thereto; (iv) the
full power, authority and legal right of each party to the Opinion Documents to
enter into the same; (v) that each Opinion Document is the legal, valid and
binding obligation of each party thereto (except
To Each of the Addressees
Listed in Schedule A
Attached Hereto
Page 2
GECC), enforceable against each such party in accordance with its terms; (vi)
that the parties have obtained and will obtain all necessary permits and other
approvals for conducting their respective businesses and operations; (vii) the
absence of evidence extrinsic to the provisions of the written agreements
between the parties that the parties intended a meaning contrary to that
expressed by those provisions; however, none of the attorneys in this firm who
has rendered legal services in connection with the representation described in
the first paragraph of this opinion letter has any current actual knowledge of
any such evidence; and (viii) the identity and capacity of all individuals
acting or purporting to act as public officials or corporate officers.
We have without independent investigation relied upon and assumed the
truth and accuracy of each of the representations and warranties in the Opinion
Documents as to factual matters contained in or made pursuant to the Opinion
Documents and certificates delivered thereunder. We have not undertaken any
independent investigation to determine the accuracy of any factual statement
therein, and no inference that we have any knowledge of any matters pertaining
to any such statement should be drawn from our representation of GECC.
In rendering the following opinions, we have relied, without making
any independent investigation with respect thereto, upon the opinion of ▇▇▇
▇▇▇▇▇▇, acting as counsel for General Electric Capital Corporation, delivered to
you on the date hereof, as to the matters addressed therein.
Based upon and subject to the foregoing and subject also to the
comments, assumptions, qualifications and exceptions set forth below, and having
considered such questions of law as we have deemed necessary as a basis for the
opinions expressed below, we are of the opinion that:
Each of the Opinion Documents constitutes the legal, valid and binding
obligation of GECC, enforceable against GECC in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors
generally and public policy considerations (in the case of the indemnity
provisions contained therein), and subject to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
We are qualified to practice law in the State of New York and we
express no opinion on the laws of any jurisdiction other than the federal laws
of the United States and the laws of the State of New York. We express no
opinion as to (i) any state or federal securities laws, (ii) any state of
federal tax laws, (iii) matters governed by Title 49 of the United States Code
or by any other aviation law or law, statute, rule or regulation of the United
States of America relating to the acquisition, ownership, leasing, registration,
use, operation, maintenance, repair, replacement, sale of or the particular
nature of the Aircraft, (iv) the applicability of the laws of any jurisdiction
that may limit the maximum rate or amount of interest that may be
To Each of the Addressees
Listed in Schedule A
Attached Hereto
Page 3
charged, taken, collected or received with respect to the obligations under the
Participation Agreement or any other Opinion Document, or as to the effect of
such laws if applicable, (v) any waiver of inconvenient forum provision in any
Opinion Document, (vi) the creation, perfection or priority of any lien or
security interest contemplated by the Opinion Documents or (vii) any choice of
law provisions in any Opinion Document.
This opinion speaks only as of the date hereof and we do not undertake
any obligation to advise you of any changes in law or fact that occur after the
date hereof. This opinion is limited to the matters expressly stated herein and
no opinion or other statement may be inferred or implied beyond the matters
expressly stated herein. At the request of our client, this opinion letter is
provided to you solely for your benefit by us in our capacity as special counsel
to GECC in connection with the transactions contemplated under the Participation
Agreement. This opinion letter may not be relied upon by you for any other
purpose or relied upon, quoted or referred to, nor may copies be delivered to,
any other Person without, in each instance, or prior written consent.
Very truly yours,
HOLLAND & KNIGHT LLP
SCHEDULE A
LIST OF ADDRESSEES
Chautauqua Airlines, Inc., as Lessee
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
First Security Bank, National Association, as Owner Trustee
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Solitair Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
A-1
EXHIBIT A
LIST OF OPINION DOCUMENTS
1. Aircraft Purchase Agreement [N281SK];
2. Participation Agreement [N281SK];
3. Trust Agreement [N281SK];
4. Tax Indemnity Agreement [N281SK].
▇-▇
▇▇▇▇▇▇▇ ▇-▇ TO
THE PARTICIPATION AGREEMENT
[Form of Opinion of General Counsel to the Owner Participant]
February ___, 2000
To Each of the Addressees
Listed in Schedule A
Attached Hereto
Re: CHAUTAUQUA AIRLINES, INC./ GENERAL ELECTRIC CAPITAL CORPORATION -
PARTICIPATION AGREEMENT [N281SK]
Ladies and Gentleman:
I am Senior Vice President and Associate General Counsel of GE Capital
Aviation Services, Inc., a wholly-owned subsidiary of General Electric Capital
Corporation, a New York corporation ("GECC"), and have acted as internal counsel
to GECC in connection with the transactions contemplated by that certain
Participation Agreement [N281SK], dated as of February ___, 2000 (the
"PARTICIPATION AGREEMENT"), among Chautauqua Airlines, Inc. ("CA"). GECC and
First Security Bank, National Association, not in its individual capacity, but
solely as Owner Trustee. All capitalized terms used but not defined herein shall
have the respective meanings given to such terms in the Participation Agreement.
This opinion is being delivered pursuant to Section 3.01(b)(xvi)(H) of the
Participation Agreement.
In connection with my opinion herein, I have examined the Aircraft
Purchase Agreement, the Participation Agreement [N281SK], the Trust Agreement
[N281SK] and the Tax Indemnity Agreement [N281SK] ("OPINION DOCUMENTS"). I have
also examined originals, or copies certified to my satisfaction, of such other
agreements, documents, certificates and statements of government officials and
corporate officers as I have deemed necessary or advisable as a basis for such
opinion. In such examination I have assumed the genuineness of all signatures
(other than those of GECC), the authenticity of all documents submitted to me as
originals and the conformity with the originals of all documents submitted to me
as copies. I have, when relevant facts were not independently established by me,
relied, to the extent I deemed such reliance proper, upon certificates of public
officials and certificates and other written or telephone statements of officers
of the parties referred to herein. I also have examined and relied as to certain
factual matters upon the representations and warranties contained in or made
pursuant to the Opinion Documents.
Based upon and subject to the foregoing, it is my opinion that:
1. The Owner Participant is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of New York, and has the
To Each of the Addressees
Listed in Schedule A Attached Hereto
corporate power and authority to execute and deliver and to
perform its obligations under the Opinion Documents.
2. Each of the Opinion Documents has been duly authorized, executed
and delivered by the Owner Participant.
3. Neither the execution and delivery by the Owner Participant of
the Opinion Documents nor the performance by the Owner
Participant of its obligations under the Opinion Documents, (i)
requires for its validity the consent or approval of, the giving
notice to, the registration with, or the taking of any other
action with respect to, any governmental authority or agency of
the United States of America or the State of New York; (ii)
contravenes any law or governmental rule or regulation of the
United States of America or the State of New York, or, to the
best of my knowledge, any judgment or other applicable to or
binding on the Owner Participant; or (iii) contravenes, results
in any breach of or constitutes any default under, any provision
of the Owner Participant's certificate of incorporation or its
amended and restated by-laws.
4. To my knowledge, there are no pending or overtly threatening
actions or proceedings against the Owner Participant before any
court or administrative agency or arbitrator which, if adversely
determined, would materially and adversely affect the Owner
Participant's ability to perform its obligations under any of
the Opinion Documents.
I am qualified to practice law in the State of New York and do not
purport to be expert in, or to render any opinion herein concerning, the laws of
any jurisdiction other than the laws of the State of New York and the federal
laws of the United States of America. My opinion is rendered only with respect
to the laws, and the rules, regulations and orders thereunder, that are
currently in effect. No opinion is expressed herein as to matters governed by
(i) any federal or state securities laws, (ii) ERISA or any federal or state tax
laws, (iii) any federal or state antitrust laws or the effect thereof or (iv)
any laws, statutes, rules or regulations relating to the acquisition, ownership,
title, registration, leasing, use or sale of aircraft.
This opinion is furnished by me at the request of GECC for your sole
benefit, and I agree that you may rely on the opinion expressed herein. No other
Person shall be entitled to rely on this opinion without my express written
consent. This opinion is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated herein. This
opinion speaks of its date only. I hereby disclaim any and all undertakings and
obligations of any kind whatsoever to advise you of any changes that hereafter
may be brought to my attention.
This opinion letter is provided subject to the following conditions:
(1) nothing contained herein shall create any obligation of or right to look to
me individually for any claim, liability, damage, loss or expense whatsoever
whether arising in contract, in tort (including
2
To Each of the Addressees
Listed in Schedule A Attached Hereto
negligence and strict liability), or otherwise in connection with this opinion
letter or with the Agreements or otherwise in connection with the transactions
contemplated hereby or thereby and 2) no judgment, order or execution entered in
any suit, action or proceeding, whether legal or equitable, with respect to any
such matters shall be taken against me.
Very truly yours,
3
SCHEDULE A
LIST OF ADDRESSEES
Chautauqua Airlines, Inc., as Lessee
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
First Security Bank, as Owner Trustee
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Solitair Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇-▇
▇▇▇▇▇▇▇ ▇-▇ TO
THE PARTICIPATION AGREEMENT
[Form of Assignment and Assumption Agreement]
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _______, _______
between [____________] (the "TRANSFEREE") and __________________________ (the
"TRANSFEROR").
W I T N E S S E T H:
WHEREAS, the Transferor is a party to a Participation Agreement
[N2__SK], dated as of June _____, 2000 among Chautauqua Airlines Incorporated,
as Lessee, First Security Bank, National Association, not in its individual
capacity (except as otherwise expressly provided therein) but solely as Owner
Trustee and the Transferor, as Owner Participant (as the same may be from time
to time amended, the "PARTICIPATION AGREEMENT") and certain other Transaction
Documents (as defined herein);
WHEREAS, the Transferor desires to sell and assign to the Transferee
all of its right, title and interest in, to and under the Trust Agreement (as
defined in the Participation Agreement) (except as reserved below), and the
Transferee desires to (i) purchase and accept from the Transferor the assignment
of all of the Transferor's right, title and interest in, to and under the Trust
Agreement (except as reserved below) and (ii) assume the Assumed Obligations (as
defined herein); and
WHEREAS, capitalized terms used herein without definition and which
are defined in the Participation Agreement are used herein with the respective
meanings given such terms in the Participation Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties agree as follows:
1. ASSIGNMENT. Effective as of the date hereof (the "TRANSFER
DATE"), the Transferor hereby irrevocably sells, assigns, transfers, conveys and
sets over to the Transferee all its right, title and interest in, to and under
the Trust Estate, the Participation Agreement, the Trust Agreement, the Tax
Indemnity Agreement and all other Operative Agreements (as defined in the
Participation Agreement), agreements, contracts, documents and instruments
executed and delivered at any time prior to the execution and delivery of this
Agreement in connection with any of the foregoing (the "TRANSACTION DOCUMENTS"),
and any proceeds therefrom, except such rights of the Transferor as have arisen
or accrued prior to the Transfer Date (such excepted rights to include,
EXHIBIT B-1 - PAGE 1
without limitation, the right to receive any amounts due or accrued to the
Transferor under any Transaction Document as of a date prior to the Transfer
Date and the right to enforce any terms under the Participation Agreement or the
Tax Indemnity Agreement with respect to acts or events occurring prior to the
Transfer Date).
2. ASSUMPTION. The Transferee hereby assumes all of the
obligations, liabilities and duties of the Transferor arising from and after the
Transfer Date under each Transaction Document (the "ASSUMED OBLIGATIONS") and
confirms that from and after the Transfer Date it shall be deemed a party to
each Transaction Document to which the Transferor is a party and shall be bound
by all the terms thereof (including the agreements and obligations of the
Transferor set forth therein) as if it were named as the Transferor therein.
3. FURTHER ASSURANCES. Each party hereto shall, at any time and
from time to time, upon the request of the other party hereto, promptly and duly
execute and deliver any and all such further instruments and documents and take
such further action as the other party may reasonably request to obtain the full
benefits of this Agreement and of the rights and powers herein granted.
4. REPRESENTATIONS AND WARRANTIES. The Transferee hereby represents
and warrants to the other parties hereto that:
(a) ORGANIZATION AUTHORITY. The Transferee (i) is a ______ duly
organized, validly existing and in good standing under the laws of _____________
and (ii) has the full [corporate] power and authority to conduct its business as
presently conducted, to own or hold under lease its properties and to execute,
deliver and perform this Agreement and to perform the Assumed Obligations.
(b) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and performance of the Assumed Obligations have been duly
authorized by all necessary corporate action on the part of the Transferee.
(c) CONFLICT. The execution, delivery and performance by the
Transferee of this Agreement and the performance of the Assumed Obligations and
the consummation or performance by the Transferee of the transactions
contemplated thereby will not conflict with or result in any violation of,
constitute a default under, or result in the creation of any Lien upon any
property of the Transferee under, any term of the Certificate of Incorporation
or By-laws of the Transferee or any agreement, mortgage, contract, indenture,
lease or other instrument, or any Applicable Law, by which the Transferee or its
properties or assets are bound, except for any such violation, conflict or
default which would not have a material adverse effect on the Transferee or its
ability to perform the Assumed obligations.
EXHIBIT B-1 - PAGE 2
2
(d) GOVERNMENT CONSENTS. Neither the execution or delivery of this
Agreement and the performance of the Assumed Obligations nor the consummation of
any of the transactions contemplated hereby or thereby by the Transferee
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 United States federal,
state or other governmental authority or agency, including any judicial body,
that would be required to be taken or obtained by the Transferee.
(e) LEGAL, VALID AND BINDING OBLIGATIONS. The Assumed Obligations
and this Agreement constitute the legal, valid and binding obligations of the
Transferee enforceable against the Transferee in accordance with their
respective terms except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting the
rights of creditors generally and by general principles of equity, regardless of
whether enforcement is pursuant to a proceeding in equity or at law.
(f) LITIGATION. There are no pending or, to the knowledge of the
Transferee, threatened actions or proceedings against the Transferee by or
before any court or administrative agency or arbitrator that, either
individually or in the aggregate, are reasonably likely to materially adversely
affect the ability of the Transferee to perform its obligations under this
Assumption Agreement or the Assumed Obligations.
(g) SECURITIES REPRESENTATION. The Transferee is acquiring its
interest in the Trust Estate for investment and not with a view to any resale or
distribution thereof, but subject, nevertheless, to any requirement of law that
the disposition of its property remain within its control at all times, and that
neither it nor anyone authorized by it to act on its behalf has directly or
indirectly offered any interest in the Trust Estate, or any similar security for
sale to, or solicited any offer to acquire any of the same from, anyone.
(h) LESSOR'S LIENS. Upon the execution of this Assumption Agreement,
there will be no Lessor's Lien attributable to the Transferee on the Trust
Estate.
(i) ERISA. No part of the funds to be used by the Transferee to
acquire the interests to be acquired by it hereunder constitutes assets (within
the meaning of ERISA and any rules and regulations thereunder) of any ERISA
plan.
(j) PERMITTED TRANSFEREE. The Transferee is a bank, savings
institution, finance company, leasing company or trust company, national banking
association acting for its own account or in a fiduciary capacity as trustee or
agent under any pension, retirement, profit sharing or similar trust or fund,
insurance company, financial institution, fraternal benefit society or a
corporation acting for its own account having [a combined capital and surplus]
[consolidated net worth or its
EXHIBIT B-1 - PAGE 3
3
equivalent] of not less than $50,000,000].(1) [The Transferee is a Citizen of
the United States.](2) [The Transferee is not an airline or other aircraft
operator or competitor of Lessee in the business of air transportation or an
Affiliate of any thereof.](3)
Notwithstanding the foregoing or anything else contained in this
Agreement, the Transferee 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 as set forth in the second sentence of Section 4(j)
hereof](4).
5. RELIANCE. The representations, warranties, covenants and
agreements of the Transferee are made for the benefit of, and may be relied upon
by, the Owner Trustee, Lessee and Transferor (collectively, the
"BENEFICIARIES"), and each of the Beneficiaries shall be deemed to be an express
third party beneficiary with respect thereto, entitled to enforce directly and
in its own name any rights or claims it may have against such Transferee as such
beneficiary.
6. PAYMENTS. Transferor hereby covenants and agrees to pay over to
Transferee, if and when received on or following the Transfer Date, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Transferor that, under Section 2 hereof, belong to Transferee, and
Transferee hereby covenants and agrees to pay over to Transferor, if and when
received on or following the Transfer Date, any amounts (including any sums
payable as interest in respect thereof) paid to or for the benefit of Transferee
that, under Section 2 hereof, belong to Transferor.
7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts (or upon
separate signature pages), all of which together shall constitute but one and
the same instrument.
----------
(1) If a guaranty is being provided pursuant to Section 5.01(c) of
the Participation Agreement, replace "The Transferee" at the beginning of this
sentence with the name of the guarantor.
(2) Include if required pursuant to Section 5.01(c) of the Participation
Agreement.
(3) Include unless consented to by Lessee as contemplated in the first proviso
in the second sentence of Section 5.01(c) of the Participation Agreement or
unless the Transferee satisfies clause (i), (ii) or (iii) of such first proviso.
(4) Include if a citizenship representation is required pursuant to Section
5.01(c) of the Participation Agreement.
EXHIBIT B-1 - PAGE 4
4
8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered on the date first above written.
[ ]
------------------------------
Transferee
By:
-----------------------------
Name:
Title:
[ ]
------------------------------
Transferor
By:
-----------------------------
Name:
Title:
EXHIBIT B-1 - PAGE 5
5
EXHIBIT B-2 TO
THE PARTICIPATION AGREEMENT
FORM OF GUARANTY AGREEMENT
[DATE]
Re: CHAUTAUQUA AIRLINES INCORPORATED - ONE EMBRAER MODEL ERJ-145LR
AIRCRAFT BEARING REGISTRATION NO. [N2____SK].
Ladies and Gentlemen:
Reference is made to that certain Assignment and Assumption Agreement dated
as of ______________ (the "ASSIGNMENT AGREEMENT") by and between _______________
("ASSIGNOR") and _____________ ("ASSIGNEE"). Assignee is a direct or indirect
subsidiary of the undersigned, _____________, a ________ ("GUARANTOR"). Except
as otherwise noted herein, all capitalized terms used herein shall have the
respective defined meanings set forth in that certain Participation Agreement
[N2___SK] (the "PARTICIPATION AGREEMENT"), dated as of June __, 2000 among (a)
Chautauqua Airlines Incorporated, a _________ corporation ("LESSEE"); (b) the
Assignor ("OWNER PARTICIPANT"); (c) First Security Bank, National Association, a
national banking association, not in its individual capacity, except as
expressly provided therein, but solely as Owner Trustee ("OWNER TRUSTEE"); (each
of the Lessee and the Owner Trustee, together with its successors and permitted
assigns, a "GUARANTEED PARTY").
In connection with the transactions contemplated by the Assignment
Agreement, Guarantor represents and warrants to, and covenants with, each
Guaranteed Party, as follows:
1. OWNERSHIP OF ASSIGNEE. Assignee is a direct or indirect subsidiary of
Guarantor.
2. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that
Guarantor is duly organized and validly existing in good standing under the laws
of _____________. The execution, delivery and performance of this Guaranty
Agreement are within Guarantor's power and authority, have been duly authorized
by all necessary corporate action on the part of the Guarantor and do not
contravene the charter or the by-laws of Guarantor or any indenture, mortgage,
credit agreement, note, long-term lease or other material agreement to which
Guarantor is a party or by which Guarantor is bound, and this Guaranty Agreement
constitutes a legal, valid and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms.
3. SUBMISSION TO JURISDICTION, ETC. Guarantor hereby agrees to be bound,
to the same extent Owner Participant is bound, by the provisions of Section
13.07 of the Participation Agreement, which are incorporated herein by reference
as if fully set forth herein.
EXHIBIT B-2 - PAGE 1
4. UNDERTAKINGS.
(a) Guarantor hereby unconditionally and irrevocably guaranties not merely
as surety but as primary obligor, the due and punctual: (i) performance by
Assignee of all of the obligations of the "Owner Participant" under the
Operative Agreements assumed by Assignee under the Assignment Agreement; (ii)
payment of any and all sums which are payable by the Owner Participant pursuant
to any of the Operative Agreements which payment obligations were assumed by
Assignee under the Assignment Agreement; and (iii) performance of, observance of
and compliance with all other obligations, covenants and undertakings and
representations and warranties of, or made by, Assignee in the Assignment
Agreement or the Owner Participant contained in or arising under the Operative
Agreements and assumed by Assignee under the Assignment Agreement (such payments
and other obligations referred to in this Section 4(a) hereinafter referred to
as the "OBLIGATIONS"). Guarantor agrees that it will not use the assets of any
ERISA Plan to fund its payment obligations hereunder.
(b) Guarantor agrees that this Guaranty Agreement is an unconditional and
absolute guaranty of payment and performance (not merely collectability), that
its undertakings hereunder are not contingent upon any Guaranteed Party bringing
any action against Assignee or resorting to any security and hereby expressly
waives any claim that its undertakings hereunder are so contingent.
(c) Guarantor irrevocably waives promptness, diligence, demand, and all
notices whatsoever as to the Obligations guaranteed hereby, and any other
circumstances which might otherwise constitute a defense available to it, or a
discharge of it (other than the defense of payment or performance), and agrees
that it shall not be required to consent to or receive any notice of any
amendment or modification of, or waiver, consent or extension with respect to,
the Participation Agreement or the other Operative Agreements to which Assignee
is a party that may be made or given as provided herein or otherwise.
(d) Guarantor further agrees to pay all expenses (including, without
limitation, all fees and disbursements of counsel) that may be paid or incurred
by any Guaranteed Party in enforcing any rights with respect to, or collecting,
any or all of the Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guaranty Agreement.
(e) Guarantor understands and agrees that its obligations hereunder shall
be construed as continuing, absolute and unconditional without regard to (i) the
validity, regularity or enforceability of any Operative Agreement, any of the
Obligations or any collateral security therefor or guarantee or right of offset
with respect thereto at any time or from time to time held by any Guaranteed
Party, (ii) any defense, set-off or counterclaim (other than a defense of
payment or performance) that may at any time be available to or be asserted by
the Assignee against any Guaranteed Party, or (iii) any other instances
whatsoever (with or without notice to or knowledge of the Assignee or the
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of Assignee for the Obligations, or of Guarantor under this
Guaranty Agreement, in bankruptcy or in any other instance.
5. NO DISCHARGE. The obligation of Guarantor hereunder will not be
discharged by: (a) any
EXHIBIT B-2 - PAGE 2
extension or renewal with respect to any obligation of Assignee, as Owner
Participant, under the Operative Agreements, (b) any modification of, or
amendment or supplement to, any such agreement; (c) any furnishing or acceptance
of additional security or any release of any security; (d) any waiver, consent
or other action or inaction or any exercise or non-exercise of any right, remedy
or power with respect to Assignee, or any change in the structure of Assignee;
(e) any insolvency, bankruptcy, reorganization, arrangement, composition,
liquidation, dissolution or similar proceedings with respect to Assignee; (f)
except as provided in Section 6 any change in ownership of the shares of capital
stock of Guarantor or Assignee; or (g) any other occurrence whatsoever, except
payment in full of all amounts payable by Assignee, as Owner Participant, under
the Operative Agreements and performance in full of all Obligations of Assignee,
as Owner Participant, in accordance with the terms and conditions of the
Operative Agreements.
6. TRANSFERS. The Guarantor may assign, convey or otherwise transfer its
obligations hereunder to any other Person (hereinafter referred to as the
"TRANSFEREE GUARANTOR"), provided that (a) the Transferee Guarantor enters into
an agreement substantially in the form of this Guaranty Agreement and (b) the
Transferee Guarantor meets the requirements of Section 5.01(c) of the
Participation Agreement relating to a "guarantor". If pursuant to Section
5.01(c) of the Participation Agreement or the preceding sentence, a new guaranty
shall be delivered or the obligations of the Guarantor shall be transferred, the
Transferee Guarantor shall deliver an opinion or opinions of counsel
substantively similar to the form of opinion attached to the Participation
Agreement as Exhibit B-3 to the effect that the obligations incurred by the
Transferee Guarantor pursuant hereto constitute the legal, valid, binding and
enforceable obligations of such Transferee Guarantor. Upon the satisfaction by
the Guarantor of the conditions set forth in this Section 6, the Guarantor shall
be released and discharged of any and all further obligations under this
Guaranty Agreement.
7. REINSTATEMENT. Guarantor agrees that this Guaranty Agreement shall be
automatically reinstated with respect to any payment made prior to the
termination of this Guaranty Agreement by or on behalf of Assignee pursuant to
the Participation Agreement or the other Operative Agreements to which Assignee
is a party if and to the extent that such payment is rescinded or must be
otherwise restored, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
8. NO SUBROGATION. Notwithstanding any payment or payments made by
Guarantor hereunder or any set-off or application of funds of Guarantor by any
Guaranteed Party, Guarantor shall not be entitled to be subrogated to any of the
rights of Guaranteed Party against Assignee or any collateral, security or
guarantee or right of set-off held by any Guaranteed Party for the payment of
the Obligations, nor shall Guarantor seek or be entitled to seek any
reimbursement from the Assignee in respect of payments made by Guarantor
hereunder, until all amounts and performance owing to the Guaranteed Parties by
Assignee on account of the Obligations are paid and performed in full.
9. SEVERABILITY. Any provision of this Guaranty Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
EXHIBIT B-2 - PAGE 3
10. MISCELLANEOUS. This Guaranty Agreement shall: (a) be binding upon
Guarantor, its successors and assigns; (b) inure to the benefit of, and be
enforceable by, the Guaranteed Parties but shall not, and is not intended to,
create rights in any other third parties; (c) not be waived, amended or modified
without the written consent of each of the Guaranteed Parties; (d) be governed
by and construed in accordance with, the internal laws of the State of New York,
and (e) remain in full force and effect until the earlier of (i) payment in full
of all sums payable by Assignee, as Owner Participant, under the Assignment
Agreement and the Operative Agreements and by Guarantor hereunder, and
performance in full of all other Obligations of Assignee, as Owner Participant,
under the Assignment Agreement and the Operative Agreements and (ii) the
compliance by Guarantor with Section 6. All notices to, requests of, demands on
and other communications with Guarantor shall be made in writing and shall be
personally delivered, sent by facsimile or telecommunication transmission (which
in either case provides written confirmation to the sender of its delivery) or
sent by registered or certified mail, postage prepaid, or by prepaid courier
service to Guarantor at: ____________________________________________,
Attention: __________________________ telephone (____) ___________] fascimile
[(_____) __________].
IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly
executed this _________ day of ______________________.
[GUARANTOR]
By:
-----------------------------------
Name:
Title:
EXHIBIT B-2 - PAGE 4
EXHIBIT B-3 TO
THE PARTICIPATION AGREEMENT
FORM OF OPINION
[Date]
TO EACH OF THE PERSONS NAMED
ON THE ATTACHED SCHEDULE I:
Re: CHAUTAUQUA AIRLINES INCORPORATED - ONE EMBRAER MODEL ERJ-145LR
AIRCRAFT BEARING REGISTRATION NO. [N2___SK]
Ladies and Gentlemen:
As counsel to ________________ a ____________________ ("Assignee"), I
advise you as follows in connection with the Assignment and Assumption Agreement
dated as of ________________, _____ (the "Assignment Agreement") between
Assignee and _________________, a ____________ ("Assignor"), and the
transactions contemplated thereby. Capitalized terms used herein and not defined
herein shall have the respective meanings attributed thereto in the Assignment
Agreement. This opinion is being furnished to you pursuant to the request of
Assignee and Section 5.01(c)(v) of the Participation Agreement.
I have, or an attorney under my supervision has, examined the
Assignment Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Assignee) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. As to all
matters of fact material to my opinions, I have, when relevant facts were not
independently established, relied upon statements, representations and
warranties contained in the Assignment Agreement and upon the statements and
certificates furnished to me.
In addition, in rendering the opinions expressed herein I have assumed
that (i) the Assignment Agreement has been duly authorized, executed,
authenticated and delivered by Assignor and constitutes the legal, valid and
binding obligation of Assignor, enforceable against Assignor in accordance with
its terms, (ii) Assignor has the requisite power, authority and legal right to
enter into and perform its respective obligations under the Assignment Agreement
and (iii) the transactions provided for in the Assignment Agreement are not
within the prohibitions of Section 406 of the Employee Retirement Income
Security Act of 1974, as amended or Section 4975 of the Internal Revenue Code of
1986, as amended.
EXHIBIT B-3 - PAGE 1
A. Based upon the foregoing and subject to the limitations
expressed in paragraph B below, I am of the opinion that:
1. Assignee is a ______________ duly organized, validly existing
and in good standing under the laws of [ ] and has full corporate
power and authority to execute, deliver and perform the Assignment
Agreement.
2. The Assignment Agreement has been duly authorized, executed and
delivered by Assignee.
3. Neither the execution and delivery of the Assignment Agreement
by Assignee, nor the consummation by Assignee of the transactions
contemplated thereby and by the Operative Agreements, conflicts with,
results in a breach of or violates any of the terms, conditions or
provisions of (i) the [Certificate][Articles] of Incorporation or By-laws
of the Assignee, (ii) to the best of my knowledge, any order, writ,
injunction or decree of any court or governmental authority against the
Assignee or by which the Assignee or any of its properties is bound or
(iii) to the best of my knowledge, any indenture, mortgage or contract or
other material agreement or instrument to which Assignee is a party or by
which it or any of its properties is bound or constitutes a default
thereunder.
4. To the best of my knowledge, there are no actions, suits or
proceedings pending or threatened before any court of administrative agency
or arbitrator which would materially adversely affect the ability of
Assignee to perform its obligations under the Assignment Agreement and the
Operative Agreements.
5. The Assignment Agreement constitutes a legal, valid and binding
obligation of Assignee enforceable against Assignee in accordance with the
terms thereof, except as the enforceability thereof may be limited by (a)
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (b) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally and (c) public policy considerations (in the case of
any indemnity provisions contained therein).
6. Except for filings with the Federal Aviation Administration,
neither the execution and delivery by Assignee of the Assignment
Agreement, nor the consummation by Assignee of any of the transactions
contemplated thereby or by the Operative Agreements, (a) requires the
consent or approval of, the giving of notice to, or the registration or
filing with, or the taking of any action with respect to, any governmental
authority or agency of the United States or (b) violates any law,
governmental rule or regulation of the United States or the State of
[ ].
B. I am qualified to practice law in the State of [ ] and I
express no opinion as to any laws other than the laws of the State of [ ],
the General Corporation Law
EXHIBIT B-3 - PAGE 2
of the State of [ ] and the federal laws of the United States of America. I
express no opinion herein as to (i) any federal or state securities laws, (ii)
any tax laws or (iii) any aviation law or other laws, statutes, rules or
regulations applicable due to the particular nature of the equipment subject to
the Lease. In addition, no opinion is expressed as to matters governed by Title
49 of the United States Code, as amended, or by any other law, statute, rule or
regulation or the United States relating to the acquisition, ownership,
registration, use, operation, maintenance, repair, replacement or sale of or the
nature of aircraft. Further, no opinion is expressed as to title to any part of
the Trust Estate. In addition, I express no opinion as to the perfection or
priority of any security interests or as to the right, title or interest in or
to the Trust Estate on the part of any Person.
This opinion is furnished by me for your sole benefit, and no other
person or entity is entitled to rely on this opinion without my express written
consent. This opinion may not be published or reproduced in any manner or
distributed or circulated to any person or entity without my express written
consent. This opinion is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated herein.
Very truly yours,
EXHIBIT B-3 - PAGE 3
SCHEDULE I
[Insert names and addresses of Lessee, Owner Trustee and Assignor]
EXHIBIT B-3 - PAGE 4
TABLE OF CONTENTS
PAGE
ARTICLE 1. INTERPRETATION....................................................................2
Section 1.01. Definitions...............................................................2
Section 1.02. References................................................................2
Section 1.03. Headings..................................................................2
Section 1.04. Appendices Schedules and Exhibits.........................................2
ARTICLE 2. SALE AND LEASING TRANSACTIONS.....................................................2
Section 2.01. Participation.............................................................2
(a) Sale and Purchase..............................................................2
(b) Leasing........................................................................3
(c) Owner Participant's Equity Investment..........................................3
(d) Delivery Date..................................................................3
Section 2.02. Closing Procedure.........................................................3
(a) Time and Place.................................................................3
(b) Actions of the Owner Trustee...................................................4
(c) Actions of the Lessee..........................................................4
ARTICLE 3. CONDITIONS PRECEDENT..............................................................5
Section 3.01. Conditions Precedent to Obligations of Owner Participant..................5
(a) Notice.........................................................................5
(b) Delivery of Documents..........................................................5
(c) Airworthiness..................................................................7
(d) Violation of Law...............................................................7
(e) No Event of Default............................................................7
(f) No Event of Loss...............................................................7
(g) Title..........................................................................7
(h) Certification..................................................................7
(i) Section 1110...................................................................8
(j) Filings........................................................................8
(k) Precautionary Financing Statements.............................................8
(l) No Proceedings.................................................................8
(m) Governmental Action............................................................8
(n) Representations and Warranties.................................................8
Section 3.02. Conditions Precedent to Obligations of Lessee.............................8
(a) Documents......................................................................9
(b) Corporate Documents............................................................9
(c) Officer's Certificate..........................................................9
(d) Other Conditions Precedent.....................................................9
Section 3.03. Post-Registration Opinion.................................................9
i
ARTICLE 4. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS................................9
Section 4.01. Lessee's Representations and Warranties...................................9
Section 4.02. Certain Covenants of Lessee..............................................12
(a) Filings and Recordings........................................................12
(b) Registration..................................................................12
(c) Information...................................................................14
(d) Corporate Existence...........................................................15
(e) Merger and Consolidation......................................................15
(f) Change of Location............................................................16
(g) Financial Statements..........................................................16
(h) Filing of Documents...........................................................16
(i) Annual Foreign Opinion........................................................17
Section 4.03. Survival of Representations and Warranties...............................17
ARTICLE 5. OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND
COVENANTS........................................................................17
Section 5.01. Representations, Warranties and Covenants of Owner Participant...........17
(a) Representations and Warranties................................................17
(b) Lessor's Liens................................................................19
(c) Assignment of Interests of Owner Participant..................................19
(d) Actions with Respect to Lessor's Estate, Etc..................................21
(e) Citizenship...................................................................21
(f) Guarantees....................................................................22
Section 5.02. Citizenship..............................................................22
(a) Generally.....................................................................22
(b) Owner Trustee.................................................................22
Section 5.03. Representations, Warranties and Covenants of Trust Company and
the Owner Trustee........................................................22
(a) Representations and Warranties................................................22
(b) Lessor's Liens................................................................24
(c) Indemnity for Lessor's Liens..................................................24
(d) Securities Act................................................................25
(e) Actions With Respect to Lessor's Estate, Etc..................................25
(f) Other Business................................................................25
(g) Performance of Agreements.....................................................25
Section 5.04. The Lessee's Right of Quiet Enjoyment....................................25
Section 5.05. Survival of Representations, Warranties and Covenants....................25
Section 5.06. Compliance with Trust Agreement, Etc.....................................25
ARTICLE 6. TAXES............................................................................26
Section 6.01. Lessee's Obligation to Pay Taxes.........................................26
(a) Generally.....................................................................26
(b) Exceptions....................................................................27
Section 6.02. After Tax Basis..........................................................29
Section 6.03. Time of Payment..........................................................29
Section 6.04. Contests.................................................................30
(a) Notice of Claim...............................................................30
ii
(b) Request for Contest...........................................................30
(c) Declining to Contest; Settlement..............................................32
(d) Continuing Claims.............................................................33
(e) Claims Barred.................................................................33
Section 6.05. Refunds..................................................................33
Section 6.06. Reports..................................................................34
Section 6.07. Survival of Obligations..................................................34
Section 6.08. Payment of Taxes.........................................................34
Section 6.09. Reimbursements by Indemnitees Generally..................................35
Section 6.10. Forms....................................................................35
Section 6.11. Verification.............................................................35
Section 6.12. Non-Parties..............................................................35
ARTICLE 7. GENERAL INDEMNITY................................................................35
Section 7.01. Generally................................................................35
(a) Indemnity.....................................................................35
(b) Exceptions....................................................................37
Section 7.02. Notice and Payment.......................................................38
Section 7.03. Defense of Claims........................................................39
Section 7.04. Insured Claims...........................................................39
Section 7.05. Subrogation..............................................................40
Section 7.06. Information..............................................................40
Section 7.07. Survival of Obligations..................................................40
Section 7.08. Effect of Other Indemnities..............................................40
Section 7.09. Waiver of Certain Claims.................................................40
Section 7.10. Certain Limitations......................................................41
ARTICLE 8. TRANSACTION COSTS................................................................41
Section 8.01. Transaction Costs and Other Costs........................................41
(a) Transaction Costs.............................................................41
(b) Continuing Expenses...........................................................41
(c) Amendments and Supplements....................................................41
ARTICLE 9. SUCCESSOR OWNER TRUSTEE..........................................................42
Section 9.01. Appointment of Successor Owner Trustee...................................42
(a) Resignation and Removal.......................................................42
(b) Conditions to Appointment.....................................................42
ARTICLE 10. LIABILITIES OF THE OWNER PARTICIPANT............................................43
Section 10.01. Liabilities of the Owner Participant....................................43
ARTICLE 11. OTHER DOCUMENTS.................................................................43
Section 11.01. Consent of Lessee to Other Documents....................................43
Section 11.02. Consent of Owner Participant to Other Documents.........................43
ARTICLE 12. NOTICES.........................................................................43
Section 12.01. Notices.................................................................43
iii
ARTICLE 13. MISCELLANEOUS...................................................................44
Section 13.01. Counterparts............................................................44
Section 13.02. No Oral Modifications...................................................44
Section 13.03. Captions................................................................44
Section 13.04. Successors and Assigns..................................................44
Section 13.05. Concerning the Owner Trustee............................................44
Section 13.06. Severability............................................................45
Section 13.07. GOVERNING LAW...........................................................45
Section 13.08. Section 1110 Compliance.................................................46
Section 13.09. Assignment..............................................................46
Definitions
Exhibit A-1 Form of Opinion of General Counsel of Lessee
Exhibit A-2 Form of Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
Exhibit A-3 Form of Opinion of Ray, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, as special counsel
to the Owner Trustee
Exhibit A-4 Form of Opinion of Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇, a
Professional Corporation
Exhibit A-5 Form of Opinion of Holland & Knight LLP, special counsel for the
Owner Participant
Exhibit A-6 Form of Opinion of General Counsel to the Owner Participant
Exhibit B-1 Form of Assignment and Assumption Agreement
Exhibit B-2 Form of Owner Participant Guaranty
Exhibit B-3 Form of Opinion of counsel to the Owner Participant in respect of
the Assignment and Assumption Agreement
iv
NOTE TO EXHIBIT 10.19
The 15 additional Participation Agreements are substantially identical in all
material respects to the filed Participation Agreement except as follows:
------------------------------------- ----------------------------------- ------------------------------------
TAIL NUMBER CLOSING DATE OWNER-PARTICIPANT
------------------------------------- ----------------------------------- ------------------------------------
N265SK June, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N267SK June, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N268SK June, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N269SK August, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N270SK August, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N271SK September, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N272SK September, 2000 General Electric Capital Corporation
------------------------------------- ----------------------------------- ------------------------------------
N273SK November, 2000 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N274SK December, 2000 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N275SK December, 2000 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N276SK December, 2000 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N277SK December, 2000 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N278SK February, 2001 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N279SK January, 2001 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
N280SK February, 2001 Aircraft Services Corp.
------------------------------------- ----------------------------------- ------------------------------------
------------------------------------- ----------------------------------- ------------------------------------
------------------------------------- ----------------------------------- ------------------------------------