CONFORMED COPY
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SUPPLEMENTAL AGREEMENT [N587ML]
Dated as of December 30, 1999
among
MIDWAY AIRLINES CORPORATION,
as Lessee
and
FLEET NATIONAL BANK,
as Lessor
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COVERING ONE CANADAIR REGIONAL JET SERIES 200ER
AIRCRAFT BEARING U.S. REGISTRATION NO. N587ML
AND MANUFACTURER'S SERIAL NUMBER 7346
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, LEASING AND SECURED LOAN TRANSACTIONS..................... 2
Section 2.01. Participation................................... 2
(a) Sale and Purchase......................... 2
(b) Payment of Lessor's Cost.................. 2
(c) Leasing................................... 2
(d) Delivery Date............................. 2
Section 2.02. Closing Procedure............................... 3
(a) Time and Place............................ 3
(b) Actions of the Lessor..................... 3
(c) Actions of the Lessee..................... 4
ARTICLE 3. CONDITIONS PRECEDENT............................................ 4
Section 3.01. Conditions Precedent to Obligations of Lessor... 4
(a) Notice.................................... 4
(b) Delivery of Documents..................... 4
(c) Airworthiness............................. 6
(d) Violation of Law.......................... 6
(e) No Event of Default....................... 6
(f) No Event of Loss.......................... 6
(g) Title..................................... 7
(h) Certification............................. 7
(i) Section 1110.............................. 7
(j) Filings................................... 7
(k) Precautionary Financing Statements........ 7
(l) No Proceedings............................ 7
(m) Governmental Action....................... 7
(n) Representations and Warranties............ 7
(o) Other Documents........................... 8
Section 3.02. Conditions Precedent to Obligations of Lessee... 8
(a) Documents................................. 8
(b) Incumbency Certificate.................... 8
(c) Other Conditions Precedent................ 8
Section 3.03. Post-Registration Opinion....................... 8
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ARTICLE 4. LESSEE'S REPRESENTATIONS, WARRANTIES AND
COVENANTS...................................................... 8
Section 4.01. Lessee's Representations and Warranties........ 8
Section 4.02. Certain Covenants of Lessee.................... 11
(a) Filings and Recordings................... 11
(b) Registration............................. 11
(c) Information.............................. 14
(d) Privileges and Franchises................ 14
(e) Merger and Consolidation................. 14
(f) Change of Location....................... 15
(g) Financial Statements..................... 15
(h) Filing of Documents...................... 16
Section 4.03. Survival of Representations and Warranties..... 16
ARTICLE 5. LESSOR'S REPRESENTATIONS, WARRANTIES AND
COVENANTS...................................................... 16
Section 5.01. Representations, Warranties and Covenants of
Lessor......................................... 16
(a) Representations and Warranties........... 16
(b) Lessor's Liens........................... 18
(c) Assignment of Lessor's Estate............ 18
(d) Citizenship.............................. 20
Section 5.02. Survival of Representations, Warranties and
Covenants...................................... 20
ARTICLE 6. TAXES.......................................................... 21
Section 6.01. Lessee's Obligation to Pay Taxes............... 21
(a) Generally................................ 21
(b) Exceptions............................... 21
Section 6.02. After Tax Basis................................ 24
Section 6.03. Time of Payment................................ 25
Section 6.04. Contests....................................... 25
(a) Notice of Claim.......................... 25
(b) Request for Contest...................... 25
(c) Declining to Contest; Settlement......... 26
(d) Claims Barred............................ 27
Section 6.05. Refunds........................................ 27
Section 6.06. Reports........................................ 28
Section 6.07. Survival of Obligations........................ 28
Section 6.08. Payment of Taxes............................... 28
Section 6.09. Reimbursements by Indemnitees Generally........ 28
Section 6.10. Forms.......................................... 29
Section 6.11. Verification................................... 29
Section 6.12. Non-Parties.................................... 29
ARTICLE 7. GENERAL INDEMNITY.............................................. 29
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Section 7.01. Generally...................................... 29
(a) Indemnity................................ 29
(b) Exceptions............................... 30
(c) Non-Parties.............................. 32
Section 7.02. Notice and Payment............................. 32
Section 7.03. Defense of Claims.............................. 32
Section 7.04. Insured Claims................................. 33
Section 7.05. Subrogation.................................... 33
Section 7.06. Information.................................... 33
Section 7.07. Survival of Obligations........................ 34
Section 7.08. Effect of Other Indemnities.................... 34
Section 7.09. Waiver of Certain Claims....................... 34
Section 7.10. Certain Limitations............................ 34
ARTICLE 8. TRANSACTION COSTS.............................................. 34
Section 8.01. Transaction Costs and Other Costs.............. 34
(a) Transaction Costs........................ 34
(b) Amendments and Supplements............... 35
ARTICLE 9. NOTICES........................................................ 35
Section 9.01. Notices........................................ 35
ARTICLE 10. MISCELLANEOUS.................................................. 36
Section 10.01. Counterparts................................... 36
Section 10.02. No Oral Modifications.......................... 36
Section 10.03. Captions....................................... 36
Section 10.04. Successors and Assigns......................... 36
Section 10.05. Severability................................... 36
Section 10.06. Limitations of Liability....................... 36
Section 10.07. GOVERNING LAW.................................. 36
Section 10.08. Section 1110 Compliance........................ 36
Section 10.09. Reinstatement.................................. 38
Section 10.10. Deficiency Agreement and Residual Agreement.... 38
Appendix A Definitions
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SUPPLEMENTAL AGREEMENT [N587ML] dated as of December 30, 1999 (this
"Agreement") between MIDWAY AIRLINES CORPORATION, a Delaware corporation
(herein, together with its successors and permitted assigns, the "Lessee") and
FLEET NATIONAL BANK, a national banking association established under the laws
of United States of America (together with its successors and permitted assigns,
the "Lessor").
W I T N E S S E T H:
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WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof.
WHEREAS, pursuant to the Purchase Agreement the Manufacturer agreed to
manufacture and sell to the Lessee and the Lessee agreed to purchase from the
Manufacturer the Aircraft; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Lessor is willing to purchase the Aircraft from the Seller for immediate lease
to the Lessee pursuant to the Lease; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Lessee has agreed to assign to the Lessor, upon the terms and conditions
contained in the Purchase Agreement Assignment and the Engine Warranty
Assignment, respectively, certain of the Lessee's rights and interests in and to
the Purchase Agreement and the Warranties (as defined in the Engine Warranty
Assignment), respectively; and
WHEREAS, to induce the Lessor to purchase the Aircraft from the
Seller, the Manufacturer has agreed to enter into the Residual Agreement
[N587ML], dated as of December 30, 1999 (the "Residual Agreement") with the
Lessor and to undertake the obligations provided therein; and
WHEREAS, to induce the Lessor to purchase the Aircraft and to enter
into the Lease, Bombardier Inc. (the "Deficiency Obligor") has agreed to enter
into the Deficiency Agreement [N587ML], dated as of December 30, 1999 (the
"Deficiency Agreement") with the Lessor 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
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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,
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paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.
Section 1.03. Headings. The headings of the various sections,
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paragraphs and clauses of this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
Section 1.04. Appendices Schedules and Exhibits. The appendices,
---------------------------------
schedules and exhibits hereto are part of this Agreement.
ARTICLE 2.
SALE AND LEASING TRANSACTIONS
Section 2.01. Participation. Subject to all of the terms and
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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 Lessor agrees to purchase the Aircraft from
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the Seller on the Delivery Date for a purchase price equal to Lessor's Cost.
(b) Payment of Lessor's Cost. The Lessor agrees to provide immediately
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available funds in the amount equal to the Lessor's Cost (the "Commitment") by
paying such amount at the time of the closing on the Delivery Date to the
account of the Lessee (or the Seller at Lessee's direction) specified by the
Lessee prior to the closing to be applied toward the payment of Lessor's Cost.
(c) Leasing. The Lessor agrees to lease to the Lessee, and the Lessee
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agrees to lease from the Lessor, the Aircraft pursuant to the Lease, such
leasing to take place concurrently with the purchase of the Aircraft by the
Lessor on the Delivery Date.
(d) Delivery Date. The "Delivery Date" shall be the date fixed by the
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Lessee and acceptable to Lessor in accordance with this Section 2.01(d) for the
closing of the sale and leasing transactions with respect to the Aircraft
contemplated hereby, provided, however, that in no event
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shall such date be later than December 30, 1999, 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 (which amount shall be subject to the approval of
Lessor in its sole discretion). 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 so long as any such date is not later
than December 30, 1999.
Section 2.02. Closing Procedure.
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(a) Time and Place. The closing shall take place at 11:00 a.m. New
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York City local time on the Delivery Date at the offices of Fulbright & ▇▇▇▇▇▇▇▇
L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other time and place as
the parties may agree. The closing shall be preceded by a pre-closing at the
same place, the time for which shall be fixed by the Lessee and the Lessor, at
which the forms of the Operative Agreements to be executed, the certificates and
other documents to be delivered and the forms of the legal opinions to be
delivered at the closing by each party or its counsel pursuant to this Agreement
shall be available for inspection by the parties and their respective counsel.
(b) Actions of the Lessor. Upon satisfaction or waiver by the Lessor
---------------------
of the conditions precedent set forth in Section 3.01, the Lessor on the
Delivery Date shall purchase the Aircraft from the Seller and lease the Aircraft
to the Lessee. To accomplish such transactions, the Lessor 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 Lessee (or directly to the Seller at Lessee's direction) for the
purchase of the Aircraft by transferring such amount in immediately
available funds to the account specified by the Lessee on or prior to the
Delivery Date;
(ii) authorize its representative or representatives, who shall
be a person or persons designated by the Lessee and acceptable to the
Lessor, solely 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;
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(vi) execute and deliver all other documents or certificates and
take such other actions as may be required of the Lessor on or before the
Delivery Date pursuant to any Operative Agreement; and
(vi) take such actions as may be reasonably requested by the
Lessee to effect the due registration of the Aircraft with the FAA in the
name of the Lessor.
(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 cause the Aircraft to be sold to the Lessor, lease the Aircraft
from the Lessor pursuant to the Lease, assign to the Lessor pursuant to the
Purchase Agreement Assignment certain of the Lessee's rights and interests in
and to the Purchase Agreement and assign to the Lessor pursuant to the Engine
Warranty Assignment the Lessee's rights and interests in and to the Warranties
(as defined in the Engine Warranty Assignment). To accomplish such transactions
the Lessee shall, concurrently with the actions of the Lessor 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)), solely to accept delivery of the Aircraft
from the Lessor 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 or any reasonable request
of Lessor.
ARTICLE 3.
CONDITIONS PRECEDENT
Section 3.01. Conditions Precedent to Obligations of Lessor. The
---------------------------------------------
obligation of the Lessor to make the Commitment available on the Delivery Date
is subject to satisfaction or waiver by the Lessor, 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
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Lessor that any document be produced or action taken that is to be produced or
taken by the Lessor:
(a) Notice. The Lessor 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 Lessor 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
4
party or parties thereto, (b) shall be reasonably satisfactory in form and
substance to the Lessor and (c) shall be in full force and effect:
(i) the Lease;
(ii) Lease Supplement No. 1;
(iii) the Tax Indemnity Agreement;
(iv) the Deficiency Agreement;
(v) the Residual Agreement;
(vi) the Purchase Agreement Assignment;
(vii) the Engine Warranty Assignment;
(viii) the PAA Consent;
(ix) the Engine Manufacturer's Consent;
(x) the Bills of Sale;
(xi) the broker's report and insurance certificates required by
Section 9 of the Lease;
(xii) copies of the Purchase Agreement and the Warranties (as
defined in the Engine Warranty Assignment);
(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 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; and (B) an incumbency certificate of
Lessee as to the person or persons authorized to execute and deliver the
relevant Operative Agreements on behalf of Lessee; together with such other
documents and evidence with respect to it as Lessor 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
5
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) the following opinions of counsel, in each case dated the
Delivery Date:
(A) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President and General Counsel
of the Lessee, substantially in the form reasonably acceptable to the
Lessor.
(B) Fulbright & ▇▇▇▇▇▇▇▇, L.L.P. special counsel for the
Lessee, substantially in the form reasonably acceptable to the Lessee and
the Lessor;
(C) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special aviation counsel,
substantially in the form reasonably acceptable to the Lessee and the
Lessor;
(D) ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, special counsel for the
Manufacturer, the Deficiency Obligor and the Seller, substantially in the
form reasonably acceptable to the Lessor and the Lessee;
(E) counsel for the Engine Manufacturer, substantially in the
form reasonably acceptable to the Lessor and the Lessee;
(F) counsel for the Deficiency Obligor, substantially in the
form reasonably acceptable to the Lessor and the Lessee; and
(G) counsel for the Seller, substantially in the form
reasonably acceptable to the Lessor and the Lessee.
(c) Airworthiness. Lessor shall receive a copy of a current, valid
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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
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this Agreement in any Applicable Law that makes it a violation of law for (a)
Lessee or Lessor to execute, deliver and perform the Operative Agreements to
which either of them is a party or (b) Lessor 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
6
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. Lessor shall have good and marketable title (subject to
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filing and recordation of the FAA ▇▇▇▇ of Sale with the FAA) to the Aircraft,
free and clear of Liens, except Permitted Liens of the type referred to in
clause (b) and (d) of the definition thereof.
(h) Certification. The Aircraft shall have been duly certificated by
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the FAA as to type and airworthiness as required by the terms of the Lease.
(i) Section 1110. Lessor, 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
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the Aircraft in the name of the Lessor shall have been duly made with the FAA in
compliance with the provisions of the Transportation Code; and (ii) the Lease,
Lease Supplement No. 1 and the FAA ▇▇▇▇ of Sale shall have been 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 Lessor which may be
created thereby, shall have been executed and delivered by the Lessee and the
Lessor (naming the Lessor as Lessor and secured party), and shall have been duly
filed in all places necessary or desirable within the State of North Carolina or
any other applicable jurisdiction.
(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
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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
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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.
(o) Other Documents. The Lessor receives such other documents,
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certificates and opinions, and evidence of such other matters, in connection
with the transactions contemplated hereby as Lessor may reasonably request.
Section 3.02. Conditions Precedent to Obligations of Lessee. The
---------------------------------------------
obligation of Lessee to lease the Aircraft on the Delivery Date is subject to
the satisfaction or waiver by Lessee, on or prior to the Delivery Date, of the
conditions precedent set forth below in this Section 3.02.
(a) Documents. Executed originals of the agreements, instruments,
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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) Incumbency Certificate. An incumbency certificate of Lessor as to
----------------------
the person or persons authorized to execute and deliver the relevant Operative
Agreements on behalf of Lessor.
(c) Other Conditions Precedent. Each of the conditions set forth in
--------------------------
Sections 3.01(c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m) and (n) shall
have been satisfied or waived by Lessee and Lessor, 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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special counsel in
Oklahoma City, Oklahoma, to deliver to Lessee and Lessor 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 State of Delaware, has its principal
place of business and chief executive
8
office (as such terms are used in Article 9 of the Uniform Commercial Code) in
Morrisville, North Carolina at the address set forth in Section 9.01(a), and is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the failure to be so qualified or in good standing
would have a materially adverse effect on its business or would impair its
ability to perform its obligations under the Lessee Documents;
(b) the Lessee has full power, authority and legal right to conduct
its business and operations as currently conducted and to own or hold under
lease its properties and to enter into and perform its obligations under the
Lessee Documents;
(c) the Lessee is an "air carrier" within the meaning of the
Transportation Code and a holder of a certificate under Section 41102(a) of the
Transportation Code and a "citizen of the United States" within the meaning of
Section 40102(a)(15) of the Transportation Code holding an "air carrier
operating certificate" issued under Chapter 447 of the Transportation Code for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of
cargo, and each such certificate is in full force and effect;
(d) the Lessee possesses all necessary certificates, franchises,
licenses, permits, rights and concessions and consents (collectively "permits")
which are necessary to the operation of the routes flown by it and the conduct
of its business and operations as currently conducted and each such permit is in
full force and effect, except for any such permits the failure to have or
maintain which would not have a material adverse effect on the Lessee or its
ability to perform its obligations under the Lessee Documents;
(e) the execution, delivery and performance of the Lessee Documents by
the Lessee have been duly authorized by all necessary corporate action on the
part of the Lessee and do not require any stockholder approval, or approval or
consent of any trustee or holder of any indebtedness or obligations of the
Lessee, and each such Lessee Documents has been duly executed and delivered and
constitutes the legal, valid and binding obligations of the Lessee enforceable
against it in accordance with the terms thereof except as such enforceability
may be limited by bankruptcy, insolvency, or other similar laws or by general
equitable principles;
(f) no authorization, consent or approval of or other action by, and
no notice to or filing with, any United States federal or state governmental
authority or regulatory body is required for the execution, delivery or
performance by the Lessee of the Lessee Documents except for such registrations,
applications and recordings referred to in the opinion of ▇▇▇▇▇ and ▇▇▇▇▇▇▇ P.C.
delivered pursuant to Section 3.01(b)(xv)(F) 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 PAA Consent and the Engine Manufacturer's Consent)
or approval under, any Applicable Law or the charter documents, as amended, or
bylaws, as
9
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 Annual Report on Form 10-K, Quarterly
Report on Form 10-Q or Current Report on Form 8-K filed by Lessee with the SEC
on or prior to the date hereof or as otherwise disclosed in writing to the
Lessor, there are no pending or, to the knowledge of the Lessee, threatened
actions, suits, investigations or proceedings against or affecting the Lessee or
any of its properties before or by any court, governmental agency, arbitration
board, tribunal or other administrative agency which, (A) may reasonably be
expected to have a materially adverse effect on the Lessee's consolidated
financial condition, business, or operations, or (B) would materially adversely
affect the ability of the Lessee to consummate the transactions contemplated by
the Operative Agreements or perform its obligations under the Lessee Documents;
(i) except for (A) the registration in the Lessor'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 or statements 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 Lessor's title to and interest in the Aircraft and the
Lessor's Estate as against the Lessee and any third parties;
(j) the Lessor has received good and marketable title to the Aircraft,
free and clear of all Liens, except Permitted Liens of the type referred to in
clause (b) and (d) of the definition thereof;
(k) 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;
(l) 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; and all records in respect of the Aircraft required by the
Aeronautical Authority have been maintained in accordance in all material
respects with the requirements of the Aeronautical Authority;
10
(m) 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;
(n) 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;
(o) the Lessee is not in default (after any applicable grace periods)
in the performance of any material term or condition of the Purchase Agreement;
and
(p) 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.
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 Lessor 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 Lessor and appropriate, to maintain the Lessor'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 Lessor 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 it 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 Lessor (provided, that the Lessor shall be and
--------
remain a Citizen of the United States), under the Transportation Code, and shall
furnish to the Lessor such information as may be required to enable the Lessor
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;
11
(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
Lessor 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 if
reasonably requested by Lessor, 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 Lessor'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 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 Lessor 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 Sublease for the Lessor to register or qualify to do business in such
country (other than in respect of administrative matters to be performed in
the ordinary course of business which shall not unduly delay or frustrate
Lessor's right to exercise its remedies under any of the Operative
Agreements);
(viii) no Liens (except Permitted Liens) shall arise by reason
of such re-registration;
(ix) the Lessor shall not 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 the Lessor in a manner
satisfactory in form and substance to the Lessor;
(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
12
normal course without material delay, it being agreed that the Lessee shall
be responsible for the cost thereof;
(xi) there is no tort liability of the owner or lessor of an
aircraft not in possession thereof under the laws of such jurisdiction more
onerous than under the laws of the United States or any state thereof (it
being agreed that, in the event such opinion cannot be given in a form
satisfactory to the Lessor, such opinion shall be waived if insurance
reasonably satisfactory to the Lessor is provided to cover such risk);
(xii) unless Lessee shall have agreed to provide insurance
reasonably satisfactory to the Lessor 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) (which
insurance shall be provided by the Lessee if the same is requested by the
Lessor and it is at the time customary in the industry to obtain such
insurance when registering an aircraft in such jurisdiction), 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 Lessor) for the taking or requisition by
such government of such use or title;
(xiii) the courts of such proposed country of registry will
respect the choice of New York law to govern the Lease;
(xiv) such re-registration may not be affected until after the
Recovery Period unless the Lessee prepays on a lump sum basis any liability
due under the Tax Indemnity Agreement as a result of such re-registration;
(xv) the Lessor shall have received opinions in scope, form
and substance reasonably satisfactory to it, 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;
(xvii) Lessee shall deliver such request to Lessor in writing at
least 45 days in advance of the date of any such proposed change in
registration; and
(xviii) the Deficiency Agreement and the Residual Agreement shall
remain in full force and effect.
13
Lessee agrees to pay on an After Tax Basis all out-of-pocket costs and expenses
(including, without limitation, reasonable counsel fees and disbursements) of
the Lessor in connection with any re-registration pursuant to this Section.
(c) Information. The Lessee shall promptly furnish to the Lessor such
-----------
information as may be required to enable the Lessor timely to file any reports
required to be filed by the Lessor as the Lessor under the Lease with any
governmental authority as a result of the Lessor's ownership interest in the
Aircraft.
(d) Privileges and Franchises. 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 right, privilege or franchise that it determines is no
longer necessary or desirable in the conduct of its business; provided that,
-------- ----
nothing in this Section 4.02(d) shall in any way otherwise diminish the
obligations of the Lessee under the Lease.
(e) Merger and Consolidation. The Lessee shall not, during the Term,
------------------------
enter into any merger with or into or consolidation with (which shall include a
reorganization which involves the Lessee and another Person), 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 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 Person 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) immediately after giving effect to such transaction,
unless otherwise consented to by Lessor which consent shall not be unreasonably
withheld, shall have a tangible net worth (determined in accordance with
generally accepted accounting principles) at least equal to the lesser of (1)
Fifty Million Dollars ($50,000,000) and (2) 75% of Lessee's tangible net worth
(determined in accordance with generally accepted accounting principles)
immediately prior to such transaction; (v) if not the Lessee, executes a duly
authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Lessor, 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 Lessor, (vi) provides an opinion from counsel
(which counsel may be the Lessee's General Counsel) delivered to the Lessor,
which opinion shall be reasonably satisfactory to the Lessor, and an officer's
certificate (which may rely, as to legal matters, on such legal opinion), each
stating that such merger, consolidation, conveyance, transfer, lease or other
disposition and the instrument noted in clause (v) above comply with this
Section 4.02(e), that such instrument is a legal, valid and binding obligation
of, and is enforceable against, such survivor or Person, and that all conditions
precedent herein provided for relating to such transaction have been complied
with, and (vii) such survivor or Person makes such filings and recordings with
the FAA as may be required pursuant to part A of subtitle VII or ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Code to evidence such merger or consolidation; provided that,
-------- ----
14
no such merger, consolidation or conveyance, transfer or lease shall be
permitted if an Event of Default shall arise as a result of such transaction.
Upon any permitted consolidation or merger, or any permitted
conveyance, transfer or lease of all or substantially all of the assets of the
Lessee and the satisfaction of the conditions specified in this Section 4.02(e),
the successor corporation formed by such consolidation or into which the Lessee
is merged or the Person to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Lessee under this Agreement and the Lease and each other Operative
Agreement and any other document contemplated hereby and thereby to which the
Lessee is a party with the same effect as if such successor corporation had been
named as the Lessee herein and therein. No such consolidation or merger, or
sale, conveyance, transfer or lease of all or substantially all of the assets of
the Lessee as an entirety shall have the effect of releasing the Lessee or any
successor corporation which shall theretofore have become the Lessee hereunder
in the manner prescribed in this Section 4.02(e) from its liability hereunder or
under the other Operative Agreements. Nothing contained herein shall permit any
lease, sublease, or other arrangement for the use, operation or possession of
the Aircraft except in compliance with the applicable provisions of the Lease.
(f) Change of Location. The Lessee agrees to give prompt prior
------------------
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 Lessor of any change in the address of its chief executive office (as such
term is used in Section 9-103(3) of the North Carolina Uniform Commercial Code)
or of any change in its corporate name.
(g) Financial Statements. The Lessee agrees to furnish to the Lessor
--------------------
during the Term:
(i) within 60 days after the end of each of the first three
fiscal quarters in each fiscal year of the Lessee, unaudited consolidated
balance sheets of the Lessee and its subsidiaries (if any) as of the end of
such quarter and related consolidated statements of income, shareholder's
equity and cash flows of the Lessee and its subsidiaries (if any) for the
period commencing at the end of the previous fiscal year and ending with
the end of such quarter, provided that so long as the Lessee is subject to
--------
the reporting provisions of the Securities Exchange Act of 1934, a copy of
the Lessee's quarterly report on Form 10-Q will satisfy this requirement;
(ii) within 120 days after the end of each fiscal year of the
Lessee, a copy of the annual report for such year for the Lessee or the
affiliated group of which the Lessee is a member (on a consolidated basis,
if applicable) and a balance sheet of the Lessee and its subsidiaries (if
any) as of the end of such fiscal year and related statements of income,
shareholder's equity and cash flows of the Lessee for such fiscal year, in
comparative form with the preceding fiscal year, in each case certified by
independent certified public accountants of national standing as having
been prepared in accordance with generally
15
accepted accounting principles in the United States, provided that so long
--------
as the Lessee is subject to the reporting provisions of the Securities
Exchange Act of 1934, a copy of the Lessee's annual report on Form 10-K
will satisfy this requirement; and
(iii) from time to time, such other non-confidential financial
information as the Lessor 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 chief executive
office) in respect of such financing statements to be prepared and, subject only
to the execution and delivery thereof by Lessor, 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).
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.
LESSOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01 Representations, Warranties and Covenants of Lessor.
---------------------------------------------------
(a) Representations and Warranties. The Lessor 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 Lessor
represents and warrants as of such earlier date):
(i) it is a national banking association duly established
under the laws United States of America 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 carry out the
transactions contemplated by this Agreement and the other Operative
Agreements to which it is a party;
(ii) the execution, delivery and performance by it of this
Agreement and the other Operative Agreements to which it is a party have
been duly authorized by all necessary corporate action on its part;
16
(iii) neither the execution, delivery or performance by the
Lessor 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 Lessor or the charter documents, as amended,
or bylaws, as amended, of the Lessor or any order, writ, injunction or
decree of any court or governmental authority against the Lessor 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 Lessor is a party or
by which it or any of its properties is bound, or constitutes or will
constitute a default thereunder, except for any such conflict, breach or
default which would not have a material adverse effect on the Lessor 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 Lessor and constitute the legal, valid
and binding obligations of the Lessor 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) the Lessor holds whatever title to the Aircraft as was
conveyed to it by the Seller;
(vi) the funds to be used by the Lessor to acquire the Aircraft
pursuant to the terms hereof do not constitute assets (within the meaning
of ERISA and any applicable rules and regulations) of an ERISA Plan; and
(vii) the Lessor is a bank, trust company, insurance company,
financial institution or corporation with a combined capital and surplus or
net worth of at least $50,000,000.
NOTWITHSTANDING THE FOREGOING OR ANYTHING ELSE CONTAINED IN THIS
AGREEMENT, THE LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY
EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY (EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT OR THE LEASE), EITHER EXPRESS OR IMPLIED, AS TO THE
AIRCRAFT, ANY PART THEREOF, ANY RECORDS, ANY LAWS, RULES OR REGULATIONS RELATING
THERETO, INCLUDING, WITHOUT LIMITATION, IN RESPECT OF THE DESIGN, CONDITION,
CAPACITY OR DURABILITY OF THE AIRCRAFT, ITS MERCHANTABILITY OR ITS FITNESS FOR
ANY PARTICULAR PURPOSE, USE OR OPERATION, THE QUALITY OF THE MATERIALS OR
WORKMANSHIP OF THE AIRCRAFT, ITS VALUE OR AIRWORTHINESS, TITLE, SAFETY, THE
ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT
(WHETHER OR NOT DISCOVERABLE BY LESSEE), COMPLIANCE OF THE AIRCRAFT WITH THE
REQUIREMENTS OF ANY LAW, RULE, REGULATION OR
17
STANDARD PERTAINING THERETO, OR THE CONFORMITY OF THE AIRCRAFT TO THE PROVISIONS
AND SPECIFICATIONS OF ANY PURCHASE DOCUMENT RELATING THERETO OR ANY INTERFERENCE
OR ANY COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL
LESSOR BE LIABLE, REGARDLESS OF ANY ACTUAL OR ALLEGED NEGLIGENCE OF LESSOR, FOR
ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE), IN
THE AIRCRAFT OR ANY PART THEREOF OR ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR
PROPERTY RESULTING THEREFROM.
(b) Lessor's Liens. The Lessor represents, warrants and covenants
--------------
that on the Delivery Date there are no Lessor's Liens attributable to it (or an
Affiliate thereof). The Lessor agrees with and for the benefit of the Lessee
that the Lessor 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 Lessor, any Lessor's Lien attributable to the Lessor (or an
Affiliate thereof); provided, however, that any Lien which would otherwise
-------- -------
constitute a Lessor's Lien hereunder shall not constitute a Lessor's Lien so
long as the existence of such Lien (1) poses no non-de minimis risk to the
Lessee of the sale, forfeiture or loss (or loss of use) of the Airframe or any
Engine or any interest therein, and (2) does not interfere in any way with the
use or operation of the Aircraft by Lessee and Lessor is diligently contesting
such Lien by appropriate proceedings. The Lessor agrees to indemnify and hold
harmless the Lessee from and against any loss, cost, expense or damage
(including reasonable attorney's fees) which may be suffered by the Lessee as a
result of the failure of Lessor to discharge and satisfy any Lessor's Liens
attributable to it, as described in this Section 5.01(b).
(c) Assignment of Lessor's Estate. At any time after the Delivery
-----------------------------
Date and subject to satisfaction of the conditions set forth in this Section
5.01(c), the Lessor may assign, convey or otherwise transfer to any Affiliate of
Lessor or to a single institutional investor or an Affiliate of an institutional
investor all (but not less than all) of the Lessor's Estate, provided that (i)
--------
the Lessor gives the Lessee at least 10 days' notice of such assignment,
conveyance or other transfer, (ii) the Lessor and any guarantor of the Lessor
shall remain liable for all obligations of the Lessor under the Operative
Agreements to which the Lessor 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 (to be prepared by the Lessor and
delivered to Lessee) to assume liability for, and undertake performance of, all
obligations of the Lessor under the Operative Agreements to which such Lessor is
a party relating to the period after the date of transfer, and (iv) the
transferee shall make a representation to the effect that the funds to be used
by the transferee to acquire the Lessor's Estate do not constitute the assets of
an ERISA Plan. Any such transferee shall (a) be (i) a bank, finance company or
leasing company 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 guaranty of such transferee subsidiary's obligations in form
and substance reasonably satisfactory to Lessee, or (iii) an Affiliate of the
transferring Lessor, 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
18
Lessor remains primarily liable for the obligations of such Affiliate under the
Operative Agreements, in which case there shall be no such net worth
requirement), (b) assume all obligations of the Lessor hereunder and under the
other Operative Agreements to which the Lessor is a party pursuant to an
agreement which shall be prepared by Lessor and delivered to Lessee 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 in the business of air transportation or an
Affiliate of any thereof; 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 (y) be
attempting a hostile takeover 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 so as to permit the continue registration of the Aircraft
under the Transportation Code, without in any way restricting the Lessee's use
and operation of the Aircraft. The Lessee 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 Lessor to a transferee
as above provided, the transferee shall be deemed the "Lessor" for all purposes
of the Operative Agreements, and shall be deemed to have acquired the same
interest in the Lessor's Estate as theretofore held by its transferor; and each
reference therein to the "Lessor" shall thereafter be deemed a reference to such
transferee and the transferring Lessor shall be released from all of its
obligations under the Operative Agreements to the extent such obligations are
assumed by such transferee. No assignment, conveyance or transfer by the Lessor
of the Lessor's Estate shall increase the amount of the liability of the Lessee
under Article 6 hereof or under the Tax Indemnity Agreement over the amount of
liability the Lessee would have incurred had such assignment, conveyance or
transfer not occurred. The Lessee hereby agrees that nothing in this Section
5.01(c) (or otherwise in the Operative Agreements) shall restrict the ability of
the Lessor to, and the Lessee hereby agrees that the Lessor may, merge or
consolidate with any Person; provided, that, in the event of a consolidation or
-------- ----
merger of the Lessor with any Person (the survivor of such merger or
consolidation being referred to as the "Survivor"), in connection with such
merger or consolidation (i) the Lessor shall give Lessee notice thereof as soon
as is reasonably practicable following the occurrence of such transaction (but
in any event within 90 days of such occurrence) and (ii) the Survivor, if other
than the Lessor, shall (A) agree (which may be by operation of law) for the
benefit of the Lessee to be bound by all terms of the Operative Agreements
pursuant to an agreement prepared by Lessor and delivered to Lessee and (B)
undertake all of the obligations of the "Lessor" thereunder. Nothing in the
foregoing sentence shall limit the obligations of the Lessor (or any Survivor)
under Section 5.01(d). The Lessor shall have no right to assign, convey or
otherwise transfer any of its right, title or interest in the Lessor's Estate
except as provided above, and any other purported assignment, conveyance or
transfer shall be without effect as to the Lessee.
Notwithstanding anything to the contrary contained herein or
otherwise, the Lessee acknowledges and agrees that, to the extent agreed to by
any transferee of the Lessor's Estate (a) the Lessor shall retain all of the
rights, remedies and/or benefits set forth in this Agreement and the other
Operative Agreements (all of such rights, remedies and/or benefits collectively,
the "Retained
19
Rights") as the same may relate to any claims, cause of action or other matter
relating to the period prior to the effective date of any transfer of the
Lessor's interest in Lessor's Estate (the "Effective Date"), and (b) the Lessor
shall be entitled to (i) exercise any rights, remedies or benefits available to
it against the Lessee or any other Person in connection with any such Retained
Rights relating to the period prior to the Effective Date, and/or (ii) any
amounts to the extent due the Lessor in connection with any such Retained Rights
relating to the period prior to the Effective Date. Any such Retained Rights
that are retained by the Lessor relating to the period prior to the Effective
Date shall not be transferable to any transferee under this Section 5.01(c).
(d) Citizenship. The Lessor represents and warrants that it is and on
-----------
the Delivery Date will be a Citizen of the United States. If the Lessor does
not comply with the requirements of this Section 5.01(d), the Lessor 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 Lessor.
The Lessor agrees, solely for the benefit of the Lessee, 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 Lessor
shall cease to be, or an event which has been publicly disclosed has occurred of
which the Lessor has knowledge and which will cause the Lessor 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 Lessor 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
Lessor shall give notice thereof to the Lessee and shall (at its own expense and
without any reimbursement or indemnification from the Lessee) immediately (and
in any event within a period of 30 days) promptly (x) effect a voting trust or
other similar arrangement, (y) transfer in accordance with the terms of this
Agreement all its rights, title and interest in and to 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).
Lessee agrees, upon the request and at the sole expense of the Lessor, to
cooperate with the Lessor in complying with its obligations under the provisions
of the first sentence of this Section 5.01(f), but without any obligation on the
part of such other party to take any action believed by it in good faith to be
unreasonably burdensome to such party or materially adverse to its business
interests.
Section 5.02 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Representations, warranties and covenants of the Lessor provided for in this
Article 5, and its 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.
20
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, by any Federal, state
or local government or taxing authority in the United States, or by any
government or taxing authority of a foreign country or of any political
subdivision or taxing authority thereof or by a territory or possession of the
United States or an international taxing authority, in any such case as relating
to or measured by:
(i) the construction, mortgaging, financing, refinancing,
purchase, charter, rental, assignment, presence, overhaul, control,
acceptance, rejection, delivery, nondelivery, transport, location,
ownership, registration, reregistration, deregistration, insuring,
assembly, possession, repossession, operation, use, non-use, condition,
maintenance, repair, improvement, conversion, sale, return, abandonment,
preparation, installation, storage, redelivery, replacement, manufacture,
leasing, subleasing, sub-subleasing, modification, alteration, rebuilding,
importation, transfer of title, transfer of registration, exportation or
other application or disposition of, or the imposition of any Lien (or the
incurrence of any liability to refund or pay over any amount as a result of
any Lien) on, the Aircraft, the Airframe, any Engine or any Part or any
interest therein;
(ii) amounts payable under the Operative Agreements;
(iii) the Aircraft, or the income or other proceeds (y) received
with respect to the Aircraft attributable to the transactions contemplated
by the Operative Agreements or (z) held by the Lessor after the occurrence
of 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.
(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, business profits,
21
alternative minimum taxes, receipts, capital, franchise, state value-added,
net worth (whether, denominated income, excise, capital stock, business and
occupation or doing business taxes) or other similarly-based taxes (other
than taxes that are in the nature of license, sales, use, foreign value-
added, transfer, rental, ad valorem, stamp, property, or similar taxes)
("Income Taxes") imposed by the United States or by any state, local or
foreign jurisdiction in which such Tax Indemnitee is subject to tax without
regard to the transactions contemplated by the Operative Agreement,
provided, however, that this clause shall not exclude from the indemnity
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described in Section 6.01(a) above any such Income Taxes to be imposed by
any jurisdiction (other than the United States or any state or local taxing
authority in any state in the United States) as a result of (I) the status
of the Lessee or any Affiliate thereof or any Permitted Sublessee as a
foreign entity or as an entity owned in whole or in part by foreign
persons, or (II) the Lessee or any Affiliate thereof or any Permitted
Sublessee having made (or having been deemed to have made) payments to such
Tax Indemnitee from the jurisdiction of the taxing authority imposing such
Tax (it being understood that any such indemnity for Income Taxes not
excluded from the indemnity described in Section 6.01(a) shall be payable
only to the extent of the net harm incurred by the Tax Indemnitee from such
Income Taxes, taking into account any incremental Tax benefit in another
tax jurisdiction resulting from payment of such Income Taxes);
(ii) Taxes imposed with respect to any period beginning after
the later of (A) the discharge in full of the Lessee's obligation, if any,
to pay Termination Value under and in accordance with the Lease, (B) the
expiration of the Term of the Lease or (C) the termination of the Lease in
accordance with the applicable provisions of the Lease thereof;
(iii) [Reserved];
(iv) With respect to any Tax Indemnitee, Taxes resulting from
the willful misconduct or gross negligence of such Tax Indemnitee or a
Related Tax Indemnitee or the breach by any Tax Indemnitee other than with
respect to the Lessor, of any representation, warranty or covenant
contained in the Operative Agreements or any document delivered in
connection therewith (unless attributable to a breach of representation,
warranty or covenant of the Lessee);
(v) Taxes imposed on the Lessor or any successor, assign or
Affiliate thereof which became payable by reason of any voluntary transfer
or disposition by such Tax Indemnitee subsequent to the Delivery Date of
any interest in some or all of the Aircraft, Airframe, Engines or Parts
thereof or its interest in the Lessor's Estate or a transfer or disposition
of shares or other interests in the Lessor or a disposition in connection
with a bankruptcy or similar proceedings involving the Lessor or a transfer
or disposition of shares or other interests in the Lessor in each case
other than (A) transfers resulting from a loss, substitution or
modification of the Aircraft, Engines or any Part, (B) transfers in
connection with 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
22
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
indemnified 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 such Tax Indemnitee (including, without limitation, a
transferee which is a new lending office of an original Tax Indemnitee) to
the extent that such Taxes would not have been imposed on the original Tax
Indemnitee or exceed the amount of Taxes that would have been imposed and
would have been indemnifiable pursuant to Section 6.01(a) hereof had there
not been a succession, assignment or other transfer by such original Tax
Indemnitee of any such interest of such Tax Indemnitee in the Aircraft or
any Part, any interest in or under any Operative Agreement, or any proceeds
thereunder unless such sale, assignment, transfer or disposition occurs in
connection with the exercise of Lease remedies;
(viii) Taxes imposed by any jurisdiction that would not have been
imposed on the Lessor but for the activities or the status of the Lessor in
such jurisdiction unrelated to the transactions contemplated by the
Operative Agreements;
(ix) Any Taxes which have been properly included in the
Purchase Price;
(x) Any Taxes imposed on the Lessor which would not have been
imposed but for a Lessor's Lien;
(xi) In the case of the Lessor, 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 Lessor's Estate or in the case of any
transferee of the Lessor referred to in Section 5.01(c), to purchase the
Lessor's Estate pursuant to Section 5.01(c);
(xii) Other than with respect to the Lessor, Taxes other than
Income Taxes that would not have been imposed but for the existence or
status of any trust used to hold title to the Aircraft;
(xiii) Taxes that are being contested in accordance with the
provisions hereof;
(xiv) [Reserved]; or
(xv) United States withholding Taxes imposed on the Lessor as a
result of the Lessor not being a U.S. Person.
23
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 Lessor, the Lessor has not
determined in good faith that claiming such benefit would have a material
adverse impact on the Lessor or an Affiliate thereof, by reason of the payment
of any Tax paid or indemnified against by the Lessee, provided that an Event of
Default has not occurred and is not continuing, such Tax Indemnitee shall
promptly pay to the Lessee, to the extent such tax benefit was not previously
taken into account in computing such payment or indemnity, but not before the
Lessee shall have made all payments then due to such Tax Indemnitee under this
Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an
amount equal to the lesser of (x) the sum of such tax benefit plus any other tax
benefit realized by such Tax Indemnitee that would not have been realized but
for any payment made by such Tax Indemnitee pursuant to this sentence and not
already paid to the Lessee, or (y) the amount of the payment made under Section
6.01 hereof and this Section 6.02 by the Lessee to such Tax Indemnitee plus the
amount of any other payments by the Lessee to such Tax Indemnitee theretofore
required to be made under this Section 6.02 and Sections 6.01 and 6.05 hereof
(and the excess, if any, of the tax benefit over the applicable amount described
in clause (x) over the amount described in clause (y) above shall be carried
forward and applied to reduce pro tanto any subsequent obligations of the Lessee
--- -----
to make payments to such Tax Indemnitee pursuant to Section 6.01 hereof). If an
amount payable by any Tax Indemnitee to the Lessee pursuant to this Section 6.02
is not paid when due because of the occurrence and continuation of any Event of
Default, such amount shall be payable by any Tax Indemnitee to the Lessee upon
the Lessee's curing all Events of Default. The Lessee shall reimburse on an
After Tax Basis such Tax Indemnitee (subject to Section 6.01(b), but only
insofar as subsections (iv), (vi), (vii), (x), (xi), (xii), (xiii), (xiv) and
(xv) thereof would apply) for any payment of a tax benefit pursuant to the
preceding sentence (or a tax benefit otherwise taken into account in calculating
the Lessee's indemnity obligation hereunder) to the extent that such tax benefit
is subsequently disallowed or reduced.
In determining the order in which any Tax Indemnitee utilizes
withholding or other foreign taxes as a credit against such Tax Indemnitee's
United States income taxes, such Tax Indemnitee shall be deemed to utilize (i)
first, all foreign taxes other than those described in clause (ii) below; and
(ii) then, on a pro rata basis, all foreign taxes with respect to which such Tax
Indemnitee is entitled to obtain indemnification pursuant to an indemnification
provision contained in any lease, loan agreement, or other financing document
(including this Agreement) that is similar to the indemnification provision in
this Article 6.
Notwithstanding the foregoing, any amount payable by the Lessor
pursuant to this Section 6.02 shall not exceed the sum of the amounts previously
paid by the Lessee to the Lessor
24
pursuant to this Article 6, less the aggregate amount of all prior payments by
the Lessor to the Lessee under this Section 6.02, with any excess amount
otherwise payable being carried forward and available to reduce pro tanto any
--- -----
subsequent obligation of Lessee to Lessor pursuant to this Article 6.
Section 6.03 Time of Payment. Any amount payable to a Tax Indemnitee
---------------
pursuant to this Article 6 shall be paid promptly, but in any event within 30
days after receipt of a written demand therefor from such Tax Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable, provided that in
--------
the case of amounts which are being contested by the Lessee in good faith or by
the Tax Indemnitee in either case pursuant to Section 6.04 hereof, or subject to
verification proceedings pursuant to Section 6.11 hereof, such amount shall be
payable within 30 days after the time such contest or verification proceeding,
as the case may be, is finally resolved. In no event shall any amount be payable
under Section 6.01 until two Business Days 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
20 days of receipt thereof) give the Lessee notice in writing of such claim and
shall furnish the Lessee with copies of any written requests for information
sent to such Tax Indemnitee from any taxing authority to the extent relating to
such Taxes with respect to which the Lessee may be required to indemnify
hereunder; provided, however, that the failure of a Tax Indemnitee to give such
-------- -------
notice or furnish such copy shall not terminate any of the rights of such Tax
Indemnitee under this Article 6, except (A) to the extent that the Lessee's
contest rights have been materially and adversely impaired by the failure to
provide such notice or copy or (B) to the extent that such failure results in
the imposition of, or an increase in the amount of, any penalties, interest or
additions to Tax related to the Tax which is the subject of such claim or
proceeding.
(b) Request for Contest. If a written claim shall be made for any
-------------------
Tax, 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, then the
Lessee shall be permitted, at its expense and in its own name, or, so long as no
Event of Default has occurred and is continuing (or if an Event of Default is
continuing, if the Lessee has posted a bond or otherwise provided to the Tax
Indemnitee reasonably satisfactory to the Tax Indemnitee in form and substance
an amount sufficient to satisfy the Tax being contested), in the name of such
Tax Indemnitee, to contest the imposition of such Tax; provided, however, that
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the Lessee shall not be permitted or entitled to contest any Tax (A) unless such
contest will not result in the risk of an imposition of criminal penalties, (B)
unless the Lessee shall have agreed in writing following notice by such Tax
Indemnitee to pay such Tax Indemnitee on demand and on an After Tax Basis all
costs and expenses that such Tax Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees,
25
disbursements, or penalties, interest and addition to tax), (C) if such contest
shall be conducted in a manner requiring the payment of the claim in advance,
unless the Lessee shall have advanced sufficient funds, on an interest free
basis, to the Tax Indemnitee 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, and (D) if such
contest shall be conducted in a manner requiring the payment of the claim,
unless the Lessee shall have timely paid the amount required.
If the Lessee shall so request within 30 days after receipt of such
notice from a Tax Indemnitee under this Section 6.04 hereof and with respect to
a Tax for which the Lessee may be obligated to indemnify pursuant to Section
6.01, such Tax Indemnitee shall in good faith at the Lessee's after-tax expense
contest the imposition of such Tax so long as Lessee fully complies with all the
terms of the proviso set forth in the first paragraph of this Section 6.04(b)
and so long as no Event of Default has occurred and is continuing (or if an
Event of Default is continuing, if the Lessee has posted a bond or otherwise
provided to the Tax Indemnitee reasonably satisfactory to the Tax Indemnitee in
form and substance an amount sufficient to satisfy the Tax being contested).
If requested by the Lessee, the Tax Indemnitee shall appeal any
adverse administrative or judicial decision so long as Lessee fully complies
with all the terms of the proviso set forth in the first paragraph of this
Section 6.04(b) and so long as no Event of Default has occurred and is
continuing (or if an Event of Default is continuing, if the Lessee has posted a
bond or otherwise provided to the Tax Indemnitee reasonably satisfactory to the
Tax Indemnitee in form and substance an amount sufficient to satisfy the Tax
being contested), except that the Tax Indemnitee shall not be required to pursue
any appeals to the United States Supreme Court.
If the taxing jurisdiction requires payment of the claim in advance of
contest, such Tax Indemnitee may make a timely request upon Lessee and Lessee
shall timely advance to such Tax Indemnitee on an interest-free basis the amount
of such Tax (including such amounts payable as interest, penalties or additions
to tax) and shall indemnify the Tax Indemnitee on an After Tax Basis against any
additional net cost to such Tax Indemnitee with respect to such advance.
(c) Declining to Contest; Settlement. (i) If, after the Lessee has
--------------------------------
properly requested a contest in accordance with this Section 6.04 and Lessee is
then complying with the terms of this Section 6.04, any Tax Indemnitee shall at
any time decline to take any action required under Section 6.04 with respect to
such contest, then, if such failure shall cause the contest to be determined
adversely or shall preclude such contest as a matter of law, the Lessee shall
not be obligated to indemnify such Tax Indemnitee for such Tax (including such
amount payable as interest, penalties or addition to 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
26
withheld or delayed, as determined in the Lessee's good faith judgment). If
any Tax Indemnitee shall settle a contest for any Tax without receiving the
Lessee's written consent, then the Lessee shall not be obligated to
indemnify such Tax Indemnitee for such Tax (including such amount payable
as interest, penalties or addition to 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) on demand
which such Tax Indemnitee may incur as a result of contesting such Taxes.
(d) 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
Section 6.01, (B) as a direct result of such failure the contest of such claim
becomes barred by law and (C) the Lessee furnishes, at the Lessee's expense, an
opinion of counsel selected by the Lessee and reasonably satisfactory to such
Tax Indemnitee to the effect that, had the contest of such claim not become
barred by law, a Reasonable Basis would have existed for pursuing such contest,
such Tax Indemnitee shall be deemed to have waived its right to any payment by
the Lessee that would otherwise be payable by the Lessee pursuant to 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 less (x) all
payments then due to such Tax Indemnitee under this Article 6, and (y) Taxes
imposed with respect to the accrual or receipt thereof, including interest
received attributable thereto, plus any tax benefit realized by such Tax
Indemnitee as a result of any payment by such Tax Indemnitee made pursuant to
this sentence; provided, however, that such amount shall not be payable (a)
-------- -------
before such time as the Lessee shall have made all payments or indemnities then
due and payable to such Tax Indemnitee under this Article 6 and (b) to the
extent that the amount of such payment would exceed (i) the amount of all prior
payments by the Lessee to such Tax Indemnitee pursuant to this Article 6 less
(ii) the amount of all prior payments by such Tax Indemnitee to the Lessee
pursuant to this Article 6 (any such excess shall be carried forward to reduce
pro tanto any subsequent obligations of the Lessee to make payments to such Tax
--- -----
Indemnitee pursuant to Section 6.01 hereof). If an amount payable by any Tax
Indemnitee to the Lessee pursuant to this Section 6.02 is not paid when due
because of the occurrence and continuation of an Event of Default, such amount
shall be payable by any Tax Indemnitee to the Lessee upon the Lessee's curing
all Events of Default.
Any subsequent loss of such refund or tax benefit shall be treated as
a Tax subject to indemnification under the provisions of this Article 6 (in the
case of any such tax benefit, subject to
27
Section 6.01(b) but only insofar as subsections (iv), (vi), (vii), (x), (xi),
(xii), (xiii), (xiv) and (xv) thereof would apply).
Section 6.06 Reports. In case any report or return is required to
-------
be made with respect to any Taxes 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 Lessor and shall send a copy of the applicable portions of such report or
return to the Tax Indemnitee and the Lessor 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 Lessor. 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 Lessor is the owner of the
Aircraft, the Airframe, any Engine or any Part or which would otherwise be
inconsistent with the terms of the Lease or the Tax Indemnity Agreement and the
position thereunder of the Lessor.
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, and Lessor's receipt of all information
reasonably
28
requested by Lessor relating thereto, 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
reasonable request, such duly executed and properly completed forms as may be
reasonably 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 and such Tax
Indemnitee, in its reasonable judgment, agrees with any such reduction or
exemption, and (y) Lessee has provided such Tax Indemnitee with any information
necessary to complete such form not otherwise reasonably available to such Tax
Indemnitee.
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 assume liability for, and also
---------
agrees to indemnify each Indemnitee against and agrees to protect, defend, save
and keep harmless each Indemnitee from and against and in respect of, and will
pay on an After Tax Basis, any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, disbursements
and expenses, demands or judgments (including reasonable legal fees and
expenses) of every kind and nature, whether or not any of the transactions
contemplated by this Agreement are consummated and whether arising before, on or
after the Delivery Date (individually, an "Expense," collectively, "Expenses"),
which may be imposed on, incurred or suffered by or asserted against any
Indemnitee, in any way relating to, arising out of or in connection with, any
one or more of the following:
29
(i) any Operative Agreement 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, pooling, 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
or absolute 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; and
(v) the enforcement of the terms of the Operative Agreements
(including this Section 7.01(a)).
(b) Exceptions. The indemnity provided for in Section 7.01(a) shall
----------
not extend to any Expense to the extent it:
30
(i) is attributable to the willful misconduct or gross
negligence of any 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) is, except to the extent fairly attributable to acts or
events occurring prior thereto, 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);
(iii) is, other than as expressly provided herein or in the
other Operative Agreements, 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 an
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 an Indemnitee pursuant to the terms of
this Agreement or such other Operative Agreement;
(v) is attributable to the incorrectness or breach by an
Indemnitee of its representations or warranties, under any of the Operative
Agreements;
(vi) is attributable to the failure by an 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 attributable to a Lessor's Lien;
(viii) is, in the case of the Lessor, attributable to the offer
or sale by an Indemnitee of any interest in the Aircraft or the Lessor's
Estate or any similar interest (including an offer or sale resulting from
bankruptcy or other proceedings for the relief of debtors in which an
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;
31
(ix) 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; and
(x) constitutes an Indemnitee's overhead.
(c) Non-Parties. If an Indemnitee is not a party to this Agreement,
-----------
in order to be entitled to the benefit of this Article 7, such Indemnitee shall
comply with the terms of this Article 7 in connection with its making any claim
for indemnification hereunder.
Section 7.02 Notice and Payment. Each Indemnitee shall give prompt
------------------
written notice to the Lessee of any liability as to which a Responsible Officer
of such Indemnitee has actual knowledge, for which the Lessee is, or may be,
liable under this Article 7; provided, however, that failure to give such notice
-------- -------
shall not terminate any of the rights of an Indemnitee under this Article 7 and
shall not release Lessee from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure adversely affects
any applicable defense or counterclaim, otherwise increases the amount the
Lessee would have been liable for in the absence of such failure to provide such
notice or adversely affects the ability of Lessee's insurers to defend such
claim.
Section 7.03 Defense of Claims. Pursuant to the terms hereof, the
-----------------
Lessee or its insurers shall have the right (in each such case at the Lessee's
sole expense) to investigate, defend (and control the defense of) any such claim
for which indemnification is sought pursuant to this Article 7 and each
Indemnitee shall reasonably cooperate with the Lessee and its insurers with
respect thereto, provided that, such right of the Lessee shall be subject to
-------- ----
Lessee having acknowledged in writing its obligation to indemnify the Indemnitee
in respect of such claim if the defense of such claim is unsuccessful (unless
and to the extent it is determined in good faith during any related proceedings
that any of the exclusions set forth in Section 7.01(b) are applicable to such
claim); provided further 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,
(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 (or any non-de minimis risk of civil) liability on such
Indemnitee (and in any such instance, Lessee shall pay the reasonable fees and
expenses of Lessor's counsel) 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 (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; provided, that,
-------- ----
32
subject to the rights of Lessee's insurers to assume and control the defense of
or to compromise (as provided herein), any such claim, any counsel selected by
Lessee in connection with any defense shall be reasonably acceptable to the
Lessor. 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;
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
without the prior written consent of the Lessee (which consent shall not be
unreasonably withheld or delayed) and its insurers, unless such Indemnitee
waives its right to be indemnified under this Article 7 with respect to such
claim. Subject to the rights of Lessee's insurers to assume and control the
defense of or to compromise, any such claim, the Lessee shall not enter into any
settlement or compromise relating to any claims against the Lessor (or any
Indemnitee) without consent of Lessor, or such Indemnitee (which consent shall
not be unreasonably withheld or delayed); provided that, Lessee's insurers may
-------- ----
not enter into any such settlement or compromise without Lessor's (or such
Indemnitee's) consent unless a release of all related claims against the Lessor
(and any other Indemnitee) shall be obtained in connection with such settlement
or compromise.
Section 7.04 Insured Claims. Notwithstanding any other provision of
--------------
this Article 7 to the contrary, in the case of any Expense indemnified by the
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee (or a Permitted Sublessee) pursuant to Section 9 of the Lease or
otherwise, it shall be a condition of such indemnity with respect to any
particular Indemnitee that such Indemnitee shall reasonably 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). So long as no Event of Default has occurred and
is continuing, 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.
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
33
under Section 7.03 and to control or participate in any proceeding to the extent
permitted by Section 7.03. The Indemnitee shall supply Lessee with such
information, not within the control of Lessee, as is in such Indemnitee's
control or is reasonably available to such Indemnitee, which Lessee may
reasonably request to control or participate in any proceeding to the extent
permitted by Section 7.03.
Section 7.07 Survival of Obligations. The indemnities and agreements
-----------------------
of the Lessee provided for in this Article 7 shall survive the expiration or
other termination of this Agreement and the other Operative Agreements.
Section 7.08 Effect of Other Indemnities. The Lessee's obligations
---------------------------
under this Article 7 shall be those of a primary obligor whether or not the
Person indemnified shall also be indemnified with respect to the same matter
under the terms of this Agreement, or any other document or instrument or by any
other Person and regardless of any other rights that Lessee may have against
such Indemnitee pursuant to any Operative Agreement or otherwise, and the Person
seeking indemnification from the Lessee pursuant to any provision of this
Agreement may proceed directly against the Lessee without first seeking to
enforce any other right of indemnification.
Section 7.09 Waiver of Certain Claims. The Lessee hereby waives and
------------------------
releases any Expense now or hereafter existing against any Indemnitee arising
out of death or personal injury to personnel of the Lessee, loss or damage to
property of the Lessee, or the loss of use of any property of the Lessee, which
results from or arises out of the condition, use or operation of the Aircraft
during the Term, including, without limitation, any latent or patent defect
whether or not discoverable.
Section 7.10 Certain Limitations. The Lessee does not guarantee and
-------------------
nothing in the general indemnification provisions of this Article 7 shall be
construed as a guarantee (or an indemnification) by the Lessee with respect to
the residual value of the Aircraft or any part thereof; provided, however, that
-------- -------
the foregoing shall not adversely affect any of the Lessor's rights or remedies
under the Lease or any other Operative Agreements, including without limitation
any rights or remedies under Section 17 of the Lease.
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 Lessor shall pay to
the Lessee an amount equal to the Transaction Costs set forth on Exhibit B to
the Lease (minus the amount referred to in clause (i) below) and the Lessee
shall utilize such funds to pay all fees and expenses of the following persons
relating to the transactions contemplated hereby, following receipt by the
Lessor of appropriate invoices with respect thereto: (i) the reasonable fees and
expenses of counsel for Lessor
34
(unless paid directly by Lessor); (ii) the reasonable fees and expenses of the
respective counsel for the Lessee, the Manufacturer, the Engine Manufacturer,
the Seller and the Deficiency Obligor; (iii) the reasonable fees and expenses of
special aviation counsel; (iv) the fees and expenses of The Seabury Group LLC
(the "Lessee Advisor"); and (v) any other amounts approved by the Lessee and the
Lessor. Upon payment of the foregoing amount by Lessor to Lessee, Lessor shall
have no further obligations in respect of the payment of the foregoing amounts;
provided that no such payments by the Lessor shall exceed in the aggregate, the
Transaction Costs.
(b) Amendments and Supplements. Without limitation of the foregoing,
--------------------------
the Lessee agrees to pay, as Supplemental Rent, to the Lessor 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 Lessor of any interest in the
Aircraft or the Lessor's Estate (and the offeror, seller, or transferor shall be
responsible for all such fees and expenses), unless such offer, sale or transfer
shall occur (A) pursuant to the exercise of any remedies under Section 17 of the
Lease, or (B) in connection with the termination of the Lease or action or
direction of the Lessee or other Person pursuant to Section 8, 13 or 14 of the
Lease.
ARTICLE 9.
NOTICES
Section 9.01 Notices. Except as otherwise specifically provided
-------
herein, all notices, requests, approvals or consents required or permitted by
the terms hereof shall be in writing (it being understood that the specification
of a writing in certain instances and not in others does not imply an intention
that a writing is not required as to the latter). Any notice shall be effective
when received. Any notice shall either be mailed, certified or registered mail,
return receipt requested with proper first class postage prepaid, or sent in the
form of a telecopy, provided that there is receipt of such notice the next
--------
Business Day from an overnight courier service, or by overnight delivery service
or delivered by hand. Any notice shall be directed to the Lessee, the Lessor 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 9.01:
(a) if to the Lessee, to its office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel, telephone (▇▇▇) ▇▇▇-▇▇▇▇,
facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as the Lessee shall from time
to time designate in writing to the Lessor; and
35
(b) if to the Lessor, to its office at c/o Fleet Capital Corporation,
50 ▇▇▇▇▇▇▇ Plaza, 5/th/ Floor, Providence, Rhode Island 02903-2305, Attention:
Chief Credit Officer, telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to
such other address as the Lessor shall from time to time designate in writing to
the Lessee.
ARTICLE 10.
MISCELLANEOUS
Section 10.01 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 10.02 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 each party hereto.
Section 10.03 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 10.04 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, and the Lessor and its successors and
permitted assigns.
Section 10.05 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 10.06 Limitations of Liability. Lessor shall not have any
------------------------
obligation or duty to Lessee or any other Person with respect to the
transactions contemplated hereby, except those obligations or duties of the
Lessor expressly set forth in this Agreement and the other Operative Agreements.
Section 10.07 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
36
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; PROVIDED, HOWEVER, TO THE
-------- -------
EXTENT PERMITTED BY APPLICABLE LAW, THAT NOTHING IN THIS AGREEMENT OR ANY OTHER
OPERATIVE AGREEMENTS SHALL BE DEEMED OR OPERATE TO PRECLUDE LESSOR FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION IN ORDER TO REALIZE
ON THE AIRCRAFT OR ANY OTHER COLLATERAL OR ANY OTHER SECURITY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LESSOR, AND LESSEE EXPRESSLY WAIVES
ANY OBJECTIONS THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS.
(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 9.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 10.07(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 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
37
OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF
OR RELATING TO THIS AGREEMENT.
Section 10.08 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 10.09 Reinstatement. If any payment, in whole or in part, of
-------------
any of the amounts due to the Lessor pursuant to the terms of any Operative
Agreement is rescinded or must otherwise be restored or returned upon the
bankruptcy, insolvency, reorganization, arrangement, adjustment, composition,
dissolution, liquidation, or the like, of the Lessee, the Lessee's obligations
in respect of such returned payment (or portion thereof) shall be continue to be
effective and shall be reinstated, all as though such payment had not been made,
notwithstanding any termination of this Agreement or any other Operative
Agreement.
Section 10.10 Deficiency Agreement and Residual Agreement.
-------------------------------------------
Notwithstanding anything to the contrary contained in the Lease, to the extent
that as a result of any actions of the Lessor the last sentence of Section 12 of
the Deficiency Agreement or the last sentence of Section 7 of the Residual
Agreement are no longer effective, the Lessee shall not be required to satisfy
the conditions set forth in Clauses (vi) and (vii) of Section 8(d)(ii) of the
Lease in the event Lessee exercises its right to substitute a Replacement
Aircraft as provided in Section 8(a)(i) of the Lease.
* * *
38
IN WITNESS WHEREOF, the parties have caused this Supplemental Agreement to
be executed by their respective, duly authorized officers as of the day and year
first written above.
MIDWAY AIRLINES CORPORATION,
as Lessee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
General Counsel
FLEET NATIONAL BANK,
as Lessor
By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Banking Officer
39
APPENDIX A
DEFINITIONS [N587ML]
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 Lessor.
-------------------
"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 two (2) 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.
"Airframe" means (i) the Canadair Regional Jet Model CL-600-2B19
--------
Series 200ER 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
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.
"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.
---------------
"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.
"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, Charlotte, North Carolina or Providence, Rhode Island.
"Citizen of the United States" means a citizen of the United States as
----------------------------
defined in (S)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(b)
----------
of the Supplemental 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.
"Deficiency Agreement" has the meaning given to such term in the
--------------------
recitals of the Supplemental Agreement.
"Deficiency Obligor" has the meaning given to such term in the
------------------
recitals of the Supplemental Agreement.
"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.
"Engine" means (A) each of the two General Electric CF34-3B1 Series
------
200 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 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 Loan Agreement" means the Loan Agreement between Fleet Capital
---------------------
Corporation, as lender and Lessee, as borrower in respect of the financing of
two General Electric CF34-3B1 Series 200 engines.
"Engine Manufacturer" means General Electric Company, a New York
-------------------
corporation.
"Engine Manufacturer's Consent" means the Engine Manufacturer's
-----------------------------
Consent and Agreement [N587ML], dated as of December 30, 1999, from the Engine
Manufacturer.
"Engine Warranty Assignment" means the Engine Warranty Assignment
--------------------------
[N587ML], dated as of December 30, 1999, between Lessee and Lessor.
"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 15 consecutive days (provided that, so long as Lessee
shall be diligently pursuing recovery of such property, such period
shall be extended to 45 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
condemnation, confiscation, seizure or requisition of title, by the
Government) or any agency or instrumentality thereof, for a period in
excess of (A) in the case of any condemnation, confiscation, seizure
or requisition of use, 180 consecutive days or (B) in the case of any
condemnation, confiscation or seizure of, or requisition of title, 15
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 Canadair Regional
Jet Series 200ER 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 Canadair Regional
Jet Series 200ER 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, 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 16/th/ day following loss of
such property or its use due to theft or disappearance or the 46/th/ 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 181/st/ day following condemnation,
confiscation, seizure or requisition of title to such property by a foreign
government referred to in clause (iv) above (or the 16/th/ day in the case of
appropriation of title), or the end of the Term if earlier than such 181/st/ or
16/th/ 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 Canadair Regional
Jet Series 200ER 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 Supplemental Agreement.
"Expiration Date" means the date specified as such in the Lease
---------------
Supplement executed and delivered on the Delivery Date.
"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 Lessor 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 Lessor.
"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 and 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 and there shall be no deduction for
any costs of removal of the Aircraft from its then location. Except as
otherwise expressly provided in the Lease, all appraisal costs will be paid by
the Lessee. 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.
"Fair Market Value Renewal Term" has the meaning given to such term in
------------------------------
Section 13(a) of the Lease.
"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.
"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.
"Indemnitee" means Lessor and each Affiliate, officer, director,
----------
employee, agent, servant, successor and permitted assigns of Lessor.
"Lease" means the Lease Agreement [N587ML], dated as of December 30,
-----
1999 between the Lessor 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 Midway Airlines Corporation, a Delaware corporation,
------
and its successors and permitted assigns.
"Lessee Documents" means the Operative Agreements to which the Lessee
----------------
is a party.
"Lessor" means Fleet National Bank, a national banking association
------
established under the laws of the United States of America, 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
---------------
Lessor in and to the Aircraft, and Engines and the Operative Agreements
including, without limitation, all amounts of Rent, insurance proceeds and
requisition, indemnity or other payments of any kind.
"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) claims against or affecting the
Lessor not related to the Operative Agreements or the transactions contemplated
thereby, (ii) acts or omissions of the Lessor not contemplated or permitted
under the terms of the Operative Agreements, (iii) Taxes or Expenses imposed
against the Lessor or Lessor's Estate which are not required to be indemnified
against by the Lessee pursuant to Articles 6 or 7 of the Supplemental Agreement
(other than pursuant to Section 6.01(b)(x) or 7.01(b)(vii)) and which are not
required to be indemnified against by the Lessee pursuant to the Tax Indemnity
Agreement, or (iv) claims against the Lessor arising from the transfer by the
Lessor 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.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
----
security interest, claim, or other similar interest of any nature whatsoever.
"Manufacturer" means Bombardier Inc., a Canadian 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 Lessor's nominal after-tax book yield
-------------------
(utilizing the multiple investment sinking fund method of analysis), computed
through the Expiration Date on the basis of the same methodology, constraints
and assumptions as were utilized by the Lessor in determining Basic Rent
percentages and Termination Value percentages as of the Delivery Date; provided,
--------
that, if the Lessor shall have transferred its interest, Net Economic Return
shall be calculated as if the Lessor had retained its interest.
"Non-U.S. Person" means any Person other than a U.S. Person.
---------------
"Officer's Certificate" means as to any company a certificate signed
---------------------
by a Responsible Officer of such company.
"Operative Agreements" means the Supplemental Agreement, the
--------------------
Deficiency Agreement, the Residual Agreement, the Return Condition Agreement,
the FAA ▇▇▇▇ of Sale, the Warranty ▇▇▇▇ of Sale, the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Warranty Assignment, the PAA Consent,
the Engine Manufacturer's Consent, the Lease, each Lease Supplement and the Tax
Indemnity Agreement.
"PAA Consent" means the Aircraft Manufacturer's Consent and Agreement
-----------
[N587ML], dated as of December 30, 1999, from the Manufacturer.
"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. Unless otherwise specified in writing by the Lessor, 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 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 Agreement" means Bombardier Regional Aircraft Division
------------------
Purchase Agreement No. PA-0393 dated September 17, 1997, as amended, between the
Lessee and the Manufacturer (including all exhibits thereto, together with all
letter agreements entered into that by their terms constitute part of such
Purchase Agreement), but only to the extent the same relates to the Aircraft.
"Purchase Agreement Assignment" means the Purchase Agreement
-----------------------------
Assignment [N587ML], dated as of December 30, 1999, between Lessee and Lessor.
"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 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.
"Replacement Airframe" means a Canadair Regional Jet Series 200ER
--------------------
series 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 a General Electric CF34-3B1 Series 200
------------------
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 Agreement" has the meaning given to such term in the
------------------
recitals of the Supplemental Agreement.
"Responsible Officer" means, with respect to any party, any Vice
-------------------
President or other 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.
"Return Condition Agreement" means the Return Condition Agreement
--------------------------
[N587ML], dated as of December 30, 1999, between the Manufacturer and the
Lessee.
"SEC" means the Securities and Exchange Commission of the United
---
States and any successor agencies or authorities.
"Section 1110" means 11 U.S.C. (S) 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.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Seller" has the meaning given to such term in Exhibit B to the Lease.
------
"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.
"Supplemental Agreement" means the Supplemental Agreement [N587ML],
----------------------
dated as of December 30, 1999, between the Lessee and the Lessor.
"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 Supplemental Agreement or Tax Indemnity Agreement or any other
Operative Agreement to the Lessor 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 Supplemental 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
--- -----
Supplemental Agreement.
"Tax Indemnitee" means each of Lessor and any Affiliate thereof.
--------------
"Tax Indemnity Agreement" means the Tax Indemnity Agreement [N587ML],
-----------------------
dated as of December 30, 1999 between the Lessee and the Lessor.
"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 by multiplying Lessor's Cost by the percentage
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 Supplemental 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.
"Uniform Commercial Code" means the Uniform Commercial Code as in
-----------------------
effect from time to time in any relevant jurisdiction.
"United States", "U.S." or "US" means the United States of America.
------------- ---- --
"U.S. Person" means a Person described in (S)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 Lessor 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 Lessor.